Chapter 14: Business Marketing Communications: Managing the Personal Selling Function

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

Personal selling is the most important demand-stimulating force in the business marketer's promotional mix. In this chapter youll 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 firms

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

1.

Personal selling is dominant because:

Compared to consumers, there arent 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 Tire 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 firms success!

Sales management means: 1. Planning 2. Organizing 3. Directing & 4. Controlling the Personal Selling Efforts

SALES FORCE MANAGEMENT

Involves (though not inclusively):

Estimating the forecasts Determining size of sales force and Selecting Training Deploying Establishing activity & financial goals Motivating, and Monitoring sales peoples efforts

a. b.

Sales operations MUST be monitored to:

Identify problems. Assess the efficiency, effectiveness and profitability of the salesperson.

1.

2.

Organize the sales force

Manage key accounts Select high-performing account managers (salespeople)

Organizing the Personal Selling Effort

Geographical Organization

Advantages:
1. 2.
3.

Most common form Reduces travel distance and time between customers Usually minimizes costs

Major disadvantages:
1. Each salesperson must perform all selling tasks for all firms products and for all customers in territory. Salesperson may not know about all products or only emphasize certain (high commission) products.

2.

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 firms total offering to customers. Disadvantage: Expensive and sometimes confusing for customers.

Organizing the Personal Selling Effort

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

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:
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1. 2.

Logistical support Inventory management

 Research

suggest that companies can get higher returns & profitability by: Segmenting their customers into tiered groups from high to low Developing 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 firms 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 Management

Consists 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. 2.

Closer long term relationships Partnerships to reduce overall costs or advance performance for the customer

Table 14.1

Traditional Selling vs. Key Account Selling

Traditional Selling Focus Key Account Selling Focus Large volume of purchases by the customer often across multiple business of the seller Core product/service plus customized applications and value-added services Long-Term Lower total costs; Broader set of strategic benefits Extensive: Broader focus as firms share strategic goals Become preferred supplier; Lower customer firms total costs; Enhance learning in the relationship Many individuals from multiple functional areas on the selling side interact with counterparts in the customer organization Many individuals within the customer organization interact in making decisions and evaluating the relationship Varies Core product/service Short-Term Lower prices & higher quality Limited: Narrow focus on price and product features Maximize revenue Satisfied customers Individual salesperson is primary link to customer organization Purchasing Manager and a few other individuals are involved in buying decisions

Sales Volume Nature of Product/ Service Offering Time Horizon Benefits to Customer Information Sharing

Sales Force Objectives Structure of Selling Center Structure of Buying Center

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; and Frank V. Cespedes, Concurrent Marketing: Integrating Products, Sales and Service (Boston: Harvard Business School Press, 1995,) pp. 186-202

Joint Efforts
If uncertainty is high, or
If product adaptation's are required, then
Customer organization should initiate a joint effort with the selling organization

to create the desired solution.


1.

Because key accounts

Possess buying power 2. Demand special services 3. 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. a. b. 2.

Centers on: Profit potential Degree customer is willing to pay for extra services 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 sellers 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 companys capabilities. 4. Staff know how to create customer solutions.

The Account Manager is responsible for:

Diagnosing customer needs.

1.

2.

Identifying matching set of internal experts.

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

3.

High Performing Account Managers:

Assemble the right people and gather the right

information to solve their customers unique problems.

Excel at building and maintaining strong

relationships.
Use these relationships to design and align

proposals that meet the selling firms capabilities (solutions) to the buying firms needs (problems).

The Cycle of Account Management Success

Internal Reputation Enhanced Successful Engagement Outcome Prioritize Relationship Building as Key Role Develop Strong Internal Links Forge Multiple Connections in Client Organization

Manage Client Relationships at Multiple Levels

Initiate Involvement with Client

Identify Resources Internally Aligned with the Client

Partner with Client to Shape New Business Proposal

Early Involvement in Client Engagement

Knowledge of Profitability Drivers

Knowledge of Competitive 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 firm b. Nature of selling task c. Firms training capability d. Market experience

Recruiting

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. 2. 3. 4.

Firm Product Customer(s) & organizational buying behavior Competition

5.
6.

Market & industry information

Effective interpersonal communication skills

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Sales Training Skills: Effective Interpersonal Communication Skills

Includes: A. Communication skills B. Listening skills C. Influencing skills D. Complaint handling skills E. Cultural diversity skills Many companies have found that as training increases, productivity increases and turnover decreases.

 Supervisions functions include:

continued training
counseling assistance time management verification setting financial & activity quotas, etc. Supervision also integrates sales activities with

upper management.

Motivation
Orville 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.

Motivation
Walker, Churchill & Fords model (fig. 16.3) hypothesizes that a salespersons performance is a function of three factors: 1. Level of motivation 2. Aptitude or ability 3. Perception about how to perform the role

Motivation is strongly related to:

Individuals perception of the types and amounts of rewards from various degrees of job performance. The value the salesperson places on those rewards.

A.

B.

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 Salespeoples 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:

What is reasonably expected Is subject to conflicting demands that s/he cannot possibly resolve Surrounded by uncertainty due to lack of information concerning expectations

1.

2.

3.

TURNOVER

Turnover is an important issue because the cost for it is extensive: A. Cost to hire and train new people B. Cost due to loss of customer C. Cost due to non-performance To reduce turnover, management will try many things to satisfy, motivate and reward good people.

Job Satisfaction Increases When:

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.
1.

Customer satisfaction increased as salespersons job satisfaction increased.

Job Satisfaction
Relationship between job satisfaction and customer satisfaction is strong when: a. Customer interactions are frequent b. Customer assumes a central role in the value-creation process c. When innovative products or services are involved

Evaluation and Control

Managements responsibility is to monitor and control sales performance at all levels: Locally Regionally Nationally

Management needs to: a. Determine if objectives are being achieved b. Identify problems c. Recommend corrective action d. Keep salespeople informed about changes (internally) such as new products or (externally) such as competitive or market conditions

PERFORMANCE MEASURES

Sales managers use both Behavior-based tools Performance-based tools

1. 2.

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 (cont)

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.

Deploying the Sales Force

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.

PCU

Planning and Control Units (PCU) consists of: Prospects Customers Territories Districts 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

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 tactics 4. Sales force organization, policies and procedures 5. Field sales manager characteristics 6. Salesperson characteristics 7. 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.

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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 firms 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 territory b. Allocation of salespeople to customer segments This method helps isolate deployment problems or opportunities worthy of management attention.

GEs Sales Force Effectiveness Initiative

1. Customer Potential and Prioritization

2. Territory Alignment
3. Variable Incentive Compensation

4. Implementation