Rajagopal. Marketing Dynamics: Theory and Practice

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Marketing Dynamics: Theory and Practice

It is important for the company to consider, how well competition satisfies the needs of potential

customers in the selected markets. Also to determine the best fit of the firm’s strategies in the

determined market segment or niche. Should the firm offer a better location, convenience, better

price, later hours, better quality, and better service, may be the further interest of the firm to gain the

competitive advantage.

Conversation with suppliers can help the firm a great deal about how industry works and what

trends are taking place in the market. They may be able to give valuable information about pricing

techniques and mark ups, about the fastest moving lines, objectives of selling activities, and why

some competitors are successful. Conversation with the customers or potential customers can give

insight into what their needs are. They can indicate what they look for in industry, what they think of

competition, what price they might pay and what level of service they like.

Now more than ever, companies see the power of a strong brand. At a time, when battered

investors, customers, and employees are questioning whom they can trust, the ability of a

familiar brand to deliver proven value flows straight to the bottom line. The BMW holds the

bottom line of customers to make decision on the best brand for satisfying the highest value

for money. The company spends hundreds of millions on aggressive communications and

upgrades the range of accessories that bear the AT&T-BMW name in order to shed its

stodgy me too image. The objective of BMW Mexico is to offer the life time guarantee to the

client, the one who enjoys the pleasure to lead. In order to obtain this goal, the company not

only puts all efforts offering automobiles of high technology, but also delivers the customized

services on the lines of the corporate policy. The company’s office in Mexico offers 2 years

of guarantee without any mileage restrictions and 6 years of guarantee against corrosion of

the body, whenever the automobile is registered with the authorized network BMW Mexico.

Besides, 2 years of guarantee is offered to the buyer in original spare parts of BMW without

any mileage limitations. All the vehicles and motorcycles of BMW are being sold in the

authorized BMW showrooms in Mexico from November 2001. A BMW not only allows the

buyer to enjoy the technology as he leads in the life but also brings him the updated

technological innovations at the reasonable costs of maintenance. The BMW Mexico

offers the driver’s safety course for the owners of BMW. Thousands of participants confirm

every year that this initiative of BMW for greater security and sovereignty in the traffic is a

great success. The PEGASO, Center of Training in Private Security and its Instructors

certified by BMW guarantee that the highly skilled methods and techniques are imparted to

the clients by the professional mechanical engineers of the company. In order to offer, the

highest level of professionalism in the training courses, PEGASO facilities, Center of Training

in Deprived Security, are established in important places which allows optimum learning and

enhance the driving skills.

Surveys and Focus Groups represent more formal ways of getting insight from customers. If

there are specific information requirements for an identified target group, it is likely that the firm

can undertake a useful survey. A focus group involves getting feedback from a specially picked

group using controlled interview techniques. However, designing an unbiased questionnaire may

require attention to detail. The process usually allows the participants to provide their opinions,

1 For details refer BMW Mexico information page at www.bme.com.mx

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come up with new ideas and brainstorm. This is valuable for generating new concepts, getting

feedback on proposed advertising or gaining insight into attitudes and opinions about a new

product. Focus groups require a skilled interviewer and hand picked participants and professional

firms can handle such projects in an efficient way.

SELLING AND BUYING PROCESS

There are three types of buying situations among the consumers in the international markets and

they need to be managed carefully by the foreign firms. These buying situations include straight

re-buy, modified re-buy and new task buy. The least complex buying situation is the straight re-

buy buying situation, wherein the customer has considerable experience in using the product and

is satisfied with the current purchase arrangements. In this case, the buyer is merely reordering

from the current supplier and engaging in routine response behavior. A modified re-buy buying

Strategy Focus 8.2: Team Selling Strategy for High Value Products

The growth of team selling is changing conventional ideas about sales and customer service. Team selling, also

known as cross-functional selling, involves the efforts of different people from different areas within an organization

working together to sell to and service a customer. This strategy of selling began in early ‘70s when sales teams

were formed in high-technology organizations such as IBM to service the complex needs of their larger customers.

It was observed necessary to have, along with a salesperson, technical support people and application specialists

involved in e.g. inventory control, manufacturing and production planning. Besides IBM, General Motors

adapted the team selling strategy and developed as part of the culture of the company. Executives of the company

felt that organizing a sales team is a major task to sell the high technology-high value products. The sales team

should necessary have a technical and finance person and likewise others. Interestingly what’s happened with

team selling is that over the years it’s filtered into less-technology-oriented businesses such as advertising,

consumer packaged goods, and financial services. Several issues may emerge before they are formally addressed

as the sales teams generally start to form naturally and informally. Communication among team members is

difficult to establish, but is one of the keys to the effectiveness of this approach. There are many reasons for a

company to choose team selling because this strategy:

• Provides strategic advantage.

• Meets the needs of demanding, global customers more effectively.

• Establishes long-term, quality relationships with clients.

• Provides competitive advantage through a different kind of customer interface strategy.

• Increases flexibility in terms of how customers are served.

• Increases sales and potential profitability.

• Forces resource allocation decisions at the field level.

• Generates better input to new product and services development.

Team selling effectiveness also depends on selection and training. Training to back up the appropriate selection

is so important, in fact, that IBM sends their team leaders to a customized executive development program on

how to be an effective key account executive. It’s a tough, rigorous program and in addition, IBM requires

recertification every few years. Also at the organizational level, in order for a team selling approach to be

successful, the supplier organization must have a strong market orientation as part of its organizational culture.

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situation exists when the customer has previously purchased and used the product. Although the

customer has information and experience with the product, it will usually want to collect additional

information and may make a change when purchasing a replacement product. A new task

buying situation, in which the organization is purchasing a product for the first time, poses the

biggest problems for the buyer. Because the account has little knowledge or experience as a

basis for making the purchase decision, it will typically use a lengthy process to collect and

evaluate purchase information. The decision-making process in this type of situation is often

called extensive problem solving. The salesperson must first gather information about (1) the

prospective customer’s operations to determine whether there is a need for the products or

services he or she has to offer and (2) the concerns of various personnel within the customer

organization who might influence the final purchase. Then, many low-key sales calls may be

necessary to educate the various purchase influencers about the seller’s offerings and to establish

credibility within the customer’s organization. Even after a sale is made, the representative or

other members of an account management team-may have a lot of work to do supervising the

installation of the product, training the customer’s personnel to use it, and providing other post-

sale services to ensure the customer will be satisfied and to increase the chances for future

sales.

Since different employees of a customer’s organization may be active at different stages of

the purchase process, an important part of sales planning involves trying to determine who the

salesperson should contact, when each contact should be made, and what kinds of information

and appeals each participant is likely to find most useful and persuasive. In many cases, however,

the roles played by various members of the buying center are sufficiently consistent across

similar types of firms that a company can establish policies to guide its salespeople. A widely

recognized framework identifies seven steps that organizational buyers take in making purchase

decisions:

• Anticipation or recognition of a problem or need,

• Determination and description of the characteristics and the quantity of the needed item,

• Search for and qualification of potential suppliers,

• Acquisition and analysis of proposals or bids,

• Evaluation of proposals and selection of suppliers,

• Selection of an order routine, and

• Performance evaluation and feedback.

Customers’ buying centers are likely to involve a wider variety of participants, when they are

considering the purchase of technically complex, expensive products such as a computer system-

than when the purchase involves a simpler or less expensive product. Consequently, firms that sell

technically complex capital equipment sometimes organize their salespeople into sales teams or

utilize multilevel selling, with different salespeople calling on different members of the customer’s

buying center to reach as many decision participants as possible and to give each participant the

kinds of information that person will find most relevant. It is necessary for the foreign firm to review

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periodically, the policies or organizational structures to guide its salespeople in dealing with customers’

buying centers.

In view of the rapid escalation of selling costs the multinational companies are using new

technologies to reduce the selling cost and increase sales efficiency. The automation of sales force

is one of new technologies that are being used by the multinational companies. Such technologically

advanced sales strategies help the companies in reallocating sales effort to customer retention,

minimizing the non-selling tasks increase the efficiency of the sale persons. Most salespeople are

employed in various kinds of retail selling. These jobs involve selling goods and services to ultimate

consumers for their own personal use, like door-to-door selling agents, insurance agents, real estate

brokers, and retail store clerks do. A much larger volume of sales, however, is accounted for by

industrial selling - the sale of goods and services at the wholesale level. Industrial selling activity

includes sales to resellers, sales to business users (such as when a manufacturer sells materials or

parts to another manufacturer, who uses them to produce another product or when a Xerox salesperson

sells a law firm a copier to be used in conducting the firm’s business) and sales to institutions. The

activities involved in both retail and industrial selling, and managing sales forces for these types of

sales activities, are very similar. Success in either type of selling requires interpersonal and

communications skills, solid knowledge of the products being sold, an ability to discover the customer’s

needs and problems, and the creativity necessary to show the customer how a particular product or

service can help satisfy those needs and offer solutions to the problems. While globalization makes

the organization of the sales force more complicated, firms tend to resolve organizational issues in

international markets in largely the same way as they do in the developed countries. The situational

and strategic factors that influence firms’ organizational decisions appear to be similar in both types

of markets, and those factors seem to affect organizational choices in similar ways both at home and

abroad. However, a good coordination of sales and marketing activities is important for a firm to

service its customers and compete effectively, observations indicate that many organizations do not

assign responsibility for all their marketing activities to a single unit.

MEASURING SALES PERFORMANCE

Basic objective of salesperson performance evaluations determine how well individual salespeople

have performed. However, the results of salespersons’ performance evaluations are used by the

foreign firms for various sales management purposes as under:

• To ensure that compensation and other reward disbursements are consistent actual

salesperson performance

• To identify, salespeople who might be promoted

• To identify, salespeople whose employment should be terminated and to sup evidence to

support the need for termination

• To determine the specific training and counseling needs of individual salespersons and the

overall sales force

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• To provide information, for effective human resource planning

• To identify, criteria that can be used to recruit and select salespeople in the future

• To advise salespeople of work expectations

• To motivate salespeople

• To help salespeople set career goals, and

• To improve salesperson performance.

These diverse purposes affect all aspects of the performance evaluation process. Performance

evaluations for the purpose of identifying salespeople for promotion into sales management positions

should focus on criteria related to potential effectiveness as a sales manager and not just current

performance as a salesperson. One of the methods that is workable and effective, discusses the

development sales benchmarking to perform competitively in the market. Some managers find it

difficult to measure the performance of sales representatives because of the variations in the attitudes

of sales representatives, customers and business conditions. However, a few questions as stated

below may be put forth to the managers before getting started with the evaluation process:

• Volume of sales in national currency/US Dollars

• Amount of time spent in office

• Personal appearance: for example, clothes, hair, cleanliness and neatness

• Number of calls made on existing accounts

• Number of new accounts opened

• Completeness and accuracy of sales orders

• Promptness in submitting reports

• Amount spent in entertaining customers

• Extent to which sales representative sells the company

• Accuracy in quoting prices and deliveries to customers

• Knowledge of the business

• Planning and routing of calls.

Usually managers evaluate their sales representatives primarily on the basis of sales volume,

they rely too much on the number of sales calls made by each of their sales representatives, compare

each sales representative’s present sales results with past sales for a corresponding period, expect

their sales representatives to follow explicitly the selling methods that worked for them when they

were selling or they give their sales representatives too much freedom. Although, it is impossible to

determine with precision all the performance evaluation approaches used by sales organizations,

several studies have produced sufficiently consistent information to warrant some general conclusions.

Most sales organizations evaluate salespersons performance annually, although firms conduct

evaluations semi-annually or quarterly. Relatively few firms evaluate salesperson performance more

often than quarterly. It has also been observed that a large number of multinational companies

engaged in selling their consumer goods use combinations of input and output criteria that are evaluated

by quantitative and qualitative measures. However, emphasis seems to be placed on outputs, with

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evaluations of sales volume results being most popular. Besides, the sales organizations, which set

performance standards or quotas tend to enlist the aid of salespeople in establishing these objectives.

The degree of salesperson input and involvement does, however, appear to vary across firms. The

multinational pharmaceutical companies generally assign weights to different performance objectives

and incorporate territory data when establishing these objectives while most salesperson performance

evaluations are conducted by the field sales manager who supervises the salesperson. However,

some firms involve the manager above the field sales manager in the salespersons performance

appraisal. Also some foreign firms use more than one source of information in evaluating salespersons

performance. Computer printouts, call reports, supervisory calls, sales itineraries, prospect and

customer files, and client and peer feedback are some of the common sources of information. Although

performance appraisal continues to be primarily a top-down process, in some companies it leads to

the implementation of a broader assessment process. An increasingly popular assessment technique,

dubbed 360° feedback involves performance assessment from multiple scorers, including sales and

external customers, team members, and even salespeople themselves.

SALES COMPENSATION

Developing an equitable and functional compensation plan that combines balance, consistent motivation,

and flexibility is extremely challenging in international operations. This is especially true when a

company operates in a number of countries, when it has individuals who work in a number of countries,

or when the sales force is composed of expatriate and local personnel. Fringe benefits play a major

role in many countries.

The expatriates working in high-tax countries prefer liberal expense accounts

and fringe benefits that are non-taxable instead of direct income subject to high taxes. A successful

sales commission plan should possess three characteristics as given below:

• The plan should offer an immediate positive reward to the salesperson for his achievements.

• The compensation plan linked to the career path should be clear and simple to understand.

• It should be relatively free of influence from factors outside the salesperson’s control.

A sales commission plan based on these three principles, will reward the company by doing what

it is supposed to do and encourage the profitable selling efforts by the sales force. Sales people

operate under the gun most of the time. They’re pressured to produce by the company, by their

families, and by their own egos. Paying salespeople a straight salary is uncommon. Such plans are

well suited for paying sales support personnel and sales trainees. Sales support personnel, including

missionaries and prospectors, are involved in situations in which, it is difficult to determine who really

makes the sale. Because missionaries and prospectors are concerned primarily with dissemination of

information rather than direct solicitation of orders, a salary can equitably compensate for effort.

Compensation based on sales results might not be fair. Salaries can provide control over salespeople’s

2 Richard B. Peterson, Nancy K. Napier, and Won Shul-Shim, “Expatriate Management: A Comparison of

MNCs across Four Parent Countries,” Thunderbird International Business Review, March-April 2000,

42(2), pp. 145-166.

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activities, and reassigning salespeople and changing sales territories is less a problem with salary

plans than with other financial compensation plans. Salary plans also make it easier to encourage

teamwork and customer service. The other methods used by the multinational companies include

straight commission and a combination of salary and commission plan. The Table 8.1 exhibits the

reasons for adapting the specific compensation plans:

Table 8.1 Compensation Plans for Sales Persons

Components Needs

Salary • Motivate effort on non-selling activitiesn

• Adjust for differences in territory potentialn

• Reward experience and competence

Commissions • Motivate a high level of selling effortn

• Encourage sales success

Incentive payments • Direct effort toward strategic objectivesn

• Provide additional rewards for top (bonus) performersn

• Encourage sales success

Sales contests • Stimulate additional effort targeted at specific short-term

objectives

Personal benefits • Satisfy salespeople’s security needsn

• Match competitive offers

1. Straight commission offers strong financial incentives to the sales persons to maximize

performance. However, they also limit the control of the sales force. Some industries like

real estate, insurance, automobiles, and securities traditionally pay the salespeople straight

commission. In these industries, the primary responsibility of salespeople is simply to close

sales; non-selling activities are less important to the employer than in some other industries.

The huge direct-sales industry, including such companies as Mary Kay Cosmetics,

Tupperware, and Avon, also pays by straight commission.

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SELECTED READINGS

Barton A. Weitz, Stephen B. Castleberry, John F. Tanner: Selling: Building Partnerships, 5

Edition,

McGraw Hill, 2003

Cron, William L., and Michael Levy: Sales Management Performance Evaluation: A Residual Income

Perspective, Journal of Personal Selling & Sales Management, August, 1987, pp 57-66.

Chang, Julia: Born to Sell, Sales and Marketing Management, Vol. 155, No. 7, July, 2003, pp 34-38.

Cummings, Betsy: Coaching Clinic, Sales and Marketing Management, Vol. 155, No. 12,

December, 2003, pp 39-42.

Day, George: Managing Market Relationships, Journal of the Academy of Marketing Science,

Vol. 28, No. 1, winter, 2000, pp 24-30.

Honeycutt Jr, Earl D., Kiran Karande, Ashraf Attia and Steven D. Maurer: A Utility Based Framework

for Evaluating the Financial Impact of Sales Force Training, Journal of Personal Selling & Sales

Management, Vol. , No. , Summer, 2001, pp 229-238.

Honeycutt Earl D, Ford John B and Simintiras Antonis : Sales Management- A Global Perspective,

Routledge, 2003

Michael T. Bosworth: Solution Selling- Creating Buyers in Difficult Selling Markets, McGraw

Hill, 1994

Moon, Mark, and John Mentzler: Improving Sales Force Forecasting, Journal of Business

Forecasting, Summer, 1999, pps 7-12.

Mishory, Jordana: Frequency Matters, Sales & Marketing Management, Vol. 156, No. 7, July,

2004, pp 36-38.

Sharma, Arun: Customer Satisfaction-Based Incentive Systems: Some Managerial and Salesperson

Considerations, Journal of Personal Selling and Sales Management,, Vol. ?, No. 2, Spring, 1997,

pp 61-70.

Thomas N. Ingram, Raymond W. LaForge, Ramon A. Avila, Jr., Charles H. Schwepker, and

Michael R. Williams: Sales Management – Analysis and Decision Making, South-Western

College Publication, 2003

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Case 8.1

CANON IN MEXICAN BUSINESS ENVIRONMENT

Canon started out as a company with a handful of employees and a burning passion. That company

soon became a world-renowned camera maker and is now a global multimedia corporation. However,

the origin on their success remain unchanged: the passion of early years of the early years of the

company and technological expertise amassed over more than 60 years. Canon pioneered the

world’s first digital full-color copying machine, and the company has continued to introduce the latest

innovations in true color reproduction and high-speed output. Small-diameter toner particles and the

four-drum system are just two revolutionary advances in this arena. To stay competitive in today’s

fast-paced, borderless business world, the company is now stressing compatibility with the newest

Windows operating systems and localization around the world for all printing conveniences. Canon

has also deployed its strengths in optical and precision technologies to create leading-edge systems

and components for the broadcasting, medical, semiconductor production and related industries.

Products incorporating key Canon components and technologies are leading the way for industries in

the digital era.

CORPORATE PHILOSOPHY

Corporate philosophy of Canon is kyosei. A concise definition of this word would be “Living and

working together for the common good,” but our definition is broader: “All people, regardless of race,

religion or culture, harmoniously living and working together into the future.” Unfortunately, the

presence of imbalance in our world -in areas such as trade, income levels and the environment-

hinders the achievement of kyosei. Addressing these imbalances is an ongoing mission, and Canon is

doing its part by actively pursuing kyosei. True global companies must foster good relations, not only

with their customers and the communities in which they operate, but also with nations and the

environment. They must also bear the responsibility for the impact of their activities on society. For

this reason, Canon’s goal is to contribute to the prosperity of the world and the happiness of humanity,

which will lead to continuing growth and bring the world closer to achieving kyosei. To help attaining

sustainable, recycling-oriented societies and fulfil its responsibilities as a good corporate citizen,

Canon is realizing the concept of environmentally conscious management. The corporate philosophy

3 This case has been prepared by Dr. Rajagoapl, Professor of Marketing, Business Division, ITESM-CCM,

Mexico City Campus, Mexico City 14380 DF ( E-mail :

rajagopal@itesm.mx )

This case has been written as the basis for class discussion rather than to illustrate either effective or

ineffective handling of an administrative situation of the company.

Author acknowledges the academic contribution of Ms. Olga Garcia (ITESM-CCM 00372979) student of

the course on Advanced Selling System and marketing executive of Canon Mexico; Maria Carmen Vega

and Eduardo Tamson of the above course in conducting the investigation and presenting the case as a

part fulfilment of the course in the January-April 2003 trimester of Graduate Program of ITESM-CCM.

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of kyosei remains as the guiding tool for the employees of the company in their quest to build a group

of companies that are appreciated and respected around the world. Canon has pursued diversification

and laid a solid base for growth well into the future through one of the world’s most comprehensive

corporate R&D efforts and with a global network of R&D facilities capitalizing on expertise in each

region, Canon is building the future.

KEY AREAS OF CANON IN MEXICAN MARKET

Canon delivers innovative digital business solutions to ensure that its customers achieve and maintain

the information edge. The increasingly competitive global marketplace, and the fact that the

organizations must store, process and share immense volumes of information with both speed and

accuracy have been the key areas of the company to penetrate in the territorial gateways like

Mexico for Latin American market. The company functions with four key areas in Mexican market

that include marketing, logistics, sales and services operations. The marketing activities of the company

consist of planning and budgeting, pricing, forecasting, purchases, marketing research and developing

promotional strategies. The company is also engaged in developing attractive media –mix and

advertising campaigns and launches the loyalty programs for its major brands. The virtual shopping

network is also a major part of the marketing functions performed by the company in the country.

The company feels that the loyal, ongoing customers are the backbone of every business and in the

prevailing highly competitive environment, these shoppers cannot be ignored or else they may be

won over by competitors. The repeat customers are more apt to buy a full range of merchandise, not

merely items that are under promotional programs. This means that the dealers and retailers of the

company can reach profit margin goals. The logistics functions of the company is largely international

trade oriented, as the Canon Mexico is a part of Canon USA and many products of the company are

acquired from its USA counterpart as inbound logistics. The import process has been one of the

major activities of the company in Mexico. The logistics of the company further involves the key

activities of transport, inventory management and developing appropriate overseas trade and

information strategies.

Services of equipments, periodic maintenance of the canon products with the accounts,

administering the warranties, and call centre control functions constitute the major part the services

network activities of the company. The call centre has the responsibility to attend on the customer

complaints, suggestions and design the conflict resolution strategies. The compliance with the NOM

procedures has been another principal activity of the company, that is considered as part of the

services functions. All Mexican products in the market must comply with Mexican Mandatory Standards

(NOMs) and their similar imported products too, and they can be called to demonstrate the

accomplishment in the customs office before the entry to Mexico. The Certificate of Conformance

with NOM is the only legal document accepted in Mexico to demonstrate compliance, when issued

by an accredited and authorized product certification body. The sales activities comprise prospecting,

managing dealers accounts, customer and dealer support, quota compliance and developing area

based strategies for augmenting the sales. Each sales area has been identified, as a profit centre and

is expected to thrive its best in achieving the targets.