978-0136074892 Solution Manual Chapter 13 Part 1

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Chapter 13: Direct Channels of Distribution: Personal Selling and

Direct Marketing

Chapter Objectives

After reading this chapter, students will have learned:

·How the sales force fits into the marketing organization

·The major duties of a salesperson

·Managing the sales force in terms of managing sales performance, designing

sales territories, determining sales force size, and assigning salespeople to

territories

·Setting sales quotas

·Issues in sales force compensation

·The impact of technology on sales management

·The importance of direct marketing

·The major direct-marketing media

Chapter Overview

The purpose of this chapter is to introduce some of the issues in managing two

major direct channels of distribution: personal selling and direct marketing.

Chapter Outline and Key Terms

Key Terms:

·Sales territory

·Breakdown method

·Workload method

·Marginal economic method

·Sales quotas

·Commission

·Salary

·Incentive payments

·Sales contests

·Virtual selling

·Direct marketing

·Measurable response

A. Definitions

1. Sales territories: A group of present and potential customers assigned to a

salesperson, often designed on a geographic basis.

2. Breakdown method: A major method used to determine the size of the sales

force that is based on the forecasted sales level divided by an assumed average

sales per salesperson.

3. Workload method: A major method used to determine the size of the sales force

that is based on the ability to calculate the total amount of work necessary to

serve the entire market.

4. Marginal economic method: A major method used to determine the size of the

sales force, based on the macroeconomic concept that a resource should be

allocated up to the point at which the marginal revenue obtained from an

additional unit of the resource equals the marginal cost.

5. Sales quotas: Specific sales goals that salespeople are required to meet.

6. Commission: A form of compensation based directly on a sale or some other

activity.

7. Salary: A form of compensation in which a basic amount of money is paid to a

worker on a regular basis.

8. Incentive payments: Monetary awards for special performance.

9. Sales contests: Sales force competition based on sales performance.

10. Virtual selling: The reengineering of sales in the 1990s, especially the impact of

sales force automations and the salesperson’s educated use of technological

tools in working with prospective customers in a highly efficient way.

11. Direct marketing: A process of addressable and trackable two-way

communication used to generate incremental sales or revenues for any

organization in any industry.

12. Measurable response: The estimation of the effects of a marketing program

such as direct marketing.

1. Duel role of the sales force:

·The sales force has a duel role in the implementation of the marketing

strategy. The sales force is responsible for communication and channel

2. There are many different organizational structures incorporating sales and

marketing.

·One example of the position of the sales force in the organizational structure

is seen in Figure 13.1 Page 365 Sales Force Organization in a Medium-

Sized Firm Shows the different titles used in a mid-size sales organization.

·Figure 13.2 Page 376 Adobe Systems Marketing Organization Shows the

organizational structure of Adobe Software marketing organization.

3. Types of sales organizations

·Product/Product Sales Organization: Organized around product lines.

· The sales force is responsible for selling to all markets one

particular product or product line.

·Figure 13.3 Page 376 Hewlett-Packard Medical Products Group

Organization Chart, 1992

·Market/Market System Organization: The sales force is organized by market

segments, as is the marketing organization.

·Sales staff sells the entire product line to customers in that segment.

·Figure 13.4 Page 378 MCI Communications Corporation

Organizational Chart, 1986

·Product/Market Sales Organization: The sales force sells all products

marketed by a division to a single market

·National/Key Accounts Organizations: Additional sales people that manage

the largest accounts or accounts that may be international or even national

vs. local accounts.

·Figure 13.5 Page 379 Ways to Organize National Account Sales

Forces Shows 4 common methods of organizing the national/key

account sales staff

·Illustration: Marriott Lodging (www.marriott.com) Page 370

·Multi-level Marketing: network marketing distribution systems.

·These systems are direct sales organizations. People recruit other

people to sell the products.

·Some image problems have plagued this type of sales system but

some organizations are working on these issues by buying back

products that not sold by the distributors.

4. What does a salesperson do?

·Salespeople are rewarded for their ability to sell or close orders from

customers.

·Types of selling situations:

·Response Selling: Salesperson is the order taker but the order was

initiated by the customer

·Trade Selling: Selling and merchandising

·Missionary Selling: Salesperson sells to the decision maker so that

person turns around and sells to external or internal customers

·Technical Selling: Sells and is also technical advisor to the purchaser

·Creative Selling: Salesperson spends time with the customer to discover

the customer’s needs/wants to develop new customers and maintain

current customers.

·Duties of the salesperson may include: Planning the sales call, traveling to

the customer’s site and making the call, filling out the call report, post-call

analysis and communicating with the customers.

C. Managing the Sales Force Performance

1. Internal Factors:

·Sales force motivation (incentives, commission, contests, etc.), sales

force aptitude for selling, sales force job satisfaction, sales force

understanding the job expectations of superiors and personal attributes.

·The type of organization the salesperson works can affect sales

performance. If the company is the market leader in the product or

product line there may be easier sell.

·The resources available to the salesperson by the company can also

affect the sales performance. Is the company heavily invested in

supporting the sales force?

2. External Factors: Customers, competitors and industry environment.

3. Figure 13.7 Page 383 Determinants of Sales Force Performance Outlines

the internal and external factors that can effect sales performance

D. Designing Sales Territories

1. Determining the Size of the Sales Force

·Breakdown Method: calculates number of sales force needed by

calculating the forecasted sales and average sales per

salesperson.

·Workload Method: calculates the total amount of work needed to

serve the entire population divided by the amount of work

expected by one salesperson.

·Classify all the firm’s customers into categories

·Determine the frequency that each account needs to

be called upon and the necessary length of each call

·Calculate the workload necessary to cover the entire

market

·Determine the time available for each salesperson

·Allocate the salesperson’s time by task

·Calculate the number of salespeople needed

·Marginal Economic Method: the number of salespeople depends

on the amount of money it costs to maintain the salespeople vs.

the revenue they will produce for the company

2. Designing Sales Territories

·There are also computer programs to assist in territory design

·Figure 13.8 Page 386 Territory Design Shows the basic steps in

territory design.

·Steps involved in designing a sales territory include:

·Select the Control Unit

·Estimate the Market Potential in Each Basic Geographic

Unit

·Form Tentative Territories

·Calculate Workload for Each Tentative Territory

·Adjust Tentative Territories

·Assign Salespeople to Territories.

·Figure 13.9 Page 387 Account Planning Matrix Can be used to

prioritize and determine the effort needed to service each

territory.

·Illustration: Syntex Corporation Page 387

(www.syntexsolutions.com)

·Figure 13.10 Page 388 Sales Response Curve Shows two

hypothetical sales response curves.

E. Setting Sales Quotas

1. Sales quotas: benchmarks that salespeople must meet.

· Quotas provide a method to evaluate performance of the sales force and

individual salespeople.

·Business seems to be moving from traditional sales volume based quotas

to customer satisfaction surveys and combination quotas as the shift

from selling products to establishing long-term customers is occurring.

2. Types of Quotas

·Sales Volume-Based: one of the most common quotas is measured in

units sold or dollar amount sold

·Financially Based Quotas: measured by profit margins. Is the most

difficult type of sales quota for the salesperson to track his/her progress

and can be manipulated by accounting procedures

·Combination Quotas: combination of metrics. Different activities that

must be performed as well as sales or profits

F. Compensation

1. Straight Salary:

·Increases in salary can be tied to sales performance.

·This form of compensation is appropriate when the goal of the sales

force is to build long-term relationships with customers and activities

such as market research and competitor analysis.

·Straight salary may appropriate when selling cycles are lengthy and

sales people are new to the organization and have not been able to

generate sales.

2. Straight Commission

·This type of compensations is directly based on sales performance.

·This type of compensation rewards the producers.

3. Combination Plans

·These plans reward producers but still provide security with a base

salary.

4. Figure 13.11 Page 390 Components and Objectives of Compensation

Plans Shows different components of potential compensation and their

objectives

G. Controlling and Evaluating the Sales Force

1. Output measures—orders, accounts

2. Input measures—sales calls, time efficiency, expenses and time spent on

non-selling activities

3. Rating scales are often used to evaluate subjective or qualitative measures of

performance.

·Sales—how well the person is doing with different accounts and

different products

·Job Knowledge

·Management of the Territory

·Customer and Company Relations

·Personal Characteristics

4. Table 13.1 Page 392 Common Ratios Used to Evaluate Salespeople