Strategic Marketing 1. Imperatives for Market-Driven Strategy 2. Markets and Competitive Space 3. Strategic Market Segmentation 4. Strategic Customer Relationship Management 5. Capabilities for Learning about Customers and Markets 6. Market Targeting and Strategic Positioning 7. Strategic Relationships 8. Innovation and New Product Strategy 9. Strategic Brand Management 10. Value Chain Strategy 11. Pricing Strategy 12. Promotion, Advertising and Sales Promotion Strategies 13. Sales Force, Internet, and Direct Marketing Strategies 14. Designing Market-Driven Organizations 15. Marketing Strategy Implementation And Control

SALES FORCE, INTERNET, AND DIRECT MARKETING STRATEGIES CHAPTER 13 SALES FORCE, INTERNET, AND DIRECT MARKETING STRATEGIES Sales Force Strategy Internet Strategy Direct Marketing Strategies McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

SALES FORCE STRATEGY A company’s sales force strategy determines how the organization will use the personal selling function to maintain contact with customers and develop the relationships that management wants in order to achieve marketing and promotion objectives.

RELATIONSHIP FEATURE: The Vital Role of Selling at the Boeing Co. During the 2000s Boeing experienced an intense competitive battle against Airbus for control of the commercial jetliner market. Airbus was winning the battle until 2005 when Boeing’s Asia-Pacific jet sales were $26 billion compared to Airbus’ $9 billion. Under a new CEO management gave salespeople much more control over selling strategy compared to previous tight and rigid control by top management. Boeing lost many sales to Airbus because of top management’s unwillingness to give competent professionals flexibility in negotiating sales. Salespeople like Larry Dickenson, Boeing’s top salesman who covers the Asia-Pacific market, builds on over 18 years of relationships with airlines like Cathay Pacific, Quantas Airways Ltd., and Singapore Airlines, Ltd., to negotiate winning contracts. Importantly, Dickenson carefully plans and executes each sales campaign, overseeing every detail in the process that may span several years. The strategy is a combination of attractive pricing, financing, and leasing arrangements in combinations with training and service packages. Source: Stanley Holmes, “Boeing’s Jet Propellant,” BusinessWeek, December 26, 2005, 40.

Determine the role of the sales force in promotion strategy Sales Force Strategy Define the selling process (how selling will be accomplished) Decide if and how alternative sales channels will be utilized Design the sales organization Recruit, train, and manage salespeople Evaluate performance and make adjustments where necessary

Challenges in Selling and Sales Management Two sets of ethical dilemmas are of particular concern to sales managers. The first set is embedded in the manager’s dealings with the salespeople. Ethical issues involved in relationships between a sales manager and the sales force include such things as fairness and equal treatment of all social groups in hiring and promotion, respect for the individual in supervisory practices and training programs, and fairness and integrity in the design of sales territories, assignment of quotas, and determination of compensation and incentive rewards. Ethical issues pervade nearly all aspects of sales force management. The second set of ethical issues arises from the interactions between salespeople and their customers. These issues only indirectly involve the sales manager because the manager cannot always directly observe or control the actions of every member of the sales force. But managers have a responsibility to establish standards of ethical behavior for their subordinates, communicate them clearly, and enforce them vigorously. Source: Mark W. Johnston and Greg W. Marshall, Sales Force Management, 7th ed., Burr Ridge, IL: McGraw-Hill/Irwin, 2003, 21.

Business and Marketing Strategy Influences on Sales Strategy Business Strategy Promotion Strategy Market Target(s) Strategy SALES STRATEGY Pricing Strategy Product Strategy Distribution Strategy

SALES FORCE CHALLENGES Escalating customer expectations Marketing productivity crisis Intense global competition SALES FORCE CHALLENGES Mergers and acquisitions Blurring of industry boundaries Technology Advances

Range of Selling Roles Transactional Selling Consulting-Type Relationships

Defining the Selling Process Finding Prospects Opening the Relationship Qualifying the Prospect Presenting the Sales Message Closing the Sale Servicing the Account Source: Mark W. Johnston and Greg W. Marshall, Sales Force Management, McGraw-Hill/Irwin, 2003, 51-56.

The Selling Process Guides Recruiting Training Effort Allocation Organizational Design Selling Support Activities

Selecting Sales Channels to End Users Major Account Management Field Sales Force Telemarketing Electronic/Mail Contact

Deployment of Selling Effort DESIGNING THE SALES ORGANIZATION Organizational Structure Deployment of Selling Effort

Sales Force Deployment Size of the Sales Force Allocation of Selling Effort Salesperson skills and effort PLUS Market potential Number and location of customers Intensity of competition Market (brand) position of the company

Designing the Sales Organization Customer needs different Market-Driven design Product/ Market-Driven design Simple product offering Complex range of products Geography-Driven design Product- Driven design Customer needs similar

Selecting an Organizational Design What is the selling job? How much customer/product specialization is necessary? Role of value chain (channel) relationships? How many sales management levels (hierarchy versus process)? Will sales teams be used? Sales channels in addition to the field sales force? Are there any sales structure danger signals (high costs, turnover, large sales variations across territory?

Salesforce.com Makes People More Productive INTERNET FEATURE: Salesforce.com Makes People More Productive Salesforce.com is an interesting example of a dot-com start-up which has developed a successful business model supplying customer management software over the Net for use by salespeople. A key feature of the software is that it is sold as a service to customers at a monthly charge for each individual user. Salesforce.com has nearly 450,000 subscribers @ 22,700 companies worldwide. Salesforce.com illustrates how Internet information technology can enhance the capabilities and efforts of salespeople. By replacing large up-front software purchases with monthly service charges, Salesforce.com offers customers a compelling value opportunity. Since this feature can be duplicated by software competitors such as Siebel Systems, Oracle, and PeopleSoft, Salesforce.com may have difficulty sustaining its competitive edge. CEO Marc Benioff launched a new product initiative in 2005 intended to strengthen Salesforce.com’s competitive edge. AppExchange is an online market place enabling software firms and customers to trade and sell applications they develop. There will be no charge for the eBay like service but Benioff expects to expand demand for the firm’s software. Source: Salesforce.com website and “An eBay for Business Software,” BusinessWeek, September 19, 2005, 78-79.

Sales Force Size Example 40 35 30 25 20 15 10 5 Sales Current level Maximum profit contribution level $ millions Gross profit contribution Selling expense 60 70 80 90 100 110 Number of salespeople

Managing the Salesforce Finding and Selecting Salespeople Training/Development Management Control Monitoring Directing Evaluating Rewarding

Wyeth Reorganizes the Sales Force to Improve Productivity STRATEGY FEATURE: Wyeth Reorganizes the Sales Force to Improve Productivity Wyeth’s changes in the sales organization are driven by concerns of physicians about duplicated sales coverage and the need to improve salesforce productivity. The prior approach of multiple salespeople calling on doctors to market the same drugs is being changed. Out of Wyeth’s salesforce of 5000, about half call on primary-care doctors. As many as 750 nay be cut or reassigned. The selling strategy is to reduce the frequency of sales calls, while making each more worthwhile. Initiatives include assigning each salesforce responsibility for more drugs, reducing sales calls on the doctors who write the fewest prescriptions, and utilizing a part-time sales force for coverage of selected accounts, and use of Internet-based seminars. Source: Scott Hensley, “Wyeth to Revamp, Cut Its Sales Force,” The Wall Street Journal, June 20, 2005, A3, A6.

Sales Force Evaluation and Control Performance Standards Performance Measures Focus on Management Control and/or Outcomes? Performance Standards

Reinventing the Sales Organization Customer Relationships Applying Technology Coaching SALES MANAGER CHALLENGES Performance Huddles Sales Structure Internal Relationships Customer Channels Keeping Score

Deciding Internet Objectives E-Commerce Strategy INTERNET STRATEGY Strategy Development Deciding Internet Objectives E-Commerce Strategy Value Opportunities and Risks Measuring Internet Effectiveness The Future of the Internet

Internet Strategy Alternatives Promotional Medium Communication Tool Value-Chain Channel Separate Business Model

Deciding Internet Objectives Creating Awareness and Interest Information Dissemination Obtaining Research Information Brand Building Improving Customer Service

Designing Internet Strategy Customer Groups Targeted Value Proposition Communications Strategy Designing the Website Structure of the Organization Alliance Partners Shareholder Value Tracking Performance

Measuring Internet Effectiveness Challenging but capabilities are developing. What should be measured and how? Major changes are likely through trial and error. Alternative measures: Ad impressions, clicks, unique visitors, total visits, page impressions

E-Tailing Finally Hits Its Stride The E-tail Effect How e-commerce is shaking up the retail landscape: THE BIG GUNS ARRIVE After early struggles, online sales at brick-and-mortar giants such as Wal-Mart, Sears, and Gap are soaring. These chains are also using the Web to test new products and move into new markets. NICHES GO NATIONAL More and more niche players are succeeding by offering variety rivals can’t match. Luggage seller eBags, for example, is able to stock 12,000 styles, compared with 250 in a typical store. SEARCH LENDS A HAND Using Google and similar Websites, consumers can search far and wide for specialized products – say, stainless-steel farm sinks. That’s creating markets for lesser known brands and new merchants. MORE PRICING PRESSURES Shoppers are increasingly using price-comparison sites such as Shopping.com and Shopzilla. The result: Ever more cutthroat competition for brick-and-mortar and online stores alike. Source: “E-Tailing Finaly Hits Its Stride,“ BusinessWeek, December 20, 2004, 36-37.

The Future of the Internet Revolutionary for certain industries and incremental for others.

DIRECT MARKETING Kiosk Shopping Catalogs Electronic Shopping Direct Mail Radio/Magazine/ Newspaper Telemarketing Television

Advantages of Direct Marketing Socio-economic Trends Time constraints/ convenience Low Access Costs Much lower than face-to-face contact Data Base Management Facilitates direct marketing initiatives Value An attractive bundle of value