Integrated Marketing Communication: Personal Selling and Direct Marketing

1
Integrated Marketing Communication Personal
Selling and Direct Marketing

• Chapter 13

2
Road Map Previewing the Concepts

• Discuss the role of a companys salespeople in
  creating value for customers and building
  customer relationships.
• Identify and explain the six major sales force
  management steps.
• Discuss the personal selling process,
  distinguishing between transaction-oriented
  marketing and relationship marketing.

3
Road Map Previewing the Concepts

• Define direct marketing and discuss its benefits
  to customers and companies.
• Identify and discuss the major forms of direct
  marketing.

4
The Nature of Personal Selling

• Most salespeople are well-educated, well-trained
  professionals who work to build and maintain
  long-term customer relationships.
• The term salesperson covers a wide range of
  positions
• Order taker Department store clerk
• Order getter Creative selling in different
  environments

5
The Role of the Sales Force

• Personal selling is a paid, personal form of
  promotion.
• Involves two-way personal communication between
  salespeople and individual customers.
• Salespeople
• Probe customers to learn about problems
• Adjust marketing offers to fit special needs
• Negotiate terms of sales
• Build long-term personal relationships

6
The Role of the Sales Force

• Sales Force serves as critical link between
  company and its customers.
• They represent the company to the customers
• They represent the customers to the company
• Goal customer satisfaction and company profit

7
Sale Force Structure

• Territorial Salesperson assigned to exclusive
  area and sells full line of products.
• Product Sales force sells only certain product
  lines.
• Customer Sales force organizes along customer or
  industry lines.
• Complex Combination of several types of
  structures.

8
Inside Sales Force

• Conduct business from their offices via telephone
  or visits from perspective buyers.
• Includes
• Technical support people
• Sales assistants
• Telemarketers

9
Selling Team

• Used to service large, complex accounts.
• Can include experts from different areas of
  selling firm.
• Pitfalls
• Can confuse or overwhelm customers
• Some people have trouble working in teams
• Hard to evaluate individual contributions

10
Recruiting and Selecting Salespeople

• Key talents of salespeople
• Intrinsic motivation
• Disciplined work style
• Ability to close a sale
• Ability to build relationships with customers

11
Recruiting Salespeople

• Recommendations from current sales force
• Employment agencies
• Classified ads

• Web searches
• College students
• Recruit from other companies

12
Sales Force Training Goals

• Learn about and identify with the company.
• Learn about the companys products.
• Learn customers and competitors
  characteristics.
• Learn how to make effective presentations.
• Learn field procedures and responsibilities.

13
Compensating Salespeople

• Fixed amount
• Salary
• Variable amount
• Commissions or bonuses
• Expenses
• Repays for job-related expenditures
• Fringe benefits
• Vacations, sick leave, pension, etc.

14
Supervising Salespeople

• Directing Salespeople
• Help them identify customers and set call norms.
• Specify time to be spent prospecting
• Annual call plan
• Time-and-duty analysis
• Sales force automation systems

15
Supervising Salespeople

• Motivating Salespeople
• Organizational climate
• Sales quotas
• Positive incentives
• Sales meetings
• Sales contests
• Recognition and honors
• Cash awards, trips, profit sharing

16
The Personal Selling Process

• Prospecting The salesperson identifies
  qualified potential customers.
• Preapproach The salesperson learns as much as
  possible about a prospective customer before
  making a sales call.
• Approach The salesperson meets the customer for
  the first time.
• Presentation The salesperson tells the product
  story to the buyer, highlighting customer
  benefits.

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The Personal Selling Process

• Handling Objections The salesperson seeks out,
  clarifies, and overcomes customer objections to
  buying.
• Closing The salesperson asks the customer for
  an order.
• Follow-up The salesperson follows up after the
  sale to ensure customer satisfaction and repeat
  business.

18
Direct Marketing
19
Four lmportant, Similarly Worded DM Terms

• Direct Mail
• Mail Order
• Direct Response Advertising
• Direct Marketing

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Four lmportant, Similarly Worded DM Terms
b

• Direct Mail is in fact a promotional medium.
  Like all media, it is used to disseminate
  messages either to inform, persuade, and/or
  remind.

21
Four lmportant, Similarly Worded DM Terms

• Direct Mail
• Mail Order does its promotion through any
  medium. It facilitates responses, remotely,
  without direct, face-to-face contact between
  buyer and seller.

22
Four lmportant, Similarly Worded DM Terms

• Direct Mail
• Mail Order
• Direct Response Advertising Is advertising
  through any medium designed to generate an
  immediate response that is measurable, such as an
  order, a request for information/to talk with a
  sales person, to have a sales person call, to
  make a donation, etc.

23
Four lmportant, Similarly Worded DM Terms

• Direct Mail
• Mail Order
• Direct Response Advertising
• Direct Marketing is an interactive system of
  marketing that uses one or more advertising media
  to effect an immediate, measurable response
  and/or transaction at any location, with this
  activity stored on an (individual)
  databaseSource The Direct Marketing Association

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Direct Marketing

• Direct marketing consists of direct connections
  with carefully targeted individual consumers to
  both obtain an immediate response and cultivate
  lasting customer relationshipsSource Kotler
  Armstrong

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Demassification A move Toward
Concentrated/Niche Segmentation
The Growth of Direct Marketing
The Internet/email
Higher Costs of Driving, Traffic and Parking
Congestion
Consumers Lack of Time
Convenience of Ordering From Direct Marketers
Growth of Customer Databases
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Mass Marketing Vs. Direct Marketing
Mass Mkting
Direct Marketing
Individual Customer
Average Consumer
Customer Anonymity
Customer Profile
Standard Product
Customized Market Offering
Mass Production
Customized Production
Mass Distribution
Individualized Distribution
Individualized Message
Mass Advertising
Individualized Incentives
Mass Promotion
Two-Way Messages
One-Way Message
Economies of Scope
Economies of Scale
Share of Mind
Share of Customer
All Customers
Profitable Customers
Customer Attraction
Customer Retention
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Customer Databases

• Customer Databases are an Organized Collection of
  Comprehensive Data About Individual Customers or
  Prospects Including
• Geographic (List Info),
• Demographic,
• Psychographic,
• Lifestyle, and
• Behavioral (Transactional) Data.

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Individual versus Market Data

• Hypothetical Company Data
• Annual Sales 1,000,000
• of Transactions 10,000
• Average Sale 100

of ind. sales of ind. Customers
NO ..???..must mass market

• Company with Database
• Rank Customers best/worst
• Profile/segment all/best customers
• Prospect based on profiles
• Version copy/offers
• Track sales by media, offer, copy
• Retain customer based on value

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• Database Marketing
• Database Marketing is the Process of Building,
• Maintaining, and Using Customer Databases and
  
• Other Databases for the Purposes of Contacting
  
• and Transacting With Customers. How
  Companies Use Their Databases
• Profiling Customers
• Deciding Which Customers/Prospects Receive
  Which Offers
• Build Customer Loyalty
• Reactivating Customers

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• Calculating the Value of a Customer (LTV)

The Promotion Free books to stimulate Bloch
School undergraduates to continue on to acquire a
Bloch graduate degreeproposed in Summer, 1995.

• Current Situation
• In 1994-5, The Bloch School spent 3000 in
  time/space advertising, and 15,000 for
  multi-purpose brochures, a total of 18,000,
  which was 0.3 of its total budget.
• From 1990-1994, only 14.2 percent of its new
  graduate enrollees were Bloch undergraduates.

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• LTV Cont.

• The Proposed Offer (for any Bloch School senior
  graduating during 1995-96 academic year)
• Enroll in successfully complete 6 hours in any
  Bloch masters program (MBA, MPA, or MS in
  accounting) the first regular semester after
  graduation (summer semester may be substituted).
• Enroll in successfully complete an additional 6
  hours in that same Bloch program the next regular
  semester after graduation The Bloch School will
  pay for all required textbooks in the students
  two most expensive courses (wrt book costs) at
  the end of that second semester if both courses
  have been successfully completed.

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• LTV Cont.
• Rational behind Choosing the Proposed Offer
• It is a sales promotion similar to those used in
  other markets to increase sales and retention.
• It is small in scope, given UMKCs and UM
  Systems history of using virtually only public
  relations for promotional purposes.
• It targets the Bloch Schools best prospects
  for acquiring students for its graduate
  programsits current students/customers.
• It costs much more to acquire new customers/
  students via promotional efforts than to retain
  existing customers/students.

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• Anecdotal Rational for the Proposed Offer(cont)
• After successfully completing the second semester
  (at least 12 total hours in the program), the
  student will realize that he/she has completed
  40 of a masters, can see the light at the end of
  the tunnel, and should more be likely to complete
  the program even without an additional
  promotional incentivebut immediately has one at
  hand.
• Informal discussions with undergraduate students
  over a period of years about whether or not such
  a promotion would make a difference as to the
  likelihood of beginning a graduate degree
  program immediately after having receiving their
  bachelors degrees were overwhelmingly positive.

34
Calculating (LTV) Table 3 Estimated Costs of
the Proposed Sales Promotion
Mailing cost of invitations to 1988-1989
pregraduates 100.00 Graduate School
and GMAT
273.00 application packets and materials
(passed out at each pizza meeting) (.75)
X (182) X ( 2.00) (Meetings first Monday and
Tuesday, Fall Semester, 1988 250.00
cost of pizza, pop, delivery.)
Books for the 40 students who
12,000.00 would have
gone on to graduate programs regardlessbased
on the highest throughput in the last 5
years (40 students) X ( 150 in
books/course)X(2 courses)

• Total Sales Promotional Costs
  12,633.10

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Calculating (LTV) Table 2
Sample of Student Records Used
36

• Table 3 LTV calculation table for graduate
  students beginning Bloch classes in Fall 1988

Fraction of Total Hours Taken by Fall 1988
New Students by Year Academic Year and by
Tuition Category
Average total hours matriculated per student
3183/15220.941
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Calculating (LTV) Table 4
Discounting the Tuition Paid Back to 1988-1989
Levels
38
Calculating (LTV) Table 5

Total Tuition of 100 New Students Beginning
Coursework in Fall 1995-96 by Academic Year and
by Tuition Category

Sums may not equal totals due to rounding.
39
Calculating (LTV) Table 6
Present Value of the Stream of Educational
Tuition Created by 100 New Students beginning
Fall, 1995

Sums may not equal totals due to rounding.
40
Calculating LTV The Analysis

• From Table 6 100 new Fall 1995 students would
  generate 452,933 (in 1995-96 ) The Total net
  Tuition.
• Total net Tuition per Student 4529.33
• - Direct Marginal Costs (est.) 100.00
• Gross Profit per Student 4429.33
  LTV1
• - Direct cost of sales promotion 300.00
• per Student (books)
• Contribution to Total Sales 4,129.33
  LTV2
• Promotion Cost Covered by Each New
• Student Acquired (Contribution Margin)

41
Calculating LTV The Analysis (cont)Sales
Promotion Breakeven (BE) Calculation

BE Total Sales Promotional Cost
Contribution Margin
12,633.10 3.059 Students
4,129.33
Arguments based on the Data

• Would require a 7.5 increase in the 40
  students
• who would have matriculated anyway
  without the
• sales Promotion3 students!

Would require a 2.1 increase in the 142
students who would not have matriculated
without the Sales Promotion3 students!

42

• Calculating LTV The Analysis

Note Predicted MO 2001-2002 Tuition
184.19/hour Actual Mo 2001-2002 Tuition
179.10/hour a difference of 2.8
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The New Direct-Marketing Model

• Some firms use direct marketing as a supplemental
  medium.
• For many companies, direct marketing constitutes
  a new and complete model for doing business.
• Some firms employ the direct model as their only
  approach.
• Some see this as the new marketing model of the
  next millennium.

44
Benefits of Direct Marketing

• Benefits to Buyers
• Convenient
• Easy to use
• Private
• Ready access to products and information
• Immediate and interactive

45
Benefits of Direct Marketing

• Benefits to Sellers
• Powerful tool for building customer relationships
• Can target small groups or individuals
• Can tailor offers to individual needs
• Can be timed to reach prospects at just the right
  moment
• Gives access to buyers they could not reach
  through other channels
• Offers a low-cost, efficient way to reach markets

46
Customer Databases

• An organized collection of comprehensive data
  about individual customers or prospects,
  including geographic, demographic, psychographic,
  and behavioral data.

47
Telemarketing

• Accounts for more than 36 of all
  direct-marketing sales.
• Used in both consumer and B2B markets.
• Includes both outbound and inbound calls.

48
Direct-Mail Marketing

• Involves sending an offer, announcement,
  reminder, or other item to a person at a
  particular address.
• Accounts for more than 31 of direct-marketing
  sales.
• Permits high target-market selectivity.
• Personal and flexible.
• Easy to measure results.

49
Catalog Marketing

• With the Internet, more and more catalogs going
  electronic.
• Print catalogs still the primary medium.
• Expected sales in 2008 176 billion.
• Harder to attract new customers with Internet
  catalogs.

50
Direct Response TV Marketing

• Direct-response advertising
• Infomercials
• Home shopping channels

51
Kiosk Marketing

• Information and ordering machines generally found
  in stores, airports, and other locations.

52
Public Policy and Ethical Issues in Direct
Marketing

• Irritation to Consumers
• Taking unfair advantage of impulsive or less
  sophisticated buyers
• Targeting TV-addicted shoppers
• Deception, Fraud
• Invasion of Privacy

53
Rest Stop Reviewing the Concepts

• Discuss the role of a companys salespeople in
  creating value for customers and building
  customer relationships.
• Identify and explain the six major sales force
  management steps.
• Discuss the personal selling process,
  distinguishing between transaction-oriented
  marketing and relationship marketing.

54
Rest Stop Reviewing the Concepts

• Define direct marketing and discuss its benefits
  to customers and companies.
• Identify and discuss the major forms of direct
  marketing.