Unit 10: Personal Selling

Personal selling process, Sales force objectives, Sales force strategy, Sales force structure,, Sales force
size, Sales force competition, Motivating the sales force.

Introduction

Advertisement clutter and large product assortment are posing new challenges. One of the major
challenges is how to reach consumer. The indirect media has an influence on consumer but its
effectiveness in generating the sales has diminished over the period. Organizations are looking towards
interpersonal communications. Companies are encouraging word of mouth communication and viral
marketing. They are concentrating on enhancing the effectiveness and efficiency of their sale force. In
this unit, we are discussing the personal selling, sales force management and direct marketing concepts

Personal Selling

Personal selling is the interpersonal communication tool of the promotion mix. A company’s salespeople
create and communicate customer value through personal interactions with customers.

Personal selling involves the communication technique in which sales people build the personal
relationship with customers to generate the value for the organization.

The value may be sales and benefits to the customer. The value may not be only financial gains, but it
may be providing the information to customer. For example, Medical representatives of DJPL provide
the information to doctors and they don’t actually sell the medicine to them.

Advantages and Disadvantages of Personal Selling

Advantages

1. It can be customized since personal element or face to face contact is involved between the
salesperson and prospective customer.

2. It can focus on prospective customers as well as cater to the existing customers.

3. It results in the actual sale, while most other forms of promotion are used in moving the customer
closer to the sale.

4. It is very helpful in maintaining long-term customer relationships and in Customer Relationship

management

5. It is applicable when products have to be demonstrated and certain features or information has to be
specifically explained to the consumers.

6. Conveniently suits certain product categories such as consumer durables – washing machines,
dishwashers, air-conditioners, etc.; highly technical items such as computers, laptops, etc.; automobiles,
industrial goods, pharmaceutical products etc.

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Disadvantages

1. It is costly to develop and operate an effective and efficient sales force.

2. Not effective because at a time the sales person can target one or two customers and so it lacks mass
appeal.

3. It is very difficult to attract upper class people.

4. It is not appropriate for all types of products as some products may not require any personal selling.

Personal selling process

Almost every company can benefit from personal selling. While face-to-face with prospects, salespeople
can get more attention than an advertisement or a display. It requires a series of activities, all of which
must be performed exceptionally well on order to build lasting and mutually profitable relationships
between buyers and sellers.

The personal selling process consists of six stages:

(1) Prospecting and Qualifying., (2) Preapproach, (3) Approach, (4) Presentation, (5) Close, and (6)
Follow-up.

Prospecting: Personal selling begins with prospecting - the search for and qualification of potential
customers. For some products that are one-time purchases such as encyclopedias, continual prospecting
is necessary to maintain sales.

There are three types of prospects. A lead is the name of a person who may be a possible customer. A
prospect is a customer who wants or needs the product. If an individual wants the product, can afford to
buy it, and is the decision maker, this individual is a qualified prospect.

Leads and prospects are generated using several sources forms: consulting a variety of sources such as
the professional press magazines, the Internet sites, the year books on paper or yellow pages; taking
advantage of different events, ceremonies where there are good chances to meet prospects;
determining the clients to give names of potential buyers; appealing to the distributors, retailers, the
other sales persons and bankers; contacting the professional associations where the prospects are
taking part in; participating to conferences .etc

Another approach for generating leads is through cold canvassing in person or by telephone. This
approach simply means that a salesperson may open a telephone directory, pick a name, and visit or call
that individual. Although the refusal rate is high with cold canvassing, this approach can be successful.
Cold canvassing is often criticized by consumers and is now regulated in several countries.

Preapproach: Once a salesperson has identified a qualified prospect, preparation for the sale begins
with the Preapproach. The preapproach stage involves obtaining further information on the prospect
and deciding on the best method of approach. Activities in this stage include finding information on who

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the prospect is, how the prospect prefers to be approached, and what the prospect is looking for in a
product or service. For example, a stockbroker will need information on a prospect's discretionary
income, investment objectives, and preference for discussing brokerage services over the telephone or
in person. For industrial products the preapproach involves identifying the buying role of a prospect (for
example, influencer or decision maker), important buying criteria, and the prospect's receptivity to a
formal or informal presentation. Identifying the best time to contact a prospect is also important. For
example, Northwestern Mutual Life Insurance Company suggests the best times to call on people in
different occupations: dentists before 9:30 A. M., lawyers between 11:00 A.m. and 2:00 P.m., and
college professors between 7:00 and 8:00 P.M.

Approach: The approach stage involves the initial meeting between the salesperson and prospect,
where the objectives are to gain the prospect's attention, stimulate interest, and build the foundation
for the sales presentation itself and the basis for a working relationship. The first impression is critical at
this stage.

Which tactic is taken will depend on the information obtained in the prospecting and preapproach
stages. The approach stage is very important in international settings. In many societies outside the
United States, considerable time is devoted to nonbusiness talk designed to establish a rapport between
buyers and sellers. For instance, it is common that two or three meetings occur, before business matters
are discussed in the Middle East and Asia.

Presentation: A good approach paves the way for a good presentation. Sales people should, find out in
advance where the sales presentation will occur. Some prospects prefer a formal presentation, perhaps
in front of several people. Others may simply offer a salesperson a few minutes to chat while the
prospect attends to other duties. Obviously, the more attention the better, but any attention is better
than none Some writers disagree strongly with this last point; they maintain that salespeople should not
accept an appointment unless reasonably assured of the prospect’s undivided attention.

A high degree of skill is necessary for effective adaptive selling. First, salespeople must know what
questions to ask. This requires acquiring knowledge of the prospect’s business. Asking questions
perceived to be uninformed can make a salesperson appear ill prepared at best and foolish at worst.
Second, ideally salespeople will have a good idea what the prospect will answer. Being able to creatively
apply product solutions to prospect problems requires that salespeople not be caught off guard by
questions that seem to come “out of left field.”

Closing the Sale

For many salespeople, particularly beginners, the close stands as the most difficult part of the process.
Closing a sale simply means asking the prospect for the order. Many salespeople view closing as a huge
leap beyond presenting product benefits and addressing prospect needs In reality, it’s not; it’s a natural
next step that the prospect expects the salesperson to take. A reluctant salesperson may see the close
only in terms of asking for potentially large sums of money, which might make them unconformable. Or
he or she may hesitate to close the sale out of fear the prospect may reject their proposal after all the
work getting to this point may have entailed. Therefore, many salespeople avoid this crucial step.

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Indeed, according to many sales managers, failure to close a sales presentation remains the single most
common mistake among inexperienced salespeople. One could argue that if a sales presentation goes
well and the prospect seems to impressed with the product and its benefits, the salesperson need not
ask for the order – the prospect will ask to buy. This is simply not the case! In fact, it seems pretty
unlikely under most normal circumstances. In fact, many Personal Selling – experienced prospects want
the salesperson to close the sale. Doing so is a sign of self assurance, confidence, and maturity. A good
close to a sales presentation also suggests a well-trained salesperson, a factor of great importance to
some prospects who want knowledgeable people handling their accounts. A well executed close means
more than simply asking the prospect for the order. Abruptly asking, “Okay, you ready to buy some
now? How ‘bout an order?” will likely undo any confidence a good presentation instilled in the prospect.
Salespeople should ease into the close as if wanting to buy is an obvious feeling.

Follow-up: The selling process does not end with the closing of a sale; rather, professional selling
requires customer follow-up. The follow-up stage includes making certain the customer's purchase has
been properly delivered and installed and difficulties experienced with the use of the item are
addressed. It is important that the salesman follows the client to get informed of his satisfaction degree
and, maybe, his probability of repurchase. Once the sale is done, the sales person must give all the
complementary information regarding the distribution delays, paying terms or the service after the
sales. It is often recommended to make a control visit after the reception of the merchandize to verify
that everything is all right. Such visit permits to detect a certain problem, to reveal the interest of the
salesman in his client and to assure the customer that he has taken the right decision.

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THE ALCOA’S CASE

Alcoa is a major supplier of sheet aluminum and special metal alloys, to manufacturers who make a wide
variety of products-ranging from soft-drink cans to airplanes, like Boeing's new 777 jet. To do a better
job of meeting its customers' needs, Alcoa has made a company wide commitment to constantly
improve the quality of its offerings. Alcoa recognizes that understanding and meeting customer
requirements is what quality is all about. As the cover of its recent annual report states: "Customer
satisfaction comes from listening, learning, understanding customer needs and continuously improving
the value we provide. Our best customer relationships become long-term partnerships."

Alcoa's salespeople are at the heart of that listening, teaming, and understanding process. To make the
partnership a profitable success, both for Alcoa and for the customer, they perform many sales tasks.
For example, with a customer like Boeing, a salesperson must work closely with engineers, purchasing
people, production people, and the other purchase influences to understand their needs-and to help
find solutions to those needs. Specialists help resolve the technical challenges. But the salespeople need
real skill to get the order and close the deal. That's just the start. An Alcoa salesperson is there all along
the way to provide technical support after the sale, ensure all orders meet Boeing's exact quality
specifications, and promptly resolve any problems that may arise.

To be certain that these challenging jobs are done well, Alcoa recruits good people and then provides
the sales training to make them even better. New people may need training to build professional
problem-solving and sales presentation skills. Even experienced sales reps need ongoing training. For
example, Alcoa gives its salespeople training in the firm's new quality programs and how they relate to
customer needs.

Different salespeople have different skills and experience. So Alcoa must carefully match them to
particular territories, customers, and product lines. And to be sure that each salesperson is highly
motivated, Aloca’s sales managers must make certain that sales compensation arrangements motivate
and reward sales people for producing needed results.

In conclusion, personal selling involves the two-way flow of communication between a buyer and a
seller, often in a face-to-face encounter, designed to influence a person's or group's purchase decision.
Personal selling plays a major role in a firm's marketing effort. Salespeople occupy a boundary position
between buyers and sellers; they are the company to many buyers and account for a major cost of
marketing in a variety of industries, and they can create value for customers.

Good salespeople don't just try to sell the customer. Rather, they try to help the customer buy-by
understanding the customer's needs and presenting the advantages and disadvantages of their
products. Such helpfulness results in satisfied customers-and long-term relationships. And strong
relationships often form the basis for a competitive advantage, especially for firms that target business
markets.

The personal seling process means to master the prospecting, preapproach, approach, presentation,
close, and follow-up. The marketing optique emphasisis the salesman capacity to listen to the client and
understand his needs and thus, revealing to his an adapted solution.

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 Designing the Sales Force

The term sales person refers to an individual representing a company to a customers by performing one
or more of the following activities: prospecting, communicating, selling,, servicing, information
gathering, and relationship building.

The term sales representative covers six positions, ranging from the least to the most creative types of
selling.

1. Deliverer: A sales person 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 sales person not expected or permitted to take an order but 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 or siding) or intangibles (insurance or education).
6. Solution vendor: A salesperson whose expertise lies in solving a customer’s problem, often with
a system of the firm’s goods and services (such as computer and communications systems).

In general, salespeople perform one or more of the following tasks:

➤ Targeting Prospecting: Searching for prospects, or leads,
➤ Deciding how to allocate their time among prospects and customers,
➤ Communicating: Communicating information about the company’s products and
services,
➤ Selling: Approaching, presenting, answering objections, and closing sales,
➤ Servicing: Providing various services to customers—consulting on problems,
rendering technical assistance, arranging financing, expediting delivery,
➤ Information gathering: Conducting market research and doing intelligence work, and
➤ Allocating: Deciding which customers will get scarce products during shortages.

Designing the Sales force Sales force Sales force Sales force size Sales force
objectives strategy structure
sales Force compensation

In designing the sales force, the company must consider the development of sales force objectives,
strategy, structure, size and compensation.

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Sales Force Objectives and Strategy
The objectives of individual salespeople should aligned with the strategic marketing goals of the firm.
Before attempting to set individual sales people’s objectives, sales management must answer questions
such as: should the firm be pursuing opportunities with new customers or depending relationship with
its existing customers? Does a new product deserve special attention because it will play a strategic role
in the firm’s product portfolio in the future? how should the firm position its products against the
products of competing firms?
Setting its salespeople’s objectives and associated sales tasks defines and communicates the
role the firm expects individuals to play in the pursuit its strategic goals. Sales management must
determine how much authority to delegate to individual sales people. For example, should management
determine the number of new customers with which salespeople should meet, or should the
salespeople decide weather to spend their time developing their existing base or meeting with new
customers? Should management set sales targets for each of the firm’s product lines or let the
salespeople determine which of its products best meet their customers’ needs?

More specific objectives need to be established when the goals of individual sales people
diverge from the goals of the firm, and when salespeople do not have the capacity, perhaps because
they are relatively new to selling, to make good decisions on their own.

Once the company decides on objectives and strategy, it can use either a direct or a contractual sales
force. A direct (company) sales force consists of full- or part-time paid employees who work exclusively
for the company. This sales force includes inside sales personnel, who conduct business from the office
using the telephone, fax, and email, and receive visits from prospective buyers, and field sales
personnel, who travel and visit customers. A contractual sales force consists of manufacturers’ reps,
sales agents, and brokers, who are paid a commission based on sales.

Sales Force Structure

The sales force strategy has implications for the sales force structure. If the company sells one product
line to one end-using industry with customers in many locations, it would use a territorial sales force
structure. If the company sells many products to many types of customers, it might need a product or
market sales force structure. Some companies need a more complex structure. Motorola, for example,
manages four types of sales forces: (1) A strategic market sales force composed of technical,
applications, and quality engineers and service personnel assigned to major accounts; (2) A geographic
sales force calling on thousands of customers in different territories; (3) A distributer sales force calling
on and coaching Motorola distributers; and (4) an inside sales force doing telemarketing and taking
orders via phone and fax.

Established companies need to revise their sales force structure as market and economic conditions
change.

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Table :Sales Force Structures (Table -summarizes the most common sales force structures.)

Territorial: Each sales representative is assigned an exclusive territory.This structure results in a

clear definition of responsibilities and increases the rep’s incentive to cultivate local business and
personal ties.Travel expenses remain relatively low, because each rep travels within a small area.

Product: The importance of sales reps’ knowing their products, together with the development of
product divisions and product management, has led many companies to structure their sales forces
along product lines. Product specialization is particularly useful for product lines that are technically
complex, highly unrelated, or very numerous. Kodak uses one sales force for its film products that are
intensively distributed, and another sales force to sell complex products that require technical support.

Market: Companies often specialize their sales forces along industry or customer lines. IBM set up a
sales office for finance and brokerage customers in New York, another for GM in Detroit, and still
another for Ford in Dearborn. Market specialization helps the sales force become knowledgeable about
specific customer needs, but the major disadvantage is that customers are scattered throughout the
country, requiring extensive travel.

Complex: When a company sells a diverse product line to many types of customers over a broad
geographical area, it often combines several structures, with sales forces specialized by territory-
product, territory-market, product-market, and so on. A sales representative might then report to one
or more line and staff managers. Motorola has four types of sales forces: (1) a strategic market sales
force composed of technical, applications, and quality engineers and service personnel assigned to
major accounts; (2) a geographic sales force calling on customers in different territories; (3) a
distributor sales force calling on and coaching Motorola distributors; and (4) an inside sales force
handling orders via phone and fax.

Sales Force Size

Once the company clarifies its sales force strategy and structure, it is ready to consider sales force size,
based on the number of customers it wants to reach. One widely-used method for determining sales
force size is the five-step workload approach:
(1) Group customers into size classes by annual sales volume.
(2) Establish call frequencies, the number of calls to be made per year on each account in a size class
(3) Multiply the number of accounts in each size class by the call frequency to arrive at the total yearly
sales call workload.
(4) Determine the average number of calls a sales rep can make
per year; and
(5) Divide the total annual calls (calculated in step 3) required by the average annual calls made by a rep
(calculated in step 4) to see how many reps are needed.

Suppose the company has 1,000 A accounts and 2,000 B accounts; A accounts require 36 calls a year
(36,000 calls yearly), and B accounts require 12 calls a year (totaling 24,000 calls). The company
therefore needs a sales force that can make 60,000 sales calls a year. If the average rep can make 1,000
calls a year, the company would need 60,000/1,000, or 60 sales representatives.

Sales Force Compensation

The compensation package is a critical element in attracting top-quality sales reps, starting with the level
and components. The level of compensation must bear some relation to the “going market price” for the
type of sales job and required abilities. If the market price for salespeople is well defined, the individual
firm has little choice but to pay the going rate. However, the market price for salespeople is seldom well
defined. Published data on industry sales force compensation levels are infrequent

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and generally lack sufficient detail.

The company must next determine the four components of sales force compensation— a fixed amount,
a variable amount, expense allowances, and benefits. The fixed amount, a salary, is intended to satisfy
the sales reps’ need for income stability. The variable amount, which might be commissions, a bonus, or
profit sharing, is intended to stimulate and reward greater effort. Expense allowances enable sales reps
to meet the expenses involved in travel, lodging, dining, and entertaining. Benefits, such as paid
vacations, sickness or accident benefits, pensions, and life insurance, are intended to provide security
and job satisfaction. Fixed compensation receives more emphasis in jobs with a high ratio of nonselling
to selling duties and in jobs in which the selling task is technically complex and involves teamwork.
Variable compensation receives more emphasis in jobs in which sales are cyclical or depend on
individual initiative.

Fixed and variable compensation give rise to three basic types of compensation plans—straight salary,
straight commission, and combination salary and commission. Only one-fourth of all firms use either a
straight-salary or straight-commission method, while three-quarters use a combination of the two,
though the relative proportion of salary versus incentives varies widely.

Straight-salary plans provide sales reps with a secure income, make them more willing to perform
nonselling activities, and give them less incentive to overstock customers. From the company’s
perspective, they provide administrative simplicity and lower turnover. Straight-commission plans
attract higher sales performers, provide more motivation, require less supervision, and control selling
costs.

Combination plans offer the benefits of both plans while reducing their disadvantages.
Such plans allow companies to link the variable portion of a salesperson’s pay to a wide variety of
strategic goals. One trend is toward deemphasizing volume measures in favor of factors such as gross
profitability, customer satisfaction, and customer retention. For example, IBM now partly rewards
salespeople on the basis of customer satisfaction as measured by customer surveys.

MOTIVATING THE SALES FORCE

Some ambitious sales representatives are self-starters who will put forth their best effort without any
special coaching. The majority of reps, however, require more encouragement and special incentives.
This is especially true of field selling, which can be frustrating because reps usually work alone, keep
irregular hours, are often away from home, frequently lack the authority to do what is necessary to win
an account, and sometimes lose large orders they have worked hard to obtain. Most people, moreover,
require incentives, such as financial gain or social recognition, to operate at full capacity.

Studying sales rep motivation, Churchill, Ford, and Walker developed a model indicating that the higher
the salesperson’s motivation, the greater his or her effort. Greater effort will lead to greater
performance, greater performance will lead to greater rewards, greater rewards will lead to greater
satisfaction, and greater satisfaction will reinforce motivation. The model thus implies that sales
managers must be able to convince salespeople that (1) They can sell more by working harder or by
being trained to work smarter, and (2) the rewards for better performance are worth the extra effort.

According to this research, the most-valued reward was pay, followed by promotion, personal growth,
and sense of accomplishment. The least-valued rewards were liking and respect, security, and
recognition. Thus, salespeople seem highly motivated by pay and the chance to get ahead and satisfy

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their intrinsic needs, and less motivated by compliments and security. The researchers also found that
the importance of motivators varied with demographic characteristics. Financial rewards were mostly
valued by older, longer-tenured people and those who had large families, while higher-order rewards
such as recognition were more valued by young salespeople who were unmarried or had small families
and usually more formal education. However, motivators can vary across countries. Whereas money is
the number-one motivator of 37 percent of U.S. salespeople, only 20 percent of salespeople in Canada
feel the same way. Salespeople in Australia and New Zealand were the least motivated by a fat
paycheck.

Sales Quotas
Many companies set sales quotas prescribing what reps should sell during the year. Quotas can be set
on dollar sales, unit volume, margin, selling effort or activity, and product type. After setting quotas,
management often ties salesperson compensation to degree of quota fulfillment.

Sales quotas are developed from the annual marketing plan. Management first prepares a sales
forecast, which becomes the basis for planning production, workforce size, and financial requirements.
Then the firm can establish sales quotas for regions and territories, often setting the total of all quotas
higher than the sales forecast to encourage managers and salespeople to perform at their best level. If
they fail to make their quotas, the company nevertheless might make its sales forecast.

In turn, each area sales manager divides that area’s quota to arrive at an individual quota for each sales
rep. A common approach to individual quotas is to set the individual rep’s quota at least equal to the
person’s previous year’s sales plus some fraction of the difference between area sales potential and
previous year’s sales. The more the rep reacts favorably to pressure, the higher the fraction should be.

Supplementary Motivators
Companies use additional motivators to stimulate sales force effort. One motivator is the periodic sales
meeting, a social occasion that also serves as an important tool for education, communication, and
motivation. Many companies sponsor sales contests to spur the sales force to a special selling effort
above what is normally expected. The contest should present a reasonable opportunity for enough
salespeople to win. At IBM, about 70 percent of the sales force qualifies for the 100 percent Club; the
reward is a 3-day trip capped off by a recognition dinner and a special pin.

Whether a sales contest is focused on selling a specific product or products during a limited time period
or is a more general recognition of top revenue earners for the period, the reward should be
commensurate with the achievement. Reps who are well paid and whose earnings are based in large
part on commissions are more likely to be motivated by a trip, a trophy, or merchandise than by a check
of equal value. At the same time, some firms are successfully using less conventional rewards to
motivate sales personnel. Ann Machado, founder and owner of Creative Staffing (an employment
services firm), rewards both sales and nonsales employees with expensive dinners, parties, flowers, spa
sessions, cooking lessons, and extra vacation time. Her secret is letting people pick the reward they want
and outline what they will do to earn it. Then all she has to do is approve it. “Letting people choose their
own rewards and goals empowers them,” says Machado.
Evaluating Sales Representatives
We have been describing the feed-forward aspects of sales supervision—how management
communicates what 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 their performance.

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Sources of Information
Management can obtain information about reps in several ways, including sales reports, personal
observation, customer letters and complaints, customer surveys, and conversations with other sales
representatives. Many companies require their representatives to develop an annual territory
marketing plan in which they outline their program for developing new accounts and increasing
business from existing accounts. This type of report casts sales reps into the role of market managers
and profit centers. Sales managers study these plans, make suggestions, and use them to develop sales
quotas.

Sales reps write up completed activities on call reports and, in addition, 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 rep 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.
Formal Evaluation
Sales reports, along with other observations, supply the raw materials for evaluation. There are several
approaches to conducting evaluations. One type of evaluation compares the rep’s current performance
to that individual’s past performance and to overall company averages on key sales performance
indicators. These comparisons help management pinpoint specific areas for improvement. For example,
if one rep’s average gross profit per customer is lower than the company’s average, that rep could be
concentrating on the wrong customers or not spending enough time with each customer.

Evaluations can also assess the rep’s knowledge of the firm, products, customers, competitors, territory,
and responsibilities; relevant personality characteristics; and any problems in motivation or compliance.
As indicated earlier, an increasing number of companies are measuring customer satisfaction not only
with their product and customer support service, but also with their salespeople. The sales manager can
also check that salespeople know and observe the law. For example, under U.S. law, salespeople’s
statements must match the product’s advertising claims. In selling to businesses, salespeople may not
offer bribes to purchasing agents or others influencing a sale; they may not obtain or use competitors’
technical or trade secrets through bribery or industrial espionage. Finally, salespeople must not
disparage competitors or competing products by suggesting things that are not true.

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