Sales Promotion and Personal Selling Key Concepts

Sales Promotion Sales Promotion Chapter 16 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.

Sales Promotion Advertising Reason to buy Sales Promotion Chapter 16 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. For example, a national TV ad often costs a total of over $5 million, and it is difficult to determine how many people purchase a product as a result of seeing the ad. With sales promotion, it is easy to measure the number of coupons redeemed or the number of contest entries.

Consumer Sales Promotion Chapter 16 Sales Promotion and Personal Selling Sales Promotion Consumer Sales Promotion Trade Sales Promotion Consumer market Marketing channel Drive immediate purchase Influence behavior Goal Notes: Sales promotion is targeted toward either of two different markets: to consumers or to members of the marketing channel (“trade”), such as wholesalers and retailers. Sales promotion expenditures have increased over the last several years as a result of increased competition, an expanding array of media choices, the demand for more deals from manufacturers, and the reliance on accountable and measurable marketing strategies. Promotion marketing in the U.S. exceeds $300 billion a year. Even power companies and restaurants have discovered the power of sales promotion.

The Objectives of Sales Promotion Chapter 16 Sales Promotion and Personal Selling The Objectives of Sales Promotion

Objectives of Sales Promotion Chapter 16 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 16.1. LO1

Tools for Consumer Sales Promotion Chapter 16 Sales Promotion and Personal Selling Tools for Consumer Sales Promotion Coupons and Rebates Premiums Loyalty Marketing Programs Contests & Sweepstakes Sampling Point-of-Purchase 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.

Tools for Consumer Sales Promotion Chapter 16 Sales Promotion and Personal Selling Tools for Consumer Sales Promotion Coupon Rebate Premium A certificate that entitles consumers to an immediate price reduction. 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. Notes: Coupons encourage product trial and repurchase, and are likely to increase the amount of a product purchased. Coupon distribution has been growing, with almost 350 billion coupons 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. Even though redemption rates are low for coupons, marketers are reevaluating the use of coupons, such as shortening the expiration time, using everyday low pricing instead, or distributing single, all-purpose coupons for redemption on several brands. In-store coupons are more likely to influence buying decisions and are redeemed 15 times more frequently than newspaper coupons. 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.

Tools for Consumer Sales Promotion Chapter 16 Sales Promotion and Personal Selling Tools for Consumer Sales Promotion 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. Notes: Loyalty marketing programs reward consumers for making multiple purchases. These programs enable companies to invest sales promotion dollars in activities designed to capture greater profits from customers already loyal to the product/company. The objective of loyalty marketing is to build long-term, mutually-beneficial relationships. Studies show that frequent shopper programs require something more than just discounts to build loyalty. Furthermore, customers are “loyal” to more than one store, and participate in multiple programs. 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.

Tools for Consumer Sales Promotion Chapter 16 Sales Promotion and Personal Selling Tools for Consumer Sales Promotion Contests Promotions that require skill or ability to compete for prizes. Sweepstakes Promotions that depend on chance or luck, with free participation. Online Sweepstakes Online How do online sweepstakes sites compare to the kind of sweepstakes entries you receive in the mail? Visit the popular sweepstakes site Sweepstakesonline.com. Do any of the contests interest you? Do you think the pitches online are ethical? Why or why not? 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.

Tools for Consumer Sales Promotion Chapter 16 Sales Promotion and Personal Selling Tools for Consumer Sales Promotion 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 40 percent. As a result, sampling has increased by more than 20 percent annually in recent years. Sampling at special events is popular, effective, and a high profile method that permits marketers to piggyback onto fun-based consumer activities.

Methods of Sampling Direct mail Door-to-door delivery Chapter 16 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?

Point-of-Purchase Promotion Chapter 16 Sales Promotion and Personal Selling Point-of-Purchase Promotion Build traffic Advertise the product Induce impulse buying 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 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.

Online Sales Promotion Chapter 16 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 counterparts. 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.

B2B -- Trade Sales Promotion Chapter 16 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 in an attempt to influence supply. 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.

Trade Allowance Trade Allowance Chapter 16 Sales Promotion and Personal Selling Trade Allowance A price reduction offered by manufacturers to intermediaries, such as wholesalers and retailers.

Push Money Chapter 16 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. E.g. Nike gives bonus to sales staff of retailers for meeting quotas

Benefits of Trade Promotions Chapter 16 Sales Promotion and Personal Selling Help manufacturers gain new distribution 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.

Forms of Trade Sales Promotion Chapter 16 Sales Promotion and Personal Selling Forms of Trade Sales Promotion

Personal Selling Personal Selling is more important if... Chapter 16 Sales Promotion and Personal Selling Personal Selling Personal Selling is more important if... Advertising & Sales Promotion are more important if... Customers are concentrated. Product is technically complex. There are few customers. Product is custom made. Product has a high value. geographically dispersed. Product is simple to understand. There are many customers. Product is standardized. Product has a low value. Notes: Exhibit 16.2 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.

Why Personal Selling is Effective Chapter 16 Sales Promotion and Personal Selling Why Personal Selling is Effective Detailed explanation or demonstration Variable sales message Directed to qualified prospects Controllable adjustable selling costs More effective than other promotion in obtaining sale and gaining customer satisfaction Personal Selling Advantages Notes: Personal selling offers several advantages over other forms of promotion, as shown on this slide.

Relationship (Consultative) Selling Relationship Selling Chapter 16 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. It’s not about a one-time sale and then moving to the next prospect. Salespeople become consultants, partners, and problem solvers as they strive to develop trust and long-term relationships.

Traditional Selling and Relationship Selling Chapter 16 Sales Promotion and Personal Selling Traditional Personal Selling LO5 Sell advice, assistance, counsel Sell products Focus on closing sales Limited sales planning Discuss product Assess “product-specific” needs “Lone wolf” approach Pricing/product focus Short-term sales follow-up Focus on customer’s bottom line Sales planning is top priority Build problem-solving environment Conduct discovery in scope of operations Team approach Profit impact and strategic benefit focus Long-term sales follow-up Relationship Selling Notes: The end result of relationship selling tends to be loyal customers who purchase from the company time after time. Relationship selling promotes a win-win situation for both buyer and seller. Exhibit 16.3 lists the key differences between traditional personal selling and relationship selling.

Relationship Selling vs. Traditional Selling Chapter 16 Sales Promotion and Personal Selling Relationship Selling vs. Traditional Selling Initial Sales Repeat Sales Successive Sales Traditional Sales Relationship Sales Sales Increases Result From Creating Value

Steps in the Selling Process Chapter 16 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 14.

Generating Leads Advertising Publicity Direct Mail/ Telemarketing Chapter 16 Sales Promotion and Personal Selling Generating Leads Advertising Publicity Direct Mail/ Telemarketing Cold Calling Internet Web Site Referrals Trade Shows/ Conventions Networking Company Records Online Linkedin Ryze Online networking groups are growing in popularity. Check out the sites for Linkedin and Ryze to read more about how these groups work. Do they sound like something you would join? How could they benefit your career? Notes: Lead generation, or prospecting, is the identification of those most likely to buy the seller’s offerings. Sales leads can be secured in several different ways, such as those sources shown on this slide.

Cold Calling Cold Calling Chapter 16 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.

Receptivity and accessibility Chapter 16 Sales Promotion and Personal Selling Qualifying Leads Receptivity and accessibility Buying power Recognized need Notes: When a prospect shows interest in having more information about a product, the salesperson has the opportunity to qualify the lead. Lead qualification consists of 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 The Web site offers a way of qualifying online leads by getting visitors to register for more information.

Needs Assessment Needs Assessment Chapter 16 Sales Promotion and Personal Selling Needs Assessment Needs Assessment A determination of the customer’s specific needs and wants and the range of options a customer has for satisfying them.

The Consultative Salesperson Chapter 16 Sales Promotion and Personal Selling The Consultative Salesperson Product or service Customers Competition Industry Salesperson must know everything about... Online Hoover’s Online Dun & Bradstreet 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”?

Developing and Proposing Solutions Chapter 16 Sales Promotion and Personal Selling Developing and Proposing Solutions Sales Proposal Sales Presentation 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.

Powerful Presentations Chapter 16 Sales Promotion and Personal Selling Powerful Presentations Be well prepared Use eye contact Ask open-ended questions Be poised Use hand gestures and voice inflection Focus on the customer needs Incorporate visual elements Know how to operate the A/V equipment Make sure the equipment works PRACTICE, PRACTICE, PRACTICE!

Handling Objections View objections as requests for information Chapter 16 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.

Look for customer signals Chapter 16 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. 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. Finding a new customer is far more expensive than retaining an existing customer. Furthermore, today’s customers are less loyal to brands and vendors. Therefore follow-up is critical in relationship building.

The Impact of Technology on Personal Selling Chapter 16 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 chores to allow more time to focus on client needs.

Steps in the Selling Process Chapter 16 Sales Promotion and Personal Selling Steps in the Selling Process