Chapter 17 Personal Selling and Sales Promotion TEACHING RESOURCES QUICK REFERENCE GUIDE Resource Location Purpose and Perspective IRM, p. 426 Lecture Outline IRM, p. 427 Discussion Starters IRM, p. 442 Class Exercises IRM, p. 444 Chapter Quiz IRM, p. 446 Semester Project IRM, p. 447 Answers to Issues for Discussion and Review IRM, p. 448 Answers to Marketing Applications IRM, p. 454 Answers to Internet Exercise IRM, p. 456 Answers to Developing Your Marketing Plan IRM, p. 457 Comments on Video Case 17 IRM, p. 459 PowerPoint Slides Instructor’s website Note: Additional resources may be found on the accompanying student and instructor websites at www.cengagebrain.com. PURPOSE AND PERSPECTIVE This chapter covers two promotion mix elements—personal selling and sales promotion. To help students build a better understanding of the purposes and roles of salespeople, the chapter initially discusses the basic steps in the personal selling process, the types of sales force personnel used in organizations, and a few new types of personal selling. It also devotes considerable detail to a discussion on sales management decisions and activities, including topics such as establishing sales force objectives; determining the size of the sales force; and the processes of recruiting, selecting, training, compensating, motivating, routing, scheduling, and controlling salespeople. Next, it discusses the different techniques of sales promotion and their application in the market. Within these, it also covers the methods used in consumer sales promotion and trade sales promotion. LECTURE OUTLINE I. The Nature of Personal Selling A. Personal selling is paid personal communication that attempts to inform customers and persuade them to purchase products in an exchange situation. 1. It gives marketers the greatest freedom to adjust a message to satisfy customers’ information needs. B. Personal Selling is the most precise of all promotional methods, enabling marketers to focus on the most promising sales prospects. 1. It is also the most effective way to form relationships with customers. C. Personal selling is often necessary to assure prospective customers about the quality of an expensive or high-risk product and answer any questions. D. Personal selling is generally the most expensive element in the promotion mix. E. Millions of people earn their living through personal selling. 1. Sales careers can offer high incomes, a great deal of freedom, a high level of training, and a high degree of job satisfaction. F. Although the public may harbor negative perceptions of personal selling, unfavorable stereotypes of salespeople are changing thanks to the efforts of major corporations, professional sales associations, and academic institutions. G. Developing ongoing customer relationships requires sales personnel with high levels of professionalism as well as technical and interpersonal skills. H. Personal selling goals vary from one firm to another. 1. However, they usually involve finding prospects, determining their needs, persuading prospects to buy, following up on the sale, and keeping customers satisfied. I. Identifying potential buyers is critical. 1. Because most potential buyers seek information before making purchase decisions, salespeople can ascertain prospects’ informational needs and then provide relevant information. a. To do so, sales personnel must be well trained regarding both their products and the selling process in general. J. Salespeople must be aware of their competitors. 1. They must monitor the development of new products and keep abreast of competitors’ sales efforts in their sales territories, how often and when the competition calls on their accounts, and what the competition is saying about their product in relation to its own. 2. Salespeople must emphasize the benefits their products provide, especially when competitors’ products do not offer those specific benefits. K. Salespersons often function as knowledge experts for the firm and provide key information for marketing decisions. L. Personal selling is changing today based on new technology, how customers gain information about products, and the way customers make purchase decisions. 1. Customer information sharing through social media, mobile and Web applications, and electronic sales presentations are impacting the nature of personal selling. 2. Some firms are adopting social media technology to reach business customers. M. Social customer relationship management (CRM) provides opportunities to manage data in discovering and engaging customers. 1. For instance, the cloud-computing models, provided by Salesforce.com to enable firms to manage relationships with their customers, can assist in personal selling sales management. N. For long-run survival, most marketers depend on repeat sales and thus need to keep their customers satisfied. 1. Satisfied customers provide favorable word-of-mouth and other communications, thereby attracting new customers. O. Although the whole organization is responsible for achieving customer satisfaction, much of the burden falls on salespeople, because they are almost always closer to customers than anyone else in the company and often provide buyers with information and service after the sale. 1. Such contact gives salespeople an opportunity to generate additional sales and offers them a good vantage point for evaluating the strengths and weaknesses of the company’s product and other marketing-mix ingredients. II. Steps of the Personal Selling Process A. No two salespeople use exactly the same selling methods. B. The personal selling process consists of seven steps—prospecting, preapproach, approach, making the presentation, overcoming objections, closing the sale, and following up (Figure 17.1). C. Prospecting 1. Developing a database of potential customers is called prospecting. 2. Salespeople seek names of prospects from company sales records, trade shows, commercial databases, newspaper announcements, public records, telephone directories, trade association directories, and many other sources. a. Sales personnel also use responses to traditional and online advertisements that encourage interested persons to send in information request forms. 3. Most salespeople prefer to use referrals—recommendations from current customers—to find prospects. a. Research shows that one referral is as valuable as 12 cold calls. 4. After developing the prospect list, a salesperson evaluates whether each prospect is able, willing, and authorized to buy the product. D. Pre-approach 1. Before contacting acceptable prospects, a salesperson finds and analyzes information about each prospect’s specific product needs, current use of brands, feelings about available brands, and personal characteristics. 2. The most successful salespeople are thorough in their preapproach, which involves identifying key decision makers, reviewing account histories and problems, contacting other clients for information, assessing credit histories and problems, preparing sales presentations, identifying product needs, and obtaining relevant literature. 3. A salesperson with a lot of information about a prospect is better equipped to develop a presentation that precisely communicates with that prospect. E. Approach 1. The approach—the manner in which a salesperson contacts a potential customer—is a critical step in the sales process. 2. Creating a favorable impression and building rapport with prospective clients are important tasks in the approach because the prospect’s first impression of the salesperson are usually lasting ones. 3. During the initial visit, the salesperson strives to develop a relationship rather than just push a product. a. The salesperson may have to call on a prospect several times before the product is considered. 4. The approach must be designed to deliver value to targeted customers. a. If the sales approach is inappropriate, the salesperson’s efforts are likely to have poor results. 5. One type of approach is based on referrals. 6. The salesperson who uses the “cold-canvas” approach calls on potential customers without prior consent. 7. Repeat contact is another common approach—when making the contact, the salesperson mentions a previous meeting. 8. The exact type of approach depends on the salesperson’s preferences, the product being sold, the firm’s resources, and the prospect’s characteristics. F. Making the Presentation 1. During the sales presentation, the salesperson must attract and hold the prospect’s attention, stimulate interest, and spark a desire for the product. 2. Salespeople who carefully monitor the selling situation and adapt their presentations to meet the needs of the prospects are associated with effective performance. 3. Salespeople should match their influencing tactics—such as information exchange, recommendations, threats, promises and ingratiation—to their prospects. 4. Different types of buyers respond to different tactics, but most respond well to information exchange and recommendations, and virtually no prospects respond to threats. 5. During the presentation, the salesperson must not only talk but also listen. 6. Nonverbal modes of communication are especially beneficial in building trust during the presentation. G. Overcoming Objections 1. An effective salesperson usually seeks out a prospect’s objections in order to address them. 2. One of the best ways to overcome objections is to anticipate and counter them before the prospect raises them. a. However, this approach can be risky, because the salesperson may mention objections that the prospect would not have raised. 3. If possible, the salesperson should handle objections as they arise. H. Closing the Sale 1. Closing is the stage in the personal selling process when the salesperson asks the prospect to buy the product. 2. During the presentation, the salesperson may use a trial close by asking questions that assume the prospect will buy. a. The salesperson might ask the potential customer about financial terms, desired colors or sizes, etc. Reactions to such questions usually indicate how close the prospect is to buying. b. A trial close allows prospects to indirectly indicate indirectly that they will buy the product without having to say the difficult words, “I’ll take it.” 3. A salesperson should try to close at several points during the presentation because the prospect could be ready to buy. 4. An attempt to close the sale may result in objections. a. Thus, closing can uncover hidden objections, which the salesperson can then address. I. Following Up 1. After successful closing, the salesperson must follow up the sale. 2. In the follow-up stage, the salesperson determines whether the order was delivered on time and installed properly, if installation was required. 3. He or she should contact the customer to learn is any problems or questions regarding the product have arisen. 4. The follow-up stage is also used to determine customers’ future product needs. III. Types of Salespeople A. Most business organizations use several kinds of salespeople. B. Based on the functions performed, salespeople can be classified into three groups: 1. Order getters 2. Order takers 3. Support personnel C. Order Getters 1. Order getters has the responsibility of increasing sales by selling to new customers and increasing sales to present customers; this task is sometimes called creative selling. a. It requires that salespeople recognize potential buyers’ needs and give them necessary information. 2. Order getting is frequently divided into two categories: current-customer sales and new-business sales. a. Current-Customer Sales (1) These sales personnel concentrate on current customers, calling on people and organizations that have purchased products from the firm before. (2) They follow up on previous sales to seek more sales from existing customers; also current customers can be sources of leads for new prospects. b. New-Business Sales (1) These sales personnel are responsible for locating prospects and converting them into buyers. (2) They are especially important in organizations that sell real estate, insurance, appliances, automobiles, and business-to-business supplies and services. D. Order Takers 1. An order taker primarily seeks repeat sales, generating the bulk of many firms’ total sales. a. One of their major objectives is to be certain that customers have sufficient product quantities where and when needed. b. Most order takers handle orders for standardized products routinely purchased and do not require extensive sales efforts; however, the role of order takers is changing into one where the order taker must identify and solve problems to better meet the needs of customers. 2. There are two groups of order takers: inside order takers and field order takers. a. Inside Order Takers (1) In many businesses, inside order takers, who work in sales offices, receive orders by mail, telephone, and the Internet. (2) Some inside order takers communicate with customers face to face; for example, retail salespeople are classified as inside order takers. b. Field Order Takers (1) These salespeople travel to customers and often develop interdependent relationships with them; they may also be referred to as outside order takers. (2) The buyer relies on the salesperson to take orders periodically (and sometimes to deliver them), and the salesperson relies on the buyer to purchase a certain quantity of products periodically. E Support Personnel 1. Support personnel facilitate selling but usually are not involved solely with making sales. a. They engage primarily in marketing industrial products, locating prospects, educating customers, building goodwill, and providing service after the sale. 2. There are many kinds of sales support personnel; the three most common are missionary, trade, and technical salespeople. a. Missionary Salespeople (1) Missionary salespeople, usually employed by manufacturers, assist the producer’s customers in selling to their own customers. (2) They call on retailers to inform and persuade them to buy the manufacturer’s products. (3) Manufacturers of medical supplies and pharmaceuticals often use missionary salespeople, called detail reps, to promote their products to physicians, hospitals, and pharmacists. b. Trade Salespeople (1) Trade salespeople are not strictly support personnel, because they take orders as well. (2) They direct much of their efforts toward helping customers, especially retail stores, and promoting the products. (3) Food producers and processors commonly employ trade salespeople. c. Technical Salespeople (1) Technical salespeople direct their efforts toward the organization’s current customers by giving technical assistance regarding the characteristics and applications of the product, system designs, and installation procedures. (2) Technical sales personnel often sell technical industrial products, such as computers, heavy equipment, and steel. IV. Team and Relationship Selling A. Personal selling has become an increasingly complex process due in large part to rapid technological innovation; the focus of personal selling is shifting from selling a specific product to building long-term relationships with customers. B. Team Selling 1. Team selling involves the salesperson joining with people from the firm’s financial, engineering, and other functional areas. a. It is appropriate for expensive, complex, high-tech business products because a single salesperson can no longer be expert in all aspects of the product and the purchase process. b. The salesperson takes the lead in the personal selling process, but other members of the team bring their unique skills, knowledge, and resources to the process to help customers find solutions to their own business challenges. 2. Team selling is advantageous in situations calling for detailed knowledge of new, complex, and dynamic technologies like jet aircraft and medical equipment. a. It can be difficult, however, for highly competitive salespersons to adapt to a team selling environment. C. Relationship Selling 1. Relationship selling, also known as consultative selling, involves building mutually beneficial long-term associations with a customer through regular communications over prolonged periods of time. a. It is especially used in business-to-business marketing. 2. Relationship selling involves finding solutions to customers’ needs by listening to them, gaining a detailed understanding of their organizations, understanding and caring about their needs and challenges, and providing support after the sale. a. This sales tactic, known as soft selling, has often led to higher sales from customers who do not feel overly pressured to purchase a product they know little about. 3. Relationship selling has significant implications for the seller. a. Firms spend six times longer on finding new customers than in keeping current customers. b. Relationship selling that generates loyal long-term customers is likely to be extremely profitable for the firm both in repeat sales as well as the money saved in trying to find new customers. c. As the personal selling industry becomes increasingly competitive, relationship selling is one way that companies can differentiate themselves from rivals to create competitive advantages. V. Managing the Sales Force A. The sales force is directly responsible for generating one of an organization’s primary inputs—sales revenue. A firm’s reputation is often determined by the ethical conduct of its sales force, making a positive ethical corporate culture imperative. B. The morale and ultimately the success of a firm’s sales force depend in large part on adequate compensation, room for advancement, sufficient training, and management support—all key areas of sales management. 1. Evaluating the input of salespeople is an important part of sales force management because of its strong bearing on a firm’s success. C. Establishing Sales Force Objectives 1. Sales objectives tell salespeople what they are expected to accomplish during a specified time period. a. They give the sales force direction and purpose and serve as standards for evaluating and controlling the performance of sales personnel. 2. Sales objectives should be stated in precise, measurable terms, be specific about the time period and geographic areas involved, achievable. 3. Sales objectives are usually established for both the total sales force and individual salespeople. a. Objectives for the entire sales force are usually stated in terms of sales volume, market share, or profit. b. Sales objectives, or quotas, for individual salespeople are commonly stated in terms of dollars or unit sales volume. (1) Other bases used for individual sales objectives include average order size, average number of calls per time period, and ratio of orders to calls. D. Determining Sales Force Size 1. The size of the sales force affects the firm’s ability to generate sales and profits, the compensation methods used, salespeople’s morale, and overall sales force management. 2. Several analytical methods are used to determine the size of the sales force. a. One method involves determining how many sales calls per year are necessary for the organization to effectively serve customers and then dividing this total by the average number of sales calls a salesperson makes annually. b. A second method is based on marginal analysis, in which additional salespeople are added to the sales force until the cost of an additional salesperson equals the additional sales generated by that person. E. Recruiting and Selecting Salespeople 1. Recruiting is a process by which the sales manager develops a list of qualified applicants for sales positions. a. Effective recruiting efforts are a vital part of implementing the strategic sales force plan and can help assure successful organizational performance. 2. A set of required qualifications should be established by the sales manager before recruiting to ensure that the recruiting process results in a pool of qualified applicants. a. Although marketers have tried for years to identify a set of traits characterizing effective salespeople, no set of generally accepted characteristics exists yet. b. Experts agree that good salespeople exhibit optimism, flexibility, self-motivation, good time management skills, empathy, and the ability to network and maintain long-term customer relationships. c. Today, companies are increasingly seeking applicants capable of employing relationship-building and consultative approaches as well as the ability to work effectively in team selling efforts. 3. A sales manager usually recruits applicants from several sources: departments within the firm, other firms, employment agencies, educational institutions, respondents to advertisements, websites (like Monster.com), and individuals recommended by current employees. 4. The process for recruiting and selecting a sales force varies from one company to another, but companies concerned about reducing sales force turnover are likely to have strict recruiting and selection procedures. a. Recruitment should be a continuous activity aimed at reaching the best applicants, and it should systematically and effectively match applicants’ characteristics and needs with the requirements of specific selling tasks. b. The selection process should ensure that new sales personnel are available where and when needed. F. Training Sales Personnel 1. Many organizations have formal training programs; others depend on informal, on-the-job training. 2. A sales training program can concentrate on the company, its products, or its selling methods, often covering all three. 3. Training programs can be aimed at newly hired salespeople, experienced salespeople, or both. a. Training for experienced company salespeople usually emphasizes product information or the use of new technology, although salespeople must also be informed about new selling techniques and changes in company plans, policies, and procedures. b. Sales managers should use ethics training to institutionalize an ethical climate, improve employee satisfaction, and help prevent misconduct. 4. Sales training may be performed in the field, at educational institutions, in company facilities, and/or by using web-based technology. 5. In some firms, recently hired salespeople receive the bulk of their training before being assigned to a specific sales position. a. Other business organizations put new recruits immediately into the field and provide formal training only after the new salesperson has gained some experience. b. Training programs for new personnel can be as short as several days or as long as three years or more. 6. Sales training for experienced personnel is often scheduled when sales activities are not too demanding. a. Because experienced salespeople usually need periodic retraining, sales management must determine the frequency, sequencing, and duration of these activities. 7. Sales managers, as well as salespeople, often engage in sales training, whether daily on the job or periodically during sales meetings; training may also be provided by outside companies specializing in training. a. The choice of methods and materials for a particular sales training program depends on type and number of trainees, program content and complexity, length and location, size of the training budget, number of trainers, and a trainer’s expertise. G. Compensating Salespeople 1. To develop and maintain a highly productive sales force, an organization must formulate and administer a compensation plan that attracts, motivates, and retains the most effective individuals. a. It should be designed to give sales management the desired level of control and to provide sales personnel with acceptable levels of income, freedom, and incentive. b. It should be flexible, equitable, easy to administer, and easy to understand. c. It should facilitate and encourage proper treatment of customers. 2. To create compensation programs, the developers must determine the general level of compensation required and the most desirable method of calculating it. a. In analyzing the required compensation plan, a firm’s sales management must ascertain a salesperson’s value to the company on the basis of the tasks and responsibilities associated with the sales position. b. Sales managers may consider several factors when determining adequate compensation: (1) Salaries of other types of personnel in the firm (2) Competitors’ compensation plans (3) Cost of sales force turnover (4) Non-salary selling expenses 3. Sales compensation programs usually reimburse salespeople for selling expenses, provide some fringe benefits, and deliver the required compensation level. To achieve this, a firm may use one or more of the three basic compensation methods: straight salary, straight commission, or a combination of the two. a. In a straight salary compensation plan, salespeople are paid a specified amount per time period, regardless of selling effort, and this sum remains the same until they receive a pay increase or decrease. b. In a straight commission compensation plan, salespeople’s compensation is determined solely by sales for a given period. (1) A commission may be based on a single percentage of sales or on a sliding scale, which involves several sales levels and percentage rates. c. In a combination compensation plan, salespeople are paid a fixed salary plus a commission based on sales volume. (1) Some combination programs require that a salesperson exceed a certain sales level before earning a commission; others offer commissions for any level of sales H. Motivating Salespeople 1. A sales manager should develop a systematic approach for motivating salespeople to be productive. 2. Effective sales force motivation is achieved through an organized set of activities performed continuously by the company’s sales management. 3. Sales personnel join organizations to satisfy personal needs and achieve personal goals. a. Sales managers must identify those needs and goals and strive to create an organizational climate that allows each salesperson to fulfill them. 4. Enjoyable working conditions, power and authority, job security, and opportunity to excel are effective, as are company efforts to make sales jobs more productive and efficient. a. Sales contests and other incentive programs can also be effective motivators. 5. Properly designed incentive programs pay for themselves many times over, and sales managers are relying on incentives more than ever. a. The most common incentive offered by companies is cash, followed by gift cards and travel. 6. The benefits of awarding merchandise are that the items have visible trophy value. a. In addition, recipients who are allowed to select the merchandise experience a sense of control, and merchandise awards can help build momentum for the sales force. 7. The disadvantages of using merchandise are that employees may have lower perceived value of the merchandise and the company may experience greater administrative problems. I. Managing Sales Territories 1. The effectiveness of a sales force that must travel to its customers is somewhat influenced by management’s decisions regarding sales territories. 2. Several factors enter into the design of a sales territory’s size and geographic shape. a. Sales managers must try to create territories that allow sales potential to be measured. b. Sales managers usually try to create territories with similar sales potential, or requiring about the same amount of work. c. Territories with equal sales potential almost always will be unequal in geographic size. d. Salespeople with larger territories to work harder and longer to generate a certain sales volume. (1) Conversely, if sales territories requiring equal amounts of work are created, sales potential for those territories will often vary e. If sales personnel are partially or fully compensated through commissions, they will have unequal income potential. f. Many sales managers try to balance territorial workloads and earning potential by using differential commission rates. g. A territory’s size and shape should also help the sales force provide the best possible customer coverage and minimize selling costs. 3. The geographic size and shape of a sales territory are the most important factors affecting the routing and scheduling of sales calls, followed by the number and distribution of customers within the territory, and sales call frequency and duration. a. Those in charge of routing and scheduling must consider the sequence in which customers are called, specific roads or transportation schedules to be used, number of calls to be made in a given period, and time of day the calls will occur. b. In some firms, salespeople plan their own routes and schedules with little or no assistance from the sales manager, but in other firms, the sales manager handles the task. c. The major goals should be to minimize salespeople’s non-selling time (time spent traveling and waiting) and to maximize their selling time. J. Controlling and Evaluating Sales Force Performance 1. To control and evaluate sales force performance properly, sales management needs information, which can be obtained from salespersons’ call reports, customer feedback, contracts, and invoices. 2. The dimensions used to measure a salesperson’s performance are determined largely by sales objectives the sales manager sets. a. Indicators of performance used by sales managers for evaluation include average number of calls per day, average sales per customer, actual sales relative to sales potential, number of new-customer orders, average cost per call, and average gross profit per customer. b. To evaluate a salesperson, a sales manager may compare one or more of these dimensions with predetermined performance standards. 3. After evaluating salespeople, sales managers take required corrective action to improve sales force performance. VI. The Nature of Sales Promotion A. Sales promotion is an activity or material, or both, that acts as a direct inducement, offering added value or incentive for the product, to resellers, salespeople, or consumers. 1. It encompasses all promotional activities and materials other than personal selling, advertising, and public relations. B. Marketers often use sales promotion to facilitate personal selling, advertising, or both; they also use advertising and personal selling to support sales promotion activities. C. Sales promotion can increase sales by providing extra purchasing incentives. D. When deciding which sales promotion methods to use, marketers must consider several factors, especially product characteristics (price, size, weight, costs, durability, uses, features, and hazards) and target market characteristics (age, gender, income, location, density, usage rate, and shopping patterns). E. The use of sales promotion has increased dramatically, primarily at the expense of advertising. This shift has occurred for several reasons: 1. Heightened concerns about value have made customers more responsive to promotional offers, especially price discounts and point-of-purchase displays. 2. Due to their size and access to checkout scanner data, retailers have gained considerable power in the supply chain and are demanding greater promotional efforts from manufacturers to boost retail profits. 3. Declines in brand loyalty have produced an environment in which sales promotions aimed at persuading customers to switch brands are more effective. 4. The stronger emphasis placed on improving short-term performance results calls for greater use of sales promotion methods that yield quick, but perhaps short-lived, sales increases. F. Consumer Sales Promotion Methods 1. Consumer sales promotion methods encourage or stimulate consumers to patronize a specific retail store or try particular products. 2. Coupons and Cents-Off Offers a. Coupons reduce a product’s price and aim to prompt customers to try new or established products, increase sales volume quickly, attract repeat purchasers, or introduce new package sizes or features. (1) They are the most widely used consumer sales promotion technique. (a) To take advantage of the new consumer interest in coupons, digital marketing—including mobile, social, and other platforms—are being used for couponing. (2) For best results, coupons should be easy to recognize and clear in stating the offer. (3) When deciding on the distribution method for coupons, marketers should consider strategies and objectives, redemption rates, availability, circulation, and exclusivity. (4) Coupons offer several advantages: (a) Print advertisements with coupons are often more effective at generating brand awareness than print ads without coupons. (b) Coupons reward current product users, win back former users, and encourage purchases in larger quantities. (c) Because they are returned, coupons also help a manufacturer determine whether it reached the intended target market. (d) Electronic coupons have even greater advantages, including lower cost per redemption, greater targeting ability, improved data-gathering capabilities, and greater experimentation capabilities to determine optimal face values and expiration cycles. (5) Coupons also have a few drawbacks: (a) The primary drawback is fraud and misredemption, which can be expensive for manufacturers. (b) Because so many manufacturers offer coupons, many consumers do not buy without some incentive, whether a coupon, a rebate, or a refund. (c) Brand loyalty among heavy coupon users has diminished, and many consumers redeem coupons only for products they normally buy. b. With cents-off offers, buyers pay a certain amount less than the regular price shown on the label or package. (1) This method is used to provide a strong incentive to try new or unfamiliar products and is commonly used in product introductions. (2) It can stimulate product sales or multiple purchases, yield short-lived sales increases, and promote products during off-seasons. (3) If used on an ongoing basis, cents-off offers can reduce the price for customers who would buy at the regular price and may also cheapen the product’s image. 4. Money Refunds and Rebates a. With money refunds, consumers submit proof of purchase and are mailed a specific amount of money. (1) Marketers employ money refunds as an alternative to coupons to stimulate sales and promote trial use of a product. (2) They are relatively low in cost, but because they sometimes generate a low response rate, they have limited impact on sales. b. With rebates, the consumer is sent a specified amount of money for making a single product purchase. (1) Marketers use rebates to reinforce brand loyalty and encourage product purchase. (2) Most rebates are offered on more expensive items and are often given at the point of sale. Rebates on smaller items are usually given through a mail-in process. (a) Research suggests that mail-in rebates are most effective in situations where consumers require a reason to purchase an item. (b) Rebates for products that provide instant gratification are more effective if provided at the point of purchase (3) The main drawback of money refunds and rebates is that many people perceive the redemption process as too complicated and products associated with them are new, untested, or have not sold well, which may result in the offers actually degrading the products’ image and desirability. (a) Many marketers allow customers to apply for a rebate online in order to make the process quicker and easier eliminating the need for forms that may confuse customers and frustrate retailers. 5. Frequent-User Incentives a. Many firms develop incentive programs to reward customers who engage in repeat (frequent) purchases. b. Frequent-user incentives foster customer loyalty to a specific company or group of cooperating companies. c. Frequent-user programs reward loyal customers and also generate data that can contribute significant information about customers that helps marketers foster desirable customer relationships. 6. Point-of-Purchase Materials and Demonstrations. a. Point-of-purchase (P-O-P) materials include outdoor signs, window displays, counter pieces, display racks, and self-service cartons. These items attract attention, inform customers, and encourage retailers to carry particular products. b. Demonstrations excellent attention-getters that manufacturers offer temporarily to encourage trial use and purchase of the product or to show how the product actually works. c. Because labor costs can be extremely high, demonstrations are not widely used. d. They can be highly effective for promoting certain types of products, such as appliances, cosmetics, and cleaning supplies. 7. Free Samples and Premiums a. Free samples are given out to stimulate trial of a product, increase sales volume in the early stages of the product’s life cycle, and obtain desirable distribution. (1) Sampling is the most expensive sales promotion method due to the high promotion and distribution costs involved. b. Premiums are items offered free or at a minimal cost as a bonus for purchasing a product. (1) Creativity is essential when using premiums; to stand out and to achieve a significant number of redemptions, a premium must match the target audience and the brand’s image. (2) Premiums are placed on or inside packages and can be distributed to retailers through the mail. 8. Consumer Contests, Consumer Games, and Sweepstakes a. In consumer contests, individuals compete for prizes based on their analytical or creative skills. (1) This method can be used to generate retail traffic and frequency of exposure to promotional messages. (2) Contestants are usually more involved in consumer contests than in games or sweepstakes, even though total participation may be lower. (3) Contests may also be used in conjunction with other sales promotional methods, such as coupons. b. In consumer games, individuals compete for prizes based primarily on chance. (1) Collecting multiple pieces (like bottle caps or a sticker on a carton of French fries) may be necessary to win or increase chances of winning the game, and this stimulates repeated business. (2) Although games may temporarily stimulate sales, it is unproven whether games impact a company’s long term sales. (3) Marketers should exercise care with games because problems or errors in a game may anger customers and could result in a lawsuit. c. The entrants in a consumer sweepstakes submit their names for inclusion in a drawing for prizes. (1) Sweepstakes are employed more often than consumer contests and tend to attract a greater number of participants. (a) However, contestants are usually more involved in consumer contests and games than in sweepstakes, even though total participation may be lower. (2) Contests, games, and sweepstakes are used to stimulate lagging sales and may be used in conjunction with other sales promotion methods. G. Trade Sales Promotion Methods 1. Trade sales promotion methods attempt to persuade wholesalers and retailers to carry a producer’s products and market them more aggressively. 2. Marketers use trade sales methods for many reasons, including: a. Countering the effect of lower-priced store brands b. Passing along a discount to a price-sensitive market segment c. Boosting brand exposure among target consumers d. Providing additional incentives to move excess inventory or counteract competitors 3. Trade Allowances a. A buying allowance is a temporary price reduction offered to resellers for purchasing specified quantities of a product. (1) Such offers are used to provide an incentive for resellers to handle new products, achieve temporary price reductions, or stimulate purchase of items in larger-than-normal quantities. (2) One drawback of buying allowances is that customers may buy “forward,” or buy large amounts that keep them supplied for many months, and also competitors may match or beat the offers, lowering profits of all sellers. b. A buy-back allowance is a sum of money that a producer gives to a reseller for each unit the reseller buys after an initial promotional deal is over. (1) This method is a secondary incentive in which the total amount of money resellers receive is proportional to their purchases during the initial promotional effort. c. A scan-back allowance is a manufacturer’s reward to retailers based on the number of pieces moved through the retailers’ scanners during a specific time period. (1) To participate in scan-back programs, retailers are expected to pass along savings to consumers through special pricing. d. A merchandise allowance is a manufacturer’s agreement to pay resellers certain amounts of money for providing promotional efforts like advertising or point of-purchase displays. (1) This is best suited to high-volume, high-profit, easily handled products. (2) Manufacturers should verify a retailers’ performance before paying them. 4. Cooperative Advertising and Dealer Listings a. Cooperative advertising is an arrangement in which a manufacturer agrees to pay a certain amount of a retailer’s media costs for advertising the manufacturer’s products. The amount usually allowed is based on the quantities purchased. b. Dealer listings are advertisements promoting a product and identifying participating retailers that sell the product. 5. Free Merchandise and Gifts a. Free merchandise is offered to resellers that purchase a stated quantity of products. (1) Free merchandise sometimes is used as payment for allowances provided through other sales promotion methods. b. A dealer loader is a gift given to a retailer that purchases a specified quantity of merchandise. (1) Dealer loaders are often used to obtain special display efforts from retailers by offering essential display parts as premiums. 6. Premium Money a. Premium money (push money) is additional compensation to salespeople offered by the manufacturer as an incentive to push a line of goods. b. This is a good method when personal selling is an important part of the marketing effort. 7. Sales Contests a. A sales contest is designed to motivate distributors, retailers, and sales personnel by recognizing outstanding achievements. b. To be effective, this method must be equitable for everyone involved. DISCUSSION STARTERS Discussion Starter 1: Sales Force Automation ASK: How do you think technology has revolutionized personal selling? Technology has radically altered how sales people do their jobs. The amount of data a salesperson has access to during the sales appointment is unprecedented. Thanks to organizations, such as Salesforce.com, most sales people can now track information about their customers as well as their own sales performance to maximize their effectiveness. Salesforce.com joined Google to offer the features of Salesforce.com with Google AdWords for search optimization marketing. The video found at the link below demonstrates this feature: http://www.youtube.com/watch?v=-LWC3LzPmuQ The video found at the following link is a brief interview with the founder of Salesforce.com about the company’s relationship with Google: http://www.youtube.com/watch?v=ZydKKE7Iuuo&feature=related Discussion Starter 2: Personal Selling Skills and Successful Job Interviewing ASK: How can an understanding of personal selling skills and tools assist you during job interviews? If you know personal selling skills, you are better able to understand how to read the interviewer and how to respond to the interviewer’s questions. Doing your homework for an interview, similar to the way a sales person plans for a sales meeting, will help you be successful in the interview. Just as there are different types of buyers, there are different types of interviewers. Each type of interviewer looks for a different kind of interaction with the interviewee. Some interviewers are very direct and get straight to the point, some are very conversational and speak about a wide variety of subjects, and some strictly follow their impressions of you. Since you won’t know the interview environment or the type of interviewer you will encounter, the best way to handle interviews is to be prepared. In the video below, you will hear about a wide range of interviewer styles and how you can best prepare for an interview with each type. http://www.youtube.com/watch?v=-zIQruPEDmg&feature=user Note: At the end of the video, the creator sells his own website and products, so you may want to end the video a minute early to avoid the sales pitch, or you may use this as an opportunity to discuss how the video is a promotional tool. The video creates value for the user and offers the creator an opportunity to sell related products and services. Discussion Starter 3: Modern Day Marketing for Vitamin Water In this exercise, you will be showing the following video clip of the Canadian NBA star, Steve Nash, and the hip-hop mogul, 50 Cent, headlining as promoters for the Vitamin Water product line: http://vimeo.com/24593207 This video clip ties into many aspects of marketing. Nash and 50 Cent talk about a promotion where consumers are encouraged to create their own Vitamin Water product and label. The winner of the competition receives a cash prize and their own personal Vitamin Water. The promotion offers celebrities, competition, and the opportunity for individual consumers to hit it big. Since the video is funny, students understand the product, and consider the marketing and promotion of this brand as hip and original. Instructors will love to use this discussion starter because they can be done with the topic in 5 minutes and energize the class. CLASS EXERCISES Class Exercise 1: Understanding the Steps Involved in Personal Selling The objective of this class exercise is to help students understand and apply the steps used in the personal selling process. Students may want to make a table with the steps and the scenarios. Prompt for students: Explain how you can use the seven steps of personal selling in everyday activities such as dating, asking parents for allowance, negotiating a higher grade on a term project, getting a job, or asking for a pay raise. The seven steps are: • PROSPECTING: The salesperson develops a list of customers. • PREAPPROACH: The salesperson finds and analyzes information about each prospect’s specific product needs, current use of brands, feelings about available brands, and personal characteristics. • APPROACH: The salesperson adopts a certain approach to contact a potential customer. The first contact is generally to assess the buyer’s needs and objectives. The prospect’s first impression is usually a lasting one. • MAKING THE PRESENTATION: The salesperson aims to attract and hold the prospect’s attention to stimulate interest. Product demonstrations, listening to comments, and observing responses are important. • OVERCOMING OBJECTIONS: One of the best ways to do this is to anticipate and counter objections before the prospect has an opportunity to raise them. Otherwise, the objections can be dealt with when they occur. • CLOSING: The salesperson asks the prospect to buy the product by attempting a trial close, which involves asking questions with an assumption that the prospect will buy the product. A salesperson should try to close at several points during the presentation. • FOLLOW-UP: The salesperson contacts the customer to learn about problems or questions that the customer may have. This may also be used to determine future needs. Class Exercise 2: Classifying Salespeople This exercise is relatively straightforward. Almost every student will have had some contact with one or several of these types of salespeople. However, students usually do not think about the types of selling these people do. Have your students classify each salesperson and justify their answers. Prompt for students: Salespeople are typically classified as order getters, order takers, and support personnel. How would you classify the following salespeople? 1. Pharmaceutical salesperson selling to doctors 2. Car salesperson 3. Retail store salesperson 4. Telemarketer soliciting donations for a charity 5. Real-estate agent 6. Heavy equipment salesperson 7. Agent for a snack-food distributor who only stocks shelves 8. Door-to-door cosmetics salesperson 9. Insurance salesperson 10. Agent for a snack-food distributor who fills a retailer’s orders Answers: The most likely answers: 1. Missionary salesperson 2. Order getter, new-business sales 3. Inside order taker 4. Order getter, new-business sales 5. Order getter, new-business sales 6. Order getter, new-business sales 7. Trade salesperson 8. Order getter/field order taker 9. Order getter, new-business sales 10. Field order taker Class Exercise 3: The Personal Selling Process This exercise is recommended as a group activity. In this chapter, you learned about the elements of the personal selling process. All of you may have participated in this process at some point. In this exercise, you will analyze one such encounter. Step 1: Discuss within your group your individual experiences with various types of sales people. Then choose one encounter among those discussed for the group activity. The encounter may either be positive or negative. Step 2: Describe the sales encounter your group has chosen. Who was involved? Where did it take place? What product or service was being sold? What was the outcome? Step 3: Choose members of your group to act out the various parts within this example and develop a short script of the encounter. Step 4: Define why you think the encounter was or was not successful. If the encounter was not successful, why did it fail? What could the sales person have done differently that may have affected the outcome? Step 5: Do a role play: let members of your group act out various parts involved in the sales encounter. Step 6: Explain why you think the encounter was or was not successful. If the encounter was not successful, what could the sales person have done differently to make it successful? CHAPTER QUIZ 1. Which of the following types of salespeople facilitate the selling function but are not involved solely with making sales? a. Field order takers b. Inside order takers c. Order getters who focus on current-customer sales d. Order getters who focus on new-business sales e. Support salespeople 2. The first step in the selling process is: a. preapproach. b. approaching the customer. c. making the presentation. d. overcoming objections. e. prospecting. 3. In order to encourage purchases of consumer products, marketers may offer to let buyers pay less than the regular price shown. This is a type of consumer sales promotion method known as: a. cents-off offers. b. coupons. c. rebates. d. refunds. e. premiums. 4. Sales promotion is defined as a(n): a. activity used as a direct inducement to resellers, salespeople, or consumers. b. advertising campaign. c. cyclical activity aimed at producing short-run effects on sales. d. noncyclical activity aimed at producing long-run effects. e. material used in personal selling. Answers to Chapter Quiz: 1.e; 2. e; 3. a; 4. a. SEMESTER PROJECT In this chapter, you learned about the elements of the personal selling process. In this exercise, you will learn how following those elements can lead to a successful interview and a job offer. Prospect: Identify two firms with which you would like an interview. Pre-approach: Gather information about each firm and what they are looking for in entry-level applicants. Check within your network of family, friends, and university resources to see if there are any opportunities to get more inside information. Approach: Determine how you can best contact the firm for an interview. Presentation: Use a video camera to film yourself doing a mock interview with someone from career services, a friend, or family member. Analyze the presentation. What did you do well that you should reinforce? What did you not do well that you need to improve? Closing the sale: Prepare a thank-you note for the interviewer and for anyone who assisted you in the process. ANSWERS TO ISSUES FOR DISCUSSION AND REVIEW 1. What is personal selling? How does personal selling differ from other types of promotional activities? Personal selling is a process of informing customers and persuading them to purchase products through personal communication in an exchange situation. It differs from other types of promotional activities, in that, it is the most precise method. It allows a marketer to adjust the message to satisfy a customer’s information needs and to zero in on the most promising prospects instead of directing promotional efforts at a group of people. 2. What are the primary purposes of personal selling? The primary purposes of personal selling can be grouped into three general categories: • To find individuals and/or organizations that are prospective buyers • To transform prospects into buyers • To maintain customer satisfaction 3. Identify the elements of the personal selling process. Must a salesperson include all these elements when selling a product to a customer? Why or why not? The personal selling process consists of several elements or steps: • The first step is prospecting and evaluating. This involves developing a list of potential customers. • After developing a list of acceptable prospects, comes the pre-approach step, in which the salesperson finds and analyzes information regarding the prospect’s specific product needs, current brands being used, feelings about available brands, and personal characteristics. • In the third step, the approach, the salesperson contacts the prospect. • During the fourth step, making the presentation, the salesperson must attract and hold the prospect’s attention, stimulate interest, and develop desire for the product. • The fifth step is overcoming the prospect’s objections. • The sixth step is closing the sale, in which the salesperson asks the prospect to buy the product or products. • The seventh and final element in the selling process is the follow-up. In this stage, the salesperson contacts the buyer to see whether the order was delivered on time and if the product was installed properly; check if the buyer has any problems or questions regarding the product; and determine the buyer’s future product needs. For personal selling to be effective, all seven elements should be included in the selling process. Each step fulfills an important function in the selling process; skipping one of the steps may affect the next stage in the process and may also alter the final output of the selling initiative. 4. How does a salesperson find and evaluate prospects? Do you consider any of these methods to be ethically questionable? Explain. A salesperson seeks the names of prospects from several sources, including company sales records, consumers’ information requests from advertisements, other customers, newspaper announcements (marriages, births, and deaths), public records, telephone directories, and trade association directories. After developing the prospect list, the salesperson evaluates each prospect to determine whether the prospect is able, willing, and authorized to buy the product. After this evaluation, some prospects may be deleted while others are deemed acceptable and are ranked according to their desirability or potential. The question about ethics will elicit varied responses. Some students may perceive the use of sources such as public records, directories, and announcements as unethical. Others may feel that this practice is ethical but that the sources of information are less satisfactory than are sales records and consumers’ information requests. 5. Are order getters more aggressive or creative than order takers? Why or why not? Order getters are generally considered more creative and aggressive than order takers because they are responsible for eliciting sales. These sales may be either new sales or sales to current customers. In either case, the salesperson is responsible for recognizing the potential buyer’s needs and providing the prospect with the necessary information. Order takers, on the other hand, engage in more repetitive tasks that involve perpetuating a long-lasting, satisfying relationship with customers. 6. Why are team selling and relationship selling becoming more prevalent? Team selling involves the salesperson joining with people from the firm’s financial, engineering, and other functional areas. Relationship selling involves building mutually beneficial long-term associations with a customer through regular communications over prolonged periods of time. They are becoming more important and prevalent due to rapid technological innovation, the increasing complexity of some products, and the shift from selling a specific product to building long-term relationships with customers by finding solutions to their needs, problems, and challenges. 7. Identify several characteristics of effective sales objectives. Sales objectives should be stated in precise, measurable terms and be specific regarding the time period and the geographic areas involved. They are usually established at two levels—for the total sales force and for each salesperson. These objectives inform salespeople about their accomplishments during a specified time period, provide the sales force with direction and purpose, and provide performance standards for the evaluation and control of sales personnel. 8. How should a sales manager establish criteria for selecting sales personnel? What do you think are the general characteristics of a good salesperson? A sales manager must develop a set of characteristics that helps evaluate people for the sales tasks adopted by an organization. To facilitate this function, the sales manager should: • Prepare a job description that enumerates the specific tasks to be performed by the salesperson • Analyze the characteristics of the firm’s successful salespeople as well as the ineffective ones Based on these two areas, the sales manager should be able to develop a set of specific requirements. Although for years marketers have attempted to create a comprehensive set of traits that characterize effective salespeople in general, the list of traits developed by an organization should reflect the needs of the company and the characteristics of its products and current target market. 9. What major issues or questions should management consider when developing a training program for the sales force? The major issues or questions to consider when developing a sales force training program are the following: • Who should be trained? Training programs can be directed toward the total sales force or toward a segment of it. • When and where should the training occur? Sales training may be performed in the field, at educational institutions, in company facilities, or in several of these locations. • What should be taught? The content of sales training programs can deal with general company background, plans, policies, and procedures; product information regarding features, uses, advantages, problem areas, parts, service, warranties, packaging, sales terms, promotion, and distribution; and selling methods. • How should the information be taught? The specific methods and materials used in a particular sales training program depend on the type and number of trainees, program content, complexity, length of the training program, size of the training budget, location, number of teachers, and the teachers’ preferences. 10. Explain the major advantages and disadvantages of the three basic methods of compensating salespeople. In general, which method would you prefer? Why? The three basic methods of compensating the salespeople, their advantages, and their disadvantages are: • The straight salary method—the straight salary method of compensation provides salespeople with maximum security, gives the sales manager a large degree of control over salespeople, is easy to administer, and yields predictable selling expenses. Its disadvantages include a lack of incentive, a necessity for close supervision, and the level of selling expenses during periods of sales decline. • The straight commission method—advantages of the straight commission method of salesperson compensation include providing the maximum amount of incentives, the ability to encourage salespeople to sell certain items by increasing the commission rate on these items, and relating selling expenses directly to sales resources. Disadvantages of this method are the lack of control over the sales force, the possibility of inadequate service to smaller accounts, and the decreased predictability of selling expenses. • The combination method—the combination method of compensation provides a certain level of financial security to salespeople, provides some degree of incentive, and yields selling expenses that fluctuate with sales revenue. Unpredictable selling expenses and difficulties in administration are disadvantages of this method. The students’ preferences for compensation methods will reflect individual attitudes toward each method and personal level of risk-taking. Because each method has advantages and disadvantages, arguments can be made for any of them. 11. What major factors should be taken into account when designing the size and shape of a sales territory? In designing the size and shape of sales territories, the sales manager should consider several factors: • First, the territories must be constructed in such a way that sales potentials can be measured. • Second, the shape of territories should facilitate salespeople’s activities to provide the best possible coverage of the firm’s customers. • Third, the territories should be designed to minimize selling costs. • Fourth, the territory size and shape should reflect the density and distribution of customers. • Fifth, topographical features should be taken into consideration. 12. How does a sales manager, who cannot be with each salesperson in the field on a daily basis, control the performance of sales personnel? A sales manager does not usually travel with each salesperson, and so information is needed to control the performance of the sales force. This information can be supplied through salespeople’s call reports, customer feedback, and invoices. Call reports and work schedules submitted by sales personnel provide the sales manager with detailed information about current interactions with clients and indicate salespeople’s plans for a specific future period. 13. What is sales promotion? Why is it used? Sales promotion is an activity and/or material that acts as a direct inducement, offering added value or incentive for the product to resellers, salespeople, or consumers. Sales promotion activities and materials are used to: • Identify and attract new customers • Introduce a new product • Increase the total number of users for an established brand • Encourage greater usage among users • Educate consumers regarding product improvements • Bring more customers into retail stores • Stabilize a fluctuating sales pattern • Increase reseller inventories • Combat or offset competitors’ marketing efforts • Obtain more and better shelf space and displays 14. For each of the following, identify and describe three techniques and give several examples: (a) consumer sales promotion methods and (b) trade sales promotion methods. Students’ choices for techniques and examples may vary, but they may include any of the following: a. Consumer sales promotion methods • Coupons are used to build volume for a brand or product when price is an important purchasing determinant. They may be for a specific brand or for a kind of product, and they may be distributed through retailers, as advertisements, or as throwaways. Clippings from newspapers or flyers distributed at shopping malls are examples of retail coupons. • Cents-off offers entice the buyer to receive a certain amount off the regular price as shown on the label or package. These provide a strong incentive to try a product and are used to promote sales of lagging products. Such offers may appear on many convenience items, including toothpaste, detergent, and coffee. • Money refunds and rebates offer a specified amount of money to be sent to the consumer by mail after proof of purchase is established. These are used to promote trial of a product and to require multiple purchases to obtain proof of purchase. Products such as shampoos and razors have offered money refunds and rebates. Rebates are increasingly offered on automobiles. • Frequent-user incentives reward customers who engage in repeat purchases. Examples of frequent-user incentives include frequent-flyer tickets and free food offered after a number of visits made at a specific restaurant. • Point-of-purchase displays include outside signs, window displays, counter pieces, display racks, and self-service cartons. These are used to encourage retailers to carry a firm’s product. • Demonstrations are supplied by the manufacturer and are good for attracting attention. They frequently show how a product works and sometimes involve the preparation and distribution of the product. An example is the demonstration of a product in an appliance store. • Free samples may be distributed by mail, by door-to-door delivery, in stores, or on packages. This type of promotion is used to stimulate trial of a new or improved product, increase volume quickly in early life cycle stages, and aid in obtaining retail distribution of the product. Recent examples of free samples include those offered to promote soaps and toothpastes. • Premiums are items offered free or at minimal cost as a bonus for purchasing a particular product. They can be placed on or inside the package or can be distributed in stores or through the mail. They are used to attract competitors’ customers, introduce different sizes of current products, add variety to promotional efforts, and stimulate loyalty. Small toys offered in cereal boxes are examples of premiums. • Consumer contests involve competition for prizes and usually are based on analytical or creative skills. An example of this technique would be to give $100 for writing a jingle for a new shampoo. • Consumer sweepstakes require entrants to submit their names for inclusion in a drawing. Sweepstakes are often sponsored by cigarette manufacturers. b. Trade sales promotion methods • Buying allowances are temporary price reductions to resellers for the purchase of specified quantities. They are used as an incentive to handle new products, achieve temporary price reductions, or stimulate the purchase of an item in quantities larger than usual. • A buy-back allowance is a secondary sales promotion method given to resellers after an initial promotional deal is over to stimulate repurchase. Such allowances are used to encourage cooperation in the initial transaction and in restocking. • A scan-back allowance is a manufacturer’s reward to a retailer based on the pieces that move through the scanner during a given time period. They directly link trade spending to product movement. • Using merchandise allowances, the manufacturer agrees to compensate resellers with certain amounts of money for providing special reseller promotional efforts, such as advertisements or displays. This technique is used for high-volume, high-profit, easily handled products. • Cooperative advertising involves an agreement by a manufacturer to pay a certain amount of the retailer’s media costs; the amount is based on the quantity of products purchased by the retailer. • A dealer listing is dual-purpose advertising that announces a product or consumer promotion and contains names of participating retailers that carry the product. • Free merchandise may be offered to a reseller that purchases a stated quantity of the same or different products. • Dealer loaders are premiums granted to a retailer for the purchase of specified quantities of merchandise. • Premium, or push, money is used as an incentive to push a line of goods by providing additional compensation to salespeople. • Sales contests use recognition of sales achievement to motivate resellers, retailers, and sales forces. 15. What types of sales promotion methods have you observed recently? Comment on their effectiveness. This is an open-ended question that will enable students to recall some sales promotion methods that they have observed. Methods used to promote retail establishments, new products, or established products will probably be more familiar than those used to promote to resellers. ANSWERS TO MARKETING APPLICATIONS 1. Briefly describe an experience you have had with a salesperson at a clothing store or an automobile dealership. Describe the steps the salesperson used. Did the salesperson skip any steps? What did the salesperson do well? Not so well? Would you describe the salesperson as an order getter, an order taker, or a support salesperson? Why? Did the salesperson perform more than one of these functions? Student answers will vary based on their experiences. They should use the information presented in “Elements of the Personal Selling Process” and “Types of Salespeople” to support their analyses. 2. Leap Athletic Shoe Inc., a newly formed company, is in the process of developing a sales strategy. Market researchers have determined that sales management should segment the market into five regional territories. The sales potential for the North region is $1.2 million; for the West region, $1 million; for the Central region, $1.3 million; for the South Central region, $1.1 million; and for the Southeast region, $1 million. The firm wishes to maintain some control over the training and sales processes because of the unique features of its new product line, but Leap marketers realize that the salespeople need to be fairly aggressive in their efforts to break into these markets. They would like to provide the incentive needed for the extra selling effort. What type of sales force compensation method would you recommend to Leap? Why? Leap should offer a combination compensation plan, in which salespeople receive a fixed salary plus a commission based on sales volume. This would give the company the control it needs while still providing incentives to the sales team. 3. Consumer sales promotions aim to increase sales of a particular retail store or product. Identify a familiar type of retail store or product. Recommend at least three sales promotion methods that could effectively promote the store or product. Explain why you would use these methods. Student answers will vary. They should pick at least three promotion methods from coupons, cents-off offers, money refunds and rebates, frequent-user incentives, point-of-purchase displays, demonstrations, free samples, premiums, consumer contests and games, and consumer sweepstakes. Students should use the information provided under “Consumer Sales Promotion Methods” to justify the methods they choose. 4. Producers use trade sales promotions to encourage resellers to promote their products more effectively. Identify which method or methods of sales promotion a producer might use in the following situations, and explain why the method would be appropriate. a. A golf ball manufacturer wants to encourage retailers to add a new type of golf ball to current product offerings. b. A life insurance company wants to increase sales of its universal life products, which have been lagging recently (the company has little control over sales activities). c. A light bulb manufacturer with an overproduction of 100-watt bulbs wants to encourage its grocery store chain resellers to increase their bulb inventories. Students should select their answers from the “Trade Sales Promotion Methods” section. The most common answers will include: a. Buying allowance (temporary price reduction that is good for new products) b. Premium/push money (additional compensation offered to salespeople) c. Almost any method would apply, but it would be a good chance to offer a buy-back allowance (a sum of money that a producer gives to a reseller for each unit the reseller buys after an initial promotional deal is over). 5. In the cosmetics industry, sales promotions reign supreme. You manufacture and market organic skin creams which are sold nationwide at your own “boutiques” inside various department stores. You are considering two different promotions for your newest lotion, which retails for $19.99. The first is providing free samples in select stores. Each sample will cost about 45 cents per customer. After carefully examining market research, you estimate that 15,000 customers will try the free sample, with 35 percent opting to purchase the product. The second promotion is a dollar-off coupon that provides a discount on select products. The coupons would be sent to all 100,000 current customers on your mailing list at a cost of 53 cents per customer. In the past, the coupons have had a 13 percent redemption rate. Which promotion would you adopt based upon the information provided? What is some additional information that could help you in choosing the best option? Students should perform a cost analysis to find the best solution: Samples Coupons Costs $6,750 $53,000 Sales 5,250 @ 19.99 each 13,000 @ 18.99 Sales Revenue $104,947.50 $246,870 Net Revenue $98,197.50 $193,870 Clearly, the coupon seems to be the best option. One of the disadvantages of coupons, however, is that customers who are already loyal customers might use the coupons to pay less for a product they were already intending to buy. Note that this mailing list of 100,000 is of those who currently do or have done business with the company. If the goals are to increase awareness of the product among both current and new customers, then couponing might receive the desired response. However, if the goal is to get entirely new customers, it might be advantageous to estimate how many new customers each method might generate. 6. Develop your analytical and communication skills using the Role-Play Exercises Online at www.cengagebrain.com. Students can visit the website and develop their analytical and communication skills. ANSWERS TO INTERNET EXERCISE TerrAlign TerrAlign offers consulting services and software products designed to help a firm maximize control and deployment of its field sales representatives. See how the company provides sales territory management solutions by visiting www.terralign.com. 1. Identify three features of TerrAlign software that are likely to benefit salespeople. The software provides digital road networks and other maps, realistic drive time calculations during territory optimizations, and helps create reports to distribute in the field. Students may find additional benefits. 2. Identify three features of TerrAlign software that are likely to benefit sales managers. The software provides sales resource optimization, sales territory design, and specific versions to match existing CRM software. Students may find additional benefits. 3. Why might field sales professionals object to the use of software from TerrAlign? Territories with equal sales potential will usually be unequal in geographic size; this causes salespeople with larger territories to work harder and longer to generate a specific sales volume. Also, if salespeople have relationships with customers outside of their area, or if many high-potential clients are located in an urban area, salespeople may object to TerrAlign’s distribution. ANSWERS TO DEVELOPING YOUR MARKETING PLAN The information obtained from the following questions should assist you in developing various aspects of your marketing plan found in the “Interactive Marketing Plan” exercise at www.cengagebrain.com. 1. Review the various types of salespeople described in this chapter. Given your promotional objectives (from Chapter 17), do any of these types of salespeople have a place in your promotional plan? The types of salespeople are order getters (current-customer sales, new business sales), order takers (inside order takers or field order takers), support personnel (missionary salespeople, trade salespeople), and technical salespeople. Given their promotional objectives, students should think about whether any of these types of salespeople have a place in their promotional plan. 2. Identify the resellers in your distribution channel. Discuss the role that trade sales promotions to these resellers could play in the development of your promotional plan. Students will have different resellers in their distribution channels depending on their product and their product’s target market. Distribution channels for different products can look very different. Nevertheless, trade sales promotions to resellers are likely to play a role in the development of every student’s promotional plan. There are many different trade sales promotion techniques. Students should review their textbook to ascertain the benefits and drawbacks of each one, and decide which would be the optimal technique to attain their objectives. Trades sales promotions methods include: • Trade allowances (buying allowance, buy-back allowance, scan-back allowance, and merchandise allowance) • Cooperative advertising and/or dealer listings • Free merchandise • Dealer loaders • Premium (or push) money • Sales contests 3. Evaluate each type of consumer sales promotion as it relates to accomplishing your promotional objectives. Students should begin by stating their promotional objectives. They then need to outline the different consumer sales promotions and link them back to their objectives. Not all promotional techniques discussed in this chapter will likely be helpful to every student. There are many different consumer sales promotions methods. Students should analyze each and choose those that best suit their specific objectives. Consumer sales promotions include: • Coupons • Cents-off offers • Money refunds • Rebates • Frequent-user incentives Point-of-purchase materials and demonstrations • Free samples • Premium • Consumer contests • Consumer games • Sweepstakes COMMENTS ON VIDEO CASE 17: MURRAY’S CHEESE ACHIEVES SUCCESS THROUGH PERSONAL SELLING Summary This case discusses how a cheese shop used personal selling to become a thriving business—and attracted Kroger’s attention in the process. For years, Murray’s Cheese was little more than a local Greenwich Village hole-in-the-wall; now, its quality cheeses and excellent customer service have become renowned across the nation. It spends zero money on advertising; instead, its in-store cheesemongers use personal selling to form relationships and instill customer loyalty. Its success resulted in a lucrative partnership with Kroger Supermarkets. Questions for Discussion 1. How would you explain the sales presentation that is most effective for selling Murray’s cheese products? Murray’s sales force uses relationship-based personal selling to achieve sales. An approach, a quick presentation, overcoming objections and closing the sale are important components to the sale. The cheesemonger approaches the customer, answers questions, and encourages the customer to sample the cheese (approach and sales presentation); tries to overcome doubts by answering questions or encouraging the consumer (overcoming objections); and finally concludes by closing the sale. 2. How would you apply the concept of relationship selling to building long-term customers at Murray’s Cheese? In its approach, the sales force uses free samples and then offers to try the cheese with the customer to establish a common ground in which to relate to the customer. In the process, the sales force becomes more familiar with the cheese they are selling, which better equips them to answer customers’ questions and provide information. 3. Do you think that Murray’s Cheese salespeople need extensive motivation and training? Yes. To create a customer-friendly environment, Murray’s cheese mongers must be highly informed about the company’s products and motivated. In terms of training, Kroger employees had to undergo extensive training before they were allowed to sell Murray’s cheese. Murray’s went so far as to create a 300-page cheese service guide for these recruits, which shows the importance of a satisfied and educated sales force to the company. Solution Manual for Foundations of Marketing William M. Pride, O. C. Ferrell 9781305361867, 9781305405769, 9780357033760
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