direct channels of distribution:personal selling and directmarketing

Direct Channels of Distribution:

Personal Selling and

DirectMarketing

Chapter ThirteenChapter Thirteen

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 13-2

Key Learning PointsKey Learning Points

How the sales force fits into the How the sales force fits into the marketing organizationmarketing organizationThe major duties of a salespersonThe major duties of a salespersonManaging the sales forceManaging the sales forceSetting sales quotasSetting sales quotasIssues in sales force compensationIssues in sales force compensationTechnology’s impact on sales Technology’s impact on sales managementmanagementImportance of direct marketingImportance of direct marketingMajor direct marketing mediaMajor direct marketing media


- Russell S. Winer

““The salesperson not only The salesperson not only communicates information communicates information about the product or service about the product or service and delivers the key value and delivers the key value proposition to the customer, proposition to the customer, but also attempts to complete but also attempts to complete the transaction with the end the transaction with the end customer (a key role of some customer (a key role of some channels).channels).””


Figure 13.1Figure 13.1Sales Force Organization in a Sales Force Organization in a

Medium-Sized FirmMedium-Sized Firm


Figure 13.2Figure 13.2Adobe Systems Marketing Adobe Systems Marketing

OrganizationOrganization


Figure 13.3Figure 13.3Hewlett-Packard Medical Products Hewlett-Packard Medical Products Group Organizational Chart, 1992Group Organizational Chart, 1992


Figure 13.4Figure 13.4MCI Communications Corporation MCI Communications Corporation

Organizational Chart, 1986Organizational Chart, 1986


Figure 1.4Figure 1.4Dessert Division Organizational Dessert Division Organizational

Chart, General Foods CorporationChart, General Foods Corporation


Figure 13.5, Part AFigure 13.5, Part AWays to Organize National Ways to Organize National

Account Sales ForcesAccount Sales Forces


Figure 13.5, Part BFigure 13.5, Part BWays to Organize National Ways to Organize National

Account Sales ForcesAccount Sales Forces


The Sales Force and the The Sales Force and the Marketing OrganizationMarketing Organization

Multilevel (network) marketingMultilevel (network) marketingSuccessive levels of salespeople Successive levels of salespeople recruit additional sales recruit additional sales representativesrepresentatives

Differs from illegal pyramid Differs from illegal pyramid schemesschemes

Suffers from image problems and Suffers from image problems and high turnoverhigh turnover


IllustrationIllustration

One of the key jobs of a salesperson is One of the key jobs of a salesperson is maintaining a good relationship with the maintaining a good relationship with the customer.customer.


Response Response sellingselling

Trade sellingTrade selling

Technical sellingTechnical selling

Missionary Missionary sellingselling

Creative Creative sellingselling

Types of Selling SituationsTypes of Selling Situations

What Does A Sales Force What Does A Sales Force Do?Do?


Figure 13.7Figure 13.7Determinants of Sales Force Determinants of Sales Force

PerformancePerformance


- Russell S. Winer

““A sales territory is a group of A sales territory is a group of present or potential customers present or potential customers assigned to a salesperson. In most assigned to a salesperson. In most cases, as the term implies, sales cases, as the term implies, sales territories are geographic areas territories are geographic areas selected to minimize travel time selected to minimize travel time between accounts and delineate between accounts and delineate clearly which person is responsible clearly which person is responsible for a particular account.for a particular account.””


n = s / pn = s / p

Determining the Size of the Determining the Size of the Sales Force Sales Force –– Breakdown Breakdown

MethodMethod

Designing Sales TerritoriesDesigning Sales Territories

nn = the number of salespeople needed = the number of salespeople neededss = forecast sales = forecast salespp = average sales per person = average sales per person


Determining the Size of the Determining the Size of the Sales Force Sales Force –– Workload Workload

MethodMethod


1. Classify the firm’s customers into 1. Classify the firm’s customers into categories.categories.

2. Determine sales call frequency and 2. Determine sales call frequency and length.length.

3. Calculate the market workload.3. Calculate the market workload.4. Determine the time available for each 4. Determine the time available for each

rep.rep.5. Allocate the salesperson’s time by task.5. Allocate the salesperson’s time by task.6. Calculate the number of salespeople 6. Calculate the number of salespeople

needed.needed.


ActivityActivity

A formerly regional business is A formerly regional business is expanding geographically. Sales for expanding geographically. Sales for the upcoming year have been the upcoming year have been forecast at $40,000,000. Their current forecast at $40,000,000. Their current sales force of seven average sales force of seven average approximately $ 2,500,000 per person approximately $ 2,500,000 per person in sales annually. Calculate how many in sales annually. Calculate how many additional sales representatives additional sales representatives should be hired for the expansion. should be hired for the expansion.



Marginal economic methodMarginal economic methodResources should be allocated to Resources should be allocated to the point were marginal revenue the point were marginal revenue equals marginal costs.equals marginal costs.

Salespeople should be hired to the Salespeople should be hired to the point where the generate $1 in point where the generate $1 in additional contribution margin.additional contribution margin.

Technique is difficult to implement.Technique is difficult to implement.

Kate S.

This sentence is not clear. Please reword.


Figure 13.8Figure 13.8Territory DesignTerritory Design


Figure 13.9Figure 13.9Account Planning MatrixAccount Planning Matrix


IllustrationIllustration

Computer analyses for territory Computer analyses for territory design and salesperson design and salesperson assignment are common today.assignment are common today.

Such programs combine Such programs combine geographic mapping with geographic mapping with optimization algorithms.optimization algorithms.

Visit Visit TerrAlign to learn more.to learn more.


Setting Sales QuotasSetting Sales Quotas

Sales quotasSales quotasQuotas are specific goals that Quotas are specific goals that salespeople have to meet.salespeople have to meet.Different types of sales quotas Different types of sales quotas exist:exist:

Sales volume based quotasSales volume based quotasProfit based quotasProfit based quotasCombination quotasCombination quotas


Figure 13.11Figure 13.11Components and Objectives of Components and Objectives of

Compensation PlansCompensation Plans



Straight salary is appropriate when:Straight salary is appropriate when:Firms want to focus on long-term Firms want to focus on long-term goals.goals.

Management wants to encourage Management wants to encourage non-selling activities by the sales non-selling activities by the sales force.force.

Products or services have long selling Products or services have long selling cycles.cycles.

Sales people are new.Sales people are new.


Compensation Plans Compensation Plans

Commission programs:Commission programs:Give incentives by directly rewarding Give incentives by directly rewarding performance.performance.

Are easy to manage.Are easy to manage.

Can be targeted.Can be targeted.

Offer little control over sales force Offer little control over sales force activities.activities.

Are hard to implement when national Are hard to implement when national accounts and local sales forces overlap.accounts and local sales forces overlap.

Produce fluctuating sales for sales force.Produce fluctuating sales for sales force.



Combination plans:Combination plans:Combine salary with one or more Combine salary with one or more additional financial incentives.additional financial incentives.

Advantages: Advantages: Incents the sales force to perform Incents the sales force to perform activities that don’t directly generate activities that don’t directly generate revenue. revenue.

Provides security while still rewarding Provides security while still rewarding performance.performance.


Table 13.1Table 13.1Common Ratios Used to Evaluate Common Ratios Used to Evaluate

SalespeopleSalespeople


Controlling and Evaluating Controlling and Evaluating the Sales Forcethe Sales Force

Subjective Evaluation Subjective Evaluation MeasuresMeasures

SalesSales

Job knowledgeJob knowledge

Management of sales territoryManagement of sales territory

Customer and company Customer and company relationsrelations

Personal characteristicsPersonal characteristics


Factors Influencing the Factors Influencing the Growth of Virtual SellingGrowth of Virtual Selling

Sales is more complex and it is Sales is more complex and it is increasingly difficult to make a sale.increasingly difficult to make a sale.Customers are more knowledgeable.Customers are more knowledgeable.Salespeople are increasingly called Salespeople are increasingly called upon to deal directly with decision upon to deal directly with decision makers.makers.Global competition is intensifying.Global competition is intensifying.Productivity demands have increased.Productivity demands have increased.

Changing Nature of the Sales Changing Nature of the Sales Force: Impact of TechnologyForce: Impact of Technology


Table 13.2Table 13.2The Virtual Selling The Virtual Selling

OrganizationOrganization


Figure 13.12Figure 13.12Med Conference WebsiteMed Conference Website


““Direct marketing is an Direct marketing is an interactive marketing system interactive marketing system that uses one or more that uses one or more advertising media to effect a advertising media to effect a measurable response and/or measurable response and/or transaction at any location.transaction at any location.””

- The Direct Marketing Association


Table 13.13Table 13.13DM-Drive Sales by Medium and DM-Drive Sales by Medium and

MarketMarket


Table 13.4Table 13.4Total Population Ordering by Total Population Ordering by Mail or Phone: Spring 2008Mail or Phone: Spring 2008


Steps in the Steps in the Direct-Marketing ProcessDirect-Marketing Process

Direct MarketingDirect Marketing

Set objective.Set objective.

Determine the Determine the target market.target market.

Choose the Choose the medium / medium / media.media.

Obtain a list.Obtain a list.

Analyze the list.Analyze the list.

Develop the Develop the offer.offer.

Test the offer.Test the offer.

Analyze the Analyze the results.results.



Direct-marketing methods:Direct-marketing methods:TelemarketingTelemarketing

Strengths & Strengths & drawbacksdrawbacks

Keys to Keys to successsuccess

Direct mailDirect mailStrengths &Strengths &drawbacksdrawbacks

Keys to successKeys to success


Figure 13.13Figure 13.13Source Data on CataloguesSource Data on Catalogues



Direct-marketing methods:Direct-marketing methods:Direct e-mailDirect e-mail

StrengthsStrengths

DrawbacksDrawbacks


Table 13.5Table 13.5The Relative Effectiveness of The Relative Effectiveness of

Direct E-mailDirect E-mail



Privacy issues:Privacy issues:““Do not call” registry (Do not call” registry (www.donotcall.gov))

SPAM and e-mail direct marketingSPAM and e-mail direct marketing

Internet privacyInternet privacy


Discussion QuestionsDiscussion Questions

The United States is considering the adoption of The United States is considering the adoption of standards similar to those outlined in the European standards similar to those outlined in the European Union Directive on Data Protection, which states:Union Directive on Data Protection, which states:

1.1. A firm must obtain the permission of the A firm must obtain the permission of the customer to obtain personal information customer to obtain personal information and explain its purpose.and explain its purpose.

2.2. It must promise not to use it for anything It must promise not to use it for anything other than the stated purpose without other than the stated purpose without consent.consent.

Do you feel such standards are sufficient? Why or Do you feel such standards are sufficient? Why or why not? What changes would you make?why not? What changes would you make?


Executive SummaryExecutive Summary

The sales force has a dual role.The sales force has a dual role.Sales forces can be organized in many Sales forces can be organized in many ways.ways.Internal and external factors affect Internal and external factors affect salesperson performance.salesperson performance.Three decisions are key for the sales Three decisions are key for the sales manager.manager.Sales quotas provide key incentives.Sales quotas provide key incentives.Combination compensation plans are more Combination compensation plans are more common.common.Technology is impacting the sales job.Technology is impacting the sales job.Direct marketing is increasingly important.Direct marketing is increasingly important.Direct e-mail is becoming more important.Direct e-mail is becoming more important.


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