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11 Retail Sales 1. How much influence does a retail sales clerk have on your purchase decision? 2. What products do sales people have the most influence? 3. What type of sales approach works the best? Discussion Slide © 2007 by Prentice Hall 11-1 11 Personal Selling, Database Marketing, and Customer Relationship Management Chapter Overview •Personal selling –Retail sales –Business-to-business sales •Database marketing •Data warehousing •Direct marketing •Permission marketing •Frequency programs •Customer relationship management © 2007 by Prentice Hall 11-2 Personal Selling • Word of mouth communications • Good experience tell average of 6 • Bad experience tell average of 11 • IMC relies heavily on personal selling. • “Last three feet” of marketing • Personal selling categories • Retail sales • Business-to-business sales © 2007 by Prentice Hall 11-3 Retail Sales • Selling in retail outlets • Single transaction sales • Order takers • Selling services • Repeat transactions • Telemarketing • Inbound telemarketing • Outbound telemarketing • Text messaging © 2007 by Prentice Hall 11-4 FIGURE 11.1 Consumer Buying Process Retail Selling • Problem recognition • Information search • Evaluation of alternatives • Purchase decision • Post-purchase evaluation © 2007 by Prentice Hall 11-5 The Manufacturer’s Dilemma • Purchase decisions – 50% in store • Retail sales personnel influence purchase decision. • To enhance manufacturer brand within retail stores, manufacturers • Provide training for retail salespeople • Advertise extensively • Offer contests and incentives at retail level • Missionary salespeople © 2007 by Prentice Hall 11-6 Cross-Selling • During initial purchase • During inbound telemarketing • Successful cross-selling • • • • • Quality customer data Integrated information technology Software and decision models Selling culture Hiring and training of right staff © 2007 by Prentice Hall 11-7 Business-to-Business Personal Selling • Field sales • Order-getters • In-house sales • Technology-based programs • Telemarketing • Internet © 2007 by Prentice Hall 11-8 Four Attributes of Great Salespeople Jack Carroll • Integrity – being honest with customers • Diligence – working hard • Resiliency – ability to bounce back and not take “no” personally • Intelligence Source: Jack Carroll, “The Four Attributes of Great Salespeople,” SalesLinks Bulletin, Mentor Associates Sales Training. (Http://www.saleslinks.com/sideline/sep-dec98/102698.htm) © 2007 by Prentice Hall 11-9 FIGURE 11.2 Types of Selling Relationships © 2007 by Prentice Hall 11-10 Steps in Developing a Strategic Partnership 1. 2. 3. 4. 5. Awareness Trial purchase Expansion of purchases Commitment Partnership Source: Based on James C. Anderson, “Relationships in Business Markets: Exchange Episodes, Value Creation, and their Empirical Assessment,” Journal of Academy of Marketing Science, Vol. 23 (19960, pp. 346-350. © 2007 by Prentice Hall 11-11 How to Build Trust in a Strategic Partnership by Thomas Wood-Young • Communicate frequently. • Return all phone calls immediately. • Handle complaints promptly with empathy and honesty. • Offer great customer service. • Understand your customer. • Become a valuable resource. • Create solutions that add value for your customers. • Partner with customers. • Create a customer, not a sale! Source: Thomas Wood-Young, “Building Trust Results in Customer Loyalty,” Sales Doctors Magazine (Http://www.salesdoctors.com/diagnosis/3trust2.htm) © 2007 by Prentice Hall 11-12 FIGURE 11.3 B-to-B Personal Selling Process • • • • • Identifying prospects Qualifying prospects Knowledge acquisition Sales presentation Follow-up © 2007 by Prentice Hall 11-13 FIGURE 11.4 Methods of Prospecting Customer leads Databases Trade shows Advertising inquiries Internet inquiries Sales promotion Vendor leads Channel leads Networking Cold calls © 2007 by Prentice Hall 11-14 FIGURE 11.5 Questions for Qualifying Prospects • What is the sales volume potential? • Is the prospect dissatisfied with its current vendor? • Does the prospect use single or multiple sourcing? • Is the prospect a good fit with current customers? • Does the prospect fit with the firm’s IMC plan? • How difficult will it be to get past the gatekeeper(s)? © 2007 by Prentice Hall 11-15 FIGURE 11.6 Knowledge Acquisition • • • • • • • • Identify current vendor(s). Identify prospect’s customers. Assess customer needs. Determine the roles of price, service, and product attributes in the purchase decision. Determine roles of trade and sales promotions in purchase decisions. Determine critical customer benefits or product attributes. Identify risk factors in switching vendors. Identify the buyer’s personality type. © 2007 by Prentice Hall 11-16 Buyer Personality Types • Intrinsic value buyers • Extrinsic value buyers • Strategic value buyers © 2007 by Prentice Hall 11-17 Sales Presentations • Types of sales presentations • • • • Stimulus-response Need-satisfaction Problem-solution Mission-sharing • Determinants of sales approach • • • • Buyer-seller relationship Product being sold Buyer personality Buying situation © 2007 by Prentice Hall 11-18 Sales Presentations and Buyer-Seller Relationships Strategic partnership Mission-sharing Problem-solution Need-satisfaction EDI relationship Trust relationship Contractual agreement Repeat transactions Stimulus-response Occasional transactions Single transactions © 2007 by Prentice Hall 11-19 Follow-Up • Customer satisfaction • Repeat business and loyalty • Salespeople and follow-up • No incentive to follow up • Create environment • Provide incentive © 2007 by Prentice Hall 11-20 FIGURE 11.7 Trends in Personal Selling • Decline in the number of salespeople • Expansion of selling channels • Long-term relationships and strategic partnering • Team selling • Database customer segmentation © 2007 by Prentice Hall 11-21 Database Marketing Database Programs Database Direct Marketing © 2007 by Prentice Hall 11-22 FIGURE 11.8 Steps in Developing a Database • • • • • • Determine objectives. Collect data. Build a data warehouse. Mine data for information. Develop marketing programs. Evaluate marketing programs and data warehouse. © 2007 by Prentice Hall 11-23 Determining Objectives • • • • • Who will use the information? What kinds of data are available? When will data be collected and used? Where will the data be located or stored? Why do we need certain data and not other types? • How will the data be used? © 2007 by Prentice Hall 11-24 Sources of Data • • • • • Internal customer data. Survey data of customers. Channel members. Commercial data sources. Government data sources. © 2007 by Prentice Hall 11-25 FIGURE 11. 9 Internal Data Information • • • • • Where are the customers located? What have they purchased? How often have they purchased? How did they initially make contact? How do they order or purchase (in person, Web, mail, phone, etc.)? • What is known about their families, occupations, payment histories, interests, attitudes, etc.? • In B-to-B situations, who are the influencers, users, deciders, and purchasers? • In B-to-B, is it a corporate office or branch office? © 2007 by Prentice Hall 11-26 The Data Warehouse • • • • Internal data External data Geocoding information Based on how the organization will use the database • Data put into warehouse must be relevant to objectives. © 2007 by Prentice Hall 11-27 Trade Area Draw Analysis Sample CACI Report for a Proposed Store Site Percentile 25% 50% 75% 90% 99% # of Customers 492 985 1,477 1,772 1,949 Distance 0.99 2.32 4.28 8.48 27.92 # of Households Penetration Rate 1,992 14,803 45,390 97,382 3,064,490 24.7% 6.7% 3.3% 1.8% 0.1% Based on a customer profile presented to CACI, 50% of the firm’s target customers live within 2.32 miles of the proposed retail site. Of the 14,803 customers who live within 2.32 miles, only 985 (or 6.7%) are customers of this firm. © 2007 by Prentice Hall 11-28 Data Mining • Building profiles of customer groups • Preparing models that predict future purchase behavior • Examples • • • • First Horizon – profiles best prospects American Eagle – price markdowns Goody’s – shopper baskets Staples – profiles of best customers © 2007 by Prentice Hall 11-29 Executives from Unica, a maker of marketing automation software, discuss the importance and use of data mining and management. Click picture to view video. © 2007 by Prentice Hall 11-30 Developing Marketing Programs • Advertising, sales promotion, and other marketing materials. • Sales support. • Direct marketing efforts. • Target specific customers. • Service support staff. © 2007 by Prentice Hall 11-31 Direct Marketing • Direct Marketing Association • Prospecting 60% • Customer retention 40% • Dell Computers • Catalog • TV and radio ads • FSI ads © 2007 by Prentice Hall 11-32 FIGURE 11.10 Methods of Direct Marketing 77% Direct mail to customers 73% Direct mail to prospects 16% Statement stuffers 24% Catalogs Direct response-promotions 21% 10% Direct response-radio Direct response-TV 8% 29% Direct response-Internet 22% Search engine marketing 17% Search engine optimization 55% E-mail to customers E-mail to prospects 46% 16% Inbound telemarketing Outbound telemarketing 24% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% % of Companies Using Particular DM Methodology © 2007 by Prentice Hall 11-33 Direct Mail • High usage B-to-B market. • Success depends on quality of database. • Message must appeal to target group. • Digital direct-to-press. • Major problem is clutter. © 2007 by Prentice Hall 11-34 Catalogs • • • • • Low-pressure sales tactics Saved for a longer period of time Passed along to others Important in business-to-business Key is the use of enhanced database and targeting of catalogs © 2007 by Prentice Hall 11-35 Number of Catalogs Received per Month 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% None One Two Three Four-Five Six-Ten Eleven plus Number of Catalogs Catalog Purchasers Catalog Non-Purchasers Source: Direct Marketing Association (Http://www.the-dma.org) © 2007 by Prentice Hall 11-36 Total Annual Expenditures from Catalogs 25% Mean = $637 Median = $300 20% 15% 10% 5% 0% $100 or less $101-$299 $300-$499 $500-$999 $1,000 plus Source: Direct Marketing Association (Http://www.the-dma.org) © 2007 by Prentice Hall 11-37 Direct Marketing (cont.) • Mass media • Broadcast (television, radio) • Print (magazines, newspapers) • Alternative media • Package insert programs (PIPs) • Ride-a-longs • Card pack • Internet • E-mail © 2007 by Prentice Hall 11-38 Steps in Developing a Permissions Marketing Program Obtain permission from the customer. Offer the consumer a curriculum over time. Reinforce the incentive to continue the relationship. Increase the level of permission. Leverage the permission to benefit both parties. Source: Seth Godin, “Permission Marketing: The Way to Make Advertising Work Again, Direct Marketing, (May 1999), Vol. 62, No. 1, pp. 41-43. © 2007 by Prentice Hall 11-39 FIGURE 11.11 Reasons Consumers Opt into an E-mail Frequency Program Sweepstakes or chance to win 41% Found site randomly 37% E-mail required to access content 38% Already customer 40% Friend recommended 24% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Percent of Respondents © 2007 by Prentice Hall 11-40 FIGURE 11.12 Reasons Customers Remain Loyal to a Permissions Relationship Interesting content 36% Account status updates 35% Contests and sweepstakes 34% Price bargains 34% Entertaining 27% 0% 5% 10% 15% 20% 25% 30% 35% 40% Percent of Respondents © 2007 by Prentice Hall 11-41 Successful Permission Marketing Programs Mutual relationship Participant empowerment Company reciprocity © 2007 by Prentice Hall 11-42 Frequent Shopper Programs 70% of U.S. households participate in a frequent-shopper program. 59% of participating households belong to two or more programs. 82% use their frequent shopper card each time they shop. Primary reason for joining is to receive discounts. 60% say the reason they shop at a particular grocery store is because the store has a frequent shopper program. Source: A.C. Nielson, Santella & Associate © 2007 by Prentice Hall 11-43 FIGURE 11.13 Frequency Program Objectives • • • • • • Maintain sales, margins, or profits. Increase loyalty of existing customers. Induce cross-selling to existing customers. Differentiate a parity brand. Preempt the entry of a new brand. Preempt or match a competitor’s frequency program. Source: Grahame R. Dowling and Mark Uncles, “Do Customer Loyalty Programs Really Work?” Sloan Management Review, (Summer 1997), Vol. 38, No. 4, pp. 71-82. © 2007 by Prentice Hall 11-44 Reasons Retailers Develop Loyalty Programs Reason for program Promotes consumer loyalty Increases “best shopper” sales Gain consumer information Maintain market share Enhance image Respond to competition Indication % 90% 65% 65% 42% 29% 10% Source: A.C. Nielson, Santella & Associate © 2007 by Prentice Hall 11-45 Principles in Building Frequency Programs Design the program to enhance the value of the product. Calculate the full cost of the program. Design a program that maximizes the customer’s motivation to make the next purchase. © 2007 by Prentice Hall 11-46 Customer Relationship Management Foundation • Database technology • Interactivity through Web sites, call centers, and other means of contacting customers • Mass customization technology © 2007 by Prentice Hall 11-47 Customer Relationship Management Steps to Develop • Identify the company’s customers. • Differentiate customers in terms of needs and value. • Lifetime value • Share of customer • Interact with customers. • Improve cost efficiency • Enhance effectiveness of interaction. • Customize goods or services. © 2007 by Prentice Hall 11-48 Lifetime Value of a Customer • • • • • • Purchases per year Average expenditure Average life span Value of expenditures = Cost of acquisition Cost of servicing account 30 $140 6.5 yrs. $ 27,300 $ 380 $ 16,380 • 60 percent of revenue • Value of customers referred $ 7,500 • Lifetime value of customer $ 18,040 © 2007 by Prentice Hall 11-49 Share of a Customer • Customer spends an average of $24,000 per year with Company A. • The customer purchases from two other vendors a total of $36,000 for the same materials or product. • Total expenditures by the customer is $60,000. • Company A has 40% share of the customer. © 2007 by Prentice Hall 11-50 Customer Relationship Management Reasons for Failure • Implemented before a solid customer strategy is created. • Rolling out a CRM program before changing the organization to match the CRM program. • Becoming technology driven rather than customer driven. • Customers feel like they are being stalked instead of being wooed. © 2007 by Prentice Hall 11-51