Personal Selling and Sales Promotion Part Eight Promotion Decisions Chapter 18 Personal Selling and Sales Promotion

Chapter Learning Objectives To define personal selling and understand its purpose To describe the basic steps in the personal selling process To identify the types of sales force personnel To understand sales management decisions and activities To explain what sales promotion activities are and how they are used To recognize specific consumer and trade sales promotion methods

Chapter Outline What Is Personal Selling? The Personal Selling Process Prospecting for Customers Evaluating Prospects Approaching the Customer Making the Presentation Overcoming Objections Closing the Sale Following Up Types of Salespeople Order Getters Order Takers Support Personnel Types of Selling

Chapter Outline (cont’d) Managing the Sales Force Establishing Sales Force Objectives Determining Sales Force Size Recruiting and Selecting Salespeople Training Sales Personnel Compensating Sales Personnel Motivating Sales Personnel Managing Sales Territories Controlling and Evaluating Sales Force Performance The Nature of Sales Promotion Consumer Sales Promotion Methods Trade Sales Promotion Methods

What Is Personal Selling? Paid personal communication that informs customers and persuades them to buy products Most adjustable to customer information needs Most precise (targeted) form of promotion methods Most expensive element in promotion mix

Figure 18.1: General Steps in the Personal Selling Process

Prospecting for Customers Developing a list of potential customers Sales records, trade shows, commercial databases, newspaper announcements, public records, telephone directories, trade association directories Reponses to advertisements with information request forms Referrals—recommendations from current customers

Evaluating Prospects Preapproach (before contacting the customer) Finding and analyzing information about the prospect Specific product needs Current use of brands Feelings about available brands Personal characteristics Additional research Identifying key decision makers Reviewing account histories and problems Contacting other clients for information Assessing credit histories and problems Preparing sales presentations Identifying product needs

Approaching the Customer The manner in which a salesperson contacts a potential customer Purpose is to gather information about the buyer’s needs and objectives Important to create a favorable first impression and build rapport with prospective customer Typical approaches Referral by another customer to a prospective customer “Cold canvass” call without prior introduction to the customer

Making the Presentation During the Presentation Attract and hold the prospect’s attention. Stimulate interest in the product. Spark a desire for the product. Listen and respond to the prospect questions and comments. Ways to Enhance the Presentation’s Effects Have the prospect touch, hold, or use the product. Use audiovisual technology to heighten the impact of the presentation.

Overcoming Objections Anticipate objections and counter them during the presentation Generally, best to handle objections as they arise

Closing the Sale Closing Closing strategies The stage in the selling process when the salesperson asks the prospect to buy the product Closing strategies “Trial” closing: asking questions (what, how, or why) that assume the customer will buy the product Asking for a tryout order: low-risk way for customer to try out the product

Following Up Determining if the delivery and setup of order was completed to the customer’s satisfaction Ascertaining the customer’s future product needs

Types of Salespeople Order Getters Order Takers Sell to new customers and increases sales to current ones Employ creative selling Current-customer sales New-business sales Order Takers Primarily seek repeat sales Inside order takers Field order takers

Types of Salespeople (cont’d) Support personnel facilitate selling but usually are not involved solely with making sales Missionary salespeople Assist the producer’s customers in selling to their own customers Trade salespeople Primarily involved in helping a producer’s customers promote a product Technical salespeople Give technical assistance to a firm’s current customers

Selected Types of Selling Team selling The use of a team of experts from all functional areas of a firm, led by a salesperson, to conduct the personal-selling process Relationship selling The building of mutually beneficial long-term associations with a customer through regular communications over prolonged periods of time

Establishing Sales Force Objectives Objectives tell salespeople what they are to accomplish during a specified time period. Objectives for the total sales force Sales volume: total units or dollars of product sold for a period of time Market share: unit or dollar percentage share of the total market for a product Profit: dollars or percentage of return on investment (ROI) Objectives for individual salespersons Quotas: dollars or units sold, or average order size, average number of calls, or ratio of orders to calls by an individual salesperson

Determining Sales Force Size Size of Sales Force Affects Compensation methods for salespersons Morale of salespersons Overall sales force management Methods for Determining Optimal Sale Force Size Divide the number of sales calls necessary to serve customers by the number of sales calls a salesperson makes annually Add additional salespersons until the cost of adding one more salespersons equals the additional sales that would be generated by that person

Recruiting and Selecting Salespeople Developing a list of qualified applicants positions Establish a set of qualifications that best match the firm’s particular sales tasks Prepare a job description listing specific tasks Analyze successful salespeople among current employees Sources of applicants Other departments in the company Employment agencies Job ad respondents Other firms Educational institutions Employee referrals

Training Sales Personnel What to teach? The company, its products, or selling methods Who to train? Newly hired or experienced salespeople, or both When/where to train? In the field, at educational institutions, in company facilities Before or after initial field assignment How to train? Videos, tests, online materials, manuals, and cases Lectures, demonstrations, simulation exercises, and on-the-job training

Compensating Salespeople Compensation Objectives Attract, motivate, and retain effective salespeople Maintain the desired level of control Provide acceptable levels of income, freedom, and incentive Encourage proper treatment of customers

Compensating Salespeople (cont’d) Compensation Plans Straight salary Paying salespeople a specific amount per period of time Straight commission Paying salespeople according to the amount of their sales in a given time period Combination compensation Paying salespeople a fixed salary plus a commission on sales volume

Figure 18.2: Average Salaries for Sales Representatives and Executives This is a premium slide. Source: From Christine Galea, “Average Salary for Sales Staffers in 2005,” Sales and Marketing Management, May 2006, p. 30. ©2004 VNU Business Media, Inc. Reprinted with permission from Sales and Marketing Management

Source: Charles Futrell, Sales Management (Fort Worth, TX: Dryden Press), 2001, pp. 307-316.

Motivating Salespeople Motivation should be provided on a continuous basis. Motivational Incentives Enjoyable working conditions Power and authority Job security Opportunities to excel Motivational Methods Sales contests Recognition programs Awards (travel, merchandise, and cash)

Managing Sales Territories Creating Sales Territories Based on similar sales potential or requiring about the same amount of work Setting differential commission rates to compensate for differences in the characteristics of territories (density and distribution of customers) Routing and Scheduling Considerations Geographic size and shape of the territory Number and distribution of customers Sequence of customer calls Routes and distances traveled Minimizing salesperson’s travel and lodging costs

Controlling and Evaluating Sales Force Performance Performance measures largely determined by sales objectives, stated in terms of sales volume, average number of calls per day, average sales per customer, actual sales relative to sales potential, number of new customer orders, average cost per call, average gross profit per customer Salespersons evaluated by comparing performance to Performance standards Other employees Past performance

What Is Sales Promotion? An activity and/or material that acts as a direct inducement to resellers or salespeople to sell a product or consumers to buy it Encourages product trial and purchase by adding value to the product Facilitates or is facilitated by personal selling and advertising Use has grown dramatically over the last 20 years at the expense of traditional advertising

What Is Sales Promotion? (cont’d) Deciding Which Sales Promotion Method to Use Product characteristics Target market characteristics Distribution channel(s) Number and types of resellers Competitive and legal environment

Consumer Sales Promotion Methods Consumer sales promotion methods encourage consumers to patronize specific stores or to try particular products Coupons Written price reductions used to encourage consumers to buy a specific product Effective coupons are easily recognized and state the offer clearly Advantages: generate brand awareness and interest and reward brand loyalty Disadvantages: Fraud and misredemptions; consumer ill-will from stock-outs during promotions

Figure 18.3: Sources of Coupons This is a premium slide. Source: Enid Burns, “Coupons Converge Online,” ClickZ, Oct. 6, 2005, www.clickz.com/showPage.html?page=3554206.

This is a premium slide. Source: Betsy Spethmann, “FSI Coupon Worth Reaches $300 Billion in 2006: MARX,” Promo, Jan. 4, 2007, http://promomagazine.com/othertactics/news/fsi_coupon_worth_300_billion_010407/ .

Consumer Sales Promotion Methods (cont’d) Cents-Off Offers Let buyers pay less than the regular price to encourage purchase Money Refund Offers consumers money when they mail in a proof of purchase, usually for multiple product purchases Rebate Sends consumers a specific amount of money for making a single product purchase

Consumer Sales Promotion Methods (cont’d) Frequent-User Incentives Loyalty programs reward frequent buyers Point-of-Purchase Displays Signs, window displays, display racks, and similar means used to attract customers and to encourage immediate purchases Demonstrations Used temporarily to encourage trial use and purchase of a product or to show how a product works. Highly effective yet costly in practice

Consumer Sales Promotion Methods (cont’d) Free Samples Free products given out to encourage trial and purchase Used to increase sales volume and obtain desirable distribution for fast turnover products The most expensive form of sales promotion Premiums Items offered free or at a minimal cost as a bonus for purchasing a product Premium must match both the target market and the brand’s image. Premiums must be easily recognizable and desirable.

Consumer Sales Promotion Methods (cont’d) Consumer Contests, Games, and Sweepstakes Used to generate retail traffic and to increase exposure to promotional messages Consumer Contests Individuals compete for prizes based on analytical or creative skills Consumer Games Individuals compete for prizes based primarily on chance, often by collecting game pieces Consumer Sweepstakes A sales promotion in which entrants submit their names for inclusion in a drawing for prizes Used more than contests and attract more widespread interest

Trade Sales Promotion Methods Trade sales promotion methods refer to ways of persuading wholesalers and retailers to carry a producer’s products and to market them aggressively Buying Allowance A temporary price reduction to resellers for purchasing specified quantities of a product Buy-Back Allowance A sum of money a producer gives a reseller for each additional unit bought after an initial promotion deal is over

Trade Sales Promotion Methods (cont’d) Scan-Back Allowance A manufacturer’s reward to retailers based on the number of pieces scanned Merchandise Allowance A manufacturer’s agreement to help resellers pay for special promotional efforts Cooperative Advertising Sharing of media costs by manufacturer and retailer for advertising the manufacturer’s products

Trade Sales Promotion Methods (cont’d) Dealer Listings Ads promoting a product and identifying retailers that sell the product; influences retailers to carry the products, builds traffic at the retail level, and encourages consumers to shop at participating dealers Free Merchandise A manufacturer’s reward given to resellers for purchasing a stated quantity of goods Usually takes the form of a reduced invoice Dealer Loader A gift, often part of a display, offered to a retailer who purchases a specified quantity of merchandise

Trade Sales Promotion Methods (cont’d) Premium (Push) Money Extra compensation to salespersons for pushing a line of products Sales Contest A means of motivating distributors, retailers, and salespeople by recognizing outstanding achievements

After reviewing this chapter you should: Be able to define personal selling and understand its importance. Be able to describe the basic steps in the personal-selling process. Be able to identify the types of sales force personnel. Have insight into sales management decisions and activities. Be able to explain what sales promotion activities are and how they can be used. Be familiar with specific consumer and trade sales promotion methods.