Week6dq

Personal Selling, Relationship Building, and Sales Management 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 major purchases require more personal selling effort.

• The salesperson plays a key role in providing the consumer with information about such products to reduce the risks involved in purchase and use.

• It is important to remember that, 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 is an integral part of the marketing system, fulfilling two vital duties: one for customers and one for companies. o First, the salesperson dispenses knowledge to buyers. o Second, 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:

o The objectives the salesperson is trying to achieve while engaged in selling activities o 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:

o 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.

o 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.

o After-sale service: Whether the sale represents a first-time or repeat purchase, the salesperson needs to ensure the following objectives are 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 product or service superiority through demonstrable actions  Build relationships

B. The Sales Relationship-Building Process • For many years, the traditional approach to selling emphasized 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 (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. o First, prospects must be located. o When names and addresses of prospects are not available, as is usually the case

when firms enter new markets or a new salesperson is hired, they can be generated by randomly calling on businesses or households or by employing mass appeals. This process, called random lead generation, usually requires a high number of contacts to gain a sale.  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. o 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 a 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 prior to embarking on sales

calls are listed below: o They should have thorough knowledge of the company they represent,

including its past history. o They should have thorough knowledge of their products and/or product lines. o They should have good working knowledge of competitor’s products. o They should have in-depth knowledge of the market for their merchandise. o 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 a 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 has

become an important goal for salesperson. • 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 that many specific activities be undertaken by the salesperson and others in the organization. These activities include o Establishing and maintaining a customer information file

o Monitoring order process o Ensuring initial proper use of the purchased product or service o Providing ongoing guidance and suggestions o Analyzing customer feedback and responding quickly to customer questions

and complaints o Continually conducting customer satisfaction research and responding to it

Relationships Can Lead to Partnerships • When the interaction between a salesperson and a 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 possess a sincere belief in the value of the product.

• From a sales management standpoint, the company’s part of the sale involves the following: o Efficient and effective sales tools, including continuous sales training, promotional

literature, samples, trade shows, product information, and adequate advertising. o An efficient delivery and reorder system to ensure that customers will receive the

merchandise as promised. o An equitable compensation plan that rewards performance, motivates the

salesperson, and promotes company loyalty. o Adequate supervision and evaluation of performance as a means of helping

salespeople do a better job not only for the company but for themselves as well. A. The Sales Management Task • Marketing managers and sales managers must make some very important decisions

regarding how the sales force should be organized. These are illustrated in Figure 9.2. • In a geographic structure, individual salespeople are assigned geographic territories to

cover. • In a product structure, each salesperson is assigned to prospects and customers for a

particular product or product line. • A customer structure assigns a salesperson or selling team to serve a single customer or

single type of customer. • In a variation of the customer 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: o First, personal selling can be the largest marketing expense component in the final

price of the product. o Second, 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. o Controlling 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. • From a practical standpoint, these forecasts are made on a short-term basis of a year

or less, although long-range 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, either in dollars or in units, 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: o It is used to establish sales quotas. o It is used to plan personal selling efforts as well as other types of promotional

activities in the marketing mix. o It is used to budget selling expenses. o 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 as follows:

o Jury of executive opinion method o Sales force composite method o Customer expectations method o Time-series analysis o Correlation analysis o 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. • One important criterion is product specialization. • Quotas represent goals assigned to salespeople. As such, quotas provide three main

benefits. o First, they provide incentives for salespeople. o Second, quotas provide a quantitative standard against which the performance

of individual sales representatives or other marketing units can be measured. o Third, quotas can be used not only to evaluate salespersons’ 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 quotas for territories is to relate sales to

forecasted sales potential. • In establishing sales quotas for its individual territories or sales personnel,

management needs to take into account three key factors: o First, all territories will not have equal potential and, therefore, compensation

must be adjusted accordingly. o Second, all sales people will not have equal ability and assignments may have

to be made accordingly. o Third, 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. o Salary usually refers to a specific amount of monetary compensation at an agreed

rate for definite time periods. o 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 listed in Figure 9.4.