PowerPoint by:Ray A. DeCormier, Ph.D.Central Ct. State U.

Chapter 14:

Business Marketing Communications:Managing the Personal Selling Function

Personal selling is the most important demand-stimulating force in the business marketer's promotional mix. In this chapter you’ll understand:

The methods for organizing the sales force.

The skills and characteristics of high-performing account managers.

The nature of the sales management function.

Selected managerial tools that can be applied to major sales force decision areas.

Stay Close to the Customer

The sales force has a central role in the firm’s strategy: managing customer relationships.

In B2B business, personal selling is the dominant component and a major determinant of overall company success.

Dominance of Personal Selling

Personal selling is dominant because:

1. Compared to consumers, there aren’t as many potential business customers.

2. The dollar purchases are much larger.3. The products and services are more

technical.4. Salespeople need to know about their

customers’ businesses and about their customers’ customers’ businesses, too!

Cost of Personal Selling

Across all industries the average cost of making a sales call is $200+, although it can cost more in some industries, less in others.

There is a significant investment in utilizing personal selling.

To maximize effectiveness and efficiency, the personal selling function must be carefully managed and integrated into the marketing mix.

Selling is Where the Selling is Where the Tire Meets the RoadTire Meets the Road

The salesperson is the initial link between the company and the customer.

Personal selling consists of complex tasks and is a challenging career.

Successful salespeople must have broad knowledge over and above their product.

They must talk intelligently, know their competition, understand industry trends, and be interesting in a worldly and charming way.

SALES FORCE MANAGEMENT

Effective sales force management is fundamental to the firm’s success!

Sales management means:1. Planning2. Organizing3. Directing &4. Controlling the Personal Selling

Efforts

SALES FORCE MANAGEMENT Involves (though not inclusively):

a. Estimating the forecastsb. Determining size of sales force

and Selecting Training Deploying Establishing activity & financial goals Motivating, and Monitoring sales people’s efforts

Sales operations MUST be monitored to:

1. Identify problems.

2. Assess the efficiency, effectiveness and profitability of the salesperson.

Organize the sales force

Manage key accounts

Select high-performing account managers (salespeople)

Organizing the Personal Selling Organizing the Personal Selling EffortEffortGeographical Organization

Advantages:1. Most common form 2. Reduces travel distance and time

between customers3. Usually minimizes costs

Major disadvantages:1. Each salesperson must perform all

selling tasks for all firm’s products and for all customers in territory.

2. Salesperson may not know about all products or only emphasize certain (high commission) products.

Product Oriented Sales Organizations

Salespersons specialize in relatively narrow components of total product line. Appropriate with huge product offerings (e.g., General Electric).

Prime benefit: Enables sales force to develop deeper product knowledge level--enhances value of firm’s total offering to customers.

Disadvantage: Expensive and sometimes confusing for customers.

Organizing the Personal Selling Organizing the Personal Selling EffortEffort

Market-Centered Organizations

Salespeople learn specific requirements of industry or customer type (e.g., specializing in the banking industry)

Salespeople are better prepared to identify and respond to buying influentials

Large Accounts are referred to as:

Key Accounts Major Accounts National Accounts Strategic Accounts

Key Account Management

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A Key Account:

1. Purchases a significant volume as a % of sales

2. Involves several organizational members in the purchasing decision

3. Buys for a geographically dispersed organization

4. Expects carefully coordinated response and specialized services from suppliers such as:1. Logistical support2. Inventory management3. Price discounts4. Customized applications

Research suggest that companies can get higher returns & profitability by:Segmenting their customers into tiered

groups from high to lowDeveloping different value propositions for

each tier

Effects:This had a positive effect on sales and

profits from top-tier customers, and no adverse effect on lower-tiered customer relationships.

Reduces sales and marketing costs.

Many companies find that 80% or their business or profits comes from 20% of their accounts.

Large firms have central procurement offices.

Often, selling firms have offices located inside the buying firm’s facilities.

Large firms expect their suppliers to provide coordinated and uniform services for all its geographically dispersed divisions.

In exchange for large orders, they expect additional services & support (e.g., JIT).

Key Account ManagementKey Account ManagementConsists of a Key Account Manager and a team composed of Sales, Marketing, Finance, Logistics, Engineering and other Functional Areas.

Key Account Managers may work on several accounts, or on ONE account, and will report to a senior executive.

Traditional Selling vs. Key Account Selling

Traditional selling emphasizes maximizing revenues.

Key account selling is multi-faceted, emphasizing:

1. Closer long term relationships2. Partnerships to reduce overall

costs or advance performance for the customer

Traditional Selling Focus

Key Account Selling Focus

Sales Volume Varies Large volume of purchases by the customer often across multiple business of the seller

Nature of Product/Service Offering

Core product/service Core product/service plus customized applications and value-added services

Time Horizon Short-Term Long-Term

Benefits to Customer

Lower prices & higher quality

Lower total costs; Broader set of strategic benefits

Information Sharing

Limited: Narrow focus on price and product features

Extensive: Broader focus as firms share strategic goals

Sales Force Objectives

Maximize revenueSatisfied customers

Become preferred supplier; Lower customer firm’s total costs; Enhance learning in the relationship

Structure of Selling Center

Individual salesperson is primarylink to customer organization

Many individuals from multiple functional areas on the selling side interact with counterparts in the customer organization

Structure of Buying Center

Purchasing Manager and a few other individuals are involved in buying decisions

Many individuals within the customer organization interact in making decisions and evaluating the relationship

Table 14.1 Traditional Selling vs. Key Account Selling

Source: Adapted with modifications from Joseph P. Cannon and Narakesari Narayandas,“Relationship Marketing and Key Account Management,“ in Handbook of Relationship Marketing,Jagdish N. Sheth and Atul Parvatiyar, eds. (Thousand Oaks, Ca.; Sage Publications, 2000), p. 409; andFrank V. Cespedes, Concurrent Marketing: Integrating Products, Sales and Service (Boston: HarvardBusiness School Press, 1995,) pp. 186-202

Joint EffortsIf uncertainty is high, orIf product adaptation's are required,

then…

Customer organization should initiate a joint effort with the selling organization…

to create the desired solution.

Because key accounts…

1. Possess buying power2. Demand special services3. Are more costly to serve

…companies need to consider sales and profit potential, as well as long-term resource commitments.

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1. Centers on:a. Profit potentialb. Degree customer is willing to pay for extra

services

2. Select customers from requiring a unique support function that is marketable to other customers.

3. Consider transactions with the customer that complements the economics of the seller’s business.

Considering these points first allows the seller the opportunity to consider whether or not to take on a particular key account.

Successful programs occur when:

1. There is senior management support.2. Objectives, assignments and

implementation procedures are well defined.

3. They are staffed by experienced people knowledgeable about company’s capabilities.

4. Staff know how to create customer solutions.

The Account Manager is responsible for:

1. Diagnosing customer needs.

2. Identifying matching set of internal experts.

3. Recruiting these experts onto an ad hoc team as customer or opportunities require.

High Performing Account Managers:

Assemble the right people and gather the right information to solve their customer’s unique problems.

Excel at building and maintaining strong relationships.

Use these relationships to design and align proposals that meet the selling firm’s capabilities (solutions) to the buying firm’s needs (problems).

The Cycle of Account Management Success

Identify ResourcesInternally Aligned

with the Client

Manage ClientRelationships at Multiple Levels

Prioritize Relationship Building as Key Role Develop

Strong Internal

Links

Forge Multiple Connections in

Client Organization

Initiate Involvement with Client

Early Involvementin Client

EngagementPartner withClient to

Shape New BusinessProposal

Successful Engagement

Outcome

Internal ReputationEnhanced

Knowledge ofProfitability

Drivers

Knowledge ofCompetitive

Strategies

Fig. 14.2

Building internal relationships

Aligning resources to client needs

Forging relationships with the customer organization

Managing the customer engagement process

Knowing the customer

Build strong relationships within the selling firm and customer organization

Recruitment and Selection

Training

Supervision and Motivation

Evaluation and Control

Recruitment & Selection

Q: Should the company hire experienced salespeople or hire and train inexperienced people?

A: It depends upon:a. Size of firmb. Nature of selling taskc. Firm’s training capabilityd. Market experience

RecruitingRecruiting Recruiting is a negotiation between two

parties.

A successful process should include procedures to weed out unqualified people and assure that good candidates are considered.

Most selection is done by the 1st line manager in conjunction with 2nd line manager.

In larger corporations, the personal selling function is often used as a training ground for higher level marketing and management functions.

Salespeople need knowledge about the:

1. Firm

2. Product

3. Customer(s) & organizational buying behavior

4. Competition

5. Market & industry information

6. Effective interpersonal communication skills

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Sales Training Skills:Effective Interpersonal Communication Skills

• Includes:A. Communication skillsB. Listening skillsC. Influencing skillsD. Complaint handling skillsE. Cultural diversity skills

• Many companies have found that as training increases, productivity increases and turnover decreases.

Supervision’s functions include: continued training

counseling

assistance

time management verification

setting financial & activity quotas, etc.

Supervision also integrates sales activities with upper management.

MotivationOrville Walker Jr., Gilbert Churchill Jr., and

Neil Ford define motivation as:The amount of effort the salesperson “desires to expend on each of the activities or tasks associated with his (her) job such as:

1.calling on potential new accounts, 2.planning sales presentations, and 3.filling out reports.”

MotivationWalker, Churchill & Ford’s model (fig. 16.3) hypothesizes that a salesperson’s performance is a function of three factors:1.Level of motivation2.Aptitude or ability3.Perception about how to perform the role

Motivation is strongly related to:

A. Individual’s perception of the types and amounts of rewards from various degrees of job performance.

B. The value the salesperson places on those rewards.

Rewards can be:

Internal: Personal feelings of accomplishment or self-worth

External: Financial incentives and/or recognition

See Fig. 16.3 (next frame)

Determinants of Salespeople’s Performances

Fig. 14.2

To be effective, incentive rewards:1. Must be well conceived.2. Be based on what salespeople

value.3. Are tied to achieving a desired

behavior.4. Recognizes the salesperson.5. Recognizes the team.

Incentives Usually consist of:

Recognition Financial rewards

Recognition is usually competitive in nature and often coupled to a sports theme such as: “Big Hitter of the Month”

Financial incentives may include: Salary Commission Bonus Expenses Contest winnings Other perks

Job dissatisfaction occurs when the salesperson does not know:

1. What is reasonably expected

2. Is subject to conflicting demands that s/he cannot possibly resolve

3. Surrounded by uncertainty due to lack of information concerning expectations

TURNOVER Turnover is an important issue

because the cost for it is extensive:A. Cost to hire and train new peopleB. Cost due to loss of customerC. Cost due to non-performance

To reduce turnover, management will try many things to satisfy, motivate and reward good people.

Job Satisfaction Increases When:1. Salespeople perceive that 1st line

supervisors closely direct and monitor performance.

2. Management provides assistance to resolve unusual problems.

3. Salespeople feel they have an active part in determining company policies and standards.

4. There is a good relationship between salesperson and manager.

Customer satisfaction increased as salesperson’s job satisfaction increased.

Job Satisfaction

Relationship between job satisfaction and customer satisfaction is strong when:a.Customer interactions are frequentb.Customer assumes a central role in the value-creation processc.When innovative products or services are involved

Evaluation and ControlEvaluation and Control

Management’s responsibility is to monitor and control sales performance at all levels:

Locally

Regionally

Nationally

Management needs to:a. Determine if objectives are being

achievedb. Identify problemsc. Recommend corrective actiond. Keep salespeople informed about

changes (internally) such as new products or (externally) such as competitive or market conditions

Sales managers use both…

1.Behavior-based tools2.Performance-based tools

…To measure performance.

Behavior-Based Performance Measures

Include:

Having the sales manager monitor and direct salespeople activities by using subjective measures to evaluate performance such as:

1. Application of product and company technology knowledge.

2. Quality of customer relationships.

Compensation is more salary driven.

Behavior-Based Performance Measures (con’t)

Is good for:

A. Salespeople who lack experience

B. Companies that need to control how their products\services are presented

C. When salespeople are asked to perform “non-sales” activities

Includes:

Less direct control

Uses objective measures such as activity, sales quotas, % share market quotas, profits, etc.

Compensation is more performance based such as large commission structure

It is good for:

A. When sales efforts are a major determinate of organizational sales success.

◦ Erin Anderson & Vincent Onyemah state, “When sales reps make that big of a difference to the bottom line, it is worth it to give them autonomy and to pay them handsomely to do what they do.”

Successful managements use both behavior and performance measures to motivate and control their sales force.

Other things to consider are selling situations from territories to types of customers.

Transactional selling is much different than relationship selling, and measurements need to be appropriate for the selling situation.

The objective of utilizing a sales force is to deploy them in the most profitable way.

That means: 1. Effectively allocating resources to

accomplish the task creating sales territories.

2. Employing sales people to serve customers within those territories.

PCUPCUPlanning and Control Units (PCU)

consists of:ProspectsCustomersTerritoriesDistricts Products

These are units where resources and controls are needed to facilitate sales.

Critical Sales Management Task: Deployment Decisions Facing Sales Organizations

Table 14.2

THREE IMPORTANT SALES TERRITORY TRAITS

Potential: Measure of total business opportunity (commissions or compensation) for all salespeople in particular market

Concentration: Degree to which potential confined to few larger accounts in territory

Geographic Dispersion: If high, sales effort will be wasted in travel time

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Table 14.3 Selected Determinants of Territory Sales Response

1.Environmental factors (e.g., health of the economy)

2.Competition (e.g., number of competitive salespersons)

3.Company marketing strategy and tactics4.Sales force organization, policies and

procedures5.Field sales manager characteristics6.Salesperson characteristics7.Territory characteristics (e.g., potential)8. Individual customer factors

Source: Adapted from Adrian B. Ryans and Charles B. Weinberg, “Territory Sales Response,” Journal of Marketing Research 16 (November 1979): pp. 453-465.

PCU opportunity includes: total potential that PCU represents for all sellers

Sales organization strength includes: competitive advantages or distinctive competencies that firm enjoys within PCU

Deployment analysis matches sales resources to market opportunities

Sales resource opportunity grid can classify industrial firm’s PCU portfolio

Fig. 14.3

By understanding where PCU potentials exists on the opportunity grid, marketing and sales managers can make better decision on:

a. Size of territoryb. Allocation of salespeople to customer

segments

This method helps isolate deployment problems or opportunities worthy of management attention.

GE’s Sales Force Effectiveness Initiative

1. Customer Potential and Prioritization

2. Territory Alignment

3. Variable Incentive Compensation

4. Implementation