978-0134058498 Chapter 22 Lecture Notes Part 1

Unlock access to all the studying documents.

View Full Document

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).