Personal Selling and Sales Management PDF

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9- 507- 039 REV: DECEMBER 1, 2006

MODULE NOTE

Personal Selling and Sales Management Salespeople represent a large part of labor in most economies. In its latest report,1 the U. S. Bureau of Labor Statistics estimates that nearly fourteen million people are employed in sales and salesrelated occupations and that these people earn over $450 billion in wages. Moreover, salespeople represent a major investment for many companies, accounting for as much as 40% of their costs. A company’s fortune often rises and falls on the productivity of its salespeople. The goal of this module is to develop a better understanding of what salespeople do, what motivates them to succeed, and how to effectively manage their efforts.

The Salesperson - A Boundary-Spanning Role Salespeople work on the boundary between a company and its customers. To the company, the salesperson is the voice of the customer. To the customer, the salesperson is the physical embodiment of the company. This boundary-spanning role creates unique tension for salespeople because they are constantly forced to reconcile the competing interests of both the buying and the selling organizations. Figure A: The Salesperson’s Boundary-Spanning Role

Company

Salesperson

Customer

Source: Casewriter.

1 These data come from the May 2005 National Occupational Employment and Wage Estimates report, which was accessed

online at http://www.bls.gov/oes/current/oes_nat.htm#b41-0000 on 1 December 2006. See occupation code 41-0000. ________________________________________________________________________________________________________________ This note was prepared by Professor Thomas Steenburgh for the sole purpose of aiding students in the Marketing course. Copyright © 2006 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.

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Module Note—Personal Selling and Sales Management

Types of Salespeople During cocktail hour discussions, sales managers still engage in the old debate of whether great salespeople are born or whether they are made. It is a question, of course, without a single answer. Some people are better suited to selling than others (in fact, some salespeople are better suited to certain types of sales jobs than others) and yet most people can sell more effectively by learning to follow a process. Whether an individual will make a good salesperson does somewhat depend on their inherent personality traits. In a classic article, Mayer and Greenberg (1964) suggest that salespeople must have two basic qualities: empathy and ego drive. Empathy allows salespeople to treat customers’ problems as their own, and ego drive enables salespeople to persist even after experiencing failure. Whether an individual is right for a given organization depends on the fit between the individual’s skills and tasks that need to be accomplished. Narayandas and Weinstein (2005) examine the differences between salespeople who thrive in ”hunter” and salespeople who thrive in “farmer” types of positions.2 Hunters Hunter salespeople are persuasive, have a strong sense of urgency, and are adept at bouncing back from rejection. They are better suited to the following types of functions: •

Sourcing and qualifying new leads

•

Obtaining appointments

•

Delivering presentations that address customers’ concerns

•

Negotiating and securing new business

Farmers Farmer salespeople are empathetic, consistent, and adept at developing relationships. They are better suited to: •

Establishing and maintaining long-term relationships

•

Providing expert advice

•

Networking within customers to find new leads

•

Negotiating and securing new business with existing customers

This type of categorization can be used to determine the likelihood of success in a job, to identify skill gaps, and to create long-term developmental plans. It should be thought of more as a snapshot in time than as a picture of unchanging personality traits.

The Sales Process Effective salespeople become adept in understanding their customers’ needs and identifying their problems. This can be an elusive skill to master even for seasoned salespeople. For example, when salespeople become successful selling to an existing set of customers, they may begin to assume that 2 McMurry (1961) and Kotler and Keller (2006) provide even finer categorizations along the spectrum of positions between

these two extremes.

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Module Note—Personal Selling and Sales Management

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they understand the problems faced by every customer and start to overlook issues that concern new prospects. Similarly, when a new product is launched, salespeople may become so immersed in learning about its features that they forget to think about how these features might be used to solve customers’ problems. Effective selling requires salespeople to understand their customers’ needs, to help customers see the bigger importance of these needs, and only then to show customers how their products might meet them. Accomplishing this takes a great deal of empathy as well as an ability to solve problems.

Understanding Customers’ Needs The first step in selling is to understand the customers’ needs. While this can be done only by going into the field, it is useful to develop a sense of what a customer might be looking for before sales calls are made. Clarifying the distinction between product features and customer benefits can help salespeople anticipate the issues that customers experience and the solutions that they may be able to offer. (See Figure B.) Turning Product Features into Customer Benefits This mental exercise helps salespeople anticipate their customers’ problems. Product features are turned into customer benefits by asking the questions, ”Why do they care?” or “Why is it important?” These questions may need to be asked several times before the ultimate customer benefit is found. For example, DeWalt makes its drills in an industrial yellow color (a product feature.) Why do tradesmen care? Tradesmen need to signal that they possess unique skills, and their choice of power tools helps convey this image. DeWalt’s industrial yellow color signals high quality. Why is this important? Tradesmen rely on other tradesmen to get new jobs (a customer benefit), so they need to maintain a professional image. Why else is it important? Customers are willing to pay more for work that they cannot do themselves (a customer benefit), so tradesmen need to signal to their customers that their work cannot be done by amateurs. Whether these truly are customer benefits depends on whether a tradesman sees them as such, which cannot be determined without talking to a real tradesman. Nevertheless, the mental exercise of turning product features into customer benefits helps put the salesperson in the customer’s shoes before a call is made. While it may seem obvious that time should be spent trying to anticipate customers’ needs, many firms give training only on product features, not on customer benefits. This may help explain why some salespeople spend a disproportionate amount of time learning about the product at the expense of anticipating the customers’ reasons to buy. Turning Customer Benefits into Product Features The opposite exercise helps salespeople determine the types of solutions that can be offered and develop lines of questions to be pursued with customers. Customer benefits are turned into product features by asking the question, ‘How can I do it?’ Salespeople often are able to identify some customer benefits that cannot be met, which helps them determine the types of probing questions that should not be asked as well as those that should be. It also helps them identify those customers who are least likely to buy. This exercise is particularly useful when salespeople have some control over the product offering, such as in professional service industries or when selling to major accounts. It also can be useful as a research and development tool, when salespeople work with engineers to develop new products.

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Module Note—Personal Selling and Sales Management

Figure B: Understanding Customers’ Needs

Customer Benefits “Why do they care?” “How can I do it?”

Product Features

Source: Casewriter.

Identifying and Building Needs Having spent some time trying to anticipate needs, the salesperson is ready to develop lines of questions to be pursued with prospects. Many of the popular books on selling, such as SPIN Selling (Rackham, 1988) and Secrets of Question Based Selling (Freese, 2003), focus on determining the right questions to ask. Ideally, the salesperson begins a conversation by asking questions that reveal the prospect’s needs. The goal is to identify what issues the prospect faces and whether or not the salesperson has something to offer. If something can be offered, the salesperson proceeds by helping the prospect articulate compelling reasons to buy. The salesperson’s questions should help the prospect clarify how the product would help them attain higher-level benefits. A critical component of this phase is that the prospect feels that they participated in defining the benefits that would be attained or, better still, that they defined them on their own. This leads to stronger commitment and a sense of urgency to complete the purchase. It also increases the prospect’s willingness to “sell” the product to others in the decision-making unit (who, depending on the type of sale, may be upper-level managers or even the prospect’s spouse.) To be successful, salespeople should ask questions about needs they can meet and should try to avoid asking questions about needs they cannot. A need the prospect believes is important, but the salesperson cannot meet should not be dismissed, especially if a competitor can meet it. Rather, the salesperson should look for ways to refocus the discussion on problems that can be solved.

Transaction Selling When selling products in a transaction-oriented environment, say a retail store, the salesperson has limited time to make a pitch to a customer. The salesperson needs to make quick judgments as to whether the customer is really interested in buying, why they are interested in buying, whether the salesperson has a product that can satisfy those needs, and how focused the customer is on price.

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Module Note—Personal Selling and Sales Management

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ABC, which stands for “always be closing”, is a common mantra because customers are unlikely to return once they leave the store. While product features often need little explanation in this environment, salespeople still need to be conscious of what matters to the customer. Only a few of the product features will be discussed, and objections, either to the product or to price, need to be anticipated and overcome quickly. Learning to handle customer objections is an especially important skill to master in this environment.

Major Accounts Selling Selling into major accounts radically differs from transaction selling. Sales take place over months or years as opposed to over minutes, many people in the buying organization are involved, and the buying organization is spending larger sums of money. It often takes years for salespeople to effectively master the skills needed to sell in this environment, and processes need to be established to help make them successful. In a classic HBR article, Shapiro and Posner (1976) describe a sales process for major accounts that helps salespeople manage complex selling tasks. They discuss the following eight steps: Open the Selling Process In the opening stage, a salesperson’s objective is to gain enough information from an initial contact to determine the person or set of people to meet in the prospective buying organization. The best openings are often provided by third-party sources because these introductions help the salesperson gain credibility with the prospect. Given this, professional service firms commonly use one another as referral sources to obtain new clients. Qualify the Prospect The next stage is to “separate the suspects from the prospects”. To avoid spending time selling to prospects that have no intention of buying, the salesperson should ask: Does the prospective buyer really have a need for my product? Do the top managers recognize that need? If they don’t, is it likely that I can educate them? Can I justify my product as a response to that need? Can I identify influential buyers and others who may affect the decision to buy? Develop the Sales Strategy Once the salesperson believes a sale is possible, she needs to develop a plan to direct her efforts. Shapiro and Posner suggest developing a “Strategic Sales Opportunity Profile” to map out the entire sales strategy. On one form, the salesperson lists all of the people that have been contacted, the information obtained, the required follow-up actions, and the results of contact. The information will vary widely from the practical (certain individuals need detailed cost estimates) to the organizational (they will only negotiate with the sellers organizational counterpart) to the personal (they cannot make decisions unless one of their associate confirms it.) In essence, the salesperson uses the opportunity profile to learn about the prospect’s decision-making process. Some of the right questions include: Will the person that I am going to call on make the actual decision? How does he fit into the organization? Is his background technical? Managerial? Although decisions to buy big-ticket items are generally made at higher levels of the customer’s organization, salespeople often feel more comfortable selling to lower levels of management. Selling only to these managers has two detrimental effects: (1) some of the strength of the sales presentation is lost in transmission from the lower levels to the upper levels of management (2) an opportunity to develop relationships with top managers is lost, and the salesperson is left guessing as to how they perceive the situation. Organize the Justification Once the salesperson has determined whom to contact, it is time to assist the prospect in cost justifying the proposal. While the salesperson needs to become completely conversant in the prospect’s operations, she is more likely to be successful if she can determine the 5 This document is authorized for educator review use only by MEHRUKH SALMAN, HE OTHER until Aug 2021. Copying or posting is an infringement of copyright. [email protected] or 617.783.7860

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Module Note—Personal Selling and Sales Management

few important variables that affect the sale. Once these variables have been determined, top executives can help the salesperson cost justify the proposal by answering questions like, “Do you think that our service can increase sales by 10% over a two year period?” Numbers are useful only if the prospect believes them to be feasible. Immediately after these data have been gathered is the right time to sell. Make the Presentation The proposal to a prospective customer is often made in the form of a formal presentation. The salesperson’s goal for this meeting is to get the right set of decision makers in the room in order to ask for the business. No new information should be presented at this meeting. Rather, the presentation should reinforce the agreed-upon solutions, cost justifications, and implementation commitments. Good presentations will include a management summary, project scope, recommended solution, description of unique advantages, financial analysis and cost justification, implementation schedule, and contract with terms and conditions. Personal involvement of the selling organization’s senior managers is often appropriate at this meeting so that any additional commitments, if necessary, can be made on the spot. Whereas handling objections well matters more in transaction selling, preventing objections from arising matters more in major accounts selling. Coordinate Resources and Personnel During the entire sales process, the salesperson is responsible for managing the resources of her company. This may require working with other organizations within her firm to meet the prospect’s needs. For example, she may have to work with design to get a special product configuration, manufacturing to ensure that enough production capacity exists, or finance to obtain special payment terms. A by-product of this interaction is that new lines of communication are established between the buyer and seller. Close the Sale Success is attained only when the sale has been closed and the customer signs the contract. When selling big-ticket items, this may occur anywhere from six months to three years after the process was started. Therefore, it is important for the salesperson to end each call by reinforcing with the customer the agreements that have been reached up to that step in the sales cycle. By continually asking and getting answers to questions such as, “If we could deliver a system that could deliver a 15% ROI per annum, would you buy?” the salesperson knows well before the process is over if the business has been won. Nurture the Account Relationship The salesperson should continue to be a liaison between the buying and selling organizations long after the sale has been closed. By making sure the product delivers the anticipated returns, the salesperson ensures profitability for the customer and puts her company in the best position to win add-on business. Post-sale service not only reinforces the customer’s confidence in the seller, but it also keeps competition out because the customer’s people are busy working with the seller.

Sales Management Having spent some time understanding what salespeople do for a firm and what motivates them to succeed, let’s now understand how to effectively manage their efforts. We’ll discuss aligning the salesperson’s objectives with the strategic goals of the firm, organizing the sales force, and managing salespeople.

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Module Note—Personal Selling and Sales Management

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Aligning Objectives Since salespeople need to treat their customers’ problems as if they were their own, it is easy for them to lose sight of their own company’s strategic goals. This makes it especially important for the company to clearly communicate what needs to be accomplished and to align, as best as it can, its salespeople’s ...