CHAPTER 18 Sales Promotion and Personal Selling Lamb, Hair, McDaniel Chapter 18 Sales Promotion and Personal Selling 2011-2012 CHAPTER 18 Sales Promotion and Personal Selling Advertising offers the consumer a reason to buy; sales promotion offers an incentive to buy. © iStockphoto.com/Terry J Alcorn

Chapter 18 Sales Promotion and Personal Selling Learning Outcomes LO 1 Define and state the objectives of sales promotion LO 2 Discuss the most common forms of consumer sales promotion LO 3 List the most common forms of trade sales promotion

Learning Outcomes LO 4 Describe personal selling Chapter 18 Sales Promotion and Personal Selling Learning Outcomes LO 4 Describe personal selling LO 5 Discuss the key differences between relationship selling and traditional selling LO 6 List the steps in the selling process

the objectives of sales promotion Chapter 18 Sales Promotion and Personal Selling Sales Promotion Define and state the objectives of sales promotion LO1

Sales Promotion LO1 Sales Promotion Chapter 18 Sales Promotion and Personal Selling Sales Promotion Sales Promotion Marketing communication activities, other than advertising, personal selling, and public relations, in which a short-term incentive motivates a purchase. Notes: In addition to advertising, public relations, and personal selling, sales promotion is utilized to increase the effectiveness of other promotional efforts. Sales promotion provides an incentive for consumers to purchase a good or service immediately, either by lowering the price or by adding value. LO1

Sales Promotion LO1 Advertising Reason to buy Sales Promotion Chapter 18 Sales Promotion and Personal Selling Sales Promotion Advertising Reason to buy Sales Promotion Incentive to buy Notes: While advertising offers a reason to buy, sales promotion offers an incentive to buy. Both are important, but sales promotion is usually cheaper and easier to measure. LO1

Sales Promotion Consumer Sales Promotion is… Trade Sales Promotion is… Chapter 18 Sales Promotion and Personal Selling Sales Promotion Consumer Sales Promotion is… sales promotion activities targeting the ultimate consumer. Trade Sales Promotion is… sales promotion activities targeting a marketing channel member, such as a wholesaler or retailer.

Objectives of Sales Promotion LO1 Chapter 18 Sales Promotion and Personal Selling Objectives of Sales Promotion Type of Buyer Loyal Customers Competitor’s Customers Brand Switchers Price Buyers Desired Results Reinforce behavior Increase consumption Change purchase timing Break loyalty Persuade to switch Persuade to buy your brand more often Appeal with low prices Supply added value Sales Promotion Examples Loyalty marketing Bonus packs Sampling Sweepstakes, contests, premiums Price-lowering promotion Trade deals Coupons, price-off packages, refunds Notes: The objectives of a promotion depend on the behavior of target consumers, as shown in Exhibit 18.1.

Tools for Consumer Sales Promotion Chapter 18 Sales Promotion and Personal Selling Tools for Consumer Sales Promotion Discuss the most common forms of consumer sales promotion LO2

Tools for Consumer Sales Promotion Chapter 18 Sales Promotion and Personal Selling Tools for Consumer Sales Promotion Coupons and Rebates Premiums Loyalty Marketing Programs Contests & Sweepstakes Sampling Point-of-Purchase Promotion Online Sales Promotion Notes: The tools selected for sales promotion must suit the objectives to ensure success of the overall promotion plan. Popular tools are shown here, and described on the following slides. LO2

Coupons and Rebates LO2 Coupon Rebate Premium Chapter 18 Sales Promotion and Personal Selling Coupons and Rebates Coupon Rebate Premium A certificate that entitles consumers to an immediate price reduction when they buy the product. A cash refund given for the purchase of a product during a specific period. An extra item offered to the consumer, usually in exchange for some proof of purchase of the promoted product. Notes: Coupons encourage product trial and repurchase, and are likely to increase the amount of a product purchased. Almost 300 billion coupons are distributed to U.S. households annually. This does not include Internet and in-store coupons. Increased competition and the introduction of 1200 new products each year have contributed to this trend. Coupons promoting new-product use are likely to stimulate purchases. In-store coupons are more likely to influence buying decisions. Rebates must be mailed in along with a proof of purchase. Rebates offer price cuts to consumers directly and are more easily controlled. Further, customer databases can be built due to the information forms required for rebates. Premiums reinforce the purchase decision, increase consumption, and persuade nonusers to switch brands. Discussion/Team Activity: Identify companies who have utilized these popular sales promotion tools. Examples: fast food services, cosmetic companies, banks, rental cars, magazines, computer manufacturers, cell phones, etc.

Loyalty Marketing Programs Chapter 18 Sales Promotion and Personal Selling Loyalty Marketing Programs Loyalty Marketing Program A promotional program designed to build long-term, mutually beneficial relationships between a company and key customers. Frequent Buyer A loyalty program in which loyal consumers are rewarded for making multiple purchases of a particular good or service. Notes: Loyalty marketing programs reward consumers for making multiple purchases. The objective of loyalty marketing programs is to build long-term, mutually-beneficial relationships between a company and key customers. Studies show that consumer loyalty is on the decline. 54 percent of primary grocery shoppers belong to two or more supermarket loyalty cards. Discussion/Team Activity: Identify several companies that offer these programs. Discuss the benefits offered by some of the more popular loyalty marketing and frequent buyer programs. LO2

Coupons and Sweepstakes Chapter 18 Sales Promotion and Personal Selling Coupons and Sweepstakes Contests Promotions in which participants use some skill or ability to compete for prizes. Sweepstakes Promotions that depend on chance, with free participation. Notes: Contests and sweepstakes are designed to create interest in a good or service, often to encourage brand switching. They are not effective tools for generating long-term sales. Furthermore, the award must appeal to the target market. Offering several smaller prizes instead of one huge prize will increase the effectiveness of a promotion. LO2

Chapter 18 Sales Promotion and Personal Selling Sampling Sampling A promotional program that allows the consumer the opportunity to try a product or service for free. Notes: Sampling allows the risk-free trial of a product. Sampling can increase retail sales by as much as 88 percent. Sampling at special events is popular, effective, and a high-profile method that permits marketers to piggyback onto fun-based consumer activities. LO2

Methods of Sampling LO2 Direct mail Door-to-door delivery Chapter 18 Sales Promotion and Personal Selling Methods of Sampling Direct mail Door-to-door delivery Packaging with another product Retail store demonstration Discussion/Team Activity: Discuss some of the occasions that you have had the opportunity to participate in product sampling. How did this influence your decision to purchase the sampled product? What methods are most effective in reaching college students? LO2

Point-of-Purchase Promotion Chapter 18 Sales Promotion and Personal Selling Point-of-Purchase Promotion Offers captive audience in retail stores Can increase sales by as much as 65 percent Notes: Point-of-purchase promotions (P-O-Ps) include shelf “talkers”, shelf extenders, ads on carts and bags, end-aisle and floor-stand displays, TV monitors and in-store audio messages, and audiovisual displays. P-O-Ps offer manufacturers a captive audience in retail stores, and can boost sales by as much as 65 percent because between 70 and 80 percent of all retail purchase decisions are made in-store. LO2

Online Sales Promotion Chapter 18 Sales Promotion and Personal Selling Online Sales Promotion Effective Types of Online Sales Promotion Free merchandise Sweepstakes Free shipping with purchases Coupons Notes: Online sales promotions have grown due to the popularity of the Internet, generating three to fives times higher response rates than those of off-line promotions. The most effective types are shown here. Internet retailers are eager to boost traffic and give away free services or equipment to lure consumers not only to the Web site but to the Internet in general. Online versions of loyalty programs are gaining popularity, and the most successful are those run by hotel and airline companies. LO2

Tools for Trade Sales Promotion Chapter 18 Sales Promotion and Personal Selling Tools for Trade Sales Promotion List the most common forms of trade sales promotion LO3

Conventions & Trade Shows Trade Sales Promotion Chapter 18 Sales Promotion and Personal Selling Trade Allowances Push Money Training Free Merchandise Store Demonstration Conventions & Trade Shows Notes: While consumer promotions pull a product through the channel by creating demand, trade promotions push a product through the distribution channel . Consumer promotion tools are used when selling to members of the distribution channel, as well as tools that are unique to manufacturers and intermediaries, shown on this slide. LO3

Trade Allowance Trade Allowance is… LO3 Chapter 18 Sales Promotion and Personal Selling Trade Allowance is… a price reduction offered by manufacturers to intermediaries, such as wholesalers and retailers. LO3

Push Money LO3 Push Money Chapter 18 Sales Promotion and Personal Selling Push Money Money offered to channel intermediaries to encourage them to “push” products--that is, to encourage other members of the channel to sell the products. LO3

Benefits of Trade Promotions Chapter 18 Sales Promotion and Personal Selling Help manufacturers gain new distributors Obtain wholesaler and retailer support for consumer sales promotions Build or reduce dealer inventories Improve trade relations Notes: Trade promotions are popular among manufacturers for many reasons, as shown on this slide. LO3

Describe personal selling Chapter 18 Sales Promotion and Personal Selling Personal Selling Describe personal selling Notes: As mentioned in Chapter 16, personal selling is a purchase situation involving a personal, paid-for communication between two people in an attempt to influence each other. In a sense, all businesspeople are salespeople. LO4

Advantages of Personal Selling Chapter 18 Sales Promotion and Personal Selling Advantages of Personal Selling Provides detailed explanation/demonstration of product Message can be varied according to motivations of each customer Can be directed only to qualified prospects Most effective promotion form in obtaining sale and satisfying customer

Chapter 18 Sales Promotion and Personal Selling Exhibit 18.2 Comparison of Personal Selling and Advertising/Sales Promotion Notes: Exhibit 18.2 compares the effectiveness of personal selling and advertising/sales promotion based on certain customer and product characteristics. Personal selling is more important as the number of potential customers decrease, as the complexity of the product increases, and as the value of the product grows. LO4

Relationship Selling LO5 Chapter 18 Sales Promotion and Personal Selling Relationship Selling Discuss the key differences between relationship selling and traditional selling LO5

Relationship (Consultative) Selling Relationship Selling Chapter 18 Sales Promotion and Personal Selling Relationship (Consultative) Selling A sales practice that involves building, maintaining, and enhancing interactions with customers in order to develop long-term satisfaction through mutually beneficial partnerships. Notes: Until recently, personal selling focused almost entirely on a planned presentation for the purpose of making a sale. In contrast, modern views of personal selling emphasize the relationship that develops between a salesperson and a buyer. The objective with relationship selling is to build long-term branded relationships with consumer/buyers. The focus is on building mutual trust between the buyer and seller. Salespeople become consultants, partners, and problem solvers as they strive to develop trust and long-term relationships. LO5

Chapter 18 Sales Promotion and Personal Selling Exhibit 18.3 Key Differences between Traditional Selling and Relationship Selling Notes: The end result of relationship selling tends to be loyal customers who purchase from the company time after time. A relationship selling strategy focused on retaining customers costs a company less than prospecting and selling to new customers. Exhibit 18.3 lists the key differences between traditional personal selling and relationship selling. LO5 SOURCE: Robert M. Peterson, Patrick L. Schul, and George H. Lucas, Jr., “Consultative Selling: Walking the Walk in the New Selling Environment,” National Conference on Sales Management, Proceedings, March 1996.

Steps in the Selling Process Chapter 18 Sales Promotion and Personal Selling Steps in the Selling Process List the steps in the selling process Notes: The sales process, or sales cycle, is the set of steps a salesperson goes through to sell a product or service. LO6

Steps in the Selling Process Chapter 18 Sales Promotion and Personal Selling Steps in the Selling Process Generate Leads Qualify Leads Probe Customer Needs Develop Solutions Handle Objections Close the Sale Follow Up Notes: Completing a sale requires several steps. It can be unique for each product or service, depending on the features of the product, characteristics of customer segments, and internal processes within the firm, such as how sales leads are generated. There are seven basic steps in the personal selling process. These steps of selling follow the AIDA concept discussed in Chapter 16. LO6

Generating Leads LO6 Advertising Publicity Direct Mail/ Telemarketing Chapter 18 Sales Promotion and Personal Selling Generating Leads Advertising Publicity Direct Mail/ Telemarketing Cold Calling Internet Web Site Referrals Trade Shows/ Conventions Networking Company Records Notes: Lead generation, or prospecting, is the identification of those firms and people most likely to buy the seller’s offerings. Sales leads can be obtained in several different ways, such as those sources shown on this slide. LO6

Cold Calling LO6 Cold Calling Chapter 18 Sales Promotion and Personal Selling Cold Calling Cold Calling A form of lead generation in which the salesperson approaches potential buyers without any prior knowledge of the prospects’ needs or financial status. Notes: Before the advent of more sophisticated methods of lead generation, most prospecting was done through cold calling. LO6

Receptivity and accessibility Chapter 18 Sales Promotion and Personal Selling Qualifying Leads Receptivity and accessibility Buying power Recognized need Notes: When a prospect shows interest in learning more about a product, the salesperson has the opportunity to qualify the lead. Lead qualification involves determining whether the prospect has three things: * A recognized need * The authority to make the purchase decision and access to funds to pay for it * Receptivity and accessibility to the salesperson LO6

Approaching the Customer and Probing Needs Chapter 18 Sales Promotion and Personal Selling Approaching the Customer and Probing Needs Needs Assessment A determination of the customer’s specific needs and wants and the range of options a customer has for satisfying them. Notes: Before approaching customers, the salesperson should learn as much as possible about the prospect’s organization and its buyers. LO6

The Consultative Salesperson Chapter 18 Sales Promotion and Personal Selling The Consultative Salesperson Product or service Customers Competition Industry Salesperson must know everything about... Online Hoover’s Online and Dun & Bradstreet www.hoovers.com; http://smallbusiness2.dnb.com/ Pick a company and try to find out as much information as you can about it using Hoover’s Online and Dun & Bradstreet. Which database gave you the best and most information about your “lead”? LO6

Developing and Proposing Solutions Chapter 18 Sales Promotion and Personal Selling Developing and Proposing Solutions Sales Proposal is… a formal written document or professional presentation that outlines how the salesperson’s product or service will meet or exceed the prospect’s needs. Sales Presentation is… Notes: After compiling information about the client’s needs and wants, the salesperson develops a solution in which the salesperson’s product or service solves the client’s problem or need. These solutions are typically presented as a sales proposal during a formal sales presentation. Usually, there is only one opportunity to present solutions, and salespeople must be able to present the proposal and handle any customer objections confidently and professionally. a formal meeting in which the salesperson presents a sales proposal to a prospective buyer. LO6

Handling Objections LO6 View objections as requests for information Chapter 18 Sales Promotion and Personal Selling Handling Objections View objections as requests for information Anticipate specific objections Investigate the objection with the customer Be aware of competitors’ products Stay calm Use the objection to close the sale Notes: The salesperson should not take objections personally as confrontations or insults. Instead, objections should be handled as requests for information, and could be used in a positive way to close the sale. LO6

Look for customer signals Chapter 18 Sales Promotion and Personal Selling Closing the Sale Negotiate Keep an open mind Look for customer signals Tailor to each market Notes: Negotiation plays a key role in closing the sale. Negotiation is the process during which both the salesperson and the prospect offer special concessions in an attempt to arrive at a sales agreement. A salesperson should emphasize value to the customer, rendering price a nonissue. In foreign markets, the sales efforts should be tailored to the appropriate way of doing business for that culture. LO6

Chapter 18 Sales Promotion and Personal Selling Following Up In the final step of the selling process—follow up—the salesperson must ensure: delivery schedules are met goods or services perform as promise buyers’ employees are properly trained to use the products Notes: The goal of relationship selling is to motivate customers to purchase again by developing long-term relationships. Most businesses depend on repeat sales, and repeat sales depend on follow-up by the salesperson. Furthermore, today’s customers are less loyal to brands and vendors. Therefore follow-up is critical in relationship building.

Chapter 18 Sales Promotion and Personal Selling Exhibit 18.3 Relative Amount of Time Spent in the Key Steps of the Selling Process Notes: Exhibit 18.4 depicts the time involved in the sales process and how those elements relate to the traditional and relationship selling approaches. Source : Robert Peterson, Patrick Schul, and George H. Lucas Jr., “Consultative Selling: Walking the Walk in the New Selling Enviroment,” National Conference on Sales Management Proceedings, March 1996.

The Impact of Technology on Personal Selling Chapter 18 Sales Promotion and Personal Selling The Impact of Technology on Personal Selling Cell phones Laptops Pagers E-Mail Electronic organizers Internet Notes: Technology will not eliminate the need for salespeople; instead, technology can help improve the customer relationship. Technology, such as laptop computers, cell phones, and pagers allow salespeople to be more accessible to the customer. The Internet provides salespeople with vast resources of information on clients, competition, and the industry. The Internet cost-effectively processes orders and services requests, and is freeing sales representatives from tedious administrative tasks to allow more time to focus on client needs. LO6

Making the Sale Beyond the Book LO6 Chapter 18 Sales Promotion and Personal Selling Making the Sale Now that you know the steps in the selling process, break down this video and Grover’s use of (or failure to use) the steps Grover Sells Hair-Care What about this man? What are his sales tactics? Vegetable Peeler Salesman Beyond the Book LO6

Vans – Sales Promotion and Personal Selling Chapter 18 Sales Promotion and Personal Selling Chapter 18 Videos Vans – Sales Promotion and Personal Selling How does Vans use giveaways and contests to market its products? Why do these strategies work so well for Vans? http://www.cengage.com/marketing/book_content/1439039429_lamb/company_clips/ch18.html Beyond the Book

Promotion and Communication Strategies Chapter 18 Sales Promotion and Personal Selling Part 5 Videos Promotion and Communication Strategies http://www.cengage.com/marketing/book_content/1439039429_lamb/part_videos/part05.html Beyond the Book