157 About 11 percent of all employed people, or 18 million people, are engaged in selling. The emergence of the Internet and other direct marketing techniques, along with the high cost of personal selling, is leading companies to reexamine the size and role of their sales forces. Are salespeople necessary? According to Peter Drucker: “People are simply too expensive to be used for selling. We cannot, by and large, sell anymore—we must market, i.e., we must create the desire to buy which we then can satisfy without a great deal of selling.” Companies don’t always need their own sales forces. About 50 percent of companies use contract sales forces: manufacturers’ reps, sales agents, and so on. Many companies hire outside salespeople to handle more marginal geographical areas and market segments. In hiring salespeople, you should hire only those who are sold on the company and its products. This is hard to fake. And you might prefer people who have failed, rather than those who never tried. And don’t hire any salesperson whom you wouldn’t want to invite to your home for dinner. In deciding on how much to pay salespeople, remember that low-paid salespeople are expensive, and high-paid salespeople are cheap. Top salespeople in a company often sell five times as much as the average salesperson but don’t get paid five times as much. Salespeople need to be motivated, much like football players huddled in a locker room. The real talent is to be able to motivate the average salesperson, not just the star performers. Watch out for the salesperson who thinks any sale is good no matter what its profitability. Tie compensation to the profit on the sale, not to the revenue. Each salesperson should see himself or herself as managing a profit center, not a sales center, and be rewarded accordingly. Here are other measures to look at in judging a salesperson’s performance: average number of sales calls per day, average sales-call time per contact, average cost and revenue per sales call, percentage of orders per hundred sales calls, and number of new and lost customers per sales period. Then compare this salesperson’s performance to the average salesperson’s performance to detect poor or exceptionally good performance. Poor performance is often excused by saying the market is mature. But calling a market “mature” is evidence of incompetence. It is probably easier to make money in a mature industry than in a hightech industry, to take an extreme case. The hardest job facing a salesperson is to tell a customer that a competitor has the better product. IBM expects its sales reps to recommend the best equipment for an application, even if this means recommending a competitor’s hardware. But the sales rep will win the customer’s respect and eventually his or her business. Marketing’s role is to support the sales force in the following ways:
• Marketing places ads and buys lists to identify new prospects. • Marketing prepares a profile of the best prospects so that salespeople know who to call on and who not to call on.
• Marketing describes the buying influences and rationales used by key customer decision makers. 158 Marketing Insights from A to Z • Marketing highlights competitors’ strengths and weaknesses and how the company’s products rate against competitors’ offerings.
• Marketing documents and distributes sales success stories and uses them in training programs.
• Marketing prepares and distributes communications (advertising, brochures, etc.) to customers to stimulate interest in the company’s products and make salespeople more welcome.
• Marketing uses advertising and telemarketing to find and qualify leads that can be turned over to the sales force. Smart companies are equipping their salespeople with sales automation equipment (computers, cell phones, fax and copy machines) and software.
Salespeople can research the customer before the visit, answer questions during the visit, and record important facts after the visit. Salespeople can retrieve product information such as tech bulletins, pricing information, customer buying history, preferred payment terms, and other data to facilitate their work. When the salesperson finally makes the sale, “The salesmen’s anxiety ends and the customer’s anxiety begins.” (Theodore Levitt)
Sales promotion describes incentives and rewards to get customers to buy now rather than later. Whereas advertising is a long-run tool for shaping the market’s attitude toward a brand, sales promotion is a short-term tool to trigger buyer action. No wonder brand managers increasingly rely on sales promotion, especially when falling behind in achieving sales quotas. Sales promotions work! Sales promotions yield faster and more measurable responses in sales than advertising does. Today the split between advertising and sales promotion may be 30–70, the reverse of what it used to be. The growth of sales promotion reflects the higher priority companies are attaching to current sales than to long-term brand building. It is a return to transaction marketing (TM) rather than relationship marketing (RM). Sales promotion can be directed at retailers, consumers, and the sales force. Retailers will work harder if offered price-offs, advertising and display allowances, and free goods. Consumers are more likely to buy in response to coupons, rebates, price packs, premiums, patronage awards, contests, product demonstrations, and warranties. The sales force operates more vigorously in response to contests with prizes for superior performance. Because of the variety of sales promotion tools, marketers need experience in knowing which to use. Some large companies have a sales promotion specialist who can advise brand managers. Or the company can engage the services of a specialist sales promotion agency. The main need is to not only use promotions but to review and record results so that the company can improve its sales promotion efficiency over time. Although most sales promotions increase sales, most lose money. One analyst estimated that only 17 percent of a given set of sales promotion campaigns were profitable. These are the cases where the sales promotion brings in new customers to sample the product and where they like the new product better than their previous brand. But many sales promotions only attract brand switchers looking for a lower price, who naturally abandon the brand when another brand goes on sale. Sales promotions are less likely to entice away loyal users of other brands. Thus sales promotions work poorest in product markets of high brand similarity. They tend to attract brand switchers who are looking for low price or premiums and who won’t be loyal to a brand. It is better to use sales promotions in product markets of high dissimilarity where new customers may find that they like your product and its features better than their previous choice. Sales promotions tend to be used more by weaker and smaller brands than stronger brands. Smaller brands have fewer funds to spend on advertising, and for a small cost they can get people to at least try their product. Sales promotions in general should be used sparingly. Incessant prices off, coupons, deals, and premiums can devalue the brand in the consumers’ minds. They can lead customers to wait for the next promotion instead of buying now. Companies are forced to use more sales promotion than they want by the trade. The trade demands discounts and allowances as a condition for putting the product on the shelf. The trade may demand consumer promotions also. So many companies have little choice but to comply. Prefer sales promotions that agree or enhance your brand image and add value. Try to use sales promotions with advertising. Advertising explains why the customer should buy the product, and sales promotion provides the incentive to buy. When used together, ads and sales promotions make a powerful combination.