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UNIT:2

PERSONAL SELLING

Personal selling is a part of the total promotional activity of the firm, which along with product, price, and place

management, goes a long way in meeting the overall marketing objectives of the organization. The ultimate

objective of the marketing function is to increase the sales of want-satisfying products and services, thus

leading to a healthy bottom line. Of the several tools available to stimulate sales, one more important tool is

personal selling.

It is a method of communication-- a sales person communicates on an individual basis with a prospect. Personal

selling is person to person communication. It is also possible to get immediate feedback in personal selling by

observing the reaction of the prospect, and thus communication can be modified on the spot. Advertising may

be receive by those who are not our target audience. Personal selling is focused directly on our target audience.

Situations in personal selling:

1. Establish product & ongoing relationship with the sales executive.2.

Established product & new relationship.

3. New product & ongoing relationship.4. New product & new relationship.

ADVANTAGES

Provides a detailed explanation or demonstration of product Message can be varied to fit the

needs of each prospective customer

Can be directed to specificqualified prospects

Instant feedback Personal persuasion can be used

A good salesman can get you to buy ice in winter

PERSONAL SELLING PROCESS

1. PRE- SALE PREPARATION: The first step in personal selling is the selection, training andmotivation of salespersons. The salespersons must be fully familiar with the product, the firm, the

market and the selling techniques. They should be well-informed about the competitor's products and

the degree of competition. They should also be acquainted with the motives and behaviour ofprospective buyers.

2. PROSPECTING: Prospecting is the process of finding and evaluating potential customer. Forqualifying a person as a potential (prospect), the sale person must identify whether the customer has an

immediate or a distant need to be satisfied. The sales person must also identify if the potential customer

has the willingness, ability, and authority to buy the product.

At this stage the salesperson does not generally come into constant with the customer.

Potential customers may be spotted through observation, enquiry and analysis of records of existing

customers. Social contacts, business associations and dealers can be helpful in the identification ofpotential buyers.

3. PRE -APPROACH: After having identified the hot leads, the salesperson plans and prepares formaking a sell call on them. The pre-approach stage of personal selling process involves further sub-

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stages such as creation of prospect's profile, deciding on the approach, establishing the objective of sales

Call, and preparing for the presentation.

This stage involves the collecting of as much relevant information as possible prior to the sales

presentation. The pre-approach investigation is carried out on new customers but also on regular

customers. Systematic collection of information requires a decision about applicability, usefulness and

how to organise the information for easy access and effective use.

4. APPROACH:Approach is the stage in personal selling process in which the sales persons makes aninitial contact with the potential customer and tries to find out his needs. At this stage, creating of

a favourable impression on customer is more important to the salesperson than pushing the product.

The salesperson should always focus on the benefits for the customer. This is done by using the

product's features and advantages. This is known as the FAB technique (Features, Advantages and

Benefits).

Features:Refers to the physical characteristics such as size, taste etc.

Advantages: Refers to the performance provided by the physical characteristics eg it does not stain.

Benefits:Refers to the benefits for the prospect. Eg. Saves you 20% on replacement cost.

5. PRESENTATION & DEMONSTRATION:The sale presentation is the most important step in theselling process. The aim of the sales presentation is to attract the prospect's attention, stimulate his

interest and stimulate his desire to stir desire for the product, so that he takes appropriate action. The

Sales Presentation is based on the AIDA (Attention, Interest, Desire, and Action) concept according to

which marketers attract attention of the potential customer to buy a product.

6. OBJECTION HANDLING:A sale cannot be achieved simply by creating interest and desire. Everycustomer wants to make the best bargain for the money he is spending. Presentation and demonstration

of the product are likely to create doubts and questions in his mind. The salesman should clear alldoubts and objections without entering into a controversy and without losing his temper. Testimonials,

money-back guarantee, tact and patience are popular means of winning over s hesitant buyers. The

salesman should convince the customer that he is making the best use of his money by purchasing the

product. For this purpose, the salesman should prove the superiority of his product over the competitive

products. He should not lose patience if the customer puts too many queries and takes time in arriving at

any decision. If the customer does not buy even after meeting rejections, the salesman should let him go

without showing temper. He must believe in the universal rule that the customer is always right.

7. NEGOTIATION: Salespeople, particularly in business to business selling, need negotiating skillsWhen to negotiate?

(a) When the buyer puts certain conditions for buying to the seller,

(b) When agreement between the buyer and the seller is needed on several factors,

(c) When the product is customized

(d) When the final price is to be decided

How to prepare for negotiation?

(a)Planning, (b) building relationship, (c) purposeStyles of negotiation

(a) I win, you lose, (b) Both of us win (or win-win style), (c) You win, I lose, and (d) Both of us lose

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8. CLOSING THE SALE: This is the climax or critical point in the personal selling process. Completingthe sale seems to be an easy task but inappropriate handling of the customer can result in loss of sale.

The salesman should not force the deal but let the customer feel that he has made the final decision. He

should guide the customer in making the choice without imposing his own view. Some adjustment in

price or other concession may sometimes be necessary for a successful closing. The salesman should

show the same interest in the customer which he exhibited during approach stage. Sales should be

closed in a cordial manner so that the customer feels inclined to visit the shop again. In closing the sale,

the article should be packed properly and handed over to the customer with speed and accuracy. Oncethe customer has purchased the article, the salesman should show and suggest an allied product. For

instance, he may suggest socks, ties, handkerchiefs, vests, etc., to a customer purchasing a shirt. This is

known as additional sales and requires great skill and tact.

9. FOLLOW UP: The objective of every salesperson is to ensure repeat sales. This can be achieved byenhancing customer satisfaction. The follow up stage is the last stage in the selling process wherein the

salesperson aims to develop a long term relationship with the customer. This stage is important role in

showing that the company and the salesperson are genuinely interested in nurturing a long term

relationship with the customer.

.

THEORIS OF SELLING

Selling is considered an art by some and a science by others and has produced two contrasting approaches to

the theory of selling. These selling theories emphasize the what to do and how to do rather than the why.

These theories, based on experiential knowledge accumulated from years of living in the market rather than

on a systematic, fundamental body of knowledge.

1.

AIDASAIDAS are seller oriented theories. Prospect goes through Five Stages I.e Attention, Interest, Desire,

Action and Satisfaction. Sales Presentation must be structured in a manner that that leads the prospect in

the right sequence

Securing Attention:o Receptive State of mindo Sales Person to have a reason to conduct the interviewo Conversation openerso Remarks about the Prospect

Gaining Interest:o Intensify the prospect's attentiono Searching the most effective selling appealo Questions to clarify attitudes and feelings towards the product

Kindling Desire:o Kindle the prospect's desire to Ready-to-buy pointo Conversation running along the main line towards the saleo Taking care of External interruptions and Objection handling

Inducing Actions:o Closing the sales buy judging the prospects reactiono Straightforwardly asking for the order vis--vis dropping the hints

Building Satisfactions:o Reassuring that the decision was righto Customer to have an impression that salesperson merely helped in deciding.

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For example-

Securing attentionTelling about RO water purifier and its quality to purify water Gaining InterestBy showing flipcharts, presentations and brochures and also focusing on

purity and health of the family members.

Kindling Desireto make them use the RO water purifier for their use Inductionconsumer purchase the product due to its effectiveness in providing pure and germ

free water

Building Satisfactionappreciate the customer by saying that he has made the good purchase byrelating its health factor.

2. Right Set of Circumstances: Right Set of Circumstances is seller oriented theories. Everything was right for the sale Situation Response Theory Particular circumstance in a selling situation cause the prospect to respond in a particular way Salesperson needs to present PROPER STIMULI or APPEALS so that desired response is resulted This is a seller oriented theory: it stresses the importance of the salesperson controlling the situation. The set of circumstances includes factors external & internal to the prospect. Proponents of this theory tend to stress external factors and the expense of internal factors. The more skilled the salesperson is in handling the set of circumstances, the more predictable is the

response.

For example- Suppose you provide a Paying guest accommodation as well as provide Tiffin services to those

living in PG as well as to others and charge for it.

3. SELLThis is a simple model describing the various actions associated with the word itself.

Show Features: it is the very first stage; expected to show the features of the product, demonstrating how it

works, and showing the results of using the product immediately.

Explain advantage: Immediately, after demonstrating the product, explain the advantage possibly related with

the features, showing the advantages which are derived from it.

Lead into benefits: Correlate the advantages with the benefits. This is simply highlighting the materialization

of those benefits in conducting the set of activities due to having/using the product.

Let them talk: Then at the end, let them talk further about the product, its features and those future benefits. If

the previous steps are done well, they will talk themselves for the sale.

4. BUYING FORMULA Emphasizes the Buyers side of the Buyer Seller Dyad Buyers needs or problems receive the major attention and the salespersons role is to find solution Buying formula is a schematic representation of a group of responses arranged in a psychological

sequence

Emphasizes the Prospects responsesThe mental involved in the purchase are

Need (Problem)

Solution

Purchase

Because the outcome of the purchase affects the chance that a continuing relation will develop between the

buyer and the seller and because nearly all sales organizations are interested in continuing relationship. It is

necessary to add a fourth element the fourth elements then are

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Need (Problem)SolutionPurchase- Satisfaction

Whenever a need is felt or problem recognized, the individual is conscious of a deficiency of satisfaction. When

definite buying habit has been established the buying formula is

Need (Problem)SolutionProduct or Service/ Trade or Brand Name - Purchase- Satisfaction

To ensure purchase the product or service and the trade name must be considered adequate, and the buyer must

experience a feeling of anticipated satisfaction when thinking of the product and service and the trade name.With adequacy and pleasant feelings included, the buying formula becomes

(Adequacy or Pleasant)

Need (Problem)SolutionProduct or Service/ Trade or Brand Name - Purchase- Satisfaction

(Adequacy/Pleasant)

For example- Suppose a salesperson goes to a lady and wants to sell a water purifier. He will tell about the

effectiveness of the purifier in cleaning water and making it purer and safer. He will place the water purifier as

the solution for pure and germ free water. When the lady purchases the water purifier it depends on her whether

she gets satisfied or not. It is not possible that the water purifier provides the same adequacy and pleasant

feeling to all. The water purifier may give adequate and pleasant feeling and the lady may purchase it and it will

provide her satisfaction. There may be other products in the market that can provide more adequacy and

feeling.

.

SPIN MODEL

Spin Model was first developed by Neil Rackham.Asking questions that are important to the customer is what

makes the SPIN model so powerful.

The 4 steps in the SPIN selling model that are used are:-

1. Initially, sellers ask Situation Questionsto establish background facts. But they don't ask too many,because Situation Questions can bore or irritate the buyer. For eg: If a buyers laptop has broken down,

then sellers first may ask "what happened when your laptop broke down?"

2. Next, they quickly move to Problem Questionsto explore problems, difficulties, anddissatisfactions. By asking Problem Questions, they uncover the customer's Implied Needs.

3. In smaller sales it could be appropriate to offer solutions at this point, but in successful larger salesthe seller holds back and asks Implication Questionsto make the Implied Needs larger and more urgent.

4. Then, once the buyer agrees that the problem is serious enough to justify action, successfulsalespeople ask Need-payoff Questionsto encourage the buyer to focus on solutions and to describe the

benefits that the solution would bring.

These questions take the buyer through the steps of identifying their problem, their pain, and a solution

that companys product or service offers.

SPIN Selling: Key Principles

There are some of the other key principles of the SPIN selling approach:-

1. Sellers must build rapport with their buyers before they buy. Rapport eases the tension that buyers have

about finding a solution to their problem.

2. They should not manipulate the buyer by finding common areas of similarity between them. Instead,

they should look for unconscious rapport such as matching speed and tone of speech.

3. They shouldnt ask too many Situation questions that the buyer feels uncomfortable with.

4. They should spend most of the time asking Problem questions rather than Situation questions on the

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basis that people buy when the pain of their problem is greater than the cost of the solution.

5. Uncover several problems before asking Implication questions as focusing on just one problem invites

the buyer to raise issues where companys solution doesn't do too well.

6. Their aim should be to get buyers to articulate the benefits in companys product or service rather spell

them out.

7. Work out the action steps that the buyer needs to take to complete the sale and get commitment to one

of these steps on each occasion that company talk.

.

The Difference between Relationship-Based Sales and the Traditional Transaction-Based Sales

Transaction-based sales as a rule, always focuses on maximizing individual sales and profits and not forming a

relationship with the consumer or customer. Relationship-based selling on the other hand, seeks to form an

interactive and retaining bond between the customer and the company in the long run. Both these sales models

differ in several notable ways such as in the core elements that form the basis of the marketing strategy and the

consequent impact on return on investment (ROI).

The transaction-based sales model does not take customer retention into precedence and draws its focus onsales with the belief that the product or service will sell by itself. A salesperson that employs this tactic often

focuses on the transaction itself, and is eager to close a deal as soon as possible. In the relationship-based

model, forming strong ties that is interactive and beneficial towards the customer is the top priority of the

company. A salesperson that uses relationship marketing will usually try to get to know their client better

before closing a deal. Due to this, studies have shown that ROI rates for companies that use relationship-based

selling tend to increase as compared to the ROI rates of transactional sales.

However, building a strong relationship is relatively more costly compared to the transaction-based sales model

since a lot of expenses are forked out over dispensing customer subscription services and leaflets. More time

must also be invested in the former as compared to transactional selling. Due to this, highly successful

companies such as Microsoft and Starbucks have employed a common theme revolving around their customers:

to figure out what they want, get them addicted to the products and keep them coming back for more.

Although relationship building has become the epitome of a steady revenue stream, some companies still adopt

the transactional-based sales model as a marketing tactic to cut back on additional costs and time.

Communicating brand awareness is more direct this way, and human resources can be minimized if less contact

is kept with the customer. If strong ties with the customer must be maintained, other human or technological

resources will be needed to operate the social media networking hub, which could be slightly costly and not to

mention time-consuming.

But if a comparison of the advantages and disadvantages were to be drawn between a transaction-based sales

model and a customer relationship model, there are several points of interest to take note of such as:

Relationship Sales Model

Advantage:A strong bond is created between the salesperson and customer, which gives off the feeling of like

and trust to enable a deal to push through.

Disadvantage:The business might remain stagnant and not move forward, which makes a salesperson an

unpaid consultant in certain circumstances.

Transactional Sales Model

Advantage:Business deals are smoother and more efficient. This significantly cuts back the amount of time

and resources expended whilst making a sale.

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Disadvantage:Customers may view this as a tad too pushy or aggressive. Additional information pertaining to

the sale might also be missed since the sale occurs too quickly.

Thus, the relationship sales model is more profitable in the long run but is also equally costly and requires

technological expertise and additional human resources. The transactional sales model is less profitable with

lesser ROI rates in the long run, but is virtually less expensive and does not require more human, financial and

information resources..

SALES FORECASTING

Demand forecasting is a useful tool for planning. It helps estimate and forecast the market share of a firm. Most

firms are very often confronted with the task of projecting future sales of their product. Identifying future sales

problems is no easy task for companies, small or big. In some cases, it is very difficult to get any information

about future market sales. Sales forecast is not just an estimation of sales; it is also matching sales

opportunitiesactual and potentialwith sales planning and procedures.

Meaning: Forecasting is a tool used for predicting future demand based on past demand information.

OBJECTIVE OF SALES FORECASTING

1 To maintain good relationships with customers by providing them good quality products in the rightquantity and at right time.

2 To check the sales of product and estimate of sales is made for future. Thereafter the actual sales arecompared with the budgeted sales and if there are any deviations then corrective actions are taken.

3 To assist customers in choosing the product off or maintaining the competitive edge in the market.4

Sales Forecasting is done to increase the market share of the company and to help the companygrow.

ELEMENTS OF GOOD FORECAST

1. Appropriate forecast horizon2. Degree of accuracy should be taken into account3. Reliable4. Choose meaningful units (dollars versus units)5. Use same forecast throughout organization

REALITIES OF SALES FORECASTING

1. Forecasts are seldom perfect: almost always wrong by some amount2. Aggregated forecasts are more accurate than individual forecasts3. More accurate for shorter time periods4. Most forecasting methods assume that there is some underlying stability in the system: watch out for

special events!

THE FORECASTING PROCESS

The forecasting process refers to a series of procedures used to forecast. It begins when an objective is

determined. For example sales objectives can be (estimation of dollar sales, number of sales people to hire,

etc.).

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Next step is determination of dependent refer to what is being forecasting: sales or the number of sales people

to hire next year) and independent variables. After this step we should determine forecast procedure and

methods for analyzing data.

Data are then gathered and analyzed often assumptions must be made about the forecast. The forecast is made,

finalized, and, estimate passes, evaluated.

Figure1. The forecasting process

It is important to know when we should use qualitative or quantitative forecasting techniques.

Managers apply quantitative forecasting techniques when environment is predictable and if they have data frompast period about sales. These techniques are good when we want to predict existing products and technologies.

They often used mathematics techniques for forecasting.

Qualitative forecasting techniques are used in the not predictable environment and when we dont have enough

data. These techniques are usually used when managers forecast launching the new product line or new

technologies.

Steps in sales forecasting:

1. Defining the objectives to be achieved.2. Dividing various products into homogenous groups.

3. Analyzing the importance of various factors to be studied for sales forecasting.

3. Selecting the method.

5. Collecting and analyzing the related information.

6. Draw conclusions from the analysis made.

7. Implementing the decisions taken.

8. Reviewing and revising the sales forecasting from time to time.

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TYPES OF TECHNIQUES

QUALITATIVE TECHNIQUES: Qualitative forecasting techniques are sometimes referred to as judgmental

of subjective techniques because they rely more upon opinion and less upon mathematics in their formulations.

The absence of past sales means that you have to be more creative in coming up with prediction in the future.

Sales forecast for new products are often based on executive judgments, sales force projection, surveys and

users expectation.

Advantages : Take intangible factor into consideration. Useful when there are little data available (new product, new market, new business unit).

Disadvantages: Long consultation process High risk of getting a biased forecast Expensive Usually not precise

We summarized qualitative forecasting techniques which include:

1. Jury of executive opinionconsists of combining top executives views concerning future sales. Thistype of forecasting technique is term a top down technique whereby a forecast is produced for the

industry.

Merits:

a) Quick and easy way to forecast.b) Many experts poll their experience and judgmentc) Qualitative results (experts knowledge)d) This method is used when the adequate information of the market is not available.

Demerits:

a) Affected by the personal views.b) More workload of key executivesc) Only based on personal judgment and may be subjective or biased.2. Customer expectationsuse customers expectations of their needs and requirements as the basis for the

forecast. The data are typically gathered by a survey of customers or by the sales force .Sales force

composite combines the individual forecasts of salespeople. This technique involves salesperson making

a product-by-product forecast for their particular sales territory. Such a method is a bottom-up approach.

3. Delphi methodis a similar to jury of executive opinion technique. The main difference the members donot meet in committee. A project leader administers a questionnaire to each member of the team whichasks questions usually of a behavioural nature. The questioning then proceeds to a more detailed second

stage which asks questions about the individual company. The process goes on to further stages where

appropriate. The ultimate objective is to translate opinion into some form of forecast.

The Delphi Method has the following steps:

1. STEP 1Various Experts are asked to answer, independently and in writing, a series of questions aboutthe future of sales or whatever other area is being forecasted.

2. STEP 2A summary of all the answers is then prepared. No expert knows, how any other expertanswered the questions.

3. STEP 3Copies of summary are given to the individual experts with the request that they modify theiroriginal answers if they think it necessary.

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4. STEP 4Another summary is made of these modifications, and copies again are distributed to theexperts. This time, however, expert opinions that deviate significantly from the norm must be justified in

writing.

5. STEP 5A third summary is made of the opinions and justifications, and copies are once againdistributed to the experts. Justification in writing for all answers is now required.

6. STEP 6The forecast is generated from all of the opinions and justifications that arise from step 5.

4.

SALES FORCE ESTIMATION METHOD: The Sales Force Method is a sales forecasting technique that predicts future sales by analyzing theopinions of sales people as a group.

Salespeople continually interact with customers, and from this interaction they usually develop a knackfor predicting future sales.

As with the jury of executive opinion method, the resulting forecast normally is a blend of the informedviews of the group.

The sales force estimation method is considered very valuable management tool and is commonly usedin business and industry throughout the world.

This method can be further improved by providing sales people with sufficient time to forecast andoffering incentives for accurate forecasts.

Companies can make their sales people better forecasters, by training them to better interpret theirinteractions with the customers.

QUANTITATIVE TECHNIQUES:Quantitative techniques are sometimes termed objective or mathematical

techniques as they rely more upon mathematics as less upon judgment in their computation. These techniques

are now very popular as a result of sophisticated computer packages.

Advantages :

Easy to use once the right model has been developed. Data collection is quick and easy since most of the required information is already in the business

systems (ex. previous sales) or readily available (ex. consumer price index).

Disadvantages :

Do not take new information into consideration : Its like driving a car by looking in the rear-view mirror.

There are many quantitative techniques:

1. TIME SERIES MODEL Assume that what has occurred in the past will continue to occur in the future Relate the forecast to only one factor TIME Include

i. naive forecastii. simple average

iii. moving averageiv. exponential smoothingv. linear trend analysis

A. MOVING AVERAGES takes an average of a specified number of past observations to make aforecast. As new observations become available, they are used in the forecast and the oldest

observations are dropped.

i. Naive forecast: Demand of the current period is used as nextperiods forecastii. Simple moving average: Stable demand with no pronounced behavioral patterns

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iii. Weighted moving average: Weights are assigned to most recent datai. Naive forecast

ii.Simple Moving Average

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262-508-97 Production and Operations Management

3-month Simple Moving Average

Jan 120

Feb 90Mar 100

Apr 75May 110

June 50

July 75Aug 130

Sept 110Oct 90Nov -

ORDERS

MONTH PER MONTH

MA 3 =

3

i = 1 Di

3

=90 + 110 + 130

3

= 110 orders

for Nov

103.388.3

95.0

78.378.3

85.0105.0110.0

MOVING

AVERAGE

iii. Weighted Moving Average

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Weighted Moving Average

WMA n = i= 1 Wi Diwhere

Wi= the weight for period i,

between 0 and 100

percent

Wi= 1.00

Adjustsmoving

average

method to

more closely

reflect data

fluctuations

Copyright 2006 John Wiley & Sons, Inc.

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282-508-97 Production and Operations Management

Weighted Moving Average Example

MONTH WEIGHT DATA

Augus t 17% 130

September33% 110October 50% 90

WMA 3 =

3

i= 1 Wi Di

= (0.50)(90) + (0.33)(110) + (0.17)(130)

= 103.4 orders

November Forecast

Copyright 2006 John Wi ley & Sons, Inc.

B. Potential Problems with Moving AverageIncreasing n smooth the forecast but makes it less sensitive to changes

Do not forecast trends well

Require extensive historical data

C. Exponential Smoothing Form of weighted moving average

a. Weights decline exponentiallyb. Most recent data weighted most

Requires smoothing constant (a)a. Ranges from 0 to 1

b. Subjectively chosen Involves little record keeping of past data

New forecast = last periods forecast + a (last periods actual demand last periods forecast)

Ft= Ft1+ a(At1- Ft1)

where Ft = new forecast

Ft1 = previous forecast

a = smoothing (or weighting)

constant (0 a 1)

EXAMPLE

Predicted demand = 142 Ford Mustangs

Actual demand = 153

Smoothing constant a = .20

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Exponential Smoothing Example

Predicted demand = 142 Ford Mustangs

Actual demand = 153Smoothing constant a = .20

New forecast = 142 + .2(153 142)

= 142 + 2.2

= 144.2 144 cars

2. ASSOCIATIVE MODELSA. MULTIPLE REGRESSIONS: statistically relates sales to one or more explanatory(independent) variables. Explanatory variables may be marketing decisions (price changes, for

instance), competitive information, economic data on any other variable that can be related to sales.

FORECASTING APPPROACH

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Forecasting Approaches

Used when situation is stable &

historical data exist

Existing products

Current technology

Involves mathematical techniques

Quantitative Methods Used when situation is vague &

little data exist

New products

New technology

Involves intuition, experience

Qualitative Methods

Considerations:

Planning horizon

Availability and value of historical data

Needs (precision and reliability)

Time and budget constraints