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Chapter 13 Communicating Customer Value: Personal Selling and Sales Promotion 441
N a v i g a t i n g t h e Key Terms
Approach (432)
Business promotions (438)
Closing (433)
Consumer promotions (436)
Customer sales force structure (420)
Event marketing (438)
Follow-up (433)
Handling objections (433)
Inside sales force (421)
Sales promotion (434)
Outside sales force (or field sales force) (421) Sales quotas (430)
Personal selling (417)
Salesperson (417)
Preapproach (432)
Selling process (431)
Presentation (432)
Team selling (424)
Product sales force structure (420)
Territorial sales force structure (419)
Prospecting (431)
Trade promotions (438)
Sales force management (419)
Travel Log
Discussing the Issues
Application Questions
1. According to the chapter, salespeople serve "two masters." 1. Explain how a company uses the workload method to
What does this mean? Is it a good or bad thing? (AASCB: determine sales-force size. If a company has 4.300
Communication)
customer accounts, each requiring four calls per year, and if
2. Explain how a company can enable marketing and sales to an average salesperson makes 1,000 calls per year, how
work better together. (AACSB: Communication)
many salespeople will be needed? (AACSB:
3. List and briefly describe the three sales-force structures
Communication: Reflective Thinking)
outlined in the chapter. What sales-force structure does
2. Name and describe the steps in the selling process. In a
CDW employ? (AACSB: Communication)
small group, develop a plan for the selling process that an
4. Define sales promotion and discuss the factors contributing office equipment firm could use to sell to small businesses
to its rapid growth. (AACSB: Communication)
in your community. (AACSB: Communication; Reflective
5. Name and describe the types of trade sales promotions.
Thinking)
(AACSB: Communication)
3. Name and briefly describe the types of consumer
6. Explain the decisions involved in designing a sales
promotions. Find examples of four of them and present
promotion program. (AACSB: Communication)
them to your class. (AACSB: Communication; Reflective
Thinking)
Under t h e H o o d : Focus o n Technology .
Sales-force automation (or SFA) allows salespeople
toOne
spend
vices.
leader in sales-force automation is Salesforce.com.
less time in their office and more time with customers. Web- but there are many other companies in this field.
based sales automation systems provide information at the 1. Visit www.salesforce.com to view a demonstration of how
touch of a button to salespeople out in the field. Such systems this service is used to automate the selling function. You
became more feasible with the advent of laptop computers.
will need to sign in to view the demonstration. Write a brief
Now, wireless technology allows even more information to be report on what you learned and discuss how the use of this
accessed using small mobile devices such as smart phones,
type of technology helps a salesperson deliver greater
pocket PCs. and PDAs. Although not as available as computer- customer value. (AACSB: Communication; Use of IT;
based systems, mobile data applications are expected to grow
Reflective Thinking)
fastest and to generate more than €60 billion in revenue world-2. Discuss drawbacks of using sales-force automation in
wide by 2012. Intuit Inc. offers mobile solutions through its
general and mobile SFA solutions in particular. (AACSB:
Eclipse Mobile interface. Whereas most SFA platforms require Communication: Reflective Thinking)
salespeople to use laptop computers, the new generation of platforms allows the same or more applications to use handheld de-
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442
Part Three Designing a Customer-Driven Marketing Strategy and Marketing Mix
Focus o n Ethics
Slotting fees, a type of allowance trade promotion, consist of a systems. In addition, retailers say they run theriskof costs j
one-time fee paid by food manufacturers to retailers for allottingsociated with the potential failure of the product. In response!
shelf space to a new product. The manufacturer buys the prod- the cries of small manufacturers that these fees create unfair
uct's way into the marketing channel. A U.S. Federal Trade competition, retailers sometimes waive slotting fees for smaller
Commission survey shows that the average slotting fee per companies.
chain for a new product is about SI0.000. and producers report 1. Assess slotting fees from the view points of both retailers
and manufacturers. How does this ty pe of allowance differ
total slotting fees in the $1,000,000 to S2.000.000 range. The
many critics of this system claim that grocery retailers have too from the others described in the chapter' Is it fair for
much power in this situation. They also assert that the slotting retailers to demand slotting fees from manufacturers?
fee system is unfair to small manufacturers who cannot afford (AACSB: Communication: Ethical Reasoning)
such large fees. Slotting fees have been called everything from2. Go to www.ftc.gov/opa/2003/11/slottingallowance.htm to
a bribe to a retailer's addiction, a questionable source of income read about the FTC report on slotting fees. What did you
that many retailers now rely on to survive. Retailers claim that learn from this report? (AACSB: Communication;
the fees are needed to offset the costs associated with new prod- Reflective Thinking)
ucts. To stock a new product, they must shift other products on
the shelf, move products in the warehouse, and update computer
1
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Chapter 13 Communicating Customer Value: Personal Selling and Sales Promotion 443
Video Case
Nudie
AD across the globe, consumers are seeking all-natural, whole- customer, "Love and happiness are overrated. But Nudies make
lome foods. Even Wal-Mart, a low-price leader, carries organicliving worthwhile!"
and all-natural foods. Nudie, a quirky little company in After viewing the video featuring Nudie, answer the folAustralia, makes its own contribution to the fast-growing natu- lowing questions about personal selling and sales promotion.
ral foods market—all-natural fruit juices, fruit crushes, and 1. How does Nudie's process for selecting sales
smoothies that provide a day's fruit in every bottle. Amidst a sea representatives compare to the process described in the text?
of all-natural products, how did Nudie reach customers and en2. What sales promotion tools does Nudie employ to reach
courage them to try its new products? Through a carefully deconsumers and encourage sales?
signed program of personal selling and sales promotion.
3. Select a sales promotion tool not listed in your previous
Nudie uses well-crafted point-of-purchase displays and a
response. How could Nudie use that tool to further promote
devoted, motivated sales force to work with resellers to reach
its products?
consumers. As a result, Nudie is the fastest-growing juice maker
in Australia, attracting an ever-increasing number of highly devoted customers who love Nudie's products. Says one Nudie
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Ending with lb* cistostr
Beginning with the customer.
o e u .
1. define direct marketing and
other powerful new
5. overview the public policy and
discuss its benefits to
technologies with online
ethical issues presented by
customers and companies
marketing strategies
direct marketing
2. identify and discuss the major 4. discuss how companies go
forms of direct marketing
about conducting online
3. explain how companies have
marketing to profitably deliver
responded to the Internet and
more value to customers
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C H A P T E R
D i r e c t
a
n
d
O n l i n e
M
a
r
k
e
t
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:
Building Direct
Customer Relationships
OAD MAP Previewing the Concepts
j H p j H M p H H H H In the previous two chapters, you learned about communicating customer value
• ^ • ^ • ^ • ^ H K j ^ ^ K through integrated marketing communication (IMC) and about four specific elements
^ ^ H H ^ H
of the marketing communications mix—advertising, publicity, personal selling, and
kvE^^^k^k^k^kj sales promotion. In this chapter, we'll look at the final IMC element, direct marketing, and
tfHh^h^h^h^h^^R at its fastest-growing form, online marketing. Actually, direct marketing can be viewed
k^k^k^k^k^kwjH as more than just a communications tool. In many ways it constitutes an overall marketHMI^k^L^LMii^k™ ing approach—a blend of communication and distribution channels all rolled into one.
As you read on, remember that although this chapter examines direct marketing as a
separate tool, it must be carefully integrated with other elements of the promotion mix.
As a tune-up, let's look at the world's largest direct marketing company—Dell. Dell
owes its incredible success in the fiercely competitive computer industry to a revolutionary business approach—the Dell Direct Model. Says one analyst/There's no better
way to make, sell, and deliver PCs than the way Dell does it, and nobody executes [the direct] model better than Dell." However, in the past few years, Dell's once-rocketing revenues have slowed and profits have fallen off, raising an imposing strategic question: Is
the heralded Dell Way running out of gas?
When 19-year-old Michael Dell began selling personal computers out of his college
dorm room in 1984. competitors and industry insiders scoffed at the concept of direct computer marketing. Yet y oung Michael quickly proved the skeptics wrong.
In little more than two decades, he has turned his dorm-room mail-order business into the S57 billion Dell computer empire.
In the United States. Dell is now number one in desktop PC sales, number one in laptops, number one in servers, and number three in printers. It captures a 33.5 percent share of the U.S. PC market, compared with number-two HP's 19.4 percent and number-three Gateway 's 6.1 percent.
Between 1995 and 2005, Dell was the darling of the U.S. stock market, producing an average annual
return to investors of 39 percent, best among all Fortune 100 companies.
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Part Three Designing a Customer-Driven Marketing Strategy and Marketing Mix
Dell owes its stunning success to its revolutionary business repurchase" scores plummeted. Admits Michael Dell. "I trunk
model—the direct model. Dell sells the lion's share of its prod-we overemphasized the price element and did not emphasize reuct via the telephone and Internet. Over the years, Dell's direct lationship and customization and experience.
Dell has also been criticized for investing too little in prodmarketing approach has delivered greater customer value
through an unbeatable combination of product customization, uct innovation and design. Its obsession w ith low costs resulted
low prices, fast delivery, and award-winning customer service. in a narrow product and operations focus—assembling, selling,
A customer can call 1 -800-Buy-Dell or log on to www.dell.com and delivering basic machines wrapped in generic grey boxes
on Monday morning; order a fully customized, state-of-the-art and counting on low prices to attract customers and sales. Thii
PC to suit his or her special needs; and have the machine deliv- focus on machines has created an "imagination gap" between
ered to his or her doorstep or desktop before the end of the Dell and more innovative competitors such as Apple. Its lack of
k—all at prices traditionally well below competitors' prices design imagination has put Dell at a disadvantage, especially in
consumer markets.
for a comparably performing PC.
Dell is moving to fix these focus, customer-service, and
Michael Dell's initial idea was to serve individual buyers
by letting them customize machines with the special features product problems but the imposing strategic question remains:
they wanted at low prices. However, this one-to-one approach Is the highly regarded Dell Way running out of gas? Can Dell's
appeals even more strongly to corporate buyers, because Dell direct-only model still deliver sales and profit growth for Dell
can so easily preconfigure each computer to precise require- in the fast-changing and highly competitive PC market? The anments. Dell routinely preloads machines with a company's own swer depends on whom you ask. Most analysts agree that Dell's
software and even undertakes tedious tasks such as pasting in- direct model still works well for selling complex PC systems to
ventory tags onto each machine so that computers can be deliv- corporate buyers, the bread and butter of Dell's current busiered directly to a given employee's desk. As a result, more thanness. But it may not work as well in consumer markets, Dell's
85 percent of Dell's sales come from businesses, governments, biggest source of potential future growth.
Much of the recent growth in PC demand has come from
and educational institutions.
The direct model results in more efficient selling and lower consumers buying laptops at electronics retailers such as Best
costs, which translate into lower prices for customers. "Nobody, Buy and Circuit City. However, boxed in by its direct sales stratbut nobody, makes [and markets] computer hardware more ef- egy and its focus on corporate customers. Dell has largely
ficiently than Dell," says one analyst. "No unnecessary costs; missed out on the boom. Further, Dell appears to be stumbling
This is an all-but-sacred mandate of the famous Dell direct busi- in its attempts to sell an expanding assortment of high-tech conness model." Because Dell builds machines to order, it carries sumer electronics products to final buyers. Some analysts sugbarely any inventory—less than three days' worth by some ac- gest that Dell's vaunted direct model may not work well fot
counts. Dealing one-to-one with customers helps the company selling LCD TVs, handhelds, MP3 players, digital cameras, and
react immediately to shifts in demand, so Dell doesn't get stuck other personal digital devices—products that consumers want
with PCs no one wants. Finally, by selling directly, Dell has no to see and experience first-hand before buying and for which
customization is not important.
dealers or retailers to pay.
What's more, in both Dell's business and consumer marSelling direct has given Dell a tremendous competitive advantage. However, after decades of rocketing revenues and kets, the direct model doesn't deliver the powerful price punch
profits, the much-heralded Dell growth engine has stalled in the that it once did. Over the years. Dell's substantial cost advanpast few years. Last year, sales grew only 2.1 percent and prof-tages forced competitors either to follow or fall away. As a
its fell off 27 percent. To make matters worse, a revitalized HP result—under what has come to be known as the "Dell
overtook Dell last year as the global leader in PC sales, and HP Effect"—competitors such as HP and Lenovo are now both
continues to eat into Dell's U.S. market share lead. The direct stunningly cost efficient, eroding Dell's price superiority.
Thus, looking ahead, Dell is carefully analy zing its directmarketing pioneer now faces a key strategic quandary: Is current sluggish growth the result of temporary market conditions only marketing strategy. In fact, it's already making adjustand flawed tactical decisions, or does it signal cracks in Dell's ments by adding some surprising new indirect channels. For
example. Dell now sells inexpensive PCs through Wal-Mart and
vaunted direct marketing model itself?
For sure, Dell has made some tactical errors in implement- is rumored to be talking with Best Buy. Circuit City, and
ing the direct marketing model. It appears to have relied too CompUSA. It has also begun opening its own chain of Dellheavily on low costs and prices, at the expense of investments branded retail stores, replacing the 100 or so smaller Dell kiosks
in customer service and product innovation. For example, as scattered in malls around the country. These are "the first steps
part of its continual cost-cutting focus. Dell shifted much of its in an evolving global retail strategy." says Michael Dell.
customer service and technical support to temporary employ ees "Customers are telling us they want more and new wavs to purand to low-cost call centers in places such as India and the chase our products. We're committed to finding new ways to
Philippines. As a result, customer satisfaction and "likely-to- reach more customers."
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Chapter 14 Direct and Online Marketing: Building Direct Customer Relationships 447
Does this mean that Dell will abandon its previously sacred think that Dell's core strengths historically will be its core
strengths in the future." says Dell. Still, he leaves the door ajar
direct model? Michael Dell says no. "Our direct model still
works very well," he asserts. "We wouldn't trade ours for any-for future strategic shifts. "The Direct Model has been a revoluone else's!" And although Dell isn't the high-flying growth tion." he says, "but it's not a religion."
company it once was, it remains a fearsome competitor. "I do
1
M
any of the marketing and promotion tools that we've examined in previous chap-
ters were developed in the context of mass marketing: targeting broad markets
with standardized messages and offers distributed through intermediaries. Today.
however, with the trend toward more narrowly targeted marketing, many companies are
adopting direct marketing, either as a primary marketing approach, as in Dell's case, or as
Direct marketing
a supplement to other approaches. In this section, we explore the exploding world of direct
Direct
connections with carefully targeted
marketing.
individual
consumers to both obtain an
Direct marketing consists of direct connections with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships.immediate response and cultivate lasting
Direct marketers communicate directly with customers, often on a one-to-one, interactivecustomer relationships.
basis. Using detailed databases, they tailor their marketing offers and communications to
the needs of narrowly defined segments or even individual buyers.
Beyond brand and relationship building, direct marketers usually seek a direct, immediate, and measurable consumer response. For example, as we learned in the chapteropening story, Dell interacts directly with customers, by telephone or through its Web
site, to design built-to-order systems that meet customers' individual needs. Buyers order directly from Dell, and Dell quickly and efficiently delivers the new computers to
their
offices.
T
h ehomes
N eor w
Direct Marketing Model
Early direct marketers—catalog companies, direct mailers, and telemarketers—gathered
customer names and sold goods mainly by mail and telephone. Today, however,firedby
rapid advances in database technologies and new marketing media—especially the
Internet—direct marketing has undergone a dramatic transformation.
In previous chapters, we've discussed direct marketing as direct distribution—as marketing channels that contain no intermediaries. We also include direct marketing as one element of the promotion mix—as an approach for communicating directly with consumers.
In actuality, direct marketing is both these things and more.
Most companies still use direct marketing as a supplementary channel or medium.
Thus, Lexus markets mostly through mass-media advertising and its high-quality dealer
network but also supplements these channels with direct marketing. Its direct marketing includes promotional DVDs and other materials mailed directly to prospective buyers and a
Web page (www.lexus.com) that provides consumers with information about various models, competitive comparisons,financing,and dealer locations. Similarly, most department
stores sell the majority of their merchandise off their store shelves but also sell through direct mail and online catalogs.
However, for many companies today, direct marketing is more than just a supplementary channel or advertising medium. For these companies, direct marketing—especially in
its most recent transformation, online marketing—constitutes a complete model for doing
business. Rather than using direct marketing and the Internet only as supplemental approaches, firms employing this new direct mode! use it as the only approach. Companies
such as Dell. Amazon.com. Quelle, and GEICO have built their entire approach to the marketplace around direct marketing. The direct model is rapidly changing the w a\ companies
think about building relationships w ith customers.
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Part Three Designing a Customer-Driven Marketing Strategy and Marketing Mix
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sales.
Direct marketing continues to become more Web oriented, and Internet marketing is
claiming a fast-growing share of direct marketing spending and sales. The Internet now accounts for only about 18 percent of direct marketing-driven sales. How ever, the DMA predicts that over the next five years Internet marketing expenditures will grow at a blistering
17 percent a year, more than three times faster than expenditures in other direct marketing
media. Internet-driven sales will grow by almost 16 percent.
Whether employed as a complete business model or as a supplement to a broader integrated marketing mix. direct marketing brings many benefits to both busers and sellers.
Benefits to Buyers
For buyers, direct marketing is convenient, easy, and private. Direct marketer^ never close
their doors, and customers don't have to battle traffic,findparking spaces, and trek through
stores to find products. From the comfort of their homes or offices, they can browse cata7
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2
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Chapter 14 Direct and Online Marketing: Building Direct Customer Relationships
logs or company Web sites at any time of the day or night. Business buyers can learn about
products and services without tying up time with salespeople.
Direct marketing gives buyers ready access to a wealth of products. For example, unrestrained by physical boundaries, direct marketers can offer an almost unlimited selection
to consumers almost anywhere in the world. For example, by making computers to order
and selling directly, Dell can offer buyers thousands of self-designed PC configurations.
many times the number offered by competitors who sell preconfigured PCs through retail
stores. And just compare the huge selections offered by many Web merchants to the more
meager assortments of their brick-and-mortar counterparts. For instance, log on to Bulbs.
com, "the Web's number-one light bulb superstore," and you'll have instant access to every
imaginable kind of light bulb or lamp—incandescent bulbs, fluorescent bulbs, projection
bulbs, surgical bulbs, automotive bulbs—you name it. No physical store could offer handy
access to such a vast selection.
Direct marketing channels also give buyers access to a wealth of comparative information about companies, products, and competitors. Good catalogs or Web sites often provide more information in more useful forms than even the most helpful retail salesperson
can. For example, the Amazon.com site offers more information than most of us can digest,
ranging from top-10 product lists, extensive product descriptions, and expert and user product reviews to recommendations based on customers' previous purchases. And Sears catalogs offer a treasure trove of information about the store's merchandise and services. In fact.
you probably wouldn't think it strange to see a Sears salesperson referring to a catalog in
the store for more detailed information while trying to advise a customer on a specific product or offer.
Finally, direct marketing is interactive and immediate—buyers can interact with sellers by phone or on the seller's Web site to create exactly the configuration of information.
products, or services they desire, and then order them on the spot. Moreover, direct marketing gives consumers a greater measure of control. Consumers decide which catalogs
they will browse and which Web sites they will visit.
Benefits to Sellers
For sellers, direct marketing is a powerful tool for building customer relationships. Using
database marketing, today's marketers can target small groups or individual consumers and
promote their offers through personalized communications. Because of the one-to-one nature of direct marketing, companies can interact with customers by phone or online, learn
more about their needs, and tailor products and services to specific customer tastes. In turn.
customers can ask questions and volunteer feedback.
Direct marketing also offers sellers a low-cost, efficient, speedy alternative for
reaching their markets. Direct marketing has grown rapidly in business-to-business marketing, partly in response to the ever-increasing costs of marketing through the sales
force. When personal sales calls cost an average of more than S320 per contact, they
should be made only when necessary and to high-potential customers and prospects.
Lower-cost-per-contact media—such as telemarketing, direct mail, and company Web
sites—often prove more cost effective. Similarly, online direct marketing results in lower
costs, improved efficiencies, and speedier handling of channel and logistics functions.
such as order processing, inventory handling, and delivery. Direct marketers such as
Amazon.com, Dell, or Netflix also avoid the expense of maintaining a store and the related costs of rent, insurance, and utilities, passing the savings along to customers.
Direct marketing can also offer greater flexibility. It allows marketers to make ongoing adjustments to its prices and programs, or to make immediate and timely announcements and offers. For example. Southwest Airlines' Ding! application takes advantage of
the flexibility and immediacy of the Web to share low-fare offers directly w ith customers: *'
When Jim Jacobs hears a "ding" coming from his desktop computer, he thinks about
discount air fares like the S122 ticket he recently bought for a flight from Tampa.
Florida, to Baltimore. Man land, on Southwest Airlines. Several times a day. SouthSố hóa bởi Trung tâm Học liệu – ĐHTN
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westcalled
sendsDing!
Jacobs"Ifand
millions
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computer
through
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says
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"I candiscounts
usually save
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449
450
fart rhr' •<• Designing a Customer-Driven Marketing Strategy and Marketing Mix
The fare to Baltimore underbid the airline's own
Web site by $36. he says. Ding! lets Southwest bypass the reservations system and pass bargain fares
directly to interested customers E\entually. Ding!
may even allow Southw est to customize fare offers
based on each customer's unique characteristics
and travel preferences. For now. Ding! provides
something any marketer craves: a one-to-one communication link between customer and brand. But
its branding power reaches further. Ding! has
turned air travel inside-out by transforming what
has historically been a planned, premeditated purchase into an impulse buy. Southwest's noisy little
icon now boasts more than 2 million subscribers
who've booked over $ 130 million in fares by using
it. Forty-five percent of its Ding! users come back
to book again, compared to the industry average of
just 27 percent.
Finally, direct marketing gives sellers access to
• Southwest Airlines "DING!" application takes advantage offlexibilityand buyers that they could not reach through other channels.
immediacy of the Web to share low-fare offers directly with customers.
Smallerfirmscan mail catalogs to customers outside
their local markets and post 1-800 telephone numbers to
handle orders and inquiries. Internet marketing is a truly
global medium that allows buyers and sellers to click
from one country to another in seconds. A Web surfer from Paris or Istanbul can access an
online L.L.Bean catalog as easily as someone living in Freeport, Maine, the direct retailer's
hometown. Even small marketersfindthat they have ready access to global markets.
Customer Databases
and Direct
Marketing
Effective direct marketing begins with a good customer database. A customer database is
an organized collection of comprehensive data about individual customers or prospects, including geographic, demographic, psychographic, and behavioral data. A good customer
database can be a potent relationship-building tool. The database gives companies "a snapshot of how customers look and behave." Says one expert. "A company is no better than
what it knows [about its customers]."
In consumer marketing, the customer database might contain a customer's demographics (age. income, family members, birthdays), psychographics (activities, interests,
and opinions), and buying behavior (buying preferences and the recency, frequency, and
monetary value—RFM—of past purchases). In business-to-business marketing, the customer profile might contain the products and services the customer has bought: past volumes and prices: key contacts (and their ages, birthdays, hobbies, and favorite foods);
competing suppliers: status of current contracts: estimated customer spending for the next
few years; and assessments of competitive strengths and weaknesses in selling and servicing the account.
Some of these databases are huge. For example, casino operator Harrah's Entertainment has built a customer database containing 30 terabytes worth of customer information. Internet portal Yahoo! records every click made by every \isitor. adding some 400
billion bytes of data per day to its database—the equivalent of 800.000 books. And WalMart captures data on every item, for every customer, for every store. e\er> dav Its database contains more than 570 terabytes of data—that's 570 trillion bytes, far greater than the
storage horsepower of 100.000 personal computers.
Số hóa bởi Trung tâm Học liệu – ĐHTN
http://www.lrc-tnu.edu.vn
Customer database
An organized collection of comprehensive
data about individual customers or
prospects, including geographic,
demographic, psychographic, and
behavioral data.
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