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
2. Direct marketers plan campaigns by deciding on objectives, target markets and
4. Customer relationship management often requires building a customer database and
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
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
C H A P T E R
22
MANAGING PERSONAL
COMMUNICATIONS: DIRECT
AND DATABASE
MARKETING AND PERSONAL
SELLING
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
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
TEACHING STRATEGY AND CLASS ORGANIZATION
PROJECTS
1. At this point in the semester-long project, students who have decided to market their
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.
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:
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?
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.
END–OF–CHAPTER SUPPORT
MARKETING DEBATE—Are Great Salespeople Born or Made?
One debate in sales is about the impact of training versus selection in developing an effective
sales force. Some observers maintain that the best salespeople are “born” that way and are
effective due to their personalities and all the interpersonal skills they have developed over a
lifetime. Others contend that application of leading-edge sales techniques can make virtually
anyone a sales star.
Take a position: The key to developing an effective sales force is selection versus the key to
developing an effective sales force is training.
In addition, salespeople must communicate trust, be trustworthy, ethical, and honest because
so much of their dealing with customers/clients depends upon these characteristics. One
cannot be expected to “train” for honesty, nor can one be expected to train a person in his/her
ethical behavior. These are traits formed from birth and can only be found during the selection
process.
Con: This is an old position, perhaps true when salespeople had only one function—to sell
and the selling process consisted mainly of convincing clients/customers of their products by
MARKETING DISCUSSION
Think about the last time you went to make a major purchase in a store. How important
was the salesperson in that decision? What did he or she do that you liked or didn’t like?
Marketing Excellence: Progressive Corporation
1. What has Progressive done well over the years to attract new insurance customers?
Suggested Answer: Progressive has been innovative in the way it communicates about
and prices its services. It offers information about its offerings and the offerings of
2. Discuss Progressive’s direct marketing campaign, which primarily revolves around
the character Flo. Why does it resonate so well with consumers?
Suggested Answer: Consumers find Flo memorable and likable, and her appearance and
3. What else should Progressive be doing to ensure it stays top of mind in the
competitive industry of insurance?
Marketing Excellence: Victoria’s Secret
1. Why has Victoria’s Secret been so successful? How does the company reach its target
audience?
Suggested Answer: The company filled an unmet need for tasteful lingerie, used
innovative direct marketing techniques to reach their target customer, used catalog
2. What do you think are Victoria’s Secret’s biggest challenges?
Suggested Answer: Victoria’s Secret’s international growth is likely to be limited by
competition and cultural norms. Its mid-tier pricing makes it susceptible to competitors
3. What’s next for Victoria’s Secret? How does the company grow?
Suggested Answer: The article notes the identification of Pink consumers, who are likely
part of the large Millennial cohort and who will hopefully remain loyal to the Victoria’s
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
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
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
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)
3. Determine offer elements (product, offer, medium, distribution
method, creative strategy)
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
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
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
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.”
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,
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
3. To deepen customer loyalty
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);
3. The unit sale is very small (a candy bar) so customer lifetime
value is low
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
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
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
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).
C. Salespeople are the company’s personal link to its customers.
D. In designing the sales force, the company must develop sales force objectives,
strategy, structure, size, and compensation
i. Sales Force Objectives and Strategy
1. Prospecting. Searching for prospects or leads
3. Communicating. Communicating information about the
company’s products and services
5. Servicing. Providing various services to the customers—
6. Information gathering. Conducting market research and doing
intelligence work
7. Allocating. Deciding which customers will get scarce products
during product shortages
ii. Salespeople handle fewer accounts and are rewarded for key account
growth; lead generation, proposal writing, order fulfillment, and
postsale support are turned over to others.
iii. Companies must deploy sales forces strategically so they call on the
right customers at the right time in the right way, acting as “account
managers” who arrange fruitful contact between people in the buying
and selling organizations.
iv. To maintain a market focus, salespeople should know how to analyze
vii. Once the company chooses its strategy, it can use a direct or a
contractual sales force.
1. A direct (company) sales force consists of full- or part-time
paid employees who work exclusively for the company. Inside
2. A contractual sales force consists of manufacturers’ reps, sales
agents, and brokers who earn a commission based on sales.
E. Sales Force Structure
i. A company that sells one product line to one end-using industry with
customers in many locations would use a territorial structure.
ii. A company that sells many products to many types of customers might
need a product or market structure.
iii. Four types of sales force:
2. A geographic sales force calling on customers in different
territories
4. An inside sales force marketing and taking orders online and
via phone
F. Sales Force Size: workload approach has five steps:
i. Group customers into size classes according to annual sales volume.
ii. Establish desirable call frequencies (number of calls on an account per
year) for each customer class.
iii. Multiply the number of accounts in each size class by the
corresponding call frequency to arrive at the total workload for the
country, in sales calls per year.
G. Sales Force Compensation: to attract top-quality reps, the company must
develop an attractive compensation package.
i. Sales reps want income regularity, extra reward for above-average
performance, and fair pay for experience and longevity.
ii. Management wants control, economy, and simplicity.
iii. Some of these objectives will conflict.
iv. Four components of sales force compensation:
1. The fixed amount, a salary, satisfies the need for income
stability.
3. Expense allowances enable sales reps to meet the costs of
travel and entertaining on the company’s behalf.
4. Benefits, such as paid vacations, sickness or accident benefits,
pensions, and health and life insurance, provide security and
job satisfaction.
v. Fixed compensation is common in jobs with a high ratio of nonselling
to selling duties and jobs where the selling task is technically complex
and requires teamwork.
vi. Variable compensation works best where sales are cyclical or depend
on individual initiative.
vii. Fixed and variable compensation give rise to three basic types of
compensation plans—straight salary, straight commission, and
combination salary and commission.
1. Straight-salary plans provide a secure income, encourage reps
2. Straight-commission plans attract higher performers, provide
3. Combination plans feature the benefits of both plans while
limiting their disadvantages.
IV. Managing the Sales Force
A. Recruiting and Selecting Representatives
i. It’s a great waste to hire the wrong people.
ii. Sales force turnover leads to lost sales, the expense of finding and
training replacements, and often pressure on existing salespeople to
pick up the slack
iii. Effective predictors of high performance in sales are composite tests
B. Training and Supervising Sales Representatives
i. Today’s customers expect salespeople to have deep product
reliable, so companies are investing more in sales training.
ii. Training time varies with the complexity of the selling task and the
type of recruit.
C. Sales Rep Productivity
i. Companies often specify how much time reps should spend
prospecting for new accounts.
ii. Some companies rely on a missionary sales force to create new interest
and open new accounts.
iii. In the course of a day, reps plan, travel, wait, sell, and perform
administrative tasks (writing reports and billing, attending sales
meetings, and talking to others in the company about production,
delivery, billing, and sales performance).
2. Time-and-duty analysis and hour-by-hour breakdowns of
activities help them understand how they spend their time and
how they might increase their productivity.
iv. To cut costs, reduce time demands on their outside sales force, and
leverage technological innovations, many have increased the size and
responsibilities of their inside sales force.
1. Inside selling is less expensive and growing faster than in-
person selling.
2. Virtual meeting software such as WebEx, communication tools
4. The inside sales force frees outside reps to spend more time
5. Inside salespeople spend more time checking inventory,
following up orders, and phoning smaller accounts.
6. They typically earn a salary or salary-plus-bonus pay.
v. Sales Technology: sales and inventory information transferred much
more quickly, but specific computer-based decision support systems
have been created for sales managers and sales representatives.
1. Going online with a tablet or laptop, salespeople can prime
themselves on backgrounds of clients, call up prewritten sales
2. One of the most valuable digital tools for the sales rep is the
company Web site.
3. Social media is a valuable digital selling tool
a. Social networking is useful in “front end” prospecting
and lead qualification as well as in “back end”
D. Motivating Sales Representatives: the majority of sales representatives require
encouragement and special incentives, especially those in the field who
encounter daily challenges.
i. Most marketers believe that the higher the salesperson’s motivation,
the greater the effort and the resulting performance, rewards, and
satisfaction—all of which in turn further increase motivation.
ii. Marketers reinforce intrinsic and extrinsic rewards of all types.
1. One research study found the employee reward with the
2. Least valued were liking and respect, security, and recognition.
In other words, salespeople are highly motivated by pay and
the chance to get ahead and satisfy their intrinsic needs, and
they may be less motivated by compliments and security.
iii. Compensation plans may even need to vary depending on the type of
salespersons: stars, core or solid performers, and laggards.
1. Stars benefit from no ceiling or caps on commissions,
2. Core performers benefit from multi-tier targets that serve as
3. Laggards respond to consistent quarterly bonuses and social
pressure.
iv. Sales Quotas: companies set annual sales quotas, developed from the
annual marketing plan, for dollar sales, unit volume, margin, selling
effort or activity, or product type.
2. The company first prepares a sales forecast that becomes the
3. Management then establishes quotas for regions and territories,
4. Even if they fail to make their quotas, the company
nevertheless may reach its sales forecast.
5. Setting sales quotas can create problems.
a. If the company underestimates and the sales reps easily
achieve their quotas, it has overpaid them.
b. If it overestimates sales potential, the salespeople will
find it very hard to reach their quotas and be frustrated
E. Evaluating Sales Representatives: Good feed-forward requires good
feedback, which means getting regular information about reps to evaluate
their performance.
i. The most important source of information about reps is sales reports.
ii. Additional information comes through personal observation,
salesperson self-reports, customer letters and complaints, customer
surveys, and conversations with other reps.
iii. Many companies require representatives to develop an annual
territory-marketing plan in which they outline their program for
developing new accounts and increasing business from existing
accounts.
iv. Reports provide raw data from which sales managers can extract key
indicators of sales performance:
2. Average sales call time per contact
4. Average cost per sales call
6. Percentage of orders per hundred sales calls
8. Number of lost customers per period
9. Sales force cost as a percentage of total sales.
v. The sales force’s reports along with other observations supply the raw
materials for evaluation.
V. Principles of Personal Selling
A. SPIN method to build long-term relationships by asking prospects several
types of questions:
i. Situation questions—These ask about facts or explore the buyer’s
present situation.
iv. Need-payoff questions—These ask about the value or usefulness of a
proposed solution.
B. Most sales training programs agree on the major steps in any effective sales
process.
i. Prospecting and Qualifying
ii. Preapproach
C. Relationship Marketing: In many cases the company seeks not an immediate
sale but rather a long-term supplier–customer relationship.
i. Salespeople working with key customers should call or visit at other