1 One to One Trade Promotion, Direct Marketing, and Personal SellingChapter Fourteen

2 Chapter Objectives Identify the sales promotion elements for B2BUnderstand the elements of direct marketing Appreciate the important role of personal selling and how it fits into the promotion mix Identify the different types of sales jobs List the steps in the creative selling process Explain the role of sales management LECTURE NOTES: By the end of this chapter, students should be able to: Identify the sales promotion elements for B2B Understand the elements of direct marketing Appreciate the important role of personal selling and how it fits into the promotion mix Identify the different types of sales jobs List the steps in the creative selling process Explain the role of sales management © 2012 Pearson Education, Inc. publishing as Prentice-Hall.

3 Real People, Real Choices: Decision Time at WoodtronicsWhich strategy should Jeffrey pursue? Option 1: Push the original solution, even though it is not the best thing for the client Option 2: Convince the client of Evolution’s price and functionality superiority Option 3: Attempt to raise the architect’s comfort level with Evolution and hope he will recommend it to the client LECTURE NOTES: Woodtronics is one of the leading manufacturers of trading desk furniture. An architect who had previously used one of Woodtronics’ best selling trading products recommended the use of a product for a new client. Woodtronics has developed a prototype for a new trading desk named Evolution, which Jeffrey believes to be better suited, given the needs of the architect’s client. The Evolution technology platform is specifically designed for high-density technology trading environments and maximizes the work surface area. However, the architect is hesitant to recommend the new product since it doesn’t have a proven track record. As a principal of Woodtronics, Jeffrey is personally involved in every major sale. He personally visited the new client and described Evolution; while the client was interested in learning more, the architect was still resisting. This leaves Jeffery with an interesting choice to make. OPTION 1: Jeffrey could preserve his relationship with the referring architect and push the original trading platform specified, even though he believes this is not the best solution. However, should the client be less than satisfied with the product, the firm’s reputation would be put at risk. OPTION 2: Jeffrey could attempt to sell the client on using the Evolution platform prototype by demonstrating how it would better fit his needs in terms of both price and functionality. However, this could alienate the architect who had been helpful in bringing new business to the firm. OPTION 3: Jeffrey could focus on educating the architect and raising his comfort level with the new Evolution product in the hope that he would be persuaded to change the recommendation to Evolution instead. Success would be a win-win situation and allow Woodtronics to place both the Evolution prototype, and retain the goodwill of the architect. Failure could mean that the architect would go to a competing firm that the architect did not perceive as wanting to “field-test” an unproven product on his client. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.

4 Figure 14.1 Trade Sales PromotionsLECTURE NOTES: Trade-oriented sales promotions target the B2B customer, specifically members of the channel of distribution, such as wholesalers, retailers, and sometimes even the manufacturer’s own sales force. Trade promotions take two forms: Incentives which are discounts and deals Those designed to increase visibility within the industry. The various forms that sales promotions can take are illustrated in Figure 14.1 As the name suggests, discount and deal promotions reduce the cost of the product to the distributor or retailer, or alternately, help defray advertising expenses. Examples of discount and deal promotions include the following: Allowances, discounts, and deals take various forms. Slotting allowances are one-time fees that firms must pay on a per store basis to place new products in grocery stores, convenience stores, and most mass merchandise stores. Merchandise allowances are provided as incentives to get the retailer to either use a display for certain period of time, or for advertising the product in the local media. These are often called bill-back allowances because the retailer performs the service first, then bills the manufacturer for the discount. Case allowances (also called off-invoice allowances) are simply discounts given to a retailer or wholesaler on items purchased during a certain period of time. Unfortunately, the assumption that retailers will use the case allowance to justify putting the product on sale to consumers proves to be true less than 50% of the time. Instead, retailers with excess warehouse space will often attempt to buy enormous quantities of the item – enough to tide them over until the next scheduled case allowance period. This is called forward buying, or sometimes bridge buying. Another problem is diverting, which occurs when a case allowance is available only to a certain geographic area. Some stores will buy larger quantities than they can use, then sell the excess to food brokers who in turn can sell them the product in geographic areas of the country where the case allowance is not currently offered. Both diverting and forward buying circumvent the purpose behind offering a merchandise allowance in the first place, which is to pass the incentive on to the ultimate consumers. Co-op advertising offers a win-win opportunity to both the retailer and the manufacturer, as the manufacturer agrees to pay a portion, or in in the case of unrestricted co-op advertising, 100% of the cost of a retailer’s local advertising. Manufacturers win because the rate charged to retailers is much lower than the rate paid by manufacturers if they were to place the ad themselves directly. They also typically create the advertising materials, allowing them to display the product and key information points in the most favorable manner possible. Retailers win because their costs are reduced, and they don’t need to deal with the hassle of creating an ad. The remaining trade sales promotions shown in Figure 14.1 are examples of tactics that are designed to increase industry visibility. We’ll discuss each as part of the next slide. © 2012 Pearson Education, Inc. publishing as Prentice-Hall. 4

5 Table 14.1 Characteristics of Trade Sales Promotion ApproachesLECTURE NOTES: Several trade promotions shown in Table 14.1 are designed to increase industry visibility: Trade shows are industry events held in large convention centers where vendors, suppliers, manufacturers from a given industry get together to share information about new products, generate sales leads, and make contacts. Only those who work in an industry can attend – these are not the same as the consumer product shows that you might have attended at the local convention center. Promotional products include branded items such mugs, clocks, mouse pads, polo shirts, pens and the like that list the name and logo of an organization. Members of the sales force often use promotional products as favors that are given to prospects or existing clients to build awareness or create good will. Point-of-purchase (POP) displays include temporary, semi-permanent, and permanent displays, as well as in signs, banners, floor ads, plastic reproductions of products, shopping cart ads and in-store television. POP displays offer a variety of benefits, including increasing consumer awareness of products, increasing impulse buys, reinforcing mass advertising and increasing off-shelf merchandising space. Retailers are generally overwhelmed with POP displays; manufacturers typically find that a merchandise allowance is helpful in convincing retailers to use displays. Incentive programs are often aimed at the firm’s own sales force. Push money is often used to motivate the sales force to sell older models, unpopular colors, or just to sell more product or demonstrate a certain item. Push money may take the form of cash bonuses, trips, or prizes. © 2012 Pearson Education, Inc. publishing as Prentice-Hall. 5

6 Trade Sales Promotion: Targeting the B2B CustomerTSNN: Trade show news network Trade-show-advisor.com tips for success POPAI: The global association for marketing at retail. PPAI: Promotional products association international WEB SITE NOTES: Links to three industry web sites are provided on this slide. TSNN: Visiting the trade show news network can be beneficial if the instructor wishes to demonstrate the wide scope and variety of trade shows that are available. A search might start with the choice of an industry, such as Food and Beverages, with delimiters placed in terms of country (USA) and perhaps other parameters. The BLOG menu often contains interesting thoughts and comments related to either changes in the industry, or techniques for improving trade show exhibits. The trade-show-advisor.com website is an excellent recent for students who are interested in learning more about the nuts and bolts of how to put together a successful trade show presence. POPAI: This website offers a great deal of information related to point-of-purchase displays and successful in-store retailing tactics. Industry news, research articles and more are available. Linking on the “Creative Gallery” link available at the top of the page is a great way to show students the wide range of POP displays being used today. PPAI: The promotional products association international website also offers industry news, plus links to various publications that contain additional news. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.

7 Direct Marketing Direct marketing Any direct communication to a consumer or business recipient designed to generate a response in the form of an order, a request for further information, and/or a visit to a store or other place of business for purchase of a product LECTURE NOTES: According to updated statistics provided by the direct marketing association, “In 2010, marketers – commercial and nonprofit – spent $153.3 billion on direct marketing, which accounted for 54.2% of all ad expenditures in the United States.  Measured against total US sales, these advertising expenditures generated approximately $1.798 trillion in incremental sales.  In 2010, direct marketing accounted for 8.3% of total US gross domestic product.  Also in 2010, there were 1.4 million direct marketing employees in the US.  Their collective sales efforts directly supported 8.4 million other jobs, accounting for a total of 9.8 million US jobs. ” SOURCE: retrieved April 29, 2011. Obviously, direct marketing has a huge impact. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.

8 Figure 14.2 Key Forms of Direct MarketingLECTURE NOTES: The four key forms of direct marketing are shown in Figure Each is explained in more detail on the following slides. © 2012 Pearson Education, Inc. publishing as Prentice-Hall. 8

9 Direct Marketing Mail orderCatalogs: Collection of products offered for sale and described in book form, usually consisting of product descriptions and photos LECTURE NOTES: Both direct mail and catalog marketing are forms of mail order. Catalogs are ordered from by over two-thirds of US adults at least once a year. Computers, clothing, pond accessories and more. Catalogs were originally created as a method for stores such as Sears to reach people who lived in areas to small to support an actual store. Recently, catalogs have provided an excellent method of reaching overseas customers. Of course many consumers receive catalogs unsolicited, and as such consider them junk mail. CatalogChoice.org allows consumers to communicate with over 3,000 cataloguers and request that their names be removed from mailing lists. This non-profit site seeks to reduce the waste that unwanted catalogs create. As the cost of paper and postage continues to increase, it is really to marketers advantage to limit catalog distribution to only those who have a true desire to receive them. Catalog Choice © 2012 Pearson Education, Inc. publishing as Prentice-Hall.

10 Direct Marketing Mail orderDirect mail: A brochure/pamphlet offering a specific good/service at one point in time LECTURE NOTES: Direct mail offers are so prevalent today, that many recipients simply send them straight to the trash. In fact, half the battle in direct mail marketing is simply to get the consumer to open the direct mail piece. One creative tactic for breaking through the clutter and getting mail opened includes disguising direct mail solicitations as greeting cards (complete with what appears to be a sticker return address from a “real” person). DISCUSSION NOTE: Ask students about to discuss whether or not they feel the greeting card disguise is an ethical direct marketing tactic. Then ask them to describe various direct mail offers they have received and what creative tactics were used by the marketer that helped motivate them to open the envelope. WEB SITE NOTE: The direct marketing association offers consumers various options for managing both direct marketing and via the DMA Choice.org website. DMA Choice © 2012 Pearson Education, Inc. publishing as Prentice-Hall.

11 Direct Marketing Telemarketing: Direct marketing conducted over the telephone Do Not Call Registry LECTURE NOTES: Everyone’s familiar with telemarketing, but you may not realize that telemarketing efforts directed towards businesses are actually more profitable than are efforts directed towards consumers. Why? Phone calls are less expensive when keeping in contact with low volume accounts compared to sending an actual sales representative to there place of business. The Federal Trade Commission established the National Do No Call Registry to eliminate unwanted phone solicitations. Telemarketing firms are supposed to check the registry at least every 31 days and purge their phone lists accordingly. Both land line and cell phones can be registered with registry. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.

12 Direct Marketing Direct-response advertising: Allows consumer to respond by immediately contacting the provider with questions or an order Direct-response TV (DRTV) Infomercials LECTURE NOTES: A classic example of direct-response TV is the Oxy Clean add featuring the late Billy Mays’, which is linked to this slide. Direct response TV includes commercials less than 2 minutes long, such as this one, as well as home shopping networks such as QVC and HSN. Not everything sells equally well; exercise equipment, self-improvement products, and health products are among the top selling categories. Infomercials are half-hour or longer commercials that involve extensive product demonstrations, often with audience involvement. Infomercials are typically shown on cable channels late at night when programming time is less expensive. OxyClean (2000) © 2012 Pearson Education, Inc. publishing as Prentice-Hall.

13 Direct Marketing M-Commerce: Promotional and other e-commerce activities transmitted over mobile phones/devices Short-messaging system marketing (SMS) LECTURE NOTES: The final form of direct marketing is m-commerce. The Coda Research Consultancy predicts that online sales by mobile devices will increase from 1.2 billion in 2009, to nearly 24 billion by (SOURCE: retrieved on 4/29/2011). The text discusses SMS text messaging as one form of mobile commerce. A growing form m-commerce is location-based, in which consumers are targeted with discounts, specials, or other offers based on their current location. And smart phones are increasingly likely to be able to access the Internet. As smart phones become more widely adopted, m-commerce efforts will continue to become more sophisticated. Many ads now contain visual displays, animations, and links back to websites. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.

14 Personal Selling: Adding the Personal Touch to the Promotion MixPersonal selling: Occurs when a company representative interacts directly with a prospect or customer to communicate about a good or service Get the scoop on sales salaries! Visit the Occupational Outlook Handbook! LECTURE NOTES: On a cost-per-contact basis, personal selling is the most expensive form of marketing communication. However, the “Personal touch” aspect of the one-on-one communication is essential for developing relationships between businesses. Plus salespeople provide information back to the firm regarding what customers think, what competitors are doing, and what concerns clients might have. Personal selling is highly effective for products that are technically complex or too expensive to market via mass media or by other methods. Intangible products are also more likely to be promoted via personal selling. Selling is one of the major career paths that many students take following graduation. Sales jobs provide high mobility – many CEOs began their company career in sales. Let’s visit the occupational outlook handbook and take a look at current predictions for growth in jobs for sales representatives in the wholesale and manufacturing industries. WEBSITE NOTE: The link will lead to the occupational outlook handbook home page. From there, select SALES / SALES OCCUPATIONS from the left-hand menu, then select sales representatives, wholesale and manufacturing from the list of links shown under the sales and related occupations. This will access the most current information regarding the job outlook, projections data (which shows growth), and earnings for different types of industries. NOTE: The 2011 Handbook shows data from The data lag is usually 2 – 3 years behind the publication date of the Handbook. Another excellent source for demonstrating the earning potentials of various jobs is via the salary.com website. Students will benefit from this site because they can access actual salary and benefit information for particular states or cities. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.

15 Figure 14.3 Factors That Influence a Firm’s Emphasis on Personal SellingLECTURE NOTES: Personal selling is often essential if firms seek to land a commitment of some type, such as a contract or purchase. But what’s it’s role in the overall promotional mix? Figure 14.3 lists the various factors that make personal selling more or less important in the promotional mix compared to advertising, and other elements. Obviously, a strong focus on personal selling is needed when a firm engages in a push strategy, because this strategy dictates that sales and trade promotions be targeted at wholesalers, retailers or other members of the distribution channel. Some advertising may still be used of course, but the push strategy expects the retailer to bear the brunt of efforts meant to reach the ultimate consumer. Personal selling is also critical when the selling firm interacts with upper level management of the client firm, and certainly when negotiations are required concerning price, trade-ins, or the need for customized or personalized services. Personal selling is also extremely helpful when the buying firm is undertaking a “new task” purchase for a product or service with which they have no experience. As mentioned earlier, the more complex or technical a product, the more likely it is that personal selling will be necessary to explain the benefits to the client, as well as how the product works. Because personal selling is expensive, it tends to restricted to larger customers for whom the high dollar sales volume will justify the time and expense associated with personal selling. © 2012 Pearson Education, Inc. publishing as Prentice-Hall. 15

16 Personal Selling is Not Appropriate in All SituationsLECTURE NOTES: Of course the drawback inherent in personal selling is that it isn’t appropriate for all situations. Salespeople can only make so many face-to-face visits a day so when the purchase volume or dollar amount involved is low, personal selling in general, or face-to-face visits with existing customers, often don’t make sense. Sometimes firms use an inside sales force to contact clients who need to order supplies. For example, a firm may use a sales representative to visit and sell copy machines, but contact the customer over the phone when checking reorder needs for toner and paper. This is because the average cost of a sales call visit was around $350 in 2010, and is expected to increase by about 5% annually – perhaps more – if gasoline prices continue to increase at the rate observed during the early months of 2011. Outside of the business to business arena, direct selling involves salespeople who bypass channel intermediaries and sell directly from the manufacturer to the consumer through one-on-one contact. Tupperware, Avon, Mary Kay and Pampered Chef are just a few examples. Even so, these independent sales representatives still try to maximize their efforts – often by convincing one of their clients to throw a “party” to which several individuals are invited. The sales representative then presents her goods to those in attendance, the host/hostess receives a free gift or credit towards a purchase for hosting the party. © 2012 Pearson Education, Inc. publishing as Prentice-Hall. 16

17 Technology and Personal SellingNumerous technologies help enhance the selling effort: Specialized software Partner relationship management (PRM) Teleconferencing, videoconferencing, and improved corporate Web sites Voice-over Internet protocol (VoIP) Assorted wireless technologies LECTURE NOTES: Many technologies can enhance the personal selling process. Smart phones provide easy and instant access to information that clients need to know, as well as offering an excellent communication channel. Although the internet access to and website information is convenient, it can’t replace the face-to-face contact necessary when high-dollar sales are on the line, which is why smart phones are simply a tool used as part of the overall selling process. Laptops, various types of software, VoIP, wireless, teleconferencing, videoconferencing, and corporate web sites are also helpful tools. Customer relationship management (CRM) and account management software such as Goldmine and ACT have helped salespeople manage their client information and prospect databases. Relatively inexpensive, these programs are easy to use and offer salespeople drop down menus, customizable information fields, and easy report generation features, all of which help the sales rep to be more productive and save valuable time. Cloud computing applications are more customizable and integrative than either ACT or Goldmine. Salesforce.com offers one of the leading applications in the industry. Cloud platforms have the advantage of low monthly costs, as clients rent the CRM system on a monthly basis, rather than paying major capital outlays to own advanced CRM software systems. Some firms use partner relationship management to link information between the selling and buying firm. This requires that both supplier and buyers share access to at least some of their data via Intranets or systems that allow each firm to maximize the usefulness of the data. Teleconferencing and videoconferencing offer excellent methods of bringing together interested parties from different locations at minimal costs, and corporate websites often offer customers the opportunity to self-serve via FAQs or access to shipment tracking / account management information. VoIP systems like Skype help salespeople on the road to talk to other Skype users for free, or very inexpensively to regular phone lines. Customers and salespeople alike are also becoming more comfortable with webcam usage and instant message technology. Finally, many salespeople use video demonstrations via their laptop to demonstrate product usage or other factors that would be difficult to do otherwise. WEBSITE NOTES: As of April 2011, all key CRM sites (ACT, Goldmine, Salesforce.com’s Sales Cloud) required individuals to register prior to being allowed to view demos of the software in question. Demos found on YouTube for Goldmine and ACT tended to be too long for class usage (6 – 9 minutes). Therefore, instructors may wish to visit the salesforce.com website prior to class, register, and preview the demo before deciding whether or not to leave the link shown on this slide in the presentation. Click the “View demo” link to begin the registration process. Salesforce.com © 2012 Pearson Education, Inc. publishing as Prentice-Hall.

18 Figure 14.4 Types of Sales JobsLECTURE NOTES: Is someone who asks if you want fries with your order a salesperson? Many different forms of sales jobs exist; retail sales are just one example, and tend to be classified as Order takers. This category also includes in-store salespeople and catalog sales order takers who essentially wait for the customer to initiate a transaction or to place the phone call to a number. Order takers then assist consumers with the paperwork or other transactional aspects of the sale. Order takers typically exhibit little initiative—they do not actively pursue new accounts and rarely exhibit any creative selling techniques. While some order taker positions exist in the B2B selling arena, most tend to be found in B2C selling situations. Technical specialists assist or support in the selling effort rather than attempt to close a sale. For example, a technical specialist may set up a new piece of equipment when delivered to the customer. Retail demonstrators—such as the “food ladies” in the grocery store who prepare and offer food samples to shoppers—are another form of technical specialist. Missionary sales people include pharmaceutical sales representatives who visit physicians for the purpose of educating them about the benefits and side effects of prescription drugs, in the hope that the doctors will prescribe their brand to patients as appropriate. Missionary sales people are sometimes called detail sales representatives. Their job may include leaving samples for the physicians, and encouraging them to prescribe the drug to their customers. However, missionary salespeople do not take orders. New-business salespeople is a broad term for any sales representative that is responsible for creating new customers. Several specific forms of new business salespeople exist, including account representatives, who service many existing accounts while attempting to attract new business; industrial sales representatives who sell non-technical products such as lubricants that are used in manufacturing; service salespeople who sell ISP or Web design services, long-distance service, or any of a host of other services, and sales engineers, who sell highly technical customized solutions to customers’ problem. Once a new-business sales person has established a relationship with a new client, they continue to service the account. In the context of long-term-relationship building, this type of salesperson is also considered to be an order getter – the person most directly responsible for a particular client’s business. Sometimes these individuals are called account managers. As a final note, more and more firms are finding that the selling function works best when team selling is used. In this context, a sales representative, technical specialist, and perhaps other players all perform a role in the sales process. When individuals from a variety of areas are used it may be called a cross-functional team. © 2012 Pearson Education, Inc. publishing as Prentice-Hall. 18

19 Two Approaches to Personal SellingTransactional selling: A form of personal selling that focuses on making an immediate sale with little or no concern for developing long-term customer relationships Relationship selling Process of building long-term customers by developing mutually satisfying, win-win relationships with customers LECTURE NOTES: Personal selling has transformed itself over the last twenty years. The “old style” mode of personal selling focused on the transaction, meaning that effort was devoted to making the sale at any cost, and little time and effort was spent on trying to understand whether what was being sold was best for the customer’s situation. Nothing was sacred – salespeople would lie to clients about the product’s capability and pressure potential customers to sign the deal. Very little attempt was made to build relationships with the customers, and customers who were subjected to the tricks and tactics used by manipulative salespeople often ended up feeling resentful towards the manufacturer and less satisfied with the experience. While transactional selling sometimes still occurs in B2C sales, fortunately, professional business-to-business selling has evolved well beyond this mode of thinking. Today, B2B salespeople focus on building relationships with clients. They focus their efforts on understanding the customer’s needs, then presenting the product or service solution that can best satisfy those needs in a manner that offers a win-win solution for both parties. Follow-up by the salesperson is extremely important; salespeople train users of the equipment, handle complaints, and check regularly with the client to be certain that they are satisfied. The benefit of relationship building in this manner is that it creates satisfied customers who return for repeat business. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.

20 Figure 14.5 Steps in the Creative Selling ProcessLECTURE NOTES: Figure 14.5 lists the steps in the creative selling process which salespeople follow as they attempt to build relationships with customers. © 2012 Pearson Education, Inc. publishing as Prentice-Hall. 20

21 The Creative Selling ProcessStep 1: Prospect and qualify Prospecting: Developing a list of potential customers Cold calling Referrals Qualifying: Determining how likely potential customers are to become customers LECTURE NOTES: The first step of the selling process involves prospecting for potential customers, and qualifying whether these sales leads are truly worth visiting. Business and telephone directories, commercially available databases, and web search engines may provide sales leads as well. Past customers who no longer do business with the firm represent an excellent sales lead, assuming they still have a need for the product. Current customers are an outstanding source of sales leads when they provide referrals to sales people of people whom they know to be in need of a good or service. This makes it easier for the sales representative to get an appointment with the prospect, and helps determine that the lead is in fact qualified (a term we will discuss in just a moment). Trade shows also offer an efficient method of gathering sales leads, as do web site generated inquiries. The least efficient method of finding sales leads is via cold calling, a process by which salespeople visit a place of business with no prior appointment or introduction. Busy buyers often resent the intrusion of a sales person who doesn’t make an appointment; manytimes the person who the sales representative needs to see is unavailable or out of the office. Even when the salesperson gets in to see the buyer, many contacts end in disappointments because the prospect has no need for the good or service being sold. The most successful salespeople tend to be very efficient prospectors. They also spend time qualifying sales leads to be certain that there is a need for the good or service, that their firm can afford to purchase the item in question, and that they know the correct individual to contact who has the authority to make the buy. While it isn’t always possible to learn all of this information prior to the first meeting, qualifying helps salespeople avoid wasted meeting time. Time is a salesperson’s most precious commodity. WEBSITE NOTES: Inc. magazine has long been a respected source of information for entrepreneurs. The sales resource section on the Inc.com Web site offers articles, how-to-guides, articles, slides, blogs and Inc.TV on a variety of topics which can be reached by navigating from the landing page linked to the PPT, or via Similarly, SalesResources.com has compiled several sales related short tutorial videos, articles, RSS feeds related to sales, and many other resources. Either of the Web sites could provide current information or videos that could be used to enhance any part of the “creative selling process” lecture. However, instructors with bandwidth constraints will most likely wish to avoid playing video in class. Inc. Sales Resources SalesResources.com © 2012 Pearson Education, Inc. publishing as Prentice-Hall.

22 The Creative Selling ProcessStep 2: The preapproach Compiling background information about prospective customers and planning the sales interview Information is gathered from many sources LECTURE NOTES: Once an appointment has been made with a prospect, the sales person begins his or her preparation in earnest. The second step of the process, called the preapproach (or precall planning) involves compiling background information about prospective customers and planning for the sales interview. Information is gathered from informal sources, the CRM system when the prospect is a current or former customer, customers’ Web sites, and/or business publications. Any information source that provides insight into the prospect’s purchase history, current needs, and customer’s interests can be helpful. Salespeople who sell non-competing products are an excellent source of information about prospective customers (as well as the problems that they may be experiencing with existing equipment). Very often these individuals can provide valuable insights into the personality or communication style of the prospective buyer, or offer other valuable information that sales representatives typically attempts to learn during the preapproach. Many times salespeople who sell non-competing but complimentary products will create an informal association (sometimes called a sales club or swapping club) for the purpose of sharing leads, perhaps by meeting for breakfast every other Friday morning. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.

23 The Creative Selling ProcessStep 3: The approach Contacting the prospect “You never get a second chance to make a good first impression” LECTURE NOTES: The approach is a commonly used term to describe the first few minutes of a face-to-face conversation with the prospect. During these early minutes, the sales representative seeks to build rapport or common ground with the prospect, by discussing mutual interests, common acquaintances or other “small talk” topics. While the salesperson hopes to be able to learn even more about the prospect’s needs, he or she must first focus on creating a good impression. Creating a strong first impression has many aspects. Salespeople should be well-groomed and wear business attire that is appropriate to the industry. Chewing gum, swearing, using poor grammar, and mispronouncing the customer’s name can make a terrible first impression from which the sales representative may never recover. Visible tattoos and body piercings are likely to be poorly received in personal selling, and are discouraged among those who wish to be considered professionals. The initial handshake is also critical to creating a first impression when it takes place at the beginning of the meeting. A sweaty hand, or “limp” handshake makes a bad impression as does too strong a handshake which seems to challenge the client to a squeezing contest. Of course shaking hands in the first place is the choice of the prospect. If the prospect doesn’t offer his or her hand first, the appropriate thing to do is to hold off on offering your hand. Very often in these cases handshakes may take place at the end of the meeting instead. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.

24 The Creative Selling ProcessStep 4: The sales presentation Laying out the benefits and added value of a firm’s product/service and its advantages over the competition Invite customer involvement Listening skills are critical LECTURE NOTES: While many sales calls involve a formal presentation of the benefits of the products or service, sometimes multiple sales calls are necessary. For example, Sales representatives must take the time to question the prospect BEFORE launching into the sales presentation, so that the sales representative thoroughly understands the prospects’ needs, how users in the firm will use the product or service, and any problems that they might be experiencing with their current equipment or vendor. Obtaining this information is critical, as it allows the sales representative to customize their presentation in a manner that grabs the buyer’s attention and keeps their interest. Listening and questioning skills are essential when attempting to learn about the needs of the prospect. Eye contact with the prospect helps show that the sales representative is interested in what he or she has to say. Questions are often open-ended, meaning that they cannot be answered with a simple yes or no. In fact, the prospect should be doing the majority of talking during the needs assessment. Open-ended questioning and active listening encourages the prospect to provide greater detail that is helpful to the sales representative when trying to understand the customer’s needs. Depending upon the industry, the salesperson may assess needs then deliver the presentation during a single appointment. More complex, technical, or customized purchases often require that a sales representative schedule a needs assessment meeting first, then make a second appointment at a later date to deliver the actual sales presentation. Regardless of whether the sales presentation takes place during a first or subsequent meeting, the sales representative focuses his or her time on explaining of the features and benefits of the firm’s product(s) address the needs of the prospect. As part of this process, the salesperson may engage in a physical or virtual demonstration of one or more product features, provide testimonials from satisfied customers or independent proof of claims from third parties, and continually ask questions to make certain that the buyer understands the relative advantages and benefits of the proposed solution. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.

25 The Creative Selling ProcessStep 5: Handle objections Anticipating why a prospect is reluctant to make a commitment and responding with additional information or persuasive arguments Welcome objections Objections must be successfully dealt with to move prospect to decision stage LECTURE NOTES: During the sale presentation, the prospect should be prepared to answer questions and to respond to reasons why a prospect is reluctant to make the purchase or lease commitment. Part of planning for the sales presentation involves anticipating common objections and planning how to respond. Common objections relate to price, quality, satisfaction with the current vendor, buying now vs. later, among others. New salespeople often dread dealing with objections and may take steps during the sales presentation to minimize questions or feedback on the part of the buyer. However, this attitude is counterproductive. Salespeople need to actively welcome questions and objections – without hearing what’s standing in the way of the sale, the sales representative has little chance of addressing those concerns and closing the deal. The process for dealing with an objection typically involves rephrasing or clarifying the nature of the issue, responding to the issue in a way that addresses the concern, then seeing whether the buyer accepts the explanation and whether the objection is overcome. For example, a prospect may tell the sales representative, “Our budget is tight right now. We can’t make any major purchases until after the first of the year.” The salesperson could deal with this objection by discussing leasing options, or even negotiating a win-win situation by saying something like, “I understand that it’s difficult to find funding for major buys at the end of the year. What if you signed a contract today, took possession of the product now, and we deferred billing your firm until January 5th? Would that take care of the problem?” If the budget problem is legitimate, such an offer may well secure the sale. However, prospects don’t always give salespeople the true reason why they are unwilling to buy. If another objection exists, offering to fix the stated objection may well reveal the hidden objection that is truly blocking the sale. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.

26 The Creative Selling ProcessStep 6: Close the sale Gaining the customer’s commitment in the decision stage using a variety of approaches: Last-objection close Assumptive or minor-points close Standing-room-only or buy-now close Step 7: The follow-up Arranging for delivery, payment, and purchase terms LECTURE NOTES: If a salesperson has done his or her job well and successfully handled objections, closing the sale should not be the painful process that many salespeople have come to dread, but rather the natural next step to take in the sales process. Closing the sale involves gaining the prospect’s commitment to lease or purchase the product. A variety of techniques can be used, but our discussion today will focus only the three shown on this slide. The last objection close asks customers if they are ready to buy, assuming that the sales representative can address any concerns they have about the product. “Are you ready to order, assuming we can prove that our product quality meets your specifications?” An assumptive or minor points close is used to “warm-up” the buyer to the inevitable by asking them to make a decision on a point related to the sale in some way. “Would you prefer the green or blue model?” or “Are you interested in buying or leasing?” or “Would you be interested in 5,000 units, or would you prefer to pay the lower price that accompanies a larger order of 10,000 units?” The standing room only close must be used ethically, as the salesperson typically attempts to motivate immediate action by implying the quantities are limited and buy run out, or that a special incentive or price discount is on the verge of expiring. What happens if a prospect says no? Salespeople typically try to uncover objections that haven’t been raised, deal with them, then ask with the order again. A good salesperson can ask for the order between 3 and 5 times (using different tactics and phrasing) without offending the prospect. Even if the salesperson doesn’t get order, they don’t give up. They simply leave the sales meeting, but retain that contact as a prospect, and attempt to schedule another sales call in the future where the sales process begins all over again. This is a critical point to realize – business is dynamic. The clients needs may change in the future and the salesperson’s firm may develop new products that more capable of meeting the client’s needs. The salesperson’s obligations to a customer don’t end with the order taking. Salespeople must be available when the product or service is delivered/installed, and should help train users at the buying firm as needed. Questions related to payments, ordering, problems, etc., are also part of the follow-up process, as are additional sales calls designed to upgrade the product or check on the status of supplies that are used in conjunction with the product. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.

27 Figure 14.6 The Salesforce Management ProcessLECTURE NOTES: Sales management is the process of planning, implementing, and controlling the personal selling function of an organization. This process contains four key steps, as shown in Figure We will discuss each of these in more detail on the following slides. © 2012 Pearson Education, Inc. publishing as Prentice-Hall. 27

28 Sales Management ProcessSetting sales force objectives Objectives state what the sales force is expected to accomplish and by when Many take many forms Individual objectives may be: Performance objectives Behavioral objectives LECTURE NOTES: Sales force objectives state what management expects the salesforce to accomplish and by when. Objectives take many forms and focus on a variety of topics such as sales, customer acquisition, cost reduction, or customer satisfaction. Other common objectives may relate to reporting on competitive activity, community involvement, training other sales representatives and the like. Often sales managers will set these objectives as performance measures for the sales force as a whole. However, sales managers also set the objectives for each individual member of the sales force. Because of differences in terms of experience, the products being sold, and the nature and potential of the sales representative’s territory, the objectives set for one salesperson may very well differ from those set for another. Performance objectives are set in terms of outcomes such as unit sales or dollar sales, either in total or by product or product line. Profit may also be used in addition to or as a substitute for dollar sales. Behavior objectives specify actions that the sales person is expected to accomplish, such as the average number of sales visits which should be made weekly, the number of prospects which should be identified, and the like. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.

29 Sales Management ProcessCreating a sales force strategy Establishing structure and size of a firm’s sales force Setting sales territories is a major responsibility; several forms exist Geographic sales force structure Product-class sales territories Industry specialization Key/major accounts LECTURE NOTES: The structure and size of the sales force is most commonly impacted by decisions related to sales territories. Simply put, the customers and potential set of customers assigned to a particular sales representative is his or her sales territory. The most common form of organizing sales territories is on a geographic basis, where a particular sales representative is given exclusive control over customer within a city, state, or some other specified geographic region. This organizational approach is appropriate for firms that sell a few products, or a line of products that is not particularly technical or complex. However, firms that have multiple product lines with diverse product offerings are better organized according to product class as this allows salespeople to develop expertise within a product category. This organization is particularly helpful when product lines are complex or highly technical. The downside is that some firms become annoyed when forced to deal with multiple sales representatives from the same firm. For example, Kraft Foods has separate sales forces for beverages, cheese and dairy, and other grocery items. Organization according to industry specialization allows salespeople to focus on the unique aspects inherent in different industries or different types of buyers. For example, General Motors has a sales force this sells only to government buyers, as government organizations have special buying requirements. GM also has a “fleet” sales force that calls on businesses such as Enterprise and Hertz, as well as corporations that buy cars for their executives and sales people. Often a manufacturer will assign a senior sales representative to what are called key or major accounts, which are typically high-volume, national accounts that would cause the firm great hardship if lost. Walmart is a key account for many businesses; P&G uses cross-functional teams to serve key accounts such as Publix Supermarkets. The rationale behind the use of key account salespeople goes back to the 80 / 20 rule: 80% of your business comes from 20% of your customers. Therefore, their satisfaction is paramount. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.

30 Sales Management ProcessRecruiting the right people Candidates are screened for several skills Pencil-and-paper test determine other competencies Sales training: Teaches salespeople about firm, its products, how to develop skills, knowledge, and attitudes to succeed Professional development is ongoing LECTURE NOTES: Salespeople drive the success of the firm. A key function of the sales management process is to ensure that processes are in place to recruit the best people, and train those that are hired to do the job properly. The best sales candidates are those that have strong listening skills, strong initiative and tenacity, excellent organizational skills, outstanding communication skills, and the ability to adapt their sales style to the situation at hand. Personal interviews are always part of the interview process, and pencil-and-paper tests can help to determine quantitative skills and other competencies (software knowledge, etc.). Sales training takes many forms. Most basic is the type of training that teaches salespeople about the benefits and drawbacks of the various products or services that they will be responsible for selling. Training also covers issues related to the firm, such as the background of the business, key policies and procedures, how to deal with ethical dilemmas, and the like. While some firms actively seek experienced salespeople, others prefer to hire individuals who are inexperienced so that they can be trained “properly”, as more experienced salespeople may have picked up bad habits in previous jobs. Teaching salespeople HOW to sell is another very common form of training. This type of training may be formal, involving classroom sessions, role plays, online videos or training sessions and the like. Small firms often rely on mentoring, an informal technique in which new sales representatives are simply asked to shadow existing representatives and learn by watching what they do. Regardless of how salespeople are trained initially, professional development is an ongoing activity in which sales representatives learn about new technology, or who are interested in advancing into managerial positions. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.

31 It’s Debatable Class Discussion QuestionPut yourself in the position of a sales manager for a moment. Sales recruits come from a variety of educational backgrounds, and often have a wide range of experience. Will sales training and developmental needs vary based on how long salespeople have been in the business? Is it possible (and feasible) to offer different training programs for salespeople at different career stages? Where do you stand? LECTURE NOTES: Answers will vary. It’s worth pointing out though that technology makes it increasingly possible to offer more customized training to salespeople depending upon their level of expertise and particular needs. Webcasts can be recorded and reused, for example, making them a cost efficient solution. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

32 Sales Management ProcessRewarding sales people Paying salespeople well to motivate them Straight commission plan Commission-with-draw plan Straight salary plan Quota-bonus plan Sales contests can boost sales Call reports aid supervisors LECTURE NOTES: Many individuals choose sales as a profession because they crave recognition for their accomplishments. Motivating salespeople often involves recognizing their efforts via the company newsletter, sales awards, or other visible forms of recognition. Of course the pay-for-performance aspect of many sales positions is also rewarding for many individuals. Compensation plans vary; let’s discuss the differences between each now. A straight commission plan is the ultimate pay for performance compensation plan – the more the sales person sells, the more he or she earns. The disadvantage of this plan is that a person’s income can be highly variable, making it difficult to budget for personal expenses. It is also a poor choice for new salespeople with no experience; it typically takes a new salesperson 12 – 18 months to get up to speed and “learn” his or her profession (particularly when selling services, which are more difficult than products). Straight commission plans have also been criticized as focusing a salesperson’s efforts on gaining new business, which sometimes comes at the expense of follow-up to existing customers. The commission-with-draw plan allows a salesperson to draw a regular payment on a weekly basis that will be charged against future commissions when current earnings are insufficient to cover the draw. While this helps the salesperson in terms of household budgeting, it’s still not the optimal choice for a new salesperson who has student loans and other expenses which must be met. The straight salary plan pays a salesperson a fixed amount, regardless of performance. Unfortunately, this provides little incentive for individuals who are motivated by earnings to work hard and build new business, but when large amounts of customer service and follow-up are necessary, a straight salary plan can ensure that salespeople are spending adequate time servicing their existing accounts. Sometimes firms combine the straight salary plan with some sort of commission to provide more encouragement to the sales force to build new business. The quota-bonus plan is more common than a combined salary and commission plan. Under the quota-bonus plan, sales representatives are paid a salary, but receive substantial bonuses when their sales volume exceeds different quota (goal) levels. Quotas can target overall volume or focus the sales representative’s efforts on a particular product or service (those that are being phased out, those that are new, those that are more profitable, those that the manufacturer is overstocked on, etc.) Sales contests allow salespeople to compete for cash, prizes, and trips for selling specific goods or services during a specified period of time. The trick is to make certain that a firm doesn’t overuse a contest; those that can be predicted as beginning or ending on a regular basis may condition salespeople to bad habits, such as holding orders until the contest begins, or pressuring clients to make extremely large orders before the contest ends. While most salespeople today do not report to a corporate maintained office (many work out of their home), supervision is essential. Since it is impossible for the sales manager to accompany every sales person every day, sales people submit weekly call reports that provide details concerning the number of new prospects visited, the number of sales calls made, the amount of product sold, the number of follow-up visits, etc. Most account management and CRM software programs generate these reports with a touch of a button. Call reports can also be used to make sales supervisors aware of competitive actions or problems that customers are experiencing. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.

33 Sales Management ProcessEvaluating the sales force Is the sales force meeting its objectives? What are possible causes of failure? Individual performance is measured against quotas or other quantitative factors Qualitative factors may also be used Expense accounts for entertainment and travel may also be monitored LECTURE NOTES: Sales managers also have the unenviable job of evaluating the sales force. Most CRM software programs share electronic information with the sales manager; this allows the sales manager to compare sales people’s performances to the objectives set for each person and for the overall sales force. It also allows a sales manager to compare the performance of one representative to another (though this may not always be an appropriate action to take). To be fair, sales managers must give careful consideration to the reasons why sales people who do not meet objectives have failed. Sometimes, it isn’t their fault. Unexpected economic downturns can turn business upside down. It would be foolish to fire a salesforce that fails to reach its objectives due to uncontrollable factors. The individual performance of each salesperson is compared against the quotas set at the beginning of the quarter or the year. An unfortunate but predictable outcome of this process is that sales managers typically increase the quotas of salespeople who meet these goals, making it more difficult to earn bonuses under the quota bonus plan the following year. Many firms also evaluate salespeople with respect to their product knowledge (perhaps via a paper and pen test). Customer satisfaction, measured by surveys sent to customers, is an example of a qualitative factor that many firms have chosen to incorporate in their review process as are metrics such as customer loyalty. Such evaluations underscore to the salesperson the importance of building and maintaining customer relationships. Finally, expense accounts are often monitored to be certain that they fall within acceptable limits and that the monies are spent for acceptable reasons. While the appropriateness of entertainment expenses is often dependent upon the size of the customer and the amount of money they generate, purchases that are excessive or which ultimately benefit the salesperson on a personal level are not. For example, the text mentioned that a sales representative had tried to expense the cost of chartering a private plane in order to make a sales meeting, after the sales representative missed the regularly scheduled flight. Another questionable expense was submitted to cover the cost of a set of china bought for the salesperson’s wife who prepared dinner for a client dinner party. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.

34 It’s Debatable Class Discussion QuestionAre these legitimate business expenses or do would you question their submission if you were a sales manager? Where do you stand? $ 1,000 paid for gambling chips divided among four clients who are being entertained at a casino. Cover charges and drinks for a local strip club. LECTURE NOTES: Answers will vary and should generate considerable discussion. Many firms develop ethical codes that explicitly list forms of acceptable entertainment as well as those which are not acceptable. Reimbursement for gambling chips is “iffy”. Technically, a court of law could construe such gifts as thinly disguised bribes. Also at issue is whether or not casinos are legal in the state in question. Reimbursing cover charges and drink charges from a local strip club is also questionable. While there is nothing illegal about these costs, using strip clubs as a form of client entertainment may be contrary to established company policy. Should the sales representative also attempt to claim expenses related to dancer tips or “lap dances”, the issue becomes even murkier. Beyond the fact of whether or not these expenses would be reimbursed, salespeople should think carefully about the “message” that is sent when they agree to entertain a client at a casino or strip club. Such actions may damage the image of the salesperson, and by association, the image of the firm. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall

35 Real People, Real Choices: Decision Made at WoodtronicsJeffrey chose option 2 Why do you think that Jeffery went directly to the client with a mock-up of the Evolution platform and involved the architect only after the client was satisfied with product? LECTURE NOTES: Jeffrey chose to ignore the architect’s recommendations and instead pitched the new Evolution platform directly the client. The architect was alerted to the change only after Jeff was certain that the client was completely satisfied with the new product, and decided to purchase it within a week of seeing the demo. Why do you think that Jeff was willing to risk alienating the architect in order to make the sale? Is this an example of transactional selling, or relationship selling? © 2012 Pearson Education, Inc. publishing as Prentice-Hall.

36 Keeping It Real: Fast-Forward to Next Class Decision Time at Sam’s ClubMeet Heather Mayo, Vice President of Merchandising for Sam’s Club Milk is difficult to supply economically and competitor’s are treating milk as a loss leader to entice consumers to their stores The decision to be made: What steps should Sam’s take to trim costs in the supply chain and make shipping milk more efficient? LECTURE NOTES: Heather Mayo is the VP of Merchandising at Sam’s Club. Most Sam’s Clubs offer grocery items in addition to packaged goods. While Milk is a staple item, it takes up a great deal of storage space and is highly perishable. Grocery stores often use milk as a loss leader, selling it below cost, in order to entice consumers into the store. As a result, Sam’s Club found itself losing marketing share to the competition. Heather realized that Sam’s needed to examine the supply chain in an effort to trim costs and become more competitive on price. We’ll see what options were considered when we discuss chapter 15. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.

37 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America © 2012 Pearson Education, Inc. publishing as Prentice-Hall.