Sales Force

About 11 percent of all employed people, or 18 million people, are engaged in selling. The emergence of the Internet and other direct marketing techniques, along with the high cost of personal selling, is leading companies to reexamine the size and role of their sales forces.

Are salespeople necessary? According to Peter Drucker: “People are simply too expensive to be used for selling. We cannot, by and large, sell anymore—we must market, i.e., we must create the desire to buy which we then can satisfy without a great deal of selling.”

Companies don’t always need their own sales forces. About 50 percent of companies use contract sales forces: manufacturers’ reps, sales agents, and so on. Many companies hire outside salespeople to handle more marginal geographical areas and market segments.

In hiring salespeople, you should hire only those who are sold on the company and its products. This is hard to fake. And you might prefer people who have failed, rather than those who never tried. And don’t hire any salesperson whom you wouldn’t want to invite to your home for dinner.


In deciding on how much to pay salespeople, remember that low-paid salespeople are expensive, and high-paid salespeople are cheap. Top salespeople in a company often sell five times as much as the average salesperson but don’t get paid five times as much.

Salespeople need to be motivated, much like football players huddled in a locker room. The real talent is to be able to motivate the average salesperson, not just the star performers.

Watch out for the salesperson who thinks any sale is good no matter what its profitability. Tie compensation to the profit on the sale, not to the revenue. Each salesperson should see himself or herself as managing a profit center, not a sales center, and be rewarded accordingly.

Here are other measures to look at in judging a salesperson’s performance: average number of sales calls per day, average sales-call time per contact, average cost and revenue per sales call, percentage of orders per hundred sales calls, and number of new and lost customers per sales period. Then compare this salesperson’s performance to the average salesperson’s performance to detect poor or exceptionally good performance.

Poor performance is often excused by saying the market is mature. But calling a market “mature” is evidence of incompetence. It is probably easier to make money in a mature industry than in a high-tech industry, to take an extreme case.

The hardest job facing a salesperson is to tell a customer that a competitor has the better product. IBM expects its sales reps to recommend the best equipment for an application, even if this means recommending a competitor’s hardware. But the sales rep will win the customer’s respect and eventually his or her business.

Marketing’s role is to support the sales force in the following ways:

• Marketing places ads and buys lists to identify new prospects.
• Marketing prepares a profile of the best prospects so that salespeople know who to call on and who not to call on.
• Marketing describes the buying influences and rationales used by key customer decision makers.
• Marketing highlights competitors’ strengths and weaknesses and how the company’s products rate against competitors’ offerings.
• Marketing documents and distributes sales success stories and uses them in training programs.
• Marketing prepares and distributes communications (advertising, brochures, etc.) to customers to stimulate interest in the company’s products and make salespeople more welcome.
• Marketing uses advertising and telemarketing to find and qualify leads that can be turned over to the sales force.

Smart companies are equipping their salespeople with sales automation equipment (computers, cell phones, fax and copy machines) and software. Salespeople can research the customer before the visit, answer questions during the visit, and record important facts after the visit.

Salespeople can retrieve product information such as tech bulletins, pricing information, customer buying history, preferred payment terms, and other data to facilitate their work.

When the salesperson finally makes the sale, “The salesmen’s anxiety ends and the customer’s anxiety begins.” (Theodore Levitt)

Sales Promotion

Sales promotion describes incentives and rewards to get customers to buy now rather than later. Whereas advertising is a long-run tool for shaping the market’s attitude toward a brand, sales promotion is a short-term tool to trigger buyer action.

No wonder brand managers increasingly rely on sales promotion, especially when falling behind in achieving sales quotas. Sales promotions work! Sales promotions yield faster and more measurable responses in sales than advertising does. Today the split between advertising and sales promotion may be 30–70, the reverse of what it used to be.

The growth of sales promotion reflects the higher priority companies are attaching to current sales than to long-term brand building. It is a return to transaction marketing (TM) rather than relationship marketing (RM).

Sales promotion can be directed at retailers, consumers, and the sales force. Retailers will work harder if offered price-offs, advertising and display allowances, and free goods.


Consumers are more likely to buy in response to coupons, rebates, price packs, premiums, patronage awards, contests, product demonstrations, and warranties. The sales force operates more vigorously in response to contests with prizes for superior performance.

Because of the variety of sales promotion tools, marketers need experience in knowing which to use. Some large companies have a sales promotion specialist who can advise brand managers.

Or the company can engage the services of a specialist sales promotion agency. The main need is to not only use promotions but to review and record results so that the company can improve its sales promotion efficiency over time.

Although most sales promotions increase sales, most lose money. One analyst estimated that only 17 percent of a given set of sales promotion campaigns were profitable. These are the cases where the sales promotion brings in new customers to sample the product and where they like the new product better than their previous brand.

But many sales promotions only attract brand switchers looking for a lower price, who naturally abandon the brand when another brand goes on sale. Sales promotions are less likely to entice away loyal users of other brands.

Thus sales promotions work poorest in product markets of high brand similarity. They tend to attract brand switchers who are looking for low price or premiums and who won’t be loyal to a brand.

It is better to use sales promotions in product markets of high dissimilarity where new customers may find that they like your product and its features better than their previous choice.

Sales promotions tend to be used more by weaker and smaller brands than stronger brands. Smaller brands have fewer funds to spend on advertising, and for a small cost they can get people to at least try their product.

Sales promotions in general should be used sparingly. Incessant prices off, coupons, deals, and premiums can devalue the brand in the consumers’ minds. They can lead customers to wait for the next promotion instead of buying now.

Companies are forced to use more sales promotion than they want by the trade. The trade demands discounts and allowances as a condition for putting the product on the shelf. The trade may demand consumer promotions also. So many companies have little choice but to comply.

Prefer sales promotions that agree or enhance your brand image and add value. Try to use sales promotions with advertising. Advertising explains why the customer should buy the product, and sales promotion provides the incentive to buy. When used together, ads and sales promotions make a powerful combination.

Segmentation

In the past, companies such as Sears or Coca-Cola, when asked who their customer is, would answer “Everybody.” But a marketer can rarely satisfy everyone in a market. Not everyone will like the same camera, car, cafeteria, or concert. Therefore, marketers must start by dividing up the market.

Companies that moved away from mass market thinking started by identifying large market segments. Procter & Gamble, in selling its Duncan Hines cake mix, would define the target market as “married women between the ages of 35 and 50 with families.”

Later companies moved from large segments to narrower niches. Estée Lauder might design a product for “black American professional women between the ages of 25 and 35.” Finally, some companies have moved to the ultimate segmentation scheme, segments of one, namely individual customers.

Today more companies are guilty of undersegmentation than oversegmentation. They imagine more high-potential prospects for their offerings than really exist. The antidote is to divide the market into several levels of potential. The first level consists of those customers who would be the most responsive to the offering.


This group should be profiled in terms of their demographic and psychographic characteristics. Then a secondary group and a tertiary group should be defined. The company should then focus its initial selling on its primary prospects; if they don’t respond, the company either has mis-segmented or its offering is of little interest.

Segments can be identified in three ways. The traditional approach is to divide the market into demographic groups, such as “women between the ages of 35 and 50.” This has the advantage of ease of reaching this group.

Its disadvantage is that there is no reason to believe that women in this group have similar needs or readiness to buy. Demographic segmentation is more about identifying a population sector than a population segment.

The second approach is to segment the market into need groups, such as “women who want to save time in shopping for food.” This is a clear need that can be met by a number of solutions, such as a supermarket taking telephone orders or Web orders that would be delivered to the home. The hope would be to identify demographic or psychographic characteristics of such women, such as being more highly educated or having a higher income.

The third approach is to segment the market by behavior groups, such as “women who order their food from Peapod and other home delivery groups.” This group is defined by their actual behavior, not just needs, and the analyst can then search for common characteristics that they may have.

Once you identify a distinct segment, the question is whether it should be managed within the existing organization or deserves to be set up as a separate business. In the latter case, Nirmalya Kumar calls it a strategic segment.

For example, food companies such as Kraft and Unilever focus primarily on their retail sales and only secondarily on food service systems. But food service requires different quantities, packages, and selling systems. It is a strategic segment and should be run independently of the food retailing group and manage its own strategy and requirements.

Selling

“Everyone lives by selling something,” noted the novelist Robert Louis Stevenson. People are selling either a product, a service, a place, an idea, information, or themselves.

Cynics view selling is a form of civilized warfare fought with words, ideas, and disciplined thinking. And they view marketing as an effort to add an element of dignity to what is otherwise a vulgar brawl.

There are many images of selling. The YTS school says that selling consists of “yell, tell, and sell.” The S&P school says selling is “spray and pray,” The LGD school says that selling is “lunch, golf, and dinner.” And the salesperson is described as a “talking brochure.”

There is the well-known story of the Stanley Works in which a consultant told the tool company, “You are not in the business of selling drills. You are in the business of selling holes.” Don’t sell features. Sell benefits, outcomes, and value.


Some individuals are gifted salespeople. They can sell refrigerators to Eskimos, fur coats to Hawaiians, sand to Arabs, all at a profit, and then repurchase them at a discount.

Good salespeople remember that they are born with two ears and one mouth. This reminds them that they should be doing twice as much listening as talking. If you want to lose the sale, make a pitch to the customer.

Some salespeople can be painful bores. Woody Allen lamented: “There are worse things in life than death. Have you ever spent an evening with an insurance salesman?”

Salespeople must get used to being rejected. Dennis Tamcsin of Northwestern Mutual Life Insurance observed: “We have something in this industry called the 10-3-1 ratio. This means that for every 10 calls a salesperson makes, he will only get to make a presentation to three, and if he’s got a good success rate, he’ll make one sale. We need people who won’t shrink from that kind of rejection.”

IBM trains its salespeople to act as if they are always on the verge of losing every customer.

What makes a successful salesperson? To succeed, a salesperson must recognize that the first person he or she has to sell to is himself or herself. His job is to get in touch with the buyer within himself. And his motto should be: “I develop clients, not sales.”

The comedian George Burns had his own opinion about what makes a successful salesperson: “The most important thing in relationship selling is honesty and integrity. If you can fake them, you’ve got it made.”

Here is a story that illustrates the difference between great salespeople and average salespeople.

A Hong Kong shoe manufacturer wondered whether a market existed for his shoes on a remote South Pacific island. He sent an order taker to the island who, upon a cursory examination, wired back: “The people here do not wear shoes. There is no market.” Not convinced, the Hong Kong manufacturer sent a salesperson to the island. This salesperson wired back: “The people here don’t wear shoes. There is a tremendous market.” Afraid that this salesrep was being carried away by the sight of so many shoeless feet, the manufacturer sent a third person, a marketer. This marketing professional interviewed the tribal chief and several natives and wired back:

“The people here don’t wear shoes. As a result their feet are sore and bruised. I have shown the chief how shoes would help his people avoid foot problems. He is enthusiastic. He estimates the 70 percent of his people will buy the shoes at $10 a pair. We probably can sell 5,000 pairs of shoes in the first year. Our cost of bringing the shoes to the island and setting up distribution would amount to $6 a pair. We will clear $20,000 in the first year, which, given our investment, will give us a rate of return on our investment (ROI) of 20 percent, which exceeds our normal ROI of 15 percent. This is not to mention the high value of our future earnings by entering this market. I recommend that we go ahead.”

This illustrates that effective marketing involves careful research into the market opportunity and the preparation of financial estimates based on the proposed strategy indicating whether the returns would meet or exceed the company’s financial objectives.

In the past, a gifted salesperson was one who could “communicate value.” But as products have become more similar, each competitive salesperson delivers essentially the same message. So the new need is for the salesperson who can “create value” by helping the customer make or save more money.

Salespeople must move from persuading to consulting. This can take the form of providing technical help, solving a difficult problem for the customer, or even helping the customer change its whole way of doing business.

Service

In an age of increasing product commoditization, service quality is one of the most promising sources of differentiation and distinction. Giving good service is the essence of practicing a customer orientation.

Yet many companies view service as a pain, a cost, as something to minimize. Companies rarely make it easy for customers to make inquiries, submit suggestions, or lodge complaints. They see providing service as a duty and an overhead, not as an opportunity and a marketing tool.

Every business is a service business. You are not a chemical company. You are a chemical services business. Theodore Levitt said: “There is no such things as service industries. There are only industries whose service components are greater or less than those of other industries. Everybody is in service.”

“Businesses planned for service are apt to succeed; businesses planned for profit are apt to fail,” observed American educator Nicholas Murray Butler.


What service level should a company deliver? Good service is not enough. Nobody talks about good service. Sam Walton, founder of Wal-Mart, set a higher goal: “Our goal as a company is to have customer service that is not just the best, but legendary.” The three Fs of service marketing are be fast, flexible, and friendly.

What is poor service? There are stories that tell of a hotel in Spain that advertises that it will accept service complaints at the front desk only from 9 to 11 A.M. each day. And there is a store in England whose sign reads, “We offer quality, service, and low price. Choose any two.”

There are two ways to get a service reputation: One is to be the best at service; the other is to be the worst at service.

Ellsworth Statler, who founded the Statler hotels, trained his people with the dictum: “In all minor discussions between Statler employees and Statler guests, the employee is dead wrong.”

You can check on the service quality of your organization by becoming a customer for a day. Phone your company as if you are a customer and put some questions to the employee. Go into one of your stores and try to buy your product. Call about returning a product or complaining about it and see how the employee handles it. You are bound to be disappointed.

Check the smile index of your employees. Remember, “A smile is the shortest distance between two people.” (Victor Borge)

Sponsorship

Sponsorship

Companies are constantly invited by various groups to sponsor events, activities, and worthwhile causes. Companies also actively seek venues where they can get their names before the public.

For example, Coca-Cola has been a long-term participating sponsor of Olympic Games, World Cups, Super Bowls, and Academy Awards. By shelling out large sums of money, Coca-Cola hopes to gain favorable public attention and also treat its associates to big-time events.

Companies will put out good money to place their names on physical facilities such as buildings, universities, and stadiums to keep their names in the public’s eye. Sometimes this backfires; Houston had to find a new name for Enron Field.


Companies can sponsor an important cause (such as better eating, more exercise, regular doctor appointments, saying no to drugs) in what is called “cause-related marketing.” By partnering with a cause that many people believe in, the company can enhance its corporate reputation, raise brand awareness, increase customer loyalty, build sales, and increase favorable press coverage.

Companies are increasingly borrowing the auras of celebrities to add radiance to their own names. Celebrities bring high attention to the brand, add to its credibility, and offer reassurance.

Not surprisingly, singers, actors, and sports figures stand ready to sell their auras. Reebok has acquired the aura of Venus Williams ($40 million contract) and Nike has acquired Tiger Woods’ aura ($100 million contract).

But be careful. PepsiCo borrowed the auras of Michael Jackson, Mike Tyson, and Madonna, all of which backfired. And Hertz borrowed O. J. Simpson’s aura, only to regret it.

Sponsorship can turn out to be either an expense or an investment. If the money doesn’t generate increased sales or corporate equity, then it is an expense. Companies that want to make the expenditure an investment have to be much more careful in deciding what to sponsor.

The question is what does a company gain from putting its name on a stadium, a Formula One racing car, a golf tournament, or an art show? Does it help the company sell more stuff?

Most companies haven’t really thought through their sponsorships. In fact, they often start a sponsorship that they continue indefinitely because of inertia or from their fear of being criticized for dropping the sponsorship.

Toyota Tennis Ad - One of the most important things for a company
is to be seen and recognized by its target audience.

If your company is going to sponsor something, make sure that it is a reasonable and relevant match to your target market and type of product/service. A good example is Timex’s sponsorship of the Iron man Triathlon to convey that its watches “take a licking and keep on ticking.” On the other hand, it wouldn’t make sense for Nestlé’s baby food division to sponsor a nursing home event.

Make sure that you decide on the objectives you are trying to achieve with the sponsorship. The money must have a positive impact on awareness, image, or customer loyalty that somehow turns into more sales. Ask how much your sales will have to increase to justify the cost.

After each sponsorship, do a postaudit of whether it achieves the objectives. Granted, it is difficult to measure the value a company receives from many of its sponsorship dollars. If you find that it didn’t contribute much value, write it off as philanthropy.

Strategy

Strategy

Strategy is the glue that aims to build and deliver a consistent and distinctive value proposition to your target market. Bruce Henderson, founder of the Boston Consulting Group, warned: “Unless a business has a unique advantage over its rivals, it has no reason to exist.”

If you have the same strategy as your competitors, you don’t have a strategy. If the strategy is different, but easily copied, it is a weak strategy. If the strategy is uniquely different and difficult to copy, you have a strong and sustainable strategy.

Harvard’s Michael Porter drew a clear distinction between operational excellence and strategic positioning. Too many companies think they have a strategy by pursuing operational excellence. They work hard at “benchmarking” the “best-of-class performers” to stay ahead of their competition.


But if they are running the same race as their competitors, their competitors may catch up. Their real need is to run a different race. Companies that target a specific group of customers and needs and deliver a different bundle of benefits can be said to have a strategy.

Several companies can be cited as having distinctive strategies.

• Southwest Airlines, the most profitable U.S. airline, is run differently than other airlines in dozens of ways: It targets price sensitive, short-trip passengers; it flies point-to-point rather than through hubs; it uses only 737s, thus reducing spare parts inventory and pilot training costs; it sells only economy class and doesn’t give seat assignments; it doesn’t serve food; it doesn’t move baggage to other carriers; and so on. The net results are that Southwest can take off after landing in 20 minutes compared to the average of 60 minutes for competitors, and its equipment is in the air longer and yields a higher return on its investment.
• IKEA, the world’s largest furniture retailer, searches for lowcost real estate in a major city, builds a giant store with a restaurant and day care center, sells good quality furniture at a lower price that customers take home in their cars and put together, offers membership privileges leading to even lower prices, and in a dozen ways remains hard to copy by any would-be imitators.
• Harley Davidson not only sells motorcycles but provides entry into a social community that rides together, has races, and shares the Harley Davidson lifestyle with its HD leather jackets and clothing, watches, pens, watches, and restaurants.

Companies have a unique strategy when (1) they have defined a clear target market and need, (2) developed a distinctive and winning value proposition for that market, and (3) arranged a distinctive supply network to deliver the value proposition to the target market.

Nirmalya Kumar calls this the 3Vs: value target, value proposition, and value network. Such companies cannot easily be copied because of the unique fit of their business processes and activities.

Companies that forge a unique way of doing business gain lower costs, higher prices, or both. While their competitors increasingly resemble each other and are forced to compete on price, strategically positioned companies avoid the bloodbath by following the beat of a different drummer.

Looking at strategy this way prevents companies from thinking they have a strategy because they are going on the Internet, or outsourcing, or restructuring, or acquiring other firms, or adopting customer relationship management. These business initiatives can easily be copied. They don’t define how a business is going about building a sustainable strategy.

One of the best rules for strategy development is to strive to find out what the target customers like and do more of it; and find out what they dislike and do less of it. This means spending time in the marketplace and seeing what matters. As stated by Al Ries and Jack Trout, “Strategy should evolve out of the mud of the marketplace, not in the antiseptic environment of an ivory tower.”

Your strategy should be some unique synthesis of features, design, quality, service, and cost. You have succeeded in building an enviable strategy when it has created such an advantageous market position that competition can only retaliate over a long time period and at a prohibitive cost.

What is bad strategy? We know it when we see it.

• Yesterday’s strategy. Sears and GM, for example, tend to be responsive to the marketplace of yesterday. “You can’t have a better tomorrow if you are thinking about yesterday all the time.” (Charles F. Kettering, American inventor) In too many companies, the old strategy is “baked in.” Dee Hock, CEO emeritus of Visa, said: “The problem is never how to get new innovative thoughts into the mind, but how to get the old ones out.”
• Protectionism. American steel companies lack strategy because they spend their time urging protectionism. Protectionism is a sure way to lose your business.
• Marketing shootouts. Price wars and mutual destruction indicate the absence of strategy rather than its presence.
• Overfocusing on problems. Peter Drucker warned against “feeding problems while starving opportunities.”
• Lack of clear objectives. Companies often fail to spell out or prioritize their objectives. “If you don’t know where you’re going, it’s really hard to get there.” (Viri Mullins, president, Armstrong’s Lock & Supply). I have a strong bias toward advising a company to do what is strategically right rather than what is immediately profitable.
• Relying on acquisitions. Companies that build their growth plans on acquisitions rather than innovation are suspect. Half of a company’s acquisitions will become tomorrow’s spin-offs.
• Middle-of-the-road strategy. What happens to those who have a middle-of-the-road strategy? They get run over.
• Believing if it isn’t broke, don’t fix it. That is one of the worst rules of management. “In today’s economy, if it ain’t broke, you might as well break it yourself, because it soon will be.” (Wayne Calloway, CEO of PepsiCo)

The sad fact is that most companies are tactics-rich and strategy-poor. Sun Tzu in the fourth century B.C. observed: “All men can see these tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved.”

Success and Failure

J. Paul Getty, the fabulously wealthy founder of Getty Oil, shared his three secrets for success: “Rise early, work late, strike oil.” Too many of us can only do the first two.

Irving Berlin, the songwriter, lamented: “The toughest thing about success is that you’ve got to keep on being a success.” “Success is never final,” as Winston Churchill observed.

Success, in fact, is the major cause of failure. Five years of success will ruin any business. Lew Platt, former CEO of Hewlett-Packard, confessed: “The single biggest problem in business is staying with your previously successful business model ... one year too long.”

The success of a company depends ultimately on the success of its customers and partners. But a company should not try to please everyone. That would be a sure way to fail.

Failure shouldn’t be viewed as always bad. Henry Ford said: “Failure is only the opportunity to begin again more intelligently.” He added that he wouldn’t hire anyone who has never failed. Thomas Huxley, the English biologist, concurred: “There is the greatest practical benefit in making a few failures early in life.”

Suppliers

Suppliers

The company’s marketers should be interested in the company’s suppliers, not just its distributors and dealers. One reason is to make sure that the company’s purchasing people buy quality supplies so that the company can deliver its promised quality level to its target customers.

Another reason is that undependable suppliers can lead to production delays and therefore to broken delivery promises to customers. A third reason is that good suppliers will provide value-adding ideas to the company beyond simply supplying the product.

Although the company’s purchasing people should seek the best suppliers, they also are judged by their ability to keep company procurement costs down. This pressure can lead to compromises in the choice of suppliers.


When Ignatio Lopez ran General Motors’ procurement, he treated the suppliers harshly, always demanding a rock-bottom price even if this put some suppliers on the edge of survival. This is shortsighted. One can guess that these hard-pressed suppliers would favor the other auto companies when it came to handling shortages or unveiling innovations.

Today most companies are reducing the number of their suppliers. The thought is that one good supplier is better than three average ones. Some companies have chosen to work with a prime supplier rather than playing off suppliers against each other in the hope of gaining concessions.

The auto industry has moved toward using a prime supplier for seating, another for engines, another for braking systems, and so on. These prime suppliers are treated as partners who coinvest in the success of the customer.

And if you are supplier, be thankful when you have a demanding customer. Rolls-Royce calls Boeing “the toughest customer we have” and they’re grateful for it. By meeting the standards of a demanding customer, the company finds it much easier to satisfy their less demanding customers.