Module 2

AN OVERVIEW OF PERSONAL SELLING

Retail Selling

Involves selling goods and services to ultimate consumers for their own personal use.
Examples: door-to-door salespeople insurance agents real estate brokers retail store clerks

Industrial Selling

Is the sale of goods and services at the wholesale level.

Industrial selling involves 3 types of customers:

1.
2.

Sales to resellers (i.e., retailers)

Sales to business users (i.e., manufacturers)

3.

Sales to institutions (i.e., hospitals or governments)

Similarities between retail and industrial selling require interpersonal skill require solid knowledge of the products being sold require an ability to discover the customer's needs and problems

Differences between retail and industrial selling industrial goods and services are more expensive and technically complex industrial customers tend to be larger and engage in extensive decision making processes involving many people within their company

Types of Sales Jobs

Simple Skills Required Order Takers

Driver Sales Person Inside Order Taker Outside Order Taker

Missionary Sales Person Support Sales People Sales Engineer

Creative Sales Representative: Tangible Products Order Getters Complex Skills Required

Creative Sales Representative: Intangibles

ALTERNATIVE SELLING TECHNIQUES

Most selling techniques conform to one of four broad philosophical orientations or approaches toward dealing with customers: 1. 2. 3. 4. The stimulus-response approach Mental-states approach Need-satisfaction approach Problem-solving approach

The stimulus-response approach

Is based on the notion that every sensory stimulus produces a response. Sales recruits learn what to say (the stimulus) and what the buyers are likely to say (the response) in most circumstances.

Mental-states approach Is based on the idea that a buyer's mind passes through successive stages before he or she decides to make a purchase. Based on the AIDA theory of persuasion (Attention, Interest, Desire, Action). Selling "formulas" are used to design a sales presentation that coincides with the buyers movement through the stages.

Need-satisfaction approach Is based on the idea that customers are to be served rather than products sold. Customers needs are the starting point in making a sale. The sales person's task is to identify the prospects needs, make the prospect aware of that need, and then persuade the prospect that his or her product or service will satisfy that need better than any other alternative.

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Problem-solving approach
Is similar to the need-satisfaction approach except that the sales person goes one step further to help the prospect identify SEVERAL alternative solutions, analyze their advantages and disadvantages, and select the best solution.

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Personal Selling: The Sales Process

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The Selling Process The personal selling process can be thought of as a chain, where each link must be successfully closed or the seller will fail to get the order. The seven steps to the personal selling process are: 1. Prospecting 2. The Preapproach 3. The Approach 4. The Presentation 5. Meeting Objections 6. Closing 7. Follow-up
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PROSPECTING Prospecting - is the method or system by which sales people learn the names of the people who need the product and can afford it. Names and addresses of good prospects can be obtained in a number of ways: 1. sales managers can prepare lists of prospects. 2. customers can suggest new leads (snowball technique). 3. present users may want new or different models. 4. competitors customers can make good prospects. 5. trade association and industry directories. 6. telephone directories. 7. other sales people. 8. suppliers, social and professional contacts.
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Prospecting - Continued One question that must be addressed by a firm's account management policies is how much emphasis sales people should give to prospecting for new customers versus servicing new accounts. In general, sales reps should devote a large percentage of time to prospecting if: 1. If the firm's product is in the introductory stage of its product life cycle. 2. If it is an infrequently purchased durable good. 3. If the typical customer does not require much service after the sale.
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Prospecting - Continued On the other hand, sales reps should spend most of their effort servicing existing customers if: 1. The firm has a large market share. 2. The firm sells frequently purchased nondurable products. 3. The firm's products require substantial service after the sale to guarantee customer satisfaction.

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THE PREAPPROACH
Preapproach - includes all the information gathering activities necessary to learn relevant facts about the prospect and his or her needs and situation. The preapproach consists of five functions: 1. To qualify the lead or disclose the party's needs and ability to pay. 2. To provide information that will enable the seller to tailor the presentation to the prospect. 3. To provide information that may keep the sales rep from making serious tactical errors during the presentation. 4. To increase the sales reps confidence to feel able to handle what ever may arise during the sale. 5. To impress the prospect that the sales rep is diligent and 17 professional.

Purchasing Agent

Buying Center

Very Low

Complexity of Products

Very High

Sales Representative

Sales Representative or Selling Team

The Preapproach
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Computerized Robot Welding Machine

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The Preapproach - Continued Qualifying the prospect:

http://www.bernardsands.com/default.asp

Before the sales person attempts to set up an appointment for a major sales presentation, he or she should determine whether the prospect qualifies as a worthwhile potential customer. Qualification involves finding the answers to three important questions: 1. Does the prospect have a need for my product or service? 2. Can I make the people that are responsible for buying so aware of that need that I can make a sale? 3. Will the sale be profitable to my company?
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The Preapproach - Continued

What the preapproach may include:

Personal Information About the Prospect

1. 2.

3. 4.
5.

Learn to spell and pronounce the name of the prospect(s). Age - older people respond to the respect that is due to them younger people in high positions like to be recognized for rising quickly in the organization. Education - may provide a topic of conversation. Residence - may reveal something about a persons social position or friends. The need for what you are selling - know how the person can best use what you are selling. 21

The Preapproach - Continued

6.
7.

8.

Authority to buy - does the prospect have to ask another person? Reference groups - Rotary Club, church, temple, country club, trade associations, etc. Recreation, interests and hobbies.

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The Preapproach - Continued

Business Information - Personnel

1. 2. 3. 4. 5. 6. Who owns the company? Who is on the board of directors? What are the business affiliations of the members of the board? Who has the final word on purchases? Who else has an influence on purchases? Who is in charge of the department that will use my product or services?

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The Preapproach - Continued

Business Information - Company Operations

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. What does it make or sell? Who are its customers? How are its products positioned in the market? What is the capacity of the plant? What parts of the finished product do they make/buy? What manufacturing processes do they employ? What type of machines do they own? What types of materials do they buy? What maintenance schedule do they operate on? Where does the company rate in the industry - volume?
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The Preapproach - Continued

Business Information - Buying Practices 1. 2. 3. 4. 5. 6. What purchasing procedures are followed by the purchasing department? When does the firm buy? How much do they buy? Who else do they buy from? Why? Are they happy with their current sources of supply? Does the firm practice reciprocity?

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THE APPROACH Approach - inspires interest in hearing more about the proposition, makes an easy transition into the presentation, and gets the prospects attention.

Objectives of the approach:

1. Attention - frequently a prospects mind is on something else. Under no circumstance should you carry on with the sale while the prospects attention is diverted. Interest - it is also possible that once youve gained attention the prospect will decide that they arent interested in what you have to say. A good approach provides the prospect with a reason for listening. Tell them the benefits of your offer. Transition - another objective of the approach is to lead smoothly into the presentation.
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2.

3.

The Approach - Continued

For most sales training programs, six basic approaches are used: 1. Introductory approach - the sales rep merely introduces him/herself and identifies the company he or she represents. 2. Assessment approach - the sales rep opens the interview with a plea for information or permission to investigate the company's problem. 3. Product approach - consists of handing the product to the prospect, with little or no conversation. 4. Customer-benefit approach - the sales rep selects a benefit package that will likely be of most interest to the prospect - based on what is known about the situation. 5. Referral approach - the sales rep receives permission of past or present customers to use their names as a reference in meeting a new prospect. 6. Consultative approach - the sales rep opens the sale by getting the prospect to talk about the problem.
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Adams Equity Theory as an Explanation for the Effectiveness of the Assessment Approach Equity - a state of interactive equilibrium w hich is achieved w hen the individuals in an interaction are allocated outcomes that are proportional to their inputs. Outcomes - positive or negative consequences resulting from interaction. Inputs - individuals contributions to the exchange that entitle that person to rew ards or costs. Sellers Outcome (sales presentation) ________________ Sellers Input (problem assessment) Buyers Outcome (problem solution) ________________ Buyers Input (Buyers Time)
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THE PRESENTATION Presentation - the main body of the sale where the sales rep presents the product or proposition and shows the prospect its benefits. Good sales presentations are built around a forceful product demonstration. Generally, sales presentations can involve either vending or consultative selling. Vending is selling price-performance benefits to purchasing agents. Consultative sellers form partnerships with business function managers whose processes they improve.
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THE PRESENTATION

Vending can take the form of tailored sales presentations or canned sales presentations. Canned presentations are prepared sales presentations. Advantages: 1. gives new sales people confidence. 2. can utilize sales techniques proven effective. 3. gives some assurance that the complete story will be told. 4. greatly simplifies sales training.

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The Presentation - Continued Consultative Selling (Hanan 1995): Hanan proposed that sales reps need to become more consultative in order to be successful. According to Hanan (1995): Consultative selling is profit improvement selling. It is selling to the high-level customer decision makers who are concerned with profit Consultative selling is selling at high margins so that the profits you improve can be shared with you.
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Consultative Selling Versus Vending Hanan (1995) Consultative Selling Vending The seller supplies The seller provides profit to the buying product to the buying firm. firm. The seller offers a The seller charges a return on the price. customer's investment. The seller uses a profit The seller uses an order improvement proposal. form. The seller quantifies The seller attempts to ($) the benefits from justify the buying the customer's firm's cost. investment. The seller attaches the The seller attaches a customer's investment price to a product. to the customer's return. competitors. The customer closes. The seller tries to close.

The seller's product is improved customer

The seller's product is equipment, a service, a

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Consultative Selling Versus Vending Hanan (1995) Consultative Selling Vending

The seller sells to a business manager. The seller features improved financial performance for the customer. The seller sells to a business manager. The seller features improved financial performance for the customer. The seller's product is improved customer profit. The seller sells to a purchasing manager. The seller features the product's performance.

The seller sells to a purchasing manager. The seller features the product's performance.

The seller's product is equipment, a service, a process, or a system.

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Consultative Selling - Continued

According to the consultative selling approach, a sale is not the sale of products or equipment. Rather a sale is the sale of a positive rate of return on the customers investment. Basically, the consultative seller re-frames the purchasing problem for the buying firm. The consultative seller gets the buying firm to focus on the savings that result from the purchase rather than on the cost of the purchase. In this way, the seller can sell based on a return on investment theme.

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Consultative Selling - Continued

Example: Suppose that you are trying to sell a new computerized paint spraying machine to a bicycle manufacturer. You know that the selling price of the painting machine is $100,000 (slightly higher than competitors prices) but the machine cuts down on paint overspray by 35% compared to their current spraying machine. How might you go about selling the machine using a vending approach? A consultative selling approach?
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Consultative Selling - Continued The vending approach: Justify the cost of the machine by telling the prospect that, although more expensive than competitors machines, the features of your machine are superior than those of your competitors. For the buying firm the decision could be as follows: Advantages: 35% less overspray. Less paint wasted. Less environmental problems disposing of wasted paint.

Disadvantages: Cost, $100,000 ($10,000 more than other vendors 36 machine).

Consultative Selling - Continued

The consultative selling approach: Re-frame the purchasing decision in financial terms that shows the customer the return that they will receive as a result of their investment in your offering.

In the present example assume that the bicycle manufacturers annual paint costs are $50,000, and the cost to have wasted paint removed and disposed of costs $10,000.
Using this information, the consultative seller can show the buying firm the return that they will receive on their investment: Savings resulting from buying the new equipment -----------------------------------------------------------------------------Cost of the new equipment
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ROI =

Consultative Selling - Continued

The savings that accrue as a result of the new equipment include a 35% reduction in paint costs and a 35% reduction in waste disposal costs per year.
Savings = .35 ($50,000) + .35 ($10,000) = $17,500 + $3,500 = $21,000 The cost of the machine is $100,000, therefore the return on the buying firms investment is: $21,000 ROI = --------------- X 100 = 21% (very high from an $100,000 opportunity cost 38 perspective)

Net Present Value

We could expand on the model and take multiple year savings into account. For example, assume the new paint spraying machine had a useful life of 10 years and the savings remained the same over this time period. Then, the total savings over the 10 years (net present value) can be computed taking into account the time value of money.

We also know that if the NPV of an investment is greater than the investment cost the investment is considered viable.

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Consultative Selling - Continued

Now, for the buyer the purchasing decision may seem like this:
Advantages: 35% less overspray Less paint wasted. Less environmental problems disposing of wasted paint. ROI = 21%

Disadvantages:

The seller has successfully takes a cost (a disadvantage) and re-framed it as a profit (an advantage).

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The Presentation - Continued Through out the presentation the sales rep makes trial closes to determine whether the customer is ready to buy. This can be done by asking such questions as: Which model do you like best? Which color do you prefer? Cash or financing?

If all goes well in the trial close, the sales rep goes right on into an assumptive close and wraps up the sale. A sales rep using an assumptive close assumes that the sale has been made. The sales rep starts filling out the order form. However, if all does not go well, the next phase of selling (i.e., meeting objections) must be undertaken.

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The Presentation - Continued Points to keep in mind concerning sales presentations: 1. 2. 3. 4. 5. 6. 7. Don't run down competitors. Ask open-ended questions. Learn to listen. Don't be too aggressive or abrasive. Present benefits. Have full knowledge of competitor's products. Understand group dynamics. Find the decision maker. Dont ignore anyone. Have full knowledge of customer's business. Deal with personality conflicts. Keep the presentation simple. Establish credibility. Guarantee next call - get an assignment.

8. 9. 10. 11. 12.

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MEETING OBJECTIONS Meeting Objections - objections should be welcomed and indicate that the prospect has some interest in the proposition. Stated versus hidden objections: Stated objections may be phony. Objection to price and product: To price: price too high or prospect can not afford the price. Procrastinating objections: Examples include: 1. Let me think about it for a while. 2. I have to talk it over with my family. 3. I have to wait until next pay check. 4. I have to look around some more.

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Meeting Objections - Continued

Things to keep in mind when meeting objections:

1. 2. Welcome objections. Be prepared to answer typical objections. Price objections Quality objections Current vendor objections Avoid emotional objections - keep cool. Visualize the sale.

3. 4.

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CLOSE Close - asking for the order. There are 5 types of closing methods. 1. The assumptive close - merely assume prospects are going to buy and begin taking orders by asking questions. 2. The physical-action close - hand the prospect a pen as an indication it's time to sign. 3. The standing-room-only close - sales rep tells prospect the product is hard to get in the hopes that the prospect will sign the order. 4. The trap close - using the prospects objections to close the sale. 5. The special offer close - giving the customer a special offer to induce them to buy.
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Sales Careers & Sales Career Stages

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The Executive Ladder in Personal Selling

President

Top Level Executives Middle Level Executives Lower Level Executives

Vice president of Sales

General sales manager Regional sales manager Staff Assistants

District sales manager

Sales supervisor

Sales person

Adopted from Stanton, Buskirk, and Spiro (1991)

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Job Activities of Sales People Sales activities include much more than just selling. A study by Montcrief (1986) identified the following activities as being important: 1. Selling 2. Working with orders 3. Servicing the product 4. Managing information 5. Servicing the account 6. Attending conferences and meetings 7. Training and recruiting 8. Entertaining 9. Traveling 10. Distribution
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Some Characteristics of Sales Jobs

1. 2. 3. 4. 5. 6. Freedom of action Variety and Challange Opportunities for advancement Compensation Working conditions Selling costs are a major part of marketing budgets

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Sales Compensation
Averages Average sales trainee Mid level sales person Starting Salaries Bachelor's in marketing MBA w/o technical degree $27,144 (1992) $44,796 $26,036 $59,995

It's not unusual for a successful, experienced salesperson to earn $100,000 per year or more. Managers Sales supervisor Top sales executives Perks Company car Liberal expense accounts Sales incentives Paid vacations, pensions, insurance, etc. $66,402 $180,000

Source: Sales and Marketing Management

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Compensation by Industry

80 70 60 50 40 30 20 10 0
Trainee Mid-Level Top-Level Supervisor

Industrial Goods Services Consumer Goods

Source: Sales and Marketing Management (1993)

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CAREER STAGES

Recent research has identified 4 distinct career stages that sales people go through during the course of their careers. 1. 2. 3. 4. Exploration Establishment Maintenance Disengagement

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Exploration People in the earliest stages of their careers (typically their 20's). They are often unsure about whether selling is the most appropriate occupation for them to pursue and whether they can be successful sales people.

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Establishment People in this stage (late 20-'s - early 30's) have settled on an occupation and desire to build it into a successful career. Primary concern - improving skills and performance and value compensation and promotion.

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Maintenance This stage normally begins around the sales persons late 30's or early 40's. Primary concern - retaining present position, status, and performance level within the sales force, which are likely to be quite high. By this stage both the opportunity and desire for promotion diminishes.

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Disengagement People begin preparing themselves for retirement and the possible loss of self-identity that can accompany separation from the job (late 50's - early 60's).

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Sales Career Path

Promoted to Management

Exploratory Stage: New Recruits

Establishment Stage

Maintenance Stage

Disengagement Stage

Drop-outs; Terminations

Frustration; Disenchantment

Adopted from Cron, Dubinsky & Michaels (1988)

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