Direct Channels of Distribution Personal Selling and Direct

Direct Channels of Distribution: Personal Selling and Direct Marketing Chapter Thirteen

Key Learning Points How the sales force fits into the marketing organization The major duties of a salesperson Managing the sales force Setting sales quotas Issues in sales force compensation Technology’s impact on sales management Importance of direct marketing Major direct marketing media Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -2

“The salesperson not only communicates information about the product or service and delivers the key value proposition to the customer, but also attempts to complete the transaction with the end customer (a key role of some channels). ” - Russell S. Winer Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -3

Figure 13. 1 Sales Force Organization in a Medium-Sized Firm Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -4

Figure 13. 2 Adobe Systems Marketing Organization Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -5

Figure 13. 3 Hewlett-Packard Medical Products Group Organizational Chart, 1992 Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -6

Figure 13. 4 MCI Communications Corporation Organizational Chart, 1986 Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -7

Figure 1. 4 Dessert Division Organizational Chart, General Foods Corporation Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -8

Figure 13. 5, Part A Ways to Organize National Account Sales Forces Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -9

Figure 13. 5, Part B Ways to Organize National Account Sales Forces Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -10

The Sales Force and the Marketing Organization Multilevel (network) marketing Successive levels of salespeople recruit additional sales representatives Differs from illegal pyramid schemes Suffers from image problems and high turnover Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -11

What Does A Sales Force Do? Types of Selling Situations Response Missionary selling Trade selling Creative selling Technical selling Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -12

Figure 13. 7 Determinants of Sales Force Performance Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -13

“A sales territory is a group of present or potential customers assigned to a salesperson. In most cases, as the term implies, sales territories are geographic areas selected to minimize travel time between accounts and delineate clearly which person is responsible for a particular account. ” - Russell S. Winer Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -14

Designing Sales Territories Determining the Size of the Sales Force – Breakdown Method n=s/p n = the number of salespeople needed s = forecast sales p = average sales person Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -15

Designing Sales Territories Determining the Size of the Sales Force – Workload Method 1. Classify the firm’s customers into categories. 2. Determine sales call frequency and length. 3. Calculate the market workload. 4. Determine the time available for each rep. 5. Allocate the salesperson’s time by task. 6. Calculate the number of salespeople needed. Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -16

Activity A formerly regional business is expanding geographically. Sales for the upcoming year have been forecast at $40, 000. Their current sales force of seven average approximately $ 2, 500, 000 person in sales annually. Calculate how many additional sales representatives should be hired for the expansion. Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -17

Designing Sales Territories Marginal economic method Resources should be allocated to the point were marginal revenue equals marginal costs. Salespeople should be hired to the point where the generate $1 in additional contribution margin. Technique is difficult to implement. Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -18

Figure 13. 8 Territory Design Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -19

Figure 13. 9 Account Planning Matrix Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -20

Illustration Computer analyses for territory design and salesperson assignment are common today. Such programs combine geographic mapping with optimization algorithms. Visit Terr. Align to learn more. Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -21

Setting Sales Quotas Sales quotas Quotas are specific goals that salespeople have to meet. Different types of sales quotas exist: Sales volume based quotas Profit based quotas Combination quotas Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -22

Figure 13. 11 Components and Objectives of Compensation Plans Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -23

Compensation Plans Straight salary is appropriate when: Firms want to focus on long-term goals. Management wants to encourage nonselling activities by the sales force. Products or services have long selling cycles. Sales people are new. Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -24

Compensation Plans Commission programs: Give incentives by directly rewarding performance. Are easy to manage. Can be targeted. Offer little control over sales force activities. Are hard to implement when national accounts and local sales forces overlap. Produce fluctuating sales force. Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -25

Compensation Plans Combination plans: Combine salary with one or more additional financial incentives. Advantages: Incents the sales force to perform activities that don’t directly generate revenue. Provides security while still rewarding performance. Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -26

Table 13. 1 Common Ratios Used to Evaluate Salespeople Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -27

Controlling and Evaluating the Sales Force Subjective Evaluation Measures Sales Job knowledge Management of sales territory Customer and company relations Personal characteristics Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -28

Changing Nature of the Sales Force: Impact of Technology Factors Influencing the Growth of Virtual Selling Sales is more complex and it is increasingly difficult to make a sale. Customers are more knowledgeable. Salespeople are increasingly called upon to deal directly with decision makers. Global competition is intensifying. Productivity demands have increased. Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -29

Table 13. 2 The Virtual Selling Organization Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -30

Figure 13. 12 Med Conference Website Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -31

“Direct marketing is an interactive marketing system that uses one or more advertising media to effect a measurable response and/or transaction at any location. ” - The Direct Marketing Association Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -32

Table 13. 13 DM-Drive Sales by Medium and Market Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -33

Table 13. 4 Total Population Ordering by Mail or Phone: Spring 2008 Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -34

Direct Marketing Steps in the Direct-Marketing Process Set objective. Determine the target market. Choose the medium / media. Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall Obtain a list. Analyze the list. Develop the offer. Test the offer. Analyze the results. 13 -35

Direct Marketing Direct-marketing methods: Telemarketing Strengths & drawbacks Keys to success Direct mail Strengths & drawbacks Keys to success Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -36

Figure 13. 13 Source Data on Catalogues Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -37

Direct Marketing Direct-marketing methods: Direct e-mail Strengths Drawbacks Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -38

Table 13. 5 The Relative Effectiveness of Direct E-mail Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -39

Direct Marketing Privacy issues: “Do not call” registry (www. donotcall. gov) SPAM and e-mail direct marketing Internet privacy Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -40

Executive Summary The sales force has a dual role. Sales forces can be organized in many ways. Internal and external factors affect salesperson performance. Three decisions are key for the sales manager. Sales quotas provide key incentives. Combination compensation plans are more common. Technology is impacting the sales job. Direct marketing is increasingly important. Direct e-mail is becoming more important. Copyright © 2011 Pearson Education, Inc. , Publishing as Prentice Hall 13 -41