978-0134129945 Chapter 14 Lecture Note Part 1

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CHAPTER 14

GLOBAL MARKETING COMMUNICATIONS DECISIONS II: SALES

PROMOTION, PERSONAL SELLING, SPECIAL FORMS OF MARKETING

COMMUNICATION

SUMMARY

A. Sales promotion is any paid, short-term communication program that adds tangible value

to a product or brand. Consumer sales promotions are targeted at ultimate consumers;

trade sales promotions are used in business-to-business marketing. Sampling gives

prospective customers a chance to try a product or service at no cost. A coupon is a

certificate that entitles the bearer to a price reduction or other value-enhancing

consideration when purchasing a product or service.

B. Personal selling is face-to-face communication between a prospective buyer and a

company representative. The strategic/consultative selling model that is widely used in

the United States is also being utilized worldwide. The model’s five strategic steps call

for developing a personal selling philosophy, a relationship strategy, a product

strategy, a customer strategy, and a presentation strategy. The six steps in the

presentation plan are: approach, presentation, demonstration, negotiation, close, and

servicing the sale. Successful global selling may require adaptation of one or more steps

in the presentation plan. An additional consideration in global selling is the composition

of the sales force, which may include expatriates, host country natives, or sales agents.

C. Several others forms of communication can be used in global marketing. These include

direct marketing, a measurable system that uses one or more media to start or complete

a sale. One-to-one marketing is an updated approach to direct marketing that calls for

treating each customer in a distinct way based on his or her previous purchase history or

past interactions with the company. Direct mail, catalogs, infomercials, teleshopping,

and interactive television are some of the direct marketing tools that have been

successfully used on a global basis. Global marketers frequently try to place their

products in blockbuster movies that will reach global audiences. Sponsorships and

product placement are also becoming vital communication tools that can be used on a

global basis.

LEARNING OBJECTIVES

1 Define sales promotion and identify the most important promotion tactics and tools used by

global marketers

2 List the steps in the strategic/consultative selling model

3 Explain the contingency factors that must be considered when making decisions about sales

force nationality

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4 Explain direct marketing’s advantages and identify the most common types of direct marketing

channels

5 Identify special forms of marketing communication and explain how global marketers integrate

them into the overall promotion mix

OVERVIEW

Sponsorships and event marketing are critical marketing tools for global companies. When

developing IMC solutions and strategies, global companies and advertising agencies are giving

these and other special forms of promotion an increasingly prominent role in the communication

mix; in the first decades of the twenty-first century, worldwide expenditures on sales promotion

have been growing at double-digit rates.

Sales promotion, direct marketing, and specialized forms of marketing communication such as

infomercials and the Internet are also growing in importance. Personal selling remains an

important promotional tool as well. Taken together, the marketing mix elements discussed in this

chapter and Chapter 13 can be used to create highly effective, integrated promotional campaigns

that support global brands.

ANNOTATED LECTURE/OUTLINE

SALES PROMOTION

(Learning Objective #1)

Sales promotion refers to any paid consumer or trade communication program of limited

duration that adds tangible value to a product or brand.

In a price promotion, tangible value may take the form of a price reduction, coupon, or mail-in

refund.

Non-price promotions may take the form of free samples, premiums, “buy one, get one free”

offers, sweepstakes, and contests.

Consumer sales promotions may be designed to make consumers aware of a new product, to

stimulate nonusers to sample an existing product, or to increase overall consumer demand.

Trade sales promotions are designed to increase product availability in distribution channels.

At many companies, expenditures for sales promotion activities have surpassed expenditures for

media advertising. At any level of expenditure, sales promotion is only one of several marketing

communication tools. Sales promotion plans and programs should be integrated and coordinated

with those for advertising, PR, and personal selling.

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Worldwide, there are several explanations for the increasing popularity of sales promotion as a

marketing communication tool. In addition to providing a tangible incentive to buyers, sales

promotions also reduce the perceived risk buyers may associate with purchasing the product.

From the point of view of the marketer, sales promotion provides accountability; the manager in

charge of the promotion can immediately track the results of the promotion.

A global company can sometimes leverage experience gained in one country market and us it in

another market.

As with other aspects of marketing communication, a key issue is whether promotion efforts

should be directed by headquarters or left to local country managers.

Four factors have been identified that contribute to more headquarters’ involvement in the sales

promotion effort: cost, complexity, global branding, and transnational trade.

1. As sales promotions command ever-larger budget allocations, headquarters naturally

takes a greater interest.

2. The formulation, implementation, and follow-up of a promotion program may require

skills that local managers lack.

3. The increasing importance of global brands justifies headquarters involvement to

maintain consistency from country to country and ensure that successful local promotion

programs are leveraged in other markets.

4. As mergers and acquisitions lead to increased concentration in the retail industry and as

the industry globalizes, retailers will seek coordinated promotional programs from their

suppliers.

Local managers in the market know the specific local situation. A number of factors must be

taken into account when determining the extent to which the promotion must be localized:

In countries with low levels of economic development, low incomes limit the range of

promotional tools available.

Market maturity can be different from country to country; consumer sampling and

coupons are appropriate in growing markets, but mature markets might require trade

allowances or loyalty programs.

Local perceptions of a particular promotional tool or program can vary.

Local regulations may rule out use of a particular promotion in certain countries.

Trade structure in the retailing industry can affect the use of sales promotions.

Sampling

Sampling is a sales promotion technique that provides potential customers with the opportunity

to try a product or service at no cost.

Disadvantages associated with sampling: cost of sampling and difficulties in assessing the

contribution a sampling program makes.

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Many companies utilize event marketing and sponsorships to distribute samples at concerts,

sports events, and other special events.

Compared with other forms of marketing communication, sampling is more likely to result in

actual trial of the product.

Couponing

A coupon is a printed certificate that entitles the bearer to a price reduction or some other special

consideration for purchasing a particular product or service.

Nearly 90 percent of all coupons are distributed in a printed ride-along vehicle known as a free-

standing insert (FSI).

Sunday papers carry the vast majority of FSIs.

On-pack coupons are attached to, or part of, the product package; they can frequently be

redeemed immediately at check out.

In-pack coupons are placed inside the package.

Cross coupons are distributed with one product but redeemable for a different product. For

example, a toothpaste coupon might be distributed with a toothbrush.

Coupons are a favorite promotion tool of consumer packaged goods companies.

Social couponing is one of the hottest online sales promotion trends today. Groupon had more

than 40 million users in 48 countries by the end of 2012.

Sales Promotion: Issues and Problems

As noted earlier, many companies are being more strategic in targeting their sampling programs.

In the case of coupons, retailers must bundle the redeemed coupons together and ship them to a

processing point.

Many times, coupons are not validated at the point of purchase; fraudulent redemption costs

marketers hundreds of millions of dollars each year.

Companies must take extreme care when formulating and executing sales promotions. In some

emerging markets, sales promotion efforts can raise eyebrows if companies appear to be

exploiting regulatory loopholes and lack of consumer resistance to intrusion.

One implication for marketing in developing countries is that, despite cultural differences,

increased availability of promotions will result in higher levels of consumer utilization.

PERSONAL SELLING

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√ (Learning Objective #2)

Personal selling is person-to-person communication between a company representative and a

prospective buyer.

The seller’s communication effort is focused on informing and persuading the prospect, with the

short-term goal of making a sale and with a longer-term goal of building a relationship with that

buyer.

Effective personal selling in a salesperson’s home country requires building a relationship with

the customer; global marketing presents additional challenges because the buyer and seller may

come from different national or cultural backgrounds.

Personal selling is a popular marketing communication tool in countries with various restrictions

on advertising.

Personal selling is used frequently in countries where low wage rates allow large local sales

forces to be hired. The cost effectiveness of personal selling in certain parts of the world has

been a key driver behind the decision at many U.S. based firms to begin marketing products and

services overseas.

The challenge to companies that wish to pursue low-cost personal selling overseas is to establish

and maintain acceptable quality among members of the sales team. The old saying, “You get

what you pay for” has come to haunt more than one company that has undertaken global

expansion.

The risks inherent in establishing a personal selling structure overseas remain today. The crucial

issue is not whether in-country sales and marketing people can provide more benefit than a

remote force. The issue is whether the country team should consist of in-country nationals or

expatriates (also known as expats); that is, employees who are sent from their home countries to

work abroad.

Environmental issues and challenges that may have an impact include:

Political risks. Unstable or corrupt governments can completely change the rules for the

sales team.

Regulatory hurdles. Governments sometimes set up quota systems or impose tariffs that

affect entering foreign sales forces.

Currency fluctuations. There have been many instances where a company’s sales effort

has been derailed not by ineffectiveness or lack of market opportunity, but by fluctuating

currency values.

Market unknowns. When a company enters a new region of the world, its selling

strategy may unravel because of a lack of knowledge of market conditions, the accepted

way of doing business, or the positioning of its in-country competitors.

The Strategic/Consultative Selling Model

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Figure 14-1 shows the Strategic/Consultative Selling Model, which has gained wide

acceptance in the United States. The model consists of five independent steps, each with three

prescriptions that can serve as a checklist for sales personnel.

First, a sales representative must develop a personal selling philosophy. This requires a

commitment to the marketing concept and a willingness to adopt the role of problem solver or

partner in helping customers.

The second step is to develop a relationship strategy, which is a game plan for establishing and

maintaining high-quality relationships with prospects and customers.

This step connects sales personnel directly to the concept of relationship marketing, an approach

that stresses the importance of developing long-term partnerships with customers.

In developing personal and relationship strategies on an international level, the representative is

wise to take a step back and understand how these strategies will likely fit in the foreign

environment.

In many countries, people have only a rudimentary understanding of sales techniques;

acceptance of those techniques may be low as well.

Sales representatives must understand that patience and a willingness to assimilate host-country

norms and customers are important attributes in developing relationships built on respect.

The third step is the development of a product strategy. This results in a plan that can assist the

sales representative in selecting and positioning products that will satisfy customer needs.

This step must include comprehension of the target market’s characteristics and the fact that

prevailing needs and wants may mandate products that are different than those offered in the

home country.

Next is the customer strategy, a plan that ensures that the sales professional will be maximally

responsive to customer needs.

The customer strategy step also includes building a prospect base, consisting of current

customers as well as potential customers (or leads). A qualified lead is someone whose

probability of wanting to buy the product is high.

The final step, the actual face-to-face selling situation, requires a presentation strategy.

This consists of setting objectives for each sales call and establishing a presentation plan to meet

those objectives.

The presentation plan that is at the heart of the presentation strategy is divided into six stages:

approach, presentation, demonstration, negotiation, closing, and servicing the sale (Figure 14-3).

The relative importance of each stage can vary from country or region.

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In the six-step presentation plan, the first step, approach, is the sales representative’s initial

contact with the customer or prospect. The most crucial element of the step is to completely

understand the decision-making process and the roles of each participant, such as the decision

maker, influencer, ally, or blocker.

In the presentation step, the prospect’s needs are assessed and matched to the company’s

products. To communicate effectively with a foreign audience, the style and message of the

presentation must be carefully thought out. In the United States, the presentation is typically

designed to sell and persuade, whereas the intent of the international version should be to educate

and inform

High-pressure tactics rarely succeed in global selling.

Next is the sales demonstration, during which the salesperson has the opportunity to tailor the

communication effort to the customer and alternately tell and show how the product can meet the

customer’s needs.

During the presentation, the prospect may express concerns or objections about the product

itself, the price, or some other aspect of the sale. Dealing effectively with objections in an

international setting is a learned art.

A common theme in sales training is the concept of active listening; in global sales, verbal and

nonverbal communication barriers of the type discussed in Chapter 4 present special challenges.

Negotiation is required to ensure that both the customer and the salesperson come away from the

presentation as winners. Some foreign customers consider American-style persistence (implying

tenacity) or arm-twisting can be considered rude and offensive.

Having completed the negotiation step, the sales representative is able to move on to the close

and thus asks for the order.

The final step is the servicing the sale. A sale does not end when the order is written.

To ensure customer satisfaction with the purchase, an implementation process must be outlined

and a customer service program established. (Exhibit 14-4)

Sales Force Nationality

As noted previously, a basic issue for companies that sell globally is the composition of the sales

force in terms of nationality. It is possible to utilize expatriate salespersons, hire host-country

nationals, or third-country sales personnel (Exhibit 14-5).

The staffing decision is contingent on several factors, including management’s orientation, the

technological sophistication of the product, and the stage of economic development exhibited by

the target country.

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A company with an ethnocentric orientation is likely to prefer expatriates and adopt a

standardized approach.

Polycentric companies selling in developed countries should opt for expatriates to sell

technologically sophisticated products; a host-country sales force can used when technological

sophistication is lower.

In less developed countries, host-country nationals should be used for products in which

technology is a factor and local agents for low-tech products.

The widest diversity of sales force nationality is found in a company in which a regiocentric

orientation prevails.

Except for high-tech products in developed countries, third-country nationals are likely to be

used in all situations.

In addition to the factors just cited management must also weigh the advantage and

disadvantages of each option.

There are advantages and disadvantages of each nationality type:

Advantages: Expatriates possess a high level of product knowledge, a demonstrated

commitment to service standards, training for promotion, and greater headquarters

control.

Disadvantages: Expatriates are very expensive, turnover is high, language and cross-

cultural training are costly.

An alternative is to build a sales force with host-country personnel:

Advantages: economical, superior market knowledge, language skills, and superior

knowledge of local culture, and implementation is quicker.

Disadvantages: needs product training, may be held in low esteem, language skills may

not be important, and it is difficult to ensure loyalty.

A third option is to hire persons who are not natives or either the headquarters country or the host

country; such persons are known as third country nationals.

Advantages: cultural sensitivity, language skills, economical, allows regional sales

coverage.

Disadvantages: identity problems, blocked for promotions, income gaps, needs product

and/or company training, loyalty not assured.

After much trial and error in creating sales forces, most companies today attempt to establish a

hybrid sales force comprised of a balanced mix of expatriates and in-country nationals.

The operative word is balanced, as there remains the potential for conflict between the two

groups.

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This is the most expensive proposition since relocation of expats and extensive training of in-

country nationals is required.

But short term costs are deemed necessary to do business and conduct personal selling overseas.

A fourth option is to utilize the services of sales agents. Agents work under contract rather than

as full-time employees.

It makes sense to set up one or more agents to gain entry to a selected country or region.

In a remote area where there is a lack of revenue, agents are retained on a fairly permanent level.

Agents are much less expensive than full-time employees and understand the market and culture.

If success is achieved, agents can be replaced by employee-based teams; if the market is not

financially viable, it is less costly to withdraw from an agent-oriented territory.

Other international personal selling approaches:

Exclusive license arrangements: a firm pays commissions to an in-country company’s

sales force to conduct personal selling.

Contract manufacturing or production with a degree of personal selling made

available

through warehouses or showrooms that are open to potential customers.

Management-only agreements: a corporation manages a foreign sales force in a mode

similar to franchising.

Joint ventures: Since many countries place restrictions on foreign ownership,

partnerships allow a company to obtain a personal sales capability and a customer base.

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