Integrated Marketing Communication: Personal Selling and Direct Marketing

1. Integrated Marketing Communication: Personal Selling and Direct Marketing Chapter 13

2. Road Map: Previewing the Concepts • Discuss the role of a company’s salespeople in creating value for customers and building customer relationships. • Identify and explain the six major sales force management steps. • Discuss the personal selling process, distinguishing between transaction-oriented marketing and relationship marketing.

3. Road Map: Previewing the Concepts • Define direct marketing and discuss its benefits to customers and companies. • Identify and discuss the major forms of direct marketing.

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

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

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

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

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

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

10. Recruiting and Selecting Salespeople • Key talents of salespeople: • Intrinsic motivation • Disciplined work style • Ability to close a sale • Ability to build relationships with customers

11. Recruiting Salespeople • Web searches • College students • Recruit from other companies • Recommendations from current sales force • Employment agencies • Classified ads

12. Sales Force Training Goals • Learn about and identify with the company. • Learn about the company’s products. • Learn customers’ and competitors’ characteristics. • Learn how to make effective presentations. • Learn field procedures and responsibilities.

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

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

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

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

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

18. Direct Marketing

19. Four lmportant, Similarly Worded DM Terms • Direct Mail • Mail Order • Direct Response Advertising • Direct Marketing

20. Four lmportant, Similarly Worded DM Terms b • Direct Mail: is in fact a promotional medium. Like all media, it is used to disseminate messages… either to inform, persuade, and/or remind.

21. Four lmportant, Similarly Worded DM Terms • Direct Mail • Mail Order: does its promotion through any medium. It facilitates responses, remotely, without direct, face-to-face contact between buyer and seller.

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

23. Four lmportant, Similarly Worded DM Terms • Direct Mail • Mail Order • Direct Response Advertising • Direct Marketing: is an interactive system of marketing that uses one or more advertising media to effect an immediate, measurable response and/or transaction at any location, with this activity stored on an (individual) database…Source: The Direct Marketing Association

24. Direct Marketing • Direct marketing consists of direct connections with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships…Source: Kotler & Armstrong

25. Demassification – A move Toward Concentrated/Niche Segmentation The Growth of Direct Marketing The Internet/email Higher Costs of Driving, Traffic and Parking Congestion Consumers Lack of Time Convenience of Ordering From Direct Marketers Growth of Customer Databases

26. Mass Marketing Vs. Direct Marketing Mass Mkting Direct Marketing *Individual Customer Average Consumer Customer Anonymity *Customer Profile Standard Product *Customized Market Offering Mass Production *Customized Production Mass Distribution *Individualized Distribution * Individualized Message Mass Advertising *Individualized Incentives Mass Promotion *Two-Way Messages One-Way Message *Economies of Scope Economies of Scale Share of Mind *Share of Customer All Customers * Profitable Customers Customer Attraction * Customer Retention

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

28. Individual versus Market Data …% of ind. sales …% of ind. Customers NO ..???..must mass market • Hypothetical Company Data: • Annual Sales = $ 1,000,000 • # of Transactions = 10,000 • Average Sale = $ 100 Company with Database: Rank Customers best/worst Profile/segment all/best customers Prospect based on profiles Version copy/offers Track sales by media, offer, copy Retain customer based on value

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

30. The Promotion: Free books to stimulate Bloch School undergraduates to continue on to acquire a Bloch graduate degree…proposed in Summer, 1995. Calculating the Value of a Customer (LTV) Current Situation: • In 1994-5, The Bloch School spent $ 3000 in time/space advertising, and $ 15,000 for multi-purpose brochures, a total of $ 18,000, which was 0.3 % of its total budget. • From 1990-1994, only 14.2 percent of its new graduate enrollees were Bloch undergraduates.

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

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

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

34. Calculating (LTV): Table 3: Estimated Costs of the Proposed Sales Promotion: Mailing cost of invitations to 1988-1989 pregraduates 100.00 Graduate School and GMAT… 273.00 application packets and materials (passed out at each pizza meeting) = (.75) X (182) X ($ 2.00) (Meetings first Monday and Tuesday, Fall Semester, 1988 250.00 cost of pizza, pop, delivery.) Books for the 40 students who 12,000.00 would have gone on to graduate programs regardless…based on the highest throughput in the last 5 years… (40 students) X ($ 150 in books/course)X(2 courses) Total Sales Promotional Costs = $ 12,633.10

35. Calculating (LTV): Table 2 Sample of Student Records Used

36. Fraction of Total Hours Taken by Fall 1988 New Students by Year Academic Year and by Tuition Category Table 3: LTV calculation table for graduate students beginning Bloch classes in Fall 1988 Average total hours matriculated per student =3183/152=20.941

37. Calculating (LTV): Table 4 Discounting the Tuition Paid Back to 1988-1989 Levels

38. Calculating (LTV): Table 5 Total Tuition of 100 New Students Beginning Coursework in Fall 1995-96 by Academic Year and by Tuition Category * Sums may not equal totals due to rounding.

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

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

41. Calculating LTV: The Analysis (cont)Sales Promotion Breakeven (BE) Calculation BE = Total Sales Promotional Cost Contribution Margin = $ 12,633.10 = 3.059 Students $ 4,129.33 Arguments based on the Data: * Would require a 7.5% increase in the 40 students who would have matriculated anyway without the sales Promotion…3 students! * Would require a 2.1% increase in the 142 students who would not have matriculated without the Sales Promotion…3 students!

42. Note: Predicted MO 2001-2002 Tuition = $ 184.19/hour Actual Mo 2001-2002 Tuition = $ 179.10/hour a difference of 2.8 % Calculating LTV: The Analysis

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

44. Benefits of Direct Marketing • Benefits to Buyers: • Convenient • Easy to use • Private • Ready access to products and information • Immediate and interactive

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

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

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

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

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

50. Direct Response TV Marketing • Direct-response advertising • Infomercials • Home shopping channels