Chapter 19 – Managing Personal Communications; Direct and Interactive Marketing, Word of Mouth, and Personal Selling

In the face of the Internet revolution, marketing communications today 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 “How can our customers reach each other?” 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. Consider how Pepsi has engaged the consumer in its marketing communications.

Marketers are trying to figure out the right way to be part of the consumer conversation. Personalizing communications and creating dialogues by saying and doing the right thing to the right person at the right time is critical for marketing effectiveness. In this chapter, we consider how companies personalize their marketing communications to have more impact. We begin by evaluating direct and interactive marketing, then move to word-of-mouth marketing, and finish by considering personal selling and the sales force.

In This Chapter, We Will Address the Following Questions
1. How can companies conduct direct marketing for competitive advantage?

2. How can companies carry out effective interactive marketing?

3. How does word of mouth affect marketing success?

4. What decisions do companies face in designing and managing a sales force?

5. How can salespeople improve their selling, negotiating, and relationship marketing skills?

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.

The Benefits of Direct Marketing
Market Demassification has resulted in an ever-increasing number of market niches. Direct marketing can reach prospects at the moment they want a solicitation and therefore be noticed by more highly interested prospects. It lets marketers test alternative media and messages to find the most cost-effective approach.Direct marketing also makes the direct marketer’s offer and strategy less visible to competitors. Finally, direct marketers can measure responses to their campaigns to decide which have been the most profitable

Successful direct marketers view a customer interaction as an opportunity to up-sell,cross-sell, or just deepen a relationship. These marketers make sure they know enough about each customer to customize and personalize offers and messages and develop a plan for lifetime marketing to each valuable customer, based on their knowledge of life events and transitions.

Direct Mail
Direct-mail marketing means sending an offer, announcement, reminder, or other item to an individual consumer.

Most direct marketers aim to receive an order from prospects and judge a campaign’s success by the response rate.

Most direct marketers apply the RFM (recency, frequency, monetary amount) formula to select customers according to how much time has passed since their last purchase, how many times they have purchased, and how much they have spent since becoming a customer.

The offer strategy has five elements—the product, the offer, the medium, the distribution method, and the 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.

By adding up the planned campaign costs, the direct marketer can determine the needed break-even response rate. This rate must be net of returned merchandise and bad debts. A specific campaign may fail to break even in the short run but can still be profitable in the long run if customer lifetime value is factored in (see Chapter 5) by calculating the average customer longevity, average customer annual expenditure, and average gross margin, minus the average cost of customer acquisition and maintenance (discounted for the opportunity cost of money).

Catalog Marketing
In catalogue marketing, companies may send full-line merchandise catalogues, specialty consumer catalogues, and business catalogues, usually in print form but also as DVDs or online.
Telemarketing – is the use of the telephone and call centres to attract prospects, sell to existing customers, and provide service by taking orders and answering questions.
Other Media for Direct-Response Marketing
Direct marketers use all the major media. e.g. newspapers, magazine, radio, etc.
Public and Ethical Issues in Direct Marketing
Direct marketers and their customers usually enjoy mutually rewarding relationships. Occasionally, however, a darker side emerges:
– Irritation.
– Unfairness.
– Deception and Fraud.
– Invasion of Privacy.

Most direct marketers want the same thing consumers want: honest and well-designed marketing offers targeted only to those who appreciate hearing about them.

The Internet provides marketers and consumers with opportunities for much greater interaction and individualisation.
Advantages and Disadvantages of Interactive Marketing
Interactive Marketing Communication Options
A company chooses which forms of interactive marketing will be most cost-effective in achieving communication and sales objectives.
Some of the main categories, discussed next, are: (1) Web sites, (2) search ads, (3) display ads, and (4) e-mails. After summarising some developments in mobile marketing,we’ll describe social media and word-of-mouth effects.

Companies must design Web sites that embody or express their purpose, history, products, and vision and that are attractive on first viewing and interesting enough to encourage repeat visits.

Seven Key Design Elements of an Effective Web Site:
1. Context. – Layout and design
2. Content. – Text,pictures,sound,and video the site contains
3. Community. – How the site enables user-to-user communication
4. Customisation. – Site’s ability to tailor itself to different users or to allow users to personalise the site
5. Communication. – How the site enables site-to-user, user-to-site, or two-way communication
6. Connection. – Degree that the site is linked to other sites
7. Commerce. – Site’s capabilities to enable commercial transactions

A hot growth area in interactive marketing is paid search or pay-per-click ads, which now account for roughly half of all online ad spending

Paid Search – marketers bid in a continuous auction on search terms that serve as a proxy for the consumer’s product or consumption interests.

Pay-Per-Click – marketers bid in a continuous auction on search terms that serve as a proxy for the consumer’s product or consumption interests.

Search Engine Optimisation has become a crucial part of marketing given the large amount of money being spent by marketers on search.

Display Ads or Banner Ads – are small, rectangular boxes containing text and perhaps a picture that companies pay to place on relevant Web sites

Interstitials – are advertisements,often with video or animation, which pop up between changes on a Web site.

E-mail allows marketers to inform and communicate with customers at a fraction of the cost of a “d-mail,” or direct mail, campaign.
E-mails must be timely, targeted, and relevant.

With cell phones’ ubiquitous nature and marketers’ ability to personalise messages based on demographics and other consumer behaviour characteristics (see Chapter 15), the appeal of mobile marketing as a communication tool is obvious.

Consumers use word of mouth to talk about dozens of brands each day, from media and entertainment products such as movies, TV shows, and publications to food products, travel services,and retail stores. Positive word of mouth sometimes happens organically with little advertising,but it can also be managed and facilitated

Paid Media – results from press coverage of company-generated advertising, publicity, or other promotional efforts.

Earned media—sometimes called free media—is all the PR benefits a firm receives without having directly paid for anything—all the news stories, blogs, social network conversations that deal with a brand.

We first consider how social media promotes the flow of word of mouth before delving into more detail on how word of mouth is formed and travels.

Social Media
There are three main platforms for social media: (1) online communities and forums, (2) bloggers (individuals and networks such as Sugar and Gawker), and (3) social networks (like Facebook, Twitter, and YouTube).

Many are created by consumers or groups of consumers with no commercial interests or company affiliations. Others are sponsored by companies whose members communicate with the company and with each other through postings, instant messaging, and chat discussions about special interests related to the company’s products and brands. These online communities and forums can be a valuable resource for companies and provide multiple functions by both collecting and conveying key information.
A key for success of online communities is to create individual and group activities that help form bonds among community members. Information flow in online communities and forums is two-way and can provide companies with useful, hard-to-get customer information and insights

Blogs – regularly updated online journals or diaries, have become an important outlet for word of mouth. Corporations are creating their own blogs and carefully monitoring those of others.

Social networks have become an important force in both business-to-consumer and business-to-business marketing. Advertising is only one avenue, however. Like any individual, companies can also join the social groups and actively participate.Having a Facebook page has become a virtual prerequisite for many companies.

Social media allow consumers to become engaged with a brand at perhaps a deeper and broader level than ever before. Marketers should do everything they can to encourage willing consumers to engage productively.But as useful as they may be, social media can never become the sole source of marketing communications. Embracing social media, harnessing word of mouth, and creating buzz requires companies to take the good with the bad.

Buzz and Viral Marketing
Some marketers highlight two particular forms of word of mouth—buzz and viral marketing

Buzz Marketing – generates excitement, creates publicity, and conveys new relevant brand-related information through unexpected or even outrageous means.

Viral Marketing – is another form of word of mouth, or “word of mouse,” that encourages consumers to pass along company-developed products and services or audio, video, or written information to others online.

Opinion Leaders
Communication researchers propose a social-structure view of interpersonal communication.75 They see society as consisting of cliques, small groups whose members interact frequently. Clique members are similar, and their closeness facilitates effective communication but also insulates the clique from new ideas. The challenge is to create more openness so cliques exchange information with others in society. This openness is helped along by people who function as liaisons and connect two or more cliques without belonging to either, and by bridges, people who belong to one clique and are linked to a person in another.

Shill Marketing or Stealth Marketing – pays people to anonymously promote a product or service in public places without disclosing their financial relationship to the sponsoring firm.

Measuring the Effects of Word of Mouth
Through demographic information or proxies and cookies, firms can monitor when customers blog, comment, post, share, link, upload, friend, stream, write on a wall, or update a profile.
To locate prospects, develop them into customers, and grow the business, most industrial companies rely heavily on a professional sales force or hire manufacturers’ representatives and agents.

Although no one debates the importance of the sales force in marketing programs, companies are sensitive to the high and rising costs of maintaining one, including salaries, commissions, bonuses, travel expenses, and benefits.

The term sales representative covers six positions, ranging from the least to the most creative types of selling:
1. Deliverer—A salesperson whose major task is the delivery of a product (water,fuel,oil).

2. Order taker—An inside order taker (standing behind the counter) or outside order taker (calling on the supermarket manager).

3. Missionary—A salesperson not permitted to take an order but expected rather to build goodwill or educate the actual or potential user (the medical “detailer”representing an ethical pharmaceutical house).

4. Technician—A salesperson with a high level of technical knowledge (the engineering salesperson who is primarily a consultant to client companies).

5. 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).

6. 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).

In designing the sales force, the company must develop sales force objectives, strategy, structure, size, and compensation.

Designing a Sales Force:
– Sales Force Objectives
– Sales Force Strategy
– Sales Force Structure
– Sales Force Size
– Sales Force Compensation

Sales Force Objectives and Strategy
Sales reps need to know how to diagnose a customer’s problem and propose a solution that can help improve the customer’s profitability.

Companies need to define specific sales force objectives. Regardless of the selling context, salespeople perform one or more specific tasks:

• Prospecting. Searching for prospects or leads

• Targeting. Deciding how to allocate their time among prospects and customers

• Communicating. Communicating information about the company’s products and services

• Selling. Approaching,presenting,answering questions,overcoming objections,and closing sales

• Servicing. Providing various services to the customers—consulting on problems, rendering technical assistance,arranging financing,expediting delivery

• Information gathering. Conducting market research and doing intelligence work

• Allocating. Deciding which customers will get scarce products during product shortages

To manage costs, most companies are choosing a Leveraged Sales Force that focuses reps on selling the company’s more complex and customised products to large accounts and uses inside salespeople and Web ordering for low-end selling.

To maintain a market focus, salespeople should know how to analyse sales data, measure market potential, gather market intelligence, and develop marketing strategies and plans.

Too often marketing and sales are in conflict:the sales force complains marketing isn’t generating enough leads and marketers complain the sales force isn’t converting them. Improved collaboration and communication between these two can increase revenues and profits.

Once the company chooses its strategy, it can use a direct or a contractual sales force.

Direct (Company) Sales Force – consists of full- or part-time paid employees who work exclusively for the company. Inside sales personnel conduct business from the office using the telephone and receive visits from prospective buyers,and field sales personnel travel and visit customers.

Contractual Sales Force – consists of manufacturers’ reps, sales agents, and brokers, who earn a commission based on sales.

Sales Force Structure
The sales force strategy also has implications for its structure. A company that sells one product line to one end-using industry with customers in many locations would use a territorial structure. A company that sells many products to many types of customers might need a product or market structure. Some companies need a more complex structure.
Sales Force Size
Sales representatives are one of the company’s most productive and expensive assets. Increasing their number increases both sales and costs. 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 has five steps:

1. Group customers into size classes according to annual sales volume.

2. Establish desirable call frequencies (number of calls on an account per year) for each customer class.

3. 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.

4. Determine the average number of calls a sales representative can make per year.

5. Divide the total annual calls required by the average annual calls made by a sales representative, to arrive at the number of sales representatives needed.

Sales Force Compensation
To attract top-quality reps, the company must develop an attractive compensation package. The company must quantify four components of sales force compensation.

The fixed amount – a salary, satisfies the need for income stability.

The variable amount – whether commissions, bonus, or profit sharing, serves to stimulate and reward effort.

Expense allowances – enable sales reps to meet the expenses of travel and entertaining.

Benefits – such as paid vacations, sickness or accident benefits, pensions, and life insurance, provide security and job satisfaction.

Fixed and variable compensation give rise to three basic types of compensation plans—straight salary, straight commission, and combination salary and commission.

Straight-salary plans provide a secure income,encourage reps to complete nonselling activities, and reduce incentive to overstock customers.

Straight-commission plans attract higher performers,provide more motivation,require less supervision,and control selling costs.

Combination plans feature the benefits of both plans while limiting their disadvantages.

One current trend deemphasizes sales volume in favour of gross profitability, customer satisfaction, and customer retention.

Various policies and procedures guide the firm in recruiting, selecting, training, supervising, motivating, and evaluating sales representatives to manage its sales force.
Recruiting and Selecting Representatives
At the heart of any successful sales force is a means of selecting effective representatives. 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. After management develops its selection criteria, it must recruit.

The human resources department solicits names from current sales representatives, uses employment agencies, places job ads, and contacts college students.

Training and Supervising Sales Representatives
Today’s customers expect salespeople to have deep product knowledge, add ideas to improve operations, and be efficient and reliable. These demands have required companies to make a much greater investment in sales training. Reps paid mostly on commission generally receive less supervision. Those who are salaried and must cover definite accounts are likely to receive substantial supervision.
Sales Rep Productivity
Left to their own devices, many reps will spend most of their time with current customers, who are known quantities. Reps can depend on them for some business, whereas a prospect might never deliver any. Companies therefore often specify how much time reps should spend prospecting for new accounts.

Time-and-duty analysis helps reps understand how they spend their time and how they might increase their productivity. In the course of a day,sales reps spend time planning, travelling, waiting, selling, and doing administrative tasks (report writing and billing; attending sales meetings; and talking to others in the company about production, delivery, billing, and sales performance).

Companies constantly try to improve sales force productivity. To cut costs, reduce time demands on their outside sales force, and leverage computer and telecommunications innovations, many have increased the size and responsibilities of their inside sales force.

Inside salespeople are of three types:
Technical Support People – provide technical information and answers to customers’ questions.
Sales Assistants – provide clerical backup for outside salespersons, call ahead to confirm appointments, run credit checks, follow up on deliveries, and answer customers’ business-related questions.
Telemarketers – use the phone to find new leads, qualify them, and sell to them.

The salesperson today has truly gone electronic. Not only is sales and inventory information transferred much faster, but specific computer-based decision support systems have been created for sales managers and sales representatives. Selling over the Internet supports relationship marketing by solving problems that do not require live intervention and thus allows more time for issues best addressed face-to-face.

Motivating Sales Representatives
The majority of sales representatives require encouragement and special incentives,especially those in the field who encounter daily challenges.

Marketers reinforce intrinsic and extrinsic rewards of all types. In other words, salespeople are highly motivated by pay and the chance to get ahead and satisfy their intrinsic needs, and may be less motivated by compliments and security.

Many companies set annual sales quotas, developed from the annual marketing plan, on dollar sales, unit volume, margin, selling effort or activity, or product type. Compensation is often tied to degree of quota fulfilment. The company first prepares a sales forecast that becomes the basis for planning production, workforce size, and financial requirements.

Evaluating Sales Representatives
We have been describing the feed-forward aspects of sales supervision—how management communicates what the sales reps 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.

The most important source of information about reps is sales reports. Additional information comes through personal observation, salesperson self-reports, customer letters and complaints, customer surveys, and conversations with other reps. Sales reports are divided between activity plans and write-ups of activity results.

Sales reps write up completed activities on call reports. Sales representatives also submit expense reports, new-business reports, lost-business reports, and reports on local business and economic conditions.

These reports provide raw data from which sales managers can extract key indicators of sales performance: (1) average number of sales calls per salesperson per day, (2) average sales call time per contact, (3) average revenue per sales call,(4) average cost per sales call, (5) entertainment cost per sales call, (6) percentage of orders per hundred sales calls, (7) number of new customers per period, (8) number of lost customers per period, and (9) sales force cost as a percentage of total sales.

The sales force’s reports along with other observations supply the raw materials for evaluation.

Reps are taught the SPIN method to build long-term relationships, with questions such as:

1. Situation questions—These ask about facts or explore the buyer’s present situation.For example, “What system are you using to invoice your customers?”

2. Problem questions—These deal with problems, difficulties, and dissatisfaction’s the buyer is experiencing.For example,”What parts of the system create errors?”

3. Implication questions—These ask about the consequences or effects of a buyer’s problems, difficulties,or dissatisfaction’s. For example,”How does this problem affect your people’s productivity?”

4. Need-payoff questions—These ask about the value or usefulness of a proposed solution. For example,”How much would you save if our company could help reduce errors by 80 percent?”

The Six Steps
Most sales training programs agree on the major steps in any effective sales process.

The first step in selling is to identify and qualify prospects. Companies qualify the leads by contacting them by mail or phone to assess their level of interest and financial capacity. “Hot” prospects are turned over to the field sales force and “warm”prospects to the telemarketing unit for follow-up.

The salesperson needs to learn as much as possible about the prospect company (what it needs, who takes part in the purchase decision) and its buyers (personal characteristics and buying styles). The sales rep must thoroughly understand the purchasing process in terms of “who, when, where, how, and why” in order to set call objectives: to qualify the prospect, gather information, or make an immediate sale. Another task is to choose the best contact approach—a personal visit, a phone call, or a letter. Finally,the salesperson should plan an overall sales strategy for the account.

The salesperson tells the product “story” to the buyer, using a features, advantages, benefits, and value (FABV) approach. Features describe physical characteristics of a market offering. Advantages describe why the features provide an advantage to the customer. Benefits describe the economic, technical, service, and social pluses delivered by the offering. Value describes the offering’s worth (often in monetary terms).

Customers typically pose objections. Psychological resistance includes resistance to interference, preference for established supply sources or brands, apathy, reluctance to give up something, unpleasant associations created by the sales rep, predetermined ideas, dislike of making decisions, and neurotic attitude toward money. Logical resistance might be objections to the price, delivery schedule, or product or company characteristics. To handle these objections, the salesperson maintains a positive approach, asks the buyer to clarify the objection, questions in such a way that the buyer answers his own objection, denies the validity of the objection, or turns it into a reason for buying.

Closing signs from the buyer include physical actions, statements or comments, and questions. Reps can ask for the order, recapitulate the points of agreement, offer to help write up the order,ask whether the buyer wants A or B,get the buyer to make minor choices such as color or size,or indicate what the buyer will lose by not placing the order now.

Follow-up and maintenance are necessary to ensure customer satisfaction and repeat business. Immediately after closing, the salesperson should cement any necessary details about delivery time, purchase terms, and other matters important to the customer. The salesperson should schedule a follow-up call after delivery to ensure proper installation, instruction, and servicing and to detect any problems, assure the buyer of the salesperson’s interest, and reduce any cognitive dissonance. The salesperson should develop a maintenance and growth plan for the account.

Relationship Marketing
Salespeople working with key customers must do more than call only when they think customers might be ready to place orders. They should call or visit at other times and make useful suggestions about the business. They should monitor key accounts, know customers’ problems, and be ready to serve them in a number of ways,adapting and responding to different customer needs or situations. Relationship marketing is not effective in all situations. But when it is the right strategy and is properly implemented, the organisation will focus as much on managing its customers as on managing its products.
Chapter Summary
1. Direct marketing is an interactive marketing system that uses one or more media to effect a measurable response or transaction at any location. Direct marketing, especially electronic marketing, is showing explosive growth.

2. Direct marketers plan campaigns by deciding on objectives, target markets and prospects, offers, and prices. Next, they test and establish measures to determine the campaign’s success.

3. Major channels for direct marketing include face-to-face selling, direct mail, catalogue marketing, telemarketing, interactive TV, kiosks, Web sites, and mobile devices.

4. Interactive marketing provides marketers with opportunities for much greater interaction and individualisation through well-designed and executed Web sites, search ads, display ads, and e-mails. Mobile marketing is another growing form of interactive marketing that relies on text messages, software apps, and ads.

5. Word-of-mouth marketing finds ways to engage customers so they choose to talk with others about products, services, and brands. Increasingly, word of mouth is being driven by social media in the form of online communities and forums, blogs, and social networks such as Facebook, Twitter, and YouTube.

6. Two notable forms of word-of-mouth marketing are buzz marketing, which seeks to get people talking about a brand by ensuring that a product or service or how it is marketed is out of the ordinary, and viral marketing, which encourages people to exchange online information related to a product or service.

7. Salespeople serve as a company’s link to its customers. The sales rep is the company to many of its customers, and it is the rep who brings back to the company much-needed information about the customer.

8. Designing the sales force requires choosing objectives, strategy, structure, size, and compensation. Objectives may include prospecting, targeting, communicating, selling, servicing, information gathering, and allocating. Determining strategy requires choosing the most effective mix of selling approaches. Choosing the sales force structure entails dividing territories by geography, product, or market (or some combination of these). To estimate how large the sales force needs to be, the firm estimates the total workload and how many sales hours (and hence salespeople) will be needed. Compensating the sales force entails determining what types of salaries, commissions, bonuses, expense accounts, and benefits to give, and how much weight customer satisfaction should have in determining total compensation.

9. 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 products, policies, and customer-satisfaction orientation; (3) supervising the sales force and helping reps to use their time efficiently; (4) motivating the sales force and balancing quotas, monetary rewards, and supplementary motivators; (5) evaluating individual and group sales performance.

10. Effective salespeople are trained in the 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 is a six-step process: prospecting and qualifying customers, preapproach, presentation and demonstration, overcoming objections, closing, and follow-up and maintenance.

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