LESSON 10 - BUSINESS BASICS PART III - MARKETING & SALES

Introduction:  Create it, Get the word out, and Sell it

A company’s financial health starts with sales.  A company must sell its products or services in order to pay the bills and earn a profit.  R&D (Research and Development) first develops the product or creates a service, marketing then lets individuals or organizations know the company exists and what they are all about, and finally sales does the selling that brings in the money. 

In this lesson we will go over the basic concepts of marketing and sales.  This will include market strategies, market research, the 4 P’s of marketing, sales tactics, type of sales, the sales force and the keys to developing successful products. 

What is a Market and the Marketing Department?

A Market is a group of customers or potential customers.  Companies focus on its particular market by getting practical information the company can use for sales, marketing, and product development.  The market starts with the total population, then Potential markets that have an interest, then Available markets that have the money, then Target markets that are the customers the company has determined to serve (the served market), then finally the Penetrated markets who have already bought your products and/or services. 

The market can then be broken up into segments and analyzed even further.  We will review market segments later in this lesson.

The Marketing Department’s key responsibilities is to determine the needs, wants, and demands of the consumer and finds ways to satisfy those needs within its product base.  Needs represents items such as food, housing, and clothing, whereas wants represents cultural based items such as makeup or vacations.  Demands are simply the wants of a consumer who has the ability to pay for what they want. 

Marketing deals with goods (which are tangible), services (an intangible benefit to customer’s), and ideas (concepts, images, etc).  Quite often, as in this lesson, the word product can also refer to goods, services, or ideas.

Once the market has been establish, the marketing department looks at ways to best market the company’s product.  Marketing does more than just promotion, they dig deep to find, or even try to create, consumer trends related to what their company is all about.  Marketing needs to know and understand the customer to the point where selling is almost non-essential, and the product or service can sell itself.

Marketers need to be creative people as there is a lot of competition out there.  Due to this continuous competition, the cycle of creating something new never ends.  A key objective of marketing is to provide products and services that customers really want.  They need to make customers feel they have a good relationship with the company.  In this way the customer feels more like a partner, not just a source of revenue for the company. Marketing is always trying to develop satisfying relationships with customers that benefit both the customer and the organization. 

Marketing needs to know how their decisions could lead to problems for other departments within the company.  For example, making a decision to incorporate advertising statements that are too generic can increase the amount of calls to customer support.  

Just as there is a split in economics (microeconomics and macroeconomics), the same holds true for marketing.  The marketing environment has similar components:

• Microenvironment deals with internal factors that can influence the company directly.  The marketing department is always looking at new strategies and market approaches.  They need to then get the rest of the company to follow their lead.  The problem is most other departments are more resistance to change.  Finance will be concerned about the cost, customer service will be concerned with the change in direction and the training needed, and R&D might have to look at a new development approach.  The process of internal marketing is focused toward overcoming this resistance to change.  The internal decision makers within the company need to look at the manpower, money, machinery, materials, and markets that are all part of the internal environment.  Distribution channels such as suppliers, vendors, warehousing, and transportation of the product, are also part of the internal environment and will be affected by marketing planning and decisions.  The same goes for outside marketing service agencies.

• Macroenvironment deals with the external factors outside of your company’s direct control.  Demographic and Social trends, Economic issues which impacts what people can afford to buy, Environmental factors such as the availability and cost of raw materials, the cost of energy and levels of pollution, Technological rate of change, and Political pressures such as legislation and effects from agencies like the FDA, FCC, or EPA that can stop certain marketing moves.

Marketers must also understand emerging technology and applications in order to truly understand what the customer expects technically.   It will also help spot potential business opportunities as well as potential threats. 

Some considerations of a company’s marketing program are consumption that seeks to get people to purchase more and more, customer satisfactionthat’s more concerned with happy customers than pushing a product people may not like, choice that gives many products to choose from (however may be costly to the company), and lifestyle that focuses on improving a person’s quality of life.

Whether the company operates as a for-profit, or as a not-for-profit, customers may believe a company is dynamic and creative based on its advertising message.  Marketing must also concentrate their efforts on the market associated with their products.  In order to put marketing efforts into play, marketing needs to develop a marketing strategy, design a marketing plan, and then implement the marketing plan.  These subjects will be taught throughout this lesson.

Key points to excellent Marketing Philosophies

What are the Five Marketing Philosophies?

The Five Marketing Philosophies help determine the management of marketing. Companies approach and conduct business in different ways in order to achieve their organizational goals.  The five competing concepts by which companies are guided in their marketing efforts are:

1.      Production concept, which is based on the fact that consumers favor products that are available and affordable.  Concentration on production efficiency and effective distribution networks outweigh the customer’s actual needs and wants.  This is used primarily when demand exceeds supply and the focus is on finding production methods that can bring the price down to attract more customers.

2.      Product concept, which is based on ways to improve the quality, performance, and features to attract buyers.  This philosophy tends to spend too much time adding features to their products, rather than thinking about what people actually need and want.

3.      Selling concept, which places the focus on sales rather than what people actually need or want.  Most of the time the product is misrepresented which results in high customer dissatisfaction.

4.      Marketing concept, which focuses on what people need and want more than the needs of the seller.  This concept is about the importance of satisfying the customer’s needs to achieve company success.  Products are developed around those needs and wants. 

5.      Societal marketing concept, which not only uses the same philosophy as the marketing concept, but also focuses around the products benefit to the betterment of society as a whole.  Greater emphasis is put on environmental impacts, population growth, resource shortages, and social services.

The marketing concept relies upon marketing research to define market segments, their size, and their needs.  The marketing department makes the appropriate decisions to satisfy those needs.

Market Research

Market Research helps companies understand and analyze their customers.  Market research mostly focuses on the following four types of information:

1. Demographic characteristics.  Research in consumer markets would include the age, race, sex, education, marital status, housing, income, and number of children.  Research in business markets would include the type of industry, annual sales, number of employees and locations, and years in business.

2. Buying behaviors.  Research is done to see how customers buy products such as in a retail store or online.  Also, the frequency of purchases and the type of advertising or influence that motivated them to buy.

3. Lifestyle or psychographics.  Research on the type of hobbies, sports, and vacations, TV shows, magazines, religion, frequency of fine dining, frequency of fast food, and even personality traits and sexual orientation.

4. Customer Satisfaction.  Research through surveys on the perceived value for the price, ease of use, useful features, what they would like to see in the future, and whether they are likely to purchase more product.

Most often, it is the larger companies who invest in market research.  Small companies feel they already know their customer base pretty well. Companies that sell commodity products such as gold, coal, grain, oil, rice and paper do not really need much market research as these products have characteristics that are indistinguishable across the companies that sell it.  With commodities, customers are mostly concerned about low prices and fast service.  Companies, like a phone manufacturer that only sells to one type of customer, is considered to be in a homogenous market.  These customers share most characteristics.  However, with a focus on product differentiation, companies can emphasize the quality of their products such as, “their coal burns longer,” or “their phones sound better,” than that of their competitors.

There are basically two types of market research; primary market research, which involves asking questions through a survey, an observational approach, or experimental approach, and secondary market research, which involves checking articles in newspapers, magazines, and books.  Good secondary sources to help research your industry are: www.census.gov/eos/www/naics/, www.hoovers.com/free/, and www.standardandpoors.com.

Secondary research is less expensive and quickest to perform, however, you get much more detail with a primary market research customer survey.  For example, with primary research you can get a good feel from prospects on the value of a potential product release, and whether or not they would buy it.  It can then be narrowed down to the type of prospect who would buy the product based on items such as age, location, and gender. 

It is important to make sure the primary research survey questionnaire gives you the exact data you need or else you will be wasting everyone’s time.  By following these 7 steps, you should have all areas covered:

1. What are the goals of the survey?   Think about exactly what it is you want to understand from your customers.

2. Who will you survey?  You want to make sure you are surveying the right clientele.  For example, if your company has two distinct areas with two distinct customers, you would not want to survey the wrong customers on a particular product release.  You also might just want to ask a sample of your customer base to get an approximate value.

3. How will you perform the survey?  Will this be done via a web site, through an e-mail blast, over the phone, or in person?  Also, will you or someone within the company perform these surveys, or will you get an unobjectionable outside source?  People tend to be more honest with an outside source rather than someone within your company.  There are pros and cons to all of these methods.  For example, an e-mail blast is quick and easy, but people tend to ignore them or might be too dissatisfied to even want to participate.  The telephone requires more time and effort, and sometimes people hate answering these types of calls, however, you can get a personal verbal response.  You need to determine what method your customers are most willing to participate in, and if the costs outweigh the benefits.

4. Create the questionnaire.  Be sure to brainstorm with people within your organization to create the most effective and pertinent questions.  Keep the survey as short as possible and test it out before you give it to your customers.  The questions can be developed with a quantitative or qualitative response:  

·         Quantitative information involves questions that have a numerical answer, which can then give you a percentage base.  For example, you can have a question that has an answer of “yes” or “no” which you can then express data like, “76% of all females are likely to buy the product.”  These are considered closed-ended questions, which are easy to compile and compare.  Ratings such as 1 – 5 or excellent, good, average, poor, and very poor are great to use for customer satisfaction surveys.  You should be concerned with a rating of 3 or average as in most cases, it is a customer who is truly dissatisfied, however, does not want to come off too cruel.  Poor and very poor are obviously big alarms that need immediate attention.

·         Qualitative information involves a verbal statement which can be used to study suggestions or comments, not just “yes” or “no” type of answers.  These are considered open-ended questions that truly capture the customer’s attitude and opinion.  You should allow at least one open-ended question on the customer satisfaction survey.

5. Present the survey.  If you followed steps 1 through 4 properly, getting the survey out to the customers should be straightforward.  Make sure you have up-to-date contact information.  If you run into snags, just make the necessary adjustments and carry on until your targeted numbers of surveys are completed.

6. Analyze the data.  This is the anxious part of the project.  Be careful not to analyze the surveys until all of the data is compiled, or else you might get a false sense of success or failure.  Your heart wants a desired outcome and you might tend to analyze the data in an unobjective way.  Be as objective as possible and look for trends, both positive and negative.  This is an important aspect of being a strong manager and leader.  This goes for any type of survey including customer satisfaction.  There might be some surveys that are questionable that need attention, however, do not pertain to the questions asked.  For example, you might want to know if a product is easy to use, however, the customer is upset at a salesperson for not returning a call and thus gives all “very poor” answers or a vulgar opinion.  Make sure you keep the data in simple terms so that everyone can fully understand the results and what actions need to be taken.  Report on the most important and major findings, and do not clutter the data with too much unimportant statistical analysis.

7. Act on the results.  The most important aspect of the completed survey is what you do with the information given.  Decide on the recommendations or evaluations and then determine what action needs to be taken.  If, for example, improvements need to be made, address those issues immediately and after a period of a few months, send out a follow up survey with the pertinent questions to be sure all has been corrected.  If the research was done to support a decision on a new product release, immediately start the process on determining the production, cost, and release dates.

Example – Basic individual Primary Market Research Questionnaire.

Analyzing your Customers and Competitive Market Strategies

Analyzing your customer base is needed before you can create a strategic marketing plan.  You need to determine which customer market your company will be operating in:

·         Consumer market, that buys your goods for individual or family use.

·         Industrial market, such as manufacturers, who buy your goods for use in the production of other goods that are then sold to others.

·         Reseller market, that buys your goods, usually through a distributor, in order to resell or rent to their customers.

·         Government market, that purchase your goods to carry out governmental functions.

·         International market, who buys your goods globally.

Competitively marketing your product is important as it plays a big part on how you are going to target your market.   Four strategies marketers use as a competitive edge, is to best determine if they are:

1. Market leaders, who are looking to dominate the industry.  They look to protect their market share like developing new product ideas, and expand their market such as finding new users and uses for their product.  Companies like Microsoft would fall into this category. 

2. Market Challengers, who are looking to challenge the market leaders.  Pepsi challenging Coke would be a good example of a market challenger strategy.

3. Market Followers, who are happy to stay at their current position.  They wait to see what the market leaders are doing to gain market share, and follow the leader without having to worry about the risks and costs of any development research.

4. Market Nichers, who are looking at just a few target markets and not trying to compete with the overall market.  They just look to gain a large enough share of its specialty market in order to maintain its profit margin.  Many new businesses choose to be a market nicher.

Market Segments and Targeting your Market

Market Segments are parts of a market that are different from one another.  They should be identifiable, accessible, substantial, unique, and durable.  Six common segmentation strategies are:

1.      Geographic segmentations, which divides the broad market into regional or local markets.

2.      Demographic segmentation, which classifies the broad market such as age, gender, income, and race with different advertising campaigns that can be used to target specific segments like males 18 to 34 years old or working mothers.

3.      Psychographic segmentation, which is social class from upper to lower, lifestyle, and personality.

4.      Behavioristic segmentation, which is loyalty status, user rate, type of occasion, or benefits sought such as quality, service, or price.

5.      Product segmentation, which divides the broad market by products like health food or junk food.

6.      Sales channel segmentation, which divides the way a product is sold such as a can of Coke in a grocery store, restaurant, or vending machine. 

Most often, market segments are combined.  An example would be combining the product segment, such as a health food, in the demographic segment like the state of California.  By segmenting markets, targeting certain factors, behaviors, and needs, and developing specific advertising, products, or services for specific markets, is extremely effective.

In contrast to consumer markets, industrial markets have customers who are fewer in numbers, but purchase larger quantities.  Most of the segmentation strategies for consumers should still apply, however, location, company type, and behavioral characteristics are the most important.

Market segmentation is a useful tool as long as the segmented markets are truly measurable for size, purchasing potential, accessible through some sort of sales method, substantial enough to make it worthwhile, and actionable to be able to develop effective programs to attract and serve the segment.

Targeting your market is the next step after you have grouped your potential markets into segments.  There are three potential strategies to use:

1. Undifferentiated marketing, which basically means your company ignores the segment differences and instead decides to develop one marketing program that would be attractive to the broadest number of buyers.  The upside to this strategy is that it saves time and money as you would not need to modify the product for different markets, and need only one promotional plan and one set of promotional materials.  The downside to this strategy is that it looks to attract the largest segments and ignores the smaller segments, which also attracts more competitors and thus will need more financial resources in order to compete.  You also leave yourself open for niche competitors who will target the smaller markets you are ignoring.

2. Differentiated marketing, which means you will focus on your target market segments and develop a marketing plan for each.  The upside is, as long as the costs of differentiation results in higher sales and higher profits, it is well worth it.  The downside is more time and costs are needed.  You would need to modify the product for certain segments, need more than one promotional plan, and need more than one set of promotional materials.

3. Concentrated marketing, which means a company with limited resources focuses on getting a large share of just one or two market segments.  This is a good strategy for niche players to use because they are focusing on just one or two segments, which are normally ignored by the larger competitor.

Once your company has determined its target markets, research needs to be done to find out facts, such as projected sales growth rates, estimated profit margins, and comparing the strategies from your competitors.  All of this information is needed in order to develop a strong marketing plan. 

You need to know the market size such as what percentage of the market is already penetrated, and the percentage already taken by your competitors.  Also, there might even be a possibility for a new product release based on your research.  A good source for researching other businesses and estimating the targeted market size is through the IRS, Dun & Bradstreet, and the Census bureau.

The next step would be to try and measure the current market demand for the product by means of total market demand, area market demand, and actual sales and market shares.  There are also techniques to use to forecast future demand such as surveys of buyer’s intentions, sales force opinions, and leading indicators.

The last step would be to determine your company’s strengths and weaknesses within the targeted market segment and customer base.  You need to make sure you can truly market the product effectively and provide the needed support.  There will be more on this subject in the 5 C’s and Marketing Strategy Basics later in this lesson.

The Marketing Mix or “The 4 P’s of Marketing”

The term “Marketing Mix” refers to a combination of many elements that a company uses to market its product, as there is much more to marketing than just advertising.  It essentially looks at everything your company can do to ensure its success in marketing the product.  The marketing mix is designated by the common phrase penned by Jerome McCarthy as, “The 4 P’s of Marketing.”  The 4 main “P’s” are Product, Price, Place, and Promotion. They are the foundation to the marketing mix.  However, in this day and age the marketing mix has extended to 3 more P’s.  They are People, Process, and Physical Evidence (including Packaging).  Positioning, which is also sometimes known as one of the P’s in the marketing mix, will also be discussed. 

Anytime a decision is made to make a change with one of the “P’s”, it also makes an impact on decisions in other areas.  For instance, a change in the “Price” of a product, such as lowering the price, could impact the “Place” or distribution area as it requires increased product shipments to retail stores.  This is why it is extremely important for the marketing department to meet with other departments to discuss any possible ramifications, and to make sure everyone is on the same page.

Example – The foundation of the Marketing Mix – The 4 P’s of Marketing

Product

Here is a detailed overview of the product segment within the marketing mix.  The perspective from a customer-centric point of view is in parenthesis:

Product (Customer Value).  This is what the company actually sells, or a service it provides.  It may even be ideas or intellectual property like images, patents or copyrights.  The first step is the design of the product. 

Before a new product is developed, it needs to go through a product-development process.  It starts off with the idea itself, then the concept, followed by a prototype, which is then product tested, market tested, and finally launched.  Research and Development or R&D, sometimes also considered hardware and software engineering, would be involved with the technical aspects of developing and building the product.  R&D will either develop new products, or improve existing products. 

Once the product has been “created” by the engineering and/or R&D team, marketing would then determine how to get it out to the marketplace. 

Some factors to consider is whether the product is a non-durable good that is usually consumed quickly, durable good that can be used many times, or a customer benefiting non-tangible service.  There are also decisions to be made on whether it is a consumer or industrial good.  A consumer good can be, a convenience good when the customer does little comparing, a shopping good when the customer will most likely compare, or a unique specialty good.  An industrial good can be materials and parts for products to be produced, capital items like equipment, supplies and services.

Decisions also need to be made regarding a perfectly fitting brand name, functionality, styling, add on's, apps, privileges, information, quality, safety, packaging, warranty, accessories, repairs, service, and support.  In most companies, marketing and sales play a major role with any decisions regarding the company’s products.  The product should fulfill a customers needs, be easy to use, the quality matches the price, is safe to use, and whether it is a good fit with the rest of the company’s business.  These can be tangible items like a physical product, or intangible items like services offered.  

Customers need to be convinced, and have a perception, of the value they are receiving with the product.  This is usually measured by how much benefit they feel they are getting for their money.  Marketing starts off by identifying the benefits of the product, which are then pitched through features such as a convenient size, special technology, or how the product solves problems.  The goal is to always try to find something that adds value.

These ideas and/or improvements are carefully determined not only with marketing, but with engineering, R&D, sales and senior management.  It is very important to determine whether the feature truly benefits the customer.  For example, a feature such as a car engine with 350 horsepower would not benefit your customer base that is primarily looking for an economic vehicle.  A feature that does not deliver a benefit is useless from a marketing point of view.  You must always think in terms of the customer. 

If your company is a manufacturer of the product, you need to know:

·         How is it going to be produced?

·         What materials and labor are needed?

·         What R&D has been conducted and what is expected in the future?

·         Is there a good Q/A or Quality Assurance test plan ?

If your company is providing a service, you need to know:

·         What services do you offer?

·         How do they work?

·         What kind of skilled labor is needed?

·         What materials and equipment is needed?

·         What are the steps involved with providing this service?

When it comes down to it, marketing needs to know everything there is to know about the company’s products and/or services, and find all the benefits to be able to best market it. 

Example – Product release roadmap

Price

Here is a detailed overview of the price segment within the marketing mix.  The perspective from a customer-centric point of view is in parenthesis:

Price (Cost).  What the customers pay for the product or service.  When determining a product’s price as it relates to the target market, and how to position that product in the market (positioning will be discussed later in this lesson), a company must consider how it must price the product in order to keep the business afloat.  Pricing mistakes can kill a good product.  First off, you need to determine the price in relation to the prices of similar products that either your company or your competition sells.  This is called the price point.  You then determine the point where you will make money on the product.  Here are some basic pricing strategies:

·         Premium Pricing, which sets a high price because the product is unique.

·         Penetration Pricing, which sets the price low to discourage competitors and capture a larger market segment.  Once the market share goal is achieved, pricing will be increased.

·         Economy Pricing, which is used to sell no-frills products at a no-frills price.  Manufacturer and marketing costs are kept to a minimum in order to make a profit.

·         Skim Pricing, which sets the price high to capture short-term profit until competitors enter the market or demand drops.

·         Competitive Pricing, which is selling your product at the lowest price of all your competitors.  This strategy is used mostly when dealing with commodities and in retail where high volume is key.

·         Cost-Plus Pricing, which takes the company’s cost to sell or make the product, and then adds on the profit in order to pay its bills, make payroll, etc.  For example, if a manufacturer’s cost to make the product is $60, and they need to make a gross margin (profit) of 40%, they would have to sell it for $100 (this was determined by 100 – 60 = 40 and 40 ÷ 100 = 40%).  The formula used to determine the gross margin of the product is by subtracting your costs from the consumer cost.  This type of strategy is used mostly with labor-intensive services and manufacturing businesses.  It is straightforward and ensures that you will make money if you are able to sell the product.  This could also be known as Keystone pricing.

·         Discriminatory pricing, which is used for customers who will pay different prices for the same product or service, such as charging less for a child at an amusement park.

·         Value Pricing, which bases the price on the value delivered to the customer.  An example would be a high tech product with very high appeal in which a customer is willing to pay a high price.  In time, however, the price will inevitably fall.  Another example of value pricing would be a fine dining restaurant in which you are paying more for the atmosphere, or because it is trendy.  In fact, high prices can automatically create the perception of value.  This phenomenon is called the Veblen Effect and can also be considered as Psychological Pricing.  This type of pricing goes against normal price theory in which the lower the price, the more you will sell.

·         Promotional Pricing, which is a low price for just a temporary period.  The hope is for the consumer to like the product so much that they will pay the inevitable higher price.

·         Geographic Price, which charges different prices for different regions.

·         Pricing Leader, which determines whether you will be a price leader or follower.

·         Fixed Pricing, which is non-negotiable between buyer and seller.

·         Variable Pricing, which is negotiated between buyer and seller.

·         Price Lining, which sets just a few prices for all of its product line.

·         Customary Pricing, which has a set price at a standard level.

·         Prestige Pricing, which equates price with quality and status.

·         Optimal Product Pricing, which is selling options or accessories along with the main product.

·         Captive Product Pricing, which sells the main product for a low price knowing that the consumer will have to continually buy supplies in order to use the product.  An example would be printer ink set at a high price with a high margin.

·         By-Product Pricing, which is used to sell waste or by-products from the manufacturer of its core products.  An example would be an oil by-product used to make plastics.

It is a good idea to always consider all possible pricing strategies.  Pricing is dynamic because as products, competitors and customers change, so must the price.  Other economic factors like recessions, booms, inflation, and interest rates also come into play.

It is important to determine a pricing strategy.  You need to be able to make decisions to determine, for example, if you are looking for a profit or just a “Return On Investment” (ROI)?  You need to be able to answer questions like these.  For example, if a product costs more to make than you are selling it for, you might think there is no sense in making it.  However, you might want to attract customers to possibly buy other products you offer by selling this particular product.  It might be worth selling, even if you do not make any profit.  This is called a loss leader. 

Decisions need to be made regarding suggested retail price, volume discounts, wholesale pricing, cash and early payment discounts, seasonal pricing, and bundling.  The pricing structure can say a lot about the product.  If priced too high, it can drive customers away, while a price that is too low, may leave potential customers wondering what is wrong with the product.  The value of the product must justify the price.  This is why it is so important to clearly let the customers know what they are going to get.  For example, if your company provides 24/7 customer support, advertise that fact as it is a service that clearly adds value.  A low price shouldn't be the only competitive edge.  There will always be competition that will sooner or later beat that price.

While the price may motivate customers to buy, it is also just as important to state the features and value that are associated with the product that separates your product from the rest.  It is also important to know that Internet buyers are more price-savvy than traditional consumers because they can easily shop around for competitive pricing and features.  The bottom line, pricing needs to be competitive, yet still allows your company to turn a profit.  One last thing to keep in mind, there are laws that regulate pricing, such as the Clayton Act, regarding monopoly issues that might need further investigation.

Place (Distribution)

Here is a detailed overview of the place or distribution segment within the marketing mix.  The perspective from a customer-centric point of view is in parenthesis:

Place/Distribution (Convenience).  There are many “Places” you can decide upon to distribute and sell your product.  These places are known as distribution channels.  After you have determined what markets you are going to reach, a distribution strategy is needed to determine what your are selling, who are the prospects, where are they, how to reach them, knowing how the distribution channel works, the costs through each channel, and how many channels you should use.  Examples of different distribution channels are:

• Directly to consumers.  This would be considered a zero-level channel since it is going from your company direct to the individual with nothing in-between.
• Directly to retailers (stores that sell direct to individuals).  This would be considered a one-level channel as it goes to a store first, and then to the individual.
• Directly to resellers (outside company that sells your product).  This is also considered a one-level channel.
• To wholesalers (the middleman) who in turn sell to resellers or retailers.  This would be considered a two-level channel.

It will need to be determined how many and what types of intermediaries or third party channels you want to have. 

You’ll also need to decide on the terms on how and who is going to stock your product.  It can be through an intensive distribution method in which you stock your product in as many places as possible, an exclusive distribution method in which limited dealers will be granted the rights to distribute your product, or selective distribution in which you choose only some of the available outlets in an area to distribute your product.  These channels will need to be motivated to sell your product if it or your company is unknown.  If your product or company is well known, the channel members will most likely be knocking on your company’s door…

There are channel regulations your company should be aware of such as the Sherman Antitrust Act and the Federal Trade Commissions Act.  These laws are put in place to protect free trade and competition.

Manufacturers need to constantly evaluate its channel members through sales quotas, inventory levels, RMA’s, and ongoing training.

Here are some other ways to get your product out to the marketplace: 

• Through the company’s internal and external sales force.
• Telemarketing by means of selling over the telephone.
• Purchasing online.  Selling over the Internet has had a tremendous impact on traditional marketing techniques.  Things to consider are web site design, Search Engine Optimization (SEO), newsgroups, getting linked up, and many other ideas that are a course in itself.
• Delivery and manufacture-on-demand.
• Directly selling through mail or magazines in which customers either mail in or call to place their order.
• Agents who do not work for the company, but make commissions when they sell the product.
• Internationally by means of exporting.
• Joint marketing agreements in which your company supplies your product to a larger company to sell. 

Once you have your distribution channels set up, you need to carefully plan, implement, and control the actual physical flow to get your products into that channel.  You will need to determine logistical costs, planning, and methods of transportation, inventory management, warehousing, sturdy packaging for shipment, material handling, and order processing.  See lesson 9 for more information regarding inventory management and supply chain. 

The basic objective for your physical distribution operations is to:

• Get the right products, to the right place, at the right time, in good condition, for the least cost.

• Have a streamlined order processing method from the time the order is placed, to the time it is ready to ship.

• Have your warehouse in the most logical, yet least expensive, location to deliver and receive the products on time and without having to constantly maneuver goods due to lack of space.

We’ve discussed how to get the product out to the market, but we also need to consider how a customer can return the product back to your company.  This is known as Return Merchandise Authorization (RMA).  You should have a well-known and clear-cut return policy indicating time limits and any other conditions well in advance.  If a customer returns a product with little to no hassle, they are more likely to come back for more. 

Promotion

Here is a detailed overview of the promotion segment within the marketing mix.  The perspective from a customer-centric point of view is in parenthesis:

Promotion (Communication).  This is the essence of marketing.  You first need to establish a brand such as Ford or Coke, then product name such as Mustang or Diet, along with a logo.  Any type of identifier that can separate your product from the rest is also beneficial, such as the unique shape of an Orangina bottle.  You also need to know whom you are targeting, which is known as demographics as previously discussed. 

Once you have your brand and demographics in order, you need to choose the way you want to present the product.  You should determine facts like whether it should be demonstrated, dramatized, explained, or displayed.  Ways to help make sure you have fully developed the content of the message, also known as the “ad copy,” are through various guidelines like AIDA and USP. 

AIDA is an acronym for:

• Get Attention by using humor, color, models, etc.
• Hold Interest with a question or statement that makes you think about the product.
• Arouse Desire that makes you want the product.
• Obtain Action that tells you what you need to do to get the product.

USP is an acronym for Unique Selling Proposition.  The message focuses on the products uniqueness, which is the motivational reason for people to buy it.  This is usually communicated through a memorable tag line that says it all about the product.  An example would be, “Milk, it does a body good.” Whether this is actually true or not, the message makes you think one important and easy to remember thing about milk, if you drink it you‘ll be healthy. 

The promotional mix is made up of four main tools, Advertising, Personal selling, Sales promotion, and Publicity.

1.      Advertising – This is the most common form of promotion.  The three most common types of advertising messages are:

·         Creative messages, which uses humor, seduction, or desire to try to attract the customer based on the image, rather than the quality.  This type of image advertising creates a mood or feeling around the product rather than focusing on the features or benefits.  An example of this type of message is a seductive jean commercial that says little about the actual quality of the product.

·         Statement messages, which focuses more on a “quick and to the point” message around the features and benefits of the product.  An example of this type of message is a cold medicine that lets you know that once taken, you will sleep easier.

·         Creative and Statement messages, which looks for the perfect combination of the two.  It clearly lets you know the features and benefits, and at the same time uses a funny or desirable image that is instantly recognizable.  This is the optimal type of message, but it is hard to find the perfect combination to get the point across.  A successful example of this type of message is the old Verizon commercial with the phrase, “Can you hear me now?  Good.”  You know you are going to get a phone that can make a call anywhere due to the image of person going around the country confirming that fact.

Once the content of the message has been established, it’s time to consider which media you will use to get your message out and create an awareness of your product.  This lets people know your product exists, and helps when making a choice on which product to buy based on seeing or recalling your ad. 

Advertising methods most commonly used are through magazines, newspapers, TV, radio, direct mail, trade shows, yellow pages, e-mail blast, billboards, posters, and over the Internet.  It is also a great idea to list testimonials, customer statements, and case studies about the value of the product on your company’s web site.

Advertising through media buys can be costly and needs to be carefully budgeted.  One way to set up a budget is to estimate the expected sales. For example, if the expected sales are $100,000, you can budget a figure like 5% towards the ad campaign, or $5,000.  You can also use the industry average towards advertising costs. 

Here is an example of a common way for a retailer or service based company to budget for advertising:

Projected gross sales, times 12% (common percentage), minus the cost of occupancy (rent), equals the advertising budget.  For example, it the gross sales is projected to be $100,000, and the cost of occupancy is $5,000, then the advertising budget should not go over $7000. 

100,000 * .12 - 5,000 = 7,000

A couple of ways to measure the amount of people who might view your advertisement is through Reach, Frequency & Impact.  Reach calculates the number of people who were potentially exposed to the ad, Frequency measures the number of times people see or hear the advertisement, and Impact determines whether the ad is remembered and communicated as intended, which is usually seen in a higher increase in sales.

2.      Personal Selling – This involves face-to-face communication.  Although it can be expensive if the salesperson is salary-based rather than commission based, it is highly effective as people are more willing to buy your product, and it also creates long lasting relationships.  There will be more information about the sales force later in this lesson.

3.      Sales Promotion - Some common promotional tools used are coupons, discounts, incentives, rebates, contests, and sponsoring special events.  These tools help getting people to buy the company’s product.  You can also use premiums such as coffee mugs, T-shirts, and tote bags.  Giving out these free premiums gets the company’s name out to your current or potential customers.   Free samples such as cereals or snack foods are also effective for consumer-based products.  Demonstrations like test drives or playing computer games are also a very effective way to promote the product. 

Sales promotions to businesses and industries such as offering quantity discounts, free merchandise or buy-back allowances, are effective and build trusting and workable relationships.

4.      Public Relations (PR) – This is one of the best and most effective ways to promote your product.  Contacting magazine editors, local TV stations, newspaper journalists, or any other type of communications to set up interviews or set up public speaking events with some of the company’s experts is a great way to promote the company and its products.  These experts are the spokespeople for the company and they can help create public interest within their industry.  Winning awards, creative articles, and press releases about a new product offering, also helps get the word out.  A positive story about your company and its products can be more effective than paid advertising.  This is because it builds credibility, and people tend to take this information as fact. 

People, Process, and Physical Evidence (Packaging)

Here is a detailed overview of the People, Process and Physical Evidence (Packaging) of the marketing mix.  By adding these three aspects to the marketing mix, you get what is known as the “7 P’s of Marketing.” 

People.  An extremely important part of any company is having the right people to support the company’s products and/or service.  Excellent customer service personnel who can provide support with clearly known expectations, such as hours of operation and average response time, is key to maintaining a high level of customer satisfaction.  Customer service skills were discussed in lesson 9.  Lessons 1 through 4 cover everything from how to lead the people, to hiring, retaining, training, and building teamwork.  Knowledgeable staff adds much value to the product offering.

Process.  Solid procedures and policies that are in place, which pertains to the company’s products and/or service, is an extremely valuable element to the marketing strategy.  Customers want to understand more than just your product; they also want to focus on the shape and form your business will take.

Physical Evidence/Packaging.  This refers to the way your product, service, and everything about your company, appears from the outside.  Decisions need to be made about the size, shape, color, material, UPC bar code, and label of the packaging.  This should be customer tested and updated when needed.  It should fall in line with your other product offerings as well.  Packaging involves the visual layout, practical setup, and when needed for products, clear and precise installation instructions. 

Product liability insurance is needed in case anyone suffers any harm from your product.  Engineering tests are also needed to make sure the package can stand up to abuses.  There may also be regulatory issues to consider.

Visual packaging of a tangible product can make or break a purchase.  Small improvements in the packaging or external appearance of your product or service can lead to completely different reactions from your customers.

It is also important in selling and marketing services and intangible products that you can’t see, but that you can provide the support needed to the customer who can see and feel the physical evidence. 

Physical Evidence can also refer to the people within your company and how they dress and act.  It can refer to how your office is set up, the professionalism of your staff, nice brochures, how you interact with your customer base, and every single visual element about your company.

Positioning the Product

Positioning is the way a consumer sees your product as it compares to other similar products on the market.  Positioning can also be considered one of the P’s in the marketing mix.  Products can be positioned by its features, benefits, class, special occasions, holidays, or against a competitor.  Even positioning your product against another product class as an alternative, such as margarine against butter, can be successful.  Re-positioning your product against a competitor by just claiming their product is not good can also work.  Political campaigns are a great example of re-positioning, even if not product related, of how negative attacks against their opponent can be more effective than a positive statement about their own candidacy. 

The goal is to position the product in the customers mind to create a certain perception, impression, and feeling that will end up offering the greatest sales potential and hopefully surpass your competitors.  A simple message that creates a great first impression is key.  You want to try to be the first to claim a unique position in the customers mind.  Even if your product might is not the first of its kind, you should still try to create a uniqueness and statement about your product that gets into the consumers psyche.

Two examples of claimed unique positions that’s most likely already engraved in your mind is that; Geritol goes with age, and Nyquil goes with nighttime cold medicine.  If you know your product cannot be the number one brand, find a way to relate to it that still says your product is viable.  A good example of this is how Avis Rent-a-Car, knowing that their competition Hertz is number one, advertised the fact that the reason to go with Avis is, “We try harder.”  This ended up positively capturing the minds of many consumers.

You need to know your positioning message and find your own place.  The message should be just a few words like Avis’s, “We try harder.”  It should be easy to identify, understand, and remember the position you are trying to claim.  The message should appeal to the customer’s emotions, not by using logic.  Logic is cold and boring, whereas emotion gives hope and excitement.  People are more willing to spend their money on inspiration, rather than on fact.

Market Opportunities

Marketers analyze the market opportunities for the company’s products and/or services towards the target markets.  A good planning tool for analyzing market opportunities is Ansoff’s product/expansion grid.  This tool helps identify new market opportunities by considering four possible directions:

1. Market Penetration, which is used to find new ways to increase sales with the current product without having to change it.  This tactic is to convince users of similar products made by another company to switch to its product, such as how Pepsi tries to convince drinkers of Coca-Cola to switch.  Other tactics are by cutting prices or improving advertising to make the product enticing, thus encouraging new and current customers to buy more of the product.

2. Market Development, which is used to find new market segments for the current product.  Ways to accomplish this would be to expand distribution channels, sell in new locations, or find new users.  An example would be to look for new demographic markets to try and attract working moms or senior citizens to buy a product they currently do not use.

3. Product Development, which is used to grow the business by improving existing products or developing new ones into market segments in which you are already successful.  Developing new features, improved technology, and improved quality are just a few development ideas.

4. Diversification, which is used to grow the business by starting up an entirely new product line outside the present business.  One factor to consider when thinking about diversifying the company would be the strengths and weaknesses of the competition.  The diversification strategies are of three types:

·         Concentric Diversification Strategy: Develop new products with the earlier technology for new segments.

·         Conglomerate Diversification Strategy: Develop new products for new markets.

·         Horizontal Diversification Strategy: Develop new products with new technology for old customers.

Before taking on new market opportunities, it is important to be sure your company has the financial capital to fund the costs.  If not, you’re putting your company at risk.  If so, does your company have the necessary production facilities and the expertise to successfully produce and market the product and/or service?  If so, then you need to look at the distribution capacity to get the new product into the marketplace.  If this is not likely, then it might be a better idea to pass on the opportunity. 

If an opportunity were considered viable, determining the market segment you want to target would be the next step.

The 5 C’s and Strategic Marketing Basics

Once you know the marketing mix, goals, and targets of your marketing effort, the next step is to develop the marketing strategy.  A good guideline to make the right decisions, while constructing a marketing plan and strategy, are the 5 C’s:

1. Customer – Determine what needs from which clients you’re trying to satisfy.  A few areas to research would be the market segments, benefits the customer wants, if the value of the benefits outweigh the costs, frequency of purchases, quantity of purchases, retail channel, and needs based on trends over time.

2. Company – Determine if your company can meet those customer needs.  For example, does your company have the right product line and/or technical expertise?  A good tool to help determine your company’s strengths and weaknesses is “SWOT” analysis.  This stands for Strengths such as innovative products, expertise, great processes and procedures, Weaknesses such as the lack of knowledgeable technical support or poor product quality, Opportunities such as a new international market or a market led by a weak competitor, and Threats such as a new competitor or price war.  This is a very good tool to analyze the internal strengths and weaknesses, and the external opportunities and threats.

SWOT diagram

3. Competition – Determine who competes with your company in meeting the customer’s needs.  Is it an active competitor or a potential threat?  What are their products exactly?  What are their strengths and weaknesses?

4. Collaborators – Determine if there is any outside source that can help the company such as distributors, suppliers, etc.

5. Context – Determine if there are any limitations due to Political issues such as legal problems, trade regulations, taxation, and labor laws, Economicconcerns such as growth rate, labor costs, and business cycle stage, Social impacts such as demographics, education, and culture, and Technologicaldevelopments such as the impact on cost structures.  This is also known as “PEST” analysis.  These forces can be dramatic and difficult to predict.

Strategic marketing decisions are mostly based on price and quality.  A product can be of exceptional quality at a high price like a Rolls Royce, or of a lower quality but lower price like a Hyundai.  Economically, it is not expected that the price of a Rolls Royce will be the same as that of a Hyundai. 

A strategic decision companies face is to choose whether they will compete on price or quality.  Marketing would then focus its efforts on the results of that decision.  For example, if the company were a thrifty clothing store, the message would focus on the low price for its everyday goods.  If the company were a Beverly Hills clothing store, the message would focus on the elite quality and design with the price being of little concern.

Companies also compete on service such as post-sales support and warranties.  They can also compete based on the novelty, design, prestige, ease of use, and technical sophistication of the product.  Product differentiation, like improved performance, improved appearance, and improved image, is a good way to make a product different from others like it.   Overall, the essential goal of a marketing strategy is to have a competitive advantage and to get that word out to the marketplace.

A market-driven company looks for and listens to customers to learn why and how customers use their products.  They look at trends in the marketplace in technology, pricing, and packaging, not to mention watching what their competitors are doing.

Marketers also try to understand who will likely influence the decision-making process for their target market.  They will not only try to design their promotions around the buyer, but also all those who may also be involved.  For example, the father will make the decision on which vacation package he will buy, however, he will also be influenced on other factors such as his wife and children.  Here are the 5 decision-making steps:

1. The initiator, who might be the child who wants to go to Disneyland.
2. The influencer, who might be a travel agent.
3. The decider, who might be the parent’s.
4. The buyer, who might be the father who used his credit card.
5. The user, who reaps the benefits, which in this case was the child who was the initiator. 

The buying process consists of:

• Problem recognition, which could be a simple need, to a complex want.
• Information search, which is how they will find the need or want.
• Evaluation of alternatives, which is when they compare with other products.
• Purchase decision, which is made after all alternatives have been evaluated.
• Post-purchase behavior, which is whether they were satisfied, or have a case of buyer’s remorse.

Whenever a new product is released, one way to look at how the new product will be adopted by buyers is the “Product Adoption Curve.”  It states the there will be various categories of buyers in a predictable order.  Most buyers wait to buy something new until the more innovative buyers adopt the product first.

Example – Product Adoption Curve, aka Technology Adoption Curve

As you can see from this graph, 2.5% of the buyers of a new product will be the innovators.  The next 13.5% will be the early adopters of the product, 34% will be the early majority, and 34% will be the late majority, followed lastly by the 16% who are the laggards.  Marketing will seek out the innovators and try to persuade them to try something new and unproven.  Early adopters will also need to be persuaded, however, they can look at success stories from the innovators.  Marketing needs to get to the early majority quickly as they will face many competitors if the product is successful.  For the late majority, marketing will try things like discounts and service plans.  By the time the company is selling to the laggards, the price will be lower so the focus will be on ways to reduce manufacturing costs to get as much profit out of the product as possible while it is still viable.  

A way to measure the products life cycle is through phases of introduction, growth, maturity, and then decline.  Basically, products are developed, continue to grow until they have reached a period of maturity, and then inevitably start to decline.  Usually the phases are shown on a curve that plots sales over time: 

Example – Product Life Cycle Curve

Each phase presents a different marketing and sales challenge.  In the introduction phase, the sales are slow and the challenge is spreading the word of the new product and finding the first customers, which are the innovators and early adopters.  In the growth phase, the sales rise, however, the challenge is to beat the competitors getting to the early adopters.  In the maturity phase, sales growth levels off and the challenge is controlling sales costs, fighting for market share, and developing variations of the product.  Finally, in the decline phase, the sales decrease so the challenge is to decide what to do with the product, such as whether it can be revitalized, or if even it’s still profitable enough to sell.  

The length of any particular phase can vary for different products.  The product life cycle only applies to successful products.  Those that don’t make it past the introduction phase are considered product failures.  There is also the chance that a product that is in the decline stage can make a comeback.

To recap, the 5 C's of Marketing are Customer, Company, Competition, Collaborators and Context.

Creating a Marketing Plan

By utilizing the subjects taught so far in this lesson, you can now create a marketing plan that should be simple and clear with a focused strategy.  An example of a marketing plan would be structured something like this:

1. Executive Overview    (summarizes the marketing plan including a brief overview of steps 2 through 9).

2. Market Review
1. Trends overview   (How big is the potential market?  Is it growing? Competitors?)
2. Market segments (see Market Segments and Target Market section of this lesson)
3. Target market   (see Market Segments and Target Market section of this lesson)

3. Competitive Review    (those who offer a similar product with similar attributes)

4. Product or Service Review    (see Products and Prices section in this lesson)

5. Strengths, Weaknesses, Opportunities, Threats    (SWOT – see the 5’Cs in this lesson)

6. Goals and Objectives    (describe where you want to be both short-term and long-term)
1. Sales objectives     (measurable in dollars, specific timetable, and expected profit)
2. Marketing objectives     (i.e. increase existing customers' buying rate by 25%)

7. Strategies    (see the associated “P’s” segments throughout this lesson along with strategic marketing decisions)
1. Product
2. Pricing
3. Place/Distribution
4. Promotion
5. People
6. Process
7. Physical Evidence/Packaging
8. Positioning

8. Action Plan and Implementation   (such as how are you going to achieve the goals? What is the timeframe or marketing calendar?  What are the projected costs? Who is doing what?)

9. Evaluation   (How will it all be tracked and measured?)

10. Conclusion   (Wrap it all up.  Try to make the overall marketing plan as short and to the point as possible)

Besides the marketing plan, it is also a good idea, for quick discussion, to have a separate creative plan that only focuses on the content of your marketing materials, which would be the purpose, how the purpose will be achieved, and the tone of the advertising, and a media plan that only focuses on the type of media that will be used along with the media calendar.

Marketing vs. Sales

Basically, think of marketing as selling the idea of a product and/or service to everyone, whereas sales sells the product and/or service one-on-one.  Marketing generates the interest, sales brings in the money.  Marketing does everything they can to reach and persuade prospects.  The sales process does everything they can to close the sale and get a signed agreement or contract.

Selling the idea, which is marketing’s responsibility, can be through such media as an advertising campaign, an e-mail blast, or through the company’s web site.  Selling to the customer, which is sales responsibility, can be through such ways as inside sales making phone calls, outside sales setting up appointments to meet with the customer face-to-face, or being approached by a consumer who is interested in the company’s product and/or service.

The job of sales is one of the toughest and most important positions in the company.  They are the ones who have to get the customer to give up their money.  Marketing, which is usually located at the company’s headquarters, tends to think strategically by identifying groups who might need the company’s product.  Sales, which mostly resides in the field, tends to think tactically by going to the individuals within those groups to try to meet those needs with the company’s product.  Strategies are best explained as the direction the marketing effort takes over some period of time, while tactics are actionable steps or decisions made in order to follow the strategies established.  Performing strategic and tactical planning activities before taking action is considered critical for long-term success.  Basically, in most cases marketing exists to support the salespeople. 

Marketing approaches their work in a think tank environment constantly looking for ways and ideas to promote and differentiate the product or service.  Sales are in the real world and are constantly looking for ways and ideas to try and persuade the reluctant buyer.  This is why there is often tension between sales and marketing.  Marketing tends to think of salespeople as mere tools to execute their creative plans, whereas sales tends to view the marketing staff as unrealistic who would be hopeless at actually making a sale. 

The way to find harmony within the two departments is making sure they constantly work together, truly understand each other, and are always making decisions together.  It is a good idea for each department to walk in each other’s shoes for a while to observe the successes and difficulties each department faces.

Much of what determines the relationship between marketing and sales depends on the product or service.  If an individual customer is buying something for themselves with their own money, it is considered consumers sales.  Examples of consumer-packaged goods would be cereal or toothpaste.  A lot of advertising through marketing is needed to get people interested in the product.  If the individual is buying something for their organization with the company’s money, it is considered commercial sales.  Commercial sales are also known as corporate, industrial or business-to-business sales.  Sales has to do more work to get the customer to purchase the goods.

As you can see, how they work together depends on the type of product or service that is offered by the company.  The important thing is that they always work together.

Sales Types, Process, Tactics and Growth

Once marketing has strategically identified the markets, sales tactically tries to win the customers.  Marketing gets the word out, and sales helps the customers find what they want. 

The different possible sales types are:

·         Order Takers, which the customer asks for something and their order is then taken.

·         Active Selling, which involves a sales-person approach to the customer such as a car lot.  The sales-person needs to be more aggressive, which usually leads to the customer being resistant.  Active selling involves overcoming sales resistance.

·         Inside Sales, which is done mainly by sales people, such as telemarketers, making outgoing calls to customers.

·         Outside Sales, which is going to the customers premise after an appointment has been made.

The sales process and tactics starts with two simple goals; selling to current customers, and finding new ones.  Marketing has done all of the strategy to find the targeted market segment; it is now time for sales to tactically find ways to sell to the targeted marketplace.  In retail, the sales challenge is lower since the customer comes to the store.  In many businesses, however, the sales people must look for customers who might be interested in the product.  This is called, “Prospecting.”  A sales person will normally make a telephone call to a targeted individual, or prospect, who they do not know, to make a sale or make appointments for a future visit.  This method is called cold calling.  A sales lead is the name of a person who has been identified as a prospect.  The term “sales call” can refer to a phone call or a personal visit.

The process of determining whether a sales lead has the potential to become a prospect is known as “qualifying” the lead.  If a prospect has been qualified, the sales person’s next task is to prepare for an eventual sales call.  The sales person will then build a rapport with the prospect by gaining background information and then assessing the prospects needs.  Once the need has been established, the sales person will present a solution.  For example, the customer is not sure what kind of phone system to get, so the sales person asks questions about what size and features are needed (assessing the needs), and then determines the perfect fit (presents the solution).  The sales person might then need to do some persuading to close the sale.  A trick of the trade is to continually ask questions to keep the customer involved while moving toward the close.  The hard sell is when the sales person aggressively starts to push the product to the reluctant buyer, even to the point of using intimidation tactics.  The overall goal, however, is not just to make the sale, but to have a satisfied customer.

Sales growth is needed in order for the company to grow.  This means the dollar volume of sales must increase in order to always be higher in the next year.  In order to succeed in sales growth, goals should be concrete and measurable (in terms of dollars and units), set at a level that is challenging but not impossible to reach, set on a specific timetable for measuring success, and linked to projected profits.  Here are 5 ways for sales to try and achieve those goals:

1. Increase the price of the product or service.  This is the simplest way and might even be justified in order to increase the dollar volume.  However, customers do not like to pay a higher price.  This is called, “Price resistance.”  When customers see higher prices, they look elsewhere or constantly try to bargain.  If there are few competitors, however, there is a chance that the price increase will work.

2. Sell other products to existing customers.  This strategy can be used if the company has other products that work in harmony with existing products currently being sold.  This is called, “Cross-selling.”  A good example of this is when you order a burger, the order taker asks, “Would you like fries with that?”

3. Sell new products to existing customers.  Companies need to always develop new products to keep the existing customers satisfied.  If they don’t, competitors will find ways to steal the customer base with better, and maybe even less expensive alternatives.  The key is to always improve on current products, and develop new ones to meet the customer’s needs.

4. Sell existing products to new customers.  A company should never be complacent with their existing customer base.  They should always look for new prospects.  The search for new customers should never stop.  Existing customers can leave for reasons such as going to a competitor, not satisfied with customer support, changing their business model, or even going out of business.

5. Sell new products to new customers.  When sales of existing products are decreasing, due to market maturity or saturation (which basically means everyone who wants and can afford the product, already has one), it is time to come up with new products for new customers.  It’s important, however, to make sure to come up with a product that is close to the main business outline.  For example, Nike started off with sport shoes and then started selling sports related products like active wear and golf clubs.

The Sales Force – Size, Organizing, Training, Motivating & Compensating

The sales force needs to be properly organized, motivated and compensated in order to have the right size to do the workload, alignment to cover all needs, and keeping them happy and selling.  In most companies, the sales force is the most critical part of the business.  At the end of the day, they are the ones who get the customer to give up their money for the company’s product or service.  They are the ones who are face-to-face with the customer earning the money that pays your wages.  The sales force needs to be supported by the whole company, even if they do put you in an uncompromising position with a customer. 

The size of the sales force greatly depends on the way the department is organized.  In its simplest terms, you can keep on hiring until the last sales person does not produce more in sales than they earn.  However, there is more to consider than just that simple philosophy. 

Sales management can organize the sales force either by geographical divisions, who are fully responsible for their region, product specialists, who will only work with customers on the specialized products they know, or VIP customers, who need extra special attention because the sales person “understands their business.”  You can hire less sales people by organizing the sales force geographically, but they might not be as knowledgeable about all of the products offered.  You can hire product specialists who will be able to be experts on all products, but more staff will be needed.  It is up to sales management on how best to organize their sales force.  The main goal is to have a sales force that can give the attention needed to each possible prospect and customer.  Regular sales calls, or “coverage,” need to be made in order to keep the customer from feeling neglected.

Good sales training is imperative.  In many cases, a sales person is given some brochures, taken on a sales call, and then expected to be an expert.  This is not the best scenario.  Sales volume will increase when a sales person has excellent knowledge of the product and how their company functions.  It also greatly helps customer service in that they do not have to explain how “something that was promised by sales can’t be delivered.”  First-rate sales people can answer virtually every question about the product they sell.  They will also know how the product stands up to the competition.  Product knowledge is essential, especially if the sales person is a product specialist.  It is sometimes harder for a sales person who is geographically based because they have to be a “jack of all trades.” 

The best way to motivate the sales force is through compensation.  Sales are usually paid in the following three ways:

1. Straight Commission, which means they get a certain percentage of each sale they make.  They do not get any salary; they are only paid on a commission basis.  This is motivating when sales are good, but depressing and very un-motivating when sales are bad.

2. Straight Salary, which means they only get paid salary with no commission based on a percentage of sales.  This is the easiest to administrate, but is not very motivating.

3. Salary Plus Commission, which means they get both a base salary and a commission based on a percentage of sales.   This is the best for motivating, but hard to administrate.

Other ways to motivate are through sales quotas in which the sales person has to hit a certain level of sales made, and income generated.  Sales quotas work well because higher commissions and bonuses are tied to quotas.  The other motivating factor of hitting a sales quota is justification for the sales person to keep their job.  If they continually miss the mark, they will most likely be let go.

Presidential awards, company retreats, sales events, and monetary or vacation grand prizes are also good motivational tools for the sales force.  At the end of the day, however, it really is mostly about the money.  A promotion to sales management might be motivating, however, most sales people do not make good managers.  They like to depend on themselves, not others.

Customer Relationship Management or CRM

CRM stands for Customer Relationship Management.  It is a process or methodology used to learn more about customers' needs and behaviors in order to develop stronger relationships with them.  The more useful way to think about CRM is as a process that will help bring together lots of pieces of information about customers, sales, marketing effectiveness, responsiveness and market trends.  A CRM that is widely known and used is Salesforce.com.

CRM helps businesses use technology and human resources to gain insight into the behavior of customers, and the value of those customers.  It can help provide better customer service, increase customer revenues, discover new customers, cross sell/up sell products more effectively, help sales staff close deals faster, make call centers more efficient, and simplify marketing and sales processes. 

The types of data CRM projects collect are responses to campaigns, shipping and fulfillment dates, sales and purchase data, account information, web registration data, service and support records, demographic data, and web sales data.  

Within a CRM there is software that has the following possibilities:

• Contact management, which stores, tracks and manages contacts and leads of an enterprise.
• Lead management, which enables an organization to manage, track and forecast sales leads.  It also helps understand and improve conversion rates.
• Self Service eCRM, which enables web based customer interaction, automation of e-mail, call logs, web site analytics, and campaign management.
• Survey management, which automates an enterprises’ electronic surveys, polls, and questionnaires that helps understand customer preferences.
• Customer Service, which has call center, help desk, and support tracking capabilities.
• Contract management, which enables an enterprise to create, track and manage partnerships, contracts, and agreements.

Quick Lesson Summary

• A Market is a group of customers or potential customers.  The market starts with the total population, then Potential markets that have an interest, then Available markets that have the money, then Target markets that are the customers the company has determined to serve (the served market), then finally the Penetrated markets who have already bought your products and/or services. 

• The Marketing Department’s key responsibilities is to determine the needs, which represent items such as food, housing, and clothing, and wants which represent cultural based items such as makeup or vacations. 

• Marketing needs to know how their decisions could lead to problems for other departments within the company.  Microenvironment deals with internal factors that can influence the company directly.  Macroenvironment deals with the external factors outside of the company’s direct control.

• Market Research helps companies understand and analyze their customers.  Market research mostly focuses on the following four types of information: Demographic characteristics, which would include the age, race, sex, education, marital status, housing, income, and number of children.  Buying behaviors, which studies how customers buy products such as in a retail store or online.  Lifestyle or psychographics that researches the type of hobbies, sports, and even personality traits and sexual orientation.  And Customer Satisfaction, which surveys on the perceived value of the overall product, and whether they are likely to purchase more product in the future.

• There are basically two types of market research; primary market research, which involves surveys, observations and experimental approaches, and secondary market research, which involves checking articles in newspapers, magazines, and books. 

• Four strategies marketers use as a competitive edge is to best determine if they are Market leaders who are looking to dominate the industry, Market Challengers who are looking to challenge the market leaders, Market Followers who are happy to stay at their current position, and Market Nichers who are looking at just a few specialized target markets.

• Market Segments are parts of a market that are different from one another.  Six common segmentation strategies are Geographic, Demographic, Psychographic, Behavioristic, Product, and Sales channel.

• The 4 P’s of the Marketing Mix refers to the Product, Price, Place, and Promotion.  They are the foundation to the marketing mix.  There is also the 7 P’s, which include People, Process, and Physical Evidence (including Packaging).  Positioning, which is also sometimes known as one of the P’s, can be part of the marketing mix as well. 

• A strategic decision companies face is to choose whether they will compete on price or quality.  Marketing would then focus its efforts on the results of that decision.  Companies also compete on service such as post-sales support and warranties. 

• Whenever a new product is released, 2.5% of the buyers will be the innovators, 13.5% will be the early adopters, 34% will be the early majority, 34% will be the late majority, and 16% will be the laggards.  This tends to follow the product life-cycle curve in which in the introduction phase, the sales are slow and the challenge is finding the innovators and early adopters.  In the growth phase, the sales rise and the challenge is to beat the competitors getting to the early adopters.  In the maturity phase, sales growth levels off and in the decline phase, the sales decrease.  These last two phases hold the late majority and laggards.

• The difference between marketing and sales is basically; marketing sells the idea of a product and/or service to everyone, whereas sales sells the product and/or service one-on-one.

• The different possible sales types are Order Takers, Active Selling, Inside Sales, and Outside Sales.  The sales force needs to be properly organized, motivated and compensated in order to have the right size to do the workload, alignment to cover all needs, and keeping them happy and selling.  A common system used by marketing and sales to learn more about customers' needs and behaviors, is CRM or Customer Relationship Management.