Business Management Tools: Sales and Marketing Principles

The Business Lifeline

Without sales, a business ceases to exist; but getting customers does not simply happen because you have years of experience, great credentials, or even the best product. Selling, say those experienced in the field, is an art and a science, requiring skills in both disciplines. Sales managers coach and train their salespeople in questioning, listening, and closing the deal. A sale is officially transacted when either an agreement to provide compensation for goods or services is signed, or payment is made in exchange for goods or services. It can be conducted via face-to-face meetings, over the telephone or Internet, and through a third-party, such as real estate brokers.

There are two kinds of sales approaches: business to business (B2B) and business to consumers (B2C). Each approach requires different strategies and techniques. B2B sales typically involve providing a purchasing agent, who makes buying decisions on behalf of a company. These transactions typically have a goal of making the business more efficient or productive, whereas B2C sales typically involve providing a consumer enjoyment, satisfaction, or utility. Sales can either be made directly, through a salesperson-buyer interaction, or indirectly, through word-of-mouth or other marketing methods. The Internet's platform combines direct sales, as in an e-commerce Web site, with indirect sales through Web-based marketing tools.

Sales managers are responsible for coaching sales teams in how to uncover prospects, manage territories, reach sales goals, and develop a customer base. They are also responsible for providing sales forecasts and sales analysis, which includes data mining, a system of reviewing sales history and targeting buying patterns. The manager obtains information through teams and company reports. She or he then reports findings to upper management, which uses the information in directing the company.

Sales Cycle

In every sales effort, there is a cycle that begins when a prospect is made aware of an offering. Ideally, it ends with a purchase. This sales cycle can be very quick, as in purchasing food products, or a long process, as in buying heavy equipment or buildings. Interested prospects are considered to be in various stages in the cycle, typically called a pipeline. Experts generally agree that the stages of the pipeline include:

Lead: This term refers to new opportunities based on a possible customer belonging to a group such as those who have purchased a similar product in the past.
Prospect: The potential buyer has been contacted via a cold call and may be interested in your offering.
Qualified or "warm" prospect: The prospect's needs could be met by your offering, and he or she could be persuaded to purchase.
"Hot" prospect: The salesperson is close to making a deal. There are buyer objections that must be overcome before the sale is made.
Customer: The buyer decides to purchase.

Once the sale is made, managers must ensure that the customer will become a repeat customer. This could involve a salesperson maintaining occasional contact with the buyer or offering incentives for repeat purchase. The performance of the company following a sale can be just as important as the sale experience itself. Businesses can spend thousands of dollars understanding their customers' satisfaction levels and their loyalty to the company. However, it is widely accepted that it takes much less effort to retain current customers than to acquire new ones. For this reason, a manager must practice customer relationship management (CRM).

Customer Relationship Management

Savvy managers understand that making the sale does not end the buying experience for the customer. Where, how, and when customers buy can be important to the long-range health of the company.

In more complex sales, particularly B2B sales, the sales team gathers information about prospects that is put into a system used for analyzing Once a sale has been made, certain data about the customer account is categorized, grouping that customer with other customers. This will shape a company's customer base. Multiple versions of software are available that enable a sales manager to analyze data collected on a variety of sales details. Managers use this information to direct sales efforts to areas that will produce the best results. Many systems provide sales projection models that forecast future sales based on existing trends. These models also monitor customer satisfaction rates; this data is critical in determining how to prevent customer loss and where to focus energy to promote long-term relationships.

Sales Teams

Companies who do business within large regions, perhaps across several states, generally have teams to handle sales activities. The density of the population the business is serving influences how many members are on a team. Some U.S. cities alone require multiple sales agents. Coordinating different territories is one of the main functions of the sales manager. She or he will determine who covers each territory and what to expect from each region, and make sure there are fair opportunities to make sales for each team member. The manager also sets sales goals, along with objectives that must be met to achieve those goals. Creating incentives and competition for awards is an effective method to inspire sales agents to reach their assigned goals. Giving recognition is also an effective motivator.

If a business produces multiple offerings, teams have greater opportunities for sales. Teams are trained to cross-sell, up-sell and switch-sell; these strategies involve persuading customers to buy alternate or additional products or services the company offers. Packaging a sale occurs when additional elements are added to a purchase for a discounted price per addition. These strategies all work best once a sales agent understands a prospect's needs.

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Sales teams are organized to conduct outbound sales or inbound sales. Outbound sales involve agents actively seeking customers, like the traditional door-to-door salesman, while inbound members handle visitors who come to them, as n retail stores. Teams that are structured for face-to-face sales make up the most labor-intensive channel for conducting sales, sometimes requiring several visits to close the deal. Though prospecting (qualifying leads) for visits can be done by other means, a sale will not happen until the prospective buyer is visited.

Telesales are conducted over the phone. If a business provides a type of product or service that is commonly known, this sales technique can be effective, as sales agents can make several or many phone calls per day. The Internet is perhaps the most proficient sales method because you need only a few workers to serve a large territory, though it is sometimes seen as somewhat limited as a communication method. The telephone has the advantage of both connecting frequently and offering more effective two-way communication.

Pricing

An essential ingredient in sales management is pricing your goods or service. The sales techniques we have discussed are often determined by the price of the company's offering. Some sales are conducted using fixed pricing, while others are done using dynamic pricing. Under fixed price systems there are several approaches a manager can choose:

Competition-based pricing: Using primary competitors' prices as a guide, a manager who has similar production and delivery costs can charge a similar price.
Cost-plus pricing: This is the simplest method and involves adding a markup to the cost of producing the output, which is usually a defined percentage such as 10 percent. This markup is considered a profit margin.
Market-based pricing: A manager will look at a demand curve of similar goods to identify an appropriate price for a targeted market. This is usually based upon the price elasticity of a product, which indicates when price changes affect demand.
Penetration pricing: Typically used for new offerings, this method establishes a low price to establish a strong market presence. The price is increased once a good market share is established.
Price skimming: For businesses that have a competitive advantage, the price is set artificially high to grab early adopters, or those at the beginning of a trend, to buy. Usually, the price drops when competitors enter the market.
Psychological pricing: Pricing designed to elicit a psychological response, such as setting a price at 95 cents instead of rounding to the next dollar.
Premium pricing: Setting an artificially high price by establishing a high value, such as a gourmet meal.
Economy pricing: Establishing a bottom-line price, typically much lower than competitors' pricing. Supermarket chains will use this strategy by offering comparable products with their own labels at reduced prices.

Pricing can be affected by public perception; the current economic environment, such as recession; and seasonal influences like winter weather in colder regions. Managers can use discounts to gain more sales over a short period of time. Businesses using dynamic pricing allow their sales agents to be flexible in pricing when necessary so that outside influences can be accounted for without sacrificing the sale. Because the marketplace can be fickle at times, a manager should examine all pricing options before establishing a cost for his or her offering.

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What Is Marketing?

Marketing is generally the discipline that leads into sales. Without announcing to the public what you offer, your business will have difficulty growing or even continuing to operate. The term "marketing" was developed early in the 20^th century, according to marketing scholar Robert Bartels in his book The History of Marketing Thought. He explains that modern marketing theory began when it was discovered that demand was not simply a result of having purchasing power; i.e., money. Ever since, businesses have been attempting to appeal to the public by creating demand. Demand is created by communicating the value an offering provides to a prospective buyer.

Creating demand is a result of appealing to the interests – more importantly the personal values and beliefs – of the company's prospects. By targeting personal motivators and attracting customers, a business gains recognition as a source for the fulfillment of customers' needs. A company's offering can solve a problem, provide enjoyment, assist with a task, or provide another benefit to a buyer. These appeals can be made to the following:

Economy: What value is a purchaser receiving in exchange for his or her payment? Does a purchase seem economical? Is it affordable?
Vanity: Will a purchase enhance physical appearance? Will stature be lifted after a purchase? Can the buyer appear smarter or more knowledgeable by accepting the offering?
Safety: How will a purchase protect he buyer or loved ones from physical harm, economic loss, or social standing? Can he or she avoid a bad situation by purchasing? What will happen if a buyer does not buy?
Opportunity: Does a purchase provide a chance to increase wealth, connect socially, or increase influence over others? Will a purchase help the buyer become more efficient, more productive, or feel more energetic?

Marketing managers understand that there is a decision-making process that prospects go through before purchasing. Though each prospective buyer makes decisions at different speeds, it generally takes time to attract a customer base. The marketing process most professionals use to influence buyer behavior involves the AIDAS concept. Originally, the theory discussed four factors necessary for effective marketing campaigns: creating attention (awareness), generating interest, provoking desire, and inspiring action of your prospects. Ensuring satisfaction was added to provide a mechanism for retaining repeat customers. The steps are described as:

Ø Attention: Create initial awareness that the offering is available.

Ø Interest: Develop prospects' consideration by highlighting features, benefits and advantages.

Ø Desire: Increase interest by persuading potential buyers that they want and need your offering.

Ø Action: Motivate prospects to take action (i.e.. make a purchase).

Ø Satisfaction: Convince buyers they will be happy with the purchase.

There are basically two techniques to use when developing a marketing approach. One way is to persuade a prospect to purchase immediately. Called "direct response marketing," this approach involves an offer that must be responded to, usually within a specific time period. The other method is to create brand recognition that places your offering in the buyer's mind. A clever logo or unique sound alone can be effective tools for achieving brand identity, but marketing professionals caution that creating identity alone does not guarantee success; the offering must fulfill the benefit promises made in the marketing message.

Niche Marketing
Instead of reaching a broad market, some businesses use niche marketing. The aim of niche marketing is to appeal to a specific group of prospects by targeting its unique needs or characteristics. For example, a company selling commonly used items like watches might highlight a watch's durability to extreme sports enthusiasts. Though durability might appeal to a wider audience, the marketing methods would specifically address this market segment. Effective niche marketers will look at all the benefits an offering provides, then narrow their marketing messages to match a specific benefit to a smaller group. Feature film marketers employ this technique when they design several advertising variations for the same film.

Targeting niche market segments requires a manager to understand each segment before designing a strategy. Simply highlighting a benefit will not produce effective results. The manager must follow three key rules for niche marketing:

Meet the segment's unique needs. It may sound obvious, but making sure your offering solves the segment's specific problems or helps accomplish its unique objectives is critical in appealing to a narrow audience. Even if the product is a commodity, such as soap, a savvy marketing manager can develop a campaign to highlight its effect on a specific group, such as parents.
Speak their language. Successful campaigns relate to their audience through elements like music, video clips, and language. The offering has to match the image that the audience envisions in order for the campaign to be successful. Automobile ads use various music genres to relate to different aged buyers.
Know competitors. Understand the marketing activities of companies providing the same offering. Standing out is important in establishing market presence, but do not "reinvent the wheel." If other businesses have been successful targeting this niche, use similar strategies.

Marketing Management

While some companies have a marketing department and others hire independent firms to create and implement marketing programs, the marketing director is typically the person responsible for coordinating the campaign development and execution. Managers are required to understand the buying patterns of market segments; define the marketing messages and strategies that will be used; oversee and direct the creation of marketing collateral, which refers to materials made for distribution; and determine the communication channels, including media outlets, to broadcast the message. As the campaign moves along, a marketing manager monitors response levels and adjusts campaign strategy accordingly. Following a campaign, the marketing manager will analyze the results and report findings to upper management. Because businesses expect a return on their marketing investment, it is critical that managers "read the market right."

There are fundamental elements that affect a marketing campaign. Managers may control some or all of the elements involved, traditionally known as the marketing mix. The four primary elements for most businesses, better known as the "Four Ps," provide the foundation for the marketing campaign. They include:

Product: The total scope of the offering including warranties, specifications, packaging, and support functions.

Pricing: The cost to obtain the goods or services, including discounting, rebating, and bundle pricing.

Promotion: The method of communicating the message including advertising, promotions, publicity, etc.

Placement: Another name for how the offering is delivered to the buyer, such as a retail outlet or service schedule.

While using these elements, 21^st century managers also now include people, taking into account personal experiences, motives, and desires. For service industries, marketing managers add process, which factors in the steps needed to provide the service, and physical evidence, which addresses the lack of a tangible product by using testimonials, demonstrations, or case studies.

Marketing's Purpose
At first glance, it might seem like marketing is simply the way to get the word out about your business. As countless U.S. businesses have found, just placing an ad or hanging a sign will not send droves of customers through your doors. Solid research about buyer behavior and prospect needs is required to develop a successful marketing campaign. Marketing efforts are designed to accomplish one of three things:

Bring in new customers: Marketing activities are likely the first exposure of your business to prospects. With a vast universe of offerings available, a manager must develop strategies that make the audience recall what you have to offer and why people should come to your business to fulfill their needs. Successful brand recognition is created when the public understands that a product or service comes from your company. This marketing objective is to create an invitation for prospects to try you out.
Increase the purchase amount: Once a product or good is established, marketing efforts can focus on increasing the loyalty factor by offering additional items to the same customer. Bundling products is an effective way to encourage higher purchase amounts. Promoting add-ons to a base offer can also increase a customer's ticket, or one-time buy.
Increase purchase frequency: Whether an offering is a durable product like a car or a one-time service, marketing strategies should include activities that produce repeat purchases. Some strategies include offering a club membership or coupons toward future purchases. Customer loyalty programs offer buyers reasons, typically generous incentives, to stay with your company. A good program can be a strong asset in maintaining long-term growth; however, some marketing analysts argue that it can take up to 18 months to establish a return on a loyal customer.

Marketing Channels

The marketing manager knows which methods to deliver the company's message. She or he can choose from television, radio, Internet, print publications, mail, and personal distribution. The goods or services will have an impact on how the message is broadcast; not every offering will have success using the same channels. Marketing professionals prefer to use channels that are measurable, as that makes campaign analysis easier, but the effectiveness of some methods is difficult to monitor.

Direct mail promotion can be effective for consumer-based marketing for either products or services. Of course, television or radio ad placement reaches a wide audience, but it can be a more expensive option and can be difficult to measure in terms of response rates. Both TV and radio offer the ability to deliver direct response advertising through extended informational commercials, sometimes called "infomercials," such as for home fitness equipment. The Internet has opened up a new realm of marketing possibilities. Recently, marketing through social network sites, sometimes called viral marketing, has produced results for certain types of businesses. Finally, personal distribution is a marketing method many small businesses use, such as handing out brochures or business cards. This can be effective when a company wants to establish a more intimate, personal image.