Chapter 17 - Managing Personal Communications
I. Learning Objectives
After reading this chapter, students should:
q Know how companies can integrate direct marketing for competitive advantage
q Know how companies can do effective interactive marketing
q Know how marketers can best take advantage of the power of word of mouth
q Know what decisions companies face in designing and managing a sales force
q Know how salespeople can improve selling, negotiating, and relationship marketing skills

II. Chapter Summary
Direct marketing is an interactive marketing system that uses one of more media to effect a measurable response or transaction at any location. Direct marketing, especially electronic marketing, is showing explosive growth.

Direct marketers plan campaigns by deciding on objectives, target markets and prospects, offers, and prices. This is followed by testing and establishing measures to determine the campaign’s success.

Major channels for direct marketing include face-to-face selling, direct mail, catalog marketing, telemarketing, interactive TV, kiosks, websites, and mobile devices.

Interactive marketing provides marketers with opportunities for much greater interaction and individualization through well-designed websites as well as online ads and promotions.

Word-of-mouth marketing finds ways to engage customers so that they choose to talk with others about products, services, and brands.

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 information related to a product or service online.

Sales personnel 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.

Designing the sales force requires decisions regarding 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). Estimating how large a sales force is required involves gauging 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.

There are five steps involved 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 orientations; (3) supervising the sales force and helping reps to use their time efficiently; (4) motivating the sales force, balancing quota, monetary rewards, and supplementary motivators; and (5) evaluating individual and group sales performance.

Effective salespeople are trained in the methods of analysis and customer management, as well as the art of sales professionalism. No approach works best in all circumstances, but most trainers agree that selling is a seven-step process: prospecting and qualifying customers, preapproach, approach, presentation and demonstration, overcoming objectives, closing, and follow-up and maintenance.

III. Chapter Outline
I. Direct Marketing
A. Benefits and Ethical Issues of Direct Marketing
1. Convenient for consumer
2. Provides information to consumer on products and services
3. Supports relationship-building efforts with consumers
4. Allows for more individual targeting and personalization versus mass media
5. Ethical issues of direct marketing
B. Direct mail
1. Can target consumers at different geographic areas or specific to one consumer, i.e. state, sectional center (first three digits of zip code), zip code, zip+4, or specific mailing address
2. Leverages technology to capture and analyze consumer information in forms of data to deliver more personal communication
3. Can create different marketing campaigns for current customers and prospects (e.g. noncustomer or an aged customer with no recent activity). Retention strategies are used for existing customers and acquisition strategies are used for prospects
4. Each business vertical market has best practices of direct mail
5. Provides opportunities to measure lifetime value and word-of-mouth effects
C. Catalog marketing
1. Use of print to provide consumers with product information and ability to order products
2. Can be supplemented by in-store merchandise if cataloger has retail presence
3. Catalogs can be customized at individual consumer level
4. Business-to-business catalog marketing supports personal selling effort
5. Business-to-business catalog marketing is challenged by frequent movement of employees versus consumer residential movement, which can be tracked via ancillary processes such as national change of address and other U.S. Postal Service-sponsored capabilities
D. Telemarketing
1. Use of telephone to attract, promote, sell, and service consumers and businesses
2. Recent legislation places constraints on who may be solicited (e.g. “do not call” list)
3. Inbound telemarketing (receive calls from customers or prospects)
4. Outbound telemarketing (organization initiates calls to customers or prospects)
5. Telemarketing functions
a) Telesales - take orders; open or manage customer accounts
b) Telecoverage - calling of customers to sustain or improve customer relationships
c) Teleprospecting - generate and qualify new leads either by phone or another channel
d) Customer service and technical support
E. Other Media for Direct-Response Marketing (all contain a call-to-action mechanism such as 1-800 numbers, web addresses, brick-and-mortar addresses)
1. Newspapers and magazines can also contain response cards to be placed in mail
2. Radio
3. Direct response TV ads
4. TV infomercials
5. Billboards - effectiveness enhanced by web addresses as one word may be sufficient for consumer recall versus a 10-digit phone number
6. E-marketing

II. Interactive Marketing - leveraging the Internet for interaction
A. Advantages and Disadvantages of Interactive Marketing - interactive marketing offers many unique benefits. Messages delivered by attractive or popular sources can potentially achieve higher attention and recall
1. It is highly accountable and its effects can be easily traced
2. The Internet offers the advantage of contextual placements
3. Light consumers of other media can be reached
4. The Internet is especially effective at reaching people during the day
5. Young, high-income, high-education consumers’ online media consumption exceeds that of TV
6. Using the Internet has disadvantages - consumers can effectively screen out most messages
7. Many feel that the pros outweigh the cons for web marketing
B. Placing Ads and Promotions Online
1. Banner ads - small rectangular boxes containing text or pictures placed on related websites for a fee
2. Sponsorships of nonproduct information such as special events, news, sports, etc.
3. Search-related ads - links provided along with consumer search results, fee paid only when link is clicked on by consumer (cost per click correlated with click rank and popularity of keyword searched) 

III. Word of Mouth
A. Social Networks - have become an important force in both business-to-consumer and business-to-business marketing (e.g. MySpace, Facebook)
1. A key aspect of social networking is word of mouth
2. Companies are becoming acutely aware of the power of word of mouth
3. Word of mouth can be particularly effective for smaller business
4. Social networking can be a vital resource for companies
B. Buzz and Viral Marketing
1. Buzz marketing generates excitement, creates publicity, and conveys new relevant brand-related information through unexpected or even outrageous means
2. Viral marketing is another form of word of mouth
3. Companies can help to create buzz
C. Opinion Leaders - communication researchers propose a social-structure view of interpersonal communication. They see society as consisting of cliques, small groups whose members interact frequently
1. Bridges (people who belong to one clique and are linked to a person in another)
2. The Law of the Few (“Mavens, Connectors, Salesmen”)
3. Concentrate on the “bees” - hyperdevoted customers who live to spread the word
4. Controversial tactic - shill marketing or stealth marketing
D. Blogs - a regularly updated online journal or diary has become an important outlet for word of mouth
1. One obvious appeal of blogs is that they bring together people with common interests
E. Measuring the Effects of Word of Mouth

IV. Designing the Sales Force
A. Sales Force Objectives and Strategy
1. Objectives - tasks to perform include prospecting, targeting, communicating, selling, servicing, information gathering, and allocating
2. Strategy - approach can be sales rep to buyer, sales rep to buyer group, sales team to buyer group, and conference selling or seminar selling. A company can utilize a direct (internal) or contractual (external) sales force
B. Sales-Force Structure - territorial, product, market, and complex 
C. Sales-Force Size 
1. Based on number of customers to reach
2. Workload approach - customer volume size classes, call frequencies, total workload, average number of calls, and number of sales reps needed
D. Sales-Force Compensation - level and appropriate combination of components (fixed, variable, expense allowances, and benefits)

V. Managing the Sales Force
A. Recruiting and Selecting Sales Representatives
1. What makes a good sales representative?
2. Recruitment procedures
3. Applicant-rating procedures
B. Training and Supervising Sales Representatives
1. Goals - to know and identify with the company, to know the company’s products, to know customers’ and competitors’ characteristics
2. Other goals - to know how to make effective sales presentations, and to understand field procedures and responsibilities
C. Sales Representatives Productivity
1. Norms for customer calls
2. Norms for prospect calls
3. Using sales time efficiently
a) Time and duty analysis to improve productivity
b) Inside sales force
(1) Due to rising cost of outside sales force
(2) Rising automation (for inside and outside sales forces)
D. Motivating Sales Representatives - the higher the salesperson’s motivation, the greater his or her effort 
1. Sales quotas
2. Supplementary motivators (meetings, contests, etc.)
E. Evaluating Sales Representatives
1. Sources of information - sales reports including activity plans and write-ups of activity reports
2. Formal evaluation - current-to-past sales comparisons, customer-satisfaction evaluation, and qualitative evaluation

VI. Principles of Personal Selling
A. Professionalism - major steps involved in any sales presentation
1. Prospecting and qualifying - identify and screen out leads
2. Preapproach - learning about the prospect
3. Presentation and demonstration - tell the product “story”
4. Overcoming objections - psychological and logical resistance
5. Closing - asking for the sale
6. Follow-up and maintenance - ensure satisfaction
B. Negotiation - price and other terms are set via bargaining behavior, in which two or more parties negotiate long-term binding agreements
1. When to negotiate - appropriate whenever a zone of agreement exists
2. Formulating a negotiation strategy - note classic bargaining tactics
C. Relationship Marketing - based on the premise that important accounts need focused and continuous attention. Main steps in establishing a relationship-marketing program include:  
1. Identify the key customers meriting relationship marketing
2. Assign a skilled relationship manager to each key customer
3. Develop a clear job description for relationship managers
4. Appoint an overall manager to supervise the relationship managers
5. Have relationship managers develop long-range goals and annual customer-relationship plans

VII. Summary
IV. Opening Thought
Students should be very familiar with the marketing systems described in this chapter, especially Internet shopping. The challenge to the instructor is ensuring that students understand that Internet marketing (e-marketing) is just one of many different avenues available to marketers trying to reach their target markets. Students may be predisposed to believe that all marketing or the future of marketing is via the electronic channels. The instructor should encourage in-class discussions on this and he/she is encouraged to take the “defensive” position to help students understand the varied levels of business and consumer marketing.

For those students who are not currently in or interested in sales, their views of salesmanship (derived from personal experiences, TV, and other forms of communication) can be an interesting source of discussion. Some students will believe that “all salesmen lie”. The section concerning the sales force may present a challenge to the instructor in disproving or refuting these common assumptions about salespeople. The instructor is encouraged to spend sufficient time on this section to show to students the sales force’s role in the overall marketing communications mix for many firms. Inviting sales managers and their sales people to the class as guest speakers will help communicate the professionalism and challenging nature of this occupation.

Marketing Insight: Major Account Management

V. Teaching Strategy and Class Organization
PROJECTS
1. At this point in the semester-long marketing plan project, students who have decided to market their product/service through direct market channels should submit their proposals. All other groups must decide at this point if they will use a direct sales force and if so, to outline the specifics (including financials) for this option.

2. Market demassification has resulted in an ever-increasing number of market niches and the use of direct marketing to reach these niches is growing. In small groups (five students suggested as the maximum), have students collect as many direct marketing advertisements sent to them over the course of a month. After collecting the catalogs, credit card offers, email notices, and other forms, students are to evaluate the effectiveness of these techniques in causing them to purchase. Which of these direct market techniques do they feel is the most successful (resulted in a purchase) or least effective (caused irritation to them), and why? What can astute marketers do to increase the effectiveness of direct marketing?

ASSIGNMENTS
Small Group Assignments
1. The direct market offering, according to the text, consists of five elements—the product, offer, medium, distribution method, and creative strategy. Have the students collect direct marketing offerings (sent to them, their families, and close friends). On a scale of 1 to 5 (1 for does not work, 5 for works very well), rank each of these offerings in terms of these five elements. What is the group’s consensus as to which offers work better (and worse), and why?  

2. Most managers agree that to increase the motivation of their salespeople they have to reinforce the intrinsic and extrinsic rewards offered. However, this is not a universally accepted opinion. Many managers use one type of reward almost exclusively in their motivation techniques. Students should interview three sales managers and ask them if they emphasize intrinsic or extrinsic rewards in their salespersons’ motivation. Which method do they personally feel is the most effective, and why? Which method do they wish they did a better job in, and why? From this research, students should form a casual relationship between the industry, its competitive nature, and the motivation techniques used.

Individual Assignments
1. The ethical issues in direct marketing concern some ambiguous techniques employed. In a research paper, students are to comb websites, consumers’ reports, and other appropriate documents, for information on industries and industry practices that consumers complain most about. Students should postulate why direct marketers continue with such practices.

2. Dell Computers has begun setting up kiosks demonstrating their products in selected malls during specific promotional periods in hopes of attracting consumers to their brand by allowing them to “try before they buy”. Consumers are then directed to the company’s website to place an order. How effective do you believe this type of direct marketing is for Dell’s business? Can this strategy work for other direct marketers? And if so, for whom?

Think-Pair-Share
1. Buzz marketing, word of mouth, and viral marketing techniques have lead to a number of new ideas and products. Have students comment on what current products they feel are the “buzz” right now. Can buzz be managed? Is it more effective for a “fad”, “trend”, or “traditional” product?

2. Infomercials can be found selling almost everything possible! As a group, have students record three different infomercials and critically evaluate their effectiveness in light of the five elements of the direct market offering. Which one do students believe is the most (and least) effective, and why?

END-OF-CHAPTER SUPPORT
MARKETING DEBATE

Are Great Salespeople Born or Made?
The key to developing an effective sales force is selection versus The key to developing an effective sales force is training.

VI. Case Study
1. Marketing in China: QQ
1) What tendency does the development of Instant Messaging (IM) impart? What are the new features of Tencent QQ as an IM service?
2) What are the core competencies of Tencent QQ that you think has allowed it to triumph its counterparts?
2. Chapter Case: Dell in China  
a) Analyze the operations of Dell’s highly-efficient sales system in China.
b) Do you think the direct-and-distribution mixed model will work? What are the major difficulties in implementing it?

3. To prepare case studies based on the following materials from Chapter 17 and to present these:
• Mini Case: Coca-Cola
• Innovative Marketing: Yahoo!

VII. Main Topic(s)
A. “Direct and Interactive Marketing”

Direct-marketing methodologies have been used for decades. Initially, direct-marketing methods were simple and limited in their effectiveness. They consisted of “push” strategies with a rudimentary form of a “call-to-action”, and usually consisted of single direct-mail programs to current customers and prospects. Prospects were found by purchasing lists of names and addresses from firms called list brokers. The message was similar, if not the same, for every consumer. Catalogers were the primary users of direct marketing as the nature of their business (remote selling without a storefront) provided the only means of communicating and transacting with their customers. Direct mail and the telephone were the main methods of communication. The catalogers who had deeper financial and technical resources, performed some analysis on their customer information and created a somewhat personalized message to the customer. This was more at a subsegment level rather than at a specific individual level. For example, if they overlaid their information with purchased demographic information, they might identify which of their customers or prospects were nurses and send a uniform catalog to only these individuals. Each communication was usually a standalone, with little or no integration with other communications. A promotion would be mailed, responses would be tracked, no lifetime value would be calculated, and marketing models were basically a means of attempting some prediction of promotion responses.

As technology capabilities improved and became more affordable, organizations started to capture and analyze more information. This may have included information on prior promotions, economic conditions, pricing strategies, or competitive information. This information was then input to their customer response analysis to gain a better understanding of their customers’ behavior. Organizations started to maintain customer historical information and calculate customer lifetime value. They also started to create behavior change models in addition to their predictive behavior models.

In the mid- to late 1990s, technology, fueled by the Internet, smart kiosks, and other innovations, created an environment where customer information could be captured more quickly and accurately, which enhanced their behavior-changing methodologies. Computer processing and storage cost reductions, increasing efficiencies in data capture, storage, and retrieval complemented by marketing-specific software tools and innovative advances in technologies that supported consumer interactivity, enabled marketers to execute sophisticated strategies while sustaining and growing relationships with individual consumers. It is no longer an option but a necessity that organizations adopt best practices in technology and interactive strategies to remain competitive.

Growing consumer social pressure related to privacy has placed new constraints on organizations. Along with an organization’s ability to capture and use vast amounts of consumer information in support of their marketing strategy comes an ethical and legal obligation. Larger organizations have the challenge of ensuring that they are in compliance with current legislation related to the use of customer information, and must be prepared to handle pending legislation if enacted. Smaller organizations face the same challenges, and additionally, they do not have all of the resources to ensure their compliance. Being aware of these challenges and being able to execute a strategy to meet them are two distinct things. For example, a multidivision corporation may find that consumers have alerted one area that they no longer wish for their information to be kept and used to maintain the relationship. However, another division in the same corporation may not be aware of this request and continues to operate as before. The website www.ftc.gov is a good place to find information regarding current and pending legislation in these areas.

B. “Sales Function Considerations”
“The Death and Rebirth of the Salesperson”
This discussion focuses on the process and changes in this important area of marketing. We also consider the role and value of effective sales force policy and strategy in the overall marketing process for the organization. It is useful to update the examples so that students will be able to identify readily with this concept based on their general knowledge of the companies and products involved in the lecture/discussion.
The discussion begins by considering past sales force strategy variables. This leads into a discussion of its implications on introducing new strategies for the future, given the substantial technological and other changes sales professionals and firms will encounter in the medium- and long-run environment.
Teaching Objectives
· To stimulate students to think about the critical sales force and policy issues.
· To recognize some of the directional variables in sales force policy.
Discussion 
Introduction—Is the Customer Your Partner?
Today’s customers want solutions, and companies are remaking their sales forces to satisfy them. Nevertheless, total-quality goals and sales quotas still clash. This is the primary theme related to the new, enlightened sales force of the future. In the past, salespeople would brag that their primary purpose in life was to push metal (IBM) or slam boxes (Xerox). Today, the sales force gauges success as much by customer satisfaction as the units sold. The former is generally a much more rigorous yardstick than the latter. Companies today are finding that if you anticipate what your customers need and then deliver it beyond their expecta­tions, order flow takes care of itself.
As more managers awake to the challenge, old stereotypes are fading faster than Willy Loman’s smile and shoeshine. Forget the mythical lone-wolf salesman; today’s trend-setting salespeople tend to work in teams. The traditional sample case is more likely to hold spreadsheets than widgets. Today’s best salespeople see themselves as problem solvers, not vendors.  They gauge success not just by sales volume but also by customer satisfaction. They do not “sell”; they “partner” with the customer.
Companies that dismiss the new, more collaborative sales methods as a fad are likely to slip behind. Today’s de­manding buyers are running out of pa­tience with mere product pushers, whether at the new-car showroom, on the floor of a department store, or in the corporate conference room. They will tell you that they do not want to deal with anyone selling anything unless they can tell the firm exactly how it will help their business.
Developing a New Attitude in Selling
If ever there was a business that cried out for a new way of selling, it is that of moving cars from the show­room floor to the driveways of Ameri­ca. The familiar but widely-despised old approach is known among automotive his­torians as the Hull-Dobbs method, named after Memphis dealers Horace Hull and James Dobbs who reputedly created it following World War II. In the old Hull-Dobbs drill, customers exist to be manipulated, first by the salesman, who negotiates the ostensibly final price, then by the sales manager and finance manager, who each in succession try to bump you to a higher price.
Car buyers are fed up. A recent survey by J.D. Power & Associates found that only 35% felt well-treated by their dealers, down from 40% a decade ago. In 1983, 26% of buyers rated the integrity of their dealers excellent or very good; by 2001, that figure had dropped to under 20%. “People feel beaten up by the process,” says an owner of 13 import and domestic franchises in the suburbs of Washington, D.C. “You think you got a good deal until you walk out the door. The salesmen are inside doing high fives, and the customer is lying out on the street.”
This is where Saturn came into the car game a few years back and presented its original, no-argument, guaranteed lowest price sticker system. The price you pay for a Saturn is the one on the sticker (between $9,995 and $18,675, de­pending on model and features). However, that is only part of the package. Buy a Saturn and you buy the company’s commitment to your satisfaction. Their contact with and to the customer may appear corny, but Saturn consistently  has scored high in the J.D. Power customer satisfaction study, just below or above Lexus and Infiniti, vehicles that cost up to five times as much. It may be corny, but it works. The philosophy of “new economy” car dealers, following the Saturn model, is to exceed customer expectations.
Saturn reformed their sales methods to exploit an obvious market opportunity; the same is true for the reformed IBM sales force, which is only half the size it was in 1990. Those who survived are part of a new operation that is a cross between a con­sulting business and a conventional sales operation. Big Blue now encourages buyers to shop for salesmen before they shop for products.
Consultants obviously need a more so­phisticated set of skills than metal pushers, and in their new role, as purveyors of solu­tions rather than products, IBM’s sales teams do not always recommend Big Blue’s merchandise. About a third of the equip­ment IBM installs are made by DEC and oth­er competitors.
One aspect of managing a sales team has not changed much: How you motivate flesh-and-blood salespeople. It remains the same idiosyncratic breed of financial incentive, inspiration, and cajolery. As the sales professionals will say: “There is nothing magical about sales. You want to be truthful and present a credible story so people will want to do business with you now and in the future. To sell effectively, you need to present the facts, list your supporting arguments, and learn all the nonverbal cues your customer gives while you’re making your presentation.”
With one element of sales motivation—how they pay their salespeople—many companies believe they can improve on tra­dition. IBM, for example, is following a growing trend to base compensation partly on customer satisfaction. For some of the new wave of salespeople, 45% of the variable com­ponent of a paycheck depends on how customers rate the salesperson. In addition, this usually depends on how well the salesperson has done in helping customers meet their business objectives. The result is a salesperson can make a lot more or a lot less.
We’re All Salespeople—Officially or Unofficially
What does it take to be a truly outstanding salesperson? As is always the case, there are no simple answers. Moreover, achieving excellence in one type of sales endeavor, say selling personal insurance, undoubtedly requires somewhat different aptitudes and skills than achieving excellence when selling sophisticated information systems to corporate buyers.
High-performing salespeople generally differ from other salespeople in terms of some general attitudes they have about the job and the man­ner in which they conduct their business. High-performing salespeople:
· Represent the interests of their companies and their clients simultaneously to achieve two-way advocacy.
· Exemplify professionalism in the way they perform the sales job.
· Are committed to selling and the sales process because they believe the sales process is in the customer’s best interest.
· Actively plan and develop strategies that will lead to programs benefiting the customer.