Global Marketing Communications Decisions Ii: Sales Promotion, Personal Selling, Special

CHAPTER 14

GLOBAL MARKETING COMMUNICATIONS DECISIONS II: SALES PROMOTION, PERSONAL SELLING, SPECIAL FORMS OF MARKETING COMMUNICATION

SUMMARY

Sales promotion is any paid, short-term communication program that adds tangible value to a product or brand. Consumer sales promotions are targeted at ultimate consumers; trade sales promotions are used in business-to-business marketing. Sampling gives prospective customers a chance to try a product or service at no cost. A coupon is a certificate that entitles the bearer to a price reduction or other value-enhancing consideration when purchasing a product or service.

Personal selling is face-to-face communication between a prospective buyer and a company representative. The Strategic/Consultative Selling Model that is widely used in the United States is also being utilized worldwide. The model's five strategic steps call for developing a personal selling philosophy, a relationship strategy, a product strategy, a customer strategy, and a presentation strategy. The six steps in the presentation plan are: approach; presentation; demonstration; negotiation; close; and servicing the sale. Successful global selling may require adaptation of one or more steps in the presentation plan. An additional consideration in global selling is the composition of the sales force, which may include expatriates, host country natives, or sales agents.

Several others forms of communication can be used in global marketing. These include direct marketing, a measurable system that uses one or more media to start or complete a sale. One-to-one marketing is an updated approach to direct marketingthat calls for treating each customer in a distinct way based on his or her previous purchase history or past interactions with the company. Direct mail, catalogs, infomercials, teleshopping, and interactive television are some of the direct marketing tools that have been successfully used on a global basis. Global marketers frequently try to place their products in blockbuster movies that will reach global audiences. Sponsorships and product placement are also becoming vital communication tools that can be used on a global basis.

OVERVIEW

In 2005, China’s Lenovo Group acquired IBM’s personal computer business for $1.25 billion. The acquisition vaulted China’s top computer company into third place among the world’s PC marketers, behind Dell and Hewlett-Packard.

The crown jewel in the acquisition was the popular ThinkPad, a laptop that features an exceptionally well-designed keyboard. Chief Executive Amelio was tasked with gradually eliminating the IBM logo as Lenovo built a global brand identity.

Chief executive Amelio and his marketing team decided to use the Olympics as a vehicle for building awareness about the corporate name and its products. Lenovo paid more than $60 million to become China’s first Olympic sponsor.

Lenovo is also the computer provider for the 2008 Beijing Summer Olympics.

Sponsorships have been a crucial marketing tool for Lenovo as it rebrands the ThinkPad. When developing IMC solutions and strategies, global companies and advertising agencies are giving sponsorship and other forms of promotion an increasingly prominent role; in the first decade ofthe twenty-first century, worldwide expenditures on sales promotion are growing at double-digit rates.

Sales promotion, direct marketing, and specialized forms of marketing communication such as infomercials and the Internet are also growing in importance. Of course, personal selling remains an important promotional tool as well.

Taken together, the marketing mix elements discussed in this chapter and Chapter 13 can be used to create highly effective integrated promotional campaigns that support global brands.

ANNOTATED LECTURE/OUTLINE

SALES PROMOTION

• What is sales promotion?

Sales promotion refers to any paid consumer or trade communication program of limited duration that adds tangible value to a product or brand.

In a price promotion, tangible value may take the form of a price reduction, coupon, or mail-in refund.

Non-price promotionsmay take the form of free samples, premiums, "buy one, get one free" offers, sweepstakes, and contests.

Consumer sales promotions may be designed to make consumers aware of a new product, to stimulate nonusers to sample an existing product, or to increase overall consumer demand.

Trade sales promotions are designed to increase product availability in distribution channels.

At many companies, expenditures for sales promotion activities have surpassed expenditures for media advertising. At any level of expenditure, sales promotion is only one of several marketing communication tools. Sales promotion plans and programs should be integrated and coordinated with those for advertising, PR, and personal selling.

• What are some of the advantages of using sales promotions?

Worldwide, there are several explanations for the increasing popularity of sales promotion as a marketing communication tool. In addition to providing an tangible incentive to buyers, sales promotions also reduce the perceived risk buyers may associate with purchasing the product.

From the point of view of the marketer, sales promotion provides accountability; the manager in charge of the promotion can immediately track the results of the promotion.

Overall, promotional spending is increasing at many companies as they shift advertising spending away from traditional print and broadcast advertising (Table 14-1)

As with other aspects of marketing communication, a key issue is whether promotion efforts should be directed by headquarters or left to local country managers.

Four factors have been identified that contribute to more headquarters involvement in the sales promotion effort: cost, complexity, global branding, and transnational trade:

1. As sales promotions command ever-larger budget allocations, headquarters naturally takes a greater interest.

2. The formulation, implementation, and follow-up of a promotion program may require skills that local managers lack.

3. The increasing importance of global brands justifies headquarters involvement to maintain consistency from country to country and ensure that successful local promotion programs are leveraged in other markets.

4. As mergers and acquisitions lead to increased concentration in the retail industry and as the industry globalizes, retailers will seek coordinated promotional programs from their suppliers.

• What factors influence the degree to which sales promotions should be localized?

Local managers in the market know the specific local situation. A number of factors must be taken into account when determining the extent to which the promotion must be localized:

• In countries with low levels of economic development, low incomes limit the range of promotional tools available.
• Market maturity can be different from country to country; consumer sampling and coupons are appropriate in growing markets, but mature markets might require trade allowances or loyalty programs.
• Local perceptions of a particular promotional tool or program can vary.
• Local regulations may rule out use of a particular promotion in certain countries (see Table 14-2).
• Trade structure in the retailing industry can affect the use of sales promotions.

• What is the difference between “sampling” and “couponing”?

Sampling

Sampling is a sales promotion technique that provides potential customers with the opportunity to try a product or service at no cost.

Disadvantages associated with sampling: cost of sampling and difficulties in assessing the contribution a sampling program makes.

Many companies utilize event marketing and sponsorships to distribute samples at concerts, sports events, or special events.

Compared with other forms of marketing communication, sampling is more likely to result in actual trial of the product.

Couponing

A coupon is a printed certificate that entitles the bearer to a price reduction or some other special consideration for purchasing a particular product or service.

Nearly 90 percent of all coupons are distributed in a printed ride-along vehicle known as a free-standing insert (FSI).

Sunday papers carry the vast majority of FSIs.

On-pack coupons are attached to, or part of, the product package; they can frequently be redeemed immediately at check out.

In-pack coupons are placed inside the package.

• What is a cross coupon?

Cross coupons are distributed with one product but redeemable for a different product. For example, a toothpaste coupon might be distributed with a toothbrush.

Sales Promotion: Issues and Problems

As noted earlier, many companies are being more strategic in targeting their sampling programs. In the case of coupons, retailers must bundle the redeemed coupons together and ship them to a processing point.

Many times, coupons are not validated at the point of purchase; fraudulent redemption costs marketers hundreds of millions of dollars each year.

Companies must take extreme care when formulating and executing sales promotions. In some emerging markets, sales promotion efforts can raise eyebrows if companies appear to be exploiting regulatory loopholes and lack of consumer resistance to intrusion.

One implication for marketing in developing countries is that, despite cultural differences, increased availability of promotions will result in higher levels of consumer utilization.

PERSONAL SELLING

Personal selling is person-to-person communication between a company representative and a prospective buyer.

The seller's communication effort is focused on informing and persuading the prospect, with the short-term goal of making a sale and with a longer-term goal of building a relationship with that buyer.

Effective personal selling in a salesperson’s home country requires building a relationship with the customer; global marketing presents additional challenges because the buyer and seller may come from different national or cultural backgrounds.

It is especially important in marketing industrial products that may be expensive and technologically complex.

It is difficult to overstate the importance of a face-to-face, personal selling effort for industrial products in global markets.

Personal selling is a popular marketing communication tool in countries with various restrictions on advertising.

Personal selling is used frequently in countries where low wage rates allow large local sales forces to be hired. The cost effectiveness of personal selling in certain parts of the world has been a key driver behind the decision at many U.S. – based firms to begin marketing products and services overseas.

The challenge to companies that wish to pursue low-cost personal selling overseas is to establish and maintain acceptable quality among members of the sales team. The old saying, "You get what you pay for" has come to haunt more than one company that has undertaken global expansion.

The risks inherent in establishing a personal selling structure overseas remain today. The crucial issues is not whether in-country sales and marketing people can provide more benefit than a remote force. The issue is whether the country team should consist of in-country nationals or expatriates (also known as expats); that is, employees who are sent from their home countries to work abroad.

Environmental issues and challenges that may have an impact include:

• Political risks. Unstable or corrupt governments can completely change the rules for the sales team.
• Regulatory hurdles. Governments sometimes set up quota systems or impose tariffs that affect entering foreign sales forces.
• Currency fluctuations. There have been many instances where a company's sales effort has been derailed not by ineffectiveness or lack of market opportunity, but by fluctuating currency values.
• Market unknowns. When a company enters a new region of the world, its selling strategy may unravel because of a lack of knowledge of market conditions, the accepted way of doing business, or the positioning of its in-country competitors.

• What are the steps involved in the Strategic/Consultative Selling Model?

The Strategic/Consultative Selling Model

Figure 14-2 shows the Strategic/Consultative Selling Model, which has gained wide acceptance in the United States. The model consists of five independent steps, each with three prescriptions that can serve as a checklist for sales personnel.

First, a sales representative must develop a personal selling philosophy. This requires a commitment to the marketing concept and a willingness to adopt the role of problem solver or partner in helping customers.

The second step is to develop a relationship strategy, which is a game plan for establishing and maintaining high-quality relationships with prospects and customers.

This step connects sales personnel directly to the concept of relationship marketing, an approach that stresses the importance of developing long-term partnerships with customers.

This step connects sales personnel directly to the concept of relationship marketing , an approach that stresses the importance of developing long-term partnerships with customers.

In developing personal and relationship strategies on an international level, the representative is wise to take a step back and understand how these strategies will likely fit in the foreign environment.

In many countries, people have only a rudimentary understanding of sales techniques; acceptance of those techniques may be low as well.

Sales representatives must understand that patience and a willingness to assimilate host-country norms and customers are important attributes in developing relationships built on respect.

The third step is the development of a product strategy. This results in a plan that can assist the sales representative in selecting and positioning products that will satisfy customer needs.

This step must include comprehension of the target market’s charactieristics and the fact that prevailing needs and wants may mandate products that are different than those offered in the home country.

Next isthecustomer strategy, a plan that ensures that the sales professional will be maximally responsive to customer needs.

The customer strategy step also includes building a prospect base, consisting of current customers as well as potential customers (or leads). A qualified lead is someone whoseprobability of wanting to buy the product is high.

The final step, the actual face-to-face selling situation, requires a presentation strategy.

• What are the stages of the presentation plan?

This consists of setting objectives for each sales call and establishing a presentation plan to meet those objectives.

The presentation plan that is at the heart of the presentation strategy is divided into six stages: approach, presentation, demonstration, negotiation, closing, and servicing the sale. The relative importance of each stage can vary from country or region.

In the six-step presentation plan, the first step, approach,is the sales representative's initial contact with the customer or prospect. The most crucial element of the step is to completely understand the decision-making process and the roles of each participant, such as the decision maker, influencer, ally, or blocker.

In the presentation step, the prospect's needs are assessed and matched to the company's products. To communicate effectively with a foreign audience, the style and message of the presentation must be carefully thought out. In the United States, the presentation is typically designed to sell and persuade, whereas the intent of the international version should be to educate and inform

High-pressure tactics rarely succeed in global selling.

Next is the sales demonstration, during which the salesperson has the opportunity to tailor the communication effort to the customer and alternately tell and show how the product can meet the customer's needs.

During the presentation, the prospect may express concerns or objections about the product itself, the price, or some other aspect of the sale. Dealing with objections in an international setting is a learned art.

A common theme in sales training is the concept of active listening; in global sales, verbal and nonverbal communication barriers of the type discussed in Chapter 4 present special challenges.

Negotiation is required to ensure that both the customer and the salesperson come away from the presentation as winners. Some foreign customers consider American-style persistence (inferring tenacity) or arm-twisting can be consider rude and offensive.

Having completed the negotiation step, the sales representative is able to move on to the close and thus asks for the order.

• Is the sale over with the “close”?

The final step is the servicing the sale.A successful sale does not end when the order is written.

To ensure customer satisfaction with the purchase, an implementation process must be outlined and a customer service program established .

Sales Force Nationality

As noted previously, a basic issue for companies that sell globally is the composition of the sales force in terms of nationality. It is possible to utilize expatriate salespersons, hire host- country nationals, or third- sales personnel. (Table 14-3).

The staffing decision is contingent on several factors, including management's orientation, the technological sophistication of the product, and the stage of economic development exhibited by the target country.

A company with an ethnocentric orientation prefers expatriates and adopts a standardized approach. (See Table 14-3)

Polycentric companies selling in developed countries use expatriates for hi-tech products; a host-country sales force is used for low-tech products.

In less developed countries, host-country nationals should be used for high tech- products and local agents for low-tech products.

Wide diversity of sales force nationality is found in regiocentric companies.

Except for high-tech products in developed countries, third-country nationals are used in all situations.

In addition to the factors just cited management must also weigh the advantage and disadvantages of each nationality type (see Table 14-4).

There are advantages and disadvantages of each nationality type:

• Advantages: Expatriates possess a high level of product knowledge, a demonstrated commitment to service standards, training for promotion, and greater headquarters control.
• Disadvantages: Expatriates are very expensive, turnover is high, language and cross-cultural training are costly.

An alternative is to build a sales force with host-country personnel:

• Advantages: economical, superior market knowledge, language skills, and superior knowledge of local culture, and implementation is quicker.
• Disadvantages: needs product training, may be held in low esteem, language skills may not be important, and it is difficult to ensure loyalty.

• What is the advantage to hiring third country nationals?

A third option is to hire persons who are not natives or either the headquarters country or the host country; such persons are known as third country nationals.