Business To Business Market B2b Marketing Essay

Published Date: 23 Mar 2015

Exchange processes involve work. Sellers must search for buyers, identify their needs, design good products and services, promote them, and store and deliver them. Activities such as product development, research, communication, distribution, pricing and service are core marketing activities.

1.1.2 Business to Business market (B2B).

Business market consists of all the organizations that buy goods and services to use for producing other products and services that, in turn, are sold, rented or supplied to others. It also includes retailing and wholesaling firms that acquire goods for purpose of reselling or renting them to others at a profit. (1)

But this definition is still narrow as the viewpoint of Jim Blythe and Alan Zimmerman (Business to Business marketing management - a global perspective). The full Business market includes customers who are institutions like hospitals and charities and all levels of government. The business market not only includes physical products but services as well. In fact, as we can see, large institutions, governments and businesses buy virtually every product and service. (3)

Business buyers generally buy to increase their profits, institutional buyers have the same concerns but they may be focused on providing an adequate surplus. There are only two basic ways to increase profits: boost sales or lower costs. These objectives may be achieved by increasing efficiency or purchasing lower-cost products/services. Sometimes business buyers also buy to avoid penalties from government regulators. Therefore, we can conclude that the most effective marketing programs directed at business buyers are always based on one of the following basic appeals:

1. Increasing sales.

2. Reducing costs.

3. Meeting government regulations.

1.1.3 Characteristics of B2B market

The market where businesses sell to other businesses is extremely large, the reason is many parts are manufactured and transacted by many steps before the completed consumer product are sold to the final consumer.

As the counting of Jim Blythe, in order to manufacture a simple product as electric hairdryer, there are about 18 transactions can be defined as business to business(B2B) category and only one final transaction belong to Business to Consumer (B2C). To make this hairdryer requires raw materials from oil, steel, aluminum and rubber producers, materials processors who process raw ores into usable products, manufacturers of parts and sub-assemblies who put together materials of various kinds and deliver serveral components to another firm who would be a final assembler. The final assembler the delivers the product to the distributor. This firm then sells the product to a wholesaler, who in turn sells to a retailer and only then the product is sold to the final consumer. Each party in this chain also buy many related goods and services. This example shows why there is more business buying than consumer buying - the number of business buyings were more bigger than that of consumer buyings. (3) (Jim Blyth and Alan Zimmerman)

Figure 1.1: Transactions belong to B2B and B2C (3)

Some typical characteristics of B2B market:

a, Market structure and Demand:

+ The buyers in this market are fewer in number but larger in term of volume and value in comparison with B2C market.

+ The market is geographically concentrated. For this characteristic, the customers who buy our equipment and materials locate mainly in Quang Ninh province, Northeast of Vietnam. The areas of coal mines are 04 centres including : Mao Khe - Uong Bi, Hon Gai, Cam Pha and Mong Duong- Khe Cham, therefore, the offices and physical infrastructure of mine also locate here.

+ Demand:

Business demand is derived demand. It derives from the demand of the other business or consumer demand.

The demand of coal from electricity, cement, chemical producer... increase will make the demand of coal exploring equipment increase due to the Coal-mine-companies want to invest to expand output and we expect to sell more equipment and materials to these businesses. In the recession of economy, the demand of electricity and cement drop and the sales of said exploring equipment will be, obviously, affected negatively.

Business demand is inelastic - The demand in consideration of the change in price. the change in price do not affect the demand in the short run. A decrease in price also do not make the demand of any equipment increases. The demand is often planned and fixed for short term. The decrease in price only makes the buying at a lower cost and the whole production more effective but do not change the demand.

Fluctuating demand: The demand in the business market for goods and services fluctuates more sharply than the demand in consumer market. A small percentage increase in demand of consumer goods and services can lead to big increases in demand of business market. In some cases, even only 10 percent increase in consumer demand can make the business demand increase as much as 200 percent during the next performance-period.

b, Nature of buying unit:

That is professional buying. Usually, the purchases of a business is done by well-trained and experienced buying staffs, who use their full working time in learning how to buy effectively. The more complicated the purchase, the more likely that the process of making decisions will include the participation of more people. Buying Units made up of technical experts and high-rank management are popular in the buying of primary goods. Moreover, some business may uses the support from consulting that make the marketing and negotiation even more difficult.

Therefore, sellers in business market must use well-trained salespeople to approach well-trained buyers.

c, Buying decision: Types and process.

+ Type of decision: the decisions of business buyers are more complex than that of consumer buyers. »¿Business buyers usually have to cope with more complex buying decisions than that the consumer buyers do.

Business buyings often involve large amount of money, complicated technical specifications and complex economic circumstances, also interactions of different people at different order-levels in the buyer's organisation structure. Because the purchases are more complicated, business buyers have to take longer time to give their decisions. For example, when a mine decide to buy a main water pump station, it often takes about one year for the fulfilment of the bid package because the only manufacturing period may last for 06 months. It also could involve hundreds of technical issues, many legal procedures, a large amount of money and many people from members of Board of directors to on-site equipment operators.

+ Process of decision: »¿

The buying process in a business are more formalized than the buying procedures of the consumer market. Big technical purchases of business often require detailed specifications of the product, formal purchase orders, careful searching for suppliers and formal approval. Especially, the buying process in the state-owned companies or government's organisations require a strict procedures that must be complied with regulations.

In the buying process of business, buyer and seller are usually more dependent on each other. In consumer market, sellers are often at a long distance from the buyers in the buying process. In contrast, in business market the sellers may stay by the buyers' side and work together with their buyers in all steps of the buying process - from defining problems, to finding solutions or supporting after-sales operations.

Some other characteristics:

Out of some mentioned characteristics, business market also have some case such as: directly buying, leasing, reciprocity.

1.2 How the customer buy in B2B market:

To master the buying behaviour of business will be the decisive factor of success for salespeople. In order to understand how business customer buy we will find the answers for the 04 questions hereunder:

What decisions do business buyers make in buying process?

Who are the participants in the buying process of business ?

What are the main influencing factors to affect buyers?

How do business buyers make decisions in the buying process?

1.2.1 What decisions do business buyer make in the buying process?

+ There are 03 situations of buying: straight rebuy, modified rebuy and new task. Also called buyer's techniques. (1) (Philip Kotler)

- Situation 1: Straight rebuy: the situation when the buyer reorders without any change in required specifications, prices, quantity and other conditions of the previours contract. In this case, purchasing department simply select from the offerings by the regulary suppliers. In many cases the buyer establishes an electronic data interchange (EDI) link with a supplier or establishes automatic buying procedures through Internet and orders are handled without any human interface. In general, these types of buying are applied in the cases that the product is of minor importance, or represents a low commitment in terms of finance or risk. Regulary sellers try to keep their fame and good relationship by good quality of goods and services. The strange sellers, step by step, try to persuade the buyer that their quality of goods and services are better than that of other and their price is more competitve. They first try to get small order and then to enlarge their share as much as possible over time.

- Situation 2 :Modified rebuy: the buyer bases on the actual requirements of work to buy with some modifications on technical specifications, time of delivery, price or other conditions. Even the supplier may be changed. Sometimes theses changes come about as a result of environmental scanning, in which the buyer has become aware of a better alternative than the one currently employed, or sometimes the changes come about because of marketing activities by the current suppliers' competitors. The drawback of this approach, however, is that it often results in damaging the relationship with existing suppliers that may have been built up over many years.

- Situation 3: New task: the business buyers buy goods or services for the first time and this is quite an open opportunity to every sellers. Past experience is therefore no guide and current suppliers may not be able to help either. Thus the buyer is faced with a complex decision process. The risks for buyers involved in switching suppliers are often too great unless there is a very real and clear advantage in doing so: such an advantage is likely to be difficult to prove in practice. The new-task situation can be seen as the seller's greatest opportunity and also the greatest challenge. The seller not only tries to put influencing factors as many as possible, but he also tries to support and provide useful information.

+ System buying and selling:

In some cases, based on the specific requirements of the project or work the business prefer buying a packaged solution for settling a problem from one single supplier. This is called System buying. Instead of buying equipment and services in different stages and in separated package of components, the business call for the bids that the supplier could supply the full set of solutions and all equipment for the project.

For example: the EPC bids (Engineering, Procurement and Construction), in which the supplier must realise works from engineering, supplying equipment and materials, construction and installation, operation and transfering to the buyer.

The sellers have recognized that business buyers prefer this method of buying, therefore the sellers have adopted and considered systems selling as a effective marketing tool. Systems selling process has two steps. Firstly, the seller sells a group of products that are inter-dependent: for example, when we sell not only coal mine proping system but also emulsion, pump and valves. Second, we sell the design for production, spare parts and other inventories, and other services to ensure that the system the buyer has bought operating smoothly. (1)

Systems selling nowadays is developed as a key marketing strategy in business market for obtaining and holding customers. The contracts often goes to the firm that provide the most complete system that meet customer's needs.

1.2.2 Who are the participants in the buying process of business?

There are very few cases where industrial buying decisions are made by only one person. Even in small businesses it is likely that several people would expect to have some influence or input into purchase decisions. Because of this, the decision - making process often becomes formalized, with specific areas of interest being expressed by members of the decision - making unit (DMU) and with roles and resposibilities being shared. This group which cannot be fixed and identified on any company organization chart, also called the BUYING CENTER, varies in size and make-up from one buying situation to another, from one type of products or services to another. Individuals may participate for a brief time only, or be part of the group from conception to conclusion.

According to Webster & Wind (1972), the DMC includes 06 categories of member: Initiators, Gatekeepers, Buyers, Diciders, Users and Influencers. (2)

According to Philip Kotler in Principles of Marketing in B2B, the DMC includes 05 members who play 05 roles in the buying decision making process. These categories are not mutually exclusive. A User might also be an Influencer or a Buyer might also be a Decider. (1)

In general, members of a Decision - making Unit tend to be more risk-averse than consumers. This is because the DMU's members have more to lose in the event of a wrong decision: for consumers, the main risk is financial and even that is limited since most retailers will replace or refund goods purchased in error. For industrial buyers, however, a serious purchasing mistake can result in major negative consequences for business as well as loss of face at work, in shattered promotion dreams, or even in dismissal in serious cases. The professional persona of industrial buyers is liable to be compromised by purchasing errors, which in turn means that buyers will feel a loss of self-esteem.

1.2.3 What are the main influencing factors to affect buyers?

When business buyers make buying decisions they often rely on many influences. Some sellers assume that are economic influences. They think that business buyers will choose the supplier offering lowest price or the best quality product. They concentrate on offering only favorable economic advantages to buyers. However, both economic and personal factors are the business buyers' concerns. The business buyers are human that are effected by not only rational evaluation but also by emotional effects.

When the business buyers receive similar offers, their rational evaluation is little. Because offers from any seller can meet their organisation's objectives, buyers then can let personal factors to make the decisive role in their buying process. However, when competing products are largely different, business buyers tend to be affected by the economic factors.

There are 04 main groups of influences on business buyers: environmental, organisational, interpersonal, and individual.

+ Environmental influences: (3)

Figure 1.2 and its explanatory notes, shows why business buyers are likely to be affected by some or all of the following environmental influences. (4) (Loudon and Della Bitta, 1993),

Economic influences: The macroeconomic environment is concerned with the level of demand in the economy and with the current taxation regime within buyer's country. These conditions affect buyers' abilities to buy goods as well as their need to buy raw materials: if demand for their product is low, the demand for raw materials to manufacture them will also be low. The macroeconomic climate affects business buyers' confidence in the same way as it affects consumer confidence. For example, a widespread belief that the national economy is about to go into a decline will almost certainly make buyers reluctant to commit to major investment in stock, equipment and machinery. At the microeconomic level, companies experiencing a boom in business will have a greater ability to pay for goods and a greater level of confidence.

Political influences: Laws issued by the Government frequently will affect the operation of businesses. A change in the structure of the government or a new policy will lead to direct impact on the economic circumstances, and this then lead to changes in the method of buying in organizations ultimately.

Legal influences: laws often lay down specific standards, which affect buyers' decisions. Often, suppliers can obtain competitive advantage by anticipating changes in the law.

Physical influences: the location of purchasing companies relative to their suppliers may be decisive, since many companies prefer to deal with people from the same cultureal background or they wish to support local suppliers.

Technological influences: the level of technological development available among suppliers will affect what buyers can obtain. The technology of buyers and sellers must also be compatible, especially in technical standards.

Cultural influences: culture establishes the values, attitudes, customary behavior, language, religion and art of a given group of people. Beyond the national culture is the corporate culture, sometimes defined as "the way we do things round here".

Ethical influences: in general, buyers are expected to act at all times for the benefit of the organization, not for personal gain. This means that, in most cultures, the buyers are expected not to accept bribes, for example. However, in some cultures bribery is the normal way of doing business, which leaves suppliers with a major ethical problem - refusing to give a bribe is likely to lose the business, but giving a bribe is probably unethical or illegal in the company's home country.

Competition influences : Today's business environment is more and more competitive. So when a competitor lauch a new product or they by somehow to get competitive advantage, the business, of course, have to change their operation in the new situation and the buying method will change accordingly.

+ Organizational influences:

More than the external factors, it's the internal factors of the organization that influence the business buying. The organizational factors may come from the corporate culture, as well as from the strategic decisions made by senior management within the company. Organizational policies, procedures, structure, rewards policy, authority, status and communication systems will all affect the ways buyers relate to salespeople.

Some examples of strategies and policies in buying organizations has had a considerable impact on buying decisions of the buyers: the emergence of just-in-time (JIT) production systems, purchasing performance evaluation, upgraded purchasing, long-term contracts... all that the business marketers must know as thoroughly as possible to match and catch the development and changes in B2B market. (1)

+ Interpersonal factors:

The DMU usually consists of different participants who have affects on each other. The seller in business market usually find difficult to define what kinds of interpersonal factors take part in the buying process. As an author notes: 'Managers does not wear tag that quote "decision maker" or "unimportant person". The power are often invisible, at least to salespeople. It is not the participants who are member of DMU always have the most influence corresponding to their rank in the business. Participants can influence on the buying process because they are responsible for rewarding and punishing policy. Or someone who has special expertise, or may affect the process with their special relationship with decision makers or top management. Interpersonal factors are usually very sensible and subtle. Whenever possible, sellers in business market should understand these factors deeply and develop strategies that take them into consideration . (1)

+ Individual influences:

»¿Each participant in the business buying process has his own personal motives, perceptions and priorities. These factors are influenced by individual characteristics such as personality, age, income, education, professional and attitudes towards gains and loss and risk. Moreover, buyers have different buying preferences, some may be technical style who analyzes in details of competitive offers before choosing a most suitable while others may be intuitive negotiators who make the best buying decisions based on the fair competition of sellers against one another . (1)

+ Situational Factors

We also could not ignore the other situational factors which can influence buying decisions of business buyers.

Time: Sometimes, business don't have enough time to apply full steps of buying procedure. In case of sudden broken-down of a machine, the business have to replace the parts for the continuity of production process, it may decide to make an order with some available existing suppliers.

Current Financial Situation: If the business is short of cash at certain point of time, it may decide to make order with the seller who have most favorable credit condition offers. Also, if the budget of a business is limited for a certain purchase, it may negotiate with the seller who offers cheaper that fits to the business's budget.

Availability: Depends on plan of each business, Some can allow long time delivery while others cannot, therefore if the supplier are unable to prepare the goods for delivery by the desired delivery date, the business buyers may shift to an other new supplier.

Special Offers: A supplier can give some special offers that may also be influenced by one of the situational factors and lead to the buying decision being affected.

As a supplier in the business market, now we have already known what factors can influence business buyers, we can build up the suitable sales strategies to this B2B market to master business buying activities and therefore win more value-contracts for our business.

1.2.4 How do business buyers make decisions in buying process?

Business buying can be seen as a series of decision, each of which leads to a further problem about which a decision must be made. From the viewpoint of the business marketer, it is possible to diagnose problems by examining the sequence of decisions, provided, the decision is known to the marketer. Marketers can identify the stage at which the firm is currently making decisions and can tailor the approach accordingly.

The most complex buying situation is New-task which involve the largest number of decision makers and buying influences. This is because New Task require the greatest amount of effort in seeking information and formulating appropriate solutions, but will also require the greatest involvement of individuals at all levels of the organization, each with their own plan. Buyers in situation of modified re-buy and straight rebuys may ignore some of the stages. (Appendix No. 1: Buygrid Framework) (3)

Recognizing a problem: the first step in buying process of business in which someone in the business finds out or be aware of a problem that can be settled by acquiring a product or service. Problem recognition can come from internal or external requirements. Internally, the business may decide to develop a new product and a new production line and materials may be in need. Or a machine may break down and need new parts.... In contrast, the buyer may be affected by external factors such as: an advertisement or an offer from a salesperson with better product but more competitive price.

Description of characteristic and quantity of product in need: the sencond step in buying process is that the business describes the general characteristics and quantity of required product. If the product are standardized, this stage is simply. But for the product with specific and complicated features, the buyer then have to consulting to opinions of other people such as: field users, engineers, consultants, financial officer... for determining the product. This group may rank the order of importance for price, availability, reliability, durability and other criteria desired in the product. In this period, a good salesperson can work with the buyers to define their requirement and he can supply information about the different product for buyer's choice.

Determination of characteristics and quantity of needed item: the third step in the buying process is that the business decides and specifies the most suitable technical characteristics of the product that they need.

Search for and evaluation of sources: the forth step in the buying process is that the buyer tries to search for best suppliers. The buyer sort out a shortlist of qualified suppliers by reviewing trade directories, searching on Internet or consulting other partners for recommendations. The Internet popularization is really a great opportunity for small suppliers to fairly compete in the market with the same advantage as the larger suppliers.

Aquisition and analysis of proposals: in this fifth step the buyer invites the qualified suppliers to hand in offers. Some suppliers will fax only a quotation or send a salesperson. However, when the purchase is complicated or expensive, the buyer will often require detailed formal presentations from each supplier in the shortlist. Seller in the business market must be good at and experienced in preparing proposals and presenting them to meet the buyer's requirement of complicated proposals. Proposals should be marketing documents, should not just express technical aspects. The presentations of salespeople must show the confidence of the seller and make the seller outstanding from other competitors.

Evaluation of proposals and selection of supplier (s): the step in buying porocess in which buyers evaluate proposals and choose a suitable supplier. During the selection, DMU will make up a list of required criteria and their ralative levels of importance. The members of DMU will rate the suppliers with their attributes and determine best suppliers. (Appendix No.2 illustrates some of the ways in which buyers can assess potential suppliers) (3)

Today, buyers tend to use the less number of suppliers. These buyers prefer suppliers to work closely with them in developing and producing goods and they will highly evaluate the useful suggestions from suppliers.

Selection an order routine: in this stage of process, the buyer send final order to the chosen supplier/suppliers, require a list of technical specifications, quantity, expected time of delivery, maintainence and warranties conditions. For the machine or equipment arising maintenance, repair and warranty, buyer are more and more using blanket orders than periodic purchase orders. In a blanket order, the seller always want to maintain a long-term relationship with buyers in which the seller will ensure to re-supply the buyer at any time needed on the basis of mutually agreed prices in a determined period. The seller keeps inventories and will supply to the the buyer if the buyer needs. Signing a blanket order will make the buyer free from reserving large inventories and bearing costs, this also minimizes administrative expenses of processing frequent similar purchasing orders.

Feedback and evaluation: the last step of buying process is that the buyer assesses the satisfaction with seller's products and services, then they decide if they will continue, adjust or shift to others. The buyer may ask the user to give his opinion about their satisfaction. The seller also considers and evaluates the same factors and cirteria applied by the buyer for being sure of that he also is giving satisfaction as expected. (Appendix No. 3: Evaluation approaches) (3)

All above methods and steps involve some degree of subjectivity, in other words each method requires buyers to make judgments about the suppliers. The fact that the credibility of outcomes for each method are small: those involved in evaluations should be excercised periodically and the criteria used by the various individuals involved needs to be checked.

1.3 The role of Personal selling in B2B marketing.

1.3.1 Definition:

Among the five main elements of integrated marketing communications - IMC (advertising, sales promotion, public relation, direct marketing) , personal selling is used as the most effective method in B2B marketing.

+ Definition of salesperson: an individual acting for a company by performing one or more of the following activities: prospecting, communicating, servicing and information gathering. Salesperson is someone who may stand behind the counter or whose job demands the creative selling of products and services (industrial equipment, insurance and consulting services...) or just builds a goodwill or educates buyers. (1)p810

+ Definition of Personal selling - is any form of personal presentation by the firm's sales force for purpose of making sales and building customer relationships.(3)

Some tools applied in Personal selling including: sales presentations, fairs and trade shows, and incentive programmes.

Personal selling can be used most effectively in any certain stages of the buying process of business, particularly in building up buyers' preferences, persuasion and actions. Compared to advertising, personal selling has several unique qualities: (3)

It relates to the interaction personally of different people, and therefore each person can see needs and characteristics of the other and then adjust accordingly.

Personal selling allows relationships of many kinds to interact, ranging from a simply related selling relationship to a deeper personal friendship. The effective salesperson who keeps the customer's interests in his heart for building a long-term relationship.

Personal selling make the buyer usually have a bigger need to listen and react, even if the reaction is a polite refuse: 'No, thank you'.

However, these unique qualities of Personal selling result some costs. A longer-term commitment are needed but the advertising are not- advertising can be easily turned on and off with no cost, but it is difficult for sales force to change. Personal selling is also the business's most expensive tool of promotion.

1.3.2 The role of personal selling:

+ The relative importance of personal selling in B2B market: we can take the comparison made by Philip Kotler in his book "Principles of Marketing" to see the importance of different promotional tools varies between consumer and business markets (see Figure 1.3). Businesses who sell consumer goods usually spare more part of their funds to advertise, the next is sales promotion, after that is personal selling and final is public relations. Advertising is relatively more important in consumer markets due to the number of buyers is larger, buyings seem to be routine, and emotions play a more important role in making buying decision process.

In contrast, the suppliers of industrial goods use most of their»¿ buget in Personal selling, the next order are sales promotion, advertising and then public relations. Generally, personal selling is used mainly with risky and expensive buying, and mainly in business markets with fewer and larger buyers.

+ The role of sales force in personal selling:

Personal selling is probably the largest single budget item in most B2B market. Salespeople earn high salaries and need expensive back-up: means of traveling, administration assistance, expensive brochures and sales materials and so forth. Counting the traveling time, preparation time, etc. Salespeople spend only a small portion in their time-budget actually making sales presentation. This leads to the question that why have we not been able to find a cheaper way to get business? (3) p248

The reason is that salespeople provide a personal touch. A salesperson is able to meet a buyer or indeed anyone else in the buying organization, discuss the organization's problems and find out a suitable creative solution. The buyer understands the company's problems, the salesperson understands the capabilities of the supplier and their products and these two one share knowledge about the industry and the environment in which it operates.

The key point in this is that selling is about establishing a dialogue: it is not about persuading buyers to buy things they don't really want, it is not about fast-talking a buyer into making a rash decision and it is definitely not about telling lies about the supplier's products. (3) p248

As a part of promotion mix, Personal selling is different from the other elements in that it always offers a two-way communication with the prospective customer, whereas each of the other elements is usually a one-way communication. And therefore, »¿personal selling shows its effectiveness than any other methods in complicated and large amount of money selling situations. This is partly what makes Personal selling such a powerful instrument; the salesperson can define points, answer questions and concentrate on those issues which are of biggest concerns to the potential customers.

More importantly, the salesperson is able to conduct a "market research" with the prospect and find out which issues are of most relevance, usually in a interactive way which permit the salespeople to point out problems which the prospect was not aware of. And more, »¿they can step by step establish long-term personal relationships with the people who can make key buying decisions.

Personal selling is used differently from company to company. Some sellers use no salespeople at all - for example, companies that sell mainly through mail-order, E-commerce or through manufacturers' representatives, sales agents or brokers. In most businesses, however, the sales force plays a most important role. In companies that sell industrial products, such as our company (ITASCO), Komatsu, CAT, salespeople may be use as the first contact, the sales force represent the company. At the same time, salesperson also performs on the viewpoint of the buyer to the seller, they arrange the contacts between the company's salespeople with the buyers.

»¿As companies build up a strategy of stronger market orientation, their sales forces are required to be more market focused and customer oriented. In today market circumstances, sellers expect salespeople can look at sales data, measure market potential, collect market useful information and then can themselves develop marketing strategies and sales plans. They should know how to combine the seller's efforts to make customer value and satisfied. In long-term development, the seller who develop a market-oriented salesforce will have more effective results than the seller who use a sales-oriented sales force. More than the winning new customers and making sales, it will help the seller to establish long-term relationships with the business buyers.

In combination with other forms of marketing communication, personal selling can performs as part of an integrated marketing program most effectively. Salespeople find it much easier to visit potential customers who have already been aware of the ability of the supplier and know partly about the supplier's products and services through advertising, exhibition, publicity.

1.4 Sales force management in personal selling:

Good sales force management plays a decisive role in the sucess of selling of a company, especially in industry selling which the orders come mainly from the long-term relationships built by the sales force.

1.4.1 Setting objectives for sales force:

The company bases on the volume of the market,the relative capability of sales force to set up the feasible objectives to the sales force. Some very specific objectives may be pointed out such as: the sales volume for each month, each quarter or the deadline for introducing the new technology to customer, the agenda of personal contacting time to customers and to prospects.... and the sales force must organize their sales teams, time budget, means of traveling, budget... basically conform to the company's selling goal.

1.4.2 Determining Sales force strategy and Designing Structure (1) p813-815

The sucess of personal selling depends much on the task of the company to design the appropriate sales force strategy and structure toward each customer or prospect.

+ The sales force strategy:

In order to win the value orders from customers, the salesforce strategy must be determined basing on the overall understanding of not only the organization's buying process but also the charateristics of the DMU's participants. From that the company may use the appropriate selling approaches as individual sales presentation or team sales presentation, conference selling or seminar selling (educational selling).

Salespeople make sales presentation in individual or team contact form they still need the assistance and support from other members of functional departments of the company. it may be the introducing phone call from the director, may be the technical information from technician, the support from finacial officer, aftersales staff or other administratvie officers.

»¿After establishing suitable selling approach the seller has two ways of organizing salesforce, that are direct or contractual basis. A direct sales force includes employees who work exclusively for the company in full time or part time working contracts. This sales force includes inside salespeople and field salespeople, of which one make sales from the seller's office while the other make sales by direct contacts to buyers. A contractual sales force was built up by manufacturer through sales representatives, sales agents or brokers who receive commission for their sales volume.

+ Structure of sales force:

From the sales force strategy identified, the company builds up the sales force structures suitable for the characteristics of customers, the products lines of the company, the characteristics of the market.... Several typical sales force structure usually used by supplier as following:

Territory structure: the way of establishing salesforce that permit each salesperson to make sales in exclusive geographic territory all the products and services of the seller.

Product structure: the way of establishing salesforce for selling only one product or serveral product in the product lines of the company. This structure is used when the company has lines of products with too complicated technical features so that the salesperson with specialized knowledges is really necessary. This type of salesforce structure may lead to the conflicts among the different sales teams in approaching the same prospects or same customers.

Customer structure: the way of organizing sales force for sales people to sell to specific customers or industry sectors. This type of sales force structure is particularly effective to apply in selling industrial goods and more and more sellers are using it. This application can make the company more customer-oriented and give the company the opportunity to develop long-term relationship.

Complex structure: »¿When the seller have a wide range of products or services for many customers in a broad area. This structure is a combination of some types of sales force structure. Salespeople can be »¿organized salespeople on the following forms: product - territory, product - customer or customer - territory. Each business should choose a salesfource structure that can explore most of their capabilities to make customers satisfied and fits the marketing strategy appling in their business.

Other structures of sales force: outside sales force (field sales force), inside sales force, team selling, and key-account selling. Each can be used in the particular context of market, selling technologies available in supplier, the volume of market...

+ The size of sales force:

Usually, the first basis that the company uses to set up the size for sales force is the workload approach. By this approach, the company considers some factors such as: the size of the buyers, the potential sales volume in short-term and medium-term, the characteristics of the products and services related to the amount of effort required and determine how many salespeople are needed to visit customers and also how many times per week/month the salespeople should visit.

1.4.3 Recruiting salespeople:

Recruitment play a decisive role in the sucessful performance of the sales force for any seller. A company, therefore, should establish a true strategy and a full standard process that need counting for the particular characteristics of the industry involved, the products and services, the relationships network, the existing sales force for recruiting good salespeople.

+The criteria required: these are different in consumer market (B2C) and B2B market, the industrial equipment even requires some specific characteristics for salesperson.

In Vietnam heavy industrial equipment, the criteria of order priority for good salespeople should be: able to build good long-term relationship, customer-oriented, experient, enthusiastic, independent, technical, self-motivated... This order is quite realistic in sales performance in Vietnam due to some factors as culture, level of technology, habits and customs and market itself.

When recruiting, beside the main criteria stated above the company also considers carefully other personal charateristics of the candidates as the health, marriage status, in order to access whether they can travel for long period, will they join the new working environment quickly? Can they be able to approach and work with top management officers of the buying business?

+ Source of candidates: from other business' sales people, recommendations from exisitng sales people, appointments from internal departments, employment agencies, introductions from professional colleges and universities....

+ Recruiting processes and procedures:

Generally, recruiting process may be devided in 06 steps:

Step 1: the board of director discusses with the sales Dept. to draw up a specific set of desirable traits and decide recruiting.

Step 2: the Human resource and Administrative Dept. gathers the demand from sales Department and builds a set of criteria of candidate

Step 3: Human resource and Administrative Department refine the CV of applicants, only CV of carefully prepared and briefly qualified are selected.

Step 4: a written test is organized then to rate the candidates. Good result candidates are informed to meet the business's interviewers.

Step 5: an interview is hold for cadidates as the final test.

Step 6: working contracts and probational period are set up for new sales people to begin.

The steps may vary from one company to another depending on the requirement of the positions, the numbers of candidates to apply, the quality of candidates...

1.4.4 Training: (3)p269

Actually, the training in a company is the next step in the recruiting process before making the produtivity of the sales force. Training can be long or short depending on the complexity of products and market, recruits are experienced or not.

Typically, training falls into two sections: classroom and field training:

Classroom training: the recruits are introduced about the company and about the products, about the competitors, about the industry and and customers. They may be taught some grounding in sales techniques (these are usually outsourcing courses). Selling experiences are also introduced by the top management and experienced salespeople.

Field training: which is an ongoing training program carried out in front of real customers in the field. People tend to learn best by performing the task, so most sales training programs involve substantial field training, either by sending out trainees with experienced salespeople or engineers, or by sending them out on their own early in their careers ("let's them swim"). The latter method is applied if there are plenty of customers. But for most industrial selling where customers and orders are fewer but larger, a mistake happens may cause serious results. In these circumstances it would be better to give trainees a long period to work in a sales team alongside more experienced salespeople.

1.4.5 Compensation for salespeople: (1)p818- p819

A good compensation policy of a company will make the sales force perform effectively. This can reduce the turn-over rate, thus reduce many types of costs for recruiting, training, costs of loss sales, and furthermore new sales people is less productive than the experienced one.

»¿Compensation is made up of several elements as follows:

Fixed amount: that is salary - the fixed income of the salesperson.

Variable amount: this sum of money is often not fixed, may be commissions or bonuses calculated based on sales volume, rewards to salesperson who has given greater efforts.

Expenses: which salespeople paid for the expenses of selling performance stipulated and accepted by the company and be repaid.

Fringe benefits: such as sickness or accident benefits, vacation holidays paid by the company, pensions and life insurance,....

The company usually uses these elements to set up the following 4 types of payment: straight salary, straight commision, salary plus bonus and salary plus commision. The appropriate type of payment can be used as a tool to motivate salespeople and also direct their activities. The sellers in industrial market tend to design the formular of payment that reward salespeople for building long-term relationship and growing long-run value of each customer.

1.4.6 Supervising sales force:

The companies must supervise the activities of the sales force to ensure that the selling activities are not in wrong direction. The supervision needed applies not only for new salespeople but the whole sales force in order to direct and motivate them for more effective performance.

+ Directing sales force:

The company may help salespeople to target customer in their territories and require them using their time budget very specifically. (Figure 1.5)

Sales manager also direct salespeople how to spend their time efficiently, requiring them to schedule their visits weeky, monthly, annually to customers and prospects and to prepare reports accordingly. Even salespeople need to be instructed timing their traveling, participating sport games with customers, eating, waiting, timepoint to meet and whom to meet...

Today, more and more the internet is popularized, the usage of internet in selling activities is more efficiently and making the selling costs reduced and changing the relative proportions of the above chart. For example, Salespeople can exchange informaion by email intead of phone calls or faxes, easier searching techincal information, customers' information, competitors' informaiton....

+ Motivating sales force:

Beside directing salespeople, the company also needs a set of norms and stipulations aiming at motivating them. Motivation tends to come from sources other than payment. The classic view of motivation was proposed by Abraham Maslow (1954). Maslow's Hierarchy of Needs model stated that people will fulfill the needs at the lower end of a pyramid (survival and security) before they move on to addressing needs at the uper end (love/belonging, esteem and self-actualization). Thus, once a salesperson has assured his physical needs, these are not motivators anymore; the individual will then moving to belonging or esteem needs.(3)p270. This case are right as the Vietnamese proverb "Mot tram tien cong khong bang mot dong tien thuong", means that one hundred as a salary/wage can not be compared to one as a bonus.

For this reasons The Board and Sales managers usually have to consider the appropriate motivational tools for the right type of salesperson.

Company's working climate: that make salespeople feel that their opportunities are fair among members, their value are highly appreciated, their good selling results are the opportunity for higher income and promotion.

Company's incentives and encouragement:

One of the usual incentives is the Sales meetings which is often organized for all salespeople and high level positions in the company an opportunity to meet in order to make their spirit higher, to make their "business culture" characteristics again popularized in all members.

Other meeting can be hold as seminars, workshops or some events such as: teambuilding, sport games. Here, salespeople have chance to exchange ideas, talking and making the relationship more familiar, time to honour the best salespeople... Other incentives can be sales contest, trips awards, merchandise awards...

Encouraging salespeople by offering a prize or gift to their family members.

All the above motivational devices aim at making the salesforce feel to be in high spirits, full of energy and ready for the new challenges. They also set up ties between salesperson to the company, making salesperson be responsible for tasks and duties assigned by the company.

1.4.7 Evaluating salespeople:

+ Why evaluating: in order to have the basis to give out some kinds of direction and motivation, the company must evaluate the salespeople' sales performance.

+ Sources of information: Sales reports are mostly used by any seller including weekly sales reports, monthly, quarterly and annually as well. Information also comes from reports of salesperson's visits to customers and prospects, from the expenses reports used for selling activities. Other sources can collect from customers' complaints, customers' surveys, talks with DMU's users and buyers, talks with other salespeople.

+ Evaluating steps:

Step 1: determine criteria for evaluating: criteria may include: sales volume(value or quantity) in territory or by accounts, percentage of completion compared with plans or quotas, gross margin compared with plan, profit compared with plan...

Step 2: set-up performance standards

Step 3: comparing performance standards.

Step 4: feedback to salespeople.

In the final step, management board talks with salespeople to point out their progresses or drawbacks and then may give directing proposals or motivational device. The aim of giving feedback is to help salespeople to improve their performance in the future.

1.5 Process in personal selling:

Personal selling is an classical method of maketing that has developed a deep literature and many principles.

Salespeople perform effectively not only because of their instinct - they are also required to be well-trained in analyzing data and well managing customers. A seller in business market want to sell effectively should apply customer-oriented strategy to personal selling. They must tell salespeople how to identify customer needs and to find suitable solutions. This approach assumes that salespeople should maintain a long term relaitonship with customers, taking care about the customer's concerns, offering good suggestions and the result is that customer will be loyal. In contrast, the sellers who apply sales-oriented approach with assumption that the customers will not decide to buy except under pressure.

The personal selling process includes many steps, in this dissertation I would like to take the view of Zimmerman in analyzing the detail of the process in which salespeople get new customer and obtain orders from them. ( See Figure 1.6 ) - The selling sequence is drawn as a circle to indicate that it is an ongoing process. (3) p255 - p256

+ Lead generation:

The activities are sometimes called Prospecting, although in fact they differ considerably. Lead generation is concerned with finding people who are prepared to meet the salesperson and hear what he has to say, (while Prospects are potential buyers who have a need for the product and able to pay for it). Lead generation is a process of establishing first contact; some leads can be supplied by the company but salespeople need skills to find their own. Leads are generated via cold-calling (making visits or phone calls without an appointment), ads, exhibition, mails, personal recommendation.

+ Prospecting:

When the lead has a need for the product and also has the means to pay for it. In some cases these issues cannot be clearly determined before the meeting with potential customer, but a good salesperson will try to investigate a prospect as thoroughly as possible before wasting time to make a sales call.

+ Preparing: preparing both physically and mentally: clothes, right presentation materials, attitude, knowledge.

+ Appointing: making appointment with the decision-makers in buying organization.

+ Presenting: the process of conducting a direct conversation with the prospect's need, from explain the solutions to prospect's need and closing the sale (the order is placed or may be not).

+ After-sales activities: including follow-up calls on customers frequently to learn lessons, to correct any shortcomings... the unexperienced salesperson often have the fear that customer will have a complaint but it is far better to find out that it is really the problem if salesperson did not. Further, after-sales visits also offer opportunities for other sales or asking recommendations. Other after-sales activities include ensuring that the paperwork is correctly completed, delivery on time and representing the customer's view back to the company and other appropriate market information.

Surveys

The need for research:

Market research is the process of identification, collection, analysis and use of information for the purpose of improving business decision making in related to the identification and solution of problems and opportunities in marketing (in general) and in sales. B2B market research is aimed at the buying behaviors of business buyers, the competition in market, sales volume forcasts, the performance of salespeople and participating members of the buying center (DMU as defined by Webster and Wind 1972) of the buyers.

Research process:

+ The first and most important step is to clearly determine what information should be collected. Will the decision be strategic or tactical? What kind of presentation will be required, whether the approache is technical or managerial.

The most important aspect of this stage of reasearch is to identify the problems. Some agreements must be made among all participants of DMU to understand fully the problem.

+ Defining purposes and objectives helps making sure for an appropriate research design.

+ Once the problem is defined, the next step is research design. The most improtant part of this step is to identify clear research objectives. The objective must be as specific as possible. In the context of our company, the exploratory research will be designed.

+ After the first two steps completed, the company should gather secondary data before moving ahead to primary data searching.

.+ we then analyze the data for selecting the useful and desired informations.

+ the last step is to prepare reports in research process.

Qualitative method:

Qualitative method in B2B market research aims to collecting and analyzing data for understanding deeply the buying behaviors and the reasons behind that behaviors of the objective buyers. The qualitative method is usually used to answer the questions why and how, not just the questions what, where, when. Therefore, samples size needed is small but concentrated. The large number of samples is unnecessary.

Research tools:

In B2B, there are 2 most often used approaches : in-depth interview and focus group

- In-depth Interview: Personal interview is mainly used by our salesforce to identify customer need, where we can raise the complex questions, discuss the sensitive topics and know the personal problems for better approach of future sales.

This tool is recommended when the opinion and assessment of the respondents are important and decisive to the buying decision of the company.