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LEARNING OBJECTIVES
In this chapter, we will address the following questions:
1. How can companies conduct direct marketing for competitive advantage?
2. What are the pros and cons of database marketing?
3. What decisions do companies face in designing a sales force?
4. What are the challenges of managing a sales force?
5. How can salespeople improve their selling, negotiating, and relationship marketing
skills?
SUMMARY
1. Direct marketing is an interactive marketing system that uses one or more media to
effect a measurable response or transaction at any location. Direct marketing, especially
electronic marketing, is showing explosive growth.
2. Direct marketers plan campaigns by deciding on objectives, target markets and
prospects, offers, and prices. Next, they test and establish measures to determine the
campaign’s success.
3. Major channels for direct marketing include face-to-face selling, direct mail, catalog
marketing, telemarketing, interactive TV, kiosks, Web sites, and mobile devices.
4. Customer relationship management often requires building a customer database and
data mining to detect trends, segments, and individual needs. A number of significant
risks also exist, so marketers must proceed thoughtfully.
5. What are the pros and cons of database marketing?
6. Salespeople serve as a company’s link to its customers. The sales rep is the company
to many of its customers, and it is the rep who brings back to the company much-needed
information about the customer.
7. Designing the sales force requires choosing objectives, strategy, structure, size, and
compensation. Objectives may include prospecting, targeting, communicating, selling,
servicing, information gathering, and allocating. Selecting strategy requires choosing the
most effective mix of selling approaches. Structuring the sales force entails dividing
territories by geography, product, or market (or some combination of these). To estimate
how large the sales force needs to be, the firm estimates the total workload and how many
sales hours (and hence salespeople) will be needed. Compensating reps requires
C H A P T E
R 22MANAGING PERSONAL
COMMUNICATIONS: DIRECT
AND DATABASE
MARKETING AND PERSONAL
SELLING
identifying the types of salaries, commissions, bonuses, expense accounts, and benefits to
give and how much weight customer satisfaction should have in determining total
compensation.
8. There are five steps in managing the sales force: (1) recruiting and selecting sales
representatives; (2) training the representatives in sales techniques and in the company’s
products, policies, and customer-satisfaction orientation; (3) supervising the sales force
and helping reps to use their time efficiently; (4) motivating the sales force and balancing
quotas, monetary rewards, and supplementary motivators; and (5) evaluating individual
and group sales performance.
9. Effective salespeople are trained in methods of analysis and customer management as
well as the art of sales professionalism. No single approach works best in all
circumstances, but most trainers agree that selling has six steps: prospecting and
qualifying customers, preapproach, presentation and demonstration, overcoming
objections, closing, and follow-up and maintenance.
OPENING THOUGHT
Students should be very familiar with the marketing systems described in this chapter,
especially Internet shopping. The challenge to the instructor in this chapter is ensuring
that the students understand that Internet marketing (e-marketing) is just one of the many
different avenues available to marketers trying to reach their target markets. Students may
be predisposed to believe that “all” marketing or the “future” of marketing is via the
electronic channels. The instructor should encourage in-class discussions on this position
and he/she is encouraged to take the “defensive” position to help the students understand
the many levels of business and consumer marketing.
For those students who are not currently salespeople, or are not interested in a career in
sales, their opinions, and views of salesmanship (derived from personal experiences, TV,
and other forms of communication) can be an interesting source of discussion. Some
students will believe that “all salesmen lie.” The section in this chapter concerning the
sales force may present a challenge to the instructor in disproving or refuting these
common assumptions about salespeople long enough to communicate the material. The
instructor is encouraged to spend sufficient time on this section to show/demonstrate to
the students the role that the sales force plays in the overall marketing communications
mix for many firms. Inviting sales managers and their salespeople to the class as guest
speakers will help communicate the professionalism and difficulty of this profession.
TEACHING STRATEGY AND CLASS ORGANIZATION
PROJECTS
1. At this point in the semester-long project, students who have decided to market their
product/service through direct market channels should submit their proposals. All
other groups must decide at this point if they will use a direct sales force and if so to
outline the specifics (including financials) for this option.
2. Market demassification has resulted in an ever-increasing number of market niches
and the use of direct marketing to reach these niches is growing. In small groups (five
students maximum), have students collect as many direct marketing advertising
pieces of information sent to them over the course of a month during the semester.
After collecting the catalogs, credit card offers, e-mail notices, and other forms,
students are to evaluate the effectiveness of these techniques in causing them to
purchase. Which one(s) of these direct marketing techniques do they feel is the most
successful (caused a purchase) or least effective (caused irritation to them), and why?
What can astute marketers do to increase the effectiveness of their direct marketing?
3. Sonic PDA Marketing Plan: Many marketers have to consider sales force
management in their marketing plans. The high cost of maintaining a direct sales
force and the need to establish multiple channels of distribution have led some
companies to include online, mail, and telephone sales for some of their personal
selling efforts. In your marketing role at Sonic, you are planning a sales strategy for
the new PDA. After reviewing your decisions about other marketing mix activities,
answer these questions about personal selling:
Does Sonic need a direct sales force or can it sell through agents and outside
representatives?
Whom should Sonic’s selling activities be focused?
What kinds of sales objectives should Sonic set for its sales personnel?
What training will sales representatives need to sell the Sonic 1000?
Summarize your answers in a written marketing plan or type them into the Marketing
Mix, Marketing Organization, and Sales Forecast sections of Marketing Plan Pro.
ASSIGNMENTS
The direct market offering, according to the text, consists of five elements—the product,
offer, medium, distribution method, and creative strategy. Have the students collect direct
marketing offerings (sent to them, their families, and close friends). On a scale of 1-5 (1
being does not work, 5 being works very well), rank each of these offerings in terms of
these five elements. What is the group’s consensus as to which offers work the best (and
worse) and why?
Most managers agree that to increase the motivation of their salespeople they have to
reinforce the intrinsic and extrinsic rewards offered. However, this is not a universally
accepted opinion. Many managers use one type of reward almost exclusively in their
motivation techniques. Students should interview three sales managers and ask them if
they emphasize intrinsic or extrinsic rewards in their salesperson’s motivation? Which
method do they personally feel is the most effective and why? Which method do they
wish they did a better job in and why? From this research, can the students form a casual
relationship between the industry, competitive nature of the industry, and the motivation
techniques used?
Dell® Computers has begun setting up kiosks demonstrating their products in regional
malls across the country. They are also selling their computers in Wal-Mart stores, Best
Buy, and other U.S. retailers. Dell will soon be selling through retailers in China.
Consumers are no longer directed to their web site to place an order. Obviously, Dell has
had to change its “contact” with consumers. What effect do you believe this type of
change in their direct marketing mantra is having on Dell’s business? Must other direct
marketers make the change?
Students are to assume the role of a salesperson calling on Jones Inc., which is a firm
employing 50 salespeople, but currently does not use any customer relationship software.
Students are to “sell” the “buyer” on the advantages of “NOW!” by demonstrating
situation, problem, implication, and need-payoff questions. Students should reverse roles
at appropriate time intervals so that each student has the opportunity to “play” buyer and
seller.
Questions for the class: How effective did you find the SPIN method to be in your
“selling situation?” How difficult is it to frame questions in terms of situation, problem,
implication, and need-payoff? Do you believe that the SPIN method works?
Infomercials can be found selling almost everything possible! As a group, have the
students videotape three different infomercials and critically evaluate the effectiveness of
these commercials in light of the five elements of the direct market offering. Which
one(s) do the students believe is the most (least) effective and why?
DETAILED CHAPTER OUTLINE
Opening Vignette: Although mass and digital communications provide many benefits,
there are times personal communications are needed to be relevant and close a sale.
Personalizing communications and saying and doing the right thing for the right person at
the right time are critical for marketing effectiveness.
I. Direct Marketing: the use of consumer-direct (CD) channels to reach and deliver
goods and services to customers without using marketing middlemen.
A. Channels used to reach individual prospects and customers: direct mail,
catalog marketing, telemarketing, interactive TV, kiosks, Web sites, and
mobile devices
i. Often seek a measurable response, typically a customer order, through
direct-order marketing.
ii. Sales produced through traditional direct marketing channels (catalogs,
direct mail, and telemarketing) have been growing rapidly, along with
direct-mail sales, which include sales to the consumer market, B-to-B,
and fund-raising by charitable institutions
B. The Benefits of Direct Marketing
i. Consumers short of time and tired of traffic and parking headaches
appreciate toll-free phone numbers, always-open Web sites, next-day
delivery, and direct marketers’ commitment to customer service
ii. Chain stores have dropped slower-moving specialty items, creating an
opportunity for direct marketers to promote these to interested buyers
instead
iii. Direct marketers can buy a list containing the names of almost any
group: left-handed people, overweight people, or millionaires and can
customize and personalize messages and build a continuous
relationship with each customer
iv. Direct marketing can reach prospects at the moment they want a
solicitation and therefore be noticed by more highly interested
prospects.
v. It lets marketers test alternate media and messages to find the most
cost-effective approach.
vi. Direct marketing also makes the company’s offer and strategy less
visible to competitors.
vii. Finally, direct marketers can measure responses to their campaigns to
decide which have been the most profitable.
C. Direct marketing must be integrated with other communications and channel
activities
i. Customer interaction is an opportunity to up-sell, cross-sell, or just
deepen a relationship.
ii. They make sure they know enough about each customer to customize
and personalize offers and messages and develop a plan for lifetime
marketing to each valuable customer, based on their knowledge of life
events and transitions.
iii. They carefully orchestrate each element of their campaigns.
D. Direct Mail: sending an offer, announcement, reminder, or other item to an
individual consumer.
i. Popular medium because it permits target market selectivity, can be
personalized, is flexible, and allows early testing and response
measurement.
ii. Cost per thousand is higher than for mass media, but the people
reached are much better prospects
iii. Overuse leads some consumers to disregard the blizzard of
solicitations they receive
iv. To construct an effective direct-mail campaign, direct marketers must:
1. Choose their objectives (e.g. response rate/customer orders)
2. Select target markets and prospects (e.g. RFM formula)
3. Determine offer elements (product, offer, medium, distribution
method, creative strategy)
4. Select a means of testing the campaign (can test products,
features, copy, mailer type, prices, envelope, etc.)
5. Choose measures of campaign success (orders, lifetime value)
a. By adding up the planned campaign costs, the direct
marketer can determine the needed break-even response
rate.
b. A specific campaign may fail to break even in the short
run but can still be profitable in the long run if we
factor in customer lifetime value
c. Lifetime Value is calculated by taking the average
customer longevity, average customer annual
expenditure, and average gross margin, minus the
average cost of customer acquisition and maintenance
(discounted for the opportunity cost of money).
E. Catalog Marketing: companies send full-line merchandise catalogs, specialty
consumer catalogs, and business catalogs, usually in print form but also as
DVDs or online.
i. Successfully marketing a catalog business depends on managing
customer lists carefully to avoid duplication or bad debts, controlling
inventory, offering good-quality merchandise so returns are low, and
projecting a distinctive image
ii. Some companies add literary or information features, send swatches of
materials, operate a special online or telephone hotline to answer
questions, send gifts to their best customers, and donate a percentage
of profits to good causes
iii. Putting their entire catalog online also provides business marketers
with better access to global consumers than ever before, saving
printing and mailing costs.
F. Telemarketing is the use of the telephone and call centers to attract prospects,
sell to existing customers, and provide service by taking orders and answering
questions.
i. It helps companies increase revenue, reduce selling costs, and improve
customer satisfaction.
ii. Companies use call centers for inbound telemarketing—receiving calls
from customers—and outbound telemarketing—initiating calls to
prospects and customers.
G. Other Media for Direct-Response Marketing
i. Newspapers and magazines carry ads offering books, clothing,
appliances, vacations, and other goods and services that individuals
can order via toll-free numbers.
ii. Radio ads present offers 24 hours a day.
iii. Some companies prepare 30- and 60-minute infomercials to combine
the selling power of television commercials with the draw of
information and entertainment.
H. Public and Ethical Issues in Direct Marketing
i. Irritation. Many people don’t like hard-sell direct marketing
solicitations.
ii. Unfairness. Some direct marketers take advantage of impulsive or less
sophisticated buyers or prey on the vulnerable, especially the elderly.
iii. Deception and fraud. Some direct marketers design mailers and write
copy intended to mislead or exaggerate product size, performance
claims, or the “retail price.”
iv. Invasion of privacy. It seems that almost every time consumers order
products by mail or telephone, apply for a credit card, or take out a
magazine subscription, their names, addresses, and purchasing
behavior may be added to several company databases.
v. People in the direct marketing industry know that, left unattended,
such problems will lead to increasingly negative consumer attitudes,
lower response rates, and calls for greater state and federal regulation.
vi. Most direct marketers want the same thing consumers want: honest
and well-designed marketing offers targeted only to those who
appreciate hearing about them.
II. Customer Databases and Database Marketing
A. A customer database is an organized collection of comprehensive information
about individual customers or prospects that is current, accessible, and
actionable for lead generation, lead qualification, sale of a product or service,
or maintenance of customer relationships.
i. A customer mailing list is not a database; it is simply a set of names,
addresses, and telephone numbers.
ii. A customer database, however, contains much more information,
accumulated through customer transactions, registration information,
telephone queries, cookies, and every customer contact.
iii. Ideally, a customer database also contains the consumer’s past
purchases, demographics (age, income, family members, birthdays),
psychographics (activities, interests, and opinions), mediagraphics
(preferred media), and other useful information.
iv. A typical business database contains business customers’ past
purchases; past volumes, prices, and profits; buyer team members’
names (and ages, birthdays, hobbies, and favorite foods); status of
current contracts; the supplier’s estimated share of the customer’s
business; competitive suppliers; assessment of competitive strengths
and weaknesses in selling and servicing the account; and relevant
customer buying practices, patterns, and policies.
v. Database marketing is the process of building, maintaining, and using
customer databases and other databases (of products, suppliers, or
resellers) to contact, transact, and build customer relationships
B. Data Warehouses and Data Mining
i. Savvy companies capture information every time a customer contacts
any of their departments, whether via purchase, a service call, an
online query, or a mail-in rebate card
ii. These data are collected by the company’s contact center and
organized into a data warehouse where marketers can capture, query,
and analyze them to draw inferences about an individual customer’s
needs and responses.
iii. Customer service reps inside the company can respond to customer
inquiries based on a complete picture of the customer relationship, and
customized marketing activities can be directed to individual
iv. Through data mining, marketing statisticians can extract from the mass
of data useful information about individuals, trends, and segments.
v. Companies can use their databases in five ways:
1. To identify prospects
2. To decide which customers should receive a particular offer
3. To deepen customer loyalty
4. To reactivate customer purchases
5. To avoid serious customer mistakes
C. The Downside of Database Marketing
i. Some situations are just not conducive to database marketing.
1. The product is a once-in-a-lifetime purchase (a grand piano);
2. Customers show little loyalty to a brand (there is a lot of
customer churn)
3. The unit sale is very small (a candy bar) so customer lifetime
value is low
4. The cost of gathering information is too high
5. There is no direct contact between the seller and ultimate buyer
ii. Building and maintaining a customer database require a large
investment.
iii. Employees may resist becoming customer-oriented and using the
available information because they find it easier to carry on traditional
transaction marketing than to practice CRM.
iv. Not all customers want a relationship with the company.
v. The assumptions behind CRM may not always hold true
III. Designing the Sales Force
A. The original and oldest form of direct marketing is the field sales call.
i. Bottom-line success in any entrepreneurial endeavor may depend on
sales execution.
ii. Companies are sensitive to the high and rising costs of maintaining a
sales force, including salaries, commissions, bonuses, travel expenses,
and benefits.
iii. Companies are trying to increase sales force productivity through
better selection, training, supervision, motivation, and compensation.
B. The term sales representative covers six positions, ranging from the least to
the most creative types of selling:
i. Deliverer—A salesperson whose major task is the delivery of a
product (water, fuel, oil).
ii. Order taker—An inside order taker (standing behind the counter) or
outside order taker (calling on the supermarket manager).
iii. Missionary—A salesperson not permitted to take an order but expected
rather to build goodwill or educate the actual or potential user (the
medical “detailer” representing an ethical pharmaceutical house).
iv. Technician—A salesperson with a high level of technical knowledge
(the engineering salesperson who is primarily a consultant to client
companies).
v. Demand creator—A salesperson who relies on creative methods for
selling tangible products (vacuum cleaners, cleaning brushes,
household products) or intangibles (insurance, advertising services, or
education).
vi. Solution vendor—A salesperson whose expertise is solving a
customer’s problem, often with a system of the company’s products
and services (for example, computer and communications systems).
