CHAPTER OUTLINE Spotlight: HubSpot, Inc. (http://www.hubspot.com) 1 Promotion Marketing communications that inform and persuade consumers Key decision in developing a promotional strategy is determining what you want to get out of it 2 The Communication Process in Promotion Describe the communication process and the factors determining a promotional mix. Communication Process with identifiable components Exhibit 17-1 Similarity of Personal and Small Business Communication Processes Components Source Message Channel options Receiver Promotional mix Blend of nonpersonal, persona, and special forms of communication aimed at a target market Promotional methods Advertising, personal selling, sales promotion tools affected by many factors Geographical nature of the market Size of the promotional budget Product s characteristics Evaluate competitor s promotional tactics 3 Determining the Promotional Budget Explain methods of determining the appropriate level of promotional expenditures. Allocating a Percentage of Sales Simplest method Examine secondary data on industry averages to use for comparison Major shortcoming of this method is a tendency to spend more on promotion when sales are increasing and less when they are declining Deciding How Much Can Be Spared Spending whatever is left over when all other activities have been funded May not accomplish promotional goals Spending as Much as the Competition Does Determining How Much Is Needed for Specific Results Exhibit 17-2 Four-Step Method for Determining a Promotional Budget Decide what it takes to do the job is preferred approach 179
4 Personal Selling in the Small Firm Describe personal selling activities. The Importance of Product Knowledge The Sales Presentation Using Prospecting Techniques Personal referrals Impersonal referrals Marketer-initiated contacts Customer-initiated contacts Practicing The Sales Presentation Improves the salesperson s success rate Consider possible customer objections to the product and prepare to handle them Price Product Timing Source Service Need Factually untrue objections may be handled by Direct denial Indirect denial Answering objections with the words feel, felt, and found; don t argue Take notes (shows you are listening) Compensation method (admit to agreeing with the objection then proceed to show compensating advantages) Pass-up method (acknowledge concern expressed and then move on) Find the true objection (ask for more details to determine how to handle the objection) Follow up and follow through (may be used to defer a decision) Making The Sales Presentation Adapt the sales approach to meet customers needs Canned sales approach will not succeed with most buyers Successful selling involves psychological elements (personal enthusiasm, friendliness, persistence) Cost Control in Personal Selling Cost for outside sales calls may be high Especially important to control costs for a new business with limited resources The Compensation Program for Salespeople Nonfinancial compensation Personal recognition and satisfaction of reaching sales quota Personal and career advancement Financial Compensation Two basic plans Commissions 180
Preferred by small businesses Approach is simple and directly related to productivity Straight salary More income security Can potentially reduce a salesperson s motivation by providing income despite low performance or no sales at all Combination of commission and straight salary most attractive plan for most small businesses 5 Advertising Practices for Small Firms Identify advertising options for a small business. Advertising Objectives Advertising is impersonal presentation of a business idea through mass media Primary goal to sell by informing, persuading, and reminding customers of the availability or superiority of a firm s product or service Must always be viewed as a complement to a good product and never as a replacement for a bad product Avoid creating false expectations with advertising May seem to be a waste of money, but is the primary alternative to personal selling which is more expensive and time-consuming Types of Advertising Product Advertising the presentation of a business idea designed to make potential customer aware of a specific product or service and create a desire for it Institutional advertising the presentation of information about a particular firm, designed to enhance the firm s image Obtaining Assistance with Advertising Advertising agencies, suppliers, trade associations, advertising media Ad agencies provide services such as: Furnish design, artwork, and copy Evaluate and recommend the ad media with greatest pulling power Evaluate the effectiveness of different advertising appeals Advise on sales promotions and merchandise displays Conduct market-sampling studies to evaluate product acceptance or determine the sales potential of a specific geographic area Furnish mailing lists Frequency of Advertising Important and highly complex issue for small businesses Should be done regularly Part of an ongoing promotional program Where to Advertise Most small firms restrict either geographically or by customer type Media should reach, but not overreach, firm s present or desired target market Combination of media depends on type of business and its current circumstances Exhibit 17-3 Advantages and Disadvantages of Major Advertising Media Web Advertising 181
Basic methods of Web Advertising for a small firm are: Company website Banner ads and pop-ups E-mail Reciprocal advertising and hyperlinks Blogs Creating and Registering a Site Name Building a User-Friendly Website See exhibit 17.4 (Website Essentials) Promoting the Website Banner Ads and Pop-Ups Often carried out through an affiliate program Some skepticism about the cost effectiveness of these ads Price comparison pop-ups an effective way to lure surfers from competitors websites Direct E-Mail Promotion Advertising delivered by means of electronic email Low-cost method to pinpoint customers and achieve response rates higher than those for banner ads Increasing in use Two obstacles Can-Spam Act of 2003 by Congress Anti-spam software Reciprocal Advertising and Hyperlinks Hyperlink is a word, phrase, or image that a user may click on to go to another part of a document or website or to a new document or website Blogs An interactive website where an individual can maintain a personal online journal, post and receive comments and reflections, and provide hyperlinks Companies that ignore blogging do so at their own peril Mobile Devices a generic term used to refer to a variety of wireless handheld computing devices APPS abbreviation for a software application for business or entertainment Social Media Websites and applications used for social networking Social networking- the use of dedicated websites and applications communicate informally with other users. Web 2.0 a term referring to the second generation of the World Wide Web, which allows for online collaboration of social interactions, and information sharing 6 Sales Promotional Tools Discuss the use of sales promotional tools. 182
Specialties Calendars, pens, key chains, coffee mugs, and shirts Enduring nature and tangible value Personal, distributed directly to the customer Trade Show Exhibits Possible path to international markets Tips for trade shows Check out the trade show s history Prepare a professional-looking display Have a sufficient quantity of literature on hand Make sure you have a good product Do pre-show promotion Have a giveaway or gimmick Train booth personnel Follow up! Publicity Provides visibility for a business at little or no cost Not always free, relatively small investment Examples: underwriting school yearbooks, sponsoring youth athletic programs, social shopping websites When to Use Sales Promotion Based on business objectives Based on effective communication SOURCES OF VIDEO AND OTHER INSTRUCTIONAL MATERIALS The Sales Connection is a video series produced by INTELECOM that includes 26 half-hour segments featuring leading sales and business experts. Visit their Web site at http://studentstore.intelecomstore.org. ANSWERS TO END-OF-CHAPTER DISCUSSION QUESTIONS 1. Describe the parallel relationship that exists between a small business communication and a personal communication. The basic structure is the same. Each involves a source, a message, a channel, and a receiver. The difference between personal and small business communication is in the form of the communication elements. Figure 17-1 in the chapter depicts the similarity, as well as these differences in form. 2. Discuss the advantages and disadvantages of each approach to budgeting funds for promotion. 183
a. Using a percentage of sales is simple and quick; the disadvantage is that a business spends more when sales are increasing but less when sales are declining. a. Spending what can be spared requires no knowledge of promotion to set the budget; its disadvantage is that it is not an organized approach. b. Spending as much as the competition does requires little knowledge of how promotion works; the disadvantage is that the competition may be promoting ineffectively, so a business that copies the competition may be copying a mistaken approach. d. Spending what it takes to do the job is most consistent with the goals of promotion; the disadvantage is that it is a time-consuming approach and requires a greater understanding of promotion. 3. Outline a system of prospecting that could be used by a small camera store. Incorporate all the techniques presented in this chapter. A list of prospects could be compiled by asking current customers about their friends who are interested in photography; obtaining mailing lists compiled by magazines in the field; noting responses to coupons or other promotional efforts, such as contests; identifying names of customers who have just walked into the store; monitoring the newspapers, photography club activities, and so on; and identifying names on film-developing envelopes. 4. Why are a salesperson s techniques for handling objections so important to a successful sales presentation? They are important for two principal reasons. First, objections are negatives. An objection is an escape for the prospect. The salesperson must shut the door on this exit. Second, there is little or no time during the presentation itself to prepare a response to objections. Thus, the preparation of techniques becomes vital. 5. Assume you have the opportunity to sell your course instructor on the idea of eliminating final examinations. Make a list of the objections you expect to hear from your instructor and describe how you would handle each objection, using some of the techniques listed on pages 505-506. Answers to this question will vary. Following are examples of some of the points that may be presented and possible objections for each: 184 Instructor Objection Exams are good learning tools. I must have something to measure what you have learned. Student Response Not having exams leaves more days to listen to your wonderful lectures. Exams do not measure what we really have learned. Trust your judgment.
The school requires documentation for a grade. We won t tell! 6. What are some nonfinancial rewards that could be offered to salespeople? The following might reward and motivate salespeople: An all-expenses-paid vacation A salesperson-of-the-month contest featuring display of the winner s picture and name in the office A billboard displaying the name of the top salesperson of the year Use of a luxury car for one month A better office A service pin awarded to top performers 7. What are the advantages and disadvantages of compensating salespeople by salary? By commissions? What do you think is an acceptable compromise? Security for the salesperson is the greatest advantage of a salary plan. A straight salary makes it easier for the firm to require non-selling activities from its sales force. This method, however, does tend to restrict the earning ability of salespeople and can reduce their motivation. A commission plan allows salespeople to make as much money as their abilities will allow. It also gives strong incentive to the sales force. A commission plan, however, means no sale, no income. A combination of the two forms of compensation can give the small business the best of both worlds. 8. What are some approaches to advertising on the Web? Basic methods of Web advertising include (1) establishing a corporate Web site and (2) creating banner ads and pop-ups, (3) using direct e-mail promotions, and (4) taking advantage of sponsorships and linkages. Establishing a Web site places information about the firm and its products/services in a place where potential customers can find it. With banner ads and pop-ups, the firm takes its message to the customer by posting advertisements on Web pages where potential buyers can see them and respond. Using direct e-mail promotions is a very inexpensive way to get the word out, but target consumers are becoming more resistant to this form of advertising. By sponsoring a Web page for another organization and perhaps even featuring a click-on link to its own site, a firm can sometimes reach customers. 9. Discuss some recommendations for designing an effective web site. Because first impressions are so important a small firm s Web site needs to be attractive and inviting. Exhibit 17-4 on page 511 of the chapter lists ten Web site design tips. Students will surely use these as part of their answer. However, 185
encourage them to expand the list and provide example Web sites for each suggestion they make. 10. How do specialties differ from trade show exhibits and publicity? Be specific. Specialties are different from trade show exhibits in that the former are enduring representations of the firm and its message, whereas trade show are experientially-based (i.e., they are time-constrained opportunities to create an impression and present information about the firm). These options always involve some cost. However, publicity works through various media to promote an image about the firm and it is often (though not always) free. COMMENTS ON CHAPTER YOU MAKE THE CALL SITUATIONS Situation 1 1. What do you think about giving away a product? Does it build sales, or does it suggest desperation? Product sample giveaways are an excellent way of connecting directly and personally with the customer. The company has the advantage of observing an immediate reaction from the customer- good or bad. The company can also take advantage of impulse buying should they have a great product. Sample giveaways is a growing trend and indeed builds sales as evidenced by the growing number of companies who sample their products on weekends at Costco. 2. How would you budget for marketing expenses if you had hired sales representative to give products away? One would utilize the same four-step method for determining the promotional budget. Allocate a percentage of sales Decide how much can be spared Spend as must a the competition Determine how much is needed for specific results Once data on the four steps above has been gathered, compare the numbers, make a decision and implement a promotional budget. In this case, the cost of the sales representative would be included in this budget. Depending on the level or detail and complexity of the item, a sales representative may be needed. For simple food items, a sales representative would not be needed and a less costly employee could give away the samples. In this case no selling or complex / detailed explanation about the product would be needed 186
3. What are some of the ways you might compensate your brand ambassadors? Which method do you think would work best and why? A combination of financial and nonfinancial compensation should be employed. Nonfinancial rewards in the form of career advancement, recognition, and advanced education and training could be offered. Financial compensation should be a blend of salary and commission. The ratio should be adjusted as the brand ambassador proves their sales skills to the company. Situation 2 1. What suggestions can you offer that would help Moore make this decision? If the advertisements are of high quality and colorful, they should be attentiongetting. The firm actually used full-scale ads covering the entire side of the trucks (9 ft. by 48 ft.). The image concern is an important consideration but should not be a problem for this product. It is likely that Moore will want to avoid some trucking companies those from insecticides or animal product companies, for example. 2. How could Moore go about determining the cost-effectiveness of this strategy? Moore offered a trucking firm approximately $1,500 for the privilege to advertise on 25 of its trucks for three years. Using these cost figures, some exposure data provided by the American Trucking Association, and a reference showing that 90 percent of survey respondents notice truck advertising, Moore estimated that she is paying only 21 cents per thousand exposures. 3. What additional factors should Moore evaluate before advertising on trucks? One concern is a legal one. Does the Department of Transportation allow this type of advertising on the trucks it regulates? With certain restrictions, Moore s ads were acceptable to the department s Bureau of Motor Carrier Safety. Moore also had to evaluate whether the trucks would be traveling into markets where the salad products were not distributed. In fact, Moore received calls from people who had seen the truck advertising but could not find the product. Situation 3 1. There is more than a 10-year age difference between members of Panchero s top management team and Joel Johnson. Do you think that difference could have contributed to Johnson s effectiveness in social networking? Why or why not? 187
The age difference probably made a difference in the beginning of this process. However once the top management team learns how do handle this type of social networking they eventually could become comfortable with it. 2. Is it ethical for Johnson to be recommending the restaurant chain where he works? Why or why not? It is ethical as long as he doesn t hide that fact from the people he talks to on Twitter, Facebook, and the other sites. 3. Have you ever posted any comments on a website about a business that you have visited? Do you check for customer comments before you shop at a particular business? Students will provide individual comments on these questions. SUGGESTED SOLUTION TO CASE 17: HUBSPOT, INC. 1. How has the salesperson s role changed because of Internet marketing? Consider differences in prospecting and presentation. The internet has added an additional layer to the promotional mix. Today s promotional mix is a blend of non-personal, personal, and special forms of communication aimed at the target market. Prospecting is a systematic process of continually looking for new customers. A sales presentation is a form of personal selling and requires the sales person to make a perfect oral delivery of the product. Prospecting techniques vary. There are personal referrals which are referrals that come from friends, customers and other businesses. Another technique is impersonal referrals which come from media publications, public records, and directories. Prospects can also be identified through marketer-initiated contacts. These are telephone calls or mail surveys to help locate possible buyers. Sales presentations give the salesperson the opportunity to respond to questions immediately. Successful salespeople should develop the following techniques: The ability to respond to a direct denial The ability to respond to an indirect denial The ability to answer objection with the words, feel, felt, and found Take notes Show compensating advantages Find the true objection 188
Follow up and follow through 2. Do you agree with HubSpot that a prospect is more qualified to make purchasing decision when it uses information found on the Internet? Yes, possibly. Because HubSpot can control the content and accuracy of their website content, they can educate their customer accurately. Therefore, the buyer has all the information they need to make an informed and intelligent buying decision. 3. How might the salesperson s compensation be different or the same with Internet sales versus traditional sales methods? Traditional sales methods allow the sales person to personally connect with the customer. The customer can enjoy the personal enthusiasm of the sales person. The sales person can also utilize their personally crafted selling techniques. HubSpot will need to evaluate the cost/benefit of sales garnered via this medium versus the impersonal selling of the internet. Certainly it would seem reasonable to compensate the sales person at a higher rate of commission for adding value to the sales experience of the customer. 4. Should a new small business rely solely on Internet promotions? What other methods should it use? Small businesses like HubSpot should be concerned with changes in technology and societal behavior and not rely exclusively on internet promotions. Two basic types of advertising are: Product advertising which is designed to make potential customers aware of a particular product or service and create a desire for it. Institutional advertising which conveys information about the business itself. It is intended to make the public aware of the company and enhance its image so that its product advertising will be more credible and effective. Where to advertise presents lots of options such as: Newspapers Magazines Radio Television Outdoor media Internet Within the internet there are also several opportunities for advertising such as: Banner ads and pop-ups Direct e-mail promotions 189
Reciprocal advertising and hyperlinks Blogs Mobile devices Apps Social media HubSpot will want to carefully design an advertising campaign that reaches its target market and likely, they will have to modify it as they learn of its effectiveness and ineffectiveness. 190