Sales Management Exam 1 (Ch. 1-4)

Transaction selling
involving separate organizations entering into an independent transaction involving the delivery of a product or service in return for compensation
Relationship selling
narrows the vendor pool, improves efficiencies, works directly with customers to solve problems
Relationship selling example #1
Xerox has identified few than 500 vendors with which it wants to do business. In contrast, 5000 vendors were supplying Xerox. As a result of buyers narrowing their vendor pool, salespeople are being asked to do more, working with customers, to solve their problems, improve efficiencies, and, in general, add value to their customers’ business.
Relationship selling example #2
Procter & Gamble has aggressively reorganized its clients teams so they are stationed very close to the company’s major accounts.
Leading versus managing
an important distinction for today’s successful sales manager. Effective sales management is now more often defined by how good a leader you are than how good a manager.
– Mentoring
– Communicate
– Cheerleader/coach
– Empower to make decisions
– Control
– Supervisor/boss
– Direct
Sales Management
all activities, processes, and decisions involved in managing the sales function in an organization
Sales Management Process
process of effective management of a company’s sales force, involves three interrelated sets a decisions or processes; formulation, implementation, evaluation and control.
Formulation of a sales program
The sales program should consider the environmental factors faced by the firm. Sales executives organize and plan the company’s overall personal selling efforts and integrate these with the other elements of the firm’s marketing strategy.
Implementation of the sales program
Involves selecting appropriate sales personnel and designing implementing approaches that will direct their efforts toward the desired objectives.
Evaluation and control of the sales program
Involves developing methods for monitoring and evaluating sales force performance through appropriate metrics.
Allows for adjustments of the sales program or the way it is implemented when performances is unsatisfactory .
External Environment
factors are beyond the control of the individual manager; however, companies do try to influence conditions to the extent they can through political lobbying, public relations campaigns, and the like.
Economic Environment
– Factors must be considered when analyzing market opportunities and developing sales forecasts: amount of growth, the unemployment rate, and the level of inflations.

– Global conditions also influence many firms’ ability to earn a profit (important)

– Existing distribution structure in an industry: number, types, and availability of wholesalers, retailers, and other intermediaries a firm might use to distribute its product.

– Competitive structure affects selling success.

Legal and Political Environment
– Increased number of laws regulate conduct of business

3 broad categories of relevant laws:
– Antitrust
– Consumer Protection
– Equal Employment Opportunity

Antitrust Provisions
Robinson-Patman Act
– Tying agreements
– Reciprocal dealing arrangments

Federal Trade Commmission Act
– Unfair methods of competition

Consumer Protection Provisions
The Fair Packaging and Labeling Act
The Truth-in-Lending Act
The Federal Trade Commision
Technological Environment
-Changes how salespeople/sales managers do their jobs
-Influences sales strategies
-Provides opportunities for product development
-Transportation, communications, and data processing change: sales territories, sales rep deployment, sales performance evaluation
Technological (example)
3M – more than half of the current sales volume is generated by products that were not in existence five years ago.
Social and Cultural Environment
– Sales managers: relationships with salespeople; interactions between salespeople and customers
– Managers can influence ethical performance by exmaple
– Ethical standards reflect integrity of firm
Development of moral standards by which actions and situations can be judged. It focuses on those actions that may result in actual or potential harm of some kind (e.g, economic, mental, physical) to an individual, group, or organization.
Natural Environment
– Influences demand for products: weather, natural disasters, availability of raw materials, energy resources

– Shortages may cause demarketing

– Social concern about possible negative environment impact of product and production

The sales organization may be engaged in part or all of its product line. The sales force is often required to help administer rationing programs, which allocate scarce supplies according to each customer’s purchase history.
Internal Organizational Environment
1. goals, objectives, and culture
2. human resoucres
3. financial resources
4. production and supply chain capabilities
5. service capabilities
6. research and development and technological capabilities
Corporate Culture
A well-defined mission together with a successful corporate history and top management’s values and beliefs leads to a strong development
Drivers of change
1. Building long-term relationships
2. Creating sales organizational structures that are more nimble and adaptable to the needs of different customer groups
3. Gaining greater job ownership and commitment from salespeople
4. Shifting sales management style from commanding to coaching
5. Leveraging available technology for sales success
6. Better integrating salesperson performance evaluation
The freedom of action and opportunities for personal initiative
Sales activities
multifaceted and challenging activities as part of the job
Job variety
Most people become bored doing routine tasks. Boredom is seldom (not common) a problem among professional salespeople.

Each customer has different needs and problems for which the salesperson can work to develop unique solutions. A salesperson must display insight, creativity, and analytical skill to close a sale.

Intrinsic rewards
rewards inherent satisfaction derived from elements of the job or role itself
Extrinsic rewards
rewards bestowed (honored) on the salesperson by the company
Work-family conflict
represents a lack of balance between one’s work life and family life such that work is encroaching (intruding) on family
Adaptive selling
the altering of sales behaviors during a customer interaction or across customer interactions based on perceived information about the nature of the selling situation.
Job enlargement
the sales tole today is broader than in the past and contains substantially more activities
Cost of a sales call
– The increasing involvement of salespeople in nonselling activities.
– It takes the performance of many nonselling activities over a long period of time to successfully practice relationship selling.
Trade servicer
-The sales force’s primary responsibility is to increase business from current and potential customers by providing them with merchandising and promotional assistance.
-The group of resellers such as retailers or distributors with whom this sales force does business.
Trade selling (example)
A Procter & Gamble salesperson selling soap and laundry products to chain-store personnel
Missionary Seller
-The sales force’s primary job is to increase business from current and potential customers by providing them with product information and other personal selling assistance

-Salespeople often do not take orders from customers directly but persuade customers to buy their firm’s product from distributors or other wholesale suppliers

Missionary selling (example)
Anheuser-Busch: its salespeople call on bar owners and encourage them to order a particular brand of beer from the local Budweiser distributor
Missionary detailers (example)
Pharmaceutical reps call on doctors as representatives of pharmaceutical manufacturers.
Technical seller
– The sales force’s primary responsibility is to increase business from current and potential customers by providing them with technical and engineering information and assistance.
– Accomplished through cross-functional selling teams
Technical selling (example)
A sales engineer from the General Electric jet engine company calling on Boeing.
New business seller
The sales force’s primary responsibility is to identify and obtain business from new customers. In relationship selling, this is analogous to a focus on securing and building the customer relationship
the people who perceive a problem or opportunity that may require the purchase of a new product service and thereby start the buying process.
the people in the organization who must use or work with the product or service
provide information evaluating alternative products and suppliers, and often play a major role in determining the specifications and criteria to use in making the purchase decision.
Control the flow of information to other people involved in the purchasing process – control information.

2 types: screens and filters

the person who actually contacts the selling organization and places the order/have authority to negotiate purcahses
the person with the final authority to make a purchase decision.
Initiator buying roll (example)
Complaints from maintenance workers and American Airlines about outmoded and inefficient equipment, for instance, might trigger the purchase of new machines.
User buying roll (example)
Drill-press operators at American Airlines might request that the purchasing agent buy drill bits from a particular supplier because they stay sharp longer and reduce downtime in the plant
Influencer buying roll (example)
At American Airlines, flight engineers or pilots often influence purchase decisions on the basis of their experience with the performance of various vendor options.
Gatekeeper buying roll (example)
-secretaries and American Airlines who can decide whose telephone call is put through to the executive or purchasing agent

-American Airlines purchasing agent who gathers proposals from 3 different companies and decides what to tell others in the buying center about each company

Buyer buying roll (example)
At American Airlines, the level of authority to buy is determined by the size and type of purchase involved.
Decider buying roll (example)
When American Airlines buys a complete, systemwide computer installation and upgrade, for instance, the final decision is likely to be made by the CEO or a top management committee.
Perceived risk
a function of the complexity of the product and situation, the relative importance of the purchase, time pressure to make a decision, and the degree of uncertainty about the product’s efficacy.
Selling center
brings together individuals from around the organization (marketing, customer service, sales, engineering, and others) to help the salesperson do his or her job more effectively
Team selling
structure within the sales organization that best meets customers needs
Key account
team managed by senior salesperson dedicated to serving important customer
Organizational buying decision staages
1. anticipation or recognition of a problem or need
2. determination and description of the traits and quality of the needed items
3. search for the qualification of potential suppliers
4. acquisition and analysis of proposals or bids
5. evaluation of proposals and selection of suppliers
6. selection of an order routine
7. performance evaluation and feedback
Stage 1
anticipation or recognition of a problem or need
Stage 2
determination and description of the traits and quality of the needed items
Stage 3
search for the qualification of potential suppliers
Stage 4
acquisition and analysis of proposals or bids
Stage 5
evaluation of proposals and selection of suppliers
Stage 6
selection of an order routine
Stage 7
performance evaluation and feedback
Derived demand
-Many organizational purchases are motivated by the requirements of the firm’s production process, merchandise inventory, or day-to-day operations (demand for goods and services)
Single-sourced suppliers
minimize the variation in quality of production inputs
new-task purchases
a customer is buying a relatively complex and expensive product or service for the firm time (e.g., a new piece of production equipment or a new computer system)
modified rebuy
a customer is interested in modifying the product specifications, prices, or other terms it has been receiving from existing suppliers and is willing to consider dealing with new suppliers to make these things happen
straight rebuy
a customer is reordering an item it has purchased many times (e.g., office supplies, bulk chemicals)
Marketing concept
strategic decisions about what products to market, where to market the products and how to get them to market, at what price, and how to communicate with consumers about the products
Marketing mix
4 elements: product, distribution, price, and promotion
Represent the “tool kit” marketers use to develop marketing strategy
Marketing communication mix
-Promotion mix
-Personal selling
-Advertising, sales promotion, direct marketing, and public relations and publicity
Marketing orientation
-Operationalization or implementation of the marketing concept
-Focuses on aligning all the various organizational processes and functions toward maximizing the firm’s success in the competitive marketplace
-Successful salespeople think beyond “selling”
-Market-driven companies do better market sensing
-Market-driven companies develop stronger relationships with customers and channels
-Internal partnering a critical component
Customer orientation
-Customer drives the marketing strategy, which is driven by the marketing mix
-Customer is the center of all marketing activities, and CRM software and touch points help ensure that the customer is accurately captured and monitored
-Partnership business model with shared risks and rewards
-Selling as customer business consultation
-Formalized customer analysis processes and agreements
-Proactively educating customers about value chain and cost reduction opportunities
-Focus on continuous improvement principles stressing customer satisfaction
Customer relationship management (CRM)
-A comprehensive business model for increasing revenues and profits by focusing on customers
-Overarching business philosophy and process tool to facilitate a customer-driven enterprise
Advantages of CRM
-Reduces advertising costs
-Increases awareness of customer needs
-Tracks effectiveness of promotional campaigns
-Competition for customers based on service, not prices
-Prevents over-spending on low-value clients, under-spending on high-value ones
-Speeds time to develop and market a product
-Improves use of customer channel
the intersection of a business event that takes place via a channel using a medium (e.g., online inquiry from a prospect, telephone follow-up with a purchaser on a service issue, face-to-face encounter with a salesperson)
Mass Marketing
Characteristics: market share, individual sales, limited segmentation, huge campaigns, not cost-effective, single treatments, focus on transactions, number of relationships
Technology: in-house, outsourced mailings, flat files/mailing lists, some packaged applications
Target Marketing
Apply principles of segmentation and positioning to create different strategies and marketing programs for different consumer groups

Characteristics: segmented campaigns, small mass marketing, focus on products
Technology: individual databases, application for products, proprietary solutions, limited analysis

Customer Marketing
a focus on developing relationships with individuals

Characteristics: lifetime value, multiple treatments
Technology: data warehouse, integrated data and applications

One-to-one Marketing
firms are now able to truly customize offerings for individual users

Characteristics: interactive segmentation, real-time matching, interactive TV, active web pages
Technology: internet enabled, many touchpoints integrated, cross-organization process

Customer value
when the customer weighs the costs of a relationship with a seller, the benefits realized from that relationship outweigh the costs.
Customer loyalty
-important goal of CRM processes
-typically highly satisfied with the relationship and the product offering and are very unlikely to switch to another company and its products or brands
Lifetime value of a customer
-One of the most important concepts in CRM**
-investment in CRM yields more successful long-term relationships with customers and that these relationships pay off handsomely in terms of cost savings, revenue growth, profits, and referrals.
CRM Process Cycle
1. knowledge discovery
2. market planning
3. customer interaction
4. analysis and refinement
Data mining
techniques to learn more about current and potential customers. A variety of software products are available to help manage the knowledge discovery phase.
Return on customer investment
adjustments made to the firm’s overall customer initiatives should yield more and more efficient investment of resources in the endeavor (maximized)
Strategic direction
Clarity in mission and goals provides the focus on which a firm’s marketing strategy may be built and implemented
Mission statement
attempts to answer the most basic questions about its reason for being. What is our business? What should it be? Seem like simple questions, but they are often difficult for management to answer.
flow from the company’s mission and represent more specific targets the firm wishes to meet

example: a firm’s financial position, how well it’s doing in the marketplace, the quality of its products, and the level of satisfaction of its customers.

should always be specific, measurable, and realistically attainable.
Strategic business units (SBUs)
May contain a number of different products or brands, and its competitive strategy will influence and constrain the marketing goals/objectives, strategies, and functional programs – including the activities of the sales force – appropriate for each of those products.
Strategic business units (SBU) example
General Electric has many global strategic business units competing in quite distinct markets – appliances, aircraft, plastics, and power systems.
Sustainable competitive advantage (SCA)
The keystone of a business-level strategy is a decision about how the business will compete it its industry
Distinctive competencies
-SCA is based on this
-What quality or attribute of the organization sets it aside from its competitors?
-How is it, or how will it be, different from the rest of the pack?
Distinctive competencies (example)
Hyundai; its unique mix of product quality, desirable features, and reasonable price.
Marketing opportunity
exists whenever some human need is unsatisfied. However, an unsatisfied need represents a viable and attractive opportunity for a firm only if:
1. The opportunity is consistent with the mission and objectives of the firms.
2. Enough potential customers exist for the needed product or service so the total potential sales volume is, or will be, substantial.
3. The firm has the necessary resources and expertise to capture an adequate share of the total market.
Functional relationships
Long-term relationships between buyer and seller based on close personal friendships. These personal relationships create a climate of cooperation, with open and honest communication.
Functional relationships (example)
financial planning (where the broker becomes a trusted confidant of the client) and contract manufacturing, an industry where salespeople develop strong relationships with product designers so that the sellers’ components are included in new products.
Strategic partnerships
long-term relationships in which the partners make significant investments to improve the profitability of both companies and jointly achieve strategic objectives
Full-line selling
Selling the entire line of associated products. Many companies try to get their foot in the door with any sale in order to prove their company’s worth as a supplier. The hope is that the buyer will want to purchase after trying out the company.
-Works best when the salesperson can leverage the existing relationship with the buyer.
-Trust in the the salesperson and the selling organization already exists; therefore, the sale should not be a difficult if the proper needs exist.
Preferred supplier
-When the buyer-seller relationship has reached the commitment stage, a stated or implied pledge to continue the relationship is in place.
-The supplier is assured a large percentage of the buyer’s business and and will get the first opportunity to earn any new business.
Integrated marketing communication (IMC)
The various ways the firm strategically communicates its message about its products to the marketplace.
-Effectively integrates personal selling, advertising and other communications options
Push strategy
-Attempts to build strong customer demand for its brand.
-Encourages wholesalers and retailers to carry the product to satisfy their customers and reap the resulting sales and profits
Pull strategy
-builds reseller support; it offers direct incentives to potential wholesalers and retailers to encourage them to stock the product.

Incentives offered to resellers: just-in-time reorder and delivery and category management

Selling team
Representatives from various functional departments of the company to a single customer
Division and Specialization of Labor
-Increase productivity – specialists can become proficient at assigned tasks
-Divide required selling activities to gain maximum benefits within the sales force
Line organization
-A type of vertical organization in which the chain of command runs from the chief sales executive down through levels of subordinates
-Chain of command runs from chief sales executive down through levels of subordinates
-Each subordinate responsible to one person
Line and staff organization
-Most common form of vertical organization structure, especially in medium and large-sized firms
-Several sales management activities are assigned to separate specialists
Outsourcing the sales forces
indicate the use of agents
Manufacturers representatives
-Intermediaries who sell part of the output of their principals on an extended contract basis.
-They take neither ownership nor physical possession of the goods they sell but concentrate instead on the selling function
Selling agents
Intermediaries who do not take title or possession of the goods they sell and are compensated solely by commissions from their principals
Transaction cost analysis (TCA)
when substantial transaction-specific assets are necessary to sell a manufacturer’s products, the cost of using and administering independent agents are likely to be higher than the costs of hiring and managing a company sales force.
Product organization
-Companies have separate sales forces for each product or product category in their line
-individual salespeople can develop familiarity with the technical attributes, applications, and the most effective selling methods associated with a single product or related products.
Product organization (example)
3M has more than 50 divisions manufacturing a diverse assortment of products ranging from scotch tape to abrasives to medical equipment.
Organization by customer type
-A natural extension of the marketing concept and reflects a strategy of market segmentation
-Advantage: salespeople become familiar with their customers’ specific business needs; they are more likely to discover ideas for new products and marketing approaches that will appeal to those customers.
Organization by selling function
Sales force specialize in prospecting for and developing new accounts, while a second force maintains and services old customers
Major and Key Accounts
-Separate corporate division/sales force
-Deliver high-level customer service to attract and maintain large and important customers
Key account sales execs
-Business managers capable of managing key accounts
-Customize products and services
-Plan and implement key account business plans
Span on Control
Dictated by managers and levels of management; the more of these there are, the lower the span of control, and vice versa.
Reduce span of control
-Sales task is complex
-Profit impact of each salesperson’s performance is high
-Salespeople are well paid and professional
-Also, at higher levels in the organization

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