Managing Personal Communications: Direct and Interactive Marketing, Word of Mouth
After reading this chapter, students should:
12) Know how companies can use integrated direct marketing for competitive advantage
13) Know how companies can do effective e-marketing
14) Know what decisions companies face in designing a sales force
15) Know how companies can manage a sales force efficiently
16) Know how salespeople can improve selling, negotiating, and relationship marketing skills
DETAILED CHAPTER OUTLINE
Today, marketing communications increasingly occur as a kind of personal dialogue between the company and its customers. Companies must ask not only “How should we reach our customers?” but also “How should our customers reach us?” and even “How can our customers reach each other?”. Technological advances allow people and companies to communicate to each other through the Internet, fax machines, cellular phones, pages, and wireless appliances. By increasing communication effectiveness and efficiency, new technologies have encouraged companies to move from mass communication to more targeted, two-way communications. Consumers now play a much more participatory role in the marketing process. Personalizing communications and creating dialogues by saying and doing the right thing to the right person at the right time is critical for marketing.
O) DIRECT MARKETING
Direct marketing is the use of consumer-direct (CD) channels to reach and deliver goods and services to customers without using marketing middlemen. They often seek a measurable response, typically a customer order, through direct-order marketing.
g. Today, many direct marketers use direct marketing to build a long-term relationship with the customer.
h. Direct marketing has been a fast-growing avenue for serving customers.
i. Direct marketing has been outpacing U.S. sales
The Benefits of Direct Marketing
Market demassification has resulted in an ever-increasing number of market niches.
16) Direct marketing benefits customers in many ways:
q. Home shopping can be fun, convenient, and hassle-free
r. Saves time
s. Introduces consumers to a larger selection of merchandise
t. Ease of comparative shopping
u. Can order goods for themselves and others
v. Business customers can benefit by learning about available products and services
B) Sellers benefit as well.
13) Direct marketers can buy a mailing list containing the names of almost any group.
14) They can customize and personalize messages.
15) Can build a continuous relationship with each customer
16) Direct marketing can be timed to reach prospects at the right moment.
17) Can receive higher readership because it is sent to more interested prospects
18) Permits the testing of alternative media and messages in a cost-effective approach
19) Direct marketers can measure responses to their campaigns to decide which one has been more profitable.
C) Direct marketing must be integrated with other communications and channel activities.
D) Every brand contact delivers an impression that can strengthen or weaken a relationship.
Direct-mail marketing involves sending an offer, announcement, reminder, or other item to a person.
A) Direct marketing is a popular medium because it:
Permits target market selectivity
Can be personalized
Allows for early testing and response measurement
In constructing an effective direct-mail campaign, direct marketers must decide on their:
Most direct marketers air to receive an order from prospects and judge a campaign ‘s success by the response rate.
A response rate of 2% is considered good.
J) Target market And Prospects
k. R-F-M formula: Recency, frequency, monetary amount to select customers
l. Points are established for each level of RFM to select the most attractive customers
m. Marketers also identify prospects on the basis of age, sex, income, education, previous mail-orders purchases, and occasions.
N) Offer elements. The offer strategy has five elements:
K) The product
L) The offer
M) The medium
N) The distribution method
O) Creative strategy
One of the great advantages of direct marketing is the ability to test, under real marketplace conditions, different elements of an offer strategy, such as products, product features, copy platform, mailer type, envelope, prices, or mailing lists.
J) Direct marketers must remember that response rates typically understate a campaign’s long-term impact.
K) To derive a more comprehensive estimate of the promotion’s impact, some companies are measuring direct marketing’s impact on:
11) Intention to buy
12) Word of mouth
Measuring Campaign Success: Lifetime Value
By adding up the planned campaign costs, the direct marketer can figure out in advance the needed break-even response rate.
9) By carefully analyzing past campaigns, direct marketers can steadily improve performance.
10) Even when a specific campaign fails to break-even in the short-run, it can still be profitable in the long run if customer lifetime is factored in.
In catalog marketing, companies may send full-line merchandise catalogs, specialty consumer, and business catalogs.
K) Catalogs are huge business—71 percent of Americans shop from home using catalogs, by phone, mail, or the Internet.
L) The success of a catalog business depends on the company’s ability to manage its:
1) Customer lists.
2) Control inventory.
3) Offer quality merchandise so returns are low.
4) Project a distinctive image.
C) Business marketers are making inroads to global consumers as well.
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.
10) Telemarketing helps companies increase revenue, reduce selling costs, and improve customer satisfaction.
11) Companies use calls centers for:
a. Inbound telemarketing
b. Outbound telemarketing
C) Telemarketing is increasing in business-to-business marketing
Other Media for Direct-Response Marketing
Direct marketers use all the major media to make offers to potential buyers.
Public and Ethical Issues in Direct Marketing
Direct marketers and their customers usually enjoy mutually rewarding relationships. Sometimes the darker-side emerges:
Deception and Fraud
Invasion of privacy
The newest channels for direct marketers are electronic. The Internet provides marketers and consumers with opportunities for much greater interaction and individualization.
Advantages and Disadvantages of Interactive Marketing
Interactive marketing offers many unique benefits. Messages delivered by attractive or popular sources can potentially achieve higher attention and recall.
13) It is highly accountable and its effects can be easily traced.
14) The Web offers the advantage of “contextual placements.”
15) Light consumers of other media can be reached.
16) The Web is especially effective at reaching people during the day.
17) Young, high income, high education consumer’s online media consumption exceeds that of TV.
18) Using the Web has disadvantages
s. Consumers can effectively screen out most messages
20) Many feel that the pros outweigh the cons for Web marketing.
21) Search Ads: Represents 40% of all online ads. The search terms serve as a proxy for the consumer’s consumption interests and trigger relevant links to product or service offerings.
22) Display Ads: Small rectangular boxes containing text and maybe pictures that companies pay to place on relevant Web sites.
23) Interstitials: Advertisements that pop up between changes on a Web site. May contain video or animation in them.
24) Internet-Specific Ads and Videos: Online videos can be cost-effective and marketers can take more freedom with them.
25) Sponsorships: Special content on Web sites that carry news, financial information, and so on. Sponsorships are best place in well-targeted sites that offer relevant information or service.
26) Alliances: When one Internet company works with another they form alliances or affiliate programs.
27) Online Communities: These communities can offer companies useful hard-to-find information about their products, services, and how their products are used or disposed.
L) Give the customer a reason to respond.
M) Personalize the content of your e-mails.
N) Offer something the customer could not get via direct mail.
O) Make it easy for customers to “unsubscribe.”
WORD OF MOUTH
Social networks, like MySpace and Facebook, have become an important force in both business-to-consumer and business-to-business marketing.
A) A key aspect of social networking is the word of mouth
B) Companies are becoming acutely aware of the power of word of mouth
C) Word of mouth can be particularly effective for smaller business
K) Social networking can be a vital resource for companies
Buzz and Viral Marketing
I) Buzz marketing generates excitement, creates publicity, and conveys new relevant brand-related information through unexpected or even outrageous means.
J) Viral marketing is another form of word of mouth
K) Companies can help to create buzz
Communication researchers propose a social-structure view of interpersonal communication. They see society as consisting of cliques, small groups whose members interact frequently.
15) Bridges: people who belong to one clique and are linked to a person in another.
16) The Law of the Few: “Mavens, Connectors, Salesmen”
17) Concentrate on the “bees” – hyperdevoted customers who live to spread the word.
18) Controversial tactic: Shill marketing or stealth marketing
A regularly updated online journal or diary have become an important outlet for word of mouth.
20. One obvious appeal of blogs is that they bring together people with common interests.
DESIGNING THE SALES FORCE
The original and oldest form of direct marketing is the field sales call.
A) Today most industrial companies rely heavily on a professional sales force to:
G) Locate prospects
H) Develop them into customers
I) Grow the business
B) U.S. firms spend over a trillion dollars annually on sales forces and sales-force materials—more than they spend on any other promotional method.
C) Nearly 12 percent of the total workforce work full time in sales occupations.
D) No one debates the importance of the sales force in marketing programs.
1) However, companies are sensitive to the high and rising costs of maintaining a sales force.
E) The term sales representative covers a broad range of positions.
F) Six can be distinguished, ranging from the least to the most creative types of selling:
12) Order taker
15) Demand creator
16) Solution vendor
G) Sales personnel serve as the company’s personal link to the customers.
10) The sales representative is the company to many of its customers
11) The sales representative brings back much needed information about the customer
Sales Force Objectives and Strategy
The days when all the sales force would do was “sell, sell, sell” are long gone. Today, sales reps need to know how to diagnose a customer’s problem and propose a solution. Salespeople show a customer-prospect how their company can help a customer improve profitability.
14) Companies need to define the specific objectives they want their sales force to achieve.
15) The specific allocation scheme depends on the kind of products and customers, but regardless salespeople will have one or more of the following specific tasks to perform:
15) Information gathering
C) Because of the expense, most companies are moving to the concept of a leveraged sales force.
1) A leveraged sales force is where the sales force focuses on selling the company’s more complex and customized products to large accounts.
9) Low-end selling is done by inside salespeople and Web ordering.
10) Tasks such as lead generation, proposal writing, order fulfillment, and post-sale support are turned over to others.
11) As a result, salespeople handle fewer accounts, but are awarded for key account growth
D) Today’s sales representatives act as “account manager” who arrange fruitful contacts between various people in the buying and selling organizations.
E) Selling increasingly calls for teamwork requiring the support of other personnel such as :
J) Top management
K) Technical people
L) Customer service representatives
M) Office staff
F) To maintain a market focus, salespeople should know how to:
8) Analyze sales data
9) Measure market potential
10) Gather market intelligence
11) Develop marketing strategies and plans
G) Once the company decides on an approach, it can use a direct or a contractual sales force.
H) A direct (company) sales force consists of full- or part-time paid employees who work exclusively for the company.
I) A contractual sales force consists of manufacturers’ reps, sales agents, and brokers who are paid a commission based on sales.
The sales-force strategy has implications for the sales-force structure. Established companies need to revise their sales-force structure as market and economic conditions change.
Sales representatives are one of the company’s most productive and expensive assets. Increasing their number will increase both sales and costs.
A) Once the company establishes the number of customers it wants to reach, it can use a workload approach to establish sales-force size. This method consists of the following five steps:
8) Customers are grouped into size classes
9) Desirable call frequencies
10) The number of accounts in each size class is multiplied by the corresponding call frequency
11) The average number of call per sales rep is determined
12) The number of sales reps needed is determined
To attract top-quality sales reps, the company has to develop an attractive compensation
A) The company must determine the four components of sales-force compensation:
(viii) The fixed amount
(ix) The variable amount
(x) Expense allowances
B) Fixed compensation receives more emphasis in jobs with a high ratio of non-selling to selling duties and in jobs where the selling task is technically complex and involves teamwork.
C) Variable compensation receives more emphasis in jobs where sales are cyclical or depend on individual initiative.
D) Fixed and variable compensation give rise to three basic types of compensation plans:
Combination salary and commission
E) Some companies see a new trend toward deemphasizing volume measures in favors of factors such as profitability, customer satisfaction, and customer retention.
MANAGING THE SALES FORCE
Various policies and procedures guide the firm in recruiting, selecting, training, supervising, motivating, and evaluating sales representatives.
Recruiting and Selecting Representatives
At the heart of any successful sales force is a means of selecting effective representatives’. One survey revealed that the top 27 percent of the sales force brought in over 52 percent of the sales.
Training and Supervising Sales Representatives
Today’s customers expect salespeople to have deep product knowledge, to add ideas to improve the customer’s operations, and to be efficient and reliable. Companies use sales-promotion tools to draw a stronger and quicker buyer response.
These demands have required companies to make a much higher investment in sales training.
New reps may spend a few weeks to several months in training.
Training time varies with the complexity of the selling task and the type of person recruited into the sales organization.
New methods of training are continually emerging.
Companies vary in how closely they supervise sales reps.
Sales Rep Productivity
Some research has suggested that today’s sales reps are spending too much time selling to smaller, less profitable accounts when they should be focusing more of their efforts on selling to larger, more profitable accounts.
Norms for Prospect Calls
Companies often specify how much time reps should spend prospecting for new accounts.
A) Companies set up prospecting standards for a number of reasons:
U) Left to their own devices, many reps will spend most of their time with current customers.
V) Some companies rely on a missionary sales force to open new accounts. The appeal of public relations and publicity is based on three distinctive qualities:
Using Sales Time Efficiently
Studies have shown that the best sales reps are those who manage their time effectively
10) One planning tool is time-and-duty analysis.
11) Companies are constantly seeking ways to improve sales-force productivity.
12) To cut costs, reduce time demands on their outside sales force, and take advantage of computer and telecommunications innovations, many companies have increased the size and responsibilities of their inside sales force.
13) Inside salespeople are of three types:
n. Technical support people
o. Sales assistants
E) The inside sales force frees the outside reps to spend more time selling to:
K) Major accounts
L) Identifying and converting new major prospects
M) Placing electronic ordering systems in customers’ facilities
N) Obtaining more blanket orders and systems contracts
F) The salesperson today has truly gone electronic
G) One of the most valuable electronic tools for the sales rep is the company Web site:
12) As a prospecting tool
13) To help define the firm’s relationship with individual accounts
14) Identify those whose business warrants a personal sales call
15) Provides an introduction to self-identified potential customers
H) Selling over the Internet supports relationship marketing by solving problems that do not require live intervention and thus allows more time to be spent on issues that are best addressed face-to-face.
Motivating Sales Representatives
The majority of sales representatives require encouragement and special incentives. Most marketers believe that the higher the salesperson’s motivation, the greater the effort and the resulting performance, rewards, and satisfaction, and thus further motivation
A) Such thinking is based on several assumptions:
Sales managers must be able to convince salespeople that they can sell more by working harder or by being trained to work smarter.
Sales manager must be able to convince salespeople that the rewards for better performance are worth the extra effort.
B) To increase motivation, marketers reinforce intrinsic and extrinsic rewards of all types.
C) One research study that measured the importance of different rewards found that the reward with the highest value was pay, followed by:
Sense of accomplishment
D) The least-value rewards were:
H) Liking and respect
I) Security and recognition
E) In other words, salespeople are highly motivated by pay and taking the chance to get ahead to satisfy their intrinsic needs, and less motivated by complements and security.
F) Setting sales quotas can create problems
G) Some companies are dropping quotas
Evaluating Sales Representatives
We have been describing the feed-forward aspects of sales supervision—how management communicates what the sales rep should be doing and motivates them to do it. But good feed-forward requires good feedback, which means getting regular information from reps to evaluate performance.
Sources of Information
The most important source of information about reps is sales report.
A) Additional information comes through.
15) Personal observation
16) Salesperson self-reports
17) Customer letters and complaints
18) Customer surveys
19) Conversations with other sales representatives
B) Sales reports are divided between:
Write-ups or activity results
C) 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.
D) Sales reps write up completed activities on call reports.
E) These reports provide raw data from which sales managers can extract key indications of sales performance:
Average number of sales calls per salesperson per day
Average sales call time per account
Average revenue per sales call
Average cost per sales call
Entertainment cost per sales call
Percentage of orders per hundred sales calls
Number of new customers per period
Number of lost customers per period
Sales-force cost as a percentage of total sales
The sales force’s reports along with other observations supply the raw materials for evaluation. There are several approaches to conduction evaluations.
A) Evaluations can also assess the salesperson’s knowledge of:
B) Personal characteristics can be rated, such as:
J) General manner
C) The sales manager can review any problems in motivation or compliance.
PRINCIPLES OF PERSONAL SELLING
Effective salespersons have more than instinct; they are trained in methods of analysis and customer management.
L) Today’s companies spend hundreds of millions of dollars each year to train salespeople in the art of selling.
M) SPIN method:
1) Situation questions
2) Problem questions
3) Implication questions
4) Need-payoff questions
The Six Steps
A) Step 1: Prospecting and Qualifying
P) The first step in selling is to identify and qualify prospects
Q) More companies are taking responsibility for finding and qualifying leads
R) Leads can be categorized, with “hot” prospects turned over to the field sales force.
a. “Warm” prospects turned over to the telemarketing unit for follow-up
B) Step 2: Preapproach
N) The salesperson needs to learn as much as possible about the prospect company
O) The salesperson should set call objectives.
a. Or decide on the best contact approach.
(i) And an overall strategy for the account
C) Step 3: Presentation and Demonstration
1) The salesperson now tells the product “story” to the buyer, following the AIDA formula:
13) Gaining attention
14) Holding interest
15) Arousing desire
16) Obtaining action
2) The salesperson uses:
Value approach (FABV).
D) Step 4: Overcoming Objections
1) Customers typically pose objections during the presentation or when asked for the order:
12) Psychological resistance
13) Logical resistance
2) To handle these objections, the salesperson maintains a:
11) Positive approach
12) Asks the buyer to clarify the objection(s)
13) Questions the buyer in a way that the buyer has to answer his or her own objection(s)
14) Denies the validity of the objection(s)
15) Turns the objection(s) into a reason for buying
3) One potential problem is for salespeople to give in too often when customers demand a discount.
P) “Sell the price” versus “sell through price.”
Q) Received training to recognize value-adding opportunities rather than price-cutting opportunities
E) Step 5: Closing
1) Salespeople need to know how to recognize closing signs from the buyer:
)B Physical actions
)C Statements or comments
2) There are several closing techniques:
)1 Ask for the order.
)2 Recapitulate the points of agreement.
)3 Offer to help write up the order.
)4 Ask whether the buyer wants A or B.
)5 Get the buyer to make minor choices such as color and sizes.
)6 Indicate what the buyer will lose if the order is not placed now.
F) Step 6: Follow-Up and Maintenance
.a Follow-up and maintenance are necessary if the salesperson wants to ensure customer satisfaction and repeat business.
.b Immediately after the closing, the salesperson should:
.a Cement any details on delivery time, purchase terms, and other matters important to the customer.
.b Schedule a follow-up call.
.c Develop a maintenance and growth plan for the account.
Today’s customers prefer suppliers:
I) Who can sell and deliver a coordinated set of products and services to many locations
J) Who can solve problems quickly
K) Who can work closely with customer teams
With a relationship management, program properly implemented the organization will focus as much on managing its customers as on managing its products.