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Sales Management: Shaping Future Sales Leaders

The Sales Function and Multi-Sales Channels Chapter 2

2-1 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Learning Objectives  Explain what the sales function consists of and how salespeople affect a firm’s supply chain  Identify the various channels in which the sales function can be carried out  Explain how effective sales management efforts can align a firm’s sales strategy in a multichannel environment

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The Sales Function  Locating potential buyers  Persuading them  Consummating the transaction

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The Supply Chain  Complete process of events and people needed to bring product to the customer  Key term Sales forecast: what the salesperson expects to sell in a particular period of time

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Managing the Supply Chain: Active vs. Passive Passive

Active

 Example: salesperson turns in sales forecast

 Salesperson actively seeks to influence what supply chain does

 Sales forecast influences what happens in supply chain, but salesperson is not taking active role in influencing chain’s activity

 Example: buyer that needs special payment terms will need the salesperson’s help in securing those terms from the company  Example: salesperson might need to arrange expedited delivery in order to meet a buyer’s needs

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Multichannel Environment  Using a number of methods, or channels, to accomplish the selling function

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Global Sales Management: Outsourcing to India  EDS manages some 500 call centers worldwide E lle s m e re I s la n d

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Global Sales Management: Why Outsource?  Lower cost  Willing and highly educated workforce availability

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Strategies to Reduce Sales Force Costs Without Sacrificing Performance  Purifying  Shifting non-selling activities to lower-cost alternatives

 Outsourcing  Hiring another company to carry out a task or set of tasks

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Advantages of Company-Employed vs. Outsourced Sales Force Company-Employed  Company can exert greater control over their efforts  Greater control over who is hired  Focus on only the company’s products, whereas an outsourced representative might be free to sell many companies’ products

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Outsourced  Firm’s selling costs can be shared with other manufacturers, reducing cost per sales call  Established relationships with customers from which the manufacturer can benefit  These can yield greater coverage of the market for the manufacturer

Types of Outsourced Salespeople Mfg Rep Mfg Agent Rep

 Independent contractor who does not take ownership of product and does not maintain an inventory

Distributor

 Sells for many manufacturers and take ownership of products, sell them on consignment, or otherwise maintain an inventory

Broker

 Represents either buyer or seller and sometimes both, carries an inventory of products but does not take ownership of them

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A Few Manufacturer’s Reps Organizations  Foodservice Sales & Marketing Association  Mfr. Rep’s Educational Research Foundation  United Association of Manufacturer’s Reps  Manufacturers’ Agents National Association  Association of Independent Manufacturers’ Reps  All offer certification to upgrade professionalism  Most specialize in industries 2-12 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Types of Company-Employed Salespeople Inside Salesperson

 Sells at a company’s facilities, either by telephone or in person

Field  Sells at the customer’s location Representative

Account Manager

 Has responsibility for building sales within specific accounts or accounts within a specific area (geographic rep)

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Types of Company-Employed Salespeople (continued) Vertical Market  Accounts all operate in the same industry Rep Retail Sales Rep

 Sells to consumers who come into stores

Trade Rep

 Sells to organizations in the supply chain, usually retailers

Missionary Salesperson (detail rep)

 Sells to people who recommend or prescribe a product to others but do not personally use it

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More on Outsourcing  Can outsource Call Centers  Can outsource parts of the sales cycle  To different sales organizations

 Often used to  Enter new markets  Keep costs variable (no overhead)  Leverage market coverage costs (share with others)

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Seamless Integration  Seamless integration: a firm’s customers can easily shift transactions across various channels  Goal: all areas have all the customer information they need so the customer is treated properly

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Alignment  Getting all of functional areas of a firm to work together  This includes the company’s various salespeople–its inside reps, geographic reps, customer service reps, etc.

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Alignment  Alignment occurs at 3 levels

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Areas to Align Technology

 CRM system used by salespeople also supports marketing

Processes and Goals

 Lead management

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Sales Metrics

 Marketing & sales have same sales targets for a new product

Self-Assessment Library  Go to http://www.prenhall.com/sal/  Access code came with your book

 Click the following  Assessments  Life in Organizations  Careers  How Motivated Am I to Manage?

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Ethics in Sales Management: Stuck in AOHell  Customer tried to cancel his AOL service 21 times  Recorded the call and posted the conversation on the Web

 Customer claimed moving to France, still had to talk to manager in order to cancel  AOL: “…every Member that calls in to cancel their account is a hot lead”  State of New York fined AOL $1.25 million for hassling customers who wanted to cancel and then billing them anyway Source: Keith Dawson, “Your Call is Not Particularly Important to Us,” Call Center Magazine (Oct. 2006), p. 4; Anonymous, “Customers Complain of Cancellation Problems,” FinancialWire (July 2, 2006), p. 1. 2-21 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Role Play: Mechanix Illustrated  Family-owned magazine serving diesel mechanic shops  5000 subscribers, 10% increase over past 2 yrs  Advertising sales stagnant  Bill North, editor  Does advertising sales

 Sandy Lake, Lake Sales  Wants to sell advertising  Wants to take over subscriber management 2-22 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Role Play (continued): Action Steps  Bill  List objectives  List concerns regarding outsourcing advertising sales

 Sandy  Develop particular sales format (phone, field, etc.)  List advantages for that format

 Role play the sales call

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Caselet 2.1: Hereford Promotions  Promotional products company with 3 sales people  In past year, sales up 8%, but customer complaints have doubled  In past quarter, 12 new customers, 15 lost  Company’s net income averaging ~$1000 / month

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Caselet 2.1 (continued): Running the numbers  Salespeople paid 10% commission on each sale  Earn an average of $10,000 /month

 Each rep earning $10,000 /month adds $5000 profit margin to the company  New salespeople won’t work for straight commission, they expect a salary ($3000) until sales are high enough to cover expenses 2-25 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

 Company averages 40 large customers per salesperson  Large customer bills $20,000 / year

 Small customers account for $20,000 /month for each rep  Each rep might have 100 small customers

Caselet 2.1 (continued): Making decisions  What alternatives for growth might Sandy consider?  What multichannel options might she pursue?

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Caselet 2.2: Marchetti Machines, Problem 1  Salesperson Frank McCaslin is close to landing a large account, one of the biggest sales of the year  Account’s CFO plays golf with Marchetti service manager Louis Ruggieri  Ruggieri says the service team hates to work on the system Frank proposed  Account’s CFO emails, “…if that is the case, we’re going to have to open our search up to some other companies to try to find something more reliable” 2-27 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Caselet 2.2 (continued): Marchetti Machines, Problem 2  Sales division is reorganizing  Bottom 10% of accounts moving to inside sales  Inside sales moving to new division with Web sales and distributor sales  Distributors are only allowed to sell to    

Accounts under $100,000 in annual revenue Accounts that require engineering that Marchetti doesn’t do Accounts they find first Cannot sell to government or accounts already on Marchetti’s customer list

 Current issue: distributors sell to Marchetti accounts  Company names are not obvious or divisions operate under different names  Difficult to know who owns the account 2-28 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Caselet 2.2 (continued): Marchetti Machines, Questions 1. How should Frank’s boss, Emily, handle the problem with Louis Ruggieri?  What should she do about the account?  What should she tell Frank if the account is lost completely?

2. What problems are likely to occur because of the reorganization?  Did these issues exist before the reorganization?  Will these issues be better or worse as a result of the change in structure?

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