Relationship Marketing:
Where Personal Selling Fits
McGraw-Hill/Irwin
Chapter
2
Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
2
2-2
Main Topics
What Is the Purpose of Business?
What Is Marketing?
Customer Orientation’s Evolution
Marketing’s Importance in the Firm
Essentials of a Firm’s Marketing Effort
Relationship Marketing
Relationship Marketing and the Sales Force
Levels of Relationship Marketing
Chapter
2
2-3
Main Topics
Partnering with Customers
The New Consultative Selling
E-Selling: Technology and Information Build Relationships
What’s a Salesperson Worth?
The Key to Success
Chapter
2
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In Chapter 2 We Will See What is Meant by
the Terms...
 Business
 Marketing
 Product, Price, Place, Promotion
 Personal Selling
2-5
The Purpose of Business is to:
 Increase the general well being of humankind
through the sales of goods and services
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This Requires
 Making a profit in order to operate the
business and to provide beneficial products
to the marketplace
2-7
Profit is a Means to an End
 Profit is needed to serve humankind
 Profit is needed to operate the business
 Profit is needed to provide products to the
marketplace
2-8
The Two Basic Functions
of Business
 Production of goods or creation of services
 Marketing those goods and services
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What is Marketing?
 Marketing is a process of planning:
 The conception, pricing, promotion, and
distribution of goods, services, and ideas
 To create exchanges that satisfy individual and
organizational objectives
2-10
Customer Orientation’s Evolution
 The production concept
 The selling concept
 The marketing concept
2-11
The Production Concept
 Companies were production oriented
We know what
people want – they
want our product.
2-12
The Selling Concept
 Characterized by product demonstrations and
unsophisticated sales techniques
 Emphasis on the product
 Product created and then sold
 Management is sales-volume oriented
 Stresses needs of the seller
2-13
The Marketing Concept
 Emphasis is on customer’s wants
 Customer’s wants drive production
 Management is profit-oriented
 Planning is long-term
 Stresses wants of buyers
2-14
Exhibit 2-1: The Difference Between
Selling and Marketing Concepts
2-15
Marketing’s Importance in the Firm
 Marketers have four main objectives:
 Maximize the sales for existing products in
existing markets
 Develop and sell new products
 Develop new markets for existing or new products
 Provide quality service to ensure repeat business
2-16
Exhibit 2-2: The Marketing Group is the Link
Between Customers and the Organization
2-17
Product: It’s More Than You Think
 A good is a physical object that can be
purchased
 A service is an action or activity performed
for a fee
 Value-added refers to benefits received that
are not included in the purchase price of a
good or service
2-18
Exhibit 2-3: Four Elements of the Marketing
Mix and Four Promotion Activities
2-19
Exhibit 2-4: Examples of
Business-To-Business Value-Adding
 Help customer reduce process costs
 Improve yields
 Reduce waste (through recycling, etc.)
 Reduce rework
 Reduce direct labor
 Reduce indirect labor (inspection, handling)
 Reduce energy costs
2-20
Exhibit 2-4: Examples of
Business-To-Business Value-Adding
 Help customer reduce inventory
 Consignment
 Just-in-time delivery
 Reduced cycle time
2-21
Exhibit 2-4: Examples of
Business-To-Business Value-Adding
 Help customer reduce administrative costs
 Simplify billing
 Improve tractability
 Use electronic data interchange
2-22
Exhibit 2-4: Examples of
Business-To-Business Value-Adding
 Improve safety for customer and his
employees
 Reduce price to the customer
 Substitute certain product components
 Improve company processes and supplier
processes
2-23
What is Meant by the Term “Product?”
 A product is a bundle of tangible and
intangible attributes, including package, color,
and brand, plus the services and even the
reputation of the seller
2-24
The Term “Product” May Refer to a Good
or Service
 Examples
 Goods - a physical object for sale
 Automobile
 Cell phone
 Prescription medicine
 Services - an action or activity done for others
for a fee
 Automobile repair
 Wireless phone plan
 Health insurance
2-25
The Good and the Service:
 Automobile - repair services
 Cell phone - wireless phone plane
 Prescription medicine - health insurance
2-26
We Will Use the Terms Follow-up and
Service. What do They Mean?*
 Follow-up refers to maintaining contact with a
customer in order to evaluate the
effectiveness of the product and the
satisfaction of the customer (More on this in
Chapter 14)
2-27
The Term “Service” May Refer to A:
 Product, as insurance and advertise which is
sold by someone
 Service, as customer service which is an
activity offered by a seller in conjunction with
the purchase of a product, such as delivery,
repair, credit cards accepted, 800 telephone
number, web site, salesperson available to
help customer (More on this in Chapter 14)
2-28
Customer Service by the Salesperson
Include:
 Salesperson goes to customer’s business to
help:
 Resell products
 Customer use product
 Handling complaints
 Return damaged products
 Provide samples
 Suggest further business opportunities
(Above discussed in Chapter 1)
2-29
People Buy More Than the Product
 People buy want-satisfaction as
 Image of owning as a
 Polo shirt vs. Wal-Mart shirt
 Dodge Viper* vs. Volkswagen Vanagon*
 What the product will do
 Its quality
*products and associated images used for illustrative purposes only
2-30
There Are Two General Types of Products Consumer and Industrial Products
 What is a consumer product?
 A consumer product is produced for, and
purchased by, households or end consumers
for their personal use
 What is an example of a consumer product?
 Toothpaste
 Television
 Clothes
2-31
There Are Two General Types of Products Consumer and Industrial Products
 What is industrial product?
 An industrial product is sold primarily for use
in producing other products. Industrial users
are profit nonprofit organizations that buy
good and services for one of three purposes*
1.To make other goods and services
2.To sell to consumer or other industrial users
3.To conduct the organization’s operations*
2-32
The Key Phrases That Differentiate Between
Consumer and Industrial Products are:
 Consumer product - personal use
 Industrial product - producing other products
 What is an example of an industrial product?
 Airlines purchase airplanes
 Boeing sells their airplanes to airlines
 University buys computers
2-33
What Is Another Name for an Industrial
Product?*
 Business product
 Organizational product
2-34
Price: It’s Important to Success
 Price refers to the value or worth of a product
that attracts the buyer to exchange money or
something of value for the product
2-35
Distribution Moves
Products to Customers
 Three Customer Groups
 A household refers to a decision-making unit that
buys for personal use
 A firm is an organization that produces goods and
services
 A government is an organization that has two
functions:
 The provision of goods and services to households and
firms
 The redistribution of income and wealth
2-36
Consumer and Industrial Products are
Often Distributed Through Resellers
 What are Resellers?
 Resellers, such as wholesalers or retailers,
purchase products and then sell to
organizations and/or individuals
2-37
What Is a Wholesaler? The Wholesaler
(May Be Referred to as a Distributor)
 Primarily engaged in buying, taking title to,
usually storing and physically handling goods
in large quantities, and reselling the goods,
usually in smaller quantities to
 Retailers
 Wholesalers
 Manufacturers
2-38
Exhibit 2-5: Examples of Distribution Channels
for Consumer and Industrial Products
2-39
Promotion Tells People
 Promotion increases sales by communicating
product information to potential customers
 The four basic components of a firm’s
promotional effort are: (PAPS)
 Personal selling
 Advertising
 Publicity
 Sales promotion
2-40
Exhibit 2-6: Promotion Activities
 Personal Selling is…
personal communication of information to persuade
 Advertising is…
non-personal communication of information paid for
by an identified sponsor such as an individual or an
organization (Methods include TV, newspapers,
catalogs and the radio)
2-41
Exhibit 2-6: Promotion Activities
 Publicity is…
non-personal communication of information that is
not paid for by an individual organization.
Information appears in media such as television,
radio and newspapers
 Sales promotion involves…
activities or materials used to create sales for goods
or services
2-42
Exhibit 2-6
2-43
Exhibit 2-6: Promotion Activities
 Two types of sales promotion
 Consumer - includes free samples, coupons,
contests, and demonstrations to consumers
 Trade - encourages wholesalers and retailers to
purchase and to sell aggressively using devices
such as sales contests, displays, special purchase
prices, and free merchandise
2-44
Exhibit 2-7: Examples of Each Marketing
Mix Element
2-45
Relationship Marketing
 Relationship marketing is the
creation of customer loyalty
 Targets a major customer
that it wants to sell to now
and in the future
 Establishes a long-term
collaborative relationship
2-46
Relationship Marketing and
the Sales Force
 Four basic questions used as guidelines in
defining the role of the sales force:
1.How much selling effort is necessary to gain and
hold customers?
2.Is the sales force the best marketing tool?
3.What type of sales activity will be necessary?
4.Can the firm gain strength relative to its
competition with its sales force?
2-47
Relationship Marketing and
the Sales Force
 Personal selling builds relationships!
 Two main functions of personal selling are to:
 Generate revenue
 Provide services to satisfy customers
 Flexible in operation
 Focused on prospective customers
 Results in actual sales
2-48
Relationship Marketing and
the Sales Force
 Salespeople
implement
relationship
marketing
2-49
Summary of Relationship Marketing
and the Sales Force
 What is the role of the sales force in the
marketing effort?
 Personal selling builds relationships
 Salespeople implement relationship marketing
2-50
Exhibit 2-8: Examples of Various Marketing and Sales Methods
Used to Sell Mid-Sized Computers Business-To-Business
2-51
Three Levels of Relationship Marketing
 Transaction selling
 Relationship selling
 Partnering
2-52
Three Levels of Relationship Marketing
 Transaction selling: customers are sold to
and not contacted again
 Relationship selling: the seller contacts
customers after the purchase to determine if
they are satisfied and have future needs
 Partnering: the seller works continually to
improve its customers’ operations, sales, and
profits
2-53
Exhibit 2-9: Dependence Increases as
Relationships become More Important
Relationships
High
Low
Low
Dependence
2-54
High
Partnering with Customers
 Encourages both the
buyer and seller to
share information
 Two companies work
toward the same
objective
2-55
Partnering, cont…
 Components of partnering include:
 Individual excellence
 Importance
 Interdependence
 Investment
 Information
 Integration
 Institutionalization
 Integrity
2-56
Exhibit 2-10
2-57
Consultative Selling
 The process of helping the customer achieve
strategic short and long-term goals through
the use of the seller’s goods and/or services
 A highly interactive dialogue between a
salesperson and a customer
 A balanced exchange of information
2-58
Three Consultative Selling Roles for the
21st Century
2-59
Three Roles of Consultative Selling
 The Team Leader
 Coordinates all of the information, resources, and
activities needed to support customers before,
during, and after the sale
 The Business Consultant
 Gives advice and service. Uses internal and
external resources to gain an understanding of the
customer’s business and marketplace
2-60
Three Roles of Consultative Selling
 The Long-Term Ally
 Creates a “win–win” situation. As the customer’s
sales and profits grow, so do the salesperson’s
 The ability of a salesperson to fulfill the role of
long-term ally is a pivotal factor in determining
whether a sales transaction is just a transaction
or the beginning of a relationship
2-61
The Customer-Seller Relationship Gap
 May occur when the salesperson’s interest in
the customer declines
 Usually after the sale
 Yet the customer’s interest increases after
the sale
 This is one reason why service after the
sales is so important
2-62
What’s a Salesperson Worth?
 “Worth” is dependent upon at least three
factors:
 What the salesperson costs
 How much he/she sells
 The profit margin
 Salespeople make a valuable contribution to
the success of their employer
 Selling closes deals and generates the
revenue to keep the organization in business
2-63
The Key to Success
 Knowing and satisfying target customers with
competitively superior products and service
 Marketing is the company function that
defines customer targets and the best way to
satisfy their needs and wants competitively
and profitably
 Marketing’s main customer contacts are
salespeople
2-64
Exhibit 2-13: Marketing and Personal
Selling Provide Service to Customers
2-65
Summary
 Selling is only one part of the overall
marketing activities of the firm
 Marketing is an exchange process between
buyers and sellers
 The marketing concept is based upon a
firm’s desire to increase sales while
anticipating and satisfying consumer needs
2-66
Summary, cont…
 The marketing mix is comprised of four
variables:
 Product
 Distribution
 Promotion
 The role of the salesperson is considered
carefully in the firm’s determination of the
promotional aspect of its marketing mix
2-67
Summary, cont…
 Consultative selling focuses on the
salesperson’s ability to provide customer
satisfaction by adding value to the sales
transaction
2-68
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-End-
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