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Module 2: Choose Your Path

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Sales Channels and Environments

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Sales Channels and Environments

Distribution Channels

There are two major distribution channels involved in the process of making products and services available to customers.[1]

Personal selling involves communication between a customer and a salesperson (B2C) with the intention of providing information for the customer to make a buying decision.

Business-to-business ( B2B) businesses sell products to other businesses for consumption by the consumer.

Whirlpool sells washers and dryers to US department store, Sears, and makes them to the specifications determined by Sears before they are sold in Sears and K-Mart stores.

Other examples of B2B selling include parts or ingredients, such as when Intel sells computer chips to Toshiba to manufacture laptop computers or when a fabric company sells cotton fabric to Gap to make their T-shirts.

Many B2B companies, such as Intel, have branded their products so that these products are quickly identified by consumers even though the products are only sold to businesses.

These companies believe so strongly in the power of branding that they are willing to invest in building the awareness and perception of their brand name despite the fact that you can’t go to a Web site or store and buy their product; you can only buy their product because it is a part of another product.

The transactions in which you as a consumer participate are business-to-consumer (also called B2C), which means that a company is selling a product or service directly to you as the ultimate consumer.When Sears and K-Mart sell the Kenmore washers and dryers to consumers, it is B2C personal selling.

Other examples of B2C selling include a waiter taking your order at a restaurant, a salesperson helping you find jeans in your size at a clothing store, or a real estate agent showing you a house.

There are some important differences between B2B and B2C selling. B2B selling engages with fewer customers (there are fewer businesses than there are consumers).

At the same time, however, B2B selling involves much larger purchases. Companies purchase parts, ingredients, or supplies to service many consumers, while consumers only purchase a product or service for their own consumption or that of their family and friends. Since B2B purchases are larger in value than consumer purchases, the selling process is usually longer.

Some companies engage in both B2B and B2C selling, such as Staples, FedEx, Microsoft, and Geek Squad, since they serve business customers as well as the ultimate consumer. Many manufacturers such as Dove, Coke, and Oscar Meyer don’t actually participate in B2C personal selling, but these brands use B2C marketing to make consumers aware of their brands.

Meanwhile, their B2B personal selling organizations focus on selling these products to retailers such as Safeway, CVS, and Sam’s Club (i.e., their customers), which in turn, sell their products in B2C channels to consumers like you.

Types of B2B and B2C Selling

When you go to a fat food restaurant and you are asked you if you want fries with your order, there is not much involved on the part of the salesperson.

This is a selling situation that matches the needs of the buyer efficiently with the operation, but it doesn’t require a personal relationship or detailed product information to consummate the sale. [2] The product or service is of low dollar value and no additional contact is required for the sale. This is called transactional selling, and it occurs in B2C situations like this one, as well as B2B situations. [3]

On the other hand, consultative selling, also called relationship selling, takes place when there is a long-term or ongoing relationship between the customer and the seller, and the salesperson takes on the task of truly understanding the customers’ needs and providing solutions to meet those needs.

In this type of selling situation, adaptive selling takes place. This occurs when a salesperson changes selling behavior during a customer call to improve the exchange or outcome. [4]

In some cases, the selling relationship goes beyond consultative selling and establishes a true method for mutual benefit; this is called a strategic alliance. In this situation, sellers and buyers work together to develop opportunities and points of difference that wouldn’t exist without the relationship. [5]

This type of relationship is usually found in B2B environments because a strategic alliance typically involves two companies that have something to gain by each taking an appropriate risk.

For example, before introducing the iPhone, Apple contracted AT&T to be the exclusive service provider. Each company had something to contribute to the relationship, and each one had something to gain. In this case, AT&T pays Apple for each new customer it receives. Apple increases its revenues, and AT&T gains new customers.

The relationship has been extremely successful for both parties, as a strategic alliance should be. [6] Although the deal between the two companies included exclusivity until 2010, it was not definite that exclusivity would expand beyond that.[7]

Satisfied customers are the true measure of success in selling. The University of Michigan in the US, publishes the American Customer Satisfaction Index every quarter, which measures customer satisfaction in a number of industries.

It’s no surprise that in the fast food category, smaller chains led the pack in actual satisfaction scores with Domino’s as the highest-rated larger chain restaurant in the May 2009 survey. McDonald’s, Wendy’s, and Taco Bell also got the thumbs-up from customers. [8]

Inside or Outside Sales?

What is the difference between the salesperson with whom you live-chat with online and the person you talk to in the store?

Although both are salespeople for the same company the person with whom you talked online is considered an inside salesperson; the salesperson you spoke with in the store is considered an outside salesperson. Inside salespeople rarely, if ever, meet face-to-face with customers, whereas outside salespeople communicate with customers in a variety of ways, including in-person meetings. [9]

For many B2B and B2C companies, the outside salespeople are generally the primary drivers of sales and costs of sales, since the outside salespeople travel to meet in person with customers to learn more about their needs, build relationships, and provide consultation and solutions.

Inside salespeople usually perform more tactical selling functions such as providing product information, following up on details, and keeping the customer informed of basic information.

Today, many companies are converting outside salespeople to inside salespeople to reduce selling costs. Advances in technology are blurring the lines between inside and outside salespeople by providing platforms for salespeople to be more collaborative and consultative.

Traditional thinking is changing, as evidenced in a recent study conducted by the International Data Corporation (IDC), a sales consulting firm, which found that currently 30 percent of revenues are influenced by inside salespeople. [10]

Jobs in Sales

You have the power to choose your career. To travel to meet with customers and understand their needs and develop opportunities for your company?

Or would you rather be a technical specialist, or a subject matter expert, and talk to customers about exactly how your product or service works? No matter what you want to do, chances are there’s a sales role that you will enjoy.

There are a variety of different types of sales positions in many industries.

For example, customer service reps and telesales reps are considered order-takers because they interact with customers. Positions such as account manager, territory manager and relationship manager are order-getters because they work to develop a relationship and solve customers problems. [11]

Sometimes, account managers, account executives, territory managers, and other similar roles perform missionary selling, which means that they call on customers who are not the ultimate purchaser.

For instance, if you were a professor and an account manager from a textbook company called on you and brought you a copy of a new book on sales management for next semester’s class, that would be considered missionary selling because the sales rep would be telling you about the textbook, but you are not the ultimate purchaser.

In this case, the sales rep is calling on you so that you adopt the textbook, put it on your syllabus, and as a result, your students purchase the textbook.

Direct Selling

You have been invited to a party at a friends to see a new line of vitamins and supplements. You talk about and try the products.

You just experienced the direct selling process, “the sale of a consumer product or service away from a fixed retail location.” [13]

Some of the most well-known direct selling companies are Amway, Mary Kay Cosmetics, Avon, and Pampered Chef. There are over 15 million people in the United States who sell products or services via direct selling. In 2007, the industry generated $30.8 billion in sales in the United States. [14]

What makes direct selling so appealing is the fact that you can run your own business using the power of an established brand without the costs of manufacturing or providing a service.

Although direct selling usually requires an initial purchase of products or services, called starting inventory, many direct sellers have been able to supplement their incomes and in some cases make it their full-time job, earning more than six figures a year.

Given the opportunities, you probably aren’t surprised to learn that direct selling is growing as a result of the current uncertain job market.

Recent graduates, retirees, and everyone in between are turning to direct selling as a way to safeguard them during the recession. It’s attractive because those who sell or distribute the products (also called independent business owners [IBOs]) make a percentage on the products they sell.

Many direct selling companies engage in network marketing, also called multilevel marketing (MLM), which allows IBOs to invite other people to sell the products and earn money based on the sales of those they recruited.

If you think about the concept of social networking on Web sites such as Facebook, it’s easy to understand MLM. You can expand your network of contacts simply by tapping into the network of your friends; MLM operates on the same principle. If you sell to your friends and they sell to their friends, your opportunity to earn money expands with every contact. [16]

Unfortunately, there have been some unscrupulous people involved in the MLM business, and some have created pyramid schemes in which many people have lost money.

As a result, most US states have laws against pyramiding, a practice that offers incentives simply for recruiting new members of the network or IBOs. The laws require incentives to be paid only when sales are generated. [17]

Entrepreneurial Selling

If you have the passion and vision to start your own business, you will need selling skills. Being an entrepreneur can be exhilarating, invigorating, and exciting.

But it can also be challenging, time-consuming, and frustrating. Successful entrepreneurs, like salespeople, plan, do their homework, listen to customers, and make ideas and solutions come alive. It’s no surprise that the traits of a successful salesperson are the same as those of an entrepreneur. Just like the different types of sales positions, there are virtually unlimited types of businesses that can be started by entrepreneurs.

Consider the fact that the Internet levels the playing field because it provides business opportunities to all businesses regardless of size. Many of these entrepreneurial business opportunities were not available even a few years ago (and will undoubtedly provide new opportunities that don’t even exist yet). So whether you are a Power Seller on eBay or a dog-walker in your neighborhood, you have the power to start the business of your dreams.

Martha Stewart (Living Omnimedia), Mark Zuckerberg (Facebook), and Jeff Bezos (Amazon) each had a unique idea for a product or service. And while good ideas are key to building a business, what ultimately made each of these people successful was their ability to sell their idea to their customers and to their investors.

Domestic v Global Selling

Does technology eliminate the need for salespeople, or does it create opportunities to connect the dots between the company and the customer?

Are salespeople more important domestically or globally? Is there a different expectation for global selling? The outlook for personal selling both in the United States and internationally is very strong. According to a study of executives from the United States, France, and Mexico, “Personal selling is not going to go away and the future looks bright.”

A study found that with the use of technology, and in many cases because of it, it’s even more important that salespeople not only know the product and the customer, but also the industry and the environment.

The diversification of product lines and customers’ needs for ancillary products such as service agreements, maintenance contracts, and multilingual options, make a skilled salesperson even more important in the transaction. [18]

Companies expand internationally for several reasons, one of which is that business in the United States is extremely competitive, so companies need more opportunities to increase sales and profits. In some cases, the only opportunity for growth is to expand internationally. But international selling presents an additional level of challenges, including cultural, political, legal, demographic, and economic issues.

Nonetheless, countries such as Brazil, Russia, India, and China, often referred to as the BRIC nations, are quickly transforming the global economy. China and India account for one-third of the world’s population, and so they represent a huge opportunity for global companies. [19]

Nonprofit Selling

Nonprofit organizations are those that use their proceeds to reinvest in the cause and are granted “tax-exempt” status from US federal and other taxes. [20]

Religious organizations, charitable organizations, trade unions, and other specifically defined organizations may qualify as nonprofit. [21] If you have a passion for a particular cause, and want to focus on making a contribution by choosing a career in the nonprofit sector, you can find selling opportunities at many organizations. There are paying career fund-raising and development positions, in the nonprofit sector.

You might be wondering what selling has to do with nonprofit organizations. The fact is that fund-raising and the development of endowments are actually the lifeblood of nonprofit organizations. Some schools may have a director of alumni relations and development.

This is the person who secures donations for the continued development of the school and facilities; for example, if the school needs a new athletic facility or classroom building, much of the funding would likely come through the alumni office. Just like for-profit businesses, selling is the engine of nonprofit organizations.

KEY TAKEAWAYS


Companies sell to customers in business-to-business (B2B) or business-to-consumer (B2C) channels. The type of channel is based on the type of consumer who is buying.

B2B selling differs from B2C selling because there are relatively few customers, larger purchases, and longer selling cycle.

When you are engaged in consultative selling, you build a relationship and tailor solutions according to your customers’ needs.

When you are engaged in transactional selling, you are focused on a single sale or transaction.

There are many different types of selling positions that may vary by industry. You may be involved in outside sales, which includes meeting face-to-face with your customers or you may be involved in inside sales, which includes contact by phone, e-mail, text, instant messaging (IM), or fax, as well as sales support activities.
Other selling environments include direct selling (independent sales agents), entrepreneurial selling (a business started by an individual), global selling (selling in countries outside the United States), and nonprofit selling (also called fund-raising or development).

Exercises

Identify a company that uses both transactional selling and consultative selling. Think about the difference in the types of products that are sold in each example. What are the differences in the customer experience in each example.

Think about the different types of sales positions you have learned about. Which type is attractive to you as a possible career? Why?

Bibliography

[1] Barton A. Weitz, Stephen B. Castleberry, and John F. Tanner, Jr., Selling: Building Partnerships,
7th ed. (New York: McGraw-Hill Irwin), 10.

[2] Gerald L. Manning, Barry L. Reece, and Michael Ahearne, Selling Today: Creating Customer Value,
11th ed.
(Upper Saddle River, NJ: Pearson Prentice Hall), 10.

[3] Charles M. Futrell, Fundamentals of Selling: Customers for Life through Service,
10th ed.
(New York: McGraw-Hill Irwin, 2008), 55.

[4] Gerald L. Manning, Barry L. Reece, and Michael Ahearne, Selling Today: Creating Customer Value, 11th ed. (Upper Saddle River, NJ: Pearson Prentice Hall), 12.

[5] Barton A. Weitz, Stephen B. Castleberry, and John F. Tanner, Jr., Selling: Building Partnerships, 7th ed. (New York: McGraw-Hill Irwin), 36. [5] Barton A. Weitz, Stephen B. Castleberry, and John F. Tanner, Jr., Selling: Building Partnerships, 7th ed. (New York: McGraw-Hill Irwin), 36.

[6] Leslie Cauley, “AT&T: We’re All About Wireless,” USA Today, July 31, 2008,http://www.usatoday.com/tech/wireless/phones/2008-07-31-att-iphone-stephenson-apple_N.htm?csp=34 (accessed June 25, 2009).

[7] Justin Sorkin, “AT&T Urging Apple to Extend Its iPhone Exclusive Agreement until 2011,”TopNews.com, April 15, 2009, http://topnews.us/content/24841-att-urging-apple-extend-its-iphone-exclusive-agreement-till-2011 (accessed June 25, 2009).

[8] American Customer Service Index, “Rise in Consumer Satisfaction Continues-Now Followed by Other Economic Indicators,” First Quarter 2009,http://www.hotelnewsresource.com/article38884ACSI__Customer_Satisfaction_Rises_Again__Now_Joined_by_Other_Economic_Indicators.html (accessed June 23, 2009).
[9] Michael Levens, Marketing: Defined, Explained, Applied (Upper Saddle River, NJ: Pearson Prentice Hall, 2010), 184.

[10] Heather Baldwin, “What Does Sales 2.0 Mean for You?” Selling Power Sales Management eNewsletter, March 3, 2008,http://www.sellingpower.com/content/newsletter/issue.php?pc=801 (accessed March 16, 2010).

[11] Charles M. Futrell, Fundamentals of Selling: Customers for Life through Service, 10th ed. (New York: McGraw-Hill Irwin, 2008), 11.

[12] Anna Muoio, “Sales School,” Fast Company, December 18, 2007,http://www.fastcompany.com/magazine/19/one.html?page=0%2C3 (accessed June 23, 2009).

[13] Direct Selling Association, “About Direct Selling,”http://www.dsa.org/aboutselling/what (accessed June 21, 2009). [14] Alina Cho, “Avon, Mary Kay Making Comeback,” CNN American Morning, June 17, 2009, http://amfix.blogs.cnn.com/2009/06/17/avon-mary-kay-making-comeback(accessed June 21, 2009).

[15] Charisse Jones, “Want a Recession-proof Job? Think Direct Sales,” USA Today, May 14, 2009, 1B.

[16] “Multilevel Marketing,” Inc., http://www.inc.com/encyclopedia/multilevel-marketing.html (accessed June 21, 2009).


[17] Federal Trade Commission, “The Bottom Line about Multilevel Marketing Plans and Pyramid Schemes,” http://www.ftc.gov/bcp/edu/pubs/consumer/invest/inv08.shtm(accessed June 21, 2009).
[18] John F. Tanner, Jr., Christophe Fournier, Jorge A. Wise, Sandrine Hollet, and Juliet Poujol, “Executives’ Perspectives of the Changing Role of the Sales Profession: Views from France, the United States, and Mexico,” Journal of Business and Industrial Marketing 23, no. 3 (2008): 193.


[19] George E. Belch and Michael A. Belch, Advertising and Promotion: An Integrated Marketing Communications Perspective, 8th ed. (New York: McGraw-Hill Irwin, 2008), 653-57.

[20] Carter McNamara, “Starting a Nonprofit Organization,” Free Management Library,http://managementhelp.org/strt_org/strt_np/strt_np.htm#anchor516676 (accessed June 23, 2009).

[21] Internal Revenue Service, “Tax Information for Charities & Other Non-Profits,”http://www.irs.gov/charities/index.html (accessed June 23, 2009).