Role of Personal Selling in B2B Marketing Essay Example

Role of Personal Selling in B2B Marketing Essay Industrial Selling Environment3 Exogenous Variables:3 Endogenous variables:3 FOUNDATIONS OF PERSONAL SELLING: AN ORGANIZATION CUSTOMER FOCUS:5 Promotion and role of personal selling:7 Personal selling: the conceptual framework:9 Stages of the selling process9 Personal selling and Competition:12 Scene 1: NEW FIRM, NEW PRODUCT LINE/MIX13 Scene 2: NEW UNKNOWN FIRM AND OLD, ESTABLISHED PRODUCT CONCEPT14 Scene 3: OLD FIRM, NEW PRODUCT-SERVICE14 Scene 4: OLD FIRM, OLD PRODUCT/SERVICE14 SALES PLANNING:14 Sales force organization15 Variable one: assignment of sales personal:15 Variable two: Type of selling and relevant sales person profiles:17 Variable three: time and territory management17 Variable four: sales training needs18 Variable five: Effective time management of all field sales personnel18 Variable six: optimization of selling efforts in a branch level operation18 Variable seven: Compensation package19 SALES CONTROL19 CHARACTERSTICS OF THE FOUR SALES CATEGORIES20 A model for Industrial Sales Force Management :21 CONCLUSION24 BIBILIOGRAPHY24 ? INTRODUCTION The quality of personal selling is the most important variable in all types of complex industrial marketing. This is very important influencing factor for convincing identified decision making unit members, whose perceived risk in vendor and model selection is the highest for capital plant and equipment, a little lesser for fabricated industrial products and services, and the least for standard industrial products and services, that s standard routine purchase. Personal selling is mainly important for coordinating with external distributors and retailers. 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Exogenous Variables: Present customers, semi-developed prospects and dealers †¢Known decision making unit members and firm-specific buying practices, based on the culture of the buying organizations that is either decentralized, mixed decentralized and has centralized decision making authority-responsibility pattern. Endogenous variables: †¢Determination of the selling strategy that is which target segments to cater to and which segments to avoid, a long with the decision base. This will depend on the vendor’s current strength and weakness. †¢The selling mix that is 6 Ps. Situational factors tend to be product-market specific †¢Government rules and regulations The need for quality trained sales professionals for three different risk situations with the following product-service groups: Types of purchase decisionsEffect of quality sales presentations by trained marketers Capital Industrial Group (CIG) †¢Very high risk †¢Very time consuming for the DMU of the buying firms †¢Very frequent purchases †¢Top quality, fully trained sales, service professionals need to be deeply involved with all DMU members in targeted buyer firms. Exhibitions, demonstrations, practical problem solving issues. †¢Referrals from satisfied customers play an important role for new vendor selection. Fabricated Industrial Group (FIG) †¢High risk †¢Time consuming for the DMU †¢Infrequent purchases †¢Complex in s far as technical, technological issues are concernedHigher the risk factor, greater th e need for quality problem solvers to: †¢Provide relevant information to DMU members time and again †¢Greater need for conviction and persuasion †¢Greater the role of physical demonstrations and referrals. Standard Industrial Group (SIG) †¢Low risk †¢More frequent purchases †¢Usually large number of well established vendors †¢Low time pressure on buyers for purchase decision making †¢Price and strict adherence to usually well defined quality standards, timely deliveries are the major criteria for split decision making on several vendors. †¢Relationship building also influences decision making over a long period of business contracts †¢Other promotional tools like sales promotion play an important part. Price negotiations are relatively more important as well as credit terms. FOUNDATIONS OF PERSONAL SELLING: AN ORGANIZATION CUSTOMER FOCUS: Business marketing strategy is executed through personal selling. Once the marketer defines target market segments based on organizational characteristics (macro level) or the characteristics of decision making units (micro level), the sales force is deployed to meet the needs of these segments. The salesperson augme nts the total product offering and serves as a representative for both buyer and seller. The image, reputation, and the seller’s ability to satisfy needs are conveyed, to an important degree, by the sales force. By helping procurement decision makers to define requirements and match the firm’s product and service to them, the sales person is offering not just a physical product but also ideas, recommendations, technical assistance, experience, confidence, and friendship. A large toy manufacturer, for example, evaluates suppliers based in product quality, delivery reliability, price, and the value of ideas and suggestion salespeople provide. This buying organization, in fact, openly solicits ideas and evaluates suppliers formally on the number and quality of these recommendations. As a representative for the buyer, the salesperson often articulates a customer specific need to RD for production personnel in the industrial firm. Product’s specification, delivery, and technical service are often negotiated through the salesperson. The salesperson serves to absorb uncertainty, reducing conflict in the buyer-seller relationship. John Knopp, a regional sales manager at Hewlett-Packard, identifies this trait in high performing sales persons; â€Å"they know how to get special things done for the customer inside or outside the system. When something has to be done outside of normal policies and practices, they find a way to get it done smoothly. Relationship Marketing: The trend toward close relationships, or even strategic partnerships, between manufacturers and their suppliers is accelerating in many business market sectors. Several forces responsible for buyer seller relationships helps in rising global competition, the quest for improved quality, rapidly changing technology and the spread of just-in-time operations. Selling Center: The selling organization members who initiate and maintain exchange relationships with industrial customers constitute the organizational selling center. The needs of a particular selling situation, especially information requirements, significantly influence the selling center’s composition. Its primary objectives are to acquire and process pertinent marketing-related information and execute selling strategies. In many industries, teamwork has emerged as a necessary prerequisite for sales success-often requiring a structured, formal selling team approach rather than the loose coalition of individuals in the selling center. Some firms such as Xerox, Hewlett-Packard and DuPont have adopted formal account management teams. The organizational buying center includes individuals who participate in the purchasing decision and who share the goals and risks of that decision. The needs of a particular buying situation dictate the composition of the buying center. Assuming visible roles in this exchange process are the sales person (selling-center representative) and the purchasing agent (buying-enter representative). The salesperson and the buyer each begin the interaction with particular plans, goals and intentions. The salesperson provides information and assistance in solving a purchasing problem in exchange for the reward of a sale. Selling Firm Buying Firm Information PProblem Solving Negotiation Friendship, Trust Product/Services Payment Reciprocity In addition to external negotiations with the buying center, the industrial salesperson, acting on behalf of the potential customer, often carries on internal negotiations with other members of the selling center, such as manufacturing or RD, to ensure a successful exchange relationship. Internal negotiations also occur within the buying center because various members represent the interests of their functional areas in selecting suppliers. Complex flows of influence characterize buyer-seller interactions in the business market. To ensure that customers are as satisfied as possible, business marketers must effectively manage the complex web of influences that intersect in buyer-seller relationships. Relationship Quality: By occupying a position close to the customer and drawing on the organization’s collective strength, the industrial salesperson is often best suited to perform the role of relationship manager. For many complex purchase decisions, organizational buyers face considerable uncertainty. From the customer’s perspective, a salesperson who can reduce this uncertainty improves the quality of the relationship. Relationship quality comprises at least two dimensions: †¢Trust in the sales person †¢Satisfaction with the salesperson In the face of the frequent uncertainty of complex industrial exchange settings, relationship quality contributes to a lasting bond by offering assurance that the sales person will continue to meet the customer’s expectations and not knowingly distort information or otherwise damage the customer’s interests. The continuity of interaction that relationship quality provides then creates ongoing opportunities for the seller to identify the customer’s unmet needs and propose new business. Promotion and role of personal selling: Personal selling is a crucial promotional tool, especially for industrial products and services. The AIDA concept stresses that the perspective buyers and users have to be made aware of the firm’s name and its products and services. Once first level awareness has been created, then results in a positive interest which in turn may lead to probable internal evaluation by the prospective buyers and users, who starts comparing this new offer with those from other established suppliers on technical, commercial and managerial grounds, after sales service etc. For consumer products and services, be these perishable, non-durable or durable items, the following characteristics are usually dominant: ? Large number of buyers and sellers ?Large number of competitors ?Wide geographical dispersions of buyers-users ?A strong influence of emotive factors, and not just rational factors on the buyers-users needs and wants Relatively, a lower sales value and volume, as compared to an equivalent unit of, say, expensive fabricated item-unit wise. In industrial buyer firms, usually the number and types of persons in the ecision making unit are usually much larger, which includes †¢The initiators can be from RD, quality, control, inspection. †¢The influencers can be from export, corporate planning, finance and marketing †¢The deciders are usually senior management personnel †¢The buyers are the internal coordinators from material management †¢The actual users are technical persons Information handling habits: ?Newspapers or insert ions in specialized journals ?Direct mail ?Tele-marketing ?Seminars and conferences ?Exhibitions ?On-the-job convincing programmes ?Use of sales and service professionals Compatible mix of the above The equal potential approach: At first the total present demand can be estimated from ?The number, types and levels of buyers-users ?Their past and present actual purchases, and growth rates ? The industrial buying methods, that id industrial buying process ? Broad geographical dispersions of buyers-users ?Their purchase frequencies and ?The expectations from the suppliers Personal selling: the conceptual framework: Personal selling is one of the most important promotion tools for industrial products and services. In a proactive vendor management the relative roles of promotools will tilt heavily in favor of quality personal selling, especially for fabricated item makers and manufacturers of capital and plant equipment. The promotional budget of the vendors for fabricated items and capital plant equipment, therefore should give †¢Minimum emphasis on publicity †¢Some emphasis on advertising †¢More emphasis on sales promotion and †¢Maximum budget for personal selling Stages of the selling process The stages of the selling process includes the 1. Prospecting and lead generation: †¢Identify a buyer-user (customer), and Maintain the customers Prospective buyer-user identification, with reference to industrial products and services, need to be application oriented. The vendor firms’ personnel have to pre-specify which firms need what types of intermediate components to make their own products and services. This listing is the first step, which leads to DMU identificat ion, assessment of the buying firms’ culture, and also of the quantities needed at a point of time. Simultaneously, competitors and their strengths and weakness need to be assessed. A vendors’ sales objective can then be planned for. 2. Handling any type of objection: First level prospectus and their relevant DMU will need information on the new vendor and the latter’s capability to solve the buyers’ problems, be it technical, commercial, or service related. The vendor firm will also have to provide information regarding the suppliers’ image, credibility, research base, and international affiliation etc. All the information provided in time to all prospective buyers to ensure that the latter parties are aware of the vendors’ services. 3. Quality sales presentations: Face-to-face interactions are essential between the buyers’ decision makers and the suppliers’ sales and service personal. The greater the technical and technological complexity and the price of the industrial product or service, the greater is the need for relatively unknown vendors to send out their best trained sales and service personal to negotiate, persuade and convince the DMU to consider them as source of the best bargain, as compared to prevailing competitive offers. Usually frequent across the interactions are required, in order to determine all aspects of the 6Ps- primarily, aspects such as †¢Product and service specifications and quantity to be delivered at a point of time which are fixed aspects †¢Price and commercial terms and Types of after sales service needed etc. 4. Sales closing: Besides functional and financial aspects, the psychological aspect of timely sales closing is also a basic trait to be learnt and developed by the vendor’s negotiating person or team. The trained negotiator also has to understand when to call it a day and ask for the buyers’ decision- i n other words, right timing is important. A little push from the proactive, aggressive professional helps the DMU, which may be in a state of confusion, to make up its minds. 5. Follow-up, feedback and replanning: This phase is often neglected, if not totally forgotten, by many professional vendors, who need to know, also in their own interest, how their product-service package is helping customers in their production and market-planning operations. These interactions help the vendors know where they stand and what more they need to do to develop a long-term business relationship with targeted buyer-user segments. This critical phase must be built into the vendor’s total selling process as a much-needed tailender, which, in reality, is a never-ending cycle. Hence, selection, recruitment, and planned training have to be carefully organized for professional marketers, whose profiles also need to be job specific. For example, for standard industrial products and services, a good planner and coordinator should have a flair for communication for maintaining external communication, meeting customers and building relationships with local distributors who are expected to service a large number of small type buyer users. For fabricated products as well as capital plant and equipment, however, more of technical specialization and servicing will be needed. The concept of integrated management system will be more relevant since each large party will demand tailored attention, from the designing of the equipment onwards. Here, the entire organization needs to be marketing oriented. For synergy and coordination within the organization, polished and sophisticated technical problem solvers are needed. They are also expected to be consultants to the major buyer-users. This type of work requires top-grade technical-cum-commercial professionals. To sum up, flexible, decentralized vendor level management need to be planners as well as doers. The principle of segmenting, targeting an positioning will be useful, when used on the basis of reliable market-based knowledge of all targeted prospects, competitors, and where needed, information on indirect distribution channel members. For specialized industrial products and services, specialized and fully-trained techno-commercial marketers will have to be selected, recruited, trained and then put on the job. Personal selling and Competition: The role of personal selling and its nature of contribution are influenced by a few exogenous factors, which includes Type of competition: ?Pure competition Monopolistic competition ?Oligopolistic competition ?No direct competitors, especially, for new products and services ? The state of monopolies The stage of the product life cycle (PLC): ?Introduction stage ?Growth stage ?Stage of maturity ?Stage of decline Some endogenous factors, from the vendor’s management’s point of view, are as follows: ? Does the vendor firm know ab out its own strengths and weakness and ? Relevant opportunities and threats ?How far should the firm reach out, say, for geographical coverage ? Are they fully aware about their competitors’ strengths and weakness Type of firmNew(unknown to the industry)Old(established product concept) New firm (unknown to the relevant industry)Scene 1 ?New firm ?New product Ex: Marubeni corporation for aluminum cansScene 2 ?New firm ?Old (similar) product and service Ex: BOC-Ohmeda Ltd for capital medical equipment Old and already established organizationScene 3: ?Old firm ?New product Ex: NCCL for IRCScene 4: ?Old firm ?Old, established product service line Ex: NALCO versus BETZ for (WTC) Scene 1: NEW FIRM, NEW PRODUCT LINE/MIX This is an extremely risky scenario, where the risks to the new vendor are the highest since both the firm and product concept are unknown. For a new firm, a new, unknown project concept can be profitably exploited only planned, systematic business developmental activities are initiated and these are professionally implemented over a fairly long period of time, for each chosen prospective user firm. The vendor firms’ own management also needs to provide the right support and work culture. The business development person has to be a problem solver and a consultant who firmly believes in utilizing the integrated, management system which ensures concurrent achievement of ? The prospect’s expectations and The venture firms’ own, usually long-term aims for an untried concept Scene 2: NEW UNKNOWN FIRM AND OLD, ESTABLISHED PRODUCT CONCEPT This is a situation which arises when a new, relatively unknown firm enters the market with a known product-service concept. Oligopolistic competition can be prevalent in such a situation. Scene 3: OLD FIRM, NEW PRODUCT-SERVICE In third scenario, a known vendor firm such a s M/s Nicco Cables Corporation India Ltd, which had been operating in India for a long time, introduces a totally unknown technology, in this case, that of irradiated cables. The cable industry has a large number of competitive firms which are operating in India. Scene 4: OLD FIRM, OLD PRODUCT/SERVICE Finally, a very safe scenario has been depicted- that of an old, known firm, say, M/s Nalco chemicals India Ltd, which had been operating in India since 1984 with established fabricated industrial products and services. SALES PLANNING: This is a very important phase for any sales management function. It sets the directions and the target for the entire organization. For a new industrial product or service, or even for an established product-service mix, sales’ planning envisages the following: ? Listing of the relevant universe ?Targeting: whom to service ?The process of positioning Especially for industrial products or services, a three phase-planning can be organized: ? Top-down planning, where the firms’ top management lays down its overall objectives, which should base on SWOT analysis. ?Grassroot planning, which will involve all sales service personnel ? Mixed planning process, where internally, usually once a year all the functional heads sit across the table and work out a common, feasible and achievable ? Budget ?Target ?Back-up support Sales force organization Variable one: assignment of sales personal: The assignment of sales personal to customers/territories can be for one of the following types of selling: Consultative selling: The need for knowledge-based and highly specialized expertise and experience demands that an user class or specific accounts, spread over a large geographical terrain, be assigned to a specific group of relevant consultants. For example, an industrial marketing research specialist may not be very comfortable with solving problems for firms which deal with consumers products and services. Variable-1Assignment of sales personal versus the type of selling ? Consultative ?Technical ?Commercial ?Direct Variable-2Type of selling and relevance of sales person’s profile Variable-3Time and territory management Variable-4Sales training needs for developing relevant manpower, who need to be selected for the first the right sales types for the right prospect and customer class need to be chosen and deployed Variable-5Effective time management of all field sales personnel: ? travelling time ?waiting time ?actual contract time for personnel selling ?relevant administrative functions Variable-6Optimization of selling efforts in a branch-level operation Variable-7Compensation package: ?industry-level parity ?monetary compensation direct incentives, both formal and informal Technical selling: For similar types of assignments, technical personnel may be desirable, especially for items with a high degree of technical component and knowledge requirement. Here the allocation of personnel may even be customer and or product specific. However, for products with common or similar technology in put requirements, for example, nuts and bolts, pumps and motors, transformers etc. even geographical coverage can be thought of. Technically knowledgeable fully trained and motivated sales persons have to be put on the job with clearly defined terms regarding ? he geographical or key account based responsibilities and targets ? allowable budgets for travelling, boarding, lodging, and related expenses ? their authority-responsibility relationship with peers and seniors ? the firms basic salary and incentives for actual target fulfillment ? on-the-job holding, problem solving and guidance by more experienced seniors and ? a healthy internal work climate, which should encourage team work and a synergistic approach to take care of the usually high level of market-based rejections of new yet to be established products and services. Commercial selling and direct selling: Both these types of selling need a low level of technical expertise. Hence depending on the area’s size and market needs, geographical assignment of sales people can e thought of. For multi-product marketing companies, however a mix of the above may be called for. From the same firm, a tea marketing division and another division marketing torches and batteries may necessitate different sales teams from the same location, since the customers and their needs are totally different, as also the distribution and promotional basis for awareness and interest generation. Variable two: Type of selling and relevant sales person profiles: There are two types of selling activities that helps the sales personnel of an organization, may have to engage in: ? maintenance selling ?developmental selling In the field of maintenance selling, sales persons primarily have to build long-term relationships with customers, prospects, and dealers or retailers for existing and known product/service categories. Regular planned follow-ups, on-the spot problem solving. Maintenance selling needs long-term relation builders with emphasis on short-term, pre-defined objectives. Variable three: time and territory management ?Assess a given market’s demand and potential, as also the number and geographical spread of the following segments: ? Major customers/prospects ?Medium-level parties ?Small parties ?Virgin prospects ?Dealers ?Internally, work out the past and present sales pattern, over a time period, of the existing buyers and users ? Estimate the business prospects for developmental parties. Simultaneously, the needed sales effort also has to be assessed, qualitatively to start with ? Assign the available manpower to the above buyer-user classes. This has to be worked out with the following factors in mind: ? The need to reach short term business aims, area-wise ?Future developmental planning ?The total cost budget to reach the above separately ?For a predefined period, assess the actual results versus plans and total time and cost investment ? If needed, re-design the selling strategy. Variable four: sales training needs The right type of sales persons need to be chosen for each type of sales, and they have to be effectively trained for the development of the relevant manpower. Comprehensive training is needed from time-to-time. Variable five: Effective time management of all field sales personnel The functional level of sales personnel and the product type will influence the allocation of a sales person’s effective time and its availability. The three major factors affect the time management includes: ? Actual field selling time, during which the sales persons interact with buyers-users. ?Administrative responsibilities, which vary depending on the sales person’s level of functioning. This includes aspects such as †¢Sales forecasting †¢Planning and control †¢Budgeting †¢Training and motivation of people working with them Inter-phase involvement with other departments within the firm and †¢Public relations ?A formal reporting system, within the company and for planned external communication, both written and verbal. Variable six: optimization of selling efforts in a branch level operation The sales manager needs to organize adequate back-up support. The aim is to free t he field sales personnel as much as possible, to enable optimum actual sales contacts with buyers, users and dealers from whom revenue can be generated. The sales managers, therefore need to build up the team spirit. The sales managers, especially at the branch operating levels, have a major role to play in organizing, motivating, staffing, training and controlling. Maintain the market leadership, and at the time, keep the internal sales staff motivated. Variable seven: Compensation package Based on different types of sales, the compensation packages differ: Consultative sales these are characterized by the product or service that is sold at the higher levels of an organization. Consultative type firms normally assign their sales persons specific accounts rather than geographical sales territories. Technical sales the distinctive haracteristic of technical sales is the product knowledge required by its sales persons. Although the sales process may take les time as compared to that of consultative sales, technical sales persons are no strangers to the selling process. This type of selling however is nearly always based on rational buying motives. Commercial sales more sales persons are employed fo r commercial sales than for the other types. The field is composed of two types of salespersons – order takers and order getters. The method of compensation in the commercial sales field varies with the nature of the firms’ product or services. Direct sales direct sales are primarily concerned with the sale of products and services to the ultimate consumer. There is some emotional appeal associated with this type of selling, and as a result, most successful sales persons in the field possess a strong persuasive ability. Unlike the other three types of selling, there is little emphasis placed on the stability of the employment situation. SALES CONTROL This is an internal process to assess actual over a time period. This can be done in terms of the following parameters ? Regional, actual sales versus targets ?Product-service line wise assessments Sales expenses ?Competitive inroads ?Other parameters CHARACTERSTICS OF THE FOUR SALES CATEGORIES Types of salesCharacteristics of the sales categoryCharacteristics of successful sales persons Consultative? Product or service is sold at higher levels of an organization ? Purchasing decisions usually authorized by several executives ? Sales persons assigned specific accounts rather th an geographical territories ? Sales persons are required to discuss the project with several people in the client’s organization? Smooth approach ? Personality compatible with achieving a few large successes periodically ? Ability to gain the confidence to the client Technical? Purchasing decisions requires the approval of several organization members but there are typically one or two buying influences ? Selling is based on rational economic buying motives? Very strong product knowledge ? Strong interest in detail ?Rational approach in utilizing sales techniques Commercial? Sales of a non-technical nature to business and industry ? Sales are often made on the first or second call ?Many more sales of lower rupee value than in the consecutive sector? Strong self organization ? Ability to reach the decision maker in the organizations quickly ? Ability to make a smooth presentation and close the sale Direct ? Sales of products or services to the ultimate consumer ? The sale is usually closed on the first call, or not closed at all ? Emotional appeal to the buyer ?Very high personnel turnover rate? Strong ability to close sales on the first call ? Strong persuasive ability ?Ability to identify a prospects’ buying motives quickly A model for Industrial Sales Force Management : Generally Deploying the sales force is treated as a critical task in Business sales management. The objective is to form the most profitable sales territories , deploy salespersons to serve potential customers in those territories , and effectively allocate sales force time among those customers. Deployment Analysis : A strategic Approach The size of the sales force establishes the level of selling effort that the business marketer can use. The selling effort is then organized by designating sales districts and sales territories. Allocation decisions determine how the selling effort is to be assigned to customers , prospects and products. Proper deployment requires a multistage approach to find the most effective and efficient way to assign sales resources( for example, sales calls, number of salespersons, percentage of salesperson’s time) across all of the planning and control units( PCU s) the firm serves(prospects , customers, territories, districts, products). Thus, effective deployment means understanding the factors that influence sales in a particular PCU, such as a territory. DEPLOYMENT DECISIONS FACING SALES ORGANIZATION Type of DecisionSpecific Deployment Decisions Set total level of selling effort Organize selling effort Allocate selling effort Determine sales force size Design sales districts Design sales territories Allocate effort to trading areas Allocate sales calls to accounts Allocate sales calls to prospects Allocate sales call time to products Determine length of sales call Territory Sales Response : There are eight classes of variables which influences the potential level of sales in a particular territory. The list shows the complexity of estimating sales response functions. Such estimates are needed, however, to make meaningful sales allocations. SELECTED DETERMINANTS OF TERRITORY SALES RESPONSE . Environmental factors (e. x. , health of economy) 2. Competition(number of competitive salespersons) 3. Company marketing