Sales is a process that involves the exchange of goods or services for money. It is a process that can be done by both businesses and individuals. The sales cycle can be broken down into four stages: prospecting, qualifying, negotiating and closing.
Sales process is not limited to getting the order from the customer, but also ensuring the money comes into the bank, once goods or services are delivered. A salesman is often the first point of contact for and customer, thus at times sales also involves after sales service to the customer. It’s a salesman job to ensure their customer is satisfied post the sale, as a happy customer is likely to bring in more customer.
Sales vs. Marketing
Sales is often confused with marketing; however, they are two different functions in an organization. They both have their own goals, but they also work together to achieve the same goal – to increase revenue for the company. Sales is the process of identifying a customer and closing the sale, whereas marketing is an enabler for the sales process. Sales has a short-term view of the market’s demand and supply forces, whereas marketing takes into account to long term view of the market.
Sales functions forecast how the market will be in the next one to six months, so that manufacturing can plan accordingly. Marketing, on the other hand, takes into account a much long-term view, of one to five years. Marketing professionals are involved in product and range planning, keep track of competition and consumer trends, brief product development so that they have a product range that can compete in the market along with competition in upcoming season.
There are two basic types of sales i.e., direct sales and indirect sales.
Direct Sales
The direct sale happens when a company or individual sell a product or services directly to a customer and they pay you for your product or service with no other intermediary. This can be done through face-to-face conversations, phone calls, emails, social media marketing campaigns, and more.
Indirect Sales
This type of sale occurs when you sell your products or services through an intermediary who then sells them to the person who is actually buying. This can be done through retailers, distributors, wholesalers, and more.
Institutional Sales
Institutional sales refers to the sale of goods and services to institutions such as hospitals, universities, and government agencies. These institutional sales departments are typically in charge of selling to their organization’s external customers, or the ultimate consumers of goods and services. Typical products that fall within an institutional sales department’s purview are not typically sold to individuals.
The main goal for institutional sales is to increase revenue and despite of lower profits for the company while also increasing brand awareness for their product or service.
Some common examples of institutional sales are as follows
- Software licenses being sold to a university by company like Microsoft, Adobe, etc.
- Manpower services like security, housekeeping, etc. being sold to offices and tech parks
- When an edible oil manufacturing company directly sells its oil to a chain of restaurants
- When an cheese chemical or gas manufacturer like INOX sells its products directly to other factories
Government Sales
Government sales are a type of institutional sales. They are used by governments to sell goods and services to the public.
Government sales can be done in two ways: tender bidding and institutional sales. Tender bidding is when the government sells goods or services through an open process where anyone can submit a bid for the product or service. Government tenders are usually more expensive than institutional sales because they require more time and effort from both parties involved in order to complete them successfully.
The main difference between these two types of government sales is that tenders allow companies to bid on specific products or services, while direct negotiations allow companies to negotiate with the government directly for specific products or services.
Common examples of government institutional sales would be
- When defense equipment manufacturers sell their products to a government via a tender process
- When infrastructure contractors bid of tenders to city municipal corporations and win a contract for supplying raw material or build a road.
Retail Sales
Retail sales is a process of selling goods or services directly to consumers. It is the act of selling items to customers in a shop, store, or other similar retail establishment. Retailers typically sell products such as food and clothing. The process often includes merchandizing, pricing, promoting or advertising of the product & brand, along with after-sales service.
Retail sales are typically made up of three parts:
- Sale itself, the first part is when an item is sold to a customer in a shop or store.
- The second part is when an item is advertised on television, radio, newspapers and magazines.
- The third part is when customers have questions about their purchase and need help from customer service representatives.
Wholesale or Distributor Sales
Wholesale or distributor is a type of business that sells products in large quantities to retailers and other businesses. They typically use the products for resale. The term “wholesale” is often used to describe a business that owns many warehouses, such as Walmart.
Wholesale is also known as distributor sales. Wholesalers are the middlemen between manufacturers and retailers, which means they buy goods from the manufacturer at a lower price than what the retailer would pay, then sell them to the retailer at a higher price. A wholesaler’s inventory is typically held in stock at a nearby major market or central office location, while the smaller stores they serve are provided with their products via distributors.
For example
- Software & electronic brands like Apple, Lenovo, Adobe sell their products via a distributor like Redington India.
- Cloud Service providers like Amazon (AWS), Microsoft Azure, Google Cloud, etc. sell their service to cloud reseller like Cloudways, Kinsta, Bluehost, etc.
Online Sales or E-commerce Sales
Online sales or e-commerce sales is the process of buying and selling goods or services over the internet. It is a global phenomenon that has been growing exponentially in recent years and it is expected to continue to grow in the future.
Online sales is defined by its medium of communication, that is the internet. Online sales can be either B2B (business to business) or B2C (business to customer) sales, where an online retailer list their products online on their website or an online marketplace, and the end consumer, make the purchase online via a credit card, PayPal, etc.
Examples of online sales are:
- Products bought on market place like Amazon.com, where a seller lists their products on the amazon website, and an individual make a purchase
- Product sold by companies like Nike, Puma, etc. on their online stores directly to the end customers.
Service Sales
Service sales is a type of sales that involves selling services to customers. A service is a product that is delivered to the customer without any physical possession. A service can be anything from a haircut, to massage, to some advice. The service provider can be an individual, a corporation, or an organization. The service provider may also be called a service seller or service vendor.
The service sale process starts with identifying a need for service from the customer’s perspective and then finding out what services would best meet that need. Once this has been determined, it is time to find out how much it will cost for the service and how long it will take to deliver it.
The service sales process can be broken down into three steps:
- Identify the demand and need of your customer for service, and price it accordingly
- Present your service to the customer in a way that they will find attractive and beneficial
- Close the sale by providing them with an offer or contract
Example of service sales are as follows
- A barber or salon selling hair cutting or hair styling services to a customer
- A business consulting company providing consulting services to company
- SaaS (Software as a Service), where software companies allow users to use their software based on a subscription model.
Commission Sales
Commission sales are a type of sales where the sales agent or broker gets paid a percentage of the sale price when a sales transaction occurs. Commission sales are becoming more popular in the digital marketing industry. They are used by digital agencies to generate revenue for their clients in areas like affiliate marketing.
Affiliate marketing is a type of digital marketing in which companies or individuals are paid for bringing in new customers or sales. It is also known as performance-based advertising, and it can be done by anyone with an internet connection.
The commission sales model is also used by e-commerce websites to generate revenue from their customers. It is also known as “commission-based” or “commission-only” sales. The seller does not receive any upfront payment for their services, but instead receives a percentage of the total amount that they help to sell.
Commission sales are typically used in the following scenarios:
- When the sales agent or broker is not able to provide a product or service but has expertise in it.
- When the sales agent or broker has an established relationship with the buyer and can provide value to them.
- When there is no upfront cost for either party involved.
The most common types of commission sales are:
- Cost-plus commission: The seller pays a fixed percentage on each sale, plus an additional fee for each unit sold
- Fixed commission: The seller pays a fixed amount per sale, regardless of how many units are sold
- Variable commission: The seller pays a percentage on each unit sold, but not on how many units are sold
Common examples of commission-based sales are
- Real estate transaction, with an agent get 1% to 2% commission on sale of property transaction between two parties.
- Used car sales transaction where the car broker gets commission on realizing a sales between the buying and selling party.
- In trading businesses like stock market, wholesale agent often work on commission or a brokerage taking a percentage share on sale of transaction.
Abhishek Sareen is a sales & marketing professional with over 16 years of experience. He started his career as a management consultant at Kurt Salmon Associates and has worked in marketing & brand management, international business in sectors like precision steel tubes for automotive industry, consumer goods and retail.
He’s is a passionate cyclist and participated in several endurance competitive events. His interests are in behavioral psychology, economics and chess. He is a graduate in Computer Science and an MBA in Marketing. He completed his executive education from IIM-A in 2016 focusing on business strategy.