Download Figure 2 Define marketing strategy - promotion

‘Why Sales and Marketing must integrate in the ‘New Economy’
by
Professor Malcolm McDonald
Cranfield School of Management
Personal selling is still very effective. But despite more professional sales forces today,
they are badly hampered by poorly conceived company marketing strategies. Malcolm
McDonald advises that only more professional marketing can really improve their
productivity and contribution to the company’s total strategic direction. In particular,
this includes a much more rational integration of personal selling into the new
communications mix emerging from e-commerce.
In the 1990s, expenditure on personal selling was still considerably larger than the
combined expenditure on both advertising and sales promotion, in spite of a fashionable
belief that precisely targeted marketing methods would make the need for personal
selling all but disappear.
The reason that the reverse happened is simply because no one has yet discovered a more
effective way of communicating with customers, of exploring the needs of increasingly
complex decision-making units, of alleviating any concerns they may have, and of
communicating the full benefits of a company's offer. Additionally, research shows that,
contrary to popular belief, companies welcome representatives as a valuable source of
information about developments.
Vast sums of money have been spent during the past decade by many organizations, with
the aim of improving the sales force's productivity. Great strides forward have been made
in most areas of sales force management. In particular, most sales people today recognize
when to sell and when to negotiate. Territory allocation and planning is no longer the
hit-and-miss affair that it used to be. Recruitment is now a much more scientific process,
with most firms aware of the value of psychometric testing as part of the selection
process. Sales managers tend to use more supportive team-building methods rather than
the old, hierarchical, tyrannical ways. Remuneration packages are better related to the
tasks that have to be performed. Evaluation procedures have improved dramatically with
the advent of relational databases. Finally, the application of tailor-made computer
packages to sales force management has greatly improved productivity. In general, it can
be concluded that today’s sales forces are more motivated, more professional, and more
productive than they were ten years ago.
In spite of these dramatic improvements, however, the sales force is still a grossly
underutilised and poorly directed marketing resource. This has more to do with
ineffective marketing strategy than with inefficient sales strategy.
At one time or another, sales force training experts all over the world have suffered the
frustration of fine-tuning a professional sales force that is held back by an ineffective
marketing strategy. At a fairly mundane level, problems related to poor delivery and poor
product quality cannot be overcome by the sales force. At a more serious level, most
companies still haven't cottoned on to the fact that it is customers, not products, that
make profits. Yet accounting systems persist in measuring only product profitability. For
example, a customer that demands Just-in-Time delivery to all of its outlets, daily sales
calls, promotional support, and that takes one hundred days to pay its accounts, is very
different from another customer taking a similar volume that only requires one central
delivery, no sales calls, no promotional support, and that takes only forty-five days to
pay its accounts. Product profitability doesn't measure any of this, with the result that
sales effort is frequently misdirected. The trouble is, the more efficient the sales effort,
the greater the damage! At an even more serious level than this, ill-thought-out
marketing strategies can cause severe financial problems for companies. Two examples
of this follow.
Product/Market Portfolios
It is a well-known fact that most new product launches fail. This, however, has more to
do with poor marketing than with poor selling. In the 1960s, research by Everett Rogers
into how new products are diffused over time, showed clearly that about 16% of any
market are opinion leaders, and that no one else will buy a new product until this group
has accepted it. Only then will the 34% of the early majority come into the market. The
remaining 50% are slow to enter the market, tend to be more conservative, and have less
money, so price often becomes important.
Yet, in spite of this well-proven research, companies still insist on launching new
products to the whole market at the same time. Yet, about 85% of customers are bound to
reject any such overtures. The result of this is that the new product fails, mainly because
of inappropriate targeting. The problem is merely exacerbated and the failure hastened by
an efficient sales force who, alas, tend to get the blame. Yet it is sheer stupidity on the
part of the marketing department, and has little to do with the sales force.
Product/Market Portfolios
Another classic marketing error concerns product/market portfolios. Figure 1 illustrates a
number of market segments represented graphically according to their attractiveness to
the company in terms of their likelihood of enabling the company to achieve its profit
objectives (the vertical axis) and the company's competitive strengths in these markets.
Circle sizes represent their importance in terms of turnover.
It is clear from this that markets in Box 1 are less attractive than those in Boxes 2 and 3,
probably because they are mature markets. But, because of our strengths, we probably
make plenty of money out of them. So, although not growing, they obviously need to be
carefully and diligently managed for sustained earnings.
Industry/Market Attractiveness
High
2
3
1
4
Medium
Low
High
Business/company strengths
Low
Figure 1 Market segments: competitive strengths and attractiveness
Box 2 has a number of very attractive markets, in which we have a strong position.
These are clearly ripe for investment and for aggressive marketing and sales policies.
Box 3 is similar to Box 2, except that we do not have many strengths, so we obviously
need to decide which ones we should choose to invest in to build strengths, as we are
unlikely to be above to afford the resources to invest in them all.
Box 4 represents the worst scenario – low attractiveness and low strengths. Clearly, we
should not waste our valuable resources here, other than on the basis of necessity.
If all of this sounds rather like a blinding glimpse of the obvious, it should be noted that
few companies even bother with this kind of analysis, with the result that the sales force
tries to be ‘all things to all men’. The result is a massive misuse of resources.
By the same rule, trying to increase market share in a mature or declining market can be
the height of folly, whilst milking products in Box 2 for profit seriously damages the
company's medium- to long-term prospects.
It can be seen from these brief examples that poor marketing can seriously damage a
company's health, especially when an excellent sales force implements the misguided
policies efficiently.
Other Problems Affecting Sales Force Productivity
There are yet further problems which are related to the apparently endemic desire that
companies have to separate marketing and sales organizationally. All this leads to is the
splendid isolation of the marketing department who have no control over the
implementation of their policies. The sales force is judged on volume, relates to today's
products and markets, and deals with individual problems, customers, and so on. The
marketing department deals with profit, future trends and portfolios (or groups) of
products and markets. Both jobs are highly professional and require special knowledge
and skills. Yet, whilst personal selling is obviously a key part of the marketing mix, its
physical and organizational separation from marketing merely exacerbates whatever
problems the company has.
This problem is closely related to the tendency some companies still have to organize
themselves around products rather than markets. Whilst this can be condoned in some
situations, generally speaking it makes sense to focus the sales force on customer groups,
rather than organizing them geographically and giving them every customer within that
territory.
The rule should be: organize around customer groups where practicable; and put
marketing as close to operations as possible, with both functions reporting to one
director, whose main function is to ensure that what is planned is actually implemented
by the sales force.
The impact of e-commerce on the sales force
Promotion is changing in a number of respects. New channels such as the Internet are
emphasising an already growing trend from mass media such as advertising through
addressable media such as direct mail to interactive media such as call centres and the
Web. Integrating these channels within a coherent strategy is not an easy task. Writers
on the new field of ‘Integrated Marketing Communications’ emphasise that before
engaging on detailed planing for each medium – writing sales plans or promotions plans,
for example – it is necessary to choose which medium to use for which customer
interactions. This is illustrated in Figure 2.
e.g test drive,
demonstration,
5 senses
Place
Distribution
Strategy
Channel/Medium
Choice
Mass media
Direct mail
- objectives
- objectives
- message strategy
- strategy
Telephone
- objectives
- strategy
- media strategy
Personal
contact
- objectives
- strategy
Integrated marketing
communications plan
Figure 2 Define marketing strategy - promotion
Electronic
Other
- objectives
- PR
- strategy
- POS
- etc
The choice of channel/medium is generally a complex one, involving different media for
different communications with the same customer. The organisation will also frequently
wish to leave some options in the hands of the customer. For example, a Dell customer
may find out about Dell from colleagues or from press advertising; investigate which
product to buy, what the price is and what configuration is required using the Web; print
out order details and pass them to the purchasing department to place the order via fax;
check on the delivery time via telephone; take delivery via a parcels service; and obtain
customer service using email. Customers are no longer content to have the medium
dictated by the supplier.
The choice of medium is clearly closely intertwined with the distribution strategy.
Distribution channels often have a mix of purposes, providing both a means of conveying
a physical product to the customer, and a medium for information exchange. A garage,
for example, provides information on the model, an opportunity for a test drive, a
location where price negotiations can occur, and a step in the physical delivery of the car
to the customer. So promotion’s focus on information exchange is closely linked to the
often physical issues of distribution. But considering the two separately can result in new
solutions, such as direct banking, Web shopping for CDs (which may need to be sampled
but won’t need to be felt physically), and complementing the sales force with
telemarketing and Web sites or minor transactions or less important customers in
business-to-business markets.
Communicating the offer is typically managed by designing, implementing and
monitoring a number of marketing communications programmes. A communication
programme could be, for example, a direct mail campaign; an advertising campaign; a
series of sales seminars; an in-store promotion’and so on. We have also stretched the
term '‘marketing communication programme’ to include management of such media as
the sales force, which may be managed in a more continuous way, with annual targets
broken down by quarter or month.
Whatever the medium, the campaign will be aiming to contribute to one or more of the
tasks involved in completing a sale. These tasks may have an unfamiliar look; in order to
represent the interactive, one-to-one nature of today’s marketing, we have renamed the
classic steps in the sales process. Figure 3 illustrates traditional views of the sales and
purchasing processes, with our revised interaction perspective between the two.
Traditional ‘push-based’ models of marketing, in which after the product is made,
prospects are found and persuaded to buy the product, are illustrated on the left. The
delivery and service that follow are operational functions with little relationship to
marketing.
Traditional models of buyer behaviour, illustrated on the right of the figure, assume more
rationality on the part of buyers, but underplay the importance of what the buyer says
back to the seller. The seller’s offering is assumed to be predetermined, rather than
developed in conjunction with the buyer.
Communicate the Offer: activities
Supplier perspective
Advertising
Selling
Interaction perspective
Marketing
activity
Define mkts/
understand value
Create value
proposition
Interaction
Recognise
exchange
potential
Buyer perspective
Decision
theory
Consumer
behaviour
Problem
recognition
Category
need
Awareness
Brand awareness
Prospecting
Initiate dialogue
Provide
information
Exchange
information
Brand attitude
- info re benefits
- brand image
- feelings
- peer influence
Persuade
Negotiate/ tailor
Trial inducement
Close sale
Commit
Reduce cognitive
dissonance
Deliver
Exchange value
Service
Monitor
Information
search
Attitude
Evaluation of
alternatives
Information
gathering &
judgement
Choices /
purchase
Purchase
process
Post-purchase
behaviour
Post-purchase
experience
Figure 3 An interaction perspective on the sales process
The stages of the process of communicating value are therefore redescribed as follows:





‘Recognise exchange potential’ replaces ‘category need’ or ‘problem recognition’.
Both sides need to recognise the potential for a mutual exchange of value. For the
selling organisation, this is much of the purpose of the marketing process, which
defines the value required by customers and creates the value proposition.
‘Initiate dialogue’ replaces ‘Create awareness’ or ‘Prospecting’. The dialogue with
an individual customer may be begun by either party. One feature of the Web, for
example, is that on many occasions, new customers will approach the supplier rather
than vice versa.
‘Exchange information’ replaces ‘Provide information’. If we are to serve the
customer effectively, tailor our offerings and build a long-term relationship, we need
to learn about the customer as much as the customer needs to learn about our
products.
‘Negotiate/tailor’ replaces ‘Persuade’. Negotiation is a two-way process which may
involve us modifying our offering in order better to meet the customer’s needs.
‘Commit’ replaces ‘Close sale’. Both sides need to commit to the transaction, or to a
series of transactions forming the next stage in a relationship, a decision with
implications for both sides.
Traditional planning by medium can then be conducted, but this time taking account of
which tasks are most appropriate for each medium, including, of course, the sales force,
as illustrated in Figure 4.
Task
Media
Recognise
Exchange
Potential
Initiate
Dialogue
Exchange
Information
Negotiate/
Tailor
Commit
Exchange
Value
Monitor
Mass Media
Direct Mail
Telephone
Electronic
Other (PR,
POS, etc.
Sales Force
Figure 4
Given the furore created by the Brady and Davis article in 1993 criticising marketing for
its lack of professionalism and accountability, and the current clamour from chief
executives for greater justification of marketing expenditure, it is inevitable that a more
scientific approach to communications planing will be embraced, as outlined here.
Unless this happens, because of the high expense of personal selling, we can certainly say
farewell to the heyday of the sales force. This would be a pity, because in our
experience, they represent a solid foundation of intelligence, commonsense and power. If
used intelligently, however, as suggested here, their future is assured.