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Chapter 9 Personal Selling, Relationship Building, and Sales Management High-Level Chapter Outline I. Importance of Personal Selling II. The Sales Process A. Objectives of the Sales Force B. The Sales Relationship-Building Process Prospecting Planning the Sales Call Presenting Responding to Objections Obtaining Commitment Building a Long-Term Relationship Relationships Can Lead to Partnerships C. People who Support the Sales Force III. Managing the Sales and Relationship-Building Process A. The Sales Management Task B. Controlling the Sales Force Forecasting Sales Establishing Sales Territories and Quotas Analyzing Expenses C. Motivating and Compensating Performance Detailed Chapter Outline I. Importance of Personal Selling The importance of the personal selling function depends partially on the nature of the product. As a general rule, goods that are new and different, technically complex, or expensive require more personal selling effort. The salesperson plays a key role in providing the consumer with information about such products to reduce the risk involved in purchase and use. For many companies, the salesperson represents the customer’s main link to the firm. In fact, to some, the salesperson is the company. It is the salesperson who serves as the conduit through which information regarding product flaws, improvements, applications, or new uses can pass from the customer to the marketing department. Along with other sales techniques, personal selling provides the push needed to get middlemen to carry new products, increase their amount of goods purchased, and devote more effort in merchandising a product or brand. In summary, personal selling fulfills two vital duties: The salesperson dispenses knowledge to buyers. Salespeople act as a source of marketing intelligence for management. II. The Sales Process Personal selling is as much an art as it is a science. The term sales process refers to two basic factors: The objectives the salesperson is trying to achieve while engaged in selling activities The sequence of stages or steps the salesperson should follow in trying to achieve the specific objectives (the relationship-building process) A. Objectives of the Sales Force Personal selling can be viewed as a strategic means to gain competitive advantage in the marketplace. Marketing management understands that while, ultimately, personal selling must be justified on the basis of the revenue and profits it produces, other categories of objectives are generally assigned to the personal selling function as part of the overall promotion mix. These objectives are: Information provision: Especially in the case of new products or customers, the salesperson needs to fully explain all attributes of the product or service, answer any questions, and probe for additional questions. Persuasion: Once the initial product or service information is provided, the salesperson needs to focus on the following objectives: Clearly distinguish attributes of the firm’s products or services from those of competitors Maximize the number of sales as a percent of presentation Convert undecided customers into first-time buyers Convert first-time customers into repeat purchasers Sell additional or complimentary items to repeat customers Tend to the needs of dissatisfied customers After-sale service: Whether the sale represents a first-time or repeat purchase, the following objectives should be met: Delivery or installation of the product or service that meets or exceeds customer expectation Immediate follow-up calls and visits to address unresolved or new concerns Reassurance of service or superiority through demonstrable actions Build relationships B. The Sales Relationship-Building Process For many years the traditional approach to selling emphasizes the first-time sale of a product or service as the culmination of the sales process. The relationship-building process, which is designed to meet the objectives, contains six sequential stages (see Figure 9.1). These stages are—prospecting, planning the sales call, presentation, responding to objections, obtaining commitment/closing the sale, and building a long-term relationship. Prospecting The process of locating potential customers is called prospecting. The prospecting activity is critical to the success of organizations in maintaining or increasing sales volume. Continual prospecting is necessary for several reasons, including the fact that customers—switch to other suppliers, move out of the organization’s market area, go out of business because of bankruptcy, are acquired by another firm, or have only a onetime need for the product or service. The prospecting process usually involves two major activities that are undertaken on a continual, concurrent basis. Prospects must be located. They can be generated by randomly calling on businesses or households or by employing mass appeals. This process is called random lead generation. For most professional, experienced salespeople, a more systematic approach to generating leads from predetermined target markets is used. This approach, aptly named selected-lead generation, uses existing contacts and knowledge to generate new prospects. The second step in the prospecting process involves screening. This qualifying process usually entails gathering information which leads to answering the following five questions: Does the lead have a want or need that can be satisfied by the purchase of the firm’s products or services? Does the lead have the ability to pay? Does the lead have the authority to pay? Can the lead be approached favorably? Is the lead eligible to buy? Depending on the analysis of answers to these questions, the determination of whether a lead is a true prospect can be made. Planning the Sales Call Salespeople will readily admit that their number one problem is getting through the door for an appointment with the prospect. Customers have become sophisticated in their buying strategies. Consequently, salespeople have to be equally sophisticated in developing their selling strategies. Some key areas of knowledge salespeople should possess are listed below: They should have thorough knowledge of the company they represent, including its past history. They should have thorough knowledge of their products and/or product lines. They should have good working knowledge of competitor’s products. They should have in-depth knowledge of the market for their merchandise. They should have accurate knowledge of the buyer or the prospect to whom they are selling. Presenting Successful salespeople have learned the importance of making a good impression. Some salespeople actually develop a checklist of things to take to the presentation so that nothing is forgotten. Salespeople who can adapt their selling style to individual buyer needs and styles have a much stronger overall performance than less-flexible counterparts. Responding to Objections To assume the buyer will passively listen and positively respond to sales presentation by placing an immediate order would be unrealistic. Objections can be raised when the salesperson attempts to secure appointments, during the presentation, when the salesperson attempts to obtain commitment, or during the after-sale follow-up. When sales prospects raise an objection, it is a sign that they are not ready to buy and need an acceptable response to the objection before the buying decision can be made. In response to an objection, the salesperson should not challenge the respondent. Rather, the salesperson’s objective should be to present the necessary information so that the prospect is able to make intelligent decisions based on that information. Obtaining Commitment It should be noted that not all sales calls end in commitment, a successful closing. If commitment is not obtained, salespeople should analyze the reasons and determine whether (l) more sales calls are necessary to obtain commitment; or (2) currently, there just does not exist a good match between customer needs and seller offerings. Building a Long-Term Relationship Focusing on building and maintaining a long-term relationship with customers have become an important goal for salespersons. Terry Vavra focuses on the value of current customers of the organization and has developed the concept of aftermarketing, which focuses the organization’s attention on providing continuing satisfaction and reinforcement to individuals or organizations that are past or current customers. Successful aftermarketing efforts require the following activities: Establishing and maintaining a customer information file Monitoring order process Ensuring initial proper use of the purchased product or service Providing ongoing guidance and suggestions Analyzing customer feedback and responding quickly to customer questions and complaints Continually conducting customer satisfaction research and responding to it Relationships Can Lead to Partnerships When the interaction between a salesperson and the customer does not end with the sale, the beginnings of a relationship are present. When a buyer and a salesperson have a close personal relationship, they both begin to rely on each other and communicate honestly. When each has a problem, they work together to solve it. Such market relationships are known as functional relationships. When organizations move beyond personal relationships, they develop strategic partnership or strategic alliances. The reasons for forming strategic partnerships vary. C. People Who Support the Sales Force In many instances, sales personnel will require some assistance at various stages of the sales process. Missionary salespeople are used in certain industries such as pharmaceuticals to focus solely on promotion of existing products and introduction of new products. A technical sales specialist supports the sales staff by providing training or other technical assistance to the prospect. When the product is extremely high priced and is being sold to the whole organization, cross-functional sales teams are often used. III. Managing the Sales and Relationship-Building Process Every personal sale can be divided into two parts: the part done by the salespeople and the part done for the salespeople by the company. Salespeople have the responsibility of being thoroughly acquainted with the product, its selling features, and points of superiority and posses a sincere belief in the value of product. From a sales management point, the company’s part of the sale involves the following: Efficient and effective sales tools An efficient delivery and recorder system An equitable compensation plan that rewards performance Adequate supervision and evaluation of performance A. The Sales Management Task Marketing managers and sales managers must take some very important decisions regarding how the sales force should be organized (Figure 9.2). In a geographic structure, individual sales people are assigned territories to cover. In a product structure, each sales person is assigned to prospect and customers for a particular product or product line. In a customer structure, a salesperson or selling team serves a single customer or single type of customer. In a variation of the customer’s structure, a company may employ major account management, or the use of team selling to focus on major customers to establish long-term relationships. A newer variation of the customer structure is the global account manager who may be in charge of a single customer and all of its global needs. B. Controlling the Sales Force There are two obvious reasons why it is critical that the sales force be properly controlled: Personal selling can be the largest marketing expense component in the final price of the product. Unless the sales force is somehow directed, motivated and audited on a continual basis, it is likely to be less efficient than it is capable of being. The sales force involves four key functions: Forecasting sales Establishing sales territories and quotas Analyzing expenses Motivating and compensating performance Forecasting Sales Sales planning begins with a forecast of sales for some future period or periods. Forecasts are made on a short-term basis of a year or less, although long-term forecasts of one to five years are made for purposes other than managing the sales force such as financing, production, and development. The sales forecast is an estimate of how much of the company’s output can be sold during a specified future period under a proposed marketing plan and under an assumed set of economic conditions. A sales forecast has several important uses: It is used to establish sales quotas. It is used to plan personal selling efforts as well as other types of promotional activities in the marketing mix. It is used to budget selling expenses. It is used to plan and coordinate production, logistics, inventories, personnel, and so forth. A forecast is never a substitute for sound business judgment. Some commonly used sales forecasting methods are: Jury of executive opinion method Sales force composite method Customer expectations method Time-series analysis Correlation analysis Other quantitative techniques Establishing Sales Territories and Quotas The establishment of sales territories and sales quotas represent management’s need to match personal selling effort with sales potential (or opportunity). Sales people restricted to a geographic area are likely to get more sales in the territory. Other than geography, an important criterion is product specialization. Quotas represent goals assigned to salespeople. As such, quotas provide three main benefits. They provide incentives for salespeople. They provide a quantitative standard against which the performance of individual sales representatives or other making units can be measured. They can be used not only to evaluate sales person performance but also to evaluate and control their efforts. Activity quotas allow the company to monitor whether salespeople are engaging in these activities to the extent desired. The most common method of establishing sales quotas for territories is to relate sales to forecasted sales potential. In establishing sales quotas for its individual territories or sales personnel, management need to take into account three key factors: All territories will not have equal potential and, therefore, compensation must be adjusted accordingly All sales people will not have equal ability and assignments may have to be made accordingly The sales task in each territory may differ from time period-to-time period Analyzing Expenses Sales forecasts should include a sales expense budget. In some companies, sales expense budgets are developed from the bottom up. C. Motivating and Compensating Performance An important task for the sales manager is motivating and compensating the sales force. There are two basic types of compensation: salary and commission: Salary—usually refers to a specific amount of monetary compensation at an agreed rate for definite time periods. Commission—is usually monetary compensation provided for each unit of sales and expressed as a percentage of sales. Very often, several compensation approaches are combined. In addition to straight dollar compensation, there are numerous other forms of incentives that can be used to motivate the sales force. Some of these types of incentives and their potential performance outcomes are described in Figure 9.4. Key Terms After marketing: A concept that focuses attention on the value of current customers to the organization and on providing continuing satisfaction and reinforcement to them as well as past customers. The goal is to build lasting relationships with customers. Correlation analysis: A method used in sales forecasting that involves measuring the relationship between the dependent variable, sales, and one or more independent variables that can explain increases or decreases in sales volume. Cross-functional sales teams: A team that might include people from sales, engineering, customer service, and finance, depending on the needs of the customer. When the product is extremely high priced and is being sold to the whole organization, cross-functional sales teams are often used. Customer organization structure: A structure that assigns a salesperson or team to serve a single customer or type of customer that has large or significant needs. Geographic organization structure: Structure in which individual salespeople are assigned geographic territories. The salesperson calls on all prospects in the territory and usually represents all of the company’s products. Lead: A prospect that may or may not have the potential to be a true prospect, a candidate, to whom a sale could be made. Major account organization structure: A variation of the customer organization structure, in which a company may assign a salesperson or a team to focus on major customers to foster long-term relationships. Missionary salesperson: Used in many industries to focus solely on the promotion of existing products and introduction of new products. Objectives of the sales force: Ultimately, revenue and sales. Other objectives include information provision, persuasion, and after-sale service. Product organization structure: Structure in which each salesperson is assigned customers and prospects for a particular product or product line. This structure is useful when the sales force must have specific technical knowledge about products in order to sell effectively. Prospecting: The process of locating potential customers. The process usually involves random lead generation which usually requires a high number of contacts to gain a sale or selected lead generation which uses existing contacts and knowledge to generate new prospects. Sales forecast: An estimate of how much of the organization’s output, either in dollars or in units, can be sold during a specific period under a proposed marketing plan and under an assumed set of economic conditions. It has many important uses in sales management, marketing planning, and strategic planning. Sales relationship-building process: Process that views the initial sale as the first step in a long-term relationship-building process, not as the end goal. It contains six sequential stages: (1) prospecting, (2) planning the sales call, (3) presenting, (4) responding to objections, (5) obtaining commitment/closing the sale, and (6) building a long-term relationship. Strategic alliance: Also called strategic partnership, long-term, formal relationships in which both parties make significant commitments and investments in each other in order to pursue mutual goals and to improve the profitability of each other. The partners in a strategic alliance actually invest in each other. Technical sales specialist: Often used when the product is to be used to solve technical problems of the buyer. They support the salesperson by providing training or other technical assistance to the prospect. Time-series analysis: A method used in forecasting sales that involves analyzing past sales data and the impact of factors that influence sales (long-term growth trends, cyclical fluctuations, seasonal variations). Additional Resources Ash, Mary Kay. The Mary Kay Way: Timeless Principles from America’s Greatest Woman Entrepreneur. Hoboken NJ: John Wiley and Sons, 2008. Jantsch, John. The Referral Engine. New York: Portfolio, 2010. Gonzalez, Gabriel R., Douglas Hoffman, and Thomas N. Ingram. “Improving Relationship Selling Through Failure Analysis and Recovery Efforts: A Framework and Call to Action.” Journal of Personal Selling and Sales Management. Spring 2005, pp. 24–32. Hunter, Gary K., and William D. Perreault. “Making Sales Technology Effective.” Journal of Marketing, January 2007, pp. 16–34. Goldon, John. Winning the Battle for Sales. New York: McGraw-Hill, 2013. Schroder, Richard M., From a Good Sales Call to a Great Sales Call. NY: McGraw-Hill, 2011. Instructor Manual for A Preface to Marketing Management J. Paul Peter, James H. Donnelly, Jr. 9780077861063, 9781259251641
