Marketing management Chapter 19 pps

ADDRESS THE FOLLOWING
QUESTIONS:
1.
How can companies use
integrated direct marketing for
competitive advantage?
2.
How can companies do effective
e-marketinq?
3. What decisions do companies
face in designing a sales force?
4.
How do companies manage a
sales force efficiently?
5. How can salespeople improve
selling,
negotiating, and
relationship marketing skills?
CHAPTER 19
MANAGING PERSONAL
COMMUNICATIONS:
DIRECT MARKETING AND
PERSONAL SELLING
Today, marketing communications are increasingly seen as an inter-
active dialogue between the company and its customers. To make
the sale to customers, marketers must work hard and work smart.
Companies must ask not only "How can we reach our customers?"
but also, "How can our customers reach us?" Thanks to technolog-
ical breakthroughs, people can now communicate through tradi-
tional media (newspapers, magazines, radio, telephone, television,
billboards), as well as through computers, fax machines, cellular

phones, pagers, and wireless appliances. By decreasing communi-
cations costs, the new technologies have encouraged more compa-
nies to move from mass communication to more targeted commu-
nications and one-to-one dialogue. But companies are also using
their sales force to provide a human touch to their marketing.
A Newell Rubbermaid trainee filling
a
product dispenser as part of
his
participation in the company's Phoenix program.
603
ewe//
Rubbermaid's Phoenix program takes college graduates and
assigns them to Wal-Mart, The Home Depot, Lowe's, and other
retailers where they do everything from stocking shelves to
demonstrating new stain-resistant plastic food containers to organizing in-
store scavenger hunts. The 500+ college graduates selected for the program
are chosen based on their accomplishments outside the classroom.
Personable jocks or sorority presidents are favored on the basis of evidence
of ambition, leadership, and teamwork. They then receive intensive training
604 PART 7
COMMUNICATING VALUE
on effective retail marketing strategies to increase consumer demand in the seven
to eight stores to which they are assigned. With their logo-emblazoned Chevy
Trailblazers, the highly motivated and energetic sales force has generated, on
average, double-digit, year-to-year sales increases.'
1
Personalizing communications—and saying and doing the right thing to the
right person at the right time—is critical. In this chapter, we consider how com-
panies personalize their marketing communications to have more of an impact.

We begin by evaluating direct marketing; then we consider personal selling and
the sales force.
::: Direct Marketing
Direct marketing is the use of consumer-direct (CD) channels to reach and deliver goods
and services to customers without using marketing middlemen. These channels include
direct mail, catalogs, telemarketing, interactive
TV,
kiosks,
Web sites, and mobile devices.
Direct marketers seek a measurable response, typically a customer order. This is some-
times called direct-order marketing. Today, many direct marketers use direct marketing to
build a long-term relationship with the customer.
2
They send birthday cards, information
materials, or small premiums to certain customers. Airlines, hotels, and other businesses
build strong customer relationships through frequency award programs and club programs.
Direct marketing is one of the fastest-growing avenues for serving customers. More and
more business marketers have turned to direct mail and telemarketing in response to the
high and increasing costs of reaching business markets through a sales force. In total, sales
from direct marketing generate almost
9
percent of the U.S. economy.
3
In addition to trying to increase sales force productivity, companies are seeking to substitute
mail- and phone-based selling units to reduce field sales expenses. Sales produced through tra-
ditional direct-marketing channels (catalogs, direct mail, and telemarketing) have been grow-
ing rapidly. Whereas U.S. retail sales grow around 3 percent annually, catalog and direct-mail
sales grow at about double that rate. Direct sales include sales to the consumer market
(53
per-

cent),
B2B (27 percent), and fund-raising by charitable institutions (20 percent). Total media
expenditures for direct marketing in 2000 (including direct
mail,
telephone, broadcast, Internet,
newspaper, magazine, etc.) has been estimated at $236.3 billion.
4
Figure 19.1 provides a break-
down of the various types of direct marketing.
The Benefits of Direct Marketing
The extraordinary growth of direct marketing is the result of many factors. Market demassi-
fication has resulted in an ever-increasing number of market niches. Higher costs of driving,
traffic congestion, parking headaches, lack of time, a shortage of retail sales help, and lines
at checkout counters all encourage at-home shopping. Consumers appreciate toll-free
phone numbers and
Web
sites available 24 hours a day, 7 days a week, and direct marketers'
commitment to customer service. The growth of next-day delivery via FedEx, Airborne, and
UPS has made ordering fast and easy. In addition, many chain stores have dropped slower-
moving specialty items, creating an opportunity for direct marketers to promote these items
to interested buyers. The growth of the Internet, e-mail, mobile phones, and fax machines
has made product selection and ordering much simpler.
Direct marketing benefits customers in many
ways.
Home shopping can be fun, convenient,
and hassle-free. It saves time and introduces consumers to a larger selection of merchandise.
They can do comparative shopping by browsing through mail catalogs and online shopping
BUSINESS ORGANIZATION
' 13 million Businesses 1
U.S.

Aggr.
Sales $17,590 trillion
i
Finance Marketing Production
Direct Marketing
Marketing Research
Market Segmentation
• Consumer
• Industrial
Direct Response
Marketing
Advertising Creation
• Direct (response)
• Indirect (support)
Media
2000 Total Spending
S421.98 billion
Direct Mail
ME:S44,715B
Postal
Non-Postal
List Rental
Telephone
ME:S167,700B
Broadcast
ME:
S73,020B
Internet
ME:
S3.2B

Newspaper
ME:
$49,246B
Magazine
ME:S17,083B
Outbound
ME:
S58,850B
Television
ME:
$53,435B
Local
ME:
S42.062B
Consumer
ME:$12,348B
Radio
ME:S19,585B
National
ME:S7,184B
Farm
ME:
0,340B
Inbound
ME:
S58.850B
Business Papers
ME:
S4.395B
Direct Response

Expenditures 2000
S236.26B
Channels of Distribution
Measurable Response and/or Transaction
Vending Machines
Sales S41.350B
Mail Order-Mail/Phone
Sales
$289.01 B
Personal Visit to Seller
(Retail)
Sales S5,223,000B
I
Personal Visit or
Call to Buyer
Sales S12.037.0B
Customer/Prospect Databases
Response/Transaction Fulfillment
Misc. Media
ME:
S66.943B
Yellow Pages
ME:12,367B
Outdoor
ME:
$1,540B
Trade shows
ME:12.6B
Other
ME:

S40,436B
I
Direct Mail Telephone Broadcast Internet Newspaper Magazine Misc. Media
$44,715B S58.850B $32.85B S3.28B S22.05B $7,650B $66,943B
I
FIG.
19.1 Direct Marketing Flow Chart
Source:
Reprinted with permission from
Direct Marketing
magazine, 224 Seventh Street. Garden City, New
York,
11530-5771.
606 PART 7 COMMUNICATING VALUE -
services. They can order goods for themselves or others. Business customers also benefit by
learning about available products and services without tying up time in meeting salespeople.
Sellers benefit as well. Direct marketers can buy a mailing list containing the names of
almost any group: left-handed people, overweight people, millionaires. They can customize
and personalize messages. Direct marketers can build a continuous relationship with each
customer. The parents of a newborn baby will receive periodic mailings describing new
clothes, toys, and other goods as the child grows.
Direct marketing can be timed to reach prospects at the right moment and receive higher
readership because it is sent to more interested prospects. Direct marketing permits the
testing of alternative media and messages in search of the most cost-effective approach.
Direct marketing also makes the direct marketer's offer and strategy less visible to competi-
tors.
Finally, direct marketers can measure responses to their campaigns to decide which
have been the most profitable. (However, see "Marketing Memo: Public and Ethical Issues in
Direct Marketing.")
Direct marketers can use a number of channels to reach individual prospects and cus-

tomers: direct mail, catalog marketing, telemarketing, TV and other direct-response media,
kiosk marketing, and e-marketing.
LANDS' END
A direct merchant of traditionally styled, upscale clothing for the family, soft luggage, and products for the home,
Lands'
End
sells its offerings through catalogs, on the Internet, and in
stores,
after being acquired by Sears for S1.86
billion in 2002. The catalogs came out four times a year starting in 1964 and included detailed write-ups of
prod-
ucts.
Lands'
End
was an early adopter of
the
Internet, launching
its Web
site in
1995.
The
U.S.
site offers every Lands'
End product
and is
the world's largest
apparel
Web site in sales
volume.
A

leader in developing new ways to enhance
shopping experiences, customers can create a 3-D Virtual Model of themselves by providing critical measurements
or a "personal wardrobe consultant" by answering questions about their clothing preferences. Weekly e-mails with
quirky tales and discounts also drive
sales.
A
story of how a customer wore his Lands' End mesh shirt to a preserve
for orphaned chimpanzees in the Republic of Ghana led to an increase of 40 percent in sales of the shirt that week.
5
Direct Mail
Direct-mail marketing involves sending an offer, announcement, reminder, or other item to a
person. Using highly selective mailing lists, direct marketers send out millions of mail pieces
each year—letters, flyers, foldouts, and other "salespeople with wings." Some direct mar-
keters mail audiotapes, videotapes, CDs, and computer diskettes to prospects and customers.
MARKETING MEMO
THE PUBLIC AND ETHICAL ISSUES IN DIRECT MARKETING
Direct marketers and their customers usually enjoy mutually
rewarding relationships. Occasionally, however, a darker side
emerges:
Irritation: Many people do not like the increasing number of
hard-sell,
direct-marketing solicitations. Especially bothersome
are dinnertime or late-night phone calls, poorly trained callers,
and computerized calls placed by auto-dial recorded-message
players.
Unfairness: Some direct marketers take advantage of impulsive
or
less
sophisticated
buyers.

TV shopping
shows
and
infomercials
may be the worst culprits with their smooth-talking hosts and
claims of drastic price reductions.
Deception and
fraud:
Some direct marketers design mailers
and write copy intended to mislead buyers. They may exag-
gerate product size, performance claims, or the "retail price."
The Federal Trade Commission receives thousands of com-
plaints each year about fraudulent investment scams or phony
charities.
i Invasion of
privacy:
It seems that almost every time consumers
order products by mail or telephone, enter a sweepstakes, apply
for a credit
card,
or take out a magazine subscription, their
names, addresses, and purchasing behavior may be added to
several company databases. Critics worry that marketers may
know too much about consumers' lives, and that they may use
this knowledge to take unfair advantage.
People in the direct-marketing industry are attempting to address
these issues. They know that, left unattended, such problems will
lead to increasingly negative consumer attitudes, lower response
rates,
and calls for greater state and federal regulation. In the final

analysis, most direct marketers want the same thing that
con-
sumers want: honest and well-designed marketing offers targeted
only to those consumers who appreciate hearing about the offer.
MANAGING PERSONAL COMMUNICATIONS: DIRECT MARKETING AND PERSONAL SELLING CHAPTER 19 607
Direct mail is a popular medium because it permits target market selectivity, can be per-
sonalized, is flexible, and allows early testing and response measurement. Although the cost
per thousand people reached is higher than with mass media, the people reached are much
better prospects. Direct mail may be paper-based and handled by the U.S. Postal Service,
telegraphic services, or for-profit mail carriers such as FedEx, DHL, or Airborne Express.
Alternatively, marketers may employ fax mail, e-mail, or voice mail to sell direct.
Direct-mail marketing has passed through a number of stages:
E
"Carpet bombing." Direct mailers gather or buy as many names as possible and send out
a mass mailing. Usually the response rate is very low.
• Database marketing. Direct marketers mine the database to identify prospects who
would have the most interest in an offer.
a Interactive marketing. Direct marketers include a telephone number and Web address,
and offer to print coupons from the Web site. Recipients can contact the company with
questions. The company uses the interaction as an opportunity to up-sell, cross-sell, and
deepen the relationship.
B
Real-time personalized marketing. Direct marketers know enough about each customer
to customize and personalize the offer and message.
• Lifetime value marketing. Direct marketers develop a plan for lifetime marketing to each
valuable customer, based on knowledge of life events and transitions.
One company long recognized for its strong, beneficial focus on customers is Maine's
L.L. Bean, Inc., which sells outdoor/casual clothing and equipment through mail order,
online catalogs, and retail stores and factory outlets.
To

maximize customer satisfaction, the
company has an unequivocal, 100 percent guarantee for all purchases. Founder L.L. Bean
placed a notice on the wall of the Freeport store in 1916, which proclaimed, "I do not con-
sider a sale complete until goods are worn out and customer still satisfied." Bean even once
refunded the money on a pair of two-year-old shoes because the customer said the pair did
not wear as well as expected!
6
In constructing an effective direct-mail campaign, direct marketers must decide on their
objectives, target markets, and prospects; offer elements, means of testing the campaign,
and measures of campaign success.
• ANZ BANK
Australia's ANZ Bank's "Change Your Home to Suit Your Life" campaign was chosen winner of the 2003 Direct
Marketing Association award as top international direct and interactive marketing campaign. Direct-response
agency M&C Saatchi used sophisticated data analysis to identify and tailor a campaign to raise interest in home
loans.
Database profiling was used to select customers from 16 distinct groups of targets. Direct mail then offered
information specific to each target audience, reflecting the recipient's situation and specific
needs.
As
a result of the
campaign,
ANZ
received a record number of calls to its home buyers' line—an 83 percent year-on-year increase—
a 3 percent rise in home loan applications, and a 47 percent increase in campaign recognition. The direct-mail
campaign specifically resulted in 4,922 new accounts or mortgages with a conversion rate of 6 percent.
7
)BJECTIVES Most direct marketers aim to receive an order from prospects.
A
campaign's
success is judged by the response rate. An order-response rate of

2
percent is normally con-
sidered good, although this number varies with product category and price. Direct mail can
achieve other communication objectives as well, such as producing prospect leads,
strengthening customer relationships, informing and educating customers, reminding cus-
tomers of
offers,
and reinforcing recent customer purchase decisions.
TARGET MARKETS AND PROSPECTS Direct marketers need to identify the characteristics
of prospects and customers who are most able, willing, and ready to buy. Most direct mar-
keters apply the R-F-M formula
[recency, frequency,
monetary amount) for rating and select-
ing customers. For any proposed offering, the company selects customers according to how
much time has passed since their last purchase, how many times they have purchased, and
how much they have spent since becoming a customer. Suppose the company is offering a
leather jacket. It might make this offer to customers who made their last purchase between
30 and 60 days ago, who make three to six purchases a year, and who have spent at least $100
608
PART 7 COMMUNICATING VALUE
MARKETING MEMO
WHEN YOUR CUSTOMER IS A COMMITTEE
One
of
the many advantages
of
database marketing and direct mail
is that they allow
you to
tailor format, offer,

and
sell messages
to
the target audience(s). Business marketers
can
create
a
series
of
interrelated
and
reinforced mailings
to
decision makers
and
deci-
sion influencers. Here
are
some tips
for
increasing success
in
sell-
ing
to a
customer-by-committee:
•
When creating lead generation and follow-up mailings, remem-
ber that most business mailings
are

screened once, twice,
or
even more before reaching your targeted audience.
n Plan and budget for a series
of
mailings to each of your customer-by-
committee members. Timing
and
multiple exposures
are
critical
in
reaching these audiences.
•
Whenever possible, mail
to
individuals
by
name
and
title. Using
the title helps
the
in-office mail screener reroute your mailing
if
the individual addressed
has
moved
on to
another job.

• Do not
necessarily
use the
same format and size
for
reaching
all
your targeted audiences. A more expensive-looking envelope
may
reach
the
president
or
CEO,
but it
may be equally effective
to use
a less expensive, less personal format
to
reach other decision
influencers.
Tell your customer-by-committee that
you are
communicating
with others
in the
organization.
Make your decision influencers feel important. They can
be
your

biggest advocates.
When communicating with different audiences, make sure
you
anticipate—and address—their individual buying objectives
and
objections.
When your database
or
mailing lists cannot help you reach all
the
key people,
ask the
individual
you are
addressing
to
pass along
your information.
When doing
a
lead-generation mailing, make sure
to ask for
the names
and
titles
of
those
who
might
be

interested
and
involved
in the
buying decision. Enter this information into your
database.
Even though
it
may seem like
a
lot
of
work (and expense)
to
write
different versions
of the
same letter
and
create different offers,
there
is a big
payoff. The final decision maker may
be
interested
in having
a
payback calculated,
but
others

may be
interested
in
day-to-day benefits such
as
safety, convenience, and time sav-
ings.
Tailor your offer
to
your targets.
Source:
Adapted from
Pat
Friesen, "When Your Customer
Is a
Committee,"
Target
Marketing (August 1998):
40.
since becoming customers. Points are established for varying R-F-M levels, and each cus-
tomer is scored. The higher the score, the more attractive the customer. The mailing is sent
only to the most attractive customers.
8
Prospects can also be identified on the basis of such variables as age, sex, income, educa-
tion, and previous mail-order purchases. Occasions provide a good departure point for seg-
mentation. New parents will be in the market for baby clothes and baby
toys;
college freshmen
will buy computers and small television sets; newlyweds will be looking for housing, furniture,
appliances, and bank loans. Another useful segmentation variable is consumer lifestyle or

"passion" groups, such as computer buffs, cooking buffs, and outdoor buffs. For business mar-
kets,
Dun
&
Bradstreet operates an information service that provides a wealth of data.
In B2B direct marketing, the prospect is often not an individual but a group of people or
a committee that includes both decision makers and multiple decision influencers. See
"Marketing Memo: When Your Customer Is a Committee" for tips on crafting a direct-mail
campaign aimed at business buyers.
Once the target market is defined, the direct marketer needs to obtain specific names.
The company's best prospects are customers who have bought its products in the past.
Additional names can be obtained by advertising some free offer. The direct marketer can
also buy lists of names from list brokers, but these lists often have problems, including name
duplication, incomplete data, and obsolete addresses. The better lists include overlays of
demographic and psychographic information. Direct marketers typically buy and test a
sample before buying more names from the same list.
OFFER ELEMENTS Nash sees the offer strategy as consisting of five elements—the product,
the
offer,
the medium, the distribution
method,
and the
creative
strategy.
9
Fortunately, all of
these elements can be tested.
In addition to these elements, the direct-mail marketer has to decide on five components
of the mailing
itself:

the outside envelope, sales letter, circular, reply form, and reply enve-
lope.
Here are some findings:
1.
The outside envelope will be more effective if it contains an illustration, preferably in
color, or a catchy reason to open the envelope, such as the announcement of a contest,
MANAGING PERSONAL COMMUNICATIONS: DIRECT MARKETING AND PERSONAL SELLING
premium, or benefit. Envelopes are more effective when they contain a colorful com-
memorative stamp, when the address is hand-typed or handwritten, and when the enve-
lope differs in size or shape from standard envelopes.
10
2.
The sales letter should use a personal salutation and start with a headline in bold type.
The letter should be printed on good-quality paper and be
brief.
A
computer-typed let-
ter usually outperforms a printed letter, and the presence of a pithy
P.S.
increases the
response rate, as does the signature of someone whose title is important.
3.
In most cases, a colorful circular accompanying the letter will increase the response rate
by more than its cost.
4.
Direct mailers should feature a toll-free number and also send recipients to their Web
site.
Coupons should be printed out at the
Web
site.

5.
The inclusion of a postage-free reply envelope will dramatically increase the response rate.
Direct mail should be followed up by an e-mail, which is less expensive and less intrusive
than a telemarketing call.
TESTING ELEMENTS One of the great advantages of direct marketing is the ability to test,
under real marketplace conditions, different elements of an offer strategy, such as products,
product features, copy platform, mailer type, envelope, prices, or mailing lists.
Direct marketers must remember that response rates typically understate a campaign's
long-term impact. Suppose only
2
percent of the recipients who receive a direct-mail piece
advertising Samsonite luggage place an older. A much larger percentage became aware of
the product (direct mail has high readership), and some percentage may have formed an
intention to buy at a later date (either by mail or at a retail outlet). Furthermore, some of
them may mention Samsonite luggage to others as a result of the direct-mail
piece.
To
derive
a more comprehensive estimate of the promotion's impact, some companies are measuring
the impact of direct marketing on awareness, intention to buy, and word of mouth.
MEASURING CAMPAIGN SUCCESS: LIFETIME VALUE By adding up the planned cam-
paign costs, the direct marketer can figure out in advance the needed break-even response
rate.
This rate must be net of returned merchandise and bad debts. Returned merchandise
can kill an otherwise effective campaign. The direct marketer needs to analyze the main
causes of returned merchandise (late shipment, defective merchandise, damage in transit,
not as advertised, incorrect order fulfillment).
By
carefully analyzing past campaigns, direct marketers can steadily improve performance.
Even when a specific campaign fails to break even in the short run, it can still be profitable in

the long run if customer lifetime is factored in (see Chapter
5).
A
customer's ultimate value is
not revealed by a purchase response to a particular mailing. Rather, it is the expected profit
made on all future purchases net of customer acquisition and maintenance costs. For an aver-
age customer, one would calculate the average customer longevity, average customer annual
expenditure, and average gross margin, minus the average cost of customer acquisition and
maintenance (properly discounted for the opportunity cost of money).
11
Catalog Marketing
In catalog marketing, companies may send full-line merchandise catalogs, specialty consumer
catalogs, and business catalogs, usually in print form but also sometimes as CDs, videos, or
online. JCPenney and Spiegel send general merchandise catalogs. Victoria's Secret and Saks
Fifth Avenue send specialty clothing catalogs to the upper-middle-class market. Through their
catalogs, Avon sells
cosmetics,
W
R.
Grace sells cheese, and
IKEA
sells furniture. Many of these
direct marketers have found that combining catalogs and
Web
sites can be an effective way to
sell. Thousands of small businesses also issue specialty catalogs. Large businesses such as
Grainger, Merck, and others send catalogs to business prospects and customers.
Catalogs are a huge business—about
71
percent of Americans shop from home using cat-

alogs by phone, mail, and Internet. They spent an average of
$149
per catalog order in 2002.
12
The success of a catalog business depends on the company's ability to manage its customer
lists carefully so that there is little duplication or bad debts, to control its inventory carefully,
to offer quality merchandise so that returns are low, and to project a distinctive image. Some
companies distinguish their catalogs by adding literary or information features, sending
swatches of materials, operating a special hot line to answer questions, sending gifts to their
best customers, and donating a percentage of the profits to good causes.
610 PART 7 COMMUNICATING VALUE
PATAGONIA
"Stunning,"
"soaring," and "wonderful" were a few of the adjectives that
Catalog Age
judges used in awarding
Patagonia's fall 2002 edition their Catalog of the Year
prize.
The judges cited the spectacular cover shot of South
American mountains, the excellent selection of merchandise, and the superb presentation. Copy was lauded as
being highly detailed without being technical, high-quality photographs were seen as providing strong visual
images, and environmental essays and field reports were deemed to add relevant editorial substance. The
judges also cited the catalog's strong customer service policies and ease of ordering.
13
The cover of the award-winning
Patagonia catalog, Fall 2002 edition.
Global consumers in Asia and Europe are catching on to the catalog craze. In the 1990s,
U.S.
catalog companies such as L.L. Bean, Lands' End, Eddie Bauer, and Patagonia began
setting up operations in Japan—and with great success. In just a few years foreign catalogs—

mostly from the United States and a few from Europe—have won
5
percent of the $20 billion
Japanese mail-order catalog market.
A
full 90 percent of
L.L.
Bean's international sales come
from Japan. Consumer catalog companies such
as
Tiffany
&
Co., Patagonia, Eddie Bauer, and
Lands' End are also entering Europe.
Business marketers are making inroads as well. Sales to foreign (mainly European) mar-
kets have driven earnings increases at Viking Office Products and computer and network
equipment cataloger Black Box Corporation. Viking has had success in Europe because,
unlike the United States, Europe has fewer superstores and is very receptive to mail order.
Black Box owes much of its international growth to its customer service policies, which are
unmatched in Europe.
1,1
By
putting their entire catalogs online, catalog companies have bet-
ter access to global consumers than ever before, and save considerable printing and mailing
costs in the process.
MANAGING PERSONAL COMMUNICATIONS: DIRECT MARKETING AND PERSONAL SELLING CHAPTER 19 611
Telemarketing
Telemarketing is the use of the telephone and call centers to attract prospects, sell to exist-
ing customers, and provide service by taking orders and answering questions. Telemarketing
helps companies increase revenue, reduce selling costs, and improve customer satisfaction.

Companies use call centers for inbound telemarketing (receiving calls from customers) and
outbound telemarketing (initiating calls to prospects and customers). In fact, companies
carry out four types of telemarketing:
a
Telesales.
Taking orders from catalogs or ads and also doing outbound calling. They can
cross-sell the company's other products, upgrade orders, introduce new products, open new
accounts, and reactivate former accounts
s
Telecoverage.
Calling customers to maintain and nurture key account relationships and
give more attention to neglected accounts.
a
Teleprospecting.
Generating and qualifying new leads for closure by another sales channel.
E
Customer service and technical support. Answering service and technical questions.
Although telemarketing has become a major direct-marketing tool, its sometimes intrusive
nature led to the establishment by the Federal Trade Commission of a National Do Not Call
Registry in October
2003
so that consumers could indicate if they did not want telemarketers
to call them at home. Only political organizations, charities, telephone surveyors, or compa-
nies with existing relationships with consumers were exempt.
15
Telemarketing is increasingly used in business as well as consumer marketing. Raleigh
Bicycles uses telemarketing to reduce the amount of personal selling needed for contacting
its dealers. In the first year, sales force travel costs were reduced by 50 percent and sales in a
single quarter went up 34 percent. Telemarketing, as it improves with the use of video-
phones, will increasingly replace, though never eliminate, more expensive field sales calls.

An increasing number of salespeople have made five- and six-figure sales without ever meet-
ing the customer face-to-face. Effective telemarketing depends on choosing the right tele-
marketers, training them well, and providing performance incentives. Here is an example of
successful telemarketing.
i- USAA
USAA, located in San Antonio, Texas, proves that a company can successfully conduct its entire insurance
busi-
ness over the phone without ever meeting customers face-to-face. From its beginnings, USAA focused on
sell-
ing auto insurance, and later other insurance products, to those with military service. It increased its share of
each customer's business by launching a consumer bank, issuing credit cards, opening a discount brokerage,
and offering a selection of no-load mutual funds. In spite of transactions taking place on the phone, USAA boasts
one of the highest customer satisfaction ratings of any company in the United States. It received the Chairman's
• Award from J. D. Power
&
Associates in 2002.
16
Other Media for Direct-Response Marketing
Direct marketers use all the major media to make offers to potential buyers. Newspapers
and magazines carry abundant print ads offering books, articles of clothing, appliances,
vacations, and other goods and services that individuals can order by dialing a toll-free
number. Radio ads present offers to listeners 24 hours a day.
TELEVISION Television is used by direct marketers in several ways:
1.
Direct-response advertising -Some companies prepare 30- and 60-minute infomercials
that attempt to combine the sell of commercials with the draw of educational informa-
tion and entertainment. Infomercials can be seen as a cross between a sales call and a
television ad and cost roughly $250,000 to $500,000 to make. A number of people have
become famous with late-night channel switchers
(e.g.,

Tony Robbins, Victoria Principal,
and Kathy Smith). Increasingly, companies selling products that are complicated, tech-
nologically advanced, or simply require a great deal of explanation are turning to
infomercials (Callaway
Golf,
Carnival Cruises, Mercedes, Microsoft, Philips Electronics,
Universal Studios, and even the online job search site, Monster.com).
17
They share the
612
PART 7
COMMUNICATING VALUE
product's story and benefits with millions of additional prospects at a cost-per-lead or
cost-per-order that usually matches or beats direct mail or print ads.
10
2.
At-home shopping channels - Some television channels are dedicated to selling goods
and services. On Home Shopping Network (HSN), which broadcasts 24 hours a day, the
program's hosts offer bargain prices on such products as clothing, jewelry, lamps, col-
lectible dolls, and power tools. Viewers call in orders on a toll-free number and receive
delivery within 48 hours. Millions of adults watch home shopping programs, and close to
half of them buy merchandise.
3.
Videotext and interactive TV- The consumer's
TV
set is linked with a seller's catalog by
cable or telephone lines. Consumers can place orders via a special keyboard device con-
nected to the system. Much research is now going on to combine
TV,
telephones, and

computers into interactive TV
KIOSK MARKETING A kiosk is a small building or structure that might house a selling or
information unit. The name describes newsstands, refreshment stands, and free-standing
carts whose vendors sell watches, costume jewelry, and other items. The carts appear in bus
and rail stations and along aisles in a mall. The term also covers computer-linked vending
machines and "customer-order-placing machines" in stores, airports, and other locations.
All of these are direct-selling tools. Some marketers have adapted the self-service feature of
kiosks to their businesses. Continental Airlines found that 66 percent of its U.S. passengers
checked themselves in via kiosks with a mean check-in time of only 66 seconds with bags
and 30 seconds without bags. McDonald's found that customers who used its kiosks to order
spent 30 percent more per order.
19
::: Interactive Marketing
The newest channels for direct marketing are electronic.
20
The Internet provides marketers
and consumers with opportunities for much greater interaction and individualization.
Companies in the past would send standard media—magazines, newsletters, ads—to every-
one.
Today these companies can send individualized content and consumers themselves
can further individualize the content. Today companies can interact and dialogue with
much larger groups than ever in the past.
The exchange process in the age of information, however, has become increasingly
customer-initiated and customer-controlled. Marketers and their representatives must wait
until customers agree to participate in the exchange. Even after marketers enter the exchange
process, customers define the rules of engagement, and insulate themselves with the help of
agents and intermediaries if they so choose. Customers define what information they need,
what offerings they are interested in, and what prices they are willing to pay.
21
Electronic marketing is showing explosive growth: $2.2 billion was spent in online adver-

tising during the fourth quarter of
2003;
43 percent of PC users, or 51 million U.S. house-
holds,
could connect to the Internet via the broadband connection necessary for swift down-
loading of dense video and music digital files.
22
These new capabilities will spur the growth
of rich media ads that combine animation, video, and sound with interactive features.
r— AXE DEODORANT
Winner of
Business
2.ffs
2003 Sweet Spot Award for Most Innovative Campaign, Unilever's Axe Deodorant body
spray was launched in 2002 targeting the 18- to 24-year-old male audience interested in improving their appeal
to the opposite
sex.
The
centerpiece of the effort, designed by
ad
agency Bartle Bogle Hegarty, was a set of com-
mercials purporting to be home videos and playing only on Axe's Web site (www.theaxeeffect.com). In each, a
pretty young woman is instantly attracted by a whiff of Axe deodorant. In one 25-second clip, a high school
cheerleader sprints onto a football field to tackle
an
Axe-saturated ball carrier. The agency's assumption was that
this demographic group—95 percent of whom spent at least four hours online—preferred to discover brands,
not to be sold them. The campaign bypassed conventional TV ads in favor of banner ads on Web sites of men's
magazines
Maxim

and
FHM
as well as on AtomFilms, a repository of quirky short movies. The banners clicked
through to a flashy Web site where surfers could view the video
clips.
The campaign R0I exceeded all expecta-
tions.
The site received seven times as many hits as expected. Four months into the campaign, 1.7 million peo-
ple had visited the site and a third of them reported that they had been sent there by friends. By year
end,
Axe
• had captured almost 4 percent of the 82 billion U.S. male deodorant market.
23
MANAGING PERSONAL COMMUNICATIONS: DIRECT MARKETING AND PERSONAL SELLING CHAPTER 19 613
The Benefits of Interactive Marketing
Interactive marketing offers many unique benefits.
24
It is highly accountable and its effects
can be easily traced. Eddie Bauer cut its marketing cost per sale by 74 percent by concen-
trating on higher-performing ads.
25
The Web offers the advantage of "contextual place-
ments." Marketers can buy ads from sites that are related to their offerings, as well as place
advertising based on contextual keywords from online search outfits like Google. In that
way, the Web can reach people when they have actually started the buying process. Light
consumers of other media, especially television, can be reached. The Web is especially effec-
tive at reaching people during the
day.
Young,
high-income, high-education customers' total

online media consumption exceeds that of TV.
26
Designing an Attractive Web Site
Clearly, all companies need to consider and evaluate e-marketing and e-purchasing oppor-
tunities.
A
key challenge is designing a site that is attractive on first viewing and interesting
enough to encourage repeat visits.
Rayport and Jaworski have proposed that effective Web sites feature seven design ele-
ments that they call the 7Cs:
27
a Context. Layout and design.
• Content. Text, pictures, sound, and video the site contains.
B
Community. How the site enables user-to-user communication.
B
Customization. Site's ability to tailor itself
to
different users or to allow users to personal-
ize the site.
E
Communication. How the site enables site-to-user, user-to-site, or two-way communication.
n Connection. Degree that the site is linked to other sites.
B
Commerce. Site's capabilities to enable commercial transactions.
To encourage repeat visits, companies need to pay special attention to context and content
factors and also embrace another "C"—constant change.
28
Visitors will judge a site's performance on its ease of use and its physical attractiveness.
Ease-of-use breaks down into three attributes: (1) The Web site downloads quickly, (2) the

first page is easy to understand, and (3) the visitor finds it easy to navigate to other pages
that open quickly. Physical attractiveness is determined by the following factors: (1) The
individual pages are clean looking and not overly crammed with content, (2) the typefaces
and font sizes are very readable, and (3) the site makes good use of color (and sound).
The Neiman Marcus
Web
site is both
attractive and functional: It is easy to
navigate and easy to shop from. If you
want to buy these leather gloves, you can
see a full description plus color choices,
and follow instructions to order in a few
clicks of the mouse.
614
PART 7
COMMUNICATING VALUE
JUST YOUR TYPE
Marketers have analyzed customers and markets in terms of gender,
age,
ethnicity, and other characteristics for decades. But demograph-
ics aren't the only tools for slicing up an online market. San Diego
market research firm Miller-Williams Inc. splits online buyers into five
categories:
Sensibles,
at
37%,
are the most numerous of all online shop-
pers,
the easiest to satisfy, and probably the best customers.
Agonizers,

representing 10%, do lots of comparison shop-
ping,
but aren't as price-oriented as
Hagglers,
who make up
34 percent.
Loaners,
representing 15 percent, emphasize ease of use in
their shopping experience. About 5 percent of online shop-
pers are Web-sawy but fickle
Techies.
The takeaway of this segmentation is that you need to know who
your customers are and make sure you aren't offering something
they don't want or
need.
"If
you
know your buyers are hagglers," rea-
sons Amy Ferraro, director of research for Miller-Williams Inc., "you
know you need to target them with coupons."
Source:
Adapted
from Mark Henricks, "Net Meeting,"
Entrepreneur,
February 2003, p. 55.
Context factors facilitate repeat visits, but they do not ensure that this happens.
Returning to a site depends on content. The content must be interesting, useful, and con-
tinuously changing. Certain types of content function well to attract first-time visitors and
to bring them back again: (1) deep information with links to related sites, (2) changing
news of interest, (3) changing free offers to visitors, (4) contests and sweepstakes,

(5) humor and jokes, and (6) games.
Companies are also paying attention to how people buy once they are shopping online.
See "Marketing Memo: Just
Your
Type"
for a look at five categories of online buyers.
Placing Ads and Promotion Online
A company has to decide which forms of Internet advertising will be most cost-effective in
achieving advertising objectives. Banner ads are small, rectangular boxes containing text
and perhaps a picture. Companies pay to place banner ads on relevant
Web
sites. The larger
the audience reached, the more the placement will cost. Some banners on Web sites are not
paid for, but instead are accepted on a barter basis. In the early days of the Internet, viewers
clicked on roughly 2 to 3 percent of the banner ads they saw, but that percentage quickly
plummeted and advertisers began to explore other forms of communication.
Many companies get their name on the Internet by sponsoring special content on Web
sites that carry
news,
financial information, and so on. Sponsorships are best placed in well-
targeted sites where they can offer relevant information or service. The sponsor pays for
showing the content and in turn receives acknowledgment as the sponsor of that particular
service on the
Web
site.
A
microsite is a limited area on the
Web
managed and paid for by an external advertiser/
company. Microsites are particularly relevant for companies selling low-interest products such

as insurance. People rarely visit an insurance company's
Web
site.
However, the insurance com-
pany can create a microsite on used-car sites that offers advice for buyers of used cars and at
the same time a good insurance deal.
Interstitials are advertisements, often with video or animation, that pop up between
changes on
a Web
site. Ads for Johnson
&
Johnson's Tylenol headache reliever pop up on bro-
kers'
Web sites whenever the stock market falls by 100 points or more. Because consumers
found pop-up ads intrusive and distracting, many computer users such as AOL installed
software to block these ads.
29
The hottest growth area has been search-related ads.
30
Thirty-five percent of
all
searches
are reportedly for products or services. Search terms are used as a proxy for the consumer's
consumption interests and relevant links to product or service offerings are listed along side
the search results from Google, MSN, and
Yahoo!.
Advertisers pay only if people click on the
links.
The cost per click depends on how high the link is ranked and the popularity of the
keyword searched. Average click-through is about 2 percent, much more than comparable

online ads.
31
At an average of
35
cents, paid search is a lot cheaper than the $l-per-lead for
Yellow Pages listings. One Samsung executive estimated that it was 50 times cheaper to reach
MARKETING MEMO
MANAGING PERSONAL COMMUNICATIONS: DIRECT MARKETING AND PERSONAL SELLING CHAPTER 19 615
1,000 people online than on
TV.
The company now spends 10 percent of its advertising bud-
get online.
32
A
newer trend, content-target advertising, links ads not to keywords but to the
content ofWeb pages.
Companies can set up alliances and affiliate
programs.
When one Internet company works
with another one, they end up advertising each other. AOL has created many successful
alliances with other companies. Amazon has almost
1
million affiliates that post Amazon ban-
ners on their Web
sites.
Companies can also undertake guerrilla marketing actions to publicize
the site and generate word of mouth. When
Yahoo!
started its Denmark site, it distributed
apples at the busiest train station in Denmark with the message that in the next hours a trip to

New York
could be won on the
Yahoo!
site; it also managed to get this mentioned in Danish
newspapers. Companies can offer to push content and ads to targeted audiences who agree to
receive them and are presumably more interested in the product or product category.
Web advertising is showing double-digit growth. Costs are reasonable compared with
those of other advertising media. For example, ESPN.com (www.espn.com), the number-one
Internet sports site, attracts more than
5
million
Web
surfers a week. Based on current adver-
tising rates, running advertising on the site for an entire year may range from $500,000 to
$1,000,000 (depending on impression
levels).
33
Yahoo!
employs 100 salespeople who demon-
strate how online ads can reach people with certain interests or who live in specific zip codes.
E-Marketing Guidelines
If a company does an e-mail campaign right, it can not only build customer relationships,
but also reap additional profits. E-mail involves only a fraction of the cost of a "d-mail," or
direct-mail, campaign. For example, Microsoft spent approximately $70 million a year on
paper-driven campaigns. Now, it sends out 20 million pieces of e-mail every month at a sig-
nificant savings over the cost of paper-based campaigns. Also, compared to other forms of
online marketing, e-mail is a hands-down winner. Click-through rates for ad banners have
dropped to less than
1
percent, whereas click-through rates for well-crafted e-mail are run-

ning around 80 percent.
Here are some important guidelines followed by pioneering e-mail marketers:
34
m
Give
the customer a reason to respond. Companies should offer surfers powerful incen-
tives for reading e-mail pitches and online ads, like e-mail trivia games, scavenger hunts,
and instant-win sweepstakes.
a Personalize the content of your e-mails. IBM's iSource is distributed directly to cus-
tomers' office e-mail each week, delivering only "the news they choose" in terms of
Announcements and Weekly Updates. Customers who agree to receive the newsletter select
from topics listed on an interest profile.
n Offer something the customer could not get via direct mail. Because e-mail campaigns
can be carried out quickly, they can offer time-sensitive information. Travelocity sends fre-
quent e-mails pitching last-minute cheap airfares. Club Med uses e-mail to pitch unsold,
discounted vacation packages to prospects in its database.
m Make it easy for customers to "unsubscribe."
It
is important that online customers have a
positive exit experience. According to a Burston-Marsteller and Roper Strach Worldwide
study, the top 10 percent of Web users who communicate much more often online typically
share their views by e-mail with 11 friends when satisfied, but contact 17 friends when they
are dissatisfied.
35
Online merchants face many challenges in expanding the public's use of e-commerce.
Customers will have to feel that the information they supply is confidential and not to be
sold to others. Customers will need to trust that online transactions are secure. Companies
must encourage communication by inviting prospects and customers to send in questions,
suggestions, and even complaints via e-mail. Some sites include a call-me button—the cus-
tomer clicks on it and his or her phone rings with a customer representative ready to answer

a question. Customer service representatives can in principle respond quickly to these mes-
sages.
Smart online marketers will answer quickly, by sending out newsletters, special prod-
uct or promotion offers based on purchase histories, reminders of service requirements or
warranty renewals, or announcements of special events.
Direct marketing must be integrated with other communications and channel
activities.
36
Citigroup, AT&T, IBM, Ford, and American Airlines have used integrated direct
marketing to build profitable relationships with customers over the years. Retailers such as
616 PART 7 COMMUNICATING VALUE
Designing the
Sales Force
FIG.
19.2 I
Designing a Sales Force
Nordstrom, Nieman Marcus, Saks Fifth Avenue, and Bloomingdale's regularly send catalogs
to supplement in-store sales. Direct-marketing companies such as L.L. Bean, Eddie Bauer,
Franklin Mint, and The Sharper Image made fortunes in the direct-marketing mail-order
and phone-order business, then opened retail stores after establishing strong brand names
as direct marketers. They cross-promote their stores, catalogs, and Web sites, for example, by
putting their
Web
addresses on their shopping bags.
VIRGIN MOBILE
In a campaign that received the top prize at the 2004 Cannes Lion awards, Virgin Mobile created a wireless
phone service campaign in Australia to sell 5-cent text messaging that combined TV and outdoor ads and a Web
page,
all based on Warren, a fictitious, love-hungry character. Outdoor ads with Warren's text address and photo
read "Be my text kitten" and "Tell me your favorite text position." During the 10-week campaign, Warren got

600,000 text responses, and the Web site got 3 million hits. Sales increased by over 35 percent month-on-month
with existing users making 15 percent more calls and sending 20 percent more text messages.
37
Ill Designing the Sales Force
The original and oldest form of direct marketing is the field sales call. Today most industrial
companies rely heavily on a professional sales force to locate prospects, develop them into
customers, and grow the business; or they hire manufacturers' representatives and agents to
carry out the direct-selling task. In addition, many consumer companies use a direct-selling
force: insurance agents, stockbrokers, and distributors work for direct-sales organizations
such as Avon, Amway, Mary Kay, and Tupperware.
U.S.
firms spend over a trillion dollars annually on sales forces and sales force materials—
more than they spend on any other promotional method. Nearly 12 percent of the total
workforce work full-time in sales occupations. Sales forces are found in nonprofit as well as
for-profit organizations. Hospitals and museums, for example, use fund-raisers to contact
donors and solicit donations.
No one debates the importance of the sales force in marketing programs. However, com-
panies are sensitive to the high and rising costs (salaries, commissions, bonuses, travel
expenses, and benefits) of maintaining a sales force. Because the average cost of a personal
sales call ranges from $200 to
$300,
and closing
a
sale typically requires four
calls,
the total cost
can range from $800 to $l,200.
3i!
Not surprisingly, companies are trying to increase the pro-
ductivity of the sales force through better selection, training, supervision, motivation, and

compensation.
The term sales
representative
covers a broad range of positions. Six can be distinguished,
ranging from the least to the most creative types of selling:
39
1.
Deliverer-A salesperson whose major task is the delivery of a product (water, fuel, oil).
2.
Order taker-A salesperson who acts predominantly as an inside order taker (the sales-
person standing behind the counter) or outside order taker (the soap salesperson calling
on the supermarket manager).
3.
Missionary-A salesperson who is not expected or permitted to take an order but whose
major task is to build goodwill or to educate the actual or potential user (the medical
"detailer" representing an ethical pharmaceutical house).
4.
Technician -
A
salesperson with a high level of technical knowledge (the engineering
salesperson who is primarily a consultant to the client companies).
5.
Demand creator-A salesperson who relies on creative methods for selling tangible
products (vacuum cleaners, cleaning brushes, household products) or intangibles
(insurance, advertising services, or education).
6. Solution vendor -
A
salesperson whose expertise is in the solving of a customer's prob-
lem, often with a system of the company's products and services (for example, computer
and communications systems).

Sales personnel serve as the company's personal link to the customers. The sales repre-
sentative is the company to many of
its
customers. It is the sales rep who brings back much-
needed information about the customer. Therefore, the company needs to carefully con-
sider issues in sales force design—namely, the development of sales force objectives,
strategy, structure, size, and compensation. (See Figure 19.2.)
MANAGING PERSONAL COMMUNICATIONS: DIRECT MARKETING AND PERSONAL SELLING CHAPTER 19 617
SOBE
John Bello, founder of SoBe nutritionally enhanced teas and juices, gives much credit to his sales force for the
brand's success. Bello claims that the superior quality and consistent sales effort it got from the 150 sales-
people the company had at its peak was directed toward one simple
goal:
"SoBe won in the street because
our sales people were there more often and in greater numbers than the competition, and they were more
motivated by far." SoBe's sales force operated at every level of the distribution
chain:
At the distributor level,
steady communication gave SoBe disproportionate focus relative to the other brands; at the trade level, with
companies such as 7-Eleven, Costco, and Safeway, most of the senior salespeople had strong personal rela-
tionships; and at the individual store level, the SoBe team was always at work setting shelves, cutting in
prod-
uct, restocking shelves, and putting up point-of-sale and displays.
40
According to Bello, bottom-line success
in any entrepreneurial endeavor depends on sales execution.
Sales Force Objectives and Strategy
The days when all the sales force did was "sell, sell, and sell" are long gone. Sales reps need
to know how to diagnose a customer's problem and propose a solution. Salespeople show a
customer-prospect how their company can help a customer improve profitability.

Companies need to define the specific objectives they want their sales force to achieve.
For example, a company might want its sales representatives to spend 80 percent of their
time with current customers and 20 percent with prospects, and 85 percent of their time on
established products and 15 percent on new products. The specific allocation scheme
depends on the kind of products and customers, but regardless of the selling context, sales-
people will have one or more of the following specific tasks to perform:
u Prospecting. Searching for prospects, or leads.
H
Targeting. Deciding how to allocate their time among prospects and customers.
• Communicating. Communicating information about the company's products and services.
• Selling. Approaching, presenting, answering questions, overcoming objections, and clos-
ing sales.
n Servicing. Providing various services to the customers—consulting on problems, render-
ing technical assistance, arranging financing, expediting delivery.
B
Information gathering. Conducting market research and doing intelligence work.
E3 Allocating. Deciding which customers will get scarce products during product shortages.
Because of the expense, most companies are moving to the concept of a
leveraged
sales
force. A sales force focuses on selling the company's more complex and customized prod-
ucts to large accounts, while low-end selling is done by inside salespeople and through Web
ordering. Tasks such as lead generation, proposal writing, order fulfillment, and postsale
support are turned over to others. Salespeople handle fewer accounts, and are rewarded for
key account growth. This is far different from expecting salespeople to sell to every possible
account, which is usually the weakness of geographically based sales forces.
41
Companies must deploy sales forces strategically so that they call on the right customers
at the right time and in the right
way.

Today's sales representatives act as "account managers"
who arrange fruitful contact between various people in the buying and selling organizations.
Selling increasingly calls for teamwork requiring the support of other personnel, such as top
management, especially when national accounts or major sales are at stake; technical people,
who supply technical information and service to the customer before, during, or after prod-
uct purchase; customer
service
representatives,
who provide installation, maintenance, and
other
services;
and an
office
staff,
consisting of sales analysts, order expediters, and assistants.
To maintain a market focus, salespeople should know how to analyze sales data, mea-
sure market potential, gather market intelligence, and develop marketing strategies and
plans.
Sales representatives need analytical marketing skills, and these skills become
especially important at the higher levels of sales management. Marketers believe that
sales forces will be more effective in the long run if they understand marketing as well as
selling.
Once the company decides on an approach, it can use a direct or a contractual sales
force.
A
direct (company) sales force consists of full- or part-time paid employees who work
exclusively for the company. This sales force includes inside sales personnel who conduct
business from the office using the telephone and receive visits from prospective buyers, and
618 PART 7 COMMUNICATING VALUE
A service representative provides

personalized,
customized service
to a
customer purchasing
a
Navistar truck.
field sales personnel who travel and visit customers. A contractual sales force consists of
manufacturers' reps, sales agents, and brokers, who are paid a commission based on sales.
Sales Force Structure
The sales force strategy has implications for the sales force structure. A company that
sells one product line to one end-using industry with customers in many locations would
use a territorial structure. A company that sells many products to many types of cus-
tomers might need a product or market structure. Some companies need a more complex
structure. Motorola, for example, manages four types of sales forces: (1) a strategic mar-
ket sales force composed of technical, applications, and quality engineers and service
personnel assigned to major accounts; (2) a geographic sales force calling on thousands
of customers in different territories; (3) a distributor sales force calling on and coaching
Motorola distributors; and (4) an inside sales force doing telemarketing and taking orders
via phone and fax.
Established companies need to revise their sales force structures as market and economic
conditions change. SAS, seller of business intelligence software, reorganized its sales force
into industry-specific groups such as banks, brokerages, and insurers and saw revenue soar
by 14 percent.
42
"Marketing Insight: Major Account Management" discusses major account
management, a specialized form of sales force structure.
Sales Force Size
Once the company clarifies its strategy and structure, it is ready to consider sales force size.
Sales representatives are one of the company's most productive and expensive assets.
Increasing their number will increase both sales and costs.

Once the company establishes the number of customers it wants to reach, it can use
a workload approach to establish sales force size. This method consists of the following
five steps:
1.
Customers are grouped into size classes according to annual sales volume.
2.
Desirable call frequencies (number of calls on an account per year) are established for
each class.
3.
The number of accounts in each size class is multiplied by the corresponding call fre-
quency to arrive at the total workload for the country, in sales calls per year.
4.
The average number of calls a sales representative can make per year is determined.
5.
The number of sales representatives needed is determined by dividing the total annual
calls required by the average annual calls made by a sales representative.
Suppose the company estimates that there are 1,000
A
accounts and 2,000
B
accounts in
the nation.
A
accounts require 36 calls a year, and B accounts require 12 calls a year. The
MANAGING PERSONAL COMMUNICATIONS: DIRECT MARKETING AND PERSONAL SELLING CHAPTER 19 619
MAJOR ACCOUNT MANAGEMENT
Major accounts (also called key accounts, national accounts, global
accounts, or house accounts) are typically singled out for special
attention.
Important customers who have multiple divisions in many

locations are offered major account
contracts,
which provide uniform
pricing and coordinated service for all customer divisions. A major
account manager (MAM) supervises field reps calling on customer
plants within their territories. Large accounts are often handled by a
strategic account management team with cross-functional personnel
who handle all aspects of the relationship. For example, in 1992,
Procter & Gamble stationed a strategic account management team to
work with Wal-Mart in its Bentonville, Arkansas, headquarters. By
1998, P&G and
Wal-Mart had
already
jointly
saved
$30 billion through
supply-chain improvements.
Today,
the P&G team in Bentonville
con-
sists of approximately 100 staffers dedicated to serving Wal-Mart.
The average company manages about 75 key
accounts.
If a com-
pany has several such accounts, it is likely to organize a major
account management division, in which the average MAM handles
nine accounts. MAMs typically report to the national sales manager
who reports to the vice president of marketing and sales, who in turn
reports to the CEO.
Major account management is growing. As buyer concentration

increases through mergers and acquisitions, fewer buyers account
for a larger share of a company's sales. Many buyers are centralizing
their purchases for certain items, which gives them more bargaining
power. Sellers in turn need to devote more attention to these major
buyers. Still another factor is that
as
products become more complex,
more groups in the buyer's organization become involved in the pur-
chase process. The typical salesperson might not have the
skill,
authority, or coverage to be effective in selling to the large buyer.
In selecting major accounts, companies look for accounts that
purchase a high volume (especially of more profitable products),
purchase centrally, require a high level of service in several geo-
graphic locations, may be price sensitive, and may want a long-term
partnering relationship. Major account managers have a number of
duties: acting as the single point of contact; developing and growing
customer business; understanding customer decision processes;
identifying added-value opportunities; providing competitive intelli-
gence;
negotiating sales; and orchestrating customer
service.
MAMs
are typically evaluated on their effectiveness in growing their share
of the account's business and on their achievement of annual profit-
and-sales volume goals. One MAM
said,
"My position must not be
as a salesman, but as a 'marketing consultant' to our customers and
a salesman of my company's capabilities as opposed to my com-

pany's products."
Major accounts normally receive more favorable pricing based
on their purchase volume, but marketers cannot rely exclusively on
this incentive to retain customer loyalty. There is always a risk that
competitors can match or beat a price or that increased costs may
necessitate raising prices. Many major accounts look for added
value more than for a price advantage. They appreciate having a
single point of dedicated contact; single billing; special warranties;
EDI links; priority shipping; early information releases; customized
products; and efficient maintenance, repair, and upgraded service.
In addition to these practical considerations, there is the value of
goodwill.
Personal relationships with personnel who value the
major account's business and who have a vested interest in the
success of that business are compelling reasons for being a loyal
customer.
Sources: S. Tubridy, "Major Account Management,"
in AMA
Management Handbook (3rd ed.), edited
by
John
J.
Hampton (New York: Amacom, 1994),
pp.
3-25,3-27; Sanjit Sengupta, Robert E. Krapfel, and Michael A. Pusateri, "The Strategic Sales Force," Marketing Management (Summer 1997): 29-34;
Robert S. Duboff and Lori Underhill Sherer, "Customized Customer Loyalty," Marketing Management (Summer 1997): 21-27; Tricia Campbell, "Getting Top
Executives
to
Sell,"
Sales

&
Marketing Management (October 1998): 39; "Promotion Marketer
of the
Decade: Wal-Mart," Promo, December
1,1999;
Noel
Capon,
Key Account Management and Planning:
The Comprehensive
Handbook for Managing
Your Company's
Most Important Strategic Asset (New
York:
Free
Press,
2001); Sallie Sherman, Joseph Sperry, and Samuel Reese,
The Seven
Keys to Managing Strategic Accounts (New
York:
McGraw-Hill
Trade,
2003). More
information can be obtained from NAMA (National Account Management Association), <www.nasm.com>.
company needs a sales force that can make 60,000 sales calls a year. Suppose the average rep
can make 1,000 calls a year. The company would need 60 full-time sales representatives.
Sales Force Compensation
To attract top-quality sales reps, the company has to develop an attractive compensation
package. Sales reps want income regularity, extra reward for above-average performance,
and fair payment for experience and longevity. Management wants control, economy and
simplicity. Some of these objectives will conflict. No wonder compensation plans exhibit a

tremendous variety from industry to industry and even within the same industry.
The company must determine the four components of sales force compensation—a fixed
amount, a variable amount, expense allowances, and benefits. The fixed amount, a salary, is
intended to satisfy the need for income
stability.
The variable amount, which might be com-
missions, bonus, or profit sharing, is intended to stimulate and reward effort. Expense
allowances enable sales reps to meet the expenses involved in travel and entertaining.
Benefits,
such as paid vacations, sickness or accident benefits, pensions, and life insurance,
are intended to provide security and job satisfaction.
MARKETING INSIGHT
620 PART 7 COMMUNICATING VALUE
Managing the
Sales Force
Recruiting
and selecting
sales
representatives.
| FIG. 19.3
Managing the Sales Force
Fixed compensation receives more emphasis in jobs with a high ratio of nonselling to
selling duties and in jobs where the selling task is technically complex and involves team-
work. Variable compensation receives more emphasis in jobs where sales are cyclical or
depend on individual initiative. Fixed and variable compensation give rise to three basic
types of compensation plans—straight salary, straight commission, and combination salary
and commission. Three-quarters of firms use a combination of salary and commission,
though the relative proportion varies widely.
43
Straight-salary plans provide sales reps with a secure income, make them more willing to

perform nonselling activities, and give them less incentive to overstock customers. From the
company's perspective, they provide administrative simplicity and lower turnover. Straight-
commission plans attract higher performers, provide more motivation, require less supervi-
sion, and control selling costs. On the negative side, commission plans overemphasize get-
ting the sale rather than building the relationship. Combination plans feature the benefits of
both plans while reducing their disadvantages.
With compensation plans that combine fixed and variable pay, companies may link the
variable portion of a salesperson's pay to a wide variety of strategic goals. Some see a new
trend toward deemphasizing volume measures in favor of factors such as gross profitabil-
ity, customer satisfaction, and customer retention. For example, IBM now partly rewards
salespeople on the basis of customer satisfaction as measured by customer surveys.
44
Other companies are basing the rep's reward partly on a sales team's performance or even
company-wide performance. This should get reps to work more closely together for the
common good.
Managing the Sales Force
Once the company has established objectives, strategy, structure, size, and compensation, it
has to recruit, select, train, supervise, motivate, and evaluate sales representatives. Various
policies and procedures guide these decisions (see Figure 19.3).
Recruiting and Selecting Representatives
At the heart of a successful sales force is the selection of effective representatives. One sur-
vey revealed that the top 27 percent of the sales force brought in over 52 percent of the sales.
Beyond differences in productivity is the great waste in hiring the wrong people. The average
annual turnover rate for all industries is almost 20 percent. Sales force turnover leads to lost
sales,
costs of finding and training replacements, and often a strain on existing salespeople
to pick up the slack.
Selecting sales reps would be simple if one knew what traits to look for. One good start-
ing point is to ask customers what traits they prefer. Most customers say they want the rep
to be honest, reliable, knowledgeable, and helpful. Determining what traits will actually

lead to sales success, however, is a challenge. Numerous studies have shown little relation-
ship between sales performance on one hand, and background and experience variables,
current status, lifestyle, attitude, personality, and skills on the other. More effective predic-
tors have been composite tests and assessment centers where the working environment is
simulated and applicants are assessed in an environment similar to the one in which they
would work.
45
After management develops its selection criteria, it must recruit. The human resources
department seeks applicants by soliciting names from current sales representatives, using
employment agencies, placing job ads, and contacting college students. Selection proce-
dures can vary from a single informal interview to prolonged testing and interviewing. Many
companies give sales applicants formal tests. Although test scores are only one information
element in a set that includes personal characteristics, references, past employment history,
and interviewer reactions, they are weighted quite heavily by such companies as IBM,
Prudential, and Procter
&
Gamble. Gillette claims that tests have reduced turnover and cor-
related well with the subsequent progress of new reps in the sales organization.
Training and Supervising Sales Representatives
Today's customers expect salespeople to have deep product knowledge, to add ideas to
improve the customer's operations, and to be efficient and reliable. These demands have
required companies to make a much higher investment in sales training.
MANAGING PERSONAL COMMUNICATIONS: DIRECT MARKETING AND PERSONAL SELLING CHAPTER 19
621
New reps may spend a few weeks to sev-
eral months in training. The median training
period is 28 weeks in industrial-products
companies, 12 in service companies, and 4
in consumer-products companies. Training
time varies with the complexity of the selling

task and the type of person recruited into the
sales organization.
r- IBM
At IBM, new reps receive extensive initial training and
may spend 15 percent of their time each year in
addi-
tional training. IBM has now switched 25 percent of the
training from classroom to e-learning, saving a great
deal of money in the process. It uses a self-study system
called Info-Window that combines a personal computer
and a laser videodisc. A trainee can practice sales calls
with an on-screen actor who portrays a buying execu-
tive in a particular industry. The actor-buyer responds
differently depending on what the trainee says.
Whirlpool uses local households to train salespeople and to help its researchers develop intelligent
major appliances.
New methods of training are continually
emerging, such as role playing and sensitivity
training; the use of cassette tapes, videotapes, and CD-ROMs; and programmed learning,
distance learning, and films on selling.
WHIRLPOOL
In order to increase its sales reps' understanding of its appliances, Whirlpool rented an eight-bedroom farm-
house near its headquarters in Benton Harbor, Michigan, and outfitted it with Whirlpool dishwashers, microwaves,
washers, dryers, and refrigerators. It sent eight new salespeople to live in the house, to cook and do laundry and
household chores. When they emerged, they knew a great deal about Whirlpool appliances and gained more
confidence than if they had taken the traditional two-week classroom training course.
46
Companies vary in how closely they supervise sales reps. Reps paid mostly on commission
generally receive less supervision. Those who are salaried and must cover definite accounts
are likely to receive substantial supervision. With multilevel selling, used by

Avon,
Sara Lee,
Virgin,
AOL Time
Warner,
and others, independent distributors are also in charge of their own
sales force selling company products. These independent contractors or reps are paid a com-
mission not only on their own sales but also on the sales of people they recruit and train.
47
Sales Rep Productivity
How many calls should a company make on a particular account each year? Some research
has suggested that today's sales reps are spending too much time selling to smaller, less
prof-
itable accounts when they should be focusing more of their efforts on selling to larger, more
profitable accounts.'
18
NORMS FOR PROSPECT CALLS Companies often specify how much time reps should
spend prospecting for new accounts. Spector Freight wants its sales representatives to spend
25 percent of their time prospecting and to stop calling on a prospect after three unsuccess-
ful calls.
Companies set up prospecting standards for a number of reasons. Left to their own
devices, many reps will spend most of their time with current customers, who are known
quantities. Reps can depend on them for some business, whereas a prospect might never
deliver any business. Some companies rely on a missionary
sales
force to open new accounts.
622 PART 7 COMMUNICATING VALUE
EFFICIENTLY Studies have shown that the best sales reps are those
who manage their time efficiently.
49

One planning tool is time-and-duty analysis, which
helps reps understand how they spend their time and how they might increase their pro-
ductivity. In the course of a day sales reps spend time planning, traveling, waiting, selling,
and in administrative tasks (report writing and billing, attending sales meetings, and talking
to others in the company about production, delivery, billing, sales performance, and other
matters). With so many duties, it is no wonder that actual face-to-face selling time amounts
to as little as 29 percent of total working time!
50
Companies are constantly seeking ways to improve sales force productivity. Their meth-
ods take the form of training sales representatives in the use of "phone power," simplifying
record keeping and administrative time, and using the computer and the Internet to develop
call and routing plans, supply customer and competitive information, and automate the
order preparation process.
OWENS-CORN ING
Owens-Corning put its sales force online with FAST—its Field Automation Sales Team system. FAST empow-
ers salespeople to make more of their own decisions by giving them a constant supply of information about
the company and the people they are dealing
with.
Using laptop computers, each salesperson can access
valuable product and customer information. With a few keystrokes, salespeople can prime themselves on
backgrounds of clients; call up prewritten sales letters; transmit orders and resolve customer service issues
on the spot during customer calls; and have samples, pamphlets, brochures, and other materials sent to
clients.
To cut costs, reduce time demands on their outside sales force, and take advantage of
computer and telecommunications innovations, many companies have increased the size
and responsibilities of their inside sales force.
51
Inside salespeople are of three types. There are technical support people, who provide
technical information and answers to customers' questions. There are sales assistants, who
provide clerical backup for the outside salespersons. They call ahead and confirm

appointments, carry out credit checks, follow up on deliveries, and answer customers'
questions. Telemarketers use the phone to find new leads, qualify them, and sell to them.
Telemarketers can call up to 50 customers a day compared to the four an outside sales-
person can contact.
The inside sales force frees the outside reps to spend more time selling to major accounts,
identifying and converting new major prospects, placing electronic ordering systems in cus-
tomers' facilities, and obtaining more blanket orders and systems contracts. The inside
salespeople spend more time checking inventory, following up orders, and phoning smaller
accounts. The outside sales reps are paid largely on an incentive-compensation basis, and
the inside reps on a salary or salary-plus-bonus pay.
Another dramatic breakthrough is the new high-tech equipment—desktop and laptop
PCs,
PDAs, videocassette recorders, videodiscs, automatic dialers, e-mail, fax machines,
and teleconferencing and videophones. The salesperson has truly gone "electronic." Not
only is sales and inventory information transferred much faster, but specific computer-
based decision support systems on CDs have been created for sales managers and sales
representatives.
One of the most valuable electronic tools for the sales rep is the company Web site, and
one of its most useful applications is as a prospecting tool. Company Web sites can help
define the firm's relationships with individual accounts and identify those whose business
warrants a personal sales call. The Web site provides an introduction to self-identified
potential customers. Depending on the nature of the business, the initial order may even
take place online. For more complex transactions, the site provides a way for the buyer to
contact the seller. Pall Corporation, a manufacturer of fluid filtration and purification
technologies, has all e-mail directed to company headquarters, with leads going directly to
the appropriate sales rep.
52
Selling over the Internet supports relationship marketing by solving problems that do not
require live intervention and thus allows more time to be spent on issues that are best
addressed face-to-face.

MANAGING PERSONAL COMMUNICATIONS: DIRECT MARKETING AND PERSONAL SELLING CHAPTER 19 623
Motivating Sales Representatives
The majority of sales representatives require encouragement and special incentives. This is
especially true of field selling: Reps usually work alone, their hours are irregular, and they
are often away from home. They confront aggressive, competing sales reps; they have an
inferior status relative to the buyer; they often do not have the authority to do what is nec-
essary to win an account; and they sometimes lose large orders they have worked hard to
obtain.
53
Most marketers believe that the higher the salesperson's motivation, the greater the effort
and the resulting performance, rewards, and satisfaction—and thus further motivation.
Such thinking is based on several assumptions.
E
Sales managers must be able to convince salespeople that they can sell more by working
harder or by being trained to work smarter. But if sales are determined largely by economic
conditions or competitive actions, this link is undermined.
a Sales managers must be able to convince salespeople that the rewards for better perfor-
mance are worth the extra effort. But if the rewards seem to be set arbitrarily or are too
small or of the wrong kind, this link is undermined.
To increase motivation, marketers reinforce intrinsic and extrinsic rewards of all types.
One research study that measured the importance of different rewards found that the reward
with the highest value was pay, followed by promotion, personal growth, and sense of
accomplishment.
54
The least-valued rewards were liking and respect, security, and recogni-
tion. In other words, salespeople are highly motivated by pay and the chance to get ahead
and satisfy their intrinsic needs, and less motivated by compliments and security. However,
the researchers also found that the importance of motivators varied with demographic char-
acteristics: Financial rewards were mostly valued by older, longer-tenured people and those
who had large families. Higher-order rewards (recognition, liking and respect, sense of

accomplishment) were more valued by young salespeople who were unmarried or had small
families and usually more formal education.
Many companies set annual sales quotas. Quotas can be set on dollar sales, unit volume,
margin, selling effort or activity, and product type. Compensation is often tied to degree of
quota fulfillment. Sales quotas are developed from the annual marketing plan. The company
first prepares a sales forecast that becomes the basis for planning production, workforce
size,
and financial requirements. Management then establishes quotas for regions and terri-
tories,
which typically add up to more than the sales forecast to encourage managers and
salespeople to perform at their best levels. Even if they fail to make their quotas, the com-
pany nevertheless may reach its sales forecast.
Each area sales manager divides the area's quota among the area's reps. Sometimes a rep's
quotas are set high, to spur extra effort, or more modestly, to build confidence. One general
view is that a salesperson's quota should be at least equal to the person's last year's sales plus
some fraction of the difference between territory sales potential and last year's sales. The
more favorably the salesperson reacts to pressure, the higher the fraction should be.
Conventional wisdom is that profits are maximized by sales reps focusing on the more
important products and more profitable products. Reps are not likely to achieve their
quotas for established products when the company is launching several new products at
the same
time.
The company will need to expand its sales force for new-product launches.
Setting sales quotas creates problems. If the company underestimates and the sales reps
easily achieve their quotas, the company has overpaid its reps. If the company overestimates
sales potential, the sales people will find it very hard to reach their quotas and be frustrated or
quit. Another downside is that quotas can drive reps to get as much business as possible—
often resulting in their ignoring the service side of the business. The company gains short-
term results at the cost of long-term customer satisfaction.
Some companies are dropping quotas.

55
Siebel, the leading supplier of sales automation
software, judges its sales reps using a number of metrics, such as customer satisfaction,
repeat business, and profitable revenues. Almost 40 percent of incentive compensation is
based on customers' reported satisfaction with service and product. The company's close
scrutiny of the sales process leads to satisfied customers: Over 50 percent of Siebel's revenue
comes from repeat business.
56
Nortel and
AT&T
Worldnet also prefer to use a larger set of
measures for motivating and rewarding sales reps. Even hard-driving Oracle has changed its
approach to sales compensation.
624 PART 7 COMMUNICATING VALUE
ORACLE
Finding sales flagging and customers griping, Oracle, the second-largest software company in the world, over-
hauled its sales department in 2002. Oracle's rapidly expanding capabilities, with diverse applications such as
human resources, supply chain, and CRM, made its account management system difficult. One rep could no
longer be responsible for selling all Oracle products to certain customers. Reorganization resulted in reps' spe-
cializing in a few particular products. To try to tone down the sales force's reputation as overly aggressive, the
commission structure was changed to a flat 4 to 6 percent, as compared to a wider range of 2 to 12 percent
depending on how close to the end of the quarter the sale was made.?
7
Evaluating Sales Representatives
We have been describing the feed-forward aspects of sales supervision—how management
communicates what the sales reps should be doing and motivates them to do it. But good
feed-forward requires good feedback, which means getting regular information from reps to
evaluate performance.
SOURCES OF INFORMATION The most important source of information about reps is
sales reports. Additional information comes through personal observation, salesperson

self-
reports, customer letters and complaints, customer surveys, and conversations with other
sales representatives.
Sales reports are divided between activity plans and write-ups of activity
results.
The best
example of the former is the salesperson's work plan, which reps submit a week or month in
advance. The plan describes intended calls and routing. This report forces sales reps to plan
and schedule their activities and inform management of their whereabouts. It provides a
basis for comparing their plans and accomplishments. Sales reps can be evaluated on their
ability to "plan their work and work their plan."
Many companies require representatives to develop an annual territory-marketing plan
in which they outline their program for developing new accounts and increasing business
from existing accounts. This type of report casts sales reps into the role of market managers
and profit centers. Sales managers study these plans, make suggestions, and use them to
develop sales quotas. Sales reps write up completed activities on call
reports.
Sales represen-
tatives also submit expense reports, new-business reports, lost-business reports, and reports
on local business and economic conditions.
These reports provide raw data from which sales managers can extract key indicators of
sales performance: (1) average number of
sales
calls per salesperson per day, (2) average sales
call time per contact, (3) average revenue per sales call, (4) average cost per sales call, (5) enter-
tainment cost per sales call, (6) percentage of orders per hundred sales calls, (7) number of new
customers per period, (8) number of lost customers per period, and (9) sales force cost as a per-
centage of total sales.
FORMAL EVALUATION The sales force's reports along with other observations supply the
raw materials for evaluation. There are several approaches to conducting evaluations. One

type of evaluation compares current performance to past performance. An example is
shown in Table 19.1.
The sales manager can learn many things about a rep from this table. Total sales
increased every year (line 3). This does not necessarily mean that the person is doing a
better
job.
The product breakdown shows that he has been able to push the sales of prod-
uct B further than the sales of product A (lines 1 and 2). According to his quotas for the
two products (lines 4 and 5), his success in increasing product B sales could be at the
expense of product
A
sales. According to gross profits (lines 6 and 7), the company earns
more selling
A
than
B.
The rep might be pushing the higher-volume, lower-margin prod-
uct at the expense of the more profitable product. Although he increased total sales by
$1,100 between 2003 and 2004 (line 3), the gross profits on total sales actually decreased
by $580 (line 8).
Sales expense (line 9) shows a steady increase, although total expense as a percentage of
total sales seems to be under control (line
10).
The upward trend in total dollar expense does
not seem to be explained by any increase in the number of calls (line 11), although it might
be related to success in acquiring new customers (line 14). There is a possibility that in
MANAGING PERSONAL COMMUNICATIONS: DIRECT MARKETING AND PERSONAL SELLING CHAPTER 19 625
Territory: Midland Sales
Representative: John Smith 2001 2002
2003

2004
1.
Net sales product
A
$251,300 $253,200
$270,000 $263,100
2.
Net sales product B 423,200 439,200
553,900 561,900
3. Net sales total 674,500 692,400
823,900 825,000
4.
Percent of quota product
A
95.6 92.0
88.0
84.7
5. Percent of quota product B 120.4
122.3
134.9 130.8
6. Gross profits product
A
$50,260 $50,640
$54,000 $52,620
7. Gross profits product B 42,320 43,920
55,390 56,190
8. Gross profits total 92,580 94,560
109,390 108,810
9. Sales expense $10,200 $11,100
$11,600 $13,200

10.
Sales expense to total sales (%) 1.5 1.6
1.4
1.6
11.
Number of calls 1,675
1,700
1,680 1,660
12.
Cost per call $6.09 $6.53
$6.90 $7.95
13.
Average number of customers 320
24 328
334
14.
Number of new customers
13
14 15 20
15.
Number of lost customers
8 10
11
14
16.
Average sales per customer
$2,108
$2,137 $2,512
$2,470
17.

Average gross profit per customer
$289
$292
$334
$326
TABLE 19.1
\
Form for Evaluating Sales
Representative's Performance
prospecting for new customers, this rep is neglecting present customers, as indicated by an
upward trend in the annual number of lost customers (line 15).
The last two lines show the level and trend in sales and gross profits per customer. These
figures become more meaningful when they are compared with overall company averages.
If this rep's average gross profit per customer is lower than the company's average, he could
be concentrating on the wrong customers or not spending enough time with each customer.
A
review of annual number of calls (line 11) shows that he might be making fewer annual
calls than the average salesperson. If distances in the territory are similar to other territories,
this could mean that he is not putting in a full workday, he is poor at sales planning and
routing, or he spends too much time with certain accounts.
The rep might be quite effective in producing sales but not rate high with customers.
Perhaps he is slightly better than the competitors' salespeople, or his product is better, or he
keeps finding new customers to replace others who do not like to deal with him. The cus-
tomers' opinion of the salesperson, product, and service can be measured by mail question-
naires or telephone calls.
Evaluations can also assess the salesperson's knowledge of the company, products, cus-
tomers, competitors, territory, and responsibilities. Personality characteristics can be rated,
such as general manner, appearance, speech, and temperament. The sales manager can
review any problems in motivation or compliance.
58

Sales reps can provide attributions as to
the success or failure of a sales call and how they would propose to improve the odds on sub-
sequent calls. Possible explanations for their performance could be related to internal
(effort, ability, and strategy) and external (task and luck) factors.
59
Ill Principles of Personal Selling
Personal selling is an ancient art. It has spawned a large literature and many principles.
Effective salespeople have more than instinct; they are trained in methods of analysis and cus-
tomer management. Today's companies spend hundreds of millions of dollars each year to
train salespeople in the art of
selling.
Sales training approaches try to transform a salesperson
from a passive order taker into an active order getter who engages in customer problem solv-
ing. An active order getter learns how to listen and question in order to identify customer
626 PART 7
COMMUNICATING VALUE
Prospecting
and qualifying
Presentation
and
demonstration
Overcoming
objections
FIG.
19.4 |
Major Steps in Effective Selling
needs and come up with sound product solutions. This approach assumes that customers
have latent needs that constitute opportunities and that they will be loyal to sales reps who
can analyze their needs and who have their long-term interests at heart. "Marketing Insight:
Principles of Customer-Oriented Selling" offers some guidelines.

Most sales training programs agree on the major steps involved in any effective sales
process.
We
show these steps in Figure 19.4, and discuss their application to industrial sell-
ing next.
60
The Six Steps
QUALIFYING The first step in selling is to identify and qualify
prospects. More companies are taking responsibility for finding and qualifying leads so that
the salespeople can use their expensive time doing what they can do best: selling.
Companies can qualify the leads by contacting them by mail or phone to assess their level of
interest and financial capacity. The leads can be categorized, with "hot" prospects turned
over to the field sales force and "warm" prospects turned over to the telemarketing unit for
follow-up. Even then, it usually takes about four calls on a prospect to consummate a busi-
ness transaction.
PREAPPROACH The salesperson needs to learn as much as possible about the prospect
company (what it needs, who is involved in the purchase decision) and its buyers (personal
characteristics and buying styles). The salesperson should set call objectives: to qualify the
prospect, gather information, make an immediate sale. Another task is to decide on the best
contact approach, which might be a personal visit, a phone call, or a letter. Finally, the sales-
person should plan an overall sales strategy for the account.
5ENTATION AND DEMONSTRATION The salesperson now tells the product "story" to
the buyer, following the
AIDA
formula of gaining attention, holding
interest,
arousing
desire,
and obtaining action. The salesperson uses a features, advantages, benefits, and value
approach (FABV). Features describe physical characteristics of a market offering, such as

chip processing speeds or memory capacity. Advantages describe why the features provide
an advantage to the customer. Benefits describe the economic, technical, service, and social
benefits delivered by the offering. Value describes the worth (often in monetary terms) of
the offering. Too often, salespeople spend too much time dwelling on product features (a
product orientation) and not enough stressing the offering's benefits and value (a customer
orientation).
OMING OBJECTIONS Customers typically pose objections during the presenta-
tion or when asked for the order. Psychological resistance includes resistance to interfer-
ence,
preference for established supply sources or brands, apathy, reluctance to giving up
something, unpleasant associations created by the sales rep, predetermined ideas, dislike
of making decisions, and neurotic attitude toward money. Logical resistance might con-
sist of objections to the price, delivery schedule, or certain product or company charac-
teristics.
To handle these objections, the salesperson maintains a positive approach, asks the
buyer to clarify the objection, questions the buyer in a way that the buyer has to answer
his or her own objection, denies the validity of the objection, or turns the objection into a
reason for buying. Handling and overcoming objections is a part of the broader skills of
negotiation.
One potential problem is for salespeople to give in too often when customers demand
a discount. One company recognized this as a problem when its sales revenues went up by
25 percent but its profit had remained flat. The company decided to retrain its salespeople
to "sell the price," rather than "sell through price." Salespeople were given richer information
about each customer's sales history and behavior. They received training to recognize value-
adding opportunities rather than price-cutting opportunities. As a result, the company's
sales revenues climbed and so did its margins.
61
CLOSING Now the salesperson attempts to close the sale. Salespeople need to know how
to recognize closing signs from the buyer, including physical actions, statements or com-
ments, and questions. There are several closing techniques. They can ask for the order,

recapitulate the points of agreement, offer to help the secretary write up the order, ask