ADVERTISING AND SALES MANAGEMENT

[FOR LIMITED CIRCULATION]

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Dr. Sneh Chawla

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Deekshant Awasthi

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 ADVERTISING AND SALES MANAGEMENT

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 Contents

PAGE

Section A
ADVERTISING
UNIT-I
COMMUNICATION BASICS
Lesson 1: Marketing 5–14

Lesson 2: Communication 15–33

Lesson 3: What is Advertising? 34–41

Lesson 4: Advertising Objectives 42–53

Lesson 5: Determination of Target Audience and Positioning 54–61

Lesson 6: Advertising Budget 62–73

UNIT-II
ADVERTISING MESSAGE AND MEDIA DECISIONS
Lesson 7: Creativity and Advertising 77–93

Lesson 8: Creative Strategy 94–102

Lesson 9: Media Planning 103–115

Lesson 10: Advertising Through Internet 116–123

Lesson 11: Media Decisions - Types of Media 124–139

UNIT-III
ORGANIZATION AND EVALUATION OF ADVERTISING EFFORTS
Lesson 12: Measuring Advertising Effectiveness 143–154

Lesson 13: Advertising Agency 155–167

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PAGE
UNIT-IV
ADVERTISING AND SOCIETY
Lesson 14: Various Aspects and Issues in Advertising 171–190

Section B
SALES MANAGEMENT
UNIT-V
FUNDAMENTALS OF PERSONAL SELLING
Lesson 15: Various Aspects of Selling 195–220
Lesson 16: Sales Management Process 221–233

UNIT-VI
SALES PLANNING AND ORGANISATION
Lesson 17: Sales Territories 237–247

Lesson 18: The Sales Budget 248–268

UNIT-VII
SALES FORCE MANAGEMENT
Lesson 19: Recruiting and Selecting Sales Personnel 271–281

Lesson 20: Planning Sales Training Programs 282–296

Lesson 21: Executing Sales Training Programme 297–303

Lesson 22: Motivating Sales Personnel 304–314

Lesson 23: Compensating Sales Personnel 315–331

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 Section A
ADVERTISING

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 UNIT - I
Communication Basics

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 L E S S O N

1
Marketing

STRUCTURE
1.1 Marketing Mix
1.2 Communication
1.3 Marketing Communication
1.4 Marketing Communication Mix
1.5 Integrated Marketing Communication (IMC)
1.6 IMC Planning Process

According to American Marketing Association (AMA), “Marketing is the process of plan-

ning and executing the conception, pricing, promotion and distribution of ideas, goods and
services to create exchanges that satisfy individual or organisational objectives”.
The definition by AMA recognizes exchange a central concept of marketing, for exchange
to take place there has to be more than one party with something of interest or value to
others. Advertising and sales promotion plays an important part in the exchange process
by informing the prospect about the availability of the product or service and persuading
him/her of its value in satisfying his/her need or want.
According to Philip Kotler; “Marketing is the social process by which individuals and
groups obtain what they need and want through creating, offering and freely exchanging
products or services of value with others.”
Matching of products with what is demanded in the market, requires determining the
requirements of potential customers and then developing and supplying those products
which meet their requirements.
According to Stanton, “Marketing is the total system of interacting business activities
designed to plan, price promote and distribute want satisfying products and services to
present and potential customers”. In the words of Stanton, Marketing is seen as compris-
ing of all activities from the time a product is conceived to the time it reaches consumer
that is planning - this would include product line to be offered, quality, design, target
audience, market segmentation etc.; price - cost of production including overheads, retail
price, discounts, rebates, allowances etc. promotion - advertising, publicity, personal selling

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Notes etc., distribution-channel of distribution from the factory to the consumer,

selectivity among wholesalers and retailers etc.

1.1 Marketing Mix

A marketer’s job is to build a marketing program to achieve company’s
objective. For this he performs various marketing activities, these activ-
ities can be classified into four categories viz. Product, price, place and
promotion which are popularly known as 4 P’s of marketing or marketing
mix. A marketer has to take various decisions regarding these four tools
to pursue its marketing objectives. The activities performed under each
of these P’s are:
Product: This includes all activities relating to conception and planning
of the actual product i.e. decision regarding product quality, design, fea-
tures, size, varieties, brand name, warranty, guarantee and other services.
Price: This area deals with activities relating to setting the price for a
product. Decisions like retail price, margins of channel members, discounts
and allowances, credit terms, credit payment period etc.
Place: Placement or Distribution refers to all activities involved in getting
the product to the final consumer. Decisions in this category relate to
channels, market coverage, location, inventory, transportation etc.
Promotion: This refers to all activities concerned with informing con-
sumers about an organisation’s offering, persuading them to buy it, re-
minding them about it from time to time. Activities like advertising, sales
promotion, personal selling, direct marketing and other unconventional
media comprise the ‘P’ of promotion.

1.2 Communication
Communication is commonly understood as the imparting, sharing, or
exchanging of information, news, views, thoughts, attitudes or ideas
between two or more people.
Communication is a very complex process and its success depends on
factors such as nature of message, audience’s interpretation and the en-
vironment in which it is received. The receivers perception of the source
and the medium used to transmit the message may also affect the ability

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 MARKETING

to communicate as many other factors as words, pictures sound or colors Notes

may have different means ingenious go different audience and people’s
perception and interpretation of them vary.

1.3 Marketing Communication

It involves all activities concerned with effectively communicating product
information to select target audience. (Target audience is the group of
consumers to whom marketing communication messages are directed).
All marketing communication is done with a purpose. The prime purpose
of communication is to seek cognitive, affective or behavioural response.
In other words the communicator might want to imprint something into
consumer’s mind (cognitive response), change an attitude (affective re-
sponse) or get the consumer to act (behavioural response).

1.4 Marketing Communication Mix

Just as Marketing mix is the set of tools to market a product, marketing
communication mix is the set of tools to promote a product. A marketing
communication manager can choose from various tools such as advertis-
ing, sales promotion, public relations, personal selling, direct marketing,
special events etc.
This marketing communication mix offers organization’s set of tools that
facilitate the attainment of long-term goals of the organization as well
as ensures that the intent of marketer is received by the target audience
in the light that marketer intends it to be.

Elements of Marketing Communication Mix

Advertising: This is commonly defined as any paid form of non-personal
presentation and promotion of ideas goods and services by an identified
sponsor.
Sales Promotion: It is the collection of tools that stimulate quicker or
greater purchase of products by consumer or trade in the short run.
Consumer Sales promotions are directed to the end user of the product
and include tools such as price discounts, coupons, rebates, contests,
sweepstakes, point of purchase material etc. Trade sales promotions are

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 ADVERTISING AND SALES MANAGEMENT

Notes directed towards the resellers to motivate them to provide special support
for the organization’s product and to market it aggressively. It includes
allowances, sales contests, trade shows etc.
Personal Selling: This is the personal presentation by the representative
of an organisation with the purpose of influencing consumer buying de-
cisions, making a sake, building long-term relationship.
Publicity: This comprises non-personal communication by third party
sources regarding an organization or its products. It includes activities to
provide newsworthy information to reporting sources like media to build
a favourable image. In other words when third party communicates about
an organization’s product, the result is publicity for the said product.
Public Relations (PR): This is the managerial activity concerned with
gathering public opinion and analyzing public attitude and thereby defining
policies and plan of action for an organization to earn public appreciation
and acceptance. The scope of PR is much broader than publicity, it involves
planned effort to positively influence the public opinion.
Direct Marketing: This is one-to-one approach that uses advertising media
to produce an inquiry, a transaction and some other immediate response.
In direct marketing the marketer and the prospect interact directly, without
the presence of any intermediary. Direct mail, direct response television
or radio, mail order catalogue, direct email, internet, telemarketing etc.
are various vehicles of direct marketing.
Unconventional Media: There are many other marketing communication
tools that defy the traditional categorisation; for example:
‹ Packaging: This is the last marketing message a consumer sees
before making a purchase decision, it serves many functional and
promotional purposes.
‹ Point of Purchase (POP) or Merchandise Material: POP materials
are stationed at retail outlets and may include fancy dispenser with
visuals and brand log, posters, danglers etc, Prime objective of POP
is to capitalise on the impulsive buyer and make one last shot at
influencing the customer.
‹ Advertising Specialities: This refers to the items that are imprinted
with company or brand logo or mark to serve as gift items Calendars,
diaries, pens, t-shirts etc. are popular speciality items.

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 MARKETING

‹ Trade Shows and Exhibits: Trade shows or fairs are exhibitions Notes
where companies in a specific industry get together to showcase
their products. Such exhibitions are attended by the members of
the industry, suppliers and buyers media etc. The primary objective
is to provide information to the highly targeted audience and get
visibility.

1.5 Integrated Marketing Communication (IMC)

IMC is a management concept that brings together all the tools of mar-
keting communications to send consistent messages to target audience.
Instead of dividing communications into several overlapping areas, IMC
unifies each communication element to deliver consistent message with
one voice, one theme and on strategy.
American Association of Advertising Agencies defines integrated mar-
keting communication as:
A concept of marketing communication planning that recognises the
added value of comprehensive plan that evaluates the strategic role of
variety of communication disciplines-for example general advertising,
direct response, sales promotion, and public relations and combines
these disciplines to provide clarity, consistency and maximum commu-
nication impact.
IMC approach to looking at communication tools not as isolated elements
that communicate different elements to consumer but as interrelated parts
that jointly go to solving communication problems this is because con-
sumers perceive various communication messages as information about a
brand from different sources. In effect the principle of integration holds
that all communications originating from a single strategic platform where
all the tools cooperate with one another will create greater impact and
synergy than when tools work individually by themselves.
Promotion managers practicing integration understand the functions,
strengths and weaknesses of each tool and use them to strengthen or add
to the work done by other tools. For example, if advertising is used to
build brand preference and inform large audience about a new product,
sales promotion is used to generate trials, build excitement and encour-
age stocking at the retail level. Public relation is used to get maximum

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 ADVERTISING AND SALES MANAGEMENT

Notes publicity for the new product, build creativity, POP merchandising can
be used to convey ad messages in store and remind consumers at the
point of purchase. Thus each tool serves different purpose but achieves
a common goal of promoting new product. Instead making tools compete
with each other, if they are planned and used jointly they can achieve
maximum communication impact.
The advocates of IMC even take a broader perspective and argue that
organisation should integrate all marketing activities so that its entire mix
of product, price, distribution and communication strategies send consis-
tent messages. This is because a consumer experiences a brand through
various “contact points”. A contact point could be a friendly salesman
of the product, a price tag that announces the price, the brand’s website
that consumer’s surf for information on brand or a brand’s hoarding that
consumer’s chance upon at a crossroad. Each of these touch points will
deliver some message to the consumer and each consumer will come in
contact with the brand through a unique mix of contact points. If each
of these contact points delivers a consistent message, the message will
be reinforced in the consumer’s mind.
Experts opine that the concept of IMC can be broadened even further to
consider not just the impact of marketing messages but also corporate mes-
sages, since everything that a company does eventually affects its image,
thus integration is important not just in communication or marketing but
also in overall business management. Consistency at the corporate level
is essential because stakeholders do not distinguish messages intended for
them or those intended for other audiences. An organization’s employee
may also be its investor, media reporter or customer. If inconsistent mes-
sages are received by that individual about the brand in various capacities
there would be a lot of confusion or distrust.

1.6 IMC Planning Process

Marketing communication is one of the four tools of the marketing mix,
hence it is based on the strategies laid down in the marketing plan, which
in turn is derived from the overall business plan. Therefore an organi-
sation begins first by strategic planning of its business, next marketing
function and then of its marketing communication.

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 MARKETING

Marketing communication managers utilise details from the marketing Notes

plan that are relevant in determining promotional strategy. The IMC
objectives are laid down so as to fulfil marketing goals. The IMC plan
selects the right communication tools, integrate them, plans accompanying
media and messages and also allocate communication budget to various
tools. In addition IMC is also responsible for managing how other tools
of marketing viz. Product, price, place, communicate to audiences.

Steps involved in the IMC planning process are:

Situation Analysis: Analysis of the factors that are relevant to the pro-
motion situation for example review of the past campaigns, assessment of
the product’s benefits, promotional strategies by competitors, analysis of
target audience - their demographic profile their behavioural pattern etc.
Determine Problem or Opportunity: The situation analysis can identify
the problems or opportunities concerning communications. IMC plans
can solve problems like lack of awareness or knowledge or negative at-
titudes. Misconception about the product, poor image etc. It can also aid
other tools of marketing viz. product, price and distribution by focussing
attention on or away from them or justifying them.
Determine Communication Objectives: Communication objectives
flow from the marketing objectives whereas marketing objectives are
outlined in terms of sales, market share, communication objectives talk
about specific communication tasks that are to be achieved and outlined
in terms of awareness to be created, attitude or behavior to be changed,
image to be built etc.
Determine Budget: After objectives are set, company has to decide how
much it is willing to spend on promotional program, taking into account
programme cost, how much it can afford, competitive spending etc.
Develop IMC Strategies: The most thorough and demanding step of the
entire planning process requires a number of key decisions to be taken
relating for example determining the marketing communication mix- to
be decided keeping in mind target audience, product type, promotional
budget., strength the weaknesses of communication tools. Determining
media strategy involves determining the communication channels that
would be used to deliver the messages. Each promotional tool has set of

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 ADVERTISING AND SALES MANAGEMENT

Notes media vehicles or delivery channels. For example, direct marketing can
be done through direct mails, emails, websites etc.
Implement the Strategies and Monitor Activities: Successful imple-
mentation calls for breaking the plan into micro level activities, timing
and scheduling them, assigning them to people in charge, coordinating
their efforts and monitoring the execution process.
Evaluating the Planning Process: Evaluation of IMC is not easy because
often communication effects are difficult to measure. At times they may
not have direct impact on sales, effects may be delayed etc. Therefore
it is important to set objectives or standards for measuring performance
in specific, measurable terms to evaluate to make evaluation possible.
Case for IMC: The prime factor in favour of IMC is its ability to add
value to company’s marketing communication efforts by making them
more consistent and unified. In addition IMC is the most effective way
of communication because it avoids duplication, selects the best possible
tool for a particular communication task and produce greater returns on
communication investment by making bigger impact.
Apart from IMC’s effectiveness there a number of environmental factors
that are compelling companies to adapt, adopt integration as a commu-
nication concept.

The reasons for the growing importance and adoption of IMC are:
Decreasing Impact of Traditional Advertising: For a number of reasons
consumers are responding lesser than ever to traditional advertising, which
has become more costly and less cost effective than before. With prolif-
eration of umpteen new brands, real product differentiation has become
small and largely insignificant making it more difficult for advertising
to create brand identity. Besides consumers are not easily impressed by
the concoction of words, visuals put together for advertising’s sake. In
addition the budget allocated to consumer and trade sales promotion has
increased with the growing pressure of generating immediate results. In
effect, much of advertising budget has got diverted to sales promotion.
Proliferation of New Ways to Reach Consumers: The shift to IMC
has been brought about by the increase in the traditional media vehicle
and the addition of new and advanced communication options. The on-
slaught of digital satellite systems have multiplied the number of channel

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 MARKETING

options, a number of alternate media like electronic magazines, online Notes

journals, news groups, social networking sites, mobile advertising etc.
are also gaining grounds. An increasing number of companies today have
an online presence through websites, sponsor interne or mobile games,
create blogs send text messages ads or brand jingle ring tones to con-
sumers. This spurt in number of low cost, more targeted, niche options
of reaching consumers has made a dent in the large audience coverage
that traditional media can offered. Also, consumers are increasing control
over what they want to hear, see and read and they are rejecting adver-
tising messages. Hence, marketers are looking at out-of-the-box ways of
communicating to their audience.
Growth of Database Marketing: Companies have been able to gather
sufficient information about customers and prospects through various
survey based and observational devices. This helps them understand
individual consumer preferences, segment and target consumers more
effectively, and customise communication programme for individuals or
small groups instead of spending large amounts on mass communication.
The modern day consumer has also become more demanding who wants
customised, interactive, permission-based communication rather than mass
scale advertising or generalised sales promotion offers.
Growth of International Marketing: With companies doing more busi-
nesses globally, they are faced with the challenge of marketing their
products not just in a region or country but throughout different markets.
This is tricky because the objective is to deliver a consistent image and
message in spite of different departments and diverse cultural settings.
Thus it is the task of IMC to coordinate functions across departments
and countries. Another challenge while maintain consistent image world-
wide is to localise certain communication elements taking into account
cultural differences.
Emphasis on Relationship Marketing: Relationship marketing is a
marketing practice that aims at building long lasting relationships with
various stakeholders of the company including customers. Relationship
marketers look at the lifetime value of a customer rather than at individual
transaction. Central to the concept of relationship marketing is customer
retention; since all interactions has prime goal of increasing lifetime
value of a customer. Relationship marketing requires communication

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Notes to be integrated because only in a synergistic system can a customer’s

various contacts with the brand be monitored. IMC has to coordinate all
communications to customers and also make the process transparent so
that managers in all departments are aware of a particular customer’s
various contacts and experiences with the brand.
Tighter Control over Communication: Today’s consumers are more
aware and informed, consumer activists forum are constantly scrutinising
communications from various brands. In general consumer’s scepticism
towards advertising and mass communication has grown. Also control
by regulatory authorities has become more strict. Thus distrust lies with
both the consumer and the regulators and intrusive and mass marketing
communication is faced with hostile audience. In such a situation IMC
has to endeavour to sync all, its communication and pass it through a
common ethical and legal test within the company.
Need for Creating Brand Identity: IMC plays an important role in the
process of branding or brand identity creation. A brand is a name, sign,
symbol, logo, trademark or combination thereof that helps to distinguish
an offering from the other. Brand recognition is a result of awareness
regarding the brand in the marketplace and is created by direct experi-
ences with the specific product and through the influence of advertising,
media coverage, word of mouth etc. A brand serves to create certain
associations that come to consumer’s mind when they think about it
(name, sign, logo etc.). IMC is responsible for creating and managing
consistent brand associations.

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 L E S S O N

2
Communication

STRUCTURE
2.1 Basic Model of Communication
2.2 Communication Process
2.3 Analyzing the Receiver
2.4 Identifying the Target Audience
2.5 Levels of Audience Aggregation
2.6 AIDA Model
2.7 +LHUDUFK\ RI (ৼHFWV 0RGHO
2.8 Innovation Adoption Model
2.9 Traditional Consumer Response Hierarchy Models
2.10 Alternate Response Hierarchies
2.11 Evaluating Alternative Response Hierarchies Models
2.12 Cognitive Processing of Communication
2.13 Elaboration Likelihood Model (ELM)
2.14 The ELM Model
2.15 Implications of the ELM
2.16 Engel Kollat Blackwell Model [EKB Model]
2.17 Consumer Decision Making Process

Communication is commonly understood as the imparting, sharing, or exchanging of in-

formation, news, views, thoughts, attitudes or ideas between two or more people.
Communication is a very complex process and its success depends on factors such as
nature of message, audience’s interpretation and the environment in which it is received.
The receiver’s perception of the source and the medium used to transmit the message may
also affect the ability to communicate as many other factors as words, pictures sound or

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 ADVERTISING AND SALES MANAGEMENT

Notes colors may have different means ingenious go different audience and
people’s perception and interpretation of them vary.
The function of all elements of integrated marketing communication pro-
gram is to communicate. Organizations send communications and messages
in variety of ways such as advertisements, brand names, logos, websites,
press releases, packaging designs, promotions and visual images. Those
involved in the planning and implementation of IMC program need to
understand the communication process and how it occurs.

2.1 Basic Model of Communication

Sender’s Receiver’s
Field of Field of
Experience Experience

Source/ Encoding Channel Decoding Receiver

Sender Message

Response
k c

Noise
Feedba

2.2 Communication Process

All messages originate from sender or source of the message. The sender
may be an individual, group or organization that wishes to transmit the
message to another individual, group or organization viz. the receiver.
The sender and the receiver are the two communicators in the commu-
nication process.
The process of communication begins when the sender determines how
a given message will be conveyed. He has to select the words, images,
symbols, format, tone etc. for the message. This process of transferring
the content of message (thoughts, ideas, news) into symbolic form is

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 COMMUNICATION

known as encoding. The sender should select symbols and languages Notes
that the receiver is familiar with and would view favorably. The encoding
process leads to the development of the message that contains information
or meaning the source hopes to convey.
The sender should also select channel of communication that is best
suited for the particular message and target audience for example local
edition of regional newspapers are best suited to announce limited period
sale of local retail shop. Channels are broadly divided into personal and
non-personal media. Personal channels of communication are direct or
one-on-one such as personal selling or word of mouth communication.
Non personal channel comprise mass media where message is sent to
many audience members simultaneously such as print or broadcast media.
After the message is encoded and transmitted through right channel the
receiver decodes the message on receipt. Decoding is the process of
translating the encoded message from its symbolic representation back
into thought or comprehension. How well, the message is decoded de-
pends on the receiver’s comprehension skills, attitude, profile, knowledge,
culture, and social system among other things. The greater the similarity,
understanding or common frames of reference between the sender and
the receiver the more effective the communication would be.
However apart from characteristics of sender and receiver certain extraneous
or environmental factors also determine effectiveness of communication
termed as noise or entropy these are the factors that create interference
in message dissemination or reception, for example, coming up of better
sales offer by competitor at the time of advertiser’s offer, the newspaper
page on which the advertiser advertised being full of other ads, power
cut at the time an ad is broadcast on television etc. are all noise causing
factors that hamper communication process.
The communication process does not end with the receiver receiving the
message. The marketer is also interested in the receiver’s response and
reactions on getting the message which help him gauge efficacy of com-
munication feedback completes the exchange process whereby receiver
becomes sender and transmits his response back to original source feed-
back can be in various forms verbal posing of question to the salesman,
purchase action after seeing an ad, or even total inaction problem that

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 ADVERTISING AND SALES MANAGEMENT

Notes marketer experience often when mass media is used is that of the indirect
or delayed response which makes it difficult to measure the effectiveness
of communication because of the difficulty in gauging delayed response
marketer often conduct consumer interviews, make store visit, or provide
feedback forms to analyze receiver’s response, comprehension, message
recall etc.

2.3 Analyzing the Receiver

To communicate effectively with the customers, marketers must understand
who the target audience is, what (if anything) it knows or feels about the
company’s product or services and how to communicate with the audience
to influence its decision making process. Marketers must also know how
the market is likely to respond to various sources of communication or
different messages before they make decision regarding source, message
or channel variables.

2.4 Identifying the Target Audience

The marketing communication begins with identifying the target audience
that will be the focus of the firm’s advertising and promotional efforts.
The target audience may consist of individuals who have specific needs
and for whom the communication must be specifically tailored. This often
requires person-to-person communication and is generally accomplished
through personal selling.
Second level of audience aggregation is represented by the group. Mar-
keters must communicate with the group of people who make or influ-
ence the purchase decision. For example, organisational purchasing often
involves buying centres committees, companies marketing their products
to businesses and organisations must understand who is the purchase
committee, what aspect of decision each individual influences and the
criteria each members use to evaluate a product. Advertising may be di-
rected at each member of the buying centre, multi level personal selling
may be necessary to reach those individuals who influence or actually
make the decisions.

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At the next level small and well-defined group of customers often referred Notes
to as market niches, can be reached through personal selling or highly
targeted media such as direct mail, the level above is the broad classes
of buyers; market segments, who have similar needs and can be reached
with similar messages. As the market segment gets larger marketers often
use broader based media such as newspapers, TV etc. to reach them.
Marketers of the most consumer products attempt to attract the attention
of the large number of present and potential customers (mass markets)
through mass communication such as advertising or publicity. Mass
communication is one-way flow of information from marketer to the
customer. Feedback of the audience’s reaction is generally indirect and
difficult to measure. Unlike personal or face-to-face communication,
mass communication does not offer marketer an opportunity to explain
or clarify the message to make it more effective. Therefore the marketer
must enter the communication situation with the knowledge of the target
audience and how it is likely to react to the message i.e. the receiver’s
response process.

Mass Markets

Market Segments

Niche Markets

Individual or Group
Audiences

2.5 Levels of Audience Aggregation

Response Process
The most important aspect of developing effective communication programs
involve understanding the response process the receiver may go through
in moving toward a specific behavior like purchasing of product and how
the promotional efforts of marketers influence consumer responses. Ex-
perts have found that consumer often respond to messages in hierarchical

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Notes order of behavior. These hierarchical responses are demonstrated through

various models of consumer response stages.

Traditional Response Hierarchy Models

Traditional response hierarchy model proposes that consumer typically
move through various stages of responses. A number of models have been
developed to depict the stages a consumer may pass through in moving
from the state of not being aware of company, product, or brand to actual
purchase behavior. These responses are typically divided into cognitive,
affective and behavioral responses. For each stage of consumer readiness
or response communicator must perform specific actions. For example,
the communicator need to imprint something into the consumer’s mind
(cognitive response), change an attitude (affective response) or get the
consumer to act (behavioral response).

2.6 AIDA Model

The AIDA (Awareness-Interest-Desire-Action) model of consumer re-
sponse hierarchy states that a consumer passes successively through the
following four stages of response:
Awareness: In the initial stage the target audience is unaware of the
product or brand hence the communicator’s objective is to build aware-
ness maybe just name recognition with simple message repeating brand
name or to give basic information about the product. In a relatively new
product category this function assumes maximum importance.
Interest: In this stage consumers graduate from awareness about the
product to interest in it. Interest in the product can be created by showing
some unique feature of the product, demonstrating how it works, fetching
popular celebrities etc.
Desire: Once the target audience is aware of and interested in the prod-
uct the next function of advertising is to get them positively inclined
towards buying it i.e. create desire and awareness for advertised product.
Desire can be built up by showing how the product addresses a consum-
er’s specific needs and by creatively promoting quality, value and other
significant features.

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Action: Advertising has not played its part until it has achieved the ul- Notes
timate objective spurring the target audience into action. In most cases
the desired action is to lead consumers to purchase but in certain cases
it can also generate inquiries, lead to retail visit etc. Brand or image
building advertising will not immediately lead to purchase action but will
create preference and desire that will ultimately translate into purchase.

2.7 Hierarchy of Effects Model

The hierarchy of effects model is stair-step and linear models proposed by
Robert Lavidge and Gary Steiner that states that advertising must move
people up a series of steps from cognitive processing to attitude change
to purchase behavior. Consumers do not switch from being disinterested
individuals to convinced purchasers in one instantaneous step. Rather
they approach the purchase decision through series of steps ranging from
awareness, knowledge, liking, preference, conviction and purchase.
A Fundamental assumption of the model, is that advertising effects occur
over time hence advertising must move consumers through the above-men-
tioned five psychological stages before it can lead to purchase.

2.8 Innovation Adoption Model

The Innovation Adoption Model is based on the diffusion of innovations
theory, looks at consumers as adopters of new innovation and classifies
them into categories such as innovators, early adopters, early majority,
late majority, and laggards based on how soon they adopt an innovation
i.e. purchase a product. Innovators are the first whereas laggards are the
last to purchase. This model points out that trying to quickly convince
the mass of new, unconventional idea is futile. It makes more sense in
convincing innovators and early adopters and taking other gradually
through the decision making process (awareness, interest, evaluation, trial
and adoption) that occurs when individuals consider adopting a new idea.
The adoption process can be speeded up through demonstration or sam-
pling programme that increase consumer confidence in the new product.

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Notes

2.9 Traditional Consumer Response Hierarchy Models

Information Processing Model
The information processing model of advertising effects was developed
by William McGuire. The model assumes the receiver in a persuasive
communication situation like advertising is an information processor or
problem solver. McGuire suggests the series of steps a receiver goes
through in being persuaded constitutes a response hierarchy. The stages of
the model are similar to hierarchy of effects; attention and comprehension
are similar to awareness and knowledge and yielding is synonymous to
liking. This model includes a stage not found in other models: retention
or receiver’s ability to retain that portion of the comprehended information
that he or she accepts as valid or relevant. This stage is important because
most promotional campaigns are designed not to motivate consumers to
take immediate action but rather provide information they may use later
when making a purchase decision. Each stage in the response hierarchy
is a dependent variable that must be attained and that may serve as an
objective of the communication process.

Evaluation of Traditional Consumer Response Hierarchy Models

The response models are useful to communicators in several ways. An
understanding of the consumer response stages explains how consumer
relate to advertising in terms of their interest in buying a product when

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they see an ad. Marketing that accounts for each response stage and Notes
moves customers through each stage can increase the result of advertising.
Understanding the response stage also helps in making strategic decision
as to audience in which phase should be addressed through a specific
campaign. For example, if advertising is targeted at people who are at
the acquirement stage, it should be more persuasive and focus on definite
product advantage and distinct feature or image.
In spite of the usefulness of these models, they do suffer from some
oversight. All the models mentioned assume that consumer moves through
a hierarchical response of cognitive-affective-behavioral response. They
assume that consumers pass through these stages only in that order. This
sequence is appropriate when the consumer has high involvement with
the product category and the differences among the products are high.
However, the hierarchy is not always relevant and has been questioned
as a result of extensive research in the fields of marketing.

Alternate Response Hierarchies

Michael Ray developed a model on information processing that identifies
three alternative ordering of these stages based on the perceived product
differentiation and product involvement. These alternative responses are
standard learning hierarchy, dissonance/attribution and low involvement
models.

Standard Learning Hierarchy

In many purchases when the consumer is highly involved in the purchase
process and there is much differentiation among the competing brands,
the consumer will go through the response process as depicted by the
traditional communication models which consist of learn-feel-do sequence.
Information and knowledge acquired or learned about various brands are
the basis of developing affect or feelings that guide what the consumer
will do (actual trial or purchase). In this hierarchy the consumer is viewed
as an active participant who gathers information through active learning.

Dissonance/Attribution Hierarchy
Second response hierarchy proposed by Ray involves situations where
consumers first behave then develop attitude or feelings as a result of

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Notes that behavior and then learn or process information that supports the
behavior. This model is do-feel-learn model, which occurs in situations
where consumers must choose between two alternatives that are similar
in quality but are complex and may have hidden or unknown attributes.
The consumer may purchase the product on the basis of a recommendation
and then attempt to support the decision by developing positive attitude
towards the product or by even developing negative feeling towards the
rejected alternative. This reduces any post-purchase dissonance or anxi-
ety the consumer the consumer may experience resulting from the doubt
over the purchase.
According to this model, the marketers need to recognize that in some
situations attitude develop after purchase. According to Ray, in these
situations the main effect of mass media is not the promotion of original
choice behavior and attitude change but rather the reduction of dissonance
be reinforcing the wisdom of the purchase or by providing supportive
information.
As with the standard learning model, this response hierarchy is likely to
occur when the consumer is involved in the purchase situation.

Low Involvement Hierarchy

In this response process the receiver is viewed as passing from cognition
to behavior to attitude change. This learn-do-feel sequence characterizes
situations of low consumer involvement in the purchase process and there
are minimal differences among the brand alternatives and mass media
advertising is important. In the low involvement hierarchy consumer
engages in passive learning and random information catching rather than
active information seeking.
In a low involvement situation the consumer does not compare the mes-
sage with the previously acquired beliefs, needs or past experiences.
The commercials result in subtle changes in the consumer’s knowledge
particularly with repeat exposure. This change in knowledge does not
result in attitude change but is related to learning something about the
advertised brand such as ad theme, slogan logo etc. When the consumer
enters the purchase this information may be necessary to trigger purchase,
the consumer will then form attitude towards the purchased brand as a
result of experience with it. (Herbert Krugman’s Theory).

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Notes
2.10 Alternate Response Hierarchies

Topical Involvement
High Low
Standard Learning Model Low Involvement
Model
Cognitive Learn Cognitive Learn
High
Affective Feel Conative Do

Perceived
Product Dif- Conative Do
ferentiation Dissonance/Attribution
Model

Conative Do Affective Feel

Low

Affective Feel

Cognitive Learn

In a low involvement situation the advertiser must recognize that the

passive, uninterested consumer may focus more on the non-message
elements and through repletion, the product’s name rises in customer’s
awareness bringing a cognitive change of increased product memory
which ultimately translates to purchase.

2.11 Evaluating Alternative Response Hierarchies Models

The various response models present an insight into the various ways
consumers may respond to the marketing communication. They encour-
age marketing communication managers to understand the nature of the
product, level of audience involvement, differences between product

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Notes alternatives and mass media significance for the product before forming
promotional strategies. If the communicators are successful in determining
the type of response process that is most likely to occur for their product,
it helps in setting appropriate advertising objectives and increasing the
effectiveness of the message.
Although traditional and alternative response models posit different ways
in which the consumer may respond, they do not adequately explain all
response hierarchies. Also the model does not talk about the negative
cognitive evaluation of an ad, which is possible if the consumer has
formed negative perception for a product based on personal experience.
When a negative trial experience precedes exposure to an ad, hence the
cognitive evaluations of the ad are more negative.

2.12 Cognitive Processing of Communication

When ads change consumer attitudes in high involvement situations, it is
quite natural to assume that this occurs because the consumers learn from
the advertising message and this change in attitude towards the brand
is the result of learning. However research in 1960s and 1970s revealed
that there was weak relationship between consumer’s recall of message
content and the attitude towards the advertised brand. The response
hierarchy models fail to explain the underlying reasons that cause the
resulting reaction. This led researchers to try to understand the nature of
cognitive reactions to advertising messages. What appeared to be really
relevant in determining attitude was the nature of thoughts that emerged
in the heads of consumer when the ad was shown.
Cognitive Responses: The thoughts that occur to consumer’s mind while
reading, viewing and/or hearing communication. Cognitive response
approach has been widely used in research by both academicians and
advertising practitioners. Its focus has been to determine the type of
responses evoked by an advertising message and how these responses
relate to attitude towards the ad, brand attitudes and purchase intentions.
The following figure depicts the basic cognitive response the research
has identified.

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Cognitive Response Model Notes

Product/Message Thought: These thoughts relate to brand or claims

made in the message. There are two types of responses in this context,
Support Arguments and Counterarguments.
Counterarguments are the thoughts the recipient has that are opposed to
the position taken in the message, Support Arguments are thoughts that
affirm the claims made in the message.
When advertising claims oppose the existing consumer beliefs, the possi-
bility of counter-argument increases. If the counter-argument is more, the
chances of message acceptance decrease considerably. On the other hand
support arguments help message acceptance. The ads should encourage
support arguments and minimize the chances of counter-arguments.
Source-Oriented Thoughts: Thoughts of this category are directed at
the source of the ad message. Negative thoughts about the endorser or
advertiser are called Source Derogations. Such thoughts generally lead
to reduction in the message acceptance. If the endorser is perceived as
unreliable, dishonest or irritating type, the message is likely to be un-
acceptable. On the other hand, thoughts that are positive and favourable
towards the source are termed as Source Bolster.
Advertisers attempt to contract endorsers who are liked by the target
audience to increase the message acceptance and credibility.
Ad-Execution Thoughts: This category of cognitive response consists of
individual’s thought about the ad itself. While reading, viewing or hearing
an advertisement many of the thoughts that audience members have may
not relate directly to the message or product. Some of these thoughts may
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Notes possibly relate to their own lives and experiences or thoughts may only
the ad execution such as tones, colours, visual quality etc. These thoughts
may prove favorable or otherwise. These aspects of thoughts are important
because of their effect on audience member’s attitude towards the brand or
the advertising message. These thoughts are affective reactions representing
the consumer’s attitude towards the ad. Much attention has been focused
on consumer’s affective reactions to ads, especially television commercials.
Attitude towards the ad represents the receiver’s feeling of favourability
or unfavourability towards the ad. Advertisers are interested in consum-
er’s reactions to the ad because these affective reactions are important
in determining the advertising effectiveness since these reactions may be
transferred to brand itself or directly influence purchase intentions.
Many advertisers use emotional appeals in the ad executions to evoke
feelings and affective reactions as the basis of their creative strategy.
The cognitive process model of communication proposed here sees a
communication not as the transmission of information, but as a series
of challenges, rewards, and affordances (resources and constraints) that
provoke and guide the receiver’s perception, thought, inference, recog-
nition, and memory.

2.13 Elaboration Likelihood Model (ELM)

The model was devised by Ricard Petty and John Cacioppo to explain the
process by which persuasive communication (such as ads) leads to persuasion
by influencing attitude. According to the model, attitude formation or change
process depends on the nature and amount of elaboration or processing of
relevant information that occurs in response to a persuasive message.
The ELM shows that elaboration likelihood is a function of two elements,
motivation and the ability to process the message. Motivation to process
the message depends on such factors as involvement, personal relevance
and individual needs and arousal levels. Ability depends on individual’s
knowledge, intellectual capacity and opportunity to process the process
the message for example an individual viewing a funny commercial may
be distracted from the processing of information about the product.
According to the model, there are two basic routes to persuasion and at-
titude change viz. the central route to persuasion and the peripheral route
to persuasion (Figure below).
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The consumer may consciously and diligently consider the information Notes
content in the ad message, in developing or changing the existing atti-
tude towards the advertised brand. In this situation the attitude is formed
or changed as a result of careful consideration, analysis, scrutiny of
message arguments and integration of relevant information with regard
to the advertised product - High Elaboration and Likelihood. Basically
the consumer is highly involved in the processing the advertisement.
Information processing of this type is called Central Route to Persua-
sion. Predominantly favourable cognitive responses (support arguments
and source bolster) lead to favourable changes in the cognitive structure
which lead to positive attitude change or persuasion. Conversely if the
cognitive processing is predominantly unfavourable and results in count-
er-arguments and/or source derogations the changes in cognitive structure
are unfavourable or result in negative attitude change.

2.14 The ELM Model

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Notes Attitude changes occurring as a result of central processing are relatively

enduring and more resistant to subsequent efforts to change with respect
to attitude object.
Under the peripheral route to persuasion, the receiver is viewed as lacking
motivation and ability to process information and is not likely to engage
in detailed cognitive processing. Rather than evaluating the information
presented in the message, the receiver relies on peripheral cues that
may be incidental to the main arguments. The receiver’s reaction to the
message depends on how he or she evaluates these peripheral cues. The
consumer may use several types of peripheral cues or cognitive short-
cuts rather than evaluating the message arguments presented in the ad.
Favourable attitude may be formed if the endorser in the ad is viewed as
an expert, or is attractive or certain executional aspects of the ad such as
music, color, or visual effects are liked by the receiver. These cues may
help the receiver form positive attitude towards the brand even if they
do not process the message portion of the ad. However these peripher-
al cues may also lead to rejection of the message, for example, if the
endorser is not liked or have credibility problems or ad is not executed
well may lead to rejection of message without any consideration to the
information or message arguments. The ELM views attitudes resulting
from peripheral processing as temporary, so favourable attitude must be
maintained by continual exposure to the peripheral cues such as through
repetitive advertising.

2.15 Implications of the ELM

The elaboration likelihood model has important implications for marketing
communications particularly with respect to involvement. For example,
if the involvement level of target audience is low the peripheral cues
may be more important than the ad message and on the other hand if the
involvement level is high the message should present strong arguments
that are difficult for the receiver to refute or counter-argue.
ELM also showed the effectiveness of source in presenting the advertising
message, if the level of involvement is low, the endorser has significant
effect on the attitude. When the receiver’s involvement is high, the use

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of endorser has no significant results on brand attitude, the quality of Notes

the arguments used in the ad are more important.
The ELM model suggests that the most effective type of message de-
pends on the route to persuasion that consumer follows. Many marketers
recognize that when the involvement levels are low for their product
categories consumers are not motivated to process advertising in detail,
creative tactics may be employed that emphasize peripheral cues and use
repetitive advertising to create and maintain favourable attitude towards
their brand.

2.16 Engel Kollat Blackwell Model [EKB Model]

To recognize the decision-making process of the customer’s purchasing,
Engel, Kollat and Blackwell created the Engel Kollat Blackwell customers’
purchasing model (“EKB model”) to explain customers’ decision-making
structure in their purchasing behaviors.
The model was originally developed in 1968 by Engel Kollat and Black-
well but has undergone several revisions. In 1990 the most recent version
came out by Engel, Blackwell and Miniard.
Consumer behavior is a complex process involving the activities people
engage in when seeking for, choosing, buying, using, evaluating and dis-
posing of products and services with the goal of satisfying needs, wants
and desires. Marketers success in influencing purchase behaviour depends
largely on how well they understand consumer behaviour.
According to the model there are five stages in the consumer decision
making process comprising the Problem Recognition, Information Search,
Alternation Evaluation, the Purchase Choice and the Outcome.
The influencing variables on these variables are stimulus inputs like
information from the mass media, personal contacts and general market
source, information processing involves the active memory where infor-
mation is stored and from where information can be retrieved next vari-
able is decision process, this involves search process, evaluation process
and deciding process. Fourth variable influencing the five activities is
the environmental influence this variable includes all the way exogenous

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Notes variables crucial for the consumer buying process like income, family,
culture, social class etc. of consumer.

2.17 Consumer Decision Making Process

EKB Model

Engel, Kollat & Blackwell (EKB) Model

Source: Engel, Blackwell and Miniard, 1993
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Entry to the model is through need recognition when the consumer ac- Notes
knowledges a discrepancy between their current state and some desirable
alternative. This process is driven by an interaction between processed
stimuli inputs and environmental and individual variables. After a need
has been acknowledged the consumer embarks on a search for informa-
tion, both internally through the consumers’ memory bank of previous
experiences, and externally. The authors argue that the model is suitable
for use in explaining situations involving both extended problem solving
and limited problem solving by modifying the degree to which various
stages of the model are engaged in by the consumer. The depth of infor-
mation search will be highly dependant on the nature of problem solving,
with new or complex consumption problems being subjected to extensive
external information searches, while simpler problems may rely wholly
on a simplified internal search of previous behaviour. Information is said
to pass through five stages of processing before storage and use, namely:
exposure, attention, comprehension acceptance and retention.
The alternative consumer choices are evaluated by the establishment of
beliefs, attitudes and purchase intentions. This process of evaluation is
influenced by both the environmental variables and the individual vari-
ables. Intention is depicted as the direct antecedent to purchase which
is the only outcome tolerated by the model. Inhibitors are not explicitly
depicted as mediating between intentions and purchase, however the en-
vironmental and individual influences are again said to act on purchase.
Situation is listed as an environmental influence, and while this factor
is not clearly defined, it could include such factors as time pressure or
financial limitations which could serve to inhibit the consumer from re-
alising their purchase intentions.
Consumption is followed by post-consumption evaluation which serves
a feedback function into future external searches and belief formation.

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 L E S S O N

3
What is Advertising?

STRUCTURE
3.1 Features of Advertising
3.2 Role of Advertising
3.3 Publicity
3.4 'LৼHUHQFH EHWZHHQ $GYHUWLVLQJ DQG 3XEOLFLW\
3.5 Advertising Management Process

The word advertising is derived from its Latin root ad verster which means to ‘to turn
towards’ or ‘to attract attention to’. Advertising is the key element in the promotion mix
of marketing. It is the tool used by marketers to disseminate information about the prod-
uct to reach out to the end user. Advertising is expected to create brand image and loyal
customer base. It is mediated communication which entails buying space and time in mass
media such as television, newspaper, radio to persuade consumers to select a particular
brand amidst the competing brands.

Promotion is the communication arm of marketing and includes marketing activities

used to inform, persuade, remind the target market about the organisation, its products,
services, and other activities to build a favourable image.
Promotion Mix constitutes specific group of marketing activities concerned with the
communication aspect with existing or potential consumers and the relevant public.
It involves activities such as advertising, personal selling, sales promotion, direct
marketing, publicity/PR, events and sponsorships.

Advertising is one of the largest generators of revenue in the world economy. It generates
employment directly and indirectly and influences a large section of people. Advertising
interests, entice, entertains and creates lifestyle.
Advertising is many things at the same time much depend on how a person views it. The
growth of advertising industry in any country is in direct relation to the level of business
activity and the health of the economy.

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According of American Marketing Association: Notes

“Advertising is the paid form of non-personal presentation and promotion
of ideas, goods and services by an identified sponsor”.
It presents an explanation of what advertising is while offering insights
into what advertising is not. The key words describing advertising are
presentation and promotion. Presentation refers to an offering while pro-
motion involves communication of ideas and persuasion. In other words
advertising offers people ideas, goods and services and persuades them
about their benefits, utility and desirability.
The definition given by the American Marketing Association did not
suggest about persuasive and creative aspects of advertising and indicate
functional responsibility. Dorothy Cohen in 1968 offered the following
definition covering these aspects.
“Advertising is business activity, employing creative technique to design
persuasive communication in mass media that promote ideas, goods and
services in manner consistent with the advertiser’s objective, delivery of
consumer satisfaction and development of social and economic welfare”.
Cohen’s definition takes care of the aspirational and functional aspects
of advertising. She described advertising as business activity that uses
persuasive techniques to promote ideas, goods and services. According
to her Advertising has twin function that takes care of both the sender
(the advertiser of product or services whose objectives it must fulfil) and
the receiver (the consumer, whose satisfaction must be kept in mind) In
the end Cohen talks about the social responsibility and the economic
welfare of society.
According to Borden and Marshall (1971), “Advertising consist of all
those activities by which visual or oral messages are addressed to se-
lected public for the purpose of informing and influencing them to buy
product or services or to act or to be inclined favourable towards ideas,
persons, trademarks or institution featured. As contrasted with publicity
and other forms of propaganda, advertising messages are identified with
the advertiser either by means of signature or an oral statement. Further
advertising is commercial transaction involving pay to the publisher,
broadcasters and others whose media are employed”.

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Notes Other Definitions:

According to Dunn and Barban,
“Advertising is paid, non-personal communication through various media
by business firms, non-profit organisations and individuals who are in
some away identified in the advertising message and who hope to inform
or persuade members of a particular audience”.

According to William J Stanton,

“Advertising consist of all activities involved in presenting to a group,
non-personal, oral or visual, openly sponsored message regarding a product,
service or idea. This message called an advertisement, is disseminated
through one or more media and paid for by the identified sponsor”.

According to Philip Kotler,

“Advertising consist of non-personal forms of communication conducted
through paid media under clear sponsorship”.
When one closely looks at all the definitions and arguments put forward
by various experts, advertising comes out as an art and to an extent an
applied science of persuasive communication. It informs, incites, interest
the prospect about the product and later reinforces the message over a
period of time either by similar positioning or changed one, keeping in
view strategy of competing brands, changing expectations of consumers,
changed environment etc.

Advertising can be summed up as:

Advertising is mass paid communication of building brands through per-
suasive communication and positioning them in consumer’s perception
with the constant eye on market environment and consumer expectation.

3.1 Features of Advertising

Paid Form: The paid aspect of the definition reflects the fact that as
opposed to publicity that refers to the stories or brand mention in mass
media without any payment, space or time for an advertising message are
usually paid for. For example: many magazines, newspapers and other

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media voluntarily donate space and time and also prepare ads for certain Notes
public service announcements and social causes.
Non-Personal Presentation and Promotion: Advertising is non personal
offering no personal interaction, delivered through mass media as opposed
to personal selling where there is face-to-face personal interaction.
Ideas, Goods and Services: Advertising as communication tool is used
not only to present and promote goods and services with the intent of
selling them, it is also increasingly used to further the goals of public
interest and social causes, e.g., ads discouraging female infanticide,
making people aware of AIDS, asking for donations to help victims of
natural disaster.
Identified Sponsor: These words clarify the difference between advertis-
ing and propaganda. Just like advertising propaganda attempts to present
certain opinions and ideas which may influence public attitude and ac-
tion, however, the source of propaganda remains unknown and therefore
authenticity of information available is doubtful. People generally do
not know who is the originator. However, in advertising, the sponsor of
ideas, goods or services is known.
Controlled: The advertiser controls the content of the advertising mes-
sage, its time and direction. Advertisers say what they want to say by
selecting appropriate medium, direct the message to audience whom they
want to target. In publicity it is not under the control of the advertiser.
Mass Communicated Media: The broad group of audience can be best
reached by mass media such as newspapers, magazines, television, radio etc.
Persuasion: The major objective of advertising inherent in presentation
and promotion of ideas, goods and services is to achieve pre-determined
objectives through persuasive communication or reinforcement of desired
attitude or behaviour.

3.2 Role of Advertising

Advertising can also be explained in terms of the role it plays in busi-
ness and society:
‹ Marketing Role: Advertising is the most popular marketing tools
used by marketers. The importance of advertising within the

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 ADVERTISING AND SALES MANAGEMENT

Notes marketing function can be interpreted in terms of the purpose it

serves in marketing efforts of the organization.
‹ It helps in building and sustenance of the brand.
‹ It facilitates segmentation, targeting, positioning of the offerings
of the marketer.
‹ It helps in generation of revenues and profits.
‹ Communication Role: Advertising is form of mass communication.
Advertising informs and also creates an image that goes beyond
the straightforward facts.
‹ Economic Role: There are two points of view about how advertising
affects an economy in the first place advertising is persuasive
communication that it decreases the likelihood that consumer will
switch to competing brand regardless of price change. By featuring
other positive attributes and avoiding price the consumer makes
decision on these non-price factors.
‹ The second approach views advertising as vehicle for helping
consumers assess value.
‹ Societal Role: Advertising also has number of social roles. It
informs us about the improved products helps to compare features
and makes informed decision. It mirrors fashion design trends and
adds to our aesthetic sense.
However there is question whether advertising follows trends or it leads
them? Does it cross the line between reflecting social values and creating
social values?

3.3 Publicity
Publicity comprises of non-personal communication by third party sources
regarding an organization or its products. In other words when third party
communicates about an organization’s product, the result is publicity for
the said product. Most publicity is obtained in the form of media coverage
or consumer word of mouth. It includes activities to provide newsworthy
information to reporting sources like media to build a favourable image. A
basic tool of publicity is press release for example a fashion house before
launching its new design of apparel organizes a press preview, it is aiming

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 WHAT IS ADVERTISING?

at publicity, it is possible that some journalists will write appositive story Notes
and others may be critical. As publicity is uncontrolled, in other words it is
up to the media to use the information and at times to selectively pick one
or two pints from the press release or press conference. A prime advantage
of publicity is its low cost since an organisation does not have to directly
pay for it. Also publicity has high credibility among audiences because it is
believed to be unbiased reporting by the third party sources, not sponsored
by the organization. For example, we often base our choice of movies or
restaurants on the basis of ratings they get in the local newspaper.

3.4 Difference between Advertising and Publicity

Basis Advertising Publicity

Source The message originates from The message originates from
the advertiser/sponsor. the media.
Sponsor The identity of the sponsor The identity of the sponsor
is clearly known. is not clear.
Control The sponsor has entire control Media has control over the
over the contents and timing contents and timing.
of the message.
Nature of Persuasive message designed Informative message designed
Message to persuade consumer to favour to inform public.
the product, service or idea.
Payment The sponsor/advertiser pays The sponsor/advertiser does
to get the message deliv- not have to pay directly-Non
ered-paid form. paid form.
Credibility Since the message is paid Since it is third party opin-
for by the advertiser - it is ion – it is considered more
considered less credible. credible than advertising.

3.5 Advertising Management Process

Importance of Advertising
To Business:
Steady Demand: Advertising creates steady demand by smoothing out the
seasonal or cyclical fluctuations. By suggesting new and more frequent use
of the product advertising helps to maintain demand throughout the year.
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 ADVERTISING AND SALES MANAGEMENT

Notes Economies of Scale: Advertising facilitates mass distribution of goods,

direct distribution and rapid sales turnover helps to reduce cost of distri-
bution. Mass distribution and steady demand further lead to large-scale
and regular production thus bringing in the scale economies.
Build Goodwill: Advertising helps in creating good image of the firm
and favourable image of its products, which increases the capacity of the
firm to survive completion and develop a foothold in the market.
Supplements Salesmanship: Advertising makes the job of personal sell-
ing easy by making consumers aware of the firm’s offering. It creates
prospective buyer ready for purchase.
Meet Competition: Advertising plays pivotal role in establishing and
maintain brands by creating brand loyalty, it supplements personal sell-
ing and sales promotion. It creates preference for particular product thus
helps the firm in meeting growing competition in the market.
Introduction of New Product: Advertising is helpful in introducing new
products by creating awareness and gaining their acceptance. By informing
about the product it stimulates their interest and persuades them to buy it.

For Consumers:
Facilitates Purchasing: Advertising makes purchasing easy by reducing
the time and effort involved in shopping. People become aware of the
source and availability of different products and need not search them out.
Wide Variety: Consumers get to know about the availability of various
brands in the market with their unique features. This provides them with
the wider variety to choose from.
Educates Consumer: Advertising provides education and knowledge to
consumers about the new products and their diverse uses.
Reduced Price: Due to large scale production and distribution, economies
of scale factors in that lowers the cost per unit of product. As a result
consumers get goods at lower price.

Middlemen:
Quick Turnover: Successful advertising creates increasing and steady
demand of the goods which facilitate the middlemen in the form of quick
turnover of the goods and their quicker margins.

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 WHAT IS ADVERTISING?

More of Communication: Advertising plays important role in informing Notes

the consumers about various features of the product or service, it facilitates
the job of middlemen and saves them the botheration of spending time,
energy and effort with each and every consumer in order to convince
them about the product attributes.
Low Cost of Doing Business: Because of quick turnover, considerable
savings in terms of inventory costs is achieved.

Society:
Employment: Advertising creates not only direct employment in the field
of advertising but also helps in generation of more jobs in production,
finance, marketing, research and development fields.
Sustains Media: Advertising provides a major source of revenue to
newspapers, magazines, radio, and television. The benefit is passed on
to the society in the form of reduced prices.
Encourage Art and Creativity: Advertising promotes the creative ener-
gies of the people involved in designing and developing advertisements.
Stimulate Research and Development: In absence of advertising many
products and innovations would remain confined to laboratory.
Incentive to Progress: Advertising is a great motivating factor, it creates
desire for better standard of living. People are induced to work hard
and earn more to buy new products brought to their knowledge through
advertising.
Creates Social Awareness: Advertising is an effective medium for spread-
ing awareness and educating people about their social and cultural values.

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 L E S S O N

4
Advertising Objectives

STRUCTURE
4.1 Functions and Nature of Advertising Objectives:
4.2 Types of Advertising Objectives
4.3 Marketing versus Communication Objectives
4.4 Sales as Advertising Goal
4.5 Problem with Sales Objective
4.6 )DFWRUV $ৼHFWLQJ 6DOHV
4.7 Communication Objectives
4.8 &RPPXQLFDWLRQ (ৼHFWV 3\UDPLG
4.9 DAGMAR Approach
4.10 Communication Task
4.11 +LHUDUFK\ RI (ৼHFWV 0RGHO RI &RPPXQLFDWLRQ 3URFHVV
4.12 Assessment and Criticism of DAGMAR Approach

Objectives could be considered as “strategic decisions” they serve as the base for much
of campaign’s strategy and tactics, as well as basis for measuring the effectiveness of
advertising. Once objectives are clearly in place, the planer can proceed to develop
strategic decisions.

An important reason for setting advertising objectives is that they provide benchmark
against which the success or failure of the promotional program is measured. Without
specific objectives it would be extremely difficult to determine what the advertising and
promotion efforts accomplished.
Defining clear objectives helps in taking operational decisions about advertising, These
decisions are:
‹ How much to spend on advertising?
‹ What media mix to be used?

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 ADVERTISING OBJECTIVES

‹ What should be the frequency of display of advertisement or campaign? Notes

‹ What should be the content and presentation of advertisements?
‹ What methods should be used for evaluating the accomplishments
of the advertisements?
Without clear objectives, it is not possible to take correct decision con-
cerning advertising copy and media. Advertising objectives help coordi-
nate the efforts of media planners, copywriters and others involved in
the advertising campaign.
To summarise some of the main considerations in setting of advertising
objectives can be illustrated as:
WHAT What role is the total marketing effort is advertising expected
to fulfil?
WHY Why is it believed that advertising can achieve its role-what
assumptions are necessary?
WHO Who should be involved in setting advertising objectives, who
should be responsible for coordinating, implementing and sub-
sequent evaluation? Who are the audience?
HOW How are the advertising objectives put into practice - what are
the precise sub-objectives and how they are intended to be at-
tained and subsequently evaluated for the level of achievement?
WHEN When will the implementation for various parts of the program
be achieved? When can response be expected to each stage
of implementation?

4.1 Functions and Nature of Advertising Objectives

Some of the important objectives of setting advertising goals are:
Provide Direction to Advertising Decisions by Serving as Criteria: Since
planning and execution of advertising campaign involve large number of
decisions, setting advertising objectives draws attention to many specific
elements in the campaign.
Provide Bases for Evaluation of Results: Since setting objectives assists
marketers in making explicit what they seek to accomplish through a par-
ticular campaign. It also permits to assess the success and failure of certain
strategies and task put into action for accomplishment of the objectives.

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 ADVERTISING AND SALES MANAGEMENT

Notes Guides Decision Makers to Seek Understanding of the Working of

the Entire Campaign Process: The decision maker of the promotional
campaign wants to know not only the factors that are a part of the cam-
paign but also relationships among the factors.
Enhance Communication within the Organisation: Proper setting of the
advertising goals serves to make known to various managers the kinds
and degrees of responsibility for specific tasks.

4.2 Types of Advertising Objectives

Advertising Objectives

Create Awareness Increase

Sales

Develop Increase
Comprehension Marketing Share

Create Build
Conviction Goodwill

Create Introduce New

Desire Product

Enter New
Secure Action Market

Communication Objectives: As means of communication advertising

aims at the following:
Create Awareness: One of the primary objectives of advertising message
is to create awareness amongst the target audience. People are stopped
by communication message either because they see they see it some
promise of reward or because it is easier to notice the communication
than to ignore it (principle of least effort).
Develop Comprehension: Second communication objective of adver-
tising is to create understanding. Audience seek either consciously or

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 ADVERTISING OBJECTIVES

subconsciously for certain information but they usually do not work too Notes
hard to find it. Advertising educates customers by providing knowledge
about the product.
Create Conviction: Advertising seeks to convince target audience that
the captioned product will meet their needs or requirements. Superiority
of the brand is highlighted and attempt is made to develop positive atti-
tude towards the advertised product and enhance the image of the brand
in the mind of potential consumers.
Create Desire: Advertising seeks to convert the dormant or unstated
needs, wants or urges into desires through persuasive communication.
Secure Action: No advertising can compel anyone to act but it can impel
people towards purchase or favourable image of the product. An impulse
to act generally comes from basic two forces:
(a) Belief that what advertisement says is true.
(b) Conviction that product will satisfy consumer’s prime motivating
forces.
Marketing Objectives: This can be elaborated as follows:
Increase Sales: An advertising campaign attempts to increase demand by
increased use of product, frequency of use, variety of use and so on new
customers are created and existing ones are induced to use the product
extensively subsequently adding to the sales or revenue of the advertiser.
Increase Market Share: Advertising seeks to overcome competition,
it is used to capture larger part of total market thereby increasing the
market share.
Build Goodwill: Advertising also aims at creating favourable image or
reputation for the firm thus builds goodwill.
Introduce New Product: Another marketing objective of advertising is
to facilitate launch of new product special feature and benefits are high-
lighted so that it is quickly accepted by the buyers.
Enter New Market: Advertising facilitates entry of the firm into new
territories by making people aware of their offering. Advertising also
supports personal selling.

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 ADVERTISING AND SALES MANAGEMENT

Notes
4.3 Marketing versus Communication Objectives
Marketing objectives are generally stated in the company’s marketing plan
and are usually defined in terms of specific, measurable outcomes such
as sales, market share, profits or return on investment. Good marketing
objectives are quantifiable. To be effective objectives must be realistic
and attainable.
Many promotional planners approach promotion from communication
perspective and believe that objective of advertising and other promo-
tional mix elements is to communicate information or selling propositions
about the product.
The two perspectives have been a topic of considerable debate and have
been elaborated in the following sections.

4.4 Sales as Advertising Goal

For many promotional spending represents an investment of firms’ scarce
resources that require economic justification. Rational managers generally
compare investment options on a common financial basis such as Return
on Investment (ROI).
Many managers believe that money spent on advertising and other form
of promotion should produce measurable results such as increasing sales
volume or increasing brand’s market share. The success and failure of
advertising should be evaluated on the basis of achievement of sales re-
sults. They prefer sales-oriented objectives to make individuals involved
in advertising and promotion think in terms of how the promotional
program will influence sales.

4.5 Problem with Sales Objective

Poor sales result can be due to any of the marketing mix variables in-
cluding quality, distribution, technology, pricing etc. (As shown in the
figure). Advertising can make consumer aware and interested in the brand
but it can’t make them buy it particularly if it is priced too high, it is
not readily available.

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 ADVERTISING OBJECTIVES

There is an adage (saying): “No amount of advertising can sell bad product”. Notes

Product
Quality

4.6 Factors Affecting Sales

Another problem associated with sales objective is that the effects of
advertising often occur over an extended period. Many experts recognize
that advertising has lagged or Carry Over Effect. Money spent on adver-
tising does not necessarily have immediate impact on sales. Advertising
may create awareness, interest or favourable image but these feelings
will not result in actual purchase until the consumer enters the market,
which may occur later. The carry-over effect adds to the difficulty of
determining the precise relationship between advertising and sales.
Another problem with sales objective is that they provide little guidance
to those responsible for planning and developing of promotional program.
The creative people working on the account need some direction as to
the nature of the advertising message company intends to communicate
to the target audience and the particular effects of response sought.

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 ADVERTISING AND SALES MANAGEMENT

Notes Where Sales Objectives are Appropriate: While there can be many
problems attempting to use sales as objective for promotional campaign,
there are situations where sales objectives are appropriate.
‹ Direct Response Advertising: In one type of advertising that evaluates
its effectiveness on the basis of sales. Product is advertised through
materials mailed to the customers in newspapers and magazines,
through internet or television, and consumers purchase the product
by mail or through net or by calling toll-free numbers. This form
of advertising generally sets objectives and measures success in
terms of sales generated by the ad.
‹ Retail Advertising: Also seeks direct response particularly when
sales or special events are being promoted. For example, special
discounts and other sales promotional schemes announced by the
retailer invokes the consumer to make immediate purchase, rush
to the store. In this case also sales criteria are used as basis of
determining the effectiveness of advertisements.

4.7 Communication Objectives

Advertising and other promotional efforts are designed to achieve such
communication as awareness, brand knowledge, favourable attitude, image
and purchase intention. Consumers are not expected to respond immediately
rather advertisers realize they must provide relevant information and create
favourable predispositions towards brand before purchase behaviour will occur.
Proponents of communication-based objectives generally use Communi-
cation Response Hierarchy models (Refer to section on Communication
Response Hierarchy) when setting advertising and promotion objectives.
In all the models the consumer passes through three successive stages:
Cognitive, Affective, and Conative.

4.8 Communication Effects Pyramid

Advertising and promotion perform communication task in the same way
a pyramid is built, by first accomplishing lower level objectives such as
awareness and comprehension, Subsequent tasks involve moving consumers
who are aware and knowledgeable about the product or service to higher
levels of the pyramid. The initial levels of pyramid as relatively easier to
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 ADVERTISING OBJECTIVES

accomplish as compared to the towards the top such as trial or purchase. Notes
Also the percentage of prospective customers will decline as movement
up to the pyramid (Refer figure)
The communication pyramid can be used to determine promotional ob-
jectives for brand, the promotional planners must determine where target
audience lies with respect to the various blocks of the pyramid. If awareness
level of brand and knowledge of its features is low, the communication
objectives should be to increase them. If people are aware of the product
and its features but liking or preference is low the advertising goal may
be to create image of the brand and move the consumer to purchase.

Purchase
5%
Trial 10%

Preference 20%

Liking 40%

Comprehension 70%

Awareness 90%

Communication Effects Pyramid

Problems with Communication Objectives: Many experts do not accept
communication objectives some say it is too difficult to translate sales
goal into specific communication objectives. In attempting to translate
the sales goal into specific communication objectives promotional plan-
ners often are not sure of what constitutes adequate level of awareness,
knowledge, liking, preference or conviction. The promotional manager
through his personal experience and judgment can determine these levels.
Also average scores on various communication measures for the advertised
and similar products should be considered along with the levels achieved
by the competitor’s products.
At some point the sales-oriented objectives must be translated into what
the company expects to communicate and to whom it hopes to commu-
nicate. For example, if the objective for a brand is to increase the sales
by 10 percent, the promotional planners should think in terms of message

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 ADVERTISING AND SALES MANAGEMENT

Notes that will be communicated to the target audience to achieve this. Possible
objectives may be:
‹ Increase the percentage of consumers in the target market who
associate specific feature, benefit or advantage with the brand.
‹ Encourage the current consumers to use the product more frequently.
‹ Encourage the consumers who have never used the product to try it.

4.9 DAGMAR Approach

In 1961 Russell H. Colley prepared a report under the sponsorship of the
Association of National Advertisers titled Defining Advertising Goals for
Measured Advertising Results (DAGMAR). The major thesis of DAG-
MAR model is that communication objectives are the logical basis for
setting advertising goals and objectives against which the results should
be measured.

Colley’s Rationale for Communication Objectives was:

“Advertising’s job is purely and simply to communicate to defined audi-
ence information and frame of mind that stimulates action. Advertising
succeeds or fails depending on how well it communicates the desired
information and attitude to the right people at the right time and at the
right cost”.

4.10 Communication Task

Advertising is mass, paid communication that is intended to create aware-
ness, develop comprehension, develop attitude and induce action.
According to DAGMAR approach the advertising objective involve com-
munication task as opposed to marketing and it is specific, involving
defined task, among defined audience, in a given time period.
Colley proposes that communication objectives be based on hierarchical
model through which the brand or objects must climb to gain acceptance.
The Hierarchy of Effects Model consists of four stages:

$ZDUHQHVV ĺ &RPSUHKHQVLRQ ĺ &RQYLFWLRQ ĺ$FWLRQ

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 ADVERTISING OBJECTIVES

Notes
4.11 Hierarchy of Effects Model of Communication Process
‹ Awareness: Involving target audience aware of the existence of
the brand or company.
‹ Comprehension: Developing an understanding what the product
is what are its specific characteristics, how it differs from the
competitors and what it would do for them.
‹ Conviction: Developing mental disposition in the minds of the
consumer to buy the product.
‹ Action: Getting the consumer to try the product for the first time,
visiting the showroom or requesting information.
There is no significant difference between Colley’s proposed model and
other hierarchy of effects models.
Colley also studied other specific tasks that advertising might be expected
to perform in leading to the ultimate objective of sale. He developed a
checklist of 52 advertising tasks to characterize the contribution of ad-
vertising and serve as starting point for establishing objectives.
Another important contribution of DAGMAR was to clarify what con-
stitutes good objective. According to Colley the objectives should have
the following features:
‹ Stated in terms of concrete and measurable communication task.
‹ Specify target audience.
‹ Indicate benchmark or starting point and the degree of change sought.
‹ Specify time period for accomplishing the objectives.
Concrete, Measurable Tasks: The communication tasks specified in the
objective should be precise written statement of what message or appeal
advertiser wants to communicate to the target audience. It should be
specific and clear enough to guide the creative professionals to develop
the advertising message. Also objective must be measurable; there must
be a way to determine whether the intended message has been commu-
nicated properly.
Target Audience: The key tenet of DAGMAR approach is specification of
well defined target audience for whom the advertising message is to be ad-
dressed for example, target audience of a luxury and premium car could be

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 ADVERTISING AND SALES MANAGEMENT

Notes defined as Corporate Executive, Self Employed, Businessman. If the target

audience is not well defined the entire promotional effort may go waste.
Benchmark and the Degree of Change Sought: It is important to know
the target audience’s present status with respect to response variables
i.e. awareness, knowledge, attitude etc. and then determine the degree of
change sought by the advertising campaign, e.g., the objective statement
may include to increase awareness level of brand X from current 10%
to 40% amongst the target audience. Determining target market’s present
position regarding various response stages requires marketing research
and without a benchmark measure quantitative assessment of the result
could not be ascertained. Benchmark is also a prerequisite to the ultimate
measurement of results an essential part of the DAGMAR is generation of
well-conceived benchmarks before the advertising goals are determined.
Time Period: The final consideration in setting advertising objectives is
to specify the time period to accomplish the objectives. The period may
be a month or a year or more. With the time period specified, a survey
to generate a set of measures can be planned and anticipated. All the
parties involved in the campaign will understand that the results will be
available for evaluation which may result in modification or change in
the current effort.

4.12 Assessment and Criticism of DAGMAR Approach

The DAMAR approach focussed advertiser’s attention on the importance
and value of using communication based objectives vis a vis marketing
or sales based objectives to measure the impact and success of adver-
tisement campaign.
Colley’s work led to the improvement in the advertising and promotional
planning process by providing a better understanding of the advertising
objectives towards which the planners effort should be directed that usu-
ally results in less subjectivity and better communication and relationship
between client and agency.
However, this approach has been questioned on the following grounds
concerning its value as advertising planning tool:
‹ Sales as Advertising Goal: Many believe that sales measure is the
only relevant measure of advertising objectives according to them

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 ADVERTISING OBJECTIVES

if the communication task for example to increase brand awareness Notes

does not affect sales positively what is the point even measuring it
and if there is no close relationship then sales must be measured
directly i.e. Sales effect is the appropriate measure of evaluation of
advertising campaign as advertising is effective only if it induces
consumer/customer to make purchase.
‹ Problem with Response Hierarchy: The hierarchical model that
postulates a set of sequential steps of awareness, comprehension,
conviction leading to action. The fact that the consumer does not
always go through this sequence of communication effects before
making purchase decision, there are alternative response models
depending on the purchase situation for example: action may precede
attitude formation and comprehension may result with the impulse
purchase of low involvement product.
‹ Practicality and Cost: Another criticism of DAGMAR concerns
the difficulties involved in implementing it. Expensive research is
required to establish quantitative standards and measure changes
in response hierarchy and is also time-consuming. Many argue
that DAGMAR is practical only for large companies with big
advertising and research budget and is beyond the means of small
and medium-sized firms.
‹ Inhibits Creativity: DAGMAR approach is a planned and rational
approach to setting advertising objectives, it imposes too much
structure and may restrict the creativity of the people engaged in
and responsible for developing of advertising campaign. It is too
concerned with the quantitative assessment of campaign’s impact on
awareness, recall or specific persuasion measures. The emphasis is
on passing number of tests rather than developing a message that
is creative and contributes to brand equity.

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 L E S S O N

5
Determination of Target
Audience and Positioning

STRUCTURE
5.1 Market Segmentation: Concept
5.2 (ৼHFWLYH 6HJPHQWDWLRQ
5.3 Target Audience
5.4 Positioning
5.5 Positioning Approaches
5.6 Determining Positioning Strategy
5.7 Repositioning

5.1 Market Segmentation: Concept

Market segmentation is the process of dividing the total market into total heterogeneous
market into relatively distinct homogeneous subgroups of consumers with common needs
and characteristics and selecting one or more segments to target with distinct marketing
programme.
Market segmentation is the extension of the marketing concept. The central idea of this
concept is customer value and must be the core element of the business decisions.
When marketers provide range of product or service options to serve diverse consumers
interest, consumers are more satisfied.

5.2 Effective Segmentation

The following five conditions must exist for effective market segmentation:
1. Firm must determine whether the market is heterogeneous, if the product needs of
consumers are homogeneous, then it makes no sense to segment the market.

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 DETERMINATION OF TARGET AUDIENCE AND POSITIONING

2. There must be logical basis to identify and divide the population Notes
in relatively distinct homogeneous groups, having common needs
and will respond to a marketing action.
3. The total market should be so divided so that comparison of estimated
sales potential, costs and profits of each segment are estimated.
4. Segments must have enough sales potential that would justify
developing and maintain marketing programme.
5. It must be possible to reach the targeted segment effectively.
Bases for Market Segmentation: A segmentation variable is characteristic
of individuals, groups or organizations that marketers use to divide and
create the total market into segments. Variables such as geographic location,
age, gender, educational level, income, personality characteristics, usage
rate or product benefits sought are frequently used to segment markets.
Geographic Segmentation: Geographic units are the basis to divide the
markets. These units may be nations, states, regions, areas of certain cli-
matic conditions or urban or rural divide. For example, Business houses
engaged in import and export often divide the market as European market,
Asian market etc.
Demographic Segmentation: Market segmentation can be based on de-
mographic variables such as age, gender, education, family size, income
and social class.
Producers of washing machines, microwaves etc. take family size as one of
the variables in segmenting the market. Toy manufacturers such as Funskool
and Fisher Price segment the market on the basis of age of the children.
Behaviouristic Segmentation: Dividing the market on the basis of vari-
ables such as benefit sought, use, occasion, user status, usage rate, loyalty,
and consumer readiness stage is termed as behaviouristic segmentation.
For example: There are distinct groups of automobile buyers who look
for economy, status, value for money, luxury etc. Archies greetings cards
are for various occasions.
Psychographics Segmentation: When segmentation is based on person-
ality or lifestyle variables it is called psychographic segmentation.
Personality can be described as an individual view about himself (self-image)
and how others views an individual. There are people who are ambitious,
aggressive, confident, impulsive, conservative, modern, gregarious, intro-
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Notes vert or extrovert. Some motorbikes manufacturers segment the market on

the basis of personality variables such as macho image, independent etc.
Lifestyle indicates how people live spend their time and money for example:
Based on the personality of adopting new products Rogers has classified
consumers as Innovators, Early Adopters. Early Majority, Late Majority
and Laggards.
Determining How Many Segments to Enter
There are three strategic options available to marketers:
(a) Concentrated Marketing: In this strategy the organisation focuses
on only one sub-group and develops marketing programmes directed
to it.
(b) Differentiated Marketing: The marketer decides to enter several
market segments or develop special offerings for each. For example:
Maruti Udyog is producing cars for various segments, Nike offers
athletic shoes for different sports.
(c) Undifferentiated Marketing: This involves ignoring the differences
among consumers and offering just one product for the entire market.
This strategy focuses on what is common in needs of consumers
rather than what is different. For example, Coca-Cola offered only
one product version for over ninety years for the whole market
and hoped it would appeal to everyone. Undifferentiated marketing
strategy provides cost economies.

5.3 Target Audience

Marketers should focus on those customers for which the product is
best suited. Any group of people can be called a market only when they
feel need for the product are interested in it and have money to buy it
and are willing to spend on it. The selection of target market helps the
marketer to identify the audience and group of customers to whom the
advertising message should be directed.
Audience selection is the process of comparing and evaluating different
market segments and then selecting one or more segments as the pros-
pects with the highest potential.

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Target audience are the people who can be reached with a particular Notes
message and a certain medium.
Audience can be profiled in terms of their demographic categories, person-
ality, lifestyle, geography etc. (Refer to Bases for segmenting the market).
Identification of Target Audience is helpful in advertising planning in
the following ways:
Designing Advertising Copy: Advertising copy is the entire message and
appeal which the advertiser wants to convey to his prospects, it consists
of all the written or spoken material in it, including the main body,
headline, subheads, all the printed material such as captions, pictures,
slogans, brand names, advertisers name etc.
It is the heart and subject matter of the advertising. The content, design, and
layout of the copy largely depends on the profiling of the target audience.
Determining Advertising Appeal: Advertising Appeal is defined as the
approach used to attract the attention of the prospective consumer. It is
viewed as something that moves people. What types of message is to
be communicated and how it is to be presented entirely depends on the
type of target audience.
Determining Media Mix and Media Vehicle: “Medium” is the general
category of available delivery systems such as broadcast media (T.V or
radio) print (newspaper, magazine), direct mail, outdoor advertising and
other support media. “Media Vehicle” is the specific carrier within the
medium category such as Hindustan Times and Times of India are print
vehicles.
The selection of various mediums of advertising and specific carrier of
the advertising message (media vehicle) depends entirely on the type of
the target audience to be reached.
Determining Message Source: Message source refers to the spokesper-
son involved directly or indirectly in delivering the advertising message.
Who presents and portrays the advertising message plays an important
part in the effective execution of advertising campaign. A key source, the
endorser in an advertisement can be celebrity, announcer, spokesperson
or common consumer etc. who endorses or demonstrates the product in
the advertisement.

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Notes
5.4 Positioning
A product cannot exist unless it finds a place in the consumer’s perception.
Any product or brand is noticed only when it occupies a particular point
or space in the individual consumer’s mind relative to the other brands
in the same product category. This perception of the product is subjective
and is governed by individual’s needs, values, beliefs, experience and
environment. “Position” is the way the product or the brand is defined
by consumers on important attributes. Positioning is the perception of
brand or brand it brings about in the mind of target consumer and re-
flects the essence of that brand or product in terms of its functional or
non-functional benefits judged by the consumer.
Thus a brand’s position is the set of associations the consumer has with
the brand. A brand’s position develops over years through advertising,
publicity and word of mouth and usage experience and can be sharp or
diffuse depending on consistency of brand’s advertising over the years. For
example, HUL’s “Lux” is the beauty soap, Maggi brand of noodles is “two
minute noodle”, BMW is positioned as “the ultimate driving machine”.
Brands can be expected to create a loyal feeling only when they are
perceived as different in some way, which is convincingly important
and persuasive for the members of the target segment, and this is what
positioning is meant to accomplish. It is not really what the product is
or does but actually what the marketer does to the mind of the consumer.
Positioning strategy is vital to provide focus on the development of an
advertising campaign. The strategy can be conceived and implemented
in a variety of ways that derive from attributes, competition, specific
application, type of consumers involved or the characteristics of the
product class.

5.5 Positioning Approaches

Positioning by Corporate Identity: Companies that have become tried
and trusted brands use their corporate identity to imply competitive
superiority of their brands such as Tata, Sony, Godrej etc. Corporate
credentials are added as a by-line. This offers strong positioning and is
used in product line extensions or brand extensions.

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Positioning by Product Attributes and Benefits: This is the most com- Notes
mon approach to positioning and involves setting brand apart from the
competitor based on the specific brand attributes and benefits offered.
For example, in case of toothpaste brands are positioned on cosmetic,
medicinal, taste or economy dimension. Close-up is positioned as fresh
breath and cosmetic benefit, Pepsodent is positioned as gum care, Colgate
is positioned as fresh breath, decay prevention and taste.
Positioning by Occasion and Time: The idea behind this positioning
approach is to find an occasion or time of use for example Vicks Vaporub
is to be used for cold, Iodex for muscle pain and sprains.
Positioning by Price Quality: This approach is quite powerful propo-
sition and has two dimensions. One for consumers looking for value of
money as purchase consideration. An excellent example in this category
is Nirma detergent powder, in early 70’s ad of good quality detergents
such as Surf had strong demonstration effect on middle-class housewives,
they wanted to use it but were unable to buy because the price was high,
Nirma positioned itself as quality product that lathered well, clean well
and the price was much less than Surf.
Another dimension of price-quality positioning is that product is positioned
on high quality and the price is kept high to communicate high quality.
In many product categories such as Perfumes, it is not possible to assess
quality, high price becomes an indicator of high quality.
Positioning by Product Category: This positioning approach is used
so that the brand is perceived as belonging to another product category.
For example: Dove brand of soap from HUL is positioned away from
the toilet soap category, it is not cleansing soap but moisturising cream.
This strategy is often used when the product category is overcrowded.
Positioning by Product User: The brand manager can determine a target
segment for which the product will be positioned. Various segment bases
can be considered. For example: cars are positioned on economy, safety,
luxury, comfort, status etc.
Positioning by Competitor: This approach is used because marketer
wants consumers to believe that the brand is superior or at least as good
as offered by the competitor. Earlier advertisements by Apple computers
wherein they compared their G3 processors against Pentium III showing

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Notes that G3 processor of 400 MHz is more powerful than 750 MHz of Pen-
tium III. This strategy is often seen in case of comparative advertising.

5.6 Determining Positioning Strategy

The exercise of determining poisoning strategy is not easy and could
prove to be difficult and quite complex. However, it becomes more man-
ageable if it is supported by marketing research and decomposed into
the following process:
‹ Identify the Competitors
‹ Determine the competitors are perceived and evaluated
‹ Determine Competitor’s position
‹ Analyze the customers
‹ Select the Position
‹ Monitor the position
The first step is to identify the competition, identification of completion
is not an easy task because brand faces competition not only from the
products in the same product class but others also for example Times of
India may compete with other news shows and channels than with the
Hindu (another newspaper). Next thing is to determine how competitor
products are perceived, it is necessary to choose an appropriate set of
product attributes for comparison. Attributes may not only include product
characteristics and customer benefits but also product associations such
as product uses or product users. Another useful exercise is to determine
how competitors are positioned, the primary focus of interest is how they
are positioned with respect to relevant attributes. Next identify the seg-
ments or cluster of customers, determining which attributes or customer
benefits are most important and then identify groups of customers who
value similar attributes or benefits. These steps should be analyzed prior
to making actual positioning decision. Once the positioning statement
selected and applied, it should be monitored for any changes which may
be required because of some emerging opportunities or change in the
product features or line extensions etc.

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Notes
5.7 Repositioning
No matter how well the product appears to be positioned, the marketer
may be forced to decide on its repositioning in response to new opportu-
nities or threats. A brand’s repositioning is usually considered when there
are attractive opportunities or the brand’s sales stagnate or decline. The
product may be provided with some new features or it may be associated
with some new uses and offered to the existing or new markets.
For example: Nestle’s milkmaid was Milkmaid Condensed Milk a conve-
nient form of milk for use as tea or coffee creamer, the sales of milkmaid
in 80’s reached plateau and the company repositioned the product as
ideal for preparing sweets and desserts. The packaging was also changed
to suit the repositioning, which led to substantial gain in sales volume.

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 L E S S O N

6
Advertising Budget

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6.1 Sales Response Models
6.2 Budgeting Approaches
6.3 7KH $ৼRUGDEOH 0HWKRG $OO <RX &DQ $ৼRUG 0HWKRG
6.4 Competitive Parity Method
6.5 Arbitrary Allocation Method
6.6 Percentage of Sales Method
6.7 Objective and Task Method
6.8 Payout Planning
6.9 Quantitative Models
6.10 )DFWRUV ,QÀXHQFLQJ $GYHUWLVLQJ %XGJHW

After determining the advertising objectives a company has to estimate how much it is
willing to spend on promotional programme. Although in an ideal situation budget should
be determined by the objectives laid out for the communication function, in constraining
situations often it is the budget which leads to revision of company’s objectives.
According to Cohen, “Translation of advertising plan into currency unit is advertising
budget”.
Advertising budget is a financial document that shows the total amount to be spent on
advertising and list the way this amount is to be allocated. It is prepared for a specific
future period of time. It is limiting factor which determines the size of advertising cam-
paign. It shows the allocation of available funds to various advertising activities.
One of the most critical decision facing marketing managers is to determine how much
to spend on promotional effort. Many consider the amount of money spent to advertising
as current business expenditure cutting into the profits rather than an investment, For this
reason when a firm faces turbulent times the axe falls at first on the advertising expendi-
ture, even though there is a strong evidence that exactly the opposite should occur (refer

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Sales Response Models). Thus maximizing the effectiveness of promo- Notes

tional spending of company is hence the prime importance especially in
times of spiralling media cost, increasing completion, consumer apathy
towards promotion and increased pressure on communication productivity.
As an element of the marketing communication mix advertisement should
be viewed as an investment in future sales. Marketers often use adver-
tising to generate immediate sales; however its greatest power is in the
cumulative long-term reinforcement effect, it builds consumer preference
and goodwill which helps enhance the reputation and value of the com-
pany and the brand name. Thus considering advertising as expenditure
is short-sighted view and may affect the brand’s image.
Setting advertising budget is not an easy task, there is no way to be abso-
lutely certain that the company is spending the right amount Some critics
say that large FMCG (Fast-moving consumer goods) companies spend too
much on image advertising without really knowing its effects, they “over-
spend” as an insurance against not spending enough. Industrial companies
on the other hand spend less on advertising, underestimating the power of
company and product image and rely too heavily on their sales force to
bring in sales. Overspending leads to waste of resources and under spending
can lead to opportunity loss, while there is no single best way to determine
the budget theoretical approaches to budgeting, situational factors as well
as methods to determine budget serve as useful guide.

6.1 Sales Response Models

Most marketing managers believe that sales and promotions are related
in one of the following two manners:
‹ The Concave Downward Function: As shown in Figure 6.1(a) as
the promotional expenditure increases, sales increases at decreasing
rate up to certain point in other words additional promotional rupee
bring in lesser and lesser sales. The reason that sales follow concave
downward curve pattern is that when the initial communication
expense is made the most lucrative prospects (innovators) or heavy
users buy the product. The task of bringing laggards and light users
with communication is more difficult and has little impact on the
total sales. According to the model the highest response rate occurs

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Notes after the first exposure and it diminishes thereafter. This model is
based on the Law of Diminishing Returns. Thus budgeting under
this model suggest that lesser advertising money may be needed to
produce optimal sales effect.
‹ S-Shaped Response Function: As shown in Figure 6.1(b), the S-shaped
curve is characterized by slow start, followed by steep growth and
then a plateau. Initial advertising and promotion expenditure has
little impact on the on sales in the range A. In range B additional
promotion expenditure brings in increased sales, up to a point. In
range C, the benefits of additional promotion expenditure taper
off. The model suggests that until a company has minimum share
of voice its advertising brings in no benefit. Share of Voice is the
advertising weight of the brand/company as a percentage of the
advertising weight of a given market or market segment. Expenditure
in range B brings in returns first at an increasing rate and then at
diminishing rate. The optimal level of expenditure is at a point
in range B where marginal revenue and marginal cost are equal.
Money spent in range C does not have much noticeable impact on
sales as the product already reached its market potential.
Incremental Sales

Incremental Sales

Advertising Expenditures Range A Range B Range C

Advertising Expenditures
(a) (b)

Figures 6.1(a) and (b): (a) Concave Downward Function

and (b) S-Shaped Response Function

Marginal Analysis: The logical process of arriving at advertising budget

is inspired by the marginal analysis, which is widely used in business
decision making to allocate scarce resources such as advertising spending
in order to maximize output such as sales.

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Marginal analysis focuses on studying whether the promotion budget Notes

be increased by one more unit or not so as to maximize profit. As il-
lustrated in Figure 6.2 as promotion expenditure increases, sales and
gross margin also increase up to a point after which they start to level
off. Profit which is the difference between gross margin and advertising
or promotion expense, is maximum when marginal revenue is equal to
marginal cost (point A).
Marginal revenue is the increase in the gross revenue by the addition of
one more unit of promotional expenditure. Whereas Marginal cost is the
increase in total cost with the addition of one more unit of promotional
expenditure. When marginal revenue is greater than the marginal cost
there is scope for increasing promotional expenditure as it would add to
the profit. On the other hand when marginal cost is greater than marginal
revenue, the promotional expenditure should be reduced.

Figure 6.2: Marginal Analysis

While the analysis is logical, it suffers from the following limitations:

Considering Sales as a Direct Result of Promotion: Advertising has
delayed or carry-over effect (discussed in Advertising objectives) Also
measurement of impact of communication on sales is nearly an impossible
task because promotion is one of the factor that influence sales there are
other factors also (refer section on advertising objective). In the words
of David Aaker and James Carman, “Looking at the relationship between
advertising and sales is somewhat worse than looking for a needle in
haystack.” Thus to try to show the size of the budget will directly affect

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Notes sales of the product is misleading. A more logical approach would be to

examine the impact of promotional budget on attainment of communication
objectives. Sales is not the only goal of promotional effort awareness,
interest, attitude change and other communication objectives are often
sought and while the bottom line may be to sell the product, these ob-
jectives may serve as basis on which the promotional effort is directed.
Difficulty in Predicting the Marginal Sales Function: Estimating the
exact rate at which sales will change as response to advertising and
promotion is a difficult task.
Because of these limitations the use of marginal analysis is not popular in
budget determination, however a conceptual understanding of the model
helps in comprehending how promotional expenditure and its results are
related and in determining how budgeting can be planned.

6.2 Budgeting Approaches

The theoretical approaches to budgeting are rarely used. Instead a number
of methods developed through practice and experience are implemented.
Some companies use more than one method and approaches to budgeting
vary among the companies depending on size and sophistication of the
company.
In practice companies use two totally different approaches to budget
setting Top-Down Approach and Build-Up Approach.
In case of Top-Down Approach the budgetary amount is established by the
higher management and passed down to various departments. Top-down
methods of budgeting include affordable method, arbitrary allocation,
percentage of sales, competitive parity and return on investment. These
top-down methods are judgemental in approach and the budget is appar-
ently not linked to the objectives and the strategies decided to attain them.
The Build-Up Approach takes into account the company’s advertising
objective and budget is allocated on the basis of what is considered
essential to accomplish the goals ascertained. Build-Up methods of
budgeting include object and task method, payout planning method and
quantitative models.

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Notes

6.3 The Affordable Method (All You Can Afford Method)

After all allocations have been made to cover other relevant company
expenditures whatever is left is allocated to advertising, that this is what
the firm can afford to spend on advertising after making allocations for
various other investment and expenditure decisions.
No consideration is given to what is expected of advertising. This ap-
proach is fairly common amongst the small firms particularly highly
technologically oriented firms that focus on new product development
and engineering and believe that if the product is good it would sell on
its own. Surprisingly this method often produces good results as if the
company is doing proper allocation to other elements of business then
probably the amount left out for advertising is adequate to meet firm’s
advertising objectives. The basis premise behind this method is “we can’t
be hurt with this method as we are allocating what we can afford and not
get into any financial problems.” However, the chances of overspending
and underspending are high with this method.

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Notes
6.4 Competitive Parity Method
Many advertisers base their advertising budget allocation on competitor’s
expenditure. Such information is available in trade journals and business
magazines. According to this approach manager decides budget amount
by matching competitor’s advertising spending (generally a percentage
of sales allocation). The logic behind this approach is that the collective
wisdom of firms probably generates advertising budgets that are quite
close to optimal. Not everyone would be too far from what is adequate
in a given industry. This method also takes into consideration the compe-
tition leading to stability in the marketplace and minimizing the chances
of promotional wars.
There are disadvantages of using this method. First it ignores the fact
that each firm allocates budget to accomplish specific objectives to solve
certain problems or to take advantage of the present or emerging oppor-
tunity. The inherent assumption is that all firms have similar advertising
objectives and their allocations are correct, which may not to reality.
Second, the method assumes that all firms have equally effective adver-
tising programmes because the expenditures are similar and therefore it
ignores the contribution of media and creative executions.
Third, the information on completive spending is available only after the
money has been spent and there is no reason to believe that competitor
will not increase or decrease its own expenditure regardless of what
other firms do.
Fourth, there is simply no guarantee that what firms in the industry spend
on advertising is the optimal level and they will continue to pursue their
existing strategies. The situations of individual firms are quite likely to
be sufficiently unique and therefore the practices of competitor should
not be followed.
This method is typically employed in conjunction with other methods
like percentage of sales method. It is never wise to ignore competition;
manager must always be aware of what competitors are doing but they
should not just emulate them in setting goals and developing strategies.

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Notes
6.5 Arbitrary Allocation Method
The management determines the budget on the basis of what is felt to
be necessary however there is no criteria for defining what is defined as
“necessary” in the context of advertising budget allocation. This method
lacks the systematic thinking that may reflect some relationship with
advertising objectives. Probably the manager believes that some amount
should be spent on advertising and picks up a figure as advertising bud-
get. This method of budget allocation has no theoretical basis and its
applicability is not recommended.

6.6 Percentage of Sales Method

This is the most commonly used method especially by the medium and
large-sized firms. The basis for budget allocation is the total sale of the
brand or product.
In its simplest application affixed percentage of last year’s sales figure
is allocated as budget. A variation of this method is to use a percentage
of the projected sales figure of following year as base. Yet another vari-
ation is to calculate average sales of last several years to decide budget
allocation.
In another different approach affixed amount of the unit product cost is
taken as advertising expense and multiplied by the number of projected
unit of sales.
For example: If the total sales in 2021-2022 were Rs. 10 lac (10,00,000),
the advertising budget may be decided as 10% of this figure for 2006-
2007 which would be Rs. 1 lac (1,00,000).
For instance the projected sales for 2022-2023 is Rs. 12 lac (12,00,000)
the budget allocated would be Rs. 1.2 lac (1,20,000) [Assuming the basis
of allocation i.e. percentage of sales remains same at 10%].
Assuming the total manufacturing cost of an article is Rs. 20 per unit and
advertising money allocated per unit is Rs. 2 and the projected sales figure
for the year is fifty thousand units (50,000) for the coming year then the
total advertising budget would be Rs. 1 lac (1,00,000) [50,000*2 = 1,00,000].

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Notes The percentage figure selected is industry standard, and it varies from
industry to industry and also among different firms in the same indus-
try. Some companies allocate a small percentage of sales as advertising
budget while others decide a higher percentage.
Actual rupee spending varies considerably depending on individual com-
pany’s total sales figure.

Advantages of this method are:

It is simple, straightforward, and easy to implement method and expen-
diture is directly related to the fund available.
If the company’s sales were more in the previous year that means it has
more funds available to be spent on advertising this year. Regardless
whether last year sales figure or projected sales figure is taken as base
it is easy to arrive at budget figure.
Unless unprecedented changes in sales managers will have a fair idea of
the budget parameters.

Disadvantages of this method are:

The basic premise of this method is that sales is cause of advertising
or it is advertising that helps generate sales. Letting the level of sales
determine the amount of advertising to be spent reverses the cause-and-
effect relationship between advertising and sales. It treats advertising as
expense associated with making a sale rather than an investment.
Another problem associated with this method is stability, proponents say
that if all firms use a similar percentage, it will bring stability to the
marketplace. The problem is this method does not allow for changes in
strategy either internally or from the competitors. An aggressive firm may
wish to allocate larger sum for advertising budget, a strategy that is not
possible with percentage of sales method unless manager is willing to
deviate from the industry standard.
In the event of introduction of new innovative product, no sales histories
are available and projecting of future sales may be difficult employing
this method is not only difficult but risky as well.
Since the advertising budget is dependent on sales only, decrease in sales
decreases the budget at a time when increase in budget is probably more

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required. Reduced advertising spending may further push the sales trend Notes
downwards.
Problem with forecasting, cyclical growth and uncontrollable factors limit
the effectiveness of this method.

6.7 Objective and Task Method

Setting objectives and budget decision are linked together and should be
considered simultaneously.
The objective and task method is based on Build-up Approach. Steps
involved in objective and task method are:
‹ Establish Advertising Objectives.
‹ Determine specific strategies and tasks necessary to achieve them.
‹ Estimate cost associated in putting these strategies and tasks in
operation.
Implementation of this method requires higher degree of managerial
involvement. The whole process must be monitored throughout keeping
in view how well the objectives are attained and suitable changes in
strategies made, if deemed necessary.
Major difficulty associated with this method is to determine which are those
specific tasks required and the costs associated with each. For instance,
if the objective is to accomplish awareness level of 50% among target
audience, what specifically are those tasks that are required to achieve
this level of awareness? How much will it cost to perform these tasks?
However, past experience serves as good guide in case of existing product.
The most fundamental advantage of this method is that it develops the
budget from the ground up which is the proper managerial approach. It
does not rely on past sales figures, forecasted sales, competitor’s spending
and considers only the factors which are under the advertiser’s control.

6.8 Payout Planning

Payout planning is a useful technique to develop budget when a new
product is introduced. It is used in conjunction with other budgeting
methods to estimate the investment value of advertising.

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Notes Managers have keen interest in knowing how much money is to be in-
vested in advertising and for how long before the brand gets established
and generates profit flow. Projection of revenue stream that the product
will generate and the cost it will incur over the projected period are
ascertained.
Preparing payout depends on the accuracy of sales forecast over time,
factors that affect market, estimated costs. Advertising expenditure during
the introductory stage of the product will be high to move the target
audience through various stages leading to purchase, growth in sales
will be expected to be low and company would lose money (incur loss).
Assuming everything goes according to the plan the advertising expen-
diture will gradually decline and sales will increase.
It is useful and logical planning tool when used in conjunction with
objective and task method for setting advertising budget, but it has cer-
tain limitations it cannot account for all uncontrollable factors such as
competition, changes in government policies and other factors that may
influence the plan.

6.9 Quantitative Models

Mathematical models and statistical techniques such as multiple regression
analysis, econometrics are used to determine the relative contribution of
advertising expenditure to sales. Some models reflect how advertising might
interact in different ways with other marketing variables and consumers.
Mathematical models have not been able to get wide acceptance in the
industry using these models require experimentation and formal analysis.
Many firms lack such capabilities and also the process is expensive and
time-consuming.

6.10 Factors Influencing Advertising Budget

1. Product Life Cycle Stage: New products typically require large
advertising budget to create awareness, develop preference and
induce product trial and purchase. Mature brands usually require
lower budget as ratio to sales.

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2. Market Size: The size of the market influences the budget allocation Notes
decision comparatively it is easier and less expensive to reach target
audience in smaller markets. Too much of advertising expenditure
in such markets may be unnecessary and wasteful. Target audience
may be dispersed in larger market areas and it would be more
expensive to reach them.
3. Advertising Tasks to be Accomplished: Larger amount of advertising
spending will be required if the task is to create brand awareness
and brand persuasion to generate trial/purchase in case of new
brand. However in case of established brands where consumers have
already tried and tested the brand and are satisfied only reminder
advertising will suffice.
4. Intensity of Competition: In a market with many competitors a
brand needs to advertise more heavily to be marking its recognition
amongst the competing brands.
5. Financial Resources: Budget is a limiting factor which determines
the size of advertising campaign. The availability of financial
resources with the advertiser is the constraining factor influencing
the amount to be spent on advertising.
6. Unexploited Sales Potential: Higher the available sales potential
higher is the need for advertising to tap it.
7. Advertising Frequency: When many advertising repetitions are
required to communicate the brand’s message to the target consumers,
the advertising budget must be large.
8. Product Differentiation: When a brand cannot be differentiated
significantly and resembles other brands in the product category,
it requires heavy advertising to set it apart from the competitors.

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 UNIT - II
Advertising Message
and Media Decisions

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 L E S S O N

7
Creativity and Advertising

STRUCTURE
7.1 What Is Creativity?
7.2 Idea Generation
7.3 Brainstorming
7.4 Creative Execution
7.5 Advertising Execution

7.1 What Is Creativity?

Advertising is called as a creative profession, ads are often called creative, people who
develop and create commercials are known as creative people and advertising agencies
gain reputation for their creativity.
Perspectives on what constitutes creativity in advertising differ. Artists when they create
a new painting or poets when they pen a new verse are often giving expressions to their
innermost thoughts which may be based on perceptions or fantasies. The outcome may
be realistic or surreal. However, when creativity is referred to in the context of advertis-
ing, it is purposive that the creative input is expected to achieve the desired response as
delineated in the marketing objective.
In coming up with dimensions along which define creativity, we drew on social and
educational psychology literature that defines creativity as divergent thinking—that is,
the ability to find fresh, unique and appropriate ideas that can be used as solutions to a
communication problem. Creativity is about giving birth to something that did not exist
before. It is the application of past experiences or ideas in a novel and unexpected way.
It is being innovative, original and different.
Creativity requires qualities like imagination, expressiveness, openness to change. These
skills may be genetic, acquired or situational. Stephen Baker in his book “Systematic
Approach to Advertising Creativity” talked about the “pyramid principle”, the pyramid is
divided into three equivalent parts (Figure 7.1(a)). The first part, the base of the pyramid
represents initiation of the creative process – the gathering of information, the second part
represents analysis that would cover a number of activities, the third or the upper part is
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Notes culmination of all efforts of the brain - when an idea is born. According
to Baker, fortunately the human mind is eminently flexible and can stretch,
dissect, combine, compare, backtrack, juggle the thought components with
amazing flexibility. When it comes to reasoning the brain surpasses even
the smartest computers which admittedly can ingest several billion bits
of information but unless told what to do with all that fodder, produce
nothing of value.

An
Idea is

Analysis

Information
Gathering

Figure 7.1(a): The Pyramid Principle

Figure 7.1(b): Bernstein’s Model

of Creative Process

David Bernstein’s model of creative process is like a double ended

funnel with a wide mouth into which all facts and figures are poured
(Figure 7.1(b)), they are eventually concentrated into the “proposition
or the offer” to be made to the reader, listener, viewer that is the target
customer This according to Bernstein, goes into the narrow central tube
and emerges as creative idea. The proposition according to the author is
arrived at through reason and P becomes I through imagination. Thus
idea becomes an ad largely as a result of craft.
The creative process model developed by English sociologist Graham
Wallas, outlined the four stages of creativity namely:
‹ Preparation: Gathering background information needed to solve
the problem through research and study.

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‹ Incubation: Getting away and letting ideas develop. Notes

‹ Illumination: Seeing the solution.
‹ Verification: Refining and polishing the idea, validating if it is an
appropriate solution.
Also advertising creativity is not the exclusive domain of those who work
on the creative side of the advertising. The nature of business requires
creative thinking from everyone involved in the promotional planning
process. Agency people such as account executives, media planners, re-
searchers as well as those on the client side such as marketing and brand
managers must all seek creative solutions to the problems encountered
in planning, developing and executing an ad campaign.

7.2 Idea Generation

How are ideas generated? Is the generation of an idea an individual ac-
tivity or the outcome of teamwork? The views amongst various writers
in this regard vary but for all writers, the idea stage is invariably the
most challenging and at the same time most rewarding. According to
Bovee and Arens, “it is the long, tedious and difficult task of assembling
all pertinent information, analyzing the problem and searching for some
verbal or visual concept of how to communicate what needs to be said. It
means establishing the mental picture of the ad, commercial or campaign
before any copy is written or the art work begun.”
Analysts differentiate between Analytical Thinking and Creative Thinking,
this can be elaborated through Figure 7.1(c).
Analytical Creative
Logic Imagination
Unique Many Possible
Answers Answers

Convergent Divergent
Vertical Lateral

Figure 7.1(c): Analytical and Creative Thinking

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Notes
7.3 Brainstorming
Brainstorming is the process of coming up with the creative idea in a
group. This concept was introduced in 1989 by Alex Osborn, an advertising
professional. The technique which is widely used by the corporate sector,
the government and the armed forces. Brainstorming is a conference tech-
nique by which group attempts to find a solution for a specific problem
by amassing all the ideas spontaneously by its members. It is technique
where participants put social inhibition and rules aside and temporarily
suspend their judgement with the aim of generating maximum new ideas.
According to David Kech, brainstorming in which people work on a
problem is based on four basic rules:
‹ No ideas are criticised.
‹ Freewheeling is encouraged.
‹ Quantity is preferred that is more the ideas greater the probability
of finding the “big idea”.
‹ “Cross fertilisation” or hitch hiking is encouraged; participants
are encouraged to improve the ideas of others to form new and
complex ones.
Following are some of the characteristics of brainstorming:
‹ Unpredictable: One does not know, where the discussion is going
to lead.
‹ Playful: Brainstorming is a fun process; one can let creativity run
wild without any checks and control.
‹ Collaborative: It is a group process, wherein participants discuss,
argue.
‹ Surprising: Since there are no bounds within which one plays, it
can unfold many surprising solutions.
‹ Challenging: It taxes the brain to come up with the innovative,
imaginative and different solutions.
‹ Unstructured: It is a random process in which ideas are not
discussed in a structured fashion.
‹ Rapid: One after the other the ideas keep on flowing freely.

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‹ Spontaneous: In this process there is no premeditation, ideas are Notes

not held back.
‹ Imaginative: Not all ideas need to have rational edge; creativity
springs from the irrational and the unthinkable.

Preparing for Brainstorming

Although brainstorming is a group activity the preparation can begin in-
dividually before the group session’s. It is important to identify the need
for brainstorming, it must serve the purpose. The person in charge of con-
ducting the brainstorming session must research, observe and explore, in
other words pre-thinking is imperative. Many advertising personnels keep
a file, portfolio or soft board with clippings interesting quotes, product
description, photographs etc. The objective of this exercise is not to copy
other’s creative idea but to use these ideas as springboard for new ideas.
When the process begins the first pre-empt is not to think in terms of
advertising but in terms of ideas. Environment conducive for the free
flow of ideas, collaboration and comfort should be spawn (created).
While there is no standard outlined process of coming up with the ideas,
following are some variables that can be considered:
Competitor’s Advertising Appeal: Often competition can be a source of
creative ideas that can be used at least at a tactical level if not at strategic
level. “Coke, the official drink” was the Coca-Cola’s slogan for Wills
Cricket World Cup 1996, Pepsi rebuffed it as “Nothing official about it.
Enjoy Pepsi”, Nestle’s Pole “The mint with the hole” was countered by
Mint-O as “All mint no hole”.

Target Audience: The target audience profile is not mere a number or

a statistics, such demographic profiling is valuable input in designing
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Notes the advertising. Hero Honda brand of scooty - pleasure targeted young
girls with the tagline why should boys have all the fun, TVS Scooty also
targeted young girls with the tagline – Go Babelicious.

Product Name and Definition: Create new names or definitions for the
product, tell something about the product, intrigue the audience. Livon
calls itself as silky potion rather than as “hair conditioner”. Dove is not
a soap but moisturising cream and a beauty bar.

Current Affairs: Current events quickly occupy people’s mind and catch
attention. Amul is forerunner in such types of ads, it always keeps its
promotion up to date with current events, with this approach Amul, al-
ways keeps the communication fresh with the new and challenging ads.

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Strategy: Strategy tells about what to do, it speaks volumes about the Notes
vision and mission of the organisation, its customers, the message to
be conveyed etc. For example: Tata tea launched Jago Re campaign, to
raise awareness for specific causes like voting driving, anti corruption.

Personification: How would the product be if it was a living person?

For example, Pillsbury Atta personified the flour in the form of Pillsbury
Doughboy, who is soft and white like dough and dressed like a chef.
Yamaha India recently launched a maiden mascot to connect with chil-
dren and parents to promote road safety. The Yamaha Children Safety
Program (YCSP) is a first-of-its-kind social initiative by the company to
educate and influence both parents and children about vital road safety
measures. The Mascot has been developed to arouse interest among kids
about the program. Fido Dido, cartoon character was used to position 7
Up as cool drink for youngsters.

Analogy: An analogy is the comparison of two unrelated things though

which is derived that something is like something else in some respects
but not in others. Analogies can be arrived at by breaking down the
product into various characteristics, components, functions, uses, effects,
benefits etc. And then creating a list of items may be people, situations,
objects, processes, actions etc. that are like these things in some way.
For example: Garnier Anti-wrinkle cream compares wrinkle with the
loose skin of the bulldog’s face. Mahindra XUV conveys the message
that Mahindra XUV 500 is really the beast by comparing it with cheetah.
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Notes

7.4 Creative Execution

The effect of the message is governed by not only what is said but also
by how it is said. The advertiser now has to turn that idea into the real
ad that captures the audience’s attention and interest.
Good creative strategy and execution can often be central to determin-
ing the success of a product or reversing the fortunes of the struggling
brand, conversely an advertising campaign that is poorly conceived or
executed is a liability.
Advertising Appeal refers to the approach used to attract the attention
of consumer, or to influence the feelings towards the product, service or
cause. Appeal can be said to form the underlying content of the adver-
tisement, it can be viewed as something that moves people, speaks of
their needs or wants and excites their interest.
Numerous different appeals can be used as the basis for advertising mes-
sage. At the broadest level these approaches are generally broken into
two categories: Rational or Informational Appeals and Emotional Appeals.

Rational/Informational Appeal
Rational appeal focuses on the consumer’s need, practical or functional
utility of the product. The content of these messages emphasizes facts,
logic, technical and analytical aspects of the advertising message. Rational
based appeals tend to be informative and advertiser using them generally
attempt to convince the consumers that their product or service has specific
attributes or would provide certain benefits that satisfy their requirements.

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Several types of advertising appeals fall under the category of Rational Notes
Appeals among them features, competitive advantage, favourable price,
news, product/service popularity appeal.
Feature Appeal focuses on the dominant traits of the product or ser-
vice. Technical and high involvement product often uses this type of
advertising appeal. These ads tend to be highly informative and present
the customer with a number of important attributes or features that will
lead to a favourable attitude towards purchasing the product featured.
For example, Toyota’s Prius is the world’s first hybrid car. In one of its
ads Maruti highlighted the new features in the New Wagon R and also
made a comparison with the old variant. Colgate Active has salt content
that fights germs.

Competitive Advantage Appeal where advertiser makes direct or indirect

comparison to other brands and usually claims brand’s superiority on one
or more attributes. Epson printer makes comparison with other printers
while claiming its superiority as the lowest cost per print page, Most of
the automobile advertisements in print medium claim their superiority by
comparing with other automobiles in the segment.

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Notes

Product/Service Popularity Appeal: This stresses the popularity of the

product or the service by claiming the number of customers who use
the brands, the number who have switched to it, the number of experts
who recommend it. For example: Honda City claims how many happy
customers they have worldwide.
Olay Campaign: Olay Total Effects, the ad highlighted how women
were urged to take the Olay challenge and how it made a difference to
their skin.

News Appeal: These are those in which some type of news or announce-
ment about the product, service or organisation dominates the ad. This
type of appeal can be used for new product or service or to inform con-
sumers about significant modifications or improvements. For example:
Quaker Oats are now available in different flavour with real fruits and
vegetables. Maggi has introduced new Oats Maggi.

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Favorable Price Appeal: This makes price offer as the dominant point Notes
of the message. It is often used by retailers to announce sales, special
offers or low everyday price. For example: Big Bazar, retail chain is
positioned as the retailer offering lowest price to its customers, on cer-
tain occasions of national importance it announces special offers. Online
E-tailer Flipkart recently announced special discounts for the upcoming
festival season and has garnered huge response.

Emotional Appeal
Emotional appeals relate to the customer’s social and or psychological
needs of purchasing a product or service. Many consumer motives for
purchase decision are emotional and their feelings towards the brand can
be more important the features or attributes. These appeals are based on
the psychological states or feelings directed to the self such as pleasure as
well as those with more social orientation such as status or recognition.
For example, Johnsons and Johnsons highlights the motherly concern
and bonding between the mother and the child, though the advertise-
ments also highlight the features of the product but it is essentially the
motherly love that is highlighted in its advertisements. Emotional appeals
can be used in many ways to depict creative strategy. Advertisers depict
characters on the ad or commercials experiencing some emotional or
transformational benefit or outcome from using the product or service.
This approach is referred to as economic integration. These appeals are
believed to put audience in a favourable frame of mind. For example:
Google’s advertisement invoking a searing and traumatic period of parti-
tion and “reunion” portray of two friends struck cultural chord and how
search engine enabled to track down the childhood friend.
Emotional appeals are used to evoke positive feelings that may be trans-
ferred to the brand.

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Notes

Combination of Rational and Emotional Appeals

In most purchase situations, consumer decisions are based on combination
of both rational and emotional motives, only the degree of each varies
depending upon the product or service category and the buying situation.
Advertising professors, Michael Ray and Mc Cann Erickson Worldwide in
conjunction developed a research technique known as Emotional Bonding
(Figure 7.2). This technique evaluates how consumers feel about the brands
and the nature of emotional rapport they have with the brand compared
to the ideal emotional state they associate with the product category.
The basic concept of emotional bonding is that consumers develop three
levels of relationship with the brand. The most basic relationship indicates
how consumers think about the brand in respect of the product benefits,
this primarily occurs as a result of rational learning process and can be
measured by how well advertising communicates the product information.
Consumers at this stage are not very brand loyal and brand switching
is common. At the next stage, the consumer assigns a personality to a
brand, the consumer’s judgement of the brand has now moved beyond
its attributes, in most cases consumers judge the personality of the brand
based on the assessment cues found in advertising. The strongest rela-
tionship that develops between the brand and the consumer is based on
the feelings or emotional attachment to the brand. Consumers develop
emotional bonds with certain brands which result in positive psychological
movement towards them.

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Notes
Emotions

Personality

Product attributes/benefits

Figure 7.2: Level of Relationships with Brands

7.5 Advertising Execution

Once advertising appeal that will be used as the basis of advertising
message has been determined, the creative team begins its execution.
Creative Execution is the way advertising appeal is presented. While it
is important for an ad to have a meaningful appeal or message to com-
municate to the consumer, the manner in which the ad is executed is
also important, Advertising execution is the way of presentation of the
desired message or appeal to the target audience. There are many ways
in which an advertising message can be presented:
‹ Straight Sell/Factual Message
‹ Testimonial
‹ Comparison
‹ Animation
‹ Humor
‹ Scientific or Technical Evidence
‹ Slice of Life
‹ Demonstration
‹ Fantasy
‹ Dramatization
‹ Combination
Straight Sell/Factual Message: This type of presents a straightforward
presentation of information concerning the product or service. This ex-
ecution style often uses rational or informative appeals. The main focus
is on the product or service and the ad attempts to communicate specific
attributes or benefits to the target audience. For example:
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Notes

Testimonial: To present the advertisement message, some advertisers pre-

fer to use a satisfied customer who praises the product or service based
on the personal experience of its usage. Such an ad execution can use
well known personalities or satisfied customers. This style of execution
is particularly effective when target audience can identify with the person
delivering such testimonial. For example, Dove brand of soap, shampoo,
oil have used the testimonials from the satisfied customers, who have
used its product and testifies it is worth it and it actually works. Olay,
pentene are other classic examples in this category.

Comparison: Comparison (direct or indirect) communicates a brand’s par-

ticular advantage over its competitors. Advertisers also use this execution
approach to position a new, less-known brand by comparing it with the
industry leader. For example: Pepsodent claims that it is better than Col-
gate in terms of germ attack. Most of the advertisements of automobiles
especially cars in print medium, often highlight the comparison amongst
the competing brands in the same segment to claim their superiority.

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Notes

Animation: Cartoons, puppet characters and demonstration with computer

generated graphics are used to communicate ad messages. For example:
Kit Kat recently started putting forward its advertising message through
this execution style.

Humor: Humor has been a popular technique in ad execution and it

makes the commercial more interesting and entertaining. Humor evokes
feelings of amusement and pleasure and favourably affects the informa-
tion processing by audience. For example: Pidilite’s Fevicol has mostly
approached humorous execution in its advertising style.

Scientific or Technical Evidence: Technical information, scientific evi-

dence and endorsements by well-known agencies or scientific bodies to
support the product or service claims. For example: It is the Indian Den-
tal Association that claims the Colgate is the number one recommended
toothpaste and is also used by dentists in India.

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Notes

Slice of Life: This execution style is based on the problem-solution

approach. This ad type portrays a problem and conflicts the consumer
might face in their daily lives and how the advertiser’s product can solve
their problem. For example: Head and Shoulders, how it helps fight the
problem of dandruff and hair fall. How Clean and Clear face wash help
fight skin problems.

Demonstration: The product may be demonstrated in actual use or it

may be shown in some sort of staged demonstration with the explicit
purpose of highlighting the key advantage of the product or service. For
example: Vanish stain removal, how the product is to be used so as to
remove all stains on clothes was highlighted in its advertisements.

Fantasy: This approach is based on the need of the consumer to find

emotional escape to offset daily routine. Certain cosmetics ads often use

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fantasy appeal to create pleasant images and symbols consumers asso- Notes
ciate with the product or service. Fantasy execution is well suited for
television medium.
Dramatization: Another execution technique particularly suitable for
television is dramatization, where focus is on telling a short story with
the product or service, it is somewhat like slice-of-life execution – that
relies on the problem-solution approach but it uses more excitement and
suspense in telling the story.
Combination: In actual practice, most commercials use combination of
various execution techniques to present the advertising message.

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 L E S S O N

8
Creative Strategy
STRUCTURE
8.1 Creating Print Advertising
8.2 Design Principles
8.3 Creating Television Commercials
8.4 Creating Radio Commercial
8.5 Creating Internet Advertisements

8.1 Creating Print Advertising

The key format elements in the print advertising are: Headlines, Sub-Heads, Body-Copy,
Slogans, Seals, Logos, Signatures, Visual Elements and Layout.

Headline
The headline contains the words in the leading position of the advertisements. These are
the words that are read first and are positioned with the intent to draw the reader’s atten-
tion. The fundamental function of the headline is to attract the reader’s attention, get them
interested and lead them to the entire ad message, it must give the reader good reason to
read the copy portion of the ad, to do this the headline must put forth the main theme,
appeal or proposition of the ad in few words. In some print ads the body copy is total-
ly absent, the headline along with illustration must communicate the entire ad message.
Headlines are usually set in larger type and are often set apart from the body copy or the
text portion of the ad to give them prominence.
There is no formula that can recommend how a good headline should be, however, the
following factors need to be considered:
‹ The headline should be short, simple words.
‹ It should include an invitation to the prospect, primary product or service benefits,
name of the brand and an interest-provoking idea to induce the readers to the rest
of the advertisement.
‹ It should furnish enough information so that consumers who read only the headline
should learn something about the product or service.

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Types of Headlines: There are numerous headlines possibilities. The type Notes
used depends upon several factors such as creative strategy, other compo-
nents of the ad etc. Headlines can be categorized as direct and indirect.
Direct Headlines: These are straightforward and informative in terms
of the message they present. Common types of direct headlines include
those offering specific benefits, making promise or announcing a reason
the reader should be interested in the product or service.
Benefit Headlines: These promise the prospect some rewarding experi-
ence with the product or service. Such headlines put forth the product’s
most important benefit.
News/Information Headline: This announces news or promises information.
Indirect Headlines: These are not straightforward about identifying the
product or service or getting to the point. But they are often more ef-
fective in attracting reader’s attention and interest because they provoke
curiosity and lure readers into the body copy to learn an answer or to
get an explanation. These types of headlines often use questions, prov-
ocations, how-to statements or challenges.
Subheads: While many ads have only one headline, one or more second-
ary heads or subheads are also common. Subhead is additional smaller
headline that appears mostly above or below the headline. When the
subhead is above the headline it is referred to as kicker or overline. Sub-
heads sometimes appear in the body copy. Subheads are usually smaller
than the headline and may appear in bold or italic type. Subheads often
enhance the readability by highlighting key sales points and support that
content presented in the headlines. Subheads are usually longer than the
headline and serve as stepping stone from headline to the body copy and
their content reinforces the headline and the advertising slogan or theme.
Body Copy: The main text portion of the print ad is called body copy or
sometimes just copy. The body copy contains the complete story and is
the logical continuation of the headlines and the subheads. It covers the
attributes, benefits and the utility of the product or service but getting the
audience to read the body copy is often difficult. The body copy must
belong enough to accommodate the complete message and short enough to
retain the reader’s interest. Body copy can be written to go along with the
various types of creative appeals and executions like comparison, demon-
stration, humor etc. Copywriters choose a copy style that is appropriate
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Notes for the type of appeal being used and effective for executing the creative
strategy and communicating the advertiser’s message to the target audience.
Visual Elements: The illustration or the visual element is often the dom-
inant part of the print ad and plays an important role in determining its
effectiveness. In some ads the visual portion of is essentially the message
itself. It must attract the attention, communicate the idea or message
and works in a synergistic fashion with the headline and body copy to
produce an effective message. The visuals capture a mood and evoke a
feeling, a context for consumer’s perception of the product or service.
Many decisions need to be made in this regard i.e. what identification
mark need should be included: brand name, company or trade name,
trademarks, logos, etc.
Seals, Logos and Signatures: A seal is awarded when a product meets
standards established by a particular agency. Such as ISO 9001 or Energy
Star etc.
Logos and signatures are special designs of the advertiser’s brand/product
name or advertiser’s company. Logo is distinctive mark that identifies a
brand or the company.
Signature is the name of the company or brand, they appear in all their
company ads, and are immediately recognised, for example, Apple, Tata,
Intel etc.
Essentially the purpose of the Visual Element is to:
‹ Capture the reader’s attention.
‹ Clarify claims made by the advertising copy.
‹ Identify subject of the advertisement.
‹ Show the product in actual use situation.
‹ Convince the readers about copy claims.
‹ Arouse the reader’s interest.
‹ Emphasize on brand’s unique features.
‹ Create a positive impression of the brand or advertiser.
‹ Qualify readers by stopping those who are legitimate prospects.
Layout: A layout is an orderly arrangement of headline, subheads, body copy,
slogan, seal, logo, signature and the visual element in an advertisement. It

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shows where each component of the ad will be placed and gives guidelines Notes
to the people working on the ad creation. Copywriters learn how much
space is available to work and how much copy should be written.
During the creative phase the designer uses thumbnails, roughs, dummies
and comprehensives.
A thumbnail is a very small sketch, rough and rapidly created drawing to
visualise the layout approach without any details. Blocks of lines indicate
the text position, and boxes show the place of the visual. The best sketch
resulting from this exercise is then developed further.
The artists draw the actual size of the advertisement in a Rough Layout.
Comprehensive layout is a highly refined exact copy of the finished
ad. It is quite detailed with photos, font style ad size etc. Generally the
comprehensive is the typeset on computers.
A dummy is prepared to get the look and feel of the brochure and the
point of purchase material. All the elements of the dummy are hand as-
sembled, mounted on sturdy paper, and then cut and folded to the size
to appear exactly like the finished product.

Examples of Few Types of Layout:

Frame: The copy is surrounded by the visual or the visual may be sur-
rounded by the copy.
Picture Window: This is the most common layout format. It has one
single dominant visual that occupies about sixty or seventy percent of
the area. The headline and copy may appear above or below the window.
Circus: This type of layout combines lots of elements to bring the ad
alive and make it interesting by art, type or color. It is created deliber-
ately to create a busy, jumbled image.
Band: Series of elements arranged in one column with usually one major
element outside this band.

8.2 Design Principles

Ads must be designed to capture the reader’s attention immediately as the
advertiser has only a second or two to capture the reader’s attention. Good
design should not only command attention but also hold it and communicate

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Notes as much information as possible in the shortest amount of time and make
the message easier to understand. The basic design could be:
All creative advertising should have a unified design. The complete layout
(copy, headline, subheads etc.) should appear as a single unified composition.
The ad should be arranged in an orderly manner so that the consumers
can read it from left to right from top to bottom. Arrangement of elements
in a sequence helps direct the reader’s eye in a structured position.
The division of space amongst the layout elements, should accentuate
and focus on the element or group so that they stand out among the rest.
The ad designer should decide whether to put more stress on illustration,
headline or logo etc.

Using Color
Color is another element of the layout and can be used with impact. Print
advertising has the potential to contend with the television. Print has the
ability to generate astonishing, eye catching colors in the advertisement. Use
of color suits many product categories such as food items, fashion items etc.
‹ Colors adds attention capturing value to the advertisement.
‹ Colors can help in imparting emphasis on important elements of
the ad.
‹ Colors can add a sense of realism and atmosphere.
‹ Colors can help easy identification of brand name, package and
trademark.
‹ Colors imparts a feeling of prestige and quality to the advertisement.

8.3 Creating Television Commercials

Television is a powerful advertising medium combining the unique ability
of sight, sound and motion. With high levels of advertising clutter in the
medium, producing a commercial that communicate effectively is complex.
Television can be used to produce a variety of appeals and executions,
which is not possible in the print medium. However, the viewers cannot
control the pace of the ad message as in the case with the print medium.
There are two basic components of the TC commercials the audio and
the video. The video consist of the sight or the visual part and the audio

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part includes the spoken words, music or other sounds to communicate Notes
the ad message. These two components need to be used in synergistic
manner to produce the desired impact.
Video Element: The visual portion generally dominates the commercial
and include all those elements that are seen on the television screen. It
is important that these visual elements are successful in attracting the
viewer’s attention and communicate the message or the idea. It may be
required to carefully combine a number of visual elements to produce
an effective commercial, e.g., the decision may concern the product, the
presenter, action sequence, close ups, customer interview, comparison,
graphics, characters, colors, symbols etc.
Audio Element: The audio portion of the commercial includes voice,
music, sound effects. The voice could include two or more people ap-
pearing in the commercial who are involved in a conversation, or it could
be a single presenter appearing as spokesperson or it could be voiceover;
where message is delivered or action on the screen is narrated or de-
scribed by the narrator not visible. In many commercial background score
or background music helps to create appropriate mood or atmosphere for
the audience. In many other commercials, music is often used to break
through the advertising clutter and attract the audience’s attention, evoke
feelings and communicate the ad message. Jingles are catchy songs built
around the product or service that communicates the advertising theme or
messages and are another important music element of the commercials.

Planning and Production of Television Commercials

In planning for television commercial the major decision is to focus on the
type of appeal and the execution style to be used. Television is well suited
to both rational and emotional advertising appeals or combination of the
two. Various execution styles such as dramatization, slice of life, humor,
testimonial etc work well on television. Advertiser’s recognise that they need
to do more than talk about, demonstrate or compare their product or service.
Their commercial have to break through the clutter and grab the viewer’s
attention, they must often appeal to emotional as well as rational buying
motives. Television is an entertaining medium, most TV audience watch TV
programmes for their entertainment value and commercials that are capable
of primarily entertaining and providing information are more successful.

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Notes A written down version of television commercial is called a Script, it

brings together various elements of the commercial and provide detailed
description of the audio and the video portions. The video portion covers
the camera actions, angles, scenes, special techniques and other important
description. The audio portion includes the copy to be spoken by voices,
the music and the sound effects.
Once the basic script has been conceived, the writer and the art director
get together to produce a storyboard, a series of drawings to show the
layout or the visual plan of the proposed commercial. The storyboard
presents the drawings of different video scenes and the detailed description
of the audio part that is associated with each scene. Those involved in
the production and approval of the commercial get a clear picture from
storyboard as to what the finished commercial would look like. “Ani-
matic” is the videotape of the storyboard along with the soundtrack. This
is sometimes used for client presentation or pre-testing of commercial.
The production phase of the commercial starts after the client approves
the storyboard or animatic. There are three phases involved and the ac-
tivities in each stage are:

Pre-Production Production Post-Production

Phase Phase Phase
All the activities under- Period during which Activities undertaken
taken before the actual filming and videotap- after the commercial
shooting or recording of ing of the commercial has been filmed and
the commercial: is done: recorded:
‹ Selection of ‹ Location or Set Shoots ‹ Editing
Director ‹ Talent Arrangements ‹ Processing
‹ Set Construction ‹ Mixing Audio and
‹ Location Video
‹ Casting ‹ Client or Agency
‹ Agency and Client Approval
Approval ‹ Release
‹ Pre-production
Meetings etc.

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Notes
8.4 Creating Radio Commercial
Radio advertising is different and difficult because unlike print and television
advertising it cannot use visuals for attracting and captivating the audi-
ence, it requires awakening images in the listener’s mind by using sound,
music and voices. There is no visual or colors to attract the audience only
the sound. The scriptwriter has to be sure that the listener believes in the
message. It must deliver the right words; the writer can create a picture in
sound (Mental Imagery). The copywriter use words, sounds and music to
create image and influence recall. The warmth of human voice is another
factor in communicating the message. Sound has an ability to generate the
mood desired by the advertiser, it can be used to create effects of footsteps,
laughter, moaning and many others. Music is the universal language and
can be a powerful source in grabbing the listener’s attention. Jingles are
the popular means of helping people remember the slogan.
The basic ingredient in the radio commercial is to promise an important
and persuasive benefit from the listener’s point of view. After determin-
ing the key promise to be communicated, the writers use select words
and sound to communicate the desired message. Some points taken into
consideration while developing advertising copy for radio are:
‹ Keep it Short and Simple: Use simple words and short sentences,
copy needs to be conversational.
‹ Maintain Clarity: Delete unnecessary words, the message should
flow in a logical sequence.
‹ Create Rapport: The tone of the voice should create a rapport
with the prospective listeners.
‹ Make it Believable: Avoid making overstatements and exaggerations.
‹ Make it Interesting: Manner of presentation of the message should
be interesting.
‹ Create Distinctiveness: Give the commercial distinct character.

8.5 Creating Internet Advertisements

The aim of marketer is to create ads that will ensure high involvement
of consumers and interactive advertising on the internet promotes more
customer involvement.
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Notes Designing Website: Web pages can combine elements and design styles
from all different media: print, film, sound etc. In addition, the need to
search and navigate creates entirely new design from whose major chal-
lenge is the ease of use.
Web pages should be attractive and appealing. Navigation is the criti-
cal factor to move through the web pages, it should be convenient for
users to move through the site and find easily the information they are
looking for. Interactivity is another important issue, to take advantage
of the special strength of his medium, there will be interactive elements
that facilitate contacting with the company with questions, complaints,
suggestions, comments etc. Internet derives its major advantage as the
advertising medium through feedback communication, which is important
input as strategic planning also the copy testing methods are developed
to evaluate the site’s potential to motivate click through behaviour.

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 L E S S O N

9
Media Planning

STRUCTURE
9.1 Developing Media Plan
9.2 0DUNHW $QDO\VLV DQG 7DUJHW 0DUNHW ,GHQWL¿FDWLRQ
9.3 Establishing Media Objectives
9.4 Media Strategy Development and Implementation
9.5 Qualitative Aspect of Media Vehicle Source
9.6 Budget Consideration

Targeting the communication message to the right audience, through the right medium with
the right strength is as important as the development of the message itself. Any advertiser
who uses mass media advertising needs to have competent services in the area of media
planning. Essentially, media planning answers the following fundamental questions:
‹ How much money to be spent on mass media?
‹ Across what media should the spends be allocated?
‹ At what point of time in the campaign period should these monies be spent?
Thus, Media Planning refers to the series of the decisions involved in delivering the
promotional message to the prospective purchaser and or user of the product or brand.
Media Planning is a process which means a number of decisions are made each of which
may be altered or abandoned as the plan develops.
Media planning has become fairly complex with the increase in the cost of various media
and the proliferation of media choices. The media planners have to critically analyse the
choice of media class and media vehicles.
Media Plan is the guide for the media selection. It requires development of specific me-
dia objectives and specific media strategies designed to attain those objectives. Once the
decisions have been made and the objectives and strategies formulated, the information
is organised into media plan.

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Notes Medium is the general category of the available delivery system, which
includes broadcast media (TV, radio) Print media (newspaper, magazine),
direct mail, outdoor advertising and other support media.
Media Vehicle is the specific carrier within the medium category. For
example: Hindustan Times is carrier of he advertiser’s advertisement in
the newspaper category.
Media Mix: This refers to various advertising channels through which
a company communicates with its target audience.
Coverage refers to the potential audience that might receive the message
through the vehicle.
Reach is the measure of the number of different audience members
exposed at least once to the media vehicle in a given period of time.
Reach is normally expressed in percentage terms. It is important to note
that reach takes into account different and distinct individuals exposed
to a given medium, thus for two different publications it is possible for
one individual to reading both these publications, in media terms it is
referred to as duplication, when calculating reach care has to be taken to
ensure that such reader is taken into account only once for the purpose.
Frequency: In order that advertising be effective the audience must be
exposed to the advertisement more than once. The number of times the
advertisement appears in a given publication or over a particular televi-
sion program is known as frequency of exposures of the advertisement.
For example: If the ad is released 10 times in a publication, the target
audience reached by that publication would have an opportunity to see
that ad 10 times this is called OTS (Opportunity to See) in media terms.
Gross Rating Point (GRP): When reach and frequency are multiplied
it is known as gross exposure of a given campaign. This is a numerical
figure indicating how many potential audience members are likely to be
exposed to a series of commercials. It does not measure the size of the
audience reached. Rather, GRPs quantify impressions as a percentage of
the target population.
It stands for reason that for a finite amount of advertising expenditure
over the mass media, reach and frequency have an inverse relation with
each other. In other words if we try to maximize reach, frequency gets
compromised on the other hand if we maximize frequency reach will
get compromised.
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Notes
9.1 Developing Media Plan

Figure 9.1: Media Planning Process

The process as shown in Figure 9.1 involves a series of stages: Market

Analysis, Establishment of Media Objectives Media Strategy Development
and Implementation and Evaluation and Follow-up.

9.2 Market Analysis and Target Market Identification

The key questions at these stages are:
‹ To whom shall we advertise?
‹ What internal or external factors may influence the media plan?
‹ Where and When should efforts be focussed?
The market analysis may reveal more than a few target markets, to decide
which group of target market should be addressed the media planners
may need some additional data regarding the audience size, composition
of target audience, e.g., users among adults (males and females), heavy
users/light users etc. The index number is considered as good indicator
or market potential as the planners are more interested in the percentage
figure rather than the absolute number.
Percentage of users in the demographic segment
Index = Percentage of population in the same segment * 100

Use of index numbers is helpful but it should be combined with percentage

and product usage figures to get a clearer and more accurate picture of
the market. Media strategies are influenced by both internal and external
factors operating at any given time. Internal factors may involve size
of the media budget, managerial and administrative capabilities of the
organization or the agency. External factors may include cost of media,
competitive factors, changes in technology etc.

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Notes The next concern is where to promote relates to the geographic consider-
ation. Companies may find that the sales are stronger in one segment or
market over the rest and may allocate advertising expenditure according
to the market potential of the area. Obviously those markets should be
the priority areas that are most likely to meet the desired objectives.
Use of Indices to determine where to promote: Brand Development
Index (BDI) and Category Development Index (CDI) may be used to
determine where to focus advertising efforts as the figures provide media
planners insight into the relative value of markets.
Percentage of brand’s total country sales in the area/segment
BDI = Percentage of total country population in the area/segment * 100

The BDI compares the percentage of brand’s total sale in the market
segment, e.g., in Rajasthan with the percentage of the total population
in Rajasthan to determine the sales potential for the brand in Rajasthan.
Percentage of product category’s total sales in the area/segment
CDI = Percentage of total country population in that area/segment
* 100

CDI is computed in the same manner as BDI except it uses information

regarding the product category as opposed to the brand in the numerator.
CDI provides information on the potential for development of the total
product category rather than specific brands. When this information is
combined with the BDI a much more insightful promotional strategy can
be developed.
Brand Development Index (BDI)
Category Development

High Low
High market share Low market share
Index (CDI)

Good market potential Good market potential

High

High market share Low market share

Low

Monitor for sales decline Poor market potential

High BDI and High CDI: This market usually represents good sales
potential for both the product category and the brand.

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High BDI and Low CDI: The category is not selling well but the brand Notes
is, probable a good market to advertise it but should be monitored for
declining sales.
Low BDI and High CDI: The product category shows high potential but
the brand is not doing well, the reason should be determined.
Low BDI and Low CDI: Both the product category and the brand are
doing poorly, not likely to be a good place for advertising.

9.3 Establishing Media Objectives

Media objectives are the goals for the media program and should be lim-
ited to those that can be accomplished through media strategies. Media
objectives are formulated to help accomplish the advertising communica-
tion task and marketing objectives. Media objectives are translated into
specific goals for the media programme. For example: Media objective
is to create awareness in the target market through:
‹ Use of print media to provide coverage of 90% of the target market
in six months.
‹ Reach 60% of the target audience at least three times (frequency)
over six months.

9.4 Media Strategy Development and Implementation

Having established what is to be accomplished, media planners consid-
er how to achieve these objectives that is they develop and implement
media strategies which evolve directly from the actions required to meet
objectives.
Criteria considered in the development of the media plans are:
‹ The Media Mix
‹ Target Market Coverage
‹ Geographic Coverage
‹ Scheduling
‹ Media Reach and Frequency

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Notes ‹ Creative Aspects and Mood/Qualitative Aspects of Media Vehicle

Source
‹ Budget Consideration
Media Mix: A wide variety of media and media vehicles are available to
the advertisers. The objective sought, the characteristics of the product,
size of the budget and individual preferences etc. may be the factors that
determine the combination of media used.
For example: A situation in which the product requires a visual demon-
stration for communicate effectively, in such a case TV may be the most
effective medium. If the promotional strategy calls for to stimulate sale
by trial by coupons print medium may be employed.
By employing media mix, advertiser can add more versatility to their media
strategies since each medium contributes its own distinct advantages. By
combining media marketers can increase coverage, reach and frequency
levels by improving the likelihood of achieving overall communication
and marketing goals.
Target Market Coverage: The media planners determines which target
market should receive the most media emphasis, this requires matching
the media and media vehicles most suitable to the target audience. The
optimal goal is the full market coverage but this is a very optimistic sce-
nario and in real situation the coverage of the media does not allow for
total market coverage, some potential customers are left without exposure
to the advertised message. It is also true that media coverage reaches
non-targeted audience who are not considered as potential customers and
the advertiser is faced with the problem of overexposure referred to as
waste coverage or media over-exposure.

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The media planner’s objective is to reach as many members of the target Notes
market as possible and at the same time minimizing the extent of any
waste coverage. The situation usually involves trade-offs, however waste
coverage is justified because the media employed are likely to be the
most effective means of delivery available and the cost of waste coverage
is exceeded by the value gained from their use.
Geographic Coverage: Geography is another important consideration for the
media planning process, the demand for certain types of products depends
on the geographic locations of the market for example, heavy woollens
are unlikely to have significant demand in Southern Indian States, thus the
marketers would have no inclination to advertise such products in such
geographic locations. The use of BDI and CDI may be quite helpful in
determining the media strategy for different geographic locations.

Scheduling
Companies would like to keep their advertising in front of the target
audience at all times as a constant reminder of its product or brand name
however in reality it is not possible for a variety of reasons such as the
funds availability rather it may not be necessary. The primary objective
of scheduling is to time the promotional efforts so that they coincide with
the highest potential buying times. The scheduling methods available to
media planners are: Continuity, Flighting and Pulsing.
Continuity refers to the continuous pattern of advertising which may
mean every day, every week, or every month. The key is that a reg-
ular or continuous pattern of advertising is developed without gaps or
non-advertising periods. Such strategies might be used for advertising of
products that are used or consumed on an ongoing basis without regard
to seasonality (FMCG goods).
Flighting employs a slightly less regular schedule with intermittent or
irregular period of advertising and non-advertising. At some time period
there may be heavier promotional expenditures and at others there may
be no advertising.
Pulsing is actually combination of Continuity and flighting. In pulsing
strategy continuity is maintained but at certain times the promotional
efforts are stepped up.

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Notes

Thus, Media schedule is the calendar of the advertising plan and is con-
cerned with the timing of the insertion of ads in the selected media. The
decisions in this area are essentially based on certain assumptions con-
cerning how the target audience will respond to the presence or absence
of the advertising message.

Media Reach and Frequency: Advertisers have variety of objectives

and face budget constraints; they usually trade off between reach and

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frequency. They must decide whether to have the message be seen or Notes
heard by more people (reach) or by fewer people more often (frequency).
As per the response hierarchies the more people are aware and are likely
to move to each subsequent stage, achieving awareness requires - Reach
that is exposing potential buyers to the message. New brands need a
high level of Reach, since the objective is to make all potential buyers
aware of the new entry. High reach is also desired at later stages of the
hierarchy. For example: At the later stage of adoption, promotion strategy
might be to use coupons or free samples, an objective of the marketer
to reach large number of people with these samples or coupons, in an
attempt to make them learn about the product, try it, develop favourable
attitude towards it and in turn lead to actual purchase.
The problem arises because there is no known way of determining how
much reach is required to achieve levels of awareness, attitude change
or buying intentions nor can we be sure an ad placed in a vehicle will
actually reach the intended audience.
The next question is about what frequency of exposure is necessary for
the ad to be seen and have an impact. Frequency is the number of times
one is exposed to the media vehicle, not necessarily the ad itself. While
advertisement may be placed in a certain vehicle, the fact that the consumer
is exposed to that vehicle does not ensure that he also has seen/read or
viewed your advertisement. As a result the frequency level expressed in
the media plan overstates the actual level of exposure to the ad. This over-
statement led some media buyers to refer to the reach of the media vehicle
as “Opportunities to See” (OTS) an ad rather than actual exposure to it.
Because the advertisers have no sure way of knowing whether exposure to
a vehicle results in exposure to the ad, it is accepted that one exposure to a
media vehicle constitutes reach provided that this exposure must occur for
the audience member to offer an opportunity to see the ad. This approach
though, does not help in determining what frequency level is needed to create
the desired impact, decisions in this regard are not always based on hard
data. It is often quoted that establishing frequency goals for an advertising
campaign is a mix of art and science but with a definite bias towards art.
Media planners often compromise and strike a balance between reach,
frequency and the number of advertising cycles in the planning period.
In most cases the advertising budget is fixed and the planners cannot

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Notes spend more on say increasing frequency without decreasing expenditure

on reach or the number of advertising cycles. The trade-offs are generally
governed by the principle that it is better to sell some people completely
than many people not at all. The trade-off between reach and frequency
is most common, if it is advantageous to maintain advertising continuity
or plan more advertising cycles as with the frequently purchased products
or services then reach should be sacrificed. For infrequently purchased
products such as consumer durables goods it is advised to increase reach
and advertise only occasionally in cyclic pattern, this may suffice to
maintain audience interest without having to reach them more frequently.
The best trade-offs depend on the media strategy, the type of the product.
It is also possible that audience members are exposed to more than one
media vehicle carrying the same ad, resulting in repetition. For example:
If an ad of fairness cream is placed in two magazines, say, Femina and
Star Dust, a number of target audience will be exposed to both vehicles
resulting in duplicated reach. If an ad is placed in one magazine only the
total number of audience exposed only once is unduplicated reach. Figures
of both duplicated and unduplicated reach are important. Unduplicated
reach represents potential new exposures and duplicated reach provides
an estimate of frequency.

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Programme Rating: This is a measure of potential reach of broadcast Notes

media/programme expressed in percentage, e.g., the number of households
that on TV sets is 100 and a certain programme is viewed in 30 of those
households, the programme rating would be 30.
Number of households viewing the programme
Programme Rating = Total number of households owning the TV sets
* 100

Gross Rating Point (GRP): The media buyers typically use a numerical
indicator to know how many potential audience members may be exposed
to a series of commercials. A summary measure combines the program
rating and the average number of times the home is reached during the
period (frequency) is commonly used reference point known as Gross
Rating Point (GRP).
GRP = Reach * Frequency
Advertisers also use GRP as the basis for examining the relationship
between reach and frequency.
Gross Rating Point (GRP)
Frequency = Reach
Gross Rating Point (GRP)
Reach = Frequency

9.5 Qualitative Aspect of Media Vehicle Source

This concept refers that the ad exposure in one vehicle might have more
impact on the audience than if the same ad is placed in another vehicle.
For example: If the ad for a cosmetic brand is placed in women magazine
say Femina, it might produce more impact on the target audience than if
the same ad is placed in another magazine say Reader’s Digest even if
the audiences were the same. The difference in the ad message impact
may be the result of audience involvement, editorial fit or the physical
reproduction qualities.
Media Vehicle’s degree of expertise associated with its area of interest
is important,, e.g., magazines related to computer, say, PC Quest, Digit
or Computer’s@Home etc. are seen by their target audience as reliable
sources of information on the subject. Media vehicle can enhance the
creativity of the message by creating a mood that affect the impact of
the commercial communication. Sports channels are believed to generate
excitement and fun loving moods, ads of soft drinks, sportswear. Women

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Notes and lifestyle magazines are used cosmetics brands. Certain media vehi-
cles have image that may carry over to the perception of the ad message
placed within them. It makes sense to think that involvement of the
target member in the media vehicle should generate more impact of an
ad message compared to another vehicle that is less interesting to the
audience. Commercials that interrupt the high involving TV programmes
may benefit because of the spillover of involvement to ad comprehension.

9.6 Budget Consideration

One of the most important decisions in the development of media strategy
is the cost estimation. The value of any strategy can be determined by
how well it delivers the message to the audience with the lowest cost
and the least waste.
Advertising and promotional costs can be categorized in two ways: The
Absolute Cost of the Medium or Vehicle and the Relative Cost of the
Medium or the Vehicle. For example: If it costs Rs. 10 lac to furnish a
full front page advertisement in a national newspaper, the absolute cost
of the media vehicle is Rs. 10 lac., with the same advertisement the reach
is 10 lac audience members the relative cost of the medium is one rupee
per reach, thus the relative cost of the medium is always in relation to
the absolute amount paid for advertising time or space and the size of
the audience delivered.

Determining the Relative Cost of the Media

To evaluate the alternatives, advertisers compare the relative cost of the
media as well as vehicles within these media. However the broadcast,
print and out of the home media does not always provide the same cost
breakdown.
Cost Per Thousand (CPM): Magazine space is sold primarily on the
basis of pages or some increment of the page. CPM has been used by
the magazine industry as a standard method to provide cost breakdowns
on the basis of cost per page per thousand circulations and is used to
compare media cost if different vehicles.
Cost of Ad Space
CPM = Circulation
* 1000

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For example: If the cost of placing one full page advertisement in Star Notes
Dust is Rs fifty thousand and the circulation of the magazine is five lac
copies, the CPM calculation would be.
50,000
CPM = 5,00,000 * 1000 = 100

Cost Per Rating point (CPRP): The broadcast media provide a different
comparative figure referred to as cost per rating point or cost per point
calculated as:
Cost of Commercial Time
CPRP = Programme Rating
For example, if the cost of a ten-second spot on Star Plus is Rs. 1.5 lac
and the programme rating is 30, the CPRP would be:
1,50,000
CPRP = 30
= 5000
Relative cost comparison of media is important, however the inter media
comparison can be misleading. For example: television combines sight
and sound with motion and magazines provide longevity. Attributes of
different media make direct comparison difficult other than cost compari-
son advertisers must also look for specific characteristics of each medium
and the vehicle within each medium.

Evaluation and Follow-up:

Evaluation is essential to assess the performance of any activity Two
factors are important in evaluating the media plan:
How successful were the strategies in achieving the media objectives? Did
the media plan was successful in accomplishing the desired objectives?
Successful strategies help build confidence and serve as reference point
in developing media strategies in future and the failure is thoroughly
analysed to learn about the shortcomings. However, there are certain
problems with the measurement that limit the degree to which one as-
sesses the relative effectiveness of advertising strategies.

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10
Advertising Through
Internet

STRUCTURE
10.1 Website
10.2 Ad Banners
10.3 Ad Buttons
10.4 Email/Internet Direct Mail
10.5 Pop-Ups/Pop-Unders
10.6 Interstitials/Transition Ads/Intermercials
10.7 Blogs and Community Forums
10.8 Search Engine Marketing
10.9 Advantages of Internet Advertising
10.10 Disadvantages of Internet Advertising

The power of internet is phenomenal, it is the ultimate advertising medium, in the pres-
ent day world it has become such an integral part of daily lives that its existence simply
cannot be ignored. Today internet as medium of advertising is not an option.
The Internet is the worldwide means of exchanging information through series of
interconnected computers.
Any communication that can be received through the online media can be termed as online
advertising or promotion. While designing communication for internet it is imperative to
remember that net is not just a promotional medium but also a transactional medium and
distribution channel. Advertising or promotion through internet can take various forms
such as:

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Notes
10.1 Website
An organisation’s or a product website is one of the most basic and potent
tools of marketing communication. A website is in fact a location on the
internet where anyone can come to find out about the company its products
or services. A website can integrate various communication tools at the
same time. It acts as public relation tool that can influence public opinion
through product information, articles, photographs, media clippings, financial
reports etc. and addresses various audience simultaneously - consumers,
employees, investors, government etc. It acts as sales promotional tool
by communicating about distributional and promotional offers. Through
promotional videos or articles that resemble advertorials (advertisement in
the form of editorial content), a website can advertise to its audience. In
addition links from the company’s banner ads or ad buttons on other sites,
consumer blogs or social networking sites can all lead to the main website.
Typically a website is composed of many pages the first page referred to
as home page is much like a book cover or gateway and is the starting
point for additional information provided in the subsequent pages.
Important point regarding website design is about website navigation; this
refers to the art and science of arranging web pages so the user can quick-
ly can easily move from one location to another. Navigation provides the
path as well as the signposts for people to get from one place to another.
Content Design: Copy created for the internet (refer Advertising Copy)
is a lot different from the conventional copy because people generally
scan the information on the net by catching words or sentences. The main
purpose of website is to disseminate information, thus the information
available on website should be updated frequently, people often visit
website when they don’t find information therefore it must be provided
upfront. Other consideration would be to highlight the keywords, use
bullets or captions to present the main idea, information pertaining to
specific issue or topic must be classified accordingly.

10.2 Ad Banners
Ad banner is strip of web page for onscreen ads. Banners may vary in
size and appearance however small rectangular advertisements on the top

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Notes of the web page are the most common format. Most banner ads perform
the function when the viewers click on them, the internet browser nav-
igates the viewer to the advertiser’s website.
They provide online visibility ad help at least in getting the brand name
or message registered among the viewers also banners provide good se-
lectivity of the target audience, advertisers can strategically place banners
by choosing relevant website based on the content of the website or the
statistics of visitors visiting that website. Further banners allow tracking
of ad effectiveness, advertiser can find out the number of people who
viewed their banners, the number who clicked through and at times their
profile. This helps them keep a track of every single rupee spent and
measure results in objective terms and in real time.
On the flip side banner advertisement can be highly annoying to view-
ers as they distract attention from the primary content and eat up the
bandwidth. Many online users are becoming banner blind and disregard
anything that flashes or looks like banner also many browsers and proxy
servers block banners. Another disadvantage is the extremely low click
rate of banners-measuring less than one percent.

10.3 Ad Buttons
Ad buttons are the smaller version of banners that often looks like an
icon and usually serve as link to advertiser’s home page.

10.4 Email/Internet Direct Mail

Email or internet direct mail has all the advantage of the online medium –
it’s fast, interactive, easy to produce and use, less costly and uniquely
personal which offers the advantage of message tailoring according to
the type of target customer or making personalised message. However
the biggest disadvantage is that of clutter because people do not like to
receive unsolicited email messages called spam that are sent out in bulk
to various recipients and get irritated by millions of marketing messages
they receive in the mailbox every day. Thus it is important to practice
responsive marketing and to create promotions that do not violate inter-
net etiquette. This falls under the philosophy of permission marketing –
the concept advocates that marketer should not intrude into prospective

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customer’s private space but should ask permission before they send out Notes
advertisements to them. Advocates of this concept believe that permission
marketing is more efficient use of marketer’s resources since advertise-
ments are not sent to the prospects who are not interested in them.

10.5 Pop-Ups/Pop-Unders
Pop-ups are the ads that “pop up” by opening a new browser window
when a specific content page is requested. Usually pop-up ad window
open in scaled-down size and have only maximize, minimize and close
buttons. These disturb the user’s browsing experience, as these need
to be clicked individually to close the window and at times overload a
browser’s capacity. Pop-Unders are slightly less irritating format because
new advertising window pops under the content window. Some web
pages trigger pop-unders when the user leaves that page. Browser’s and
software’s allow the users to block all pop-up advertising.
A special type of pop-up advertisement is the hover ad, a combination of
ad banners and pop-up that do not scroll with the web page, but hover over
the page either obscuring (hiding) it completely or by being translucent.

10.6 Interstitials/Transition Ads/Intermercials

Interstitials are “in between pages” that appear on or between web pages
before redirecting the user to the actual content page that he has request-
ed. They appear between two content pages and hence are also known
as transitional ads or intermercial ads.
Interstitials are one of the few advertising forms that are difficult to
be blocked by the user, however they are less annoying than pop-ups/
pop-unders and always include a skip button on interstitials so that user
can avoid them if they want to and do not get irritated.

10.7 Blogs and Community Forums

Unlike website, blogs are more dynamic than websites where market-
ers establish a dialogue with the readers or share news, views, opinion
or knowledge that meet the ends of the audience in an informal way.
Blogs are also a place where companies can expect customers to open

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Notes their heart out and give honest reviews. Through blogs companies can
learn what customers have to say about their product, test new products
and even build internal brands, e.g., Microsoft tests its product through
blogs created by employees. CNN-IBN connects with its news viewers
through blogs wherein employees talk about various issues ranging from
politics to daily life.
Similarly, e-groups are electronic discussion forums for communities with
common interest – health, education, poetry etc. That holds immense
potential for marketing products. The key to remember while communi-
cation on blogs, e-groups etc. is to keep the discussion casual, honest,
short and in vernacular language.

10.8 Search Engine Marketing

When web surfers are not aware of the website domain’s name, the log-
ical way to find them about it is through search engines. Search Engine
Marketing is thus a set of tactics designed to increase the visibility of
website in the search engine result pages so that more users would visit
the site.
Keywords and Copywriting: One way that a search engine determines
whether or not your web page is relevant to the keywords searched by
the user is by matching those keywords with the content of the web
page. A web marketer needs to understand his audience and target the
correct search words and phrases on his web page in order to optimise
the page. For example for a website that gives information on real estate
properties in Delhi, following keywords or phrases could be used – Delhi
Real Estate, Delhi Homes/2bhk/3bhk in Delhi, Rental Properties in Delhi,
Commercial Properties in Delhi etc. However identification of key phrases
will not give a look listing for any of those search terms instead identify
what is the theme of the web page, what your target audience is most
likely to search for and what competition is offering and then use the
three four words or phrases accordingly.. Do not attempt to sprinkle the
web page with the generalised keywords. Professional keyword generation
softwares are also available.
Relevant Hyperlink Names: Search engines pay a lot of attention to
hyperlinks and the text immediately surrounding hyperlinks because it

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points to the content linked from that page. Hence attempt is made to Notes
include important keyword phrases in the links and surrounding texts.
Page and Image Titles: Meaningful and relevant page or image titles
should be given to each individual page of the website, the page titles
called “title pages” appear in the search engine result pages and also as
window labels in the computer taskbar panel. By reading the page title
the user should be able to make out what website and the page is all
about. Thus the page title should include a select few keyword phrases.
Like pages, images too need titles because search engines cannot read the
content of the images, image titles called “alt pages” too should include
keywords or phrases that describe the image and increase the frequency
of the keywords on the page.
Include Site Map: As well as helping in navigation the site map also
helps search engines to find all the pages of a website.
Avoid Spamming: The above techniques should not be used with the
intention to trick search engines and get higher listings because search
engines have smart technologies that can detect these efforts called
spamming, and blacklists website indulging in it. For example: Websites
have submitted duplicate pages inserted keywords of the same color as
pages, background, used popular keywords that do not directly relate to
the content of the web page have been blacklisted after their spamming
attacks were detected.
When communication managers have optimised their websites for search
engines they may submit their websites to the search engines.
Paid Inclusions: Rather than waiting for the search engines to find their
sites naturally which can take quite some time communication managers
might want to get listed faster through paid inclusions called Pay for
Inclusions (PFI) or PPI (Pay Per Inclusions).

10.9 Advantages of Internet Advertising

Target Marketing: The major advantage of web is the ability to target
specific groups of individuals or groups with the minimum of waste cov-
erage. Internet resembles a combination of trade magazines and business
journals and trade shows and exhibitions, as only those interested in the
products will visit the site. In the consumer market, through personal-

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Notes ization, sites are becoming more tailored to meet one’s needs and wants.
Message Tailoring: As a result of target marketing, messages can be
designed to appeal to the specific needs and wants of the target audience,
the interactive capabilities of the internet make it possible to carry one-
to-one marketing.
Interactive Capabilities: Internet provides strong potential for increas-
ing customer involvement and almost immediate feedback. It provides a
forum wherein the complaints, suggestions or grievances can be issued
and addressed.
Information Access: The greatest advantage of internet is the availability
of the information 24*7. Internet users can access plethora of information
anywhere, anytime they want to.
Sales Potential: Internet provides the potential for converting prospects
into customers. Real time order processing, order booking can be done
through this medium.
Creativity: Creatively designed sites can enhance a company’s image, lead
to repeat visits and positively position the company or the organisation.
Exposure: For many small and medium-size enterprises, the internet en-
ables them to gain exposure to potential customers that would otherwise
have been costly or impossible. For a section of investment that would
be required using traditional media, companies can gain national and
international exposure.
Speed: The internet is the quickest and the fastest medium of connecting
with the target audience, for those requesting information on company its
offerings, it is the quickest means to get the desired information.
Complements IMC (Integrated Marketing Communication): Internet
both complements and is complemented by other IMC media, it serves
as an important link in the integrative process.

10.10 Disadvantages of Internet Advertising

We Snarl: At times downloading information from the net takes a long
time, sites may become inaccessible due to too many visitors. For many
users who expect speed, this is the major disadvantage.

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Clutter: As the number of ad proliferates the likelihood of one’s ad Notes

being noticed drops accordingly, the result is that some ads may not get
noticed and some viewers may become irritated by the clutter.
Potential for Deception: Data collection without consumer’s knowledge
and permission, hackers and credit card thefts are a number of problems
confronting internet.
Irritation: Consumer’s discontent with clutter, e-mail spam, pop-ups and
pop-unders are irritating aspects on the internet.
Privacy: Internet marketers must be careful not to impinge upon the
privacy of users.

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11
Media Decisions - Types
of Media

STRUCTURE
11.1 Newspaper
11.2 Magazines
11.3 Radio Advertising
11.4 Television Advertising
11.5 Product Placements in Movies and Television Shows
11.6 Advertising in Movie Theatres
11.7 Out-of-Home Advertising
11.8 Outdoor Advertising
11.9 Transit Advertising
11.10 )DFWRUV $ৼHFWLQJ WKH &KRLFH RI D 3DUWLFXODU 0HGLD

11.1 Newspaper
The primary role of newspaper is to promptly deliver detailed coverage of news and oth-
er information, and incorporate interesting features for the readers. Newspapers can be
classified in different ways, one of the way of classification is:
National Newspapers: These are the newspapers with national circulation, these news-
papers have editorial content with nationwide appeal such as The Hindu, The Times of
India, Nav Bharat Times, Dainik Jagran etc. These newspapers mainly attract national and
regional advertisers.
Daily Newspapers (Regional/Local): These newspapers provide brief coverage of the
important national news and events, but there is detailed coverage of news, events and
issues concerning regional/local geographic areas besides they also cover business, sports
and other relevant information. These newspapers are generally popular because of their
nearer-to-the-home focus of news.

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Special Audience Newspapers: Some papers cater to the needs of the Notes
specific audience groups with specialized editorial content such as The
Economic Times, Financial Express cater to the groups in the field of
industry, business, finance etc. The editorial content is focussed on the
information and issues related to these aspects.

Different Types of Newspaper Advertising

Classified Advertising: This refers to the advertising arranged according
to a particular section or head, e.g., real estate, job vacancies matrimonial
columns etc.
Display Advertising: This type of advertising is seen both in newspapers
and magazines and uses illustrations, photos, headlines and other visual
elements besides text.
Special Inserts: A variety of special inserts and advertisements appear in
newspapers such as tender notices, public notices, financial reports etc.
Pre-printed ads do not appear in the newspaper but are distributed
through newspapers. These ads are printed by the advertiser and are
taken to the newspaper or the newspaper distributor to be inserted inside
the newspaper and delivered to the readers. These may take the form of
brochures or catalogues, leaflets, circulars etc.
Free Standing Inserts (FSI) is the pre-printed ad inserted in the news-
paper folds that fall out when the reader opens the newspaper and may
attract reader’s immediate attention.

Advantages of Newspaper Advertising

Penetration: One of the primary advantages offered by the newspaper
to an advertiser is the high degree of market coverage or penetration. A
high percentage of literate people read newspapers daily both in urban and
rural areas, the level of readership is high among households with higher
income and education levels. By making one space buy the advertiser
is able to achieve more extensive coverage and reach different segments
of population with the advertising message. By using daily newspapers,
national or local, media planners can achieve a high level of frequency
in media schedule.

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Notes Reader’s Involvement: People devote some time every day to reading
newspapers and while they are exposed to news, entertainment and infor-
mation their consumption decisions are also influenced by what they read
in advertisements. Consumers use retail ads to determine product prices
and availability. One aspect of newspaper that is helpful to advertiser is
the reader’s knowledge about particular section of the paper, e.g., ads of
sporting goods usually appear in the sports section, local retailer often
advertises in the city supplements of the newspaper.
Flexibility: Unlike television, newspaper offers considerable flexibility
in terms of accepting and running the advertisements. Most newspapers
accept ads allowing a closing time of 24 hours before the publication.
Advertisers take advantage of this flexibility in responding to current
market conditions and reaching customers with timely messages.
Creativity: Use of newspaper allows advertisers to use creative options
as the ads can be produced and run in different sizes, shapes or formats.
External peripherals are also used to make the advertisement more cre-
ative and attractive.
Geographic and Language Selectivity: Advertiser can take the advantage
of newspapers to reach selected geographical markets. They can also se-
lect newspapers published in several languages, this allows them greater
flexibility in terms of reaching specific market areas by using single or
combination of newspapers.
Relatively Low Cost: In comparison to other media the relative cost of
making newspaper ad as well as cost of getting it printed is low. Also
because of the extensive penetration the cost per reach of the target au-
dience is also very low.

Limitations of Newspaper Advertising

Poor Reproduction Quality: One of the greatest limitations of news-
paper as an advertising medium is their poor reproduction quality. The
newsprint is a coarse paper that limit the quality of the ads produced
in the newspaper and is not suited for proper color reproduction, when
a product’s visual appearance is important in the ad, the advertiser will
not use newspaper advertising.

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Short Life Span: Newspapers are not a leisure and pleasure medium Notes
and hence people do not devote much time to reading them, most people
read newspapers as soon as they are received and then dump and throw
them away. Newspapers are not read when they are two or three days
old. Many just skim through newspapers and this increases the possibility
of missing the ad or not paying attention to most ads.
Clutter: Like most other media, newspapers also suffer from advertising
clutter. An average newspaper contains many advertisements that compete
for consumer’s attention and interest. It is not unusual to see more than
two ads of different brands of the same product category in the same issue.
To make the ad stand out and have better chance of attracting attention,
advertisers have the costly option of using colors buying larger ad space.
Limited Selectivity: Newspapers can offer geographic selectivity but
beyond this they are not selective mediums in terms of demographics
and lifestyle characteristics. Most newspapers have wide circulation and
reach among different customer groups making it difficult for advertisers
to concentrate on any specifically defined target segment.

11.2 Magazines
Magazines are the most specialised of all advertising mediums. Numerous
magazines are targeted towards specific target audience, e.g., magazines
like India Today, Reader’s Digest, and Outlook cater to the general in-
terest. Femina, Women’s Era are women lifestyle magazines. Auto India,
Competition Success Review cater to the special interest target audience.
Availability of wide variety of magazines makes them quite an appeal-
ing medium to a large number of advertisers who specifically want to
put forward their advertising message to a narrowly well-defined target
audience.

Advantages of Magazine Advertising

Selectivity: Major advantage of magazines as a medium is the selectivity
or their ability to reach to specific target audience. Usually magazines
are published for audience with special interest. Other than interest-based
selectivity magazines also offer demographic selectivity and can reach
specific targets segments because of their editorial content and focus on

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Notes well-defined demographic characteristics. For example: A high percentage

of students in the age group of 16-25 read Completion Success Review.
Film magazines are read by large number of teenagers in the age group
of 14-19.
Reproduction Quality: From advertiser’s point of view, a highly desir-
able and valuable characteristic of magazines is the reproduction quality
of the advertisements. Magazines are generally printed on high-quality
paper, the printing process used is modern and provide equally superior
reproduction in color. Use of colors in ads is particularly important for
advertisers when the product’s visual elements are important in creating
an impact, e.g., Cosmetic products.
Creative Flexibility: Advertisers can take great deal of flexibility in terms
of the type, size and placement of advertising material in magazines.
There are options of special facilities that help advertisers in making the
ad more noticeable and readable such as gatefolds, bleed pages, inserts
or multiple page advertising.
Gatefolds: This is the form of multi-page insertion and uses the third
page that folds out and gives extra-large spread for the advertisement.
Bleed Pages: In this the ad extends all the way to the edge of the page
without leaving any margin of white space surrounding the ad. Bleed
creates an impression about the ad that it is larger and produce dramatic
effects.
Inserts of different types include return cards, booklets, CDs, coupons etc.
Three-dimensional pop-up ads are that jump off the page.
Permanence: Another distinctive advantage offered by magazines is their
long life span. TV and radio typically deliver fleeting messages that have
a very short life span, the life span of a newspaper is even less than a
day. People generally read magazines over several days and retain them
at their home for reference.
Readers Involvement: People generally purchase magazines for information
value, magazine reading is less hurried and offers an opportunity to examine
and add more thoroughly. Unlike ads in the broadcast media, magazine ads
are non-intrusive and readers can ignore. For ads of expensive, complex
or high involvement products, advertising through magazines can use long
and detailed copy to communicate effectively with consumers.

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Services: Some magazines offer an important service facility of “split runs” Notes
in which two or more versions of an ad are printed in the alternate copies
of magazine. This is helpful for advertisers to pre-test the comparative
ability and effectiveness of two ads in generating the desired response.

Limitations of Magazine Advertising

Long Lead Time: Magazines do not offer spontaneity as newspaper and
radio, the lead time when the advertising material must be submitted and
when it will run is sufficiently long. A magazine advertisement may take
four weeks or more to run after the advertiser submits it. Long lead time
means that magazine ads cannot be as timely as with other media and
make it difficult for advertisers to react to current conditions in the market.
High Cost: The cost of ad space in magazines varies according to the
size and the type of audience they reach and the degree of selectivity.
Magazines are expensive media on cost term reach basis.
Limited Reach and Frequency: Magazines are generally not as effec-
tive as other media in terms of reach and frequency. As magazines are
selective they reach specific well-defined target audience, to reach to
broad target audience, media planner have to buy space in a number of
magazines. Also, a number of magazines are either monthly or fortnightly
publications, therefore the scope of building the frequency is limited.
Competition and Clutter: It is interesting to note that as the success
and circulation of magazine increases, it attracts more advertising. This
creates much competition and causes clutter. Clutter makes it difficult
for advertiser to gain readers attention and involve them into advertising
message.

11.3 Radio Advertising

Advantages of Radio Advertising
Selectivity: Radio offers high degree of selectivity through geographic
coverage by a large number of stations and various programme formats.
Advertiser can focus their ad messages towards specific audience who
understand different languages in different areas which may not otherwise
be possible through other media.

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Notes Cost Efficiency: The cost of making advertisement for radio is placing
the same across various stations is less as compared to the cost of mak-
ing and placing the advertisement on television. The low cost of radio
means advertiser can build more reach and frequency into their media
schedule with limited budget.
Flexibility: Among all the media, radio is probably the most flexible as
it has short closing period. Radio commercials can usually be produced
in a relatively short time and if required the ad message can be changed
almost just before the broadcast time. The same ad message may be ad-
justed in different languages to suit the market conditions.
Mental Imagery: Radio advertising uses sound and major advantage of
this situation is that it encourages audience to use their imagination in
creating images while processing the ad messages. Radio may reinforce
television messages through image transfer, wherein the images of tele-
vision commercials are implanted into radio spot. The idea is that when
consumers hear the ad message they connect to the television commercial
they had seen, thus reinforcing its video images.
Geographical Coverage: Radio can and does reach almost everywhere
in India, even at those places where there is no television connectivity,
people who cannot read and write, radio can reach those sections as well.
Integrated Marketing Opportunities: Radio provides marketers with a
variety of integrated marketing opportunities. Advertisers often use radio
stations and personalities to enhance their involvement with the local
market and to gain influence. Retailers often use on-site radio broadcast,
combined with special sales promotion to attract customers to their stores
and get them to make a purchase.

Limitations of Radio Advertising

Creative Limitations: The most fundamental problem associated with
radio is the lack of visual elements, the radio advertiser cannot show
or demonstrate the product or make use of other visual appeals. A radio
commercial like television commercial is short-lived and fleeting mes-
sages that do not allow the receiver to control the pace at which it is
processed, because of these creative limitations many companies tend to
ignore radio.

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Clutter: With the increasing intensity of advertising, clutter has become Notes
a problem in advertising vehicle and radio is no exception. Radio stations
and programmes carry many advertising messages and it is becoming
increasingly difficult for ad messages to attract and retain audience’s
attention.
Audience Fragmentation: Large number of radio stations create audi-
ence fragmentation, the number of audience tuned in to any particular
radio station is quite small. Advertisers who want to reach broad market
through radio with language differences have to buy time on a number
of stations reaching specific geographic area.
Limited Listener Attention: Another problem with radio commercials is
that it is difficult to retain listener’s attention to commercials. Programme
switching is frequent among listeners and they often miss or avoid com-
mercials. Possibilities of distortions in radio broadcast are high and this
irritates the listeners and commercials are missed.
Limited Research Data: The research data on radio is limited as com-
pared to television, newspaper and magazines.

11.4 Television Advertising

Creativity and Impact: The greatest advantage of television is the oppor-
tunity it provides for presenting the advertised message. The interaction
of sight, sound and motion offers huge creative opportunities and makes
possible dramatic, lifelike representation of products and services. Tele-
vision commercials can be used to convey mood or image for the brand
as well as to develop emotional or entertaining appeals. The commercial
can effectively communicate an image or mood associated with the brand.
If the nature of the product is such that demonstration would convey the
ad message more effectively, TV is the most suitable ad medium.
Coverage and Cost Effectiveness: Advertising on television makes it
possible to reach a large number of audiences regardless of income,
age, gender, educational level, most people at least watch something on
television. Advertisers’ selling products and services appealing to broad
target audience find that television has become particularly popular me-
dium and can reach mass markets in cost effective manner, as the cost
per reach comes out to be relatively low on this medium.

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Notes Selection and Flexibility: Television offers selectivity through regional

coverage, broadcast time and programme content. Advertisers can refine
their target audience coverage by appealing to groups with specific inter-
ests such as sports, music, news etc. as there are a number of channels
and a number of programmes centered on one or the other interest matter.
Captivity and Attention: Television is intrusive in that commercials
impose themselves on viewers as they watch their favourite programme.
Unless a special effort is made to avoid the commercials, we are exposed
to most of the commercials.
Use of Appeals and Demonstration: Advertisers can use various appeals
in various markets as considered appropriate through television medium.
The impact of emotional appeal can be highlighted through television in
the most impressive manner. Also television is an excellent medium for
demonstrating the product or service.
Least Effort: In television commercials use of both audio and video is
made, it calls for least effort on the part of the target audience to get
the message across. As opposed to the print media, people have to read
and understand the message.

Limitations of Television Advertising

Though television is unsurpassed from the creative perspective, the me-
dium has several disadvantages these are:
Cost: Despite the efficiency of TV in reaching large audience, it is an
expensive medium to advertise. The high cost of TV commercials not
only emanates from the high cost of buying media space but also from
the cost of producing a quality commercial.
Lack of Selectivity: However, television provides selectivity in terms of
targeting audiences on the basis of their interest such as programme time,
broadcast time etc. but for advertisers who are interested in delivering their
message to a very specific, narrowly defined, small target audience, televi-
sion often leads to media over exposure or waste coverage, thus reducing its
cost-effectiveness. Audience selectivity is improving still the medium does
not offer as much selectivity as radio, magazine, newspaper or direct mail.
Fleeting Message: Most television commercials last for 30 seconds or

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less, commercials are becoming shorter and shorter as the demand for Notes
the limited broadcast time. Increasing media costs are also forcing the
advertisers to consider shorter commercials. Nothing tangible is left for
the audience to examine in such a short duration.
Clutter: The problem of fleeting messages and shorter commercials is
compounded by the fact that advertiser’s message is only one of many
spots and other non-programming material seen during the commercial
break, so it may have trouble being noticed. One of the advertiser’s biggest
concerns with TV advertising is the potential decline in the effectiveness
because of such clutter.
Limited Viewers’ Attention: Buying time on television does not guarantee
exposure, it only offers opportunity to communicate the ad message to
a larger audience. There is increasing evidence that the size of viewing
audience shrinks during the commercial break, viewers move away from
the TV sets for one or the other reason to avoid commercials. With the
increase in the number of commercials, getting audience to pay attention
is becoming increasingly challenging. Audience members find themselves
armed with remote control that makes zipping and zapping convenient.
Zipping: This refers to fast-forwarding the commercials as they appear
when viewing the previously recorded movie or some other programme.
Zapping refers to changing channels to avoid commercials.
Some advertisers believe that the ultimate way to zip-zap proof com-
mercials is to produce creative advertising messages that will attract and
hold advertiser’s attention, however as the number of channels and the
television programmes increases, this problem is likely to continue also
people primarily watch television because of its entertainment value and
not because they wish to be bombarded by commercials.
Distrust and Negative Evaluation: Many consider television commercials
to be intrusive and consumers are defenceless against the bombardment of
these ads. TV viewers are in no position to exercise any control on the
transmission of message and what becomes visible on their screens. Many
dislike TV advertising when they believe it is offensive, uninformative or
when they do not like its content or presentation. Many people generally
distrust television commercials more than any other form of advertising.

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Notes
11.5 Product Placements in Movies and Television Shows
An increasing number of companies pay to have their products used in
the movies, music videos or television shows. The merits and demerits
of this medium of advertising are:

Advantages
Exposure: A large number of people watch movies, this form of exposure
is not subject to zipping and zapping (at least not in the theatre). High
exposure numbers are also offered for TV tie-ins.
Frequency: Depending on how the product is used in the movie or pro-
gram, there may be ample opportunity for repeated exposure.
Recall: It has been observed that the chance of products being noticed
is always high in film advertising, also the audience’s ability to recall
the product shown the movie is also very high.
Acceptance: It has been viewed that in general audience accepts the
product placements in the movies and evaluates them positively.

Limitations
High Absolute Cost: The absolute cost of placing a product in films or
television is very high.
Time of Exposure: While the products will be exposed to the audience,
there is no guarantee that the viewers will notice the product.
Limited Appeal: The appeal that can be made in this media form is
limited. There is little or no potential for discussing the product bene-
fits or providing detailed information. The endorsement of the product
is indirect and the flexibility for product demonstration is subject to its
use in the movies.
Lack of Control: The advertiser has no say over when and how the
product will be shown.
Negative Placements: Some products may appear in the movie scenes
that are disliked by the audience or create unfavourable impression.

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Notes
11.6 Advertising in Movie Theatres
Commercials shown before the film and previews, during interval ads in
theatre lobbies, at kiosk etc. are categorised under this head.

Advantages of Movie Theatre Advertising

Exposure: As a source of entertainment, movies are quite popular as
the number of people visiting the movie theatre are substantial, so it is
possible to carry the message across lots of people.
Mood of the Audience: People deliberately plan to go to the movie
theatres, their pre-movie mood is positive and this mood may lead to
carry-over effect on the advertised product.
Selectivity: Advertiser can be selective in terms of region, town and type
of cinema halls and could reach to the select audience.
Lack of Clutter: The biggest advantage of advertising in movie theatre
is the limited number of ads, this eliminates the chance of clutter.
Recall: It is observed that people recall the ads which they watch in
movie theatre better than the ads that they watch on their television sets.
Cost: In terms of both the absolute cost and the relative cost per expo-
sure, advertising in movie theatre is cost-effective.

Limitations of Movie Theatre Advertising

Irritation: Most people do not like to see the ads in this media, audi-
ence irritation can lead to development of negative feelings towards the
advertised product.

11.7 Out-of-Home Advertising

Out-of-home advertising encompasses many advertising forms; most
popular amongst include outdoor (billboards and signs) advertising and
transit (both inside and outside) advertising.

11.8 Outdoor Advertising

Outdoor advertising is the oldest medium of advertising. It is usually
used as a supportive medium by most national advertisers and includes

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Notes billboards, hoardings, posters, wall paintings etc. Outdoor advertising can
generate considerable reach and frequency levels at a fraction of the cost
of the mainstream media.

Advantages of Outdoor Advertising

Wide Coverage of Local Market: A broad base of exposure is possible
in local markets through this medium, with both day and night presence.
Frequency: Purchase cycles of outdoor spaces are usually for 30 days
period, consumers are generally exposed a number of times, resulting in
high level of frequency.
Geographic Flexibility: Outdoor advertising is highly flexible and can
be placed almost anywhere the law permits. It can be placed near stores,
on buildings along city roads etc. and can conveniently cover local or
regional markets, the message can be altered to address to the audience
preference with their choice of language.
Cost Efficiency: Outdoor advertisements are very cost-efficient as com-
pared to other media.
Effectiveness: Outdoor advertising often leads to increased sales, partic-
ularly when combined with other promotional techniques.
Creativity: By combining color, art and short copy outdoor advertising
can quickly captivate the viewer’s attention.

Limitations of Outdoor Advertising

Waste Coverage: While it is possible to reach specific audiences, gener-
ally the outdoor advertising results in high-level waste coverage because
not everyone driving or walking by the billboard is part of the intended
target audience.
Message Wear Out: Because of the high frequency of exposure, outdoor
advertising can lead to quick wear-out effects.
Limited Message Capabilities: Because of the speed with which most
people pass by outdoor ads, exposure time is short so the messages are
limited to select few words, phrases or illustrations. Lengthy and detailed
messages using different appeals is not possible through this medium.
Measurement Problem: One of the most difficult problems of outdoor
advertising is measurement of reach, frequency and other effects.

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Legal Constraints: About placement of billboards and hoardings, where Notes

these will be placed, how many banners at an intersection etc. are to be
approved by the local authorities.
Limited Effectiveness: A number of uncontrollable factors may lessen
the effectiveness of outdoor ads such as traffic signals, trees, structures
may distract the viewers.
Public Criticism: Various public interest groups and environmental groups
criticise outdoor billboards and posters claiming that they are an eyesore,
nuisance and often distract people causing road accidents.

11.9 Transit Advertising

Advantages of Transit Advertising
Exposure Duration: Long length of exposure to an ad is one of the
major advantages of transit advertising.
Exposure Frequency: Those who commute to their place of work and
back home every day are exposed to same ads reputedly, this increases
the frequency of exposure of ads.
Geographic Selectivity: Advertisers can choose geographical areas to
reach to select segment, this is particularly useful to local advertisers
who can buy locations in certain nearby areas or transit options.
Low Cost: Both the absolute cost and the relative cost of placing ad-
vertisements in this medium are very less as compared to other media.

Limitations of Transit Advertising

Waste Coverage: While geographic selectivity may be an advantage, not
everyone who rides a transportation vehicle is a potential customer and
may lead to waste coverage.
Image Factor: To many advertisers, transit advertising does not carry
the image they would like to represent their product or services.
Mood of the Audience: Sitting, standing in a crowded transit medium
may not be conducive to reading advertising.
Creative Limitations: The message on the outside of vehicle is fleeting
and only short copy points are appropriate that limit any creativity.

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Notes
11.10 Factors Affecting the Choice of a Particular Media
Nature of the Product: The type of product to be advertised is the
main determinant of the advertising medium. Consumer products like
soap, tooth paste (FMCG products) that are meant for masses should be
advertised through newspaper, radio, outdoor displays etc, On the other
hand the industrial goods like machinery, raw material etc. should be
advertised through specialised trade, technical and professional journals.
The general character of the product may also strongly influence the type
of media used, e.g., Racer bikes are usually advertised in select cars and
bike magazines because it ultimately reaches the select target market also
the impact of advertisement insertion in such magazines is very high
also readers are also interested in the content of such advertisements,
therefore, reader’s involvement is also very high.
Nature and Size of the Market: Market characteristics such as geograph-
ical location, size of the population, purchasing power have an important
bearing on the advertising media. Advertising in local markets can be
done through local newspapers, outdoor display. Newspapers, Television
or internet is appropriate for advertising in national and international
markets. In case of limited and easily identified market specialised mag-
azines may be appropriate choice. Characteristics of the market in terms
of age, education etc. (demographic profile) are also very important when
selecting appropriate medium or media vehicle.
Objectives of Advertising: When the objective is to create mass aware-
ness for the newly introduce product a combination of various media
may be used however extensive usage of Television, newspaper, radio.
When the objective is to stimulate purchase amongst the target market
who are already aware about you or offering in such a situation trials
may be induced through free samples wherein the use of print medium
is more appropriate.
Type of Audience: The type of people for whom the message is ad-
dressed is also an important consideration. Illiterate people can be better
approached through radio, television or movies. Newspaper, magazines
and internet can be used to convey message to the educated customers.
The type of media vehicle to be selected depends upon the language or
content in respect to the nature of audience.

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Type of Message: Choice of advertising media also depends upon the Notes
length of the advertised message. Magazines are better choice for colour-
ful, newspapers radio or TV are more appropriate when newsworthiness
and timeliness are an integral part of the message, e.g., when beverage
maker Pepsi and coke were accused for having pesticides content in their
product and the report was covered by almost all the media forms (print
and broadcast) immediate clarification was required as the negative atti-
tude was seem being developed against the products both the cola major
came up with their detailed explanations in all the newspapers citing
their response to the accusation and assuring the customers hope safe
it is to enjoy their drinks, the choice of media selected was newspaper
because such accusation required an immediate response and the length f
the message was also in detail because of the type of clarification sought
therefore print medium came as preferred choice.
Circulation of Media: How many people or households can be covered
by a particular medium is another factor to be considered. Not just the
coverage of the media but qualitative aspects such as editorial fit, pres-
tige, audience involvement etc should also be considered.
Cost of Media: The cost of advertising medium both the absolute cost
of advertising and the relative cost (absolute amount paid divided by
the number of customers covered) should be considered, analysed and
evaluated across various medium and media vehicles so as to determine
the best way to reach the target audience at the least cost.
Advertising Budget: The advertising budget puts a limiting factor on the
amount available to be spent on across different media. The advertiser
must choose a medium in which he can get sufficient insertions with the
funds available.
Media Used by Competitors: The type of media used by the competi-
tors also influence the choice of medium of advertisement, e.g., Design-
er Apparels are usually advertised through select magazines or certain
newspaper supplements that carry the lifestyle and the fashion segment,
people looking for designer clothes become habitual of seeing such ad-
vertisement in these sections, in order to face competition it becomes
necessary to advertise in the popular media.

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 UNIT - III
Organization and Evaluation
of Advertising Efforts

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 L E S S O N

12
Measuring Advertising
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12.1 Measuring Advertising Effectiveness

Almost any time one engages in a project or activity, whether for work or fun, some
measure of performance occurs, advertising and promotion is not an exception. Both
clients and agencies are continually striving to determine whether their communication
are working and how well they are working in relative to the other options. Measuring
the effectiveness of promotional program is critical element in the promotional planning
process. Research allows to evaluate the performance of the specific promotional mes-
sage element and provides input for the next period’s situation analysis, it is a necessary
ingredient for the continuing planning process.

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Notes
12.2 What to Test
This section considers what elements to evaluate.
Source Factor: An important question is whether the spokesperson being
used is effective and how the target market will respond to him or her,
e.g., Mr. Amitabh Bachchan was effective in the pulse polio “Do Boond
Zindagi Ki” campaign; wherein he compelled people to get their kids
vaccinated for the polio.
Message Variables: Both the message variables and how that is com-
municated are bases for evaluation for example: the message may not
be strong enough to pull the readers into the ad by attracting their at-
tention or is clear enough to help them evaluate the product. A number
of factors regarding the message and its delivery may have an effect on
the effectiveness including the headline, illustration, text and layout etc.
Media Strategies: Media decisions need to be evaluated. Research may
be designed to determine which media class (e.g., broadcast or print),
subclass (newspaper or magazine) or specific vehicle (which newspaper
or magazine) generates the most effective results. The location within the
particular medium (e.g., front page, back page or under specific section
head say Sports section etc.) and the size of the ad or the length of
commercial also merits examination.
Another factor is Vehicle option source effect; the differential impact that
the advertising exposure will have on the same audience members if the
exposure occurs in one media option rather than another.
Final factor in media decisions involve scheduling, the evaluation of
flighting versus pulsing or continuity schedule is important particularly
given the increasing cost of media space and media time.
Advertising Budgeting Decision: A number of studies have examined the
effects of budget size on advertising effectiveness and the effects of various
ad expenditure on sales. Many companies have also attempted to determine
whether increasing their ad budget directly increases sales. The relationship
is often hard to hard to establish, perhaps because using sales as an indi-
cator of effectiveness ignore the impact of other marketing mix elements.

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Notes
12.3 When to Test
All the test measures are classified according to when they are conduct-
ed. Pretests are the measure taken before the campaign is implemented,
pretests may occur at a number of points from as early as idea generation
to rough execution to testing the final version before implementing it.
Post-tests occur after the ad or commercial has been in field. Post testing
is designed to determine if the campaign is accomplishing the objectives
sought and serve as an input for the next period’s situation analysis.

12.4 Where to Test

Laboratory Test: In laboratory tests people are brought to a particular
location where they are shown the ads or commercials. The major ad-
vantage of lab setting is the control it affords the researchers. Changes
in copy, headlines, illustrations, colors, font can be manipulated inex-
pensively and differential impact of each assessed. This makes it much
easier for researchers to isolate the contribution of each.
The major disadvantage is lack of realism. And the greatest effect of lack
of realism is a testing bias when people are brought into lab they may
scrutinize the ads much more closely than they would at home.
Field Test: These are the tests of the ad or commercials under natural
viewing situations complete with realism of noise, distraction, and comforts
of home. Filed test take into account the effects of repetition, program
content and even the presence of competitive messages. Major disadvan-
tage of field test is lack of control, it may be impossible to isolate the
cause of viewer’s evaluations and field tests take more money and time
to conduct so the results are not available quickly to be acted upon.

12.5 Why to Test/Reasons to Measure Advertising

Effectiveness
Assessing the effectiveness of ads before they are implemented and/or after
the final versions have been completed and fielded offers various advantages:
Avoid Costly Mistake: If the advertising and promotional program is
not accomplishing its objectives not only the money spent lost but also

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Notes the potential gain that could result from the advertising program. Thus,
measuring the effects of advertising does not just save money, it also
helps to maximize its investment.
Evaluate Alternative Strategies: Typically there are a number of strat-
egies under consideration before a firm, for example there may be many
questions as to which medium should be used or whether one message
or one type of appeal or execution style be used or the alternate one.
To evaluate which strategy is and would be best suitable for the firm or
brand, it is essential to measure advertising effectiveness.
Increasing Efficiency of Advertising in General: Sometimes advertiser
get so close to the project they lose sight of what they are seeking and
because they know what they are trying to say, they expect the audience
will also understand. They may use technical jargon that not everyone
is familiar with or the creative department may get too creative or too
sophisticated that they lose meaning that is to be communicated.
Determine if Objectives are Achieved: In a well designed IMC plan,
specific objectives are established, if objectives are attained new ones
need to be established for the next planning period. An assessment of
how program element led to the attainment of goals should take place
and/or reasons for less than desired achievement must be determined.

12.6 Why Not to Test

Companies give a number of reasons for not measuring the effectiveness
of advertising and promotional messages:
Cost: Perhaps the most commonly cited reason for not testing particularly
among the smaller firms is the cost involved in conducting the testing
procedures to determine the efficacy of advertising. Good research may
be expensive both in terms of time and money. Many believe that the
amount spent on advertising research may be better spent on the improved
production of ad, additional media buys etc.
Disagreement on what to Test: The objectives sought in the promotion-
al program may differ by industry, stages of the product life cycle, or
even for different people within the firm. The sales manager may want
to see the impact of promotion on sales, the top management may wish
to know the impact on the corporate image and those involved in the

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 MEASURING ADVERTISING EFFECTIVENESS

creative process may wish to assess recall or recognition of the ad. Lack Notes
of agreement on what to test often lead to no testing.
Objections of Creative: It has been argued that the creative department
does not want its work to be scrutinised or tested and many agencies are
reluctant to submit their work for testing. As the creative department of
the ad agencies argue that tests are not true measures of creativity and
effectiveness of ad, applying measures stifles their creativity.
Research Problem: Another major issue for not measuring advertising
effectiveness is that it is difficult to isolate the effects of promotional
elements. Each variable in the marketing mix affect the success or failure
of the product. As it is difficult to isolate the measures of contribution
of each marketing element directly, managers decide not to test at all.

12.7 How to Test

Conducting evaluative research is not easy. Twenty one of the largest US
advertising agencies have endorsed a set of principles aimed at improving
research used in preparing and testing ads, providing a better creative
product for the client and controlling the cost of TV Commercials. This
set of nine principles, called PACT (Positioning Advertising Copy Test-
ing) defines copy testing as research which is undertaken when a decision
is to be made about whether advertising should run in the marketplace.
Whether this stage utilizes a single test or a combination of tests, its
purpose is to aid in the judgement of specific advertising executions.
1. Provide measurements that are relevant to the objectives of the
advertising.
2. Require agreement about how the result will be used in advance of
each specific test.
3. Provide multiple measurements (because multiple measurements are
not adequate to assess ad performance).
4. Be based upon model human response to communication – the reception
of stimulus, the comprehension of stimulus and the response to stimulus.
5. Allow for consideration of whether the advertising stimulus should
be exposed more than once.

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Notes 6. Require that the more finished a piece of copy is the more soundly it
can be evaluated and require as minimum that alternative executions
be tested in the same degree of finish.
7. Provide control to avoid biasing effects of the exposure context.
8. Take into account the basic consideration of sample definition.
9. Demonstrate reliability and validity.

12.8 Testing Process

Testing of advertisements may occur throughout its development process:
‹ Concept testing
‹ Rough, prefinished art copy and or commercial testing ^ Pre-Testing
‹ Finished art or commercial pre-testing
‹ Market testing of ads of commercials (Post testing)
Concept testing is conducted very early in the campaign development
process in order to explore targeted consumer’s response to a poten-
tial advertisement. Positioning statements, copy, headlines, colors used,
typeface, package designs, illustrations may be scrutinized ad evaluated.
One of the most commonly used methods for concept testing is focus
groups which usually consist of eight to ten people from the target market
of the product (however number may be more depending upon the group
consensus, strength of response or degree of participation) and are pre-
sented with the concept to be tested and are asked to discuss. A variety
of issue may be examined and consumers are free to go into the depth
in areas they consider important. The results are easily obtained, directly
observable and immediate. However the results obtained are qualitative
and not quantified this restrict further analysis also group influences may
bias the participants responses.
Other commonly used methods are:
Paired Comparison: Wherein the respondent is presented with two
different product concepts and are asked to evaluate and express their
preference and reasons for it.
Rank Order: Respondent is presented with series of product concepts
and are asked to rank them in order of preference.

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In both the above methods rather than participating in a group discussion, Notes
individuals assess the concepts via rating scale questionnaires etc.

12.9 Rough Art Copy and Commercial Testing

Consumer Jury: Group of respondents are asked to rate a selection of
layouts or copy versions presented in paste ups on separate sheets.
Direct questioning, Focus groups, order of merit tests, paired comparison
test may be used for conducting test on consumer jury.
Certain flaws in the methodology limit its usefulness such as preference
for specific types of advertising may overshadow the objectivity of eval-
uation by the respondent, sometimes participants rate an ad good on all
characteristics because they like a few and overlook specific weaknesses
(halo effect), respondent instantly become self-appointed expert paying
more attention and being more critical than usual.
Comprehension and Reaction Tests: One key concern for the advertiser
is whether the ad or the commercial conveys the meaning intended. The
second concern is the reaction that the ad generates. Comprehension and
reaction tests are designed to assess these responses.
Test of comprehension and reaction employ no one standard procedure.
Personal interview, group interview or focus groups may be used for
this purpose.

12.10 Pretesting of Finished Ads

Finished advertisement or commercial is tested since it has not been
presented to the market changes can still be made.
Portfolio Test: It is laboratory methodology designed to expose group
of respondents to a portfolio consisting of both control or test ads, they
are then asked what information they recall from the ads, the underlying
assumption being that the ads that yield the highest recall are the most
effective. While portfolio tests offer the opportunity to compare the ads
directly, certain weaknesses limit their applicability.
Factors other than creativity and or presentation may affect recall. Interest
in product or product category, the fact that respondents know they are

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Notes participating in attest or interviewer instructions may account for more

differences than the ad itself.
Recall may not be the best test for all types of products, according to
some researchers ability to recognise the ad when shown for a low in-
volvement product may be a better measure than recall.
Dummy Advertising Vehicles: In an improvement on the portfolio test,
ads are placed in dummy magazine developed by the agency or the re-
search firm, the magazines contain the regular editorial features of interest
to the readers as well as the test ads and are distributed to the random
sample in predetermined geographical areas. Readers are told the mag-
azine publisher is interested in evaluation of editorial content and then
they are interviewed on their reactions to both editorial content and ads.
Recall, recognition and interest generating capabilities of ads are assessed.
The most important advantage of this method is that it provides a more
natural setting, readership occur at participants own home, the test more
closely approximates a natural reading situation and the reader may go
back to the magazine as they typically do but the method shares the
disadvantages associated with the portfolio tests, the testing effect is not
eliminated and product interest may still bias the result.
Theatre Tests: Respondents are invited to view pilots of the proposed
television programs in between they are shown advertisements commer-
cials, they are asked to indicate what they like and didn’t like in the
commercial, recall of various aspects of the commercial, interest in and
reaction to the commercial, interest in brand under consideration etc.
Proponents argue that theatre test offer distinct advantages in addition to
control, this method indicates how one’s commercial will fare against others.
Those opposed to theatre test cite a number of disadvantages: environment
is too artificial, lab setting is bad enough, group effect of having others
present and overtly exhibiting their reactions may influence viewers who
do not have any reactions themselves.
Physiological Measures: Involves laboratory setting in which physiological
responses are measured, these measures indicate the receiver’s involuntary
response to the ad, and theoretically eliminating biases associated with
the voluntary measures (Involuntary responses are those over which the
individual has no control such as reflexes).

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Pupil Dilation: Pupillometer is the device that measures person’s pupil Notes
dilation and constriction (narrower, tightening) to the pupil of the eyes in
response to stimuli. Dilation is associated with action and constriction involves
body’s conservation of energy. Pupil dilation suggest a stronger interest or
preference for an ad implies arousal or attention getting capabilities.
Galvanic Skin Response (GSR): Also known as Electro Dermal Re-
sponse (EDR) GSR measures the skin’s resistance to a small amount
of current passed between the two electrodes. Response to the stimulus
activates sweat glands which in turn increases the conductness of the
electric current. Thus GSR/EDR activity might reflect a reaction to ad-
vertising, viewing several different advertisements involuntarily reveals
variations in interest through automatic recording of the EDR response
on the skin. Excitement can cause either an extremely unfavourable or an
extremely favourable reaction both reactions will show up on the graph.
Eye Tracking: Viewers are asked to view an ad while a sensor aims
abeam of infrared light at the eye, the beam follows the movement of
the eye and shows the exact spot on which the viewer is focusing, the
continuous reading of responses demonstrates which elements of the ad
are attracting attention, how long the viewer is focusing on them and the
sequence in which they are viewed.
Eye tracking can identify strength and weaknesses in an ad, e.g., back-
ground action may distract the viewer’s attention away from the product
being advertised, thus advertiser can remedy this distraction before com-
mercially telecasting the ad.
Brain Waves: Can be taken from the skull to determine electric fre-
quencies in the brain, these electrical impulses are used in two areas of
research: alpha waves and hemispheric lateralization.
Alpha activity refers to the degree of brain activation, people are in the
alpha state when they are inactive, sleeping or resting. In this state a
person is less likely to be processing information. By measuring subject’s
alpha level while viewing a commercial researcher can assess the degree
to which the attention and processing are likely to occur.
Hemispheric Lateralization: Distinguishes the alpha activity in the left
and the right hemisphere/side of the brain. The right side of the brain
processes the visual stimuli and the left side processes the verbal stimuli,

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Notes the right hemisphere respond to emotional stimuli and left side respond
to logic. Advertiser could design ads to increase learning and memory
by creating stimuli to appeal to each hemisphere.

12.11 Post Testing

After the ad and or campaign has been implemented, post-tests are con-
ducted to measure communication or sales effects of the ads, to provide
insight on advertisement’s performance and provide input about the con-
duct of future advertisements.
Inquiry Tests: These are used both in consumer and business-to-busi-
ness market testing, these tests measure advertising effectiveness on the
basis of inquiries generated from the ads. Inquiry can take the form of
number of phone calls/emails received, number of coupons returned or
direct inquiries through reader cards.
Split-Run Tests: Variations of ad appear in different copies of the same
newspaper or magazine both the copy style would carry an offer or
gift or free booklet depending on which ad results in greater number
of inquiries the advertiser decides which ad would be more effective in
generating sales.
Inquires may not be the true measure of attention getting or information
providing aspect of the ad, the reader may be attracted to the ad, read
it, even store information but may not inquire at a particular time. Time
constraint, lack of need for the product at the time the ad is run and
other factors may limit the number of inquires. Also receiving small
number of inquiries does not mean the ad was not effective ; attention,
awareness, recall, attitude change may all have been achieved. At the
other extreme a person with particular need for the product will respond
to an ad regardless of specific qualities of the ad.
Recognition Tests: Once exposure to the media vehicle has been es-
tablished, the interviewer may use recognition tests. Respondents flip
through the pages and points to the items he remembers. This test is
based on the premise that there is a positive correlation between noticing
an advertisement for a product and buying that product.
Recall Tests: Refers to the measures of the proportions of the sample
audience that can recall an advertisement. These tests assess the ad’s

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impact on memory of the respondent. There are two types of Recall: Notes
Aided Recall and Unaided Recall. In aided recall the respondent is
prompted by showing a picture of the advertisement with the sponsor or
brand’s name blanket out, in unaided recall only the product or service
name may be given.
However the respondent’s degree of involvement with the product or
the distinctiveness of the appeals or visuals may affect the recall scores.
Day After Recall Tests: The Day After Recall (DAR) is measure of
television commercials where consumers are asked about the ad after
the day they saw it (or even more). DAR is the percentage of those is
the commercial audience who were watching the show before and after
the commercial was shown, who recalled something specific about the
commercial such as sales message, story line, plot or some visual or au-
dio element. These percentages of the ad being tested are compared with
the norm or historical average for the ads of similar length, or similar
product categories.
The major advantage of day after recall test is that they are field test, the
natural setting is supposed to provide a more realistic response. However
the program content may influence recall, DAR tests may favour un-
emotional appeals because respondents are asked about the message and
thinking messages are easier to recall than emotional ones so the recall
score for emotional ads may be lower.
Test Marketing: Many companies conduct tests designed to measure their
advertising effects in specific test marks before releasing them nationally.
The test markets chosen are representative of the target market. A variety
of factors may be tested reaction to the ads, the effects of various budget
size or special offers. The advantage of test marketing of ads is realism,
regular viewing environment are used and the testing effects are minimised.
A high degree of control can be attained if the test is designed success-
fully, e.g., to identify the association between the advertising frequency
and consumer’s buying habit. On the other side the major disadvantage
associated are the cost and the time involved.
Tracking Studies: One of the more useful and adaptable form of post
testing involves tracking the effects of the ad campaign by taking mea-
surements at regular intervals. Tracking studies have been used to measure
the effects of advertising on awareness, recall, interest and attitude to-

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Notes wards the ad or brand as well as purchase intention. This may be applied
to both print and broadcast ads. Personal interview, phone survey, mall
intercepts may be used. It yields the most valuable information to the
advertiser for assessing the current programs and planning for the future.
Also standard set of questions can track effects of campaign over time.

12.12 Essentials of Effective Testing

Good tests of advertising effectiveness must address the nine principles
established by PACT.
‹ Establish Communication Objectives: Marketing objectives
established for the promotional program are not good measures of
communication effectiveness, e.g., it is very difficult to isolate the
impact of advertising effort on sales as there are number of factors
that has bearing on the level of sales generated, on the other hand
attainment of communication objectives an be measured and leads
to accomplishment of marketing objectives.
‹ Use Consumer Response Model: Hierarchy of Effects model or
Cognitive response models which provide an understanding of the
effects of communication and lend themselves to achievement of
communication objectives.
‹ Use Both Pre Tests and Post Tests: From cost point of view pre
testing makes sense, it may mean the difference between the success
or failure of the campaign or the product. But it should work in
conjunction with post-tests which avoid the limitations of pre-tests,
use much larger samples and take place in the more natural settings.
‹ Use Multiple Measures: Many attempts to measure the effectiveness
of advertising focus on one major dependent variable perhaps
recognition, recall, sales. Advertising may have variety of effects
on the consumers, for true measure of advertising effectiveness a
number of measures may be required.
‹ Properly Understand and Implement Research: It is critical to
understand research methodology. What constitutes a good design?
Does it measure what we need to? Is it valid or reliable? There is
no shortcut to these criteria and there is no way to avoid it if you
truly want to measure advertising effectiveness.

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 L E S S O N

13
Advertising Agency

STRUCTURE
13.1 Advertising Agency
13.2 Client or Advertiser’s Role in Organising for Advertising
13.3 Centralised System
13.4 Decentralised System
13.5 Types of Advertising Agency
13.6 Advertising Agencies - Indian Scenario
13.7 Agency’s Compensation/How Does Advertising Agencies Earn Revenue
13.8 Selection of Advertising Agency
13.9 Signing Up
13.10 Induction Process
13.11 %ULH¿QJ 3URFHVV
13.12 Agency’s Ranking
13.13 Top 15 Media Agencies

13.1 Advertising Agency

The word “Advertiser” in the marketing parlance is the term used for the organisation
that uses mass media to advertise for its products and services. They provide necessary
funds that go into media buying and creating advertisements. Developing and implementing
integrated marketing communications program is usually complex and detailed process.
The organisation can handle most of these functions through its advertising department
or by setting up an in house advertising agency. For most of the companies advertising
planning and execution is handled by an outside advertising agency.
According to American Association of Advertising Agencies (AAAA), “Advertising
agency is an independent business organisation composed of creative and business people
who develop, prepare and place advertising in advertising media for sellers seeking to find
customers for their goods and services”. In present scenario more and more advertising

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Notes agencies are acting as partners with the clients and assuming more re-
sponsibility for developing the marketing and promotional programmes.
Media organisations perform a vital function in the advertising com-
munication process by providing information or entertainment to their
audience and thereby provide an environment for the advertiser’s message.
The media must possess those attributes that attract audiences so that
clients and their advertising agencies want to buy space or time to reach
to their target markets with the ad message in a cost effective manner.
Another important group of participants includes various service specialists
and providers of collateral services. They include direct response agencies,
sales promotion agencies, marketing research providers, photographers etc.

13.2 Client or Advertiser’s Role in Organising for Advertising

The manner in which a company organises for advertising and other
promotional elements depends upon several factors such as company
size, number of products, budget, structure of marketing organization
etc. Many companies have an advertising department, many marketing
personnel often provide inputs in campaign planning, agency selection
and evaluation of proposed programmes. Some large organisations form
a spate in house advertising agency responsible for advertising and other
promotional activities.
Centralised System: Marketing activities in some companies are divided
along the functional lines such as advertising, sales, product planning,
research and development etc. The advertising manager looks after all
promotional activities concerned with company’s product and services
including budgeting, creation of ads, their production, media schedules
and sales promotion.
Usually companies that do not have many divisions, product or service
lines or brands often use centralised system. Having centralised adver-
tising department makes it easier for the top management to participate
in decision making. Since fewer people are involved in deciding the
programmes in a centralised system, operating efficiency is greater. On
the negative side, it is often difficult for the advertising department to
fully comprehend the overall strategy for the brand and the response to
the specific problems faced by the brand may be slow.

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Notes
13.3 Centralised System

Marketing Product
Research Planning

Decentralised System: This is used in large corporations with many

product lines and brands. Typically the company has many strategic busi-
ness units or divisions with separate manufacturing, research, marketing,
sales, product or brand management departments. Each brand is assigned
to a brand manager also termed as product manager; who is typically
responsible for managing the brand including planning, budgeting, sales
and its profit performance. The brand manager often has one or more
assistant brand managers for planning, implementing and control of mar-
keting programme.
Under the brand management system all functions associated with adver-
tising and other promotions are the responsibility of brand manager, who
works closely with the advertising agency and other specialist service
providers as they prepare the promotional programme. The advertising
department as part of marketing services provide support to brand man-
agers in planning and coordinating integrated promotional communica-
tion (Refer Figure). In a multi-product company, brand managers may
compete with the brands in the same product category handled by other
brand managers within the company and not just the outside competitors.
In this system, brand managers are often involved in competition among
themselves to gain the top management attention for more budget alloca-
tion leading to undesirable rivalries and sometimes even disproportionate
fund allocation.

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Notes
13.4 Decentralised System

Marketing
Research

Sales
Promotion

Brand
Manager 3

13.5 Types of Advertising Agency

Advertising agency is an independent organisation that provides one or
more specialised advertising and promotion-related services to assist
companies in developing, preparing and executing their advertising and
other promotion programmes.
The main reason why companies use outside ad agencies is because they
provide the clients with services of highly skilled specialists in their chosen
fields. An advertising agency may have personnel that include writers,
artists, media research specialists and other with specific knowledge and
skills expertise and experience to hep the client market their product and
services. Some agencies distinguish themselves in providing specialist
services for companies in particular industry.
Full Service Agencies: As the name suggests, a full service agency pro-
vides a whole range of services to the clients both advertising and non

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advertising. Advertising services encompasses planning, creating, and Notes

producing advertising campaigns which broadly includes account planning,
research, creative services, media planning, production of advertisement
material for print, broadcast and outdoor media etc. Non-advertising
functions may include public relations, making corporate identity plans,
organizing fairs, exhibitions etc. Some agencies are even involved in
their client’s marketing processes which may include distribution and
suggesting marketing strategies for their products.
The full-service agency is composed of various departments each respon-
sible for providing needed inputs to perform various functions to serve
the client. Such an agency often tends to have following functional areas:
‹ Account Services
‹ Marketing Services
‹ Creative Services
‹ Management and Finance
Account Services or Account Management: This is the link between
the ad agency and its clients. The account executive is responsible for
understanding the advertiser’s marketing and promotion needs and inter-
preting them to the agency personnel. The account executives also present
agency recommendations and obtain client approval.
Marketing Services: Most full service agencies maintain a research de-
partment whose function is to gather, analyse and interpret information
that will be useful in developing advertisements for the clients. This
can be done through primary research or through previously published
material (secondary research). The research department may also design
and conduct research to pretest the effectiveness of the advertising copy.
The media department of the agency analyze, select and contracts for
space or time in the media that will be used to deliver the advertisement
message. The media department is expected to develop media plan that
will reach the target market and effectively communicate the message.
The research and media department perform most of the functions that
full service agencies need to plan and execute their clients advertising
programs. Some agencies offer additional marketing services to their cli-
ents to assist in other promotional. An agency may have sales promotion
department or merchandising department that specialise in developing

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Notes contests, premiums, point of sale materials and other sales materials.
Creative Services: The creative service department is responsible for the
creation and execution of advertisements. The individuals who conceive
the ideas for the ads and write headlines, sub heads and body copy are
known as copywriters. They are also involved in developing the basic
appeal or theme of the ad campaign. The art department is responsible
for how the ad looks.
Members of the creative department work together to develop ads that
will communicate the key points determined to be the creative strategy
of the client’s product or services.
Once the copy, layout and illustration is approved, the ad is turned over
to the production department. Most agencies do not produce finished
ads, they hire specialists to complete the finished product.
Creating an ad often involve many people and take considerable time, in
large agencies with many clients coordinating the creative and production
processes can be a major problem. A traffic department coordinates all
phases of production to see that the ads are completed on time and all
deadlines for submitting the ads to the media are met.
Management and Finance: Like any other business an advertising
agency must be managed and perform basic operating and administrative
functions such as accounting, finance, HR. It must also attempt to gen-
erate new business and manage its personnel carefully and get maximum
productivity from them.
Creative Boutiques: A creative boutique is an agency that provides only
creative services. These specialised companies have developed in response
to some clients desire to use only the creative talent of an outside provider
while maintain other functions internally. The client may seek outside
creative talent because it believes an extra creative effort is required or
because its own employees do not have sufficient skills in this regard.
Full service agencies also often subcontract work to the creative boutiques
when they are busy or want to avoid adding full time employees on their
payroll. These agencies usually perform creative function on fee basis.
Media Buying Services: Media buying services are independent entities
that specialize in buying media space or time. Agencies and clients usu-
ally develop their own media strategies and hire the buying service to

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execute them. Some media buying services do help advertiser plan their Notes
media strategies, because these agencies purchase large space and time,
they receive discounts. These agencies are paid a fee or commission for
their work.
In–House Advertising Agencies: The evolution of in house agencies
began as a logical progression when many corporate realized that starting
their own advertising agency was an interesting option wherein not only
they be able to invest in the booming industry but also get tremendous
value for all group companies whose work would then be centralized out
of their own agency. The operating model was further refined allowing
the agency to compete in the market as separate entity, this helped the
finances of both the company and the agency.
Mudra Communications, which was started by Reliance, as an in house
agency in the early 1980’s is today amongst the premier agencies in the
country. Not only did it achieve formidable reputation in the industry for
its work, it also set up the Mudra Institute of Communication (MICA),
Ahmedabad in 1991. MICA is one of the foremost schools of post grad-
uate education in the field of communication.
Another example in this category is Lowe Lintas, which began operations
individually in 1969 as Lintas, the Indian division of Lintas (acronym for
Lever International Advertising Services) which itself was established in
1899, later a part of Unilever. In 2000, the company changed its name
to Lowe Lintas following the global merger of the IPG networks.
Another format of the in-house advertising agency is the setting up of a
department or division to handle the communication requirement of the
company. In addition these divisions also do all the work that comes
up in the company beyond advertising such as work concerning internal
communication, sales literature, trade communication etc.

13.6 Advertising Agencies - Indian Scenario

There are many accredited advertising agencies in India, besides a num-
ber of smaller ones looking for accreditation to be engaged in national
advertising. In order to get credit facilities and full agency discounts from
the media, agencies need to get accreditation from the Indian Newspaper
Society (INS). One of the key functions performed by the society is to

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Notes provide assistance to member publications in regard to monitoring the

recovery of their dues from Advertising Agencies and Advertisers.

13.7 Agency’s Compensation/How Does Advertising

Agencies Earn Revenue
There are three methods used to compensate the agencies for their varied
services:
‹ Commission
‹ Negotiated Fee
‹ Percentage Charges
Commission from Media: Traditional method of compensating agencies
is through a commission system. The agency is paid a fixed commission
from the media on any advertising space or time purchased for the ad-
vertiser. This system provides a simple method for determining payments.
This system has been criticised whether the fixed percentage paid repre-
sent an equitable compensation for the services rendered by the agency.
To produce an ad, two advertising agencies may put the same amount of
effort, However one client spends Rs. 5,00,000 on media and other spends
Rs. 10,00,000. Assuming commission rate is 10%, one agency would get
paid Rs. 50,000 and other Rs. 1,00,000 in commission. Thus this method
encourages agencies to recommend higher media expenditure to increase
their earnings. In period of media cost inflation, the agencies earn dispro-
portionate amount as commission. Those who favour this method say that
not only is it easy, but it also encourages competition among agencies
on factor other than price, such as quality of advertisements produced.
They further argue that agencies have to devote more time and effort to
large accounts and often perform other services for them so the accounts
generate proportionately higher revenues for the agency.
Negotiated Fee: Since many believe that commission system is not equi-
table to all parties, many agencies and their clients have developed some
type of fee arrangement or cost plus agreements for agency compensation.
Some are using incentive based compensation.
Fixed Arrangement: There are two basic types of fee arrangement, in
Fixed Fee Method, the agency charges a basic monthly fee for all of

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its services and credits the client any media commission earned. Agency Notes
and the client agree on the specific work to be done and the amount
the agency will be paid for it. Sometimes the agencies are compensated
through Fee Commission Combination, in which media commission
received are credited against the fee.
Cost Plus Agreement: Under cost plus agreement, the client agrees to
pay the agency a fee based on the cost of its work plus some agreed
upon profit margin. This system requires that the agency keep detailed
record of the cost it incurs in working on the clients account. Direct
costs plus an allocation for overhead and mark up for profits determine
the amount of agency bill.
Fee agreements and cost plus system are commonly used in conjunction
with the commission system. The fee based system can be advantageous
to both the client and agency. Many clients prefer fee or cost plus system
because they receive a detailed break down of where and how their adver-
tising and promotion money is being spend. However these arrangements
can be difficult for the agency as they require careful cost accounting
and may be difficult to estimate when bidding for the clients business.
Incentive Based Compensation: Many clients these days are demanding
more accountability from their agencies and tying agency compensation
to performance through some type of incentive based system. While
there are many variations, the basic idea is that the agency’s ultimate
compensation level will depend on how well it meets predetermined
performance goals. These goals often include objective measures such as
sales or market share as well as subjective measures such as evaluation
of quality of agency’s creative work. Companies using incentive based
system determine agency compensation through media commission, fees,
bonus or some combination of these methods.
Percentage Charges: Another way to compensate an agency is by adding
a mark up of percentage charges to various services the agency purchase
from the outside providers. These may include market research, art work,
printing, and other services or materials. Since suppliers of these services
do not allow the agency a commission, percentage charges cover admin-
istrative costs while allowing a reasonable profit for the agency’s efforts.

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Notes
13.8 Selection of Advertising Agency
The points that need to be considered while deciding upon an advertising
agency are:
‹ Core Competence: With respect to agency’s core competence a
client needs to consider is the agency geared to handle the nature
of jobs at the client’s end.
‹ Service Orientation: In terms of service orientation, the client has
to consider is the agency geared for along term association, does
its culture similar or dissimilar to the client’s, is its temperament
aligned to the client’s.
‹ Category Exposure: It essentially deals with the following questions:
Does the agency has prior experience in the client’s category?
Alternatively does the agency have experience in allied categories?
‹ Current Portfolio - Competitive Closure: It needs careful consideration
on the following fronts:
Is the agency experienced across categories to enable cross category
knowledge and insights?
Is the agency already handling a competitive business.
‹ Resource Allocation: The following queries need to be addressed:
Is the agency assigning sufficient quota of resources to your business?
Does the agency have the breadth of expertise to provide you with
the right nature of expertise?
‹ Remuneration: Is the agency affordable? Is its financial expectation
aligned to your budgetary constraint.
Size: Is the agency too big for your requirement? or is it too small?

13.9 Signing Up
Agencies and the clients sign up formal contracts delineating the scope
of work, terms and conditions, resource support, estimation, billing and
payment procedures, legal ramifications etc.
Following the signing up of an agency the process moves into the stage
of working together towards a common goal. Any move by the client to

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help agency make the transition or come on board goes along way in Notes
strengthening the relationship and also in ensuring greater productivity
from the agency.
The help from the client comes in the form of induction process culminating
in brief. This is akin to an individual taking up a new job. The better the
understanding of the company, its business, its challenges, its compulsions,
its motivators and drivers the better will be the output of the agency.

13.10 Induction Process

To start with both the agency and the client need to have a formal in-
duction at each other’s offices to understand the business and its various
aspects. Typically the more scientifically oriented clients take their agency
counterparts for an introduction to the customer so as to assimilate market
information first hand. This help gives the agency a feel of the market
and helps it to gauge the pulse of the consumer vis-a-vis the category,
the client and the competition.

13.11 Briefing Process

Most clients these days expect the agency to lay the role of marketing
and communication consultant and not just an advertising support sys-
tem. The whole objective in co-opting the agency is to ensure that the
agency personnel are as equipped with the category knowledge as erst-
while marketing departments, thereby ensuring the smooth functioning of
brand related activities at the agency end. It also empowers the agency to
evolve its own analysis of market dynamics and the imperatives required.
Most of clients are now looking forward their own marketing strategies,
evolve suitable platforms and recommend brand solutions as part of their
service deliverables.
However, the ideal situation is when the client-agency partnership is
truly symbiotic association wherein both are equal and there exists mu-
tual respect and respect. The sharing of knowledge and data should be
two-way and setting the objectives should be a combined exercise. The

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Notes absence of this harmony can create problems that may be insurmountable
for the brand in the long run.

13.12 Agency’s Ranking

The parameters on which the agencies get ranked and which have been
arrived at in consultation and discussion with the industry itself are
indicators of what an advertiser looks for in its agency partner. The pa-
rameters across the years have been as follows:
Client Servicing: Aspects such as ensuring timelines, understanding and
implementing strategies, having result-oriented approach, stability, good
knowledge about the brand/market etc.
Creative Ability: Aspects such as generation of new ideas, execution of
ideas while retaining brand values keeping creative on strategy.
Account Planning Ability: Aspects such as consumer insights, using
research well, value add on communication strategy, own initiatives on
brand development.
360 Degree Capability: Aspects such as agency’s ability to plan and
implement communication solutions that go beyond traditional media are
through the line and are present across consumer touch points.
Partnering with the Client: Aspects such as optimizing budgets, keeping
brand growth in focus maintain consistent client servicing team for long
period of time etc.
Innovation and Thought Leadership: Aspects such as being a forerunner
in advertising, innovating new models of advertising.
Investment in Employee: Aspects such as training, investing in good
work environment, investing in new technology overall exposure across
categories.
Business Development Ability: Aspects such as being forerunner in win-
ning business pitches, retaining existing clients, generating more business
from existing clients.

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Brand Equity Agency Reckoner - Economic Times Notes

13.13 Top 15 Media Agencies

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 UNIT - IV
Advertising and Society

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 L E S S O N

14
Various Aspects and Issues
in Advertising

STRUCTURE
14.1 Ethical and Legal Aspects of Advertising
14.2 Legal Aspects of Advertising
14.3 Consumer Complaint Committee (CCC)
14.4 Unlicensed Employment Agencies
14.5 Misleading Advertising
14.6 Economic and Social Issues of Advertising

14.1 Ethical and Legal Aspects of Advertising

Every profession is governed by “law of the land” and advertising is no exception. Over a
period of time, judgements emanating from various court of law add to new interpretation
and enactments. Advertising law refers to the laws defining the ways in which products,
services or ideas can be advertised in terms of placement, timing and content. Similarly
every profession also develops code of conduct for its professionals, both the laws and
code of ethics serve as a beacon for practitioners.
It is interesting to note that there is a slight difference in the degree to which the constitution
guarantee freedom of speech and expression can be enjoyed by the advertising industry,
when compared to other branches of mass media. Article 19(1) states simply “All citizens
shall have the right to freedom of speech and expression” The companion Article 19(2)
qualifies this right by providing that the state can impose reasonable restrictions on its
exercise “in the interest of sovereignty and integrity of India, friendly ties with foreign
states, public order, decency and morality or in relation to contempt of court, defamation
or incitement to an offence.”

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Notes
14.2 Legal Aspects of Advertising
‹ The Indecent Representation of Women Prohibition Act, 1986: The
Act defines the indecent representation of women likely to deprave,
corrupt or injure the public morality and forbids the depiction of
women in an indecent and derogatory manner.
‹ The Emblem and Names (Prevention and Proper Use) Act, 1950:
Forbids the use by any private party of certain names and emblems
etc. Many companies may like to use pictures of political dignitaries
and the national emblem to commemorate certain national days.
In such a circumstance permission need to be sought beforehand.
‹ The Prevention of Insults to National Honor Act, 1971: Forbids
bringing into contempt the national flag or Constitution of India
in any manner.
‹ The Drugs and Magic Remedies (Objectionable Ads) Act, 1954:
Prohibits ads for the products and services claiming to cure medical
ailments tantra, mantra, kavach, miraculous power for cure, treatment
or prevention of any diseases.
‹ Indian Penal Code, 1860: Makes it punishable offence to advertise
any obscene publication or distribution of unauthorized lotteries,
promote by words spoken or written or by signs or by visual
representations create hatred between different religious, racial groups.
‹ Cigarettes and Other Tobacco Products (Prohibition of Advertisement
and Regulation of Trade and Commerce, Production, Supply
and Distribution Act), 2003: This Act prohibits all direct and
indirect advertisements that suggest or promote the use of tobacco
products. Advertisement include all types such as display ads, films
or video tapes with ads, leaflets, handbills, documents, pamphlets,
transit ads etc.
‹ Consumer Protection Act, 1986: This Act provides for the better
protection of the interests of consumers and for the purpose of
establishing consumer councils for the settlement of the consumer
disputes. Under this Act, consumers, their representatives, voluntary
consumer organisations and the government can complain against
unfair trade practices, defective or hazardous products etc. The Act

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 VARIOUS ASPECTS AND ISSUES IN ADVERTISING

serves two purposes: one to provide education to consumer regarding Notes

their rights and secondly to provide for a simplified inexpensive
and speedy remedy for redressal of consumer grievances.
‹ SEBI (Securities and Exchange Board of India) (Disclosure
and Investor Protection), Guidelines 2000: SEBI (Securities and
Exchange Board of India) issued guidelines on advertisements to
ensure investor protection from unscrupulous practices of companies:
Advertisement should be truthful and not contain information that is
untrue or misleading. Advertisement inviting people to subscribe for
any issue shall not contain inaccurate portrayal of past performance
of company or portrayal in a manner that implies past gains or
income will be expected in future, language used is not clear or
understandable.
‹ Competition Act, 2002: Intends to prevent practices having adverse
effect on competition to promote and sustain competition in market.
‹ Disparagement: When advertisers intentionally make false or misleading
negative remark against competing brands. (Refer Misleading Advertising
for details)
‹ The Prize Competition Act, 1955: Prohibits the publication of
matter with unauthorized prize, competition while the Prize Chits
and Money Circulation Schemes (Banning) Act, 1978 imposes a
similar prohibition in respect of chits and money circulation schemes.
Ethics are set of moral principles that guides action and creates a sense
of moral behaviour. Many laws are put into force that determine what
is permissible in advertising. However, not every issue is controlled by
rules. Marketers are often faced with decisions regarding appropriateness
of their actions which are based on ethical considerations rather than what
is within the law or industry guidelines. There is considerable overlap
between what many consider to be ethical issues in advertising and the
issues of manipulation, taste, and the effects of advertising on values
and lifestyle.
Sex appeals and/or nudity are used simply to gain consumer attention:
which is not even appropriate to the product being advertised and also
is in poor taste. With the increasing level of clutter in the advertising
environment, advertisers continue using appeals that attract the attention
of the consumers but offend many people.
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Notes
The primary criticism of advertising is that it is misleading and deceives
consumers. There are people who believe everything they see or hear.
Deception also occurs as a result of how consumer perceives the ad and
its impact on their opinion and beliefs. Puffery is exaggerating with su-
perlatives or subjective opinions. Though certain degree of exaggeration
is considered normal what bothers is the extent to which advertisers
knowingly make false, untruthful or misleading claims.
The most fundamental objective of all advertising is to cut through the
clutter, capture attention and create an impression that lingers on the
memory of its target audience. While doing so advertisers create desires,
shapes attitude alter social values and raise many ethical questions.
Advertising Standard Council of India (ASCI) work to maintain the
ethical code.
The Advertising Standards Council of India (ASCI), established in 1985,
is committed to the cause of Self-Regulation in Advertising, ensuring
the protection of the interests of consumers. ASCI was formed with the
support of all four sectors connected with Advertising, viz. Advertisers,
Advertising Agencies, Media (including Broadcasters and the Press) and
others like PR Agencies, Market Research Companies etc.
ASCI has adopted a Code for Self-Regulation in Advertising. It is a com-
mitment to honest Advertising and to fair competition in the market-place.
It stands for the protection of the legitimate interests of consumers and
all concerned with Advertising - Advertisers, Media, Advertising Agen-
cies and others who help in the creation or placement of advertisements.
ASCI is a voluntary self-regulatory organization, registered as a not-
for-profit company under section 25 of the Indian Cos. Act. ASCI is
not a Government body. It is a voluntary Self Regulatory Organization.
However, ASCI is represented in all committees working on advertising
content in every Ministry of the Government of India.
ASCI has one overarching goal to maintain and enhance the public’s
confidence in advertising. ASCI seeks to ensure that advertisements con-
form to its Code for Self-Regulation which requires advertisements to be:
‹ Honest Representation: Truthful and honest to consumers and
competitors.

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Notes
‹ Non-Offensive to Public: Within the bounds of generally accepted
standards of public decency and propriety.
‹ Against Harmful Products/Situations: Not used indiscriminately
for promotion of products, hazardous or harmful to society or to
individuals particularly minors, to a degree particularly unacceptable
to society at large.
‹ Fair in Competition: Not derogatory to competition.
The Code’s rules form the basis for judgement whenever there may be
conflicting views about the acceptability of an advertisement, whether it
is challenged from within or from outside the advertising business. Both
the general public and an advertiser’s competitors have an equal right to
expect the content of advertisements to be presented fairly, intelligibly
and responsibly. The Code applies to advertisers, advertising agencies
and media.

Responsibility for the Observance of this Code

The responsibility for the observance of this Code for Self-Regulation in
Advertising lies with all who commission, create, place or publish any
advertisement or assist in the creation or publishing of any advertise-
ment. All advertisers, advertising agencies and media are expected not
to commission, create, place or publish any advertisement which is in
contravention of this Code.
This Code applies to advertisements read, heard or viewed in India even
if they originate or are published abroad so long as they are directed to
consumers in India or are exposed to significant number of consumers
in India.

Code and the Law

The Code’s rule are not the only ones to affect advertising. There are
many provisions, both in the common law and in the statutes, which can
determine the form or the content of an advertisement. The Code is not
in competition with law. Its rules and the machinery through which they
are enforced, are designed to complement legal controls, not to usurp or
replace them.

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Notes
14.3 Consumer Complaint Committee (CCC)
ASCI encourages the public to complain against the ads which they may
be unhappy with any reason and ensures that each complaint receives
prompt and objective consideration by an impartial Consumer Complaints
Committee (CCC). It takes 4 to 6 weeks from the date CCC receives a
“complete” complaint. This should include full particulars of the Print
Advertisement, the name and date of Publication, and clipping or copy
of the print Advertisement. In case of a TVC (Television Commercials)
airing, the complaint is required to have the Channel, date and time of
the TVC, reasonable description of an A/V, specific claims or visual de-
pictions which are considered to be false, misleading or objectionable and
the reasons for the same. In the light of the Code, the committee asks
the agency or the advertiser to comment and submit the substantiation.
The standards of conduct laid down by ASCI in the following four chap-
ters of its Code are minimum standards of acceptability.

Chapter I
To ensure the Truthfulness and Honesty of Representations and Claims
made by Advertisements and to Safeguard against misleading Advertise-
ments following code was established:
‹ Advertisements must be truthful. All descriptions, claims and
comparisons which relate to matters of objectively ascertainable
fact should be capable of substantiation.
‹ Where advertising claims are expressly stated to be based on or
supported by independent research or assessment, the source and
date of this should be indicated in the advertisement.
‹ Advertisements shall not, without permission from the person, firm
or institution under reference, contain any reference to such person,
firm or institution which confers an unjustified advantage on the
product advertised or tends to bring the person, firm or institution
into ridicule or disrepute.
‹ Advertisements shall neither distort facts nor mislead the consumer
by means of implications or omissions. Advertisements shall not
contain statements or visual presentation which directly or by

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implication or by omission or by ambiguity or by exaggeration are Notes

likely to mislead the consumer about the product advertised or the
advertiser or about any other product or advertiser.
‹ No advertisement shall be permitted to contain any claim so
exaggerated as to lead to grave or widespread disappointment in
the minds of consumers.

Chapter II
Advertisement should contain nothing indecent, vulgar, especially in
depiction of women, or nothing repulsive which is likely, in the light of
generally prevailing standards of decency and propriety, to cause grave
or widespread offence.

Chapter III
To safeguard against the indiscriminate use of advertising in situations or
of the promotion of products which are regarded as hazardous or harmful
to society or to individuals, particularly minors, to a degree or of a type
which is unacceptable to society at large.
No advertisement shall be permitted which:
(a) Tends to incite people to crime or to promote disorder and violence
or intolerance.
(b) Derides any race, caste, colour, creed, gender or nationality.
(c) Presents criminality as desirable or directly or indirectly encourages
people - particularly minors - to emulate it or conveys the modus
operandi of any crime.
(d) Adversely affects friendly relations with a foreign State.
Advertisements addressed to minors shall not contain anything, whether
in illustration or otherwise, which might result in their physical, mental
or moral harm or which exploits their vulnerability. For example, Ad-
vertisements.
(a) Should not encourage minors to enter strange places or to converse
with strangers in an effort to collect coupons, wrappers, labels or
the like.

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Notes (b) Should not feature dangerous or hazardous acts which are likely to
encourage minors to emulate such acts in a manner which could
cause harm or injury.
(c) Should not show minors using or playing with matches or any inflammable
or explosive substance; or playing with or using sharp knives, guns or
mechanical or electrical appliances, the careless use of which could
lead to their suffering cuts, burns, shocks or other injury.
(d) Should not feature minors for tobacco or alcohol-based products.
(e) Should not feature personalities from the field of sports, music and
cinema for products which, by law, either require a health warning
in their advertising or cannot be purchased by minors.
Advertisements shall not propagate products, the use of which is banned
under the law.
Advertisements should contain nothing which is in breach of the law nor
omit anything which the law requires.

Chapter IV
To ensure that Advertisements observe fairness in competition such that
the Consumer’s need to be informed on choice in the Market-Place and
the Canons of generally accepted competitive behaviour in Business are
both served.
Advertisements containing comparisons with other manufacturers or
suppliers or with other products including those where a competitor is
named, are permissible in the interests of vigorous competition and public
enlightenment, provided:
(a) It is clear what aspects of the advertiser’s product are being compared
with what aspects of the competitor’s product.
(b) The subject matter of comparison is not chosen in such a way as
to confer an artificial advantage upon the advertiser or so as to
suggest that a better bargain is offered than is truly the case.
(c) The comparisons are factual, accurate and capable of substantiation.
(d) There is no likelihood of the consumer being misled as a result of
the comparison, whether about the product advertised or that with
which it is compared.
(e) The advertisement does not unfairly denigrate, attack or discredit other
products, advertisers or advertisements directly or by implication.
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Advertisements shall not be similar to any other advertiser’s earlier run Notes
advertisements in general layout, copy, slogans, visual presentations,
music or sound effects, so as to suggest plagiarism.

General Rules of Conduct in Advertising:

‹ Advertising shall be designed as to conform to the laws of the
country and should not offend the morality, decency, and religious
susceptibilities of the people.
‹ No advertisement shall be permitted that.
‹ Derides any race, caste, color, creed and nationality.
‹ Is against any of the directive principles or any other provision of
the constitution of India.
‹ Tends to incite people to crime, cause disorder or violence or breach
of law or glorifies violence or obscenity in any way.
‹ Presents criminality as desirable.
‹ Adversely affects friendly relations with the foreign state.
‹ Exploits national emblem or any part of the constitution or the
person or personality of a national leader or dignitary.
‹ Relates to or promotes cigarettes and tobacco products, liquor, wines
and other intoxicants.
‹ No advertisement shall be permitted the objects whereof are wholly
or mainly of religious or political end or have relation to any
industrial dispute.
‹ Ads for services concerned with the following shall not be
acceptable:
‹ Money lenders
‹ Chit Funds

14.4 Unlicensed Employment Agencies

Saving schemes and lotteries other than those conducted by the central
or the state government organizations, nationalised and recognised banks
and public sector undertakings.

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Notes
14.5 Misleading Advertising
Misleading advertising means any advertising which in any way deceives
or is likely to deceive consumers and is likely to affect their economic
behaviour or injure a competitor. Thus false or deceptive advertising is
also a type of misleading advertising.
Following practices also comprise misleading advertising:
Puffery or Exaggeration: Even law permits trade puffing or exagger-
ations, but subjective statement of opinion about the product’s quality
such as best or super, puffery means statements that praise the advertised
item with subjective opinions, superlatives, vague statements containing
no specific facts.
Palming Off: Occurs when a producer creates an impression that his
goods or services are offered by competitor with a view to gain com-
mercial advantage.
Disparagement: When advertiser intentionally makes false or misleading
negative remark against competing brands so as to establish the superi-
ority of its products.
Bait and Switch Advertising: When an advertiser advertise the products
or services at a specified price when they are aware that they would
be unable to supply reasonable quantities at that price for a reasonable
period. Special offers are made to draw customers to a store when in
fact they do not have a fair chance of buying the advertised product at
the said price.
In India, misleading advertisements are dealt with under the Consumer
Protection Act and the self-regulatory ASCI Code.

Select Recent ASCI Decisions

COMPANY : Honda Cars India Ltd
PRODUCT : Honda City
COMPLAINT : “India’s Most Fuel Efficient Car”

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DECISION: UPHELD Notes

The CCC viewed the print Ad and considered the Advertiser’s response.
Advertiser did not provide comparative data with other competitive brands
to prove that Honda City is “India’s most fuel efficient car”, which was
not substantiated. The CCC concluded that the decision of complaint being
Upheld stands on review as the advertisement contravened Chapter I.1
of the Code.

COMPANY : Marico Ltd.

PRODUCT : Nihar Naturals Shanti Amla Hair Oil
COMPLAINT : Enriched with 500% vitamin E
NATURE OF COMPLAINT: This claim needs to be substantiated with
necessary support data.

DECISION: UPHELD
The CCC viewed the Website Ad and considered the Advertiser’s response.
The CCC concluded that the claim, “Enriched with 500% vitamin E”,
was misleading as the comparison was being made with a year 2010
marketed product and contravened Chapter I.4 of the ASCI Code. The
complaint was UPHELD.

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Notes

COMPANY: Hindustan Unilever Ltd.

PRODUCT: Fair & Lovely
COMPLAINT: The TVC suggests that fairness is essential for a girl to
match a boy in status or essential when a girl is to get married or grow
up in hierarchy at work place.

DECISION: UPHELD
The CCC viewed the TVC and considered the Advertiser’s response. The
CCC concluded that the TVC conveys that fairness is essential for a girl
to get married,(the link to marriage was objectionable) or for a woman to
achieve financial status. The TVC derides colour and gender and contra-
vened Chapter III.1(b) of the Code. The complaint was UPHELD.
COMPANY: Adani Wilmar Ltd.
PRODUCT: Fortune Rice Bran Health
COMPLAINT: The ad shows, Dr. Anjali Mukerjee stating, “Make a
Healthy Choice for your Family.” The advertiser should provide (1) Ev-
idence to prove credentials of Anjali Mukerjee as quoted in the ad. as a
“Dr” (2) Substantiate the testimonial by providing (i) consent by Anjali
Mukerjee, (ii) the claim being current (iii) endorsement is verifiable.

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DECISION: UPHELD Notes

The CCC viewed the print Ad and considered the Advertiser’s response.
The CCC concluded that the certificate pertaining to the credential of
Ms Anjali Mukherjee permits her to only issue sick & leave certificate
and that too only in the State of West Bengal. The endorsement by Ms
Anjali Mukherjee as a Doctor or Nutrition Expert “Make a Healthy
Choice for your family”, was not substantiated and was considered to be
misleading. The advertisement contravened Guidelines for Advertising of
Foods & Beverages as well as Chapters I.1 and I.4 of the ASCI Code.
The complaint was UPHELD.

COMPANY: Apple India Private Limited

PRODUCT: iPhone 5S
COMPLAINT: The ad mentions that the effective price of iPhone 5S is
Rs. 41,010. This appears to be incorrect and to be a misrepresentation
of facts. The ad shows breakup of the MRP. It shows down payment
and EMI options and also shows Cash Back benefit. However the last
column of their table shows the “Effective Price” of the phone as Rs.
41,010. The Effective Price is actually Rs. 55,890. At best, the effective
price from MRP before EMI is Rs. 51,000.

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Notes DECISION: UPHELD

The CCC viewed the print Ad and concluded that the Ad distorts facts
and is misleading. The advertisement contravened Chapter I.4 of the ASCI
Code. The complaint was UPHELD.

COMPANY: Career Launcher India Private Limited

PRODUCT: Career Launcher
COMPLAINT:
1. All India Leader in CLAT & IPM. 2. India’s No. 1 Institute for Law
Entrance Exam. 3. Confirm your seat in your dream institute in just 45
days.
DECISION: UPHELD
The CCC viewed the print Ad and considered the Advertiser’s response.
The CCC concluded that the claims, “All India Leader in CLAT & IPM”,
“India’s No. 1 Institute for Law Entrance Exam”, were not substantiated
and no comparative data was provided for all India level. The claim, “Con-
firm your seat in your dream institute in just 45 days”, was misleading
by ambiguity as it was the net of number of days on which the classes
are held. The advertisement contravened Guidelines for Advertising of
Educational Institutions and Programs as well as Chapters I.1 and I.4 of
the ASCI Code. The complaint was UPHELD.

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 VARIOUS ASPECTS AND ISSUES IN ADVERTISING

Notes

COMPANY: Hitachi Home & Life Solutions (India) Ltd.

PRODUCT: Hitachi AC
COMPLAINT: Hitachi AC can be purchased with 0% interest and
no processing fees. RBI had banned the 0% interest schemes in India.
RBI/2013-14/292 DBS.CO.PPD No. 3578/11.01.005 /2013-14 September
17, 2013.

DECISION: NOT UPHELD

The CCC viewed the print Ad and considered the Advertiser’s response.
The CCC concluded that the claim of 0% financing and such communi-
cation for Credit cards was not false and is permissible for Non-Banking
Financial Company. The complaint was NOT UPHELD.

COMPANY: Dabur India Limited

PRODUCT: Odomos Naturals
COMPLAINT: 1. My child will not get Dengue. When a child goes out
to play, Every mom thinks in this manner. 2. When you can give complete
protection to your child, with Odomos, then why not? 3. Odomos - All
day protection from mosquitoes.

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Notes DECISION: UPHELD

The CCC viewed the print Ad and considered the Advertiser’s response.
The CCC concluded that the claim “My child will not get Dengue. When
a child goes out to play, every mom thinks in this manner” was not
objectionable. This complaint was NOT UPHELD. Claim substantiation
was provided for claims “When you can give complete protection to your
child, with Odomos, then why not” AND “Odomos - All day protection
from mosquitoes”. However, as this level of protection was dependent
on the applied quantity and frequency of application. The print ad was
misleading by omission as it does not provide clear instruction of the
level of application and period for reapplication. The advertisement con-
travened Chapter I.4 of the ASCI Code. This complaint was UPHELD.
COMPANY: Idea Cellular
PRODUCT: Idea Cellular
COMPLAINT: TVC gives an impression to viewers that the only way
to test genuineness of a Pashmina Shawl is to check whether it can
be passed through a finger ring. In fact the GI gives specifications for
Kashmir Pashmina which tests the true quality of a pure Pashmina shawl.
Hence all other forms that do not conform to the quality manual under
GI can be termed as spurious.

Nature of Complaint:
Accordingly, the following conclusions can be drawn - A ring test is not
at all a confirmatory test for certifying quality of a genuine Pashmina
product. In fact, it is learnt that shawls made out of synthetic fibre like
viscose can also easily pass through a finger ring. That the parameters
under the GI Act are the only testing parameters to check the genuineness
of claimed Pashmina.
DECISION: UPHELD
The CCC viewed the TVC and considered the Advertiser’s response. A ring
test is not a confirmatory test for certifying quality of a genuine Pashmina
product and the claim in the ad was not substantiated with authentic data.
A non-Pashmina material could also pass the ring test. The CCC concluded
that the Ad distorts facts and perpetuates a layman’s belief about testing
Pashmina and therefore, is misleading. The advertisement contravened
Chapters I.1 and I.4 of the Code. The complaint was UPHELD.
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COMPANY: L’Oreal India Private Limited Notes

PRODUCT: Garnier Fructis Long and Strong
COMPLAINT: 1. Now Get Even Stronger Hair. 2. Improved Formula.

DECISION: UPHELD
The CCC viewed the TVC and considered the Advertiser’s response,
and concluded that the claim of “Improved formula” was not adequately
substantiated by providing comparison with the old formula. The claim
of “Now Get Even Stronger Hair” was not adequately substantiated as
the baseline values for the performance of non-conditioning shampoo
were different and the results were not comparable for the old and new
formula. The advertisement contravened Chapter I.1 of the ASCI Code.
The complaint was UPHELD.

COMPANY: TVC Sky Shop Limited

PRODUCT: Shri Lakshmi Kuber Dhan Varsha Yantra
COMPLAINT: The ad suggests that the product is for attaining better
finances and assets. According to Advertising Code - 7[5], no advertising
shall contain references which are likely to lead the public to infer that the
product advertised or any of its ingredients has some special or miraculous
or super-natural property or quality, which is difficult of being proved.

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Notes NATURE OF COMPLAINT:

According to Advertising Code - 7[11], no programme shall carry adver-
tisements exceeding twelve minutes per hour, which may include up to
ten minutes per hour of commercial advertisements, and up to two min-
utes per hour of a channel’s self-promotional programmes. Moreover, the
duration of some of the advertorials is as long as 15-16 minutes which
itself is a violation of Advertising Code - 7[11].

DECISION: UPHELD
The CCC reviewed the relevant parts of the TVC and considered the Ad-
vertiser’s response. The CCC concluded that the claim that the “product
is for attaining better finances and assets”, was not substantiated with
supporting data. The advertisement contravened Chapter I.1 of the ASCI
Code as well as Advertising Code - 7[5] under the Cable Television
Network Rules, 1994. The complaint was UPHELD.
COMPANY: LG Electronics India Pvt. Ltd.
PRODUCT: LG Air Conditioners
COMPLAINT: The ad contains a disclaimer/written information on the
screen but in very small font, which is illegible and unreadable.

DECISION: UPHELD
The CCC viewed the TVC and considered the Advertiser’s response. The
CCC concluded that the content/text shown in the TVC was not legible,
and the Ad contravened the ASCI Guidelines on Supers. The complaint
was UPHELD.

14.6 Economic and Social Issues of Advertising

Economic Issues
Effect on the Value of Products or Services: Advertising is an expenditure
incurred to inform, persuade, remind and reinforce consumers to purchase
the advertised product; it entails money outflow which adds to the cost of
the product, thus making the product costlier without any value increment
in the product. However, studies have shown that while an ad may not
speak directly about the product’s quality, the image created by advertising
may imply quality and make the product more desirable thus, adding value

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to the product. Advertising also adds value by educating consumers about Notes
the various types of products available, different uses of the product etc.
thus enabling them to make informed choice and facilitate purchasing.
Effect on Price: Advertising adds cost and affects prices; in case if com-
panies stop advertising, product would cost less and would be available
to consumers at lower prices. This is the major area of continuing debate.
The proponents for advertising opine that advertising help lower the
overall cost of the product by informing vast number of people about the
offering thus entails large scale operations which bring in the economies
of scale that actually lowers the cost of the product more than enough to
offset the increment in cost entailed by spending on advertising.
Effect on Competition: Advertising creates barrier to entry for smaller
firms with fewer resources who cannot match large firms with huge
advertising budget. High cost may inhibit the entry and brands of large
firms probably benefit greatly from this barrier. This results in decrease
in competition and increase in the price of the product. But the advocates
of advertising have different views. They say it is unrealistic to single out
advertising as the sole cause of barrier to entry or dominance of a firm
in the market. There are several other important factors such as product
quality, price, distribution system, research and development, competitive
strategies adopted by the firm etc. Market entry against the large firms is
difficult not because of advertising but because of the investment required
in plant and machinery, research and development etc.
Social Issues
The source of controversy over advertising stems from the way it is used
by advertisers in accomplishing market or communication objectives which
influence social values, lifestyles and society’s taste.
Social and Cultural Values: It is generally agreed that advertising exerts
a powerful social influence and is criticised for encouraging materialism.
Advertising is blamed for depicting stereotypes and controlling the media.
Materialism is the tendency to accord undue importance to material in-
terests. Many say advertising promotes materialism, critics of advertising
say that it should be used only to provide information on the product’s
quality, features or price etc. and not attempt to persuade consumers by
playing on their emotions, anxieties and psychological needs fostering
disconnect and exploiting them to purchase things they do not need. To
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Notes counter this basis the proponents for advertising argue that consumer
whose basic needs have been fulfilled can be interested in fulfilling higher
order needs for instance a consumer may buy an expensive television with
ultra loaded features to enjoy high quality video and music than simply
acquire a material possession to impress someone.
There is no doubt that advertising and the advertised products are a part
of our culture and influence it in some way. However, advertising cannot
be said to have the power to dominate the forces of religion, family,
literature etc. that contribute to the values of the society. Proponents of
advertising argue that advertising merely reflects the tastes and values
of society and does not shape them. Advertising keeps pace with the
dynamic market conditions and what rather is seen as materialism is a
matter of improved standard of living.
Stereotyping ignores differences among individuals and presents individual
or group in an unvarying pattern. Critics often point out that advertising
perpetuates stereotyping of women, advertising has failed to portray the
changing role of women in the society. Depiction of women in settings
such as family illness, cooking, children, approval by mother-in-law,
marriage etc. has shown them as dependent on men, less intelligent and
hardly ever in authoritative roles.
There is perceptible improvement in this regard as advertisers have start-
ed to recognise the role of the working women in family affairs and in
decision making. Women are often depicted in diverse roles that reflect
their changing role in the society as they are increasingly entering into
professional, managerial, technical or administrative careers.

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 Section B
SALES MANAGEMENT

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 UNIT - V
Fundamentals of Personal Selling

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 L E S S O N

15
Various Aspects of Selling
Shri Raman Chawla
Bhagat Singh College (E)
Revised by: Dr. Virender Kaushal
Consortium for Educational Communication

STRUCTURE
15.1 Introduction
15.2 'H¿QLWLRQV
15.3 Features of Selling
15.4 ,PSRUWDQFH 6LJQL¿FDQFH  RI 6HOOLQJ
15.5 Scope of Selling
15.6 Objectives of Selling
15.7 Types of Selling (Sales Management, Personal Selling and Salesmanship) and
their Relationship
15.8 Buyer-Seller Dyads
15.9 Theories of Selling
15.10 AIDAS Theory of Selling
15.11 “Right Set of Circumstances” Theory of Selling
15.12 “Buying-Formula” Theory of Selling
15.13 “Behavioural-Equation” Theory

15.1 Introduction
Selling is a fundamental business activity and a crucial element of any economic system.
It is the process of persuading a potential buyer to purchase a product or service in ex-
change for money. At its core, selling involves understanding and addressing the needs
and desires of consumers while generating revenue for the seller. This process typically
begins with identifying potential customers, or prospects, who might benefit from the
product or service offered. Sellers must then prepare by researching these prospects to

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Notes tailor their approach effectively. The initial contact, or approach, is a key
stage where sellers engage with prospects through various means such
as face-to-face meetings, phone calls, or emails. The aim is to establish
a connection and begin building a relationship. Following this, the seller
presents the product or service, highlighting its features, benefits, and
value to the buyer. This presentation is crucial, as it seeks to convince
the buyer of the product’s worth and how it meets their specific needs.
Handling objections is another vital part of the selling process. Buyers
may have concerns or doubts about the product or service, and addressing
these objections requires strong communication and problem-solving skills.
The goal is to reassure the buyer and overcome any barriers to purchase.
Once the buyer is convinced, the closing stage involves finalizing the
sale by securing the buyer’s commitment. This often includes negotiating
terms, prices, and conditions to reach a mutually beneficial agreement.
After the sale, follow-up is essential for ensuring customer satisfaction
and maintaining a positive relationship. This can involve providing post-
sale support and addressing any issues that arise, which helps in fostering
long-term customer loyalty and encouraging repeat business.
Successful selling requires a blend of skills and techniques, including
effective communication, active listening, negotiation, persuasion, and
relationship building. Salespeople must be able to articulate the value of
their product or service clearly and adapt their approach based on the
buyer’s feedback. Building trust and maintaining ethical practices are also
crucial in selling. Ethical selling involves being honest and transparent
with buyers, avoiding deceptive tactics, and ensuring that the sales process
is conducted with integrity. This approach not only helps in establishing
a positive reputation but also fosters lasting relationships with customers.
In essence, selling is more than just a transaction, it is about creating
value for both the buyer and the seller. It drives revenue, supports business
growth, and contributes to market expansion. Effective selling strategies
can differentiate a business from its competitors and enhance its market
presence. Additionally, selling provides valuable feedback from customers,
which can be used to improve products, services, and overall business
operations. Ultimately, selling is a dynamic and multifaceted process
that plays a critical role in the economy and the success of businesses.

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Notes
15.2 Definitions
‹ John A. Little: “Selling is the act of persuading potential buyers
to choose a product or service by presenting its benefits and value
in a way that aligns with their needs and desires.”
‹ Michael J. Cunningham and Joseph R. Cunningham: “Selling
is the act of persuading a potential buyer to make a purchase. It
involves understanding the buyer’s needs, presenting the product
or service effectively, handling objections, and closing the sale.”
‹ Neil Rackham: “Selling is a process in which a salesperson helps
a customer identify their needs and presents a solution that satisfies
those needs. It involves asking questions, listening to the customer,
and offering a tailored solution.”
‹ Philip Kotler and Gary Armstrong: “Selling is the process of
influencing the customer to buy a product or service. It involves
identifying, anticipating, and satisfying customer needs through the
exchange of value.”
‹ Robert Cialdini: “Selling is the art of influencing people to make
a decision that benefits both the seller and the buyer. It relies on
principles of persuasion and understanding human behaviour.”
‹ Salesforce: “Selling is the process of guiding a potential customer
through a series of interactions to demonstrate how a product or
service can solve their problem or meet their need.”
‹ William J. Stanton: “Selling is a personal communication process
where the seller and buyer engage in a two-way interaction aimed
at reaching an agreement on the purchase of goods or services.”

15.3 Features of Selling

Selling is a multifaceted process with several key features that contribute
to its effectiveness. Here are some prominent features of selling:
‹ Customer-Centric Approach: Selling focuses on understanding and
addressing the needs, preferences, and problems of the customer.
A successful sales process involves active listening and tailoring
solutions to meet specific customer requirements.

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Notes ‹ Persuasion and Influence: At its core, selling involves persuading

potential buyers to make a purchase decision. This requires effective
communication skills, the ability to highlight the benefits of the
product or service, and strategies to influence the buyer’s decision-
making process.
‹ Value Proposition: Selling emphasizes presenting a clear value
proposition. This means demonstrating how the product or service
offers benefits or solves problems better than competitors or alternative
solutions.
‹ Personalization: Effective selling often involves personalizing the
sales pitch to align with the buyer’s individual needs and preferences.
Personalized interactions build rapport and increase the likelihood
of closing a sale.
‹ Relationship Building: Selling is not just about a one-time transaction,
it often involves building and maintaining long-term relationships
with customers. Establishing trust and credibility can lead to repeat
business and customer loyalty.
‹ Problem-Solving: Successful selling involves identifying the
customer’s pain points or needs and offering solutions that address
these issues. This problem-solving approach helps in positioning
the product or service as the optimal choice.
‹ Communication Skills: Effective communication is crucial in
selling. Salespeople must be able to clearly articulate the features
and benefits of the product or service, as well as handle objections
and negotiate terms effectively.
‹ Objection Handling: A key feature of selling is the ability to
address and overcome objections or concerns raised by potential
buyers. This requires empathy, patience, and the ability to provide
convincing responses.
‹ Sales Process Management: Selling involves managing a structured
process, which includes stages such as prospecting, approaching,
presenting, handling objections, closing, and following up. Each
stage requires specific skills and strategies to be executed effectively.
‹ Negotiation: Negotiation is an integral part of selling. It involves
discussing and agreeing on terms such as price, delivery, and

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payment conditions. Effective negotiation skills are essential for Notes

reaching mutually beneficial agreements.
‹ Product Knowledge: In-depth knowledge of the product or service
being sold is crucial. Salespeople must be well-versed in features,
benefits, and potential limitations to effectively address customer
inquiries and build credibility.
‹ Feedback Collection: Selling includes gathering feedback from
customers to improve sales strategies and processes. This feedback
can provide insights into customer satisfaction, product performance,
and areas for improvement.
‹ Ethical Practices: Ethical selling practices involve honesty, transparency,
and integrity in all interactions with customers. Maintaining ethical
standards helps build trust and sustain positive relationships.
‹ Technology Integration: Modern selling often involves the use
of technology such as Customer Relationship Management (CRM)
systems, sales automation tools, and digital communication platforms
to enhance the efficiency and effectiveness of the sales process.

15.4 Importance (Significance) of Selling

Selling is a critical activity in business and the economy, with far-reaching
significance. Here are key aspects of its importance:
‹ Revenue Generation: Selling is the primary mechanism through
which businesses generate revenue. Successful sales directly impact
a company’s profitability and financial health. Without effective
selling, even the best products or services can fail to reach the
market and contribute to the business’s bottom line.
‹ Market Penetration and Expansion: Effective selling helps businesses
penetrate new markets and expand their customer base. Through
strategic selling efforts, companies can reach different geographic
regions or demographic segments, enhancing their market presence
and growth potential.
‹ Customer Needs Fulfillment: Selling is essential for understanding
and addressing customer needs. By engaging with customers and
offering solutions tailored to their requirements, businesses can

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Notes improve customer satisfaction and loyalty. This process helps in

creating value for customers and solving their problems.
‹ Competitive Advantage: A strong selling strategy can provide a
competitive edge in the market. By differentiating products or services
and effectively communicating their unique value propositions,
businesses can stand out from competitors and attract more customers.
‹ Relationship Building: Selling involves building and maintaining
relationships with customers. Long-term relationships foster trust
and loyalty, leading to repeat business and referrals. Effective selling
creates a positive customer experience, which can result in enduring
partnerships and increased customer retention.
‹ Feedback and Improvement: Interaction with customers during the
selling process provides valuable feedback. This feedback can inform
product development, marketing strategies, and overall business
operations. Understanding customer preferences and pain points helps
businesses improve their offerings and adapt to market changes.
‹ Economic Impact: Selling drives economic activity by facilitating the
exchange of goods and services. It supports the overall economy by
contributing to employment, generating tax revenue, and stimulating
economic growth. The success of businesses in selling their products
and services has a broader impact on economic development.
‹ Brand Building: Selling plays a crucial role in brand building.
Effective sales practices help in establishing and reinforcing a
company’s brand image and reputation. Positive interactions with
customers can enhance brand perception and loyalty.
‹ Sales Performance Metrics: The success of selling efforts is often
measured through various performance metrics, such as sales volume,
conversion rates, and customer acquisition costs. Monitoring these
metrics helps businesses evaluate the effectiveness of their sales
strategies and make data-driven decisions.
‹ Innovation and Adaptation: Selling often drives innovation as
businesses strive to meet evolving customer needs and preferences.
The need to address changing market demands and stay ahead of
competitors can lead to the development of new products, services,
and selling techniques.

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Notes
15.5 Scope of Selling
The scope of selling encompasses a broad range of activities, strategies,
and functions that extend beyond mere transaction facilitation. Here are
key aspects of the scope of selling:
‹ Sales Strategy Development: Planning and Execution: Developing
effective sales strategies involves analysing market trends, understanding
customer needs, and setting objectives. This includes planning sales
tactics, defining target markets, and choosing appropriate sales
channels.
‹ Market Research and Analysis: Understanding the Market:
Selling requires ongoing market research to identify opportunities,
understand customer behaviour, and monitor competitive landscapes.
This research helps in tailoring sales approaches and refining product
offerings.
‹ Customer Relationship Management (CRM): Building and
Maintaining Relationships: CRM systems and strategies are essential
for managing interactions with current and potential customers. This
includes tracking customer interactions, addressing inquiries, and
nurturing long-term relationships to foster loyalty and repeat business.
‹ Sales Process Management: Structured Approach: Managing the
sales process involves overseeing the various stages from prospecting
and lead generation to closing and follow-up. Each stage requires
specific skills and tactics to ensure successful sales outcomes.
‹ Product Knowledge and Training: Expertise in Offerings: Sales
professionals must possess in-depth knowledge of the products or
services they are selling. This includes understanding features, benefits,
and potential drawbacks. Ongoing training helps sales teams stay
informed about new developments and improve their selling techniques.
‹ Customer Needs Assessment: Identifying Needs: Effective selling
involves assessing and understanding customer needs and preferences.
This requires active listening, asking the right questions, and analysing
customer feedback to offer tailored solutions.

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Notes ‹ Sales Presentation and Communication: Effective Pitching:

Crafting and delivering compelling sales presentations is a key
aspect of selling. This includes preparing persuasive arguments,
addressing customer concerns, and clearly communicating the value
proposition of the product or service.
‹ Objection Handling and Negotiation: Overcoming Challenges:
Handling objections and negotiating terms are critical parts of the
sales process. Sales professionals need to address customer concerns,
provide satisfactory answers, and negotiate favourable terms to close
deals successfully.
‹ Sales Metrics and Performance Evaluation: Tracking Success:
Monitoring sales performance through metrics such as sales volume,
conversion rates, and customer acquisition costs is essential. Analysing
these metrics helps in evaluating the effectiveness of sales strategies
and making data-driven improvements.
‹ Sales Promotion and Incentives: Driving Sales: Implementing
sales promotions, discounts, and incentive programs can boost sales
and attract new customers. These initiatives are part of a broader
strategy to stimulate demand and achieve sales goals.
‹ Sales Technology and Tools: Utilizing Technology: Leveraging
sales technologies, such as CRM systems, sales automation tools,
and data analytics, enhances the efficiency and effectiveness of
the sales process. These tools assist in managing leads, tracking
performance, and optimizing sales activities.
‹ Ethical and Legal Considerations: Compliance and Integrity:
Selling involves adhering to ethical standards and legal regulations.
This includes ensuring truthful representation of products, maintaining
customer privacy, and complying with industry regulations and
standards.
‹ Global and Cross-Cultural Selling: Expanding Reach: For businesses
operating internationally, selling also involves understanding and
adapting to different cultural norms and practices. This includes
tailoring sales approaches to diverse markets and navigating cross-
cultural communication.

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Notes
15.6 Objectives of Selling
The objectives of selling are essential for guiding sales activities and
achieving business goals. Here are the primary objectives:
‹ Revenue Generation: Financial Goals: The primary objective
of selling is to generate revenue by converting prospects into
customers. This involves achieving sales targets and contributing
to the company’s overall financial performance.
‹ Customer Acquisition: Expanding the Customer Base: Acquiring
new customers is a critical objective. Sales efforts are focused on
identifying potential customers, qualifying leads, and closing new
business to expand the company’s market reach.
‹ Customer Retention and Loyalty: Building Long-Term Relationships:
Retaining existing customers and fostering their loyalty is a key
objective. This involves providing excellent service, addressing
customer needs, and maintaining ongoing relationships to ensure
repeat business.
‹ Market Penetration: Increasing Market Share: Sales efforts aim
to penetrate new markets and increase market share. This includes
reaching new geographic regions, demographic segments, or industry
sectors.
‹ Brand Building: Enhancing Brand Reputation: Selling activities
contribute to building and strengthening the company’s brand. Effective
selling helps establish a positive brand image and reinforces the
company’s value proposition in the market.
‹ Customer Needs Fulfillment: Solving Problems: One of the
primary objectives is to understand and address customer needs. This
involves providing solutions that meet their specific requirements
and solve their problems.
‹ Achieving Sales Targets: Meeting Specific Goals: Sales targets
and quotas are set to achieve specific revenue goals. Meeting or
exceeding these targets is a crucial objective for measuring sales
performance and success.
‹ Feedback Collection: Gathering Insights: Selling provides valuable
feedback from customers regarding their preferences, needs, and

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 ADVERTISING AND SALES MANAGEMENT

Notes experiences. This feedback is used to improve products, services,

and sales strategies.
‹ Product or Service Promotion: Creating Awareness: Selling involves
promoting the company’s products or services to potential customers.
This includes highlighting features, benefits, and differentiators to
create awareness and generate interest.
‹ Cross-Selling and Up-Selling: Maximizing Sales Opportunities:
Encouraging customers to purchase additional products (cross-selling)
or upgrade to higher-value options (up-selling) is a key objective.
This helps increase the overall value of each sale.
‹ Market Research and Insights: Understanding Market Dynamics:
Selling activities provide insights into market trends, customer
preferences, and competitive landscapes. This information is valuable
for strategic planning and business development.
‹ Profitability Improvement: Enhancing Margins: Effective selling
aims to improve profitability by optimizing pricing strategies,
reducing discounting, and increasing the average sale value. This
contributes to better financial performance.
‹ Customer Education: Informing Customers: Educating customers
about the benefits and uses of products or services is an important
objective. This helps customers make informed purchasing decisions
and enhances their overall experience.
‹ Building a Sales Pipeline: Future Sales Opportunities: Developing
a robust sales pipeline with qualified leads and potential opportunities
ensures a steady flow of future sales and revenue.

15.7 Types of Selling (Sales Management, Personal Selling

and Salesmanship) and their Relationship
Sales management, personal selling, and salesmanship are all related. Sales
management manages the personal-selling effort which, in turn, is imple-
mented largely through salesmanship. In managing the personal selling
effort, the sales executive must understand various activities comprising
the salesperson’s job (including salesmanship), know the kinds of problems
sales personnel face (including many in salesmanship) and be prepared to

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 VARIOUS ASPECTS OF SELLING

suggest solutions (including ways to handle problems in salesmanship). Notes

Thus, personal selling is a broader concept than salesmanship. Personal
selling, along with other key marketing elements such as pricing, ad-
vertising, product development and research, marketing channels, and
physical distribution, is a mean for implementing marketing programs.
Salesmanship is only one aspect of personal selling. Precisely, salesman-
ship is one of the skills used in personal selling. This is well defined
by L.J. Shapiro. He has defined it as the art of successfully persuading
prospects or customers to buy products or services from which they can
derive suitable benefits, thereby increasing their total satisfactions. At
one time, the emphasis in salesmanship was almost wholly on persuasion.
These days, recognising the importance of persuasion, the emphasis has
been shifted to the benefits attractive to prospects and customers. One
variation of benefit-oriented salesmanship is “consultative selling”. This
consultative selling is described as an approach to creating long-term,
mutually beneficial sales relationship with major customers by helping
them to improve their profit through the use of the salesperson’s products
and services.
Thus, salesmanship is seller-initiated effort that provides prospective
buyers with information and other benefits, motivating or persuading
them to make buying decisions in favor of the seller’s product or ser-
vice. Sales personnel have to interact in different ways with the different
customer’s personnel. Effective sales personnel adjust their personalities
on every call, making sure that what they say and do is compatible with
each prospect’s personality.
Both personal selling and advertising make use of salesmanship techniques.
Both are means for motivating or persuading prospective buyers to buy.
Advertising, often described as salesmanship in print, utilizes non-personal
presentations which are generally less flexible than the personal presen-
tations made by sales personnel. Personal Selling has a unique attribute
and that is, sales personnel can identify differences among buyers and
pattern presentations according to individual differences.
The sales executive needs to know a considerable amount about personal
selling and salesmanship. Successful sales executives have a thorough
knowledge of the theoretical aspects and have also learned through
field selling experience as to how the theories relate to and work out in

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Notes practice. While many sales executives some of them outstanding, have
had little or no field selling expenses, the normal progression to, sales
management is by that route. Sales executives must be in close enough
touch with actual selling situations and continuous changes in them to
understand the routine problems faced by sales personnel.

15.8 Buyer-Seller Dyads

Salesmanship involves buyer-seller interactions. Sociologists use the term
“dyad” to describe a situation in which two people interact with one an-
other. The salesperson and the prospect, personally interacting with each
other, constitute one example or a “buyer-seller dyad.” Another is the
interaction of a seller using advertising with a particular prospect in the
reading, listening, or viewing audience. In both advertising and personal
selling, the seller seeks to motivate or persuade the prospective buyer
to behave favourably toward the seller. Whether or not the buyer reacts
according to the seller’s desire depends upon the nature of the interaction.
The opportunity for interaction is less in the advertising case than in the
personal selling case. Generally, the buyer reacts to the combined impact
of both as advertising and personal selling often supplement each other.
Whenever possible, sales personnel should be assigned to prospects whose
characteristics are similar to their own, thus improving the chance of
successful dyadic relationships. Such relationship is more easily accom-
plished in industrial selling, where there are fewer prospects about whom
information is needed, than in consumer-goods selling, where the number
of prospects and customers per salesperson is generally much larger.
The physical characteristics (age, height) and objective factors (income,
religion, education) and variables that relate to personality factors (politics,
smoking) affect the relationship. In addition to these factors, the customer’s
perception of how well the salesperson’s behavior fits into the customer’s
conception of what that behavior should be is a necessary condition for
the continuation of dyadic interaction.
Another factor influencing dyadic interactions among buyers and sellers is
the buyer’s initial conditioning with respect to selling. People are taught
from childhood to beware of the tricky salesperson.

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There are indications that sales people, as they actually perform their Notes
jobs, leave much to be desired in the impact they make on customers
studies of the attitudes of buyers and purchasing agents reveal that many
are critical of the salesperson’s lack of product knowledge, failure to
follow up, general unreliability, use of flattery, bad manners, commercial
dishonesty and so forth.
Figure 15.1 shows a conceptual model of “salesperson-buyer” dyadic rela-
tionships. This model views the sales process as being influenced by both
salesperson and buyer, each a focal person influenced by personal charac-
teristics and role requirements. Personal characteristics include personality,
values, attitudes, past experiences, and the like. Role set requirements (for
example, formal authority and organizational autonomy) interact with personal
characteristics to shape needs and expectations. Focal persons’ perceptions
of each other’s needs may lead to adjustments of their own (notice the
“feedback” mechanism represented by the broken lines in the figure).
On the basis of their own needs and expectations, each focal person de-
velops a strategy aimed to negotiate a favourable exchange. That strategy
may embrace persuasion, communication of facts or offers, friendship
and other elements. If the strategies prove compatible, an exchange takes
place. Otherwise, the salesperson and the buyer may stop interacting; or
based on feedback from the unsuccessful negotiation, either or both may
adapt by altering strategy, attempting to adjust needs and expectations,
or modifying role requirements. Because role requirements, as well as
needs and expectations often are determined by forces beyond the focal
person’s control, one or both may find it impossible to adapt; for instance,
to meet a buyer’s expectations, a salesperson may need to set prices, yet
this may be against company policy and beyond the salesperson’s con-
trol. When the particular round of negotiations is terminated regardless
of its outcome, the experience becomes input into future interactions of
the salesperson and customer.

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Notes Start
Salesperson-Customers
Relationship

Salesperson Customer

Role Requirement Personal Personal Role Requirement

& Characteristics Characteristics Characteristics & Characteristics

Personal
Affiliation

Needs and Expectations Adjustment Needs and Expectations

Choice of Strategy Choice of Strategy

Negotiation
Feedback

Feedback
Adapt Adapt

Exchange

Experience
Stop

Figure 15.1: Conceptual Model of “Salesperson-Buyer”

Dyadic Relationships

15.9 Theories of Selling

There is disagreement as to whether selling is a science with basic con-
cepts that are easily taught, or an art learned only through experience.
The fact that selling is considered an art by some and a science by others
has produced two contrasting approaches to the theory of selling.
The first approach to building the theory of selling was to distil the ex-
periences of successful salespeople and, to a lesser extent, advertising
professionals. Many such persons, of course, succeeded because of their

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grasp of practical, or learned-through-experience psychology and their abil- Notes

ity to apply it in actual sales situations. Thus, it is not too surprising that
such selling theories emphasize the “what to do” and “how to do” rather
than explaining “why.” These theories, based on experiential knowledge
accumulated from years of “living in the market” rather than on a sys-
tematic, fundamental body of knowledge, are subject to Howard’s dictum,
“Experiential knowledge can be unreliable.”
The second approach to building the theory of selling was to borrow re-
search findings from the behavioural sciences. The late E.K. Strong, Jr.,
Prof. of Psychology of the Stanford Graduate School of Business, was a
pioneer in this effort, and his “buying formula” theory of selling is present-
ed later in this section. John A. Howard of the Columbia Graduate School
of Business has been at the forefront of the marketing scholars who have
adapted the findings of research in behavioural science to the analysis of
buying behavior; his “behavioural equation,” discussed later in this section,
is an attempt to develop a unified theory of buying and selling.
The purpose here, then, is to examine four theories that attempt to iden-
tify and explain the process of influencing others to buy. The first two,
the “AIDAS” theory and the “right set of circumstances” theory, are
salesperson or seller-oriented. The third, the “buying formula” theory
of selling, is buyer-oriented. And the fourth, the behavioural equation,
emphasizes the buyer’s decision process but also takes the salesperson’s
influence process into account. One can understand the selling process
better if one understands these four theories.

15.10 AIDAS Theory of Selling

The first theory, popularly known as the AIDAS theory, after the initials
of the five words used to express it, forms the basis for many sales and
advertising texts and is the skeleton around which are organized many
training programs in selling. Some support for this theory is found in the
psychological writings of William James, but there is little doubt that the
construct is based mainly upon experiential knowledge and, in fact, was
in existence as early as 1898. During the successful selling interview,
according to this theory, the prospect’s mind passes through five suc-
cessive mental stages: attention, interest, desire, action, and satisfaction.

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Notes Implicit in this theory is the notion that the prospect goes through these
five stages consciously; so, the salesperson’s presentation must lead the
prospect through them in the right sequence if a sale is to result. The
five stages are:
(a) Securing Attention: The salesperson’s initial goal is to pull the prospect
into a receptive state of mind for the main body of the presentation.
The first few minutes of the interview are crucial. The salesperson
has to have a reason, or an excuse, for conducting the interview. If
the salesperson has made a previous appointment with the prospect;
this phase presents no problem, but experienced sales personnel
say that even with such an appointment a salesperson must possess
considerable mental alertness, and be a skilled conversationalist,
to survive the beginning of the interview. The prospect’s guard
is naturally up since he or she realizes that the caller is bent on
selling something. So, the salesperson must establish good rapport
at once. The salesperson needs an ample supply of “conversation
openers,” and must make a favourable first impression. Favourable
first impressions are assured by, among other things, proper neatness,
friendliness, and genuine smile. Skilled sales personnel often decide
upon conversation openers just before the interview so that those
chosen are as timely as possible. Generally, it is advantageous if
the opening remarks are about the prospect (people like to talk and
hear about themselves), or if they are favourable comments about
the prospect’s business. A good conversation opener causes the
prospect to relax his or her feeling of caution and sets the stage for
succeeding phases to the salesperson’s presentation. Conversation
openers that cannot be readily tied in with the remainder of the
presentation should be avoided, for once the conversation starts to
wander, great skill is required to return to the main theme.
(b) Gaining Interest: The second goal is to intensify the prospect’s
attention so that it evolves into a state of strong interest. Many
techniques are used for gaining interest. Some salespeople develop
a contagious enthusiasm for their product, becoming so inspired
that the prospect’s interest is built up almost automatically. Another
technique is to let the prospect handle the product or a sample.
When the product is bulky or technical, sales portfolios, flipcharts,
or other visual aids serve the same purpose.
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Throughout the interest phase, one of the main purposes is to search Notes
out the selling appeal that is most likely to be effective. Sometimes,
the prospect drops hints, which the salesperson then uses in selecting
the best approach. To encourage the prospect along this line, some
salespeople devise methods to elicit revealing questions. Others draw
out the prospect by asking questions designed to clarify attitudes and
feelings toward the product. The more experienced the salesperson,
the more he or she can rely on what has been learned from other
interviews with similar prospects. But even experienced sales personnel
must do considerable probing, usually of the question-and-answer
variety, before identifying the strongest appeal. In addition, prospects’
interest are affected by basic motivations, closeness of the interview
subject to current problems, its timeliness, and their mood - receptive,
sceptical, or hostile and the salesperson must take all these into
account in selecting the appeal to emphasize.
(c) Kindling Desire: The third goal is to kindle the prospect’s desire to
the ready-to-buy point. The salesperson must remain in control of
the situation and keep the conversation running along the main line
toward the sale. The development of sales obstacles, the prospect’s
objections, external interruptions, and irrelevant remarks tend to
sidetrack the presentation during this phase. Obstacles have to be
faced, and ways found to get around them. Objections need answering
to the prospect’s satisfaction. Time is saved, and the chance of
making a sale improved, if objections are anticipated and answered
before the prospect has a chance to raise them. External interruptions
cause breaks in the presentation; and when conversation resumes,
good salespeople normally summarize what has been said earlier
before continuing. Irrelevant remarks should generally be disposed
of tactfully, with finesse, but sometimes distracting digression is
best handled bluntly, for example, “well, that’s all very interesting,
but to get back to the subject...’’
(d) Inducing Action: If the presentation has been perfect, the prospect is
ready to act, that is, to buy. However, buying is not usually automatic
and, as a rule, must be induced. Experienced sales personnel rarely
try for a close until they are positive that the prospect is fully
convinced of the merits of the proposition. Thus, it is necessary

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for the salesperson to sense when the time is right. The trial close,
Notes
the close on a minor point, and the trick close are used to test the
prospect’s reactions to the proposition. Some sales personnel never
ask for a definite “yes” or “no” for fear of getting a “no”, from
which they think there is no retreat. But it is usually better to ask
for the order straightforwardly. Most prospects find it easier to slide
away from hints than from frank requests for an order.
(e) Building Satisfaction: After the customer has given the order, the
salesperson should reassure the customer that the decision was the
correct one. The customer should be left with the impression that
the salesperson merely helped in making the decision. Building
satisfaction means thanking the customer for the order, which
should always be done, and attending to such matters as making
certain that the order is correct as written, and following up on
any promises made. Because the order is the climax of the selling
situation, the possibility of an anticlimax should be avoided, for
instance, customers sometimes unsell themselves, and the salesperson
should not linger too long.

15.11 “Right Set of Circumstances” Theory of Selling

“Everything was right for the sale to take place” sums up the popu-
lar version of the second theory. This theory, sometimes known as the
“situation-response” theory, had its psychological origin in experiments
with animals, and holds that the particular circumstances prevailing in
a given selling situation cause the prospect to respond in a predictable
way. More specifically if the salesperson succeeds in securing the at-
tention and gaining the interest of the prospect, and if the salesperson
presents the proper stimuli or appeals, the desired response (that is, the
sale) will result. Furthermore, according to the theory, the more highly
skilled the salesperson is in handling the total set of circumstances, the
more predictable is the response.
The relevant set of circumstances, which the theory suggests that the
salesperson should try to control, include factors external and internal to
the prospect. To use a simplified example, suppose that the salesperson
says to the prospect, “Let’s go out for a cup of coffee.” The salesperson
and the remark represent external factors. But at least four factors internal

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to the prospect affect the response. These are the presence or absence Notes
of desires: (1) to have a cup of coffee, (2) to have it now, (3) to go
out, and (4) to go out with the salesperson.
Proponents of this theory tend to overstress external factors and ne-
glect the internal factors. They seek selling appeals that evoke desired
responses. Sales personnel who try to apply the theory experience dif-
ficulties traceable to internal factors, that is, prospect’s/deeply rooted
habits and instinctive behaviour. It is easy to control the external factors
in many selling situations, but the internal factors do not readily tend
themselves to manipulation. Thus, the main difficulty is that this is a
seller-oriented theory. It overstresses the importance of the salesperson
controlling the situation, does not adequately handle the problem of
influencing factors internal to the prospect, and fails to assign appro-
priate weight to the response side of the situation-response interaction.

15.12 “Buying-Formula” Theory of Selling

In marked contrast to the two theories just discussed, the third places
emphasis on the buyer’s side of the buyer-seller dyad. The buyer’s
needs or problems receive major attention, and the salesperson’s role
is conceived as helping the buyer find solutions. This theory attempts
to answer the question: what thinking process goes on in the prospect’s
mind that causes the decision to buy or not to buy? The buying formula
itself is a schematic representation of a group of responses, arranged
in psychological sequence. The buying-formula theory, in other words,
emphasizes the prospect’s responses (which, of course, are strongly
influenced by internal factors) and de-emphasizes the external factors,
on the assumption that the salesperson, being naturally conscious of
the external factors, will not overlook them. Since the salesperson’s
normal inclination is to neglect the internal factors, the formula is a
convenient way to help the salesperson to remember.
The origin of this theory is not clear, but recognizable versions appear
in a number of early books on advertising and selling by authors who
had experiential knowledge of salesmanship. Several psychologists also
advanced explanations substantially similar to that contained in the
buying formula. The name “buying formula” was given to this theory

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Notes by the late E.K. Strong, Jr. and the following step-by-step explanation
is adapted from his teaching and writings.
Reduced to their simplest elements, the mental processes involved in a
purchase are:
QHHG RU SUREOHP  ĺ VROXWLRQ ĺ SXUFKDVH
Because the outcome of a purchase affects the chance that a continuing
relationship will develop between the buyer and the seller, and because
nearly all sales organizations are interested in such continuing relationships,
it is necessary to add a fourth element to our analysis of a purchase. The
four elements, then, are:
QHHG RU SUREOHP  ĺ VROXWLRQ ĺ SXUFKDVH ĺ VDWLVIDFWLRQ
whenever a need is felt, or a problem recognized, the individual is con-
scious of a deficiency of satisfaction. In the world of selling and buying,
the solution will always be a product or service or both, and they will
belong to a potential seller.
In purchasing, then, the element “solution” involves two parts: (1) product
(and/or service), and (2) trade name (name of manufacturer, company,
or salesperson).
In buying anything, the purchaser proceeds mentally from need or problem
to product or service, to trade name, to purchase; and, upon using the prod-
uct or service he or she experiences satisfaction or dissatisfaction. Thus,
when a definite buying habit has been established, the buying formula is:
need or product and/ trade satisfaction or
ĺ ĺ ĺ purchase ĺ
problem or service name dissatisfaction
To ensure purchase, the product or service and the trade name (that is,
the source of supply) must be considered adequate, and the buyer must
experience a (pleasant) feeling of anticipated satisfaction when thinking
of the product and/or service and the trade name. In a great many cas-
es, an item viewed as adequate is also liked, and vice versa: but this is
not always so. Some products and services that are quite adequate are
not liked, and some things are liked and bought that are admittedly not
as good as competing items. Similar reasoning applies to trades names.
Some sources of supply are both adequate and liked; others are adequate
but not liked; still others are liked but patronized even though they are
inadequate compared to competing sources.

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With adequacy and pleasant feelings included, the buying formula becomes: Notes
Adequacy Adequacy
need or product and/ trade
ĺ ĺ ĺ purchase ĺ satisfaction
problem or service name
Pleasant Feelings Pleasant Feelings
When a buying habit is being established, the buyer must know why
the product or service is an adequate solution to the need or problem,
and why the trade name is the best one to buy. It is also necessary that
the buyer have a pleasant feeling toward the product or service and the
trade name.
Then, whenever the buyer’s buying habit is challenged by a friend’s
remark, a sales person’s presentation of a competing article, or an adver-
tisement for a competing item, it is essential that the buyer have reasons
with which to defend the action, and that, in addition, he or she has a
pleasant feeling toward both the product or service and the trade name.
All this is represented by the dashed lines in the formula.
The primary elements in a well-established buying habit are those con-
nected by solid lines, on the central line of the formula. Most purchases
are made with scarcely a thought as to why, and with a minimum of
feeling. And it should be the constant aim of the salesperson and adver-
tiser to form such direct associations. Reasons (adequacy of solution)
and pleasant feelings constitute the elements of defence in the buying
habit. As long as they are present, buying will continue as in the past.
The answer to each selling problem is implied in the buying formula and
the differences among answers are merely differences in emphasis upon
the elements in the formula.
Where the emphasis should be placed depends upon a variety of circum-
stances. Without going into detail, it may be said that:
1. If the prospect does not feel a need or recognize a problem that can
be satisfied by the product or service, the need or problem must
be emphasized.
2. If the prospect does not think of the product or service when he or
she feels the need or recognizes the problem, the association between
need or problem and product or service must be emphasized.
3. If the prospect does not think of the trade name when he or she

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Notes thinks of the product or service, the association between product

or service and trade name must be emphasized.
4. If need or problem, product or service, and trade name are well
associated, emphasis must be put upon facilitating purchase and use.
5. If competition is felt, emphasis must be put upon establishing in
the prospects’ minds the adequacy of the trade-named product or
service, and pleasant feelings toward it.
6. If sales to new prospects are desired, every element in the formula
must be presented.
7. If more sales to old customers are desired, the latter must be reminded.
(Developing new uses is comparable to selling to new customers.)

15.13 “Behavioural-Equation” Theory

Using a stimulus-response model (a sophisticated version of the “right
set of circumstances” theory), and incorporating numerous findings from
behavioural research, J.A. Howard explains buying behaviour in terms of
the purchasing decision process, viewed as phases of the learning process.
Four essential elements of the learning process included in the stimu-
lus-response model are drive, cue, response, and reinforcement, described
as follows:
1. Drives are strong internal stimuli that impel the buyers’ response.
There are two kinds of drives:
(a) Innate drives stem from the physiological needs, such as hunger,
thirst, pain, cold, and sex.
(b) Learned drives, such as striving for status or social approval,
are acquired when paired with the satisfying of innate drives,
and they represent elaborations of the innate drives, serving as
a facade behind which the functioning of the innate drives is
hidden. Insofar as marketing is concerned, the learned drives
are probably dominant in economically advanced societies.
2. Cues are weak stimuli that determine when they will respond.
(a) Triggering cues (cues which set off chain reaction) activate
the decision process for any given purchase.

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(b) Non-triggering cues influence the decision process but do not Notes
activate it and may operate at any time even though the buyer
is not contemplating a purchase.
There are two kinds:
1. Product cues are external stimuli received from the product
directly, for example, colour of the package, weight, or
price.
2. Informational cues are external stimuli that provide
information of a symbolic nature about the product. Such
stimuli may come from advertising, conversations with
other people (including sales personnel), and so on.
(c) Specific product and information cues may sometimes also
function as triggering cues. This may happen when price
triggers the buyer’s decision.
3. Response is what the buyer does.
4. A reinforcement is any event that strengthens the buyer’s tendency
to make a particular response.
Howard incorporates these four elements into a behavioural equation,
stated in its simplest form as follows:
B = P× D × K × V
Where,
B = response or the internal response tendency, that is, the act of pur-
chasing a brand or patronizing a supplier
P = predisposition or the inward response tendency, which is strength
of habit
D = present drive level (amount of motivation)
K = “incentive potential” that is, the value of the product or its potential
satisfaction to the buyer
V = intensity of all cues: triggering, product, or informational
Howard believes the relation among the variables is multiplicative rather
than additive. Thus, if any independent variable has a zero value, B will
also be zero and there is no response. No matter how much P there may

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Notes be, for example, if the individual is totally unmotivated (D = 0), there is
no response.
Each time there is a response - a purchase - in which satisfaction (K)
received is sufficient to yield a reward, predisposition (P) increases in
value. In other words, when the satisfaction received yields a reward,
reinforcement occurs, and, technically, what is reinforced is the tendency
to make a response in the future to the cue that immediately preceded
the rewarded response. After reinforcement, the probability increases that
the buyer will buy the product (or patronize the supplier) the next time
the cue appears - in other words, the buyer has learned.
Buyer-Seller Dyad and Reinforcement: In the interactions of a salesper-
son and a buyer, each can display a type of behaviour that is rewarding,
that is reinforcing, to the other. The salesperson provides the buyer with
a product (and the necessary information about it and its uses) that the
buyer needs; this satisfaction of the need is rewarding to the buyer, who,
in turn, can reward the salesperson by buying the product. Each can also
reward the other by another type of behaviour, that of providing social
approval. The salesperson gives social approval to a buyer by displaying
high reward with friendly greetings /arm conversation, praise, and the like.
In understanding the salesperson-client relation, it is helpful to separate
the economic aspects from the strictly social features. The salesperson
wished to sell a product, and the buyer wishes to buy it. Thus, these are
the economic features of the relationship. Each participant also places a
value and cost upon the strictly social features. Behaviour concerning these
features of the relationship consist of sentiments, or expressions of different
degrees of liking or social approval. Salespersons attempt to get more or
less valuable reward (reinforcement) either in sentiment or economic ac-
tivity by changing their own behaviour or getting buyers to change theirs.
Salesperson’s Influence Process: The process by which the salesperson
influences the buyer is explainable in terms of the behavioural equation
(B = P × D × K × V). The salesperson influences P (Predisposition)
directly, for example, through interacting with the buyer in ways re-
warding to the buyer. The greatest effect on P, however, is thought to
come from using the product. The salesperson exerts influence through
D (amount of motivation), such influence being especially strong when
the buyer seeks information primarily in terms of informational cues. If

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the ends to be served through satisfying a drive or a need are not clearly Notes
defined, by helping to clarify these, the buyer’s goals, the salesperson
again exerts influence through D. when the buyer has stopped learning
when the buyer’s buying behaviour consists solely of automatic respons-
es the salesperson influences D by providing triggering cues. When the
buyer has narrowed down the choices to a few sellers from whom to
make purchases, the salesperson, by communicating the merits of the
company brand, can cause it to appear relatively better, and thus affect
K (its potential satisfaction for the buyer). Finally, the salesperson can
vary the intensity of his or her effort, so making the difference in V (the
intensity of all cues).
Salespersons’ Role in Reducing Buyer Dissonance: According to Fest-
inger’s theory of cognitive dissonance, when individuals choose between
two or more alternatives, anxiety or dissonance will almost always oc-
cur because the decision has certain unattractive as well as attractive
features. After making decisions, people tend to expose themselves to
information that they perceive as likely to support their choices, and to
avoid information that is likely to favor rejected alternatives. Although
Festinger evidently meant his theory to apply only to situations involv-
ing post-decision anxiety, it seems reasonable that it should also hold
for those involving pre-decision anxiety. Hauk, for instance, writes that
a buyer may panic on reaching the point of decision, and rush into the
purchase as an escape from the problem, or put it off because of the
difficulty of deciding among alternatives. It would appear, then, that
a buyer may experience either pre-decision or post-decision anxiety or
dissonance, or both.
Howard notes that reducing both pre and post decision anxiety or disso-
nance is an important function of the salesperson. Recognizing that the
buyer’s dissonance varies both according to whether the salesperson-client
relation is ongoing or new. Howard considers the four types of cases
involving the salesperson’s role in dissonance reduction.
1. An Established Product: An ongoing salesperson-client relation.
Unless the market is unstable, the buyer tends toward automatic
response behavior, in which no learning is involved, and thus
experiences little, if any, dissonance; but insofar as it does occur,
the salesperson would be effective because the salesperson would
be trusted by the buyer.
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Notes 2. An Established Product: A new salesperson-client relation. The

salesperson, being new, would be less effective in reducing dissonance.
3. A New Product: An ongoing salesperson-client relation. Unless
the buyer generalizes heavily from personal experience with an
established similar product, the buyer would experience dissonance,
especially if it were an important product. Because of the established
relationship with the buyer, the salesperson would be capable of
reducing dissonance.
4. A New Product: A new salesperson-client relation. The buyer would
need dissonance reduction, and the salesperson would be less capable
of providing it.
According to Zaltman, there are two ways to facilitate the buyers’ dis-
sonance reduction. They are: (1) by reemphasizing the advantages of
the product purchased, while stressing the disadvantages of the foregone
alternatives; and (2) in cases of dissonance traceable to buyer’s feelings
that they have purchased items not sanctioned by the relevant reference
groups, by showing that many characteristics of the chosen item are
similar to products the buyers have foregone, but which are approved by
the reference groups. In other words, the buyer experiencing cognitive
dissonance needs reassuring that the decision is or was a wise one; the
salesperson exerts influence by providing information that permits the
buyers to rationalize the decision.

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 L E S S O N

16
Sales Management Process
Shri Raman Chawla
Bhagat Singh College (E)
Revised by: Dr. Virender Kaushal
Consortium for Educational Communication

STRUCTURE
16.1 Prospecting
16.2 Sales Resistance
16.3 Closing Sales
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16.1 Prospecting
Efficient organization of their time and thorough planning of their work are earmarks of
above-average salespersons; they are ever alert for ways to “stretch” productive selling
time. They arrange travel and call schedules to economize on time spent on route and
distance travelled. They make advance appointments to avoid prolonged waiting periods
and unnecessary callbacks. Most important they do not waste time trying to sell to peo-
ple who cannot buy or are not likely to do so. The planning work, which is essential in
eliminating calls on nonbuyers, is called prospecting.
Improvement in prospecting is one of the most promising approaches to stretching pro-
ductive selling time. Many sales personnel devote too little time to prospecting and, as
a consequence, too much to calling on non-prospects. Salespersons who are proficient in
prospecting are able to apply their selling efforts more productively; they do not waste time
calling on non-prospects, and can devote their full attention to those most likely to buy.
Some companies use specialized personnel for prospecting work, but most regard it as one
of the salesperson’s normal responsibilities. Even though salespersons may not do “all” the
prospecting, they should understand the process. They often have access to information
on likely prospects that is not available to central office personnel.

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Notes Steps in Prospecting

The steps in prospecting are: (1) formulating prospect definitions, (2)
searching out potential accounts, (3) qualifying prospects and determin-
ing probable requirements, and (4) relating company products to each
prospect’s requirements.
Formulating Prospect Definitions: Prospective customers must have the
willingness, the financial capacity, and the authority to buy, and they must
be available to the salesperson. Salespersons waste time when they attempt
to sell individuals who have neither need for the product nor money to
pay for it. Salespersons also waste time if they try to sell to the wrong
persons; so it is important to ascertain which persons in each firm have
the authority to buy. And although individuals may qualify as prospects
in all the preceding respects, they may be completely inaccessible to
the salesperson. The president of a large corporation, for example, may
need insurance, and be willing and able to pay for it; but a particular
salesperson may have no way to make the contact.
In addition to meeting the slated requirements, there are other require-
ments unique to each company’s customers. Starting with data on the
profitability of present accounts, any characteristics typical of profitable
accounts but not, shared by unprofitable accounts should be deleted. These
identifying characteristics ideally should be ones easily recognizable from
information appearing in directories of lists. Prospects in many categories
of businesses and professions, for instance, are readily identified from
classified listings in telephone and city directories. Key characteristics
that identify profitable accounts are assembled into descriptions of the
various classes of customers, and these serve as prospect definitions.
Searching Out Potential Accounts: Using the prospect definitions, the
salesperson combs available information sources for the names of probable
prospects, or “suspects,” as they are called. Sources of prospect informa-
tion include: directories of all kinds, news and notes in trade papers and
business magazines, credit reports, membership lists of chambers of com-
merce and trade and manufacturers’ associations, lists purchased from list
brokers, and records of service requests. Other sources include responses
to company advertising, sales personnel of noncompeting firms calling
on the same general classes of trade, conventions and meetings, bankers
and other “centers of influence,” and the salesperson’s own observations.
Salespeople selling services, insurance, for example, uncover prospects
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among their acquaintances; members of their professional, religious, and Notes

social organizations; and from the referrals of friends. Another source
of prospects is the “continuous chain” satisfied customers suggest, vol-
untarily or on request, other leads to the salesperson who served them.
Qualifying Prospects and Determining Probable Requirements: As
more information is assembled on each tentative prospect (i.e. “suspect”),
it becomes easier to make estimates on the probable requirements of each
for the types of products sold by the company. Prospects with requirements
too small to represent profitable business are removed from further consid-
eration, unless their growth possibilities show promise. Even after tapping
all readily available information sources, additional information often is
required to qualify certain prospects, and personal visits by salespersons
may be the only way to obtain it. These visits may not result in sales, but
they do save time, as prospects are separated from non-prospects.
Relating Company Products to Each Prospect’s Requirements: The
final step is to plan the strategy to use in approaching each prospect.
From the information assembled it is usually possible to determine the
probable needs of each prospect. From what the salesperson knows about
the company’s products, their uses and applications, he or she selects
those that seem most appropriate for a particular prospect.
The salesperson’s presentation should now be easy to construct, and it
can be tailored rather precisely to fit the prospect. The salesperson should
have rather clear ideas of the specific objections the prospect may raise,
and other obstacles to the sale that may be encountered. The salesperson
now is ready to contact the prospect, the only tasks remaining are making
an appointment, deciding how to open the presentation, and determining
how to persuade the prospect to become a customer.

16.2 Sales Resistance

Prospects exhibit sales resistance by pointing out real or imagined obstacles
to the sale, and by voicing objections, sincere or insincere. In analyzing
sales resistance, the salesperson needs skill in the accurate and rapid
appraisal of people and their motivations. A prospect’s expressed sales
resistance should be identified as either an obstacle or an objection. An
obstacle must be classified as real or unreal; an objection, as sincere or

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Notes insincere. After sizing up sales resistance in this manner, the salesperson
is in a position to select the next moves.
Obstacles to Sales: Obstacles are real or apparent reasons that the prospect
has for not buying. If the obstacle is real, it precludes the consummation
of the sale. But if it is only apparent, there are ways to deal with it. A
prospect says a temporary shortage of cash prevents buying - an obstacle,
not an objection and the salesperson helps the prospect deal with it by
explaining a method for financing the purchase. Some obstacles can be
dealt with, others cannot. When an obstacle to a sale arises, the sales-
person should determine whether or not there is a way to get around it.
If the salesperson recognizes the specific obstacle and knows a way to
deal with it, the next move is to present the solution to the prospect.
Sales Objections: Objections are never good reasons for failing to complete
the sale, but they nearly always divert the salesperson’s presentation from
its main course. At best, an objection requires a short and satisfactory an-
swer; at worst, it blocks the sale entirely. Adroitness in handling objections
is an important difference between effective and ineffective salespeople.
Sincere objections can be traced to incompleteness, inaccuracy, or vagueness
in the sales presentation. Prospects may not recognize the nature of their
needs, or they may have doubt about the appropriateness of the product
to fulfil those needs. Prospects may be confused in some respect, or may
even react unfavourably to the salesperson’s personality. Except when
personality conflict cannot be resolved (a real obstacle, not an objection),
sincere objections are overcome by patient and thorough explanation.
Insincere objections are used by prospects to discourage salespersons, to
get rid of them, to lest their competence, and as false excuses for not
buying. When salespersons sense that an objection is insincere, they should
seek to regain the offensive as soon as possible. Under no circumstances
should they permit an insincere objection to provoke an argument. This
is one of the surest ways to lose a sale.
Some sales executives feel that every objection, no matter how insincere,
should be dealt with the utmost courtesy and answered as well as possi-
ble. Others believe that insincere objections should be ignored. The best
defensive strategy often is a strong counterattack, and the salesperson
should seek to regain the initiative as soon as he or she can gracefully
do so.

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Notes
16.3 Closing Sales
The tactics of selling followed during the presentation affect the ease of
closing the sale. Generally, low-pressure sales are closed more easily than
high-pressure ones. In low-pressure sales, prospects are made to feel that
they are reaching the buying decisions themselves, and primarily through
rational processes of thought, so there is less need for extra push just
before the sales are consummated. In high-pressure sales, the main thrust
is on the prospects’ emotions, so salespersons attempt to propel prospects
into buying decision. Often the prospect regains normal perspective as
the sale nears its climax and, if this happens, the salesperson needs un-
usually effective persuasion to close the sale.
Every salesperson approaches certain closing with considerable apprehen-
sion. At closing time, either the salesperson sells the prospect an order,
or the prospect sells the salesperson on a “no sale.” But closing time
also provides an opportunity to register tangible proof of selling skill.
Occasionally even the best salesperson must rely upon closing skill to
make the sale.
Prospecting, if well done, puts the salesperson in the proper frame of
mind for the close. The salesperson should feel that a real service is be-
ing performed for the prospect, not that “a bill of goods is being sold.”
There should be no doubt that the product is the best solution to the
prospect’s problems.
When the sales presentation has been complete and clear, no difficulty
should be met in closing the sale. All obstacles to the sale and all ob-
jections have been removed to the prospect’s entire satisfaction. Basic
agreement has already been reached, and the prospect is ready to accept
the salesperson’s proposal.
But even after an excellent presentation, and in spite of thorough pros-
pecting, some prospects refrain from positive commitments. The natural
tendency of many people is to let inertia guide their reactions as many
are perfectly happy to leave things as they are, and salespersons leave
empty-handed unless they manage to jolt these prospects into buying.
The skilled closer gives the extra push that triggers a buying response.
But failures to get an order result as much from poor prospecting and
inept presentations as from ineffective closing.

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Notes When an attempted close fails, the salesperson should normally try another.
The refusal does not necessarily imply an unwillingness to buy; it may
indicate the prospect’s need for additional information, or for clarification
of some point. Some executives recommend that sales personal attempt
as many as five closes before abandoning the effort. Early attempts at a
close should be so expressed that the prospect’s refusal will not cut off
the presentation. A salesperson must judge the sincerity of a prospect’s
refusal, surrendering gracefully when it is clear that no sale will be made.
The salesperson should first try an indirect close, that is, attempt to get
the order without actually asking for it. The salesperson may ask the
prospect to state a preference from among a limited number of choices
(as to models, delivery dates, order size, or the like), so phrasing the
question that all possible responses are in the salesperson’s favor except
for one - “None at all.” or the salesperson may summarize, emphasizing
features that visibly impress the prospect, showing how the reasons for
the purchase outweigh those opposed to it. Then the salesperson pauses
for the prospect’s response, which is expected to be, “Go ahead and write
the order.” Sometimes, the extra push may be a concession that makes
the purchase sufficiently more attractive to complete the sale. Or the
salesperson may assume that the sale has been made, write out the order
and hand it to the prospect for approval. If the prospect disapproves, the
issue becomes clearer. Perhaps one last objection is voiced, but after it
is satisfactorily answered, the sale is made.
When one or more attempts at an indirect close fail, the salesperson
should use the direct approach. Few genuine prospects respond negatively
to a frank request for the order. In fact, many people, especially those
who are themselves engaged in selling, do not buy unless the order is
asked for directly.
After studying the process of selling in detail, we can summarize the
process of selling in the following steps:

16.4 Process of Effective Selling

The process of selling involves several detailed stages, each aimed at moving
a prospect from initial awareness to making a purchase decision. Here’s an

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in-depth look at each stage of the selling process with a detailed example: Notes
Step 1: Prospecting: Identifying and gathering potential customers who
might be interested in your product or service.
Steps:
‹ Research: Use databases, social media, and industry reports to find
potential leads.
‹ Networking: Attend industry events, webinars, and conferences to
connect with potential prospects.
‹ Referrals: Ask existing customers or business contacts for referrals.
Example: A sales representative from EcoTech Solutions, a company
selling energy-efficient lighting systems, uses LinkedIn to identify facil-
ities managers in commercial buildings. They also attend industry trade
shows focused on sustainability and collect business cards from interested
attendees.
Step 2: Qualifying Leads: Evaluating prospects to determine if they are
likely to become paying customers.
Steps:
‹ Initial Contact: Reach out to leads via phone calls, emails, or
networking messages.
‹ Assessment: Determine if the lead fits the ideal customer profile
based on criteria such as budget, authority, need, and timeline (often
referred to as BANT – Budget, Authority, Need, Timing).
‹ Scoring: Use lead scoring models to prioritize leads based on their
likelihood to convert.
Example: The sales rep at EcoTech contacts facilities managers to ask
about their current lighting systems, budget for upgrades, decision-making
process, and timeline for implementing new solutions. They find that a
lead from a large office building has a substantial budget and is actively
seeking energy-efficient options, making them a high-priority lead.
Step 3: Approaching the Customer: Making the initial contact to in-
troduce the product or service.

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Notes Steps:
‹ Introduction: Present yourself and your company.
‹ Value Proposition: Clearly state the benefits of your product or
service and how it can address the customer’s specific needs.
Example: The EcoTech sales rep schedules a meeting with the facilities
manager. During the meeting, they introduce EcoTech Solutions and pres-
ent a brief overview of their energy-efficient lighting systems, focusing
on how these solutions can reduce energy costs and improve lighting
quality in the office building.
Step 4: Needs Assessment: Identifying and understanding the specific
needs, challenges, and goals of the customer.
Steps:
‹ Questioning: Ask open-ended questions to uncover detailed information
about the customer’s needs.
‹ Listening: Actively listen to the customer’s responses and take notes.
‹ Analysing: Evaluate the information to understand how your product
or service can meet their needs.
Example: The sales rep asks questions about the current lighting issues,
such as high energy costs and poor lighting quality. They learn that the
office is looking to reduce energy consumption and improve employee
productivity through better lighting. The sales rep listens carefully and
notes these points to tailor their solution accordingly.
Step 5: Presentation: Demonstrating how the product or service meets
the customer’s needs.
Steps:
‹ Customization: Tailor the presentation to address the specific needs
and pain points identified during the needs assessment.
‹ Demonstration: Provide a live demo, case studies, or simulations
to showcase how the product works and its benefits.
‹ Benefits: Highlight key features and benefits that solve the customer’s
problems.
Example: The EcoTech sales rep presents a customized demo of the
energy-efficient lighting system. They use data and case studies from

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similar office buildings to show how the system reduces energy costs Notes
and improves lighting quality. The presentation includes a cost-benefit
analysis tailored to the customer’s specific situation.
Step 6: Handling Objections: Addressing any concerns or objections
the customer may have about the product or service.
Steps:
‹ Anticipate: Prepare for common objections related to price, functionality,
or implementation.
‹ Listen and Clarify: Understand the objection and ask clarifying
questions if needed.
‹ Respond: Provide information, solutions, or reassurances to address
the objection.
‹ Confirm: Ensure the objection is resolved and the customer is
satisfied with the response.
Example: The facilities manager raises concerns about the initial cost of
the lighting system and its compatibility with existing fixtures. The sales
rep explains the long-term savings on energy bills and offers a flexible
financing plan. They also provide technical documentation showing com-
patibility with existing systems.
Step 7: Closing the Sale: Finalizing the sale and obtaining a commitment
from the customer.
Steps:
‹ Ask for the Sale: Directly request the customer’s commitment to
purchase.
‹ Negotiate Terms: Finalize terms, pricing, and delivery details.
‹ Confirm Agreement: Get a signed contract or purchase order.
Example: After addressing all concerns, the sales rep asks if the facilities
manager is ready to proceed with the purchase. They offer a limited-time
discount to encourage immediate action. The facilities manager agrees,
and they finalize the contract, outlining the purchase details and delivery
schedule.
Step 8: Follow-Up: Maintaining contact with the customer after the sale
to ensure satisfaction and address any issues.

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Notes Steps:
‹ Check-In: Follow up to ensure the customer is satisfied with the
product or service.
‹ Support: Provide any additional support or training needed for
product implementation.
‹ Feedback: Gather feedback to improve future sales processes and
customer satisfaction.
Example: The sales rep at EcoTech follows up with the facilities manager
a few weeks after installation to ensure the lighting system is working as
expected and to address any post-installation questions. They offer addi-
tional training for staff and ask for feedback on the installation process
and the product’s performance.

16.5 Managing Ethics in Selling Environment

Ethical and human values are crucial in the selling process to ensure that
sales activities are conducted with integrity, respect, and fairness. These
values contribute to building trust with customers, fostering long-term
relationships, and maintaining a positive reputation. Here’s a detailed
overview of the key ethical and human values to consider while selling:
1. Honesty: Being truthful and transparent in all interactions with
customers.
Considerations:
‹ Accurate Information: Provide clear and accurate information
about the product or service, including its features, benefits, and
limitations.
‹ Avoid Misrepresentation: Do not exaggerate or make false
claims about the product or service.
‹ Disclosure: Fully disclose any potential drawbacks or costs
associated with the product or service.
2. Integrity: Adhering to moral and ethical principles in all sales
activities.

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Considerations: Notes
‹ Consistency: Maintain consistency in behaviour and communication,
ensuring that actions align with stated values and commitments.
‹ Ethical Practices: Follow ethical practices in pricing, promotions,
and negotiations.
‹ Responsibility: Take responsibility for any mistakes or issues
and address them promptly and honestly.
3. Respect: Treating customers and colleagues with dignity and consideration.
Considerations:
‹ Listening: Listen actively to customer needs and concerns,
showing genuine interest and empathy.
‹ Courtesy: Interact with customers and colleagues courteously
and professionally.
‹ Confidentiality: Respect the privacy and confidentiality of
customer information.
4. Fairness: Ensuring that all customers are treated equitably and justly.
Considerations:
‹ Equal Treatment: Treat all customers fairly, without discrimination
based on race, gender, age, or other personal characteristics.
‹ Reasonable Pricing: Offer fair pricing and avoid exploiting
customers’ lack of knowledge or vulnerability.
‹ Transparent Policies: Implement and communicate clear, fair
policies regarding returns, refunds, and warranties.
5. Empathy: Understanding and sharing the feelings and perspectives
of customers.
Considerations:
‹ Customer Needs: Show empathy by understanding and addressing
the specific needs and concerns of each customer.
‹ Support: Offer support and assistance tailored to the individual
circumstances of the customer.
‹ Sensitivity: Be sensitive to the emotional and psychological
aspects of the sales process, particularly in high-stress situations.

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Notes 6. Accountability: Being accountable for actions and decisions in the

sales process.
Considerations:
‹ Ownership: Take ownership of the sales process and outcomes,
including both successes and failures.
‹ Follow-Through: Ensure that commitments and promises made
to customers are fulfilled.
‹ Transparency: Be transparent about any potential conflicts of
interest or issues that may affect the customer.
7. Professionalism: Conducting oneself in a manner that reflects high
standards of professionalism.
Considerations:
‹ Competence: Demonstrate competence and expertise in the
product or service being sold.
‹ Appearance and Behaviour: Maintain a professional appearance
and attitude in all interactions.
‹ Ethical Standards: Adhere to industry standards and ethical
guidelines in all sales activities.
8. Customer-Centric Approach: Prioritizing the needs and interests
of the customer throughout the sales process.
Considerations:
‹ Personalization: Personalize the sales approach to meet the
unique needs of each customer.
‹ Value Addition: Focus on adding value to the customer’s
experience rather than just closing a sale.
‹ Long-Term Relationships: Build long-term relationships based
on trust and mutual benefit.
9. Transparency: Being open and clear about all aspects of the sales
process.
Considerations:
‹ Clear Communication: Communicate all relevant information
about the product, pricing, and terms in a clear and understandable
manner.

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‹ Honest Negotiations: Engage in honest and transparent negotiations Notes

without hidden agendas.
‹ Disclosure of Conflicts: Disclose any potential conflicts of
interest that may affect the sales process.
10. Ethical Marketing Practices: Implementing marketing strategies
that adhere to ethical principles.
Considerations:
‹ Truthful Advertising: Ensure that all advertising and promotional
materials are truthful and not misleading.
‹ Respect for Competitors: Avoid disparaging competitors or
engaging in unethical competitive practices.
‹ Responsible Targeting: Avoid targeting vulnerable or impressionable
segments of the market inappropriately.

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 UNIT - VI
Sales Planning and Organisation

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 L E S S O N

17
Sales Territories
Shri Raman Chawla
Bhagat Singh College (E)

STRUCTURE
17.1 Reasons for Establishing or Revising Sales Territories
17.2 Procedures for Setting up or Revising Sales Territories
17.3 Deciding Assignment of Sales Personnel to Territories
17.4 Routing and Scheduling Sales Personnel

Establishment of sales territories facilitates matching selling efforts with sales opportu-
nities. Sales personnel are assigned the responsibility for serving particular groupings of
customers and prospects, and provide contact points with the markets. Territorial assign-
ments provide direction to the planning and control of sales operations.
In establishing sales territories, management is taking an important first step toward ac-
cumulating a fund of knowledge on the company’s comparative strengths and weaknesses
in serving different groupings of customers and prospects. By taking these variations into
account in planning sales operations, managerial efforts to improve the company’s com-
petitive position should be more realistic and effective.
Realistic sales planning is done on a territory-by-territory basis rather than by the total
market. Characteristics of customers and prospects vary significantly from one sales ter-
ritory to another and sometimes even from one country to the next. For sales planning
the territory is a more homogeneous unit than the market as a whole.
The emphasis in the concept of the sales territory is upon customers and prospects rather
than upon the area in which an individual salesperson is to work. Operationally defined,
a sales territory is a grouping of customers and prospects assigned to an individual sales-
person. Whether designated geographically or not, a sales territory is basically a grouping
of customers and prospects that can be called upon conveniently and economically by an
individual salesperson.

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Notes This chapter is divided in four sections. Section I discusses reasons for
establishing or revising territories. Section II describes the procedures for
setting or revising sales territories. Section III explains how to assign
sales personnel to territories and finally section IV explains how to install
appropriate routing and scheduling plans.

17.1 Reasons for Establishing or Revising Sales Territories

Sales territories are initially set up, and subsequently revised as market
conditions dictate, to facilitate the planning and control of sales oper-
ations. But that is the general reason for having sales territories. More
specifically, there are five main reasons for having sales territories: (1)
to provide proper market coverage, (2) to control selling expenses, (3) to
assist in the program for evaluating sales personnel, (4) to contribute to
sales force morale and (5) to aid in the coordination of personal selling
and advertising efforts.
(1) Providing Proper Market Coverage: Sometimes a Company loses
business to competitors because it does not have proper market
coverage. Sales management has failed to match company selling
efforts with sales opportunities effectively, competitors have secured
a better match, and they obtain the orders. To overcome problems
of this type, generally management must establish sales territories,
if the company does not already use them, or revise those which
it already has. If sales territories are set up intelligently and if
assignments of sales personnel to them are carefully made, it
is possible to obtain proper market coverage. It should be need
that mere establishment or revision of the sales territories is not
enough. Other managerial action is also required. The design of the
territories should permit sales personnel to cover them conveniently
and economically. They should represent reasonable workloads for
the sales staff while assuring that all prospects who are potentially
profitable can be contacted. Because of variations in the profit
potentials of different accounts, the coverage plan must provide for
variations in the frequencies of sales calls.
Good territorial design allows sales personnel to spend sufficient
time with customers and prospects and minimizes time on the road.

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 SALES TERRITORIES

This permits them to become thoroughly conversant with customer’s Notes

problems and requirements. Successful selling is based upon helping
customers solve the problems, not just upon making sales or, even
worse, upon taking orders. Well-designed sales territories, combined
with appropriate salesforce assignments, result in calls upon different
classes of customers and prospects at needed frequencies. Call
regularity is important in selling products purchased on a repeal
basis, and persistence turns many a prospect into a regular account.
(2) Controlling Selling Expenses: Good territorial design combined with
careful salesperson assignment results in low selling expenses and
high sales volumes. Sales personnel spend fewer rights away from
home, which reduces or eliminates many charges for lodging and
food; at the same time, the necessary number of travel miles is
reduced, with an accompanying decrease in transportation expenses.
These savings, plus the higher sales volumes that follow from the
increased amount of productive selling time, have a favourable effect
upon the ratio of selling expenses to sales. In fact, even if selling
expenses remain unchanged, the sales increase made possible through
proper market coverage reduces the selling-expense percentage.
Reduced selling-expense ratios do not, however, follow automatically
from the establishment or revision of sales territories. If territorial
planning is unsound or is not combined with appropriate assignments
of sales personnel, selling-expense ratios may increase. If the planner,
for instance, ignores normal travel routes and geographical barriers,
sales personnel may spend time traveling when they could be calling
on customers; such conditions result in higher selling expenses and
lower sales volumes.
(3) Assisting in the Program for Evaluating Sales Personnel: Well-
designed sales territories assist management in securing information to
use in evaluating sales personnel. Selling problems vary geographically,
and the impact of competition differs widely among regions. When the
total market is divided into territories, analysis reveals the company’s
strengths and weaknesses in different areas, and appropriate adjustments
can then be made in selling strategies. Collection and analysis of sales
and cost data are done on a territorial basis. Accurate estimates of
the sales potential that each salesperson should be held responsible

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 ADVERTISING AND SALES MANAGEMENT

Notes for result, as well as reliable estimates for the costs of realizing that
potential. Thus, through analyzing the market territory by » territory
and pinpointing sales and cost responsibility to individual sales
personnel, management has the information it needs to set quotas
and to evaluate each salesperson’s performance against them.
(4) Contributing to Sales Force Morale: Good territorial designs help
in stimulating the interest of sales personnel in their jobs and
in maintaining sales force morale. Well-designed territories are
convenient for sales personnel to cover; they represent reasonable-
sized workloads, and sales personnel find that their efforts produce
results. All are responsible for achieving giver levels of performance
within their own territories, so all know specifically what management
expects of them. The results that come from each sales territory
can be correlated with the efforts of individual sales personnel.
Good territorial design plus intelligent salesperson assignment help
make each person as productive as possible and make for possible
high earnings, self-confidence, and job satisfaction. Morale should
be high also because there will be few conflicting claims of sales
personnel to the same accounts when sales territories are not used
there are numerous conflicts. Even with well-designed sales territories,
some conflicts arise, because there are always some customers who
transact business in more than one territory; but well-designed
territories reduce the magnitude of the problem. Finally, salesforce
morale should be high because Excellence, in planning territories
and making territorial assignments should cause sales personnel to
spend minimum time on the road.
(5) Aiding in Coordination of Personal Selling and Advertising Efforts:
Management may set up sales territories or revise existing territorial
arrangements with a view to improving the coordination of personal-
selling and advertising efforts. In most marketing situations, personal
selling or advertising alone cannot accomplish the entire selling task
as efficiently or as economically as these two major selling efforts,
skilfully harmonized, are capable of doing. By blending personal
selling and advertising, management takes advantage of a synergistic
effect (sometimes referred to as the ...2 + 2 = 5.. effect), and obtains
a performance greater than the sum of its parts.

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 SALES TERRITORIES

Sales personnel play key roles in management’s attempts to capitalize on Notes

synergistic opportunities. Prior to launching an advertising campaign for a
new consumer product, for example, sales personnel may call upon dealers
to outline the marketing plan’s objectives, provide them with tie-in displays
and other promotional materials, and make certain that adequate supplies
of the product are on hand in the retail outlets. Territorial assignments
make every dealer the responsibility of some salesperson; and proper
routing ensures that sales personnel contact all dealers at appropriate times
relating to the breaking of the consumer advertising campaign. In some
cases, the manufacturer’s marketing plan calls for dealers to share in the
costs of advertising the product. Here, again, sales personnel “sell” such
cooperative programs to dealers in their assigned territories. In situation
where sales personnel perform work related to the advertising effort, the
results are more satisfactory if the work is delegated and managed on a
territory-by-territory basis rather than for the entire market.

17.2 Procedures for Setting up or Revising Sales Territories

In setting up or in revising sales territories, there are four steps: (1) se-
lecting a basic geographical control unit, (2) determining sales potentials
in control units, (3) combining control units into tentative territories and
(4) adjusting for coverage difficulty and redistricting tentative territories.
(1) Selecting a Basic Geographical Control Unit: The starling point in
territorial planning is the selection of a basic geographical control
unit. The most commonly used control units are districts, PIN code
numbers, cities, standard metropolitan statistical areas, trading areas,
and states. Sales territories are put together as consolidations of
basic geographical control units.
There are two reasons for selecting a small control unit. One is to
realize one of the important benefits of using territories, the precise
geographical identification of sales potential. If the control unit is
too large, areas with how sales potentials are hidden by inclusion
with areas having high sales potentials, and areas with high sales
potentials are obscured by inclusion with those having low sales
potentials. The second reason is that these units remain relatively
stable and unchanging, making it possible to redraw territorial
boundaries easily by redistributing control units among territories.
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Notes (2) Determining Sales Potential Present in Each Control Unit: Having
selected the basic control unit, the next step is to determine the
sales potential present in each unit. Thus, the territorial planner
needs some way to measure sales potentials, which represent the
maximum possible sales opportunities open to a specific company
selling a good or service during a stated future period to particular
market segments. For the present purpose, substitute “a particular
control unit” for “a particular market segment” - in other words,
each control unit is a particular geographical market segment.
Geographical market segments, like all market segments, are made
up of present and prospective customers so the territorial planner
must identify the buyers of the product as precisely as possible.
Having identified the potential buyers, the planner next determines
how much sales potential exists in each control unit. The planner
ascertains how many potential buyers in each class there are in
each control unit and the unit’s total market potential. Then the
planner estimates the portion of the total market potential that the
company has an opportunity to obtain (that is, the sales potential
for the particular control unit under study).
(3) Combining Control Units into Tentative Territories: Having measured
the sales potential of each control unit and decided which are to
receive sales coverage, the planner combines units into tentative sales
territories. This step results in only a tentative arrangement because
subsequent adjustments must be made for relative coverage difficulty.
At this stage, the planner assumes that no significant differences
in the physical or other characteristics of individual control units
exist to make some units more difficult to cover than others. The
purpose now is to obtain a “first approximation” of how the total
market should be arranged into sales territories, and it is logical
to combine continuous control units into tentative territories, each
containing approximately the same sales potential.
However, the planner must immediately decide how many territories
there should be, and this, assuming that all sales personnel are of
average ability, is the same as deciding the size of the sales force.
Basically, the planner must estimate the percentage of the total
sales potential that each average salesperson should be capable of

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 SALES TERRITORIES

realizing. Analysis of past sales experience helps in making this Notes

estimate, which, once made, can be used to determine the number
of territories.
(4) Adjusting for Differences in Coverage Difficulty and Redistricting
Tentative Territories: The final step is to redistrict the tentative
territories by adjusting for differences in coverage difficulty. The
tentative territories each contain approximately the same sales
potential, and the relative difficulty of obtaining sales coverage
has been ignored, up to now. Almost certainly, however, territories
with nearly equal sales potentials exhibit considerable differences in
the selling effort required to realize that potential and in turn, the
amount of selling expense incurred. Earlier the simplifying assumption
was made that no significant differences in the physical or other
characteristics of different geographical control units existed. How
it is time to remove this unrealistic assumption, for the fact is that
sales potential is almost never evenly distributed among control
units. And this generally goes along with significant differences in
physical and other characteristics that make providing sales coverage
more difficult for some control units than for others.
Difference is coverage difficulty represents difference in the workloads
required of sales personnel. It is helpful, then, to ascertain how large the
maximum workload (the largest workload to be assigned to any sales-
person) should be. It is not necessary that all workloads be the same
size, since sales personnel vary in ability as well as in drive, and some
can safely be assigned larger workloads. However, there is an upper
size limit to the “desirable workload,” and this also limits the maximum
geographical extent of any sales territory. When final adjustments for
coverage difficulty are made, sales territories represent varying amounts
of sales potential and different-sized workloads, but none should exceed
the estimate for the maximum desirable workload.

17.3 Deciding Assignment of Sales Personnel to Territories

When the sales territorial arrangement seems the best obtainable, it is
time to assign sales personnel to territories. Up to this point in territori-
al planning an implicit assumption has been that all sales personnel are

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Notes “average,” that is, that all are interchangeable, each capable of producing
similar results at similar costs regardless of territorial assignments. Clear-
ly, this is an unrealistic assumption, adopted only for territorial planning
purposes, and one that must be discarded when sales personnel are being
assigned to territories. Few sales personnel are exactly average. They vary
in ability, initiative, and effectiveness as well as in physical condition
and energy. What constitutes a reasonable and desirable workload for
one individual may not be appropriate for the next. Furthermore, many
a salesperson’s effectiveness varied with the territory assigned. A person
may be outstanding in one territory and a failure in a second, even though
territorial sales potentials and coverage difficulty factors are identical. A
person’s relative performance, moreover, is conditioned by environmental
factors such as customer characteristics, customs and traditions, ethnic
influences, and the like.
In assigning sales personnel to territories, management should seek to
obtain the most profitable alignment of selling efforts with sales oppor-
tunities. The territories, containing varying sales potentials, represent
different amounts of sales opportunity. The sales personnel, differing in
ability and potential effectiveness, represent the range of selling talent
available. The general guide that management should follow in making
sales assignments is to assign each salesperson to the particular territory
where his or her relative contribution to profit is the highest. Although,
as a practical matter, this guide cannot be applied in all aspects of every
problem involving assignment of sales personnel to territories, it is the
“ideal” that the planner should work toward.
The general guide for assigning sales personnel to territories is not uni-
versally applicable because the amount of discretion management has in
making these decisions differs considerably from company to company.
At one extreme, some companies display great reluctance to transfer sales
personnel to different territories, management fearing not only sales-force
resistance but the consequences of breaking established salesperson-cus-
tomer relationships. These companies adhere generally to a “no transfer”
or “infrequent transfer” policy and, in order to secure a proper alignment
of selling talent and territorial sales opportunities, restrictions on shifting
sales personnel are worked into territorial designs. The planner expands or
contracts territorial boundaries, adding to or subtracting from individual

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 SALES TERRITORIES

territorial sales potentials until the resulting territories contain sales poten- Notes
tials appropriate to the abilities of sales personnel already assigned. These
companies, in effect, design sales territories around, and to fit the abilities
of, sales personnel.
At the opposite extreme, management in a few companies enjoys the
maximum freedom in assigning any salesperson to any territory, design-
ing territories (according to procedures similar to those discussed earli-
er) and closely aligning salespeople’s ability levels with territorial sales
opportunity levels. Management in these companies is free to shift sales
personnel to predesigned territories where their relative contributions to
profit are maximized.
The situation in most companies is somewhere between the two extremes.
For various reasons, some totally outside management’s control, certain
sales personnel cannot be transferred, but others can be freely moved
from one territory to another. This means, that in most cases, manage-
ment must design some sales territories to fit the ability levels of certain
nontransferable sales personnel while identifying and reassigning other
sales personnel with ability levels appropriate to sales territories designed
according to the suggested procedures.

17.4 Routing and Scheduling Sales Personnel

Routing and scheduling plans are aimed toward maintaining the lines
of communication, to improving sales coverage, and minimizing wasted
time. When management is informed at all times of all salesperson’s
whereabouts in the field or at least knows where they should be, it is
easier to contact them to provide needed information or last-minute in-
structions. Chances are greater that sales personnel will be where they
are supposed to be. The improvement in communications results in more
effective control over sales personnel.
Installation of routing and scheduling plans helps to improve sales
coverage. The mechanics of setting up a routing plan are fairly simple,
but in working out the plan, there must be detailed information on the
numbers and locations of customers, the available means and methods
of transportation connecting concentrations of customers, and the call
frequency rates for different classes of customers. Detailed maps must be

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Notes available showing not only towns and cities and transportation routes but
factors such as trading-area boundaries and such topographical features
as mountain ranges, lakes, bridges, and ferry, lines. If sales personnel are
to travel by air, airport locations, relative to cities on the route must be
known. The route, or routes, finally laid out should permit the salesperson
to return home at least on weekends.
If the route planner considers the desired call frequency rate for each cus-
tomer on the route, the call schedule results as a by-product of setting up the
route. In many cases, however, making up the call schedule is more involved
than planning the route itself. Customers and prospects are segregated into
different groups according to the frequency with which calls should be made
upon each group. Using detailed maps, the planner identifies the locations
of members of each customer and prospect group and reconciles the route
with these locations. Hence, it often develops that the salesperson must be
provided with a different route each time he or she travels the territory, in
order to achieve the desired call frequency for each account in the territory,
and to incorporate new customers and prospects into the itinerary. Further-
more, because changes occur in account classifications, in the number of
prospects, in the nature and intensity of competitive activity, as well as in
such factors as road conditions, it is impractical to set up fixed route and
call schedules for long periods in the future.
The greatest gain from using routing and scheduling plans comes from the
opportunities to reduce wasted time by sales personnel. If the salesperson’s
route is planned by management, much backtracking, travel time and
other “non-selling” time can be eliminated. If the salesperson’s calls are
scheduled, the call frequency can be adjusted to fit customers’ needs and.
incidentally, it may automatically build up the size of the average order.
In scheduling sales personnel, some firms not only designate the cus-
tomers to be called upon each day but prescribe the hour at which each
call is to be made. Generally, such detailed scheduling is compiled with
a system for making appointments in advance of actual calls. Companies
not using scheduling plans usually suggest that their salespeople make
advance appointments, but often this suggestion is ignored. For detailed
scheduling to be effective, the scheduler needs current information on
the time required for each call, the probable waiting time at each stop,
the travel time between calls, and the probable time with each custom-

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 SALES TERRITORIES

er. This information is difficult to collect and keep up to date. Detailed Notes
scheduling is most feasible when management can count upon customer’s
full cooperation. Most firms allow their sales personnel “time cushions”
to take care of the many variations met on each selling trip.
Routing, Scheduling, and Control: The routing plan, the scheduling
plan, or both can assist sales management in obtaining closer control
over sales personnel’s movements and the way they spend their time. The
routing and scheduling plans are integral parts of the overall process of
establishing sales territories and assigning sales personnel to them. Any
routing or scheduling plan should be subjected to frequent checkups to
see how it is working and to detect needed adjustments. Call reports
should be compared with route and call schedules to determine whether
plans are being followed. Variations or discrepancies should be noted,
and sales personnel asked for explanations. Adherence to the plans is
also enforced by supervisors or branch sales managers making frequent
and unannounced visits to the field.

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 L E S S O N

18
The Sales Budget
Shri Raman Chawla
Bhagat Singh College (E)

STRUCTURE
18.1 Purposes of the Sales Budget
18.2 Sales Budget - Form and Content
18.3 Budgetary Procedure
18.4 Objectives in Using Quotas
18.5 Quotas, the Sales Forecast, and the Sales Budget
18.6 Types of Quotas and Quota Setting Procedures
18.7 Administering the Quota System

The sales budget is a statement of projected sales revenues and selling expenses. Such a state-
ment enables a company to find out the estimated net profit. The sales forecast is the general
source for the sales-volume portion of the sales budget. The sales-volume objective, derived
from the sales forecast, is broken down into precise details as to the quantities of products
that are to be sold, the sales personnel or sales districts that are to sell them, the customers
or classes of trade that are to buy them, and the quantities that are to be sold during differ-
ent time segments in the operating period. Making all these breakdowns requires complex
sequences of planning decisions. Once these breakdowns have been made, then estimates
are made of the selling expenses that will be incurred in implementing this sales program.
This chapter is divided into three sections. Section I highlights the two main purposes of
the sales budget. Section II explains the form and content of the sales budget and finally,
Section III deals with budgetary procedure.

18.1 Purposes of the Sales Budget

1. Mechanism of Control: The primary orientation in sales budgeting is toward control.
The completed budget, which is a composite of sales, expense, and profit goals for
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various sales units, serves as a yardstick against which progress is Notes

measured. Comparison of accomplishments with different breakdowns
of the budget provides a measurement of the quality of performance
of such units as individual sales personnel, sales regions, products,
marketing channels, and customers. Furthermore, these evaluations
help to identify specific weaknesses in operating plans, thus enabling
sales management to make indicated revisions aimed to improve
performance. The sales budget itself, since it is a master standard
against which diverse aspects of performance are measured, then
serves as an instrument for controlling sales volume, selling expenses
and net profits.
Computerized processing of information has enormously increased
the effectiveness of control through the sales budget. Management is
provided daily with details of actual performance, measured against
budgeted performance. With current and complete information on
sales volume and selling expenses the sales manager can identify
variations from the budget and take corrective action before they
get too badly out of the line.
2. Instrument of Planning: Although the primary orientation in sales
budgeting is toward control, the budgeting process itself requires
complex sequences of planning decisions. The sales forecast shows
where it is possible for the business to go, and during the sales
budgeting process ways and means are determined for the business
to get from where it is to where it wants to go. The sales forecast
reveals data on sales potentials, and the budget planners calculate
the expenses of converting forecasted sales into actual sales.
The sales budget planners are expected to formulate the sales plan
so that both sales volume and net profit objectives are reached.
Showing how to achieve the targeted sales volume is not enough.
The planners must show how the targeted volume can be reached,
while keeping selling expenses at a level that permits attainment of
the targeted profit. Sales budgeting necessarily requires the drafting
of alternative sales plans and selection of the one most appropriate
for serving the company’s sales volume and net profit objectives.

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Notes
18.2 Sales Budget - Form and Content
The completed sales budget is a statement of projected sales revenues and
selling expenses. The so-called “summary” of the sales volume section
of the sales budget is expressed both in rupees and units of product, so
that budgeted figures can be readily adjusted for price changes. The bud-
get section on planned sales volume is presented in considerable detail.
Not only are total unit sales shown but unit sales of each product, unit
sales by sales territory (and/or region), unit sales by quarters or months,
and unit sales by class of account (or type of marketing channel). For,
instance. Table 17.1 shows units sales of Products A, B and C by sales
regions for 2023. Table 17.2 carries the breakdown one step further and
shows unit sales of the three products in the north region by quarter.
Table 17.3 carries the breakdown another step further and shows unit
sales of the three products in the north region for the first quarter by
class of account. Companies, with computerized marketing information
system, of course, have the capability of calling up for display on desk-
side consoles these and other breakdowns. Not every company uses the
same kinds of breakdowns, each selecting those that are appropriate to
its own planning, directing, and controlling of sales efforts.
Estimating Budgeted Selling Expenses: The sales budget is drafted with
a view toward obtaining an optimum net profit for the forecast volume
of sales. It should be noted that it is the optimum and not the maximum
net profit that is the short-run, profit objective. Profit maximization is
the objective over the long-run, but other considerations such as the
necessity for providing “business-building” customer services, and for
scheduling calls on prospective new accounts, make profit optimization
the short-run goal. In other words, some selling expenses would not be
incurred if management did not look beyond the immediate period cov-
ered by the budget. But a forward-looking management considers such
present expenditures as investments that should return sales and net profit
amount during succeeding budgetary periods. Management reasons that
certain expenditures made during the period just ahead should permit the
realization of future savings in similar expenditures.

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Table 18.1: Unit Sales by Sales Regions, 2023 Notes

Region North East West South Total
Product
A 80 90 70 80 320
B 60 60 50 75 245
C 45 35 25 30 135
Table 18.2: Unit Sales, North Region by Quarters, 2023
Quarter I II III IV Total
Product
A 25 20 15 20 80
B 15 15 15 15 60
C 7 8 15 15 45
Table 18.3: Unit Sales, North Region, First Quarter,
by Class of Account, 2023
Class of Account A B C Total
Product
A 15 8 2 25
B 9 3 3 15
C 4 2 1 7
Thus, both immediate and long-run sales plans should be taken into ac-
count in arriving at estimates for the items of selling expense included
in the sales budget. Indeed, the most appropriate immediate sales plan
must be an integral part of the plan covering a longer period. However,
sales plans for the period just ahead must be drafted in sharper outline
than those for longer periods, such as for those covering five, ten, or
twenty-five years. For the immediate budgeting period, plans are draft-
ed in terms of types and amounts of personal selling efforts that should
be applied to attain the sales and profit objectives. If the sales volume
goal for the coming budget period calls for an additional Rs. 1 million
in sales, sales management must identify the activities that reaching this
goal will entail. In turn, these activities, which may be stated in such
terms as the number of new dealers needed in various classifications,
must be translated into estimates of the expenses that will be incurred
in performing them.

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Notes Therefore, after-sales management succeeds in expressing its plan for the
forthcoming budgetary period in terms of the activities to be performed,
the next step is to convert these activities into money estimates for the
various items of selling expense to be incurred. For instance, if the plan
calls for sales personnel to travel a total of 500,000 miles in the course
of the year ahead, and a straight mileage allowance of 18 rupees per
mile is paid, an item of Rs. 90,000 to cover mileage allowances must be
included in the selling expense section of the sales budget. The paying of
18 rupees a mile for sales travel, a previously established practice, aids in
estimating the costs of reimbursing sales personnel for travel but manage-
ment must still determine the total number of miles sales personnel are to
travel. In budgeting items of selling expense, then, management must (1)
estimate the volume of performance of the activity and (2) multiply that
volume by the cost of performing some measurable unit of the activity.
Different companies adopt different methods for estimating selling ex-
penses. Some simply total selling expenses over a recent period and di-
vide by the number of units of product sold, thus arriving at an average
cost per unit sold. This figure is then multiplied by the forecast for unit
sales volume, to obtain an estimate for total budgeted selling expenses.
Some adjust the average cost per unit sold for changes in the strength of
competition, general business conditions, the inflation rate, and the like.
Other companies calculate for past periods the percentage relationship
of total selling expense to sales volume. This percentage, which may or
may not be adjusted for changes in conditions, is then applied to the
sales forecast money to estimate budgeted selling expenses.
Finally, some companies build up their estimates for total selling expens-
es by applying historical unit cost figures to individual selling expense
items. This is not a true standard distribution cost method, but it does
force management to focus upon individual expense items rather than
upon the total. Consequently, the expense estimates in the budget should
possess greater accuracy than if total selling expense percentages or total
selling expenses per unit of product were used.

18.3 Budgetary Procedure

Company budgetary procedure normally begins in the sales department. After
all, the sales department in nearly all companies is the only department
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generating inward flows of sales revenues. The nature and amount of the Notes
predicted flows of sales revenues impact directly upon the activities of
departments throughout the enterprise. Therefore, once top management
receives and gives tentative approval to the sales budget, other departments
prepare budgets outlining their plans for the future operating period. For
instance, the production department takes its cue from the sales budget
in preparing budgets for manufacturing expense and inventory, as well
as in planning production schedules. Similarly, the financial department
uses the sales budget as the starting point in preparing budgets for capital
expenditures, earnings and cash position, and administrative expenses. It
should be noted that the production department is mainly interested in the
budgeted unit sales, whereas the financial department is concerned chiefly
with planned rupee sales.
(a) Planning Styles and Budgetary Procedures: There are two basic
planning styles - top-down and bottom-up. In top-down planning,
top management sets the objectives and drafts the plans for all
organizational units. By contrast, in bottom-up planning, the different
organizational units (generally departments) prepare their own
tentative objectives and plans and forward them to top management
for consideration.
Sales budgetary procedures differ from company to company with
most of the differences traced to differences in basic planning
styles. If the predominant planning style is top-down, the head
of each organizational unit in the sales department (for example,
a regional sales manager) receives his or her sales and profit
objectives from the next level above and makes plans to fit those
objectives. Adjustments in objectives may be made if subordinates
raise questions regarding their fairness or soundness, but the natural
tendency in a top-down organization is for subordinates to accept
the objectives passed down by their superiors.
If the predominant planning style is bottom-up, the heads of even
minor organizational units, such as branch sales managers, and
sometimes even individual sales personnel, assist in determining
sales and profit objectives and in making plans to accomplish
them. Most budgeting experts recommend that planning be done
at least partially in the bottom-up style, arguing that participation

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Notes in planning at all levels helps greatly to maximize benefits from

sales budgeting.
Democratic administration requires the widest possible participation
in planning; and participation, from the organizational standpoint,
is as much a vertical as a horizontal concept. It is as important to
have participation from each organizational level, from the lowest to
the highest, as it is to have the overall company budget representing
the best thinking from all divisions.
(b) Handling Competition for Available Funds within the Marketing
Division: The top sales executive must be prepared to argue effectively
for an equitable share of funds from the marketing division. The
sales executive, like the advertising manager, marketing research
manager, customer service manager, product managers, and other
staff executives in the marketing department, submits a budget
proposal to the chief marketing executive. From the proposals
received from subordinates, the chief marketing executive selects
those which are of the greatest potential benefits and which the
company can afford to implement. In discharging this function, the
chief marketing executive checks to assure that the plans presented
are the result of careful study, that the proposed expenditures will
enable the subordinate to carry out the plans, and that the forecasted
sales are attainable.
The top sales executive should understand that the amount of money
finally allocated to the sales department depends upon the value of
the individual budgetary proposals to the company as a whole. The
sales executive must also keep this in mind in dividing the sales
department’s budget among subordinate departmental units. If a
bottom-up planning procedure has been used, each subordinate has
already prepared his or her own sales objectives and an estimate
of the expenses to be incurred; thus, the tasks of dividing up sales
objectives and budgeted selling expenses are simplified.
(c) “Selling” the Sales Budget to Top Management: The chief sales
and marketing executives must recognize that every budget proposal
they make to top management is in competition with proposals
submitted by the heads of other divisions. At budget-making time,
top management receives more proposals than it is financially able

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to carry out simultaneously. Therefore, in appraising proposals, top Notes

management looks not only at intrinsic merits but also at the probable
overall value or return to the organization as a whole. Consequently,
the sales budget has to be “sold” to top management. The budget
should be presented to top management just as a salesperson would
make a presentation to a prospect. Top management has too many
varied responsibilities to be concerned with details of any one
department. So, it is safe to assume that high executives are at least
partially ignorant of the problems faced by the department, and of
the many problems faced in putting together a good sales program.
As in any other selling task, the starting point should be a careful
assessment of the wants and needs of the prospect. For the top
executive, the major want is benefit to the company. How does
the company, and incidentally the top executives, stand to gain
from the proposed sales budget? To top management, the budget
is a proposal to spend money to bring in profit. It is the job of
lop management to divide the available money among the various
departments, and the share each receives depends on the ability of
the executive concerned to sell his or her boss on the benefits to
accrue from the plan.
(d) Using the Budget for Control Purposes: Once the approved budgets
have been redistributed to all organizational units, budgetary control
features go into operation. Individual items in each budget serve
as “quotas” or “standards” against which management measures
performance. From this point on, each level of management is
expected to compare performance against standards.
For purposes of control, each sales manager receives budget progress
reports. This report may be prepared monthly, but more effective control
is achieved if progress reports are weekly. In this way, corrective action
can be initiated before actual performance moves too far from budgeted
performance. The report shows actual sales and expenses for the week, the
month to date, and the year to date, budgeted sales and expenses, and the
differences between the two. Sales performance figures are broken down
further in whatever ways are useful to the executives using them - for
example, by product, by package size, by sales territory, or by customer.
When actual performance shows a variance from budgeted performance,

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Notes two courses of action are available. The first is to determine whether the
variance is a result of poor performance by the sales group. It might be
discovered that a salesperson’s travel expenses are out of line because
of inefficient territorial coverage. In this case, steps would be taken to
ensure that the salesperson organizes travelling more carefully, so that
budgeted expenses can be brought back into line. However, if it turned
out that travel expenses have increased because of the necessity of calling
on new customers not previously covered, the second course of action
would be necessary i.e., to revise the budget to reflect changed conditions.
The budget is not an end in itself, merely a tool. Every effort should be
made to bring actual performance into line with budget estimates; but if
unanticipated conditions are encountered there should be no hesitation
about revising the budget. At the same time, the budget should not be
changed too readily. If it is to be changed each operating period, it serves
no real purpose and becomes a mere record of sales and expense.

QUOTAS
Quotas are quantitative objectives assigned to specific sales organizational
units. Sales management sets and administers quotas for organizational
units of the sales management, such as for individual sales districts and
sales personnel. Quotas set for sales regions, or other marketing units on
higher organizational levels, are customarily broken down and reassigned
to lower-level units like sales districts, or to individual sales personnel.
All quotas have a time dimension they quantify what management expects
in the way of accomplishment within a given period.
The discussion on quotas is divided into four sections. Section I explains
four objectives in using quotas. Section II describes the relationship
among quotas, the sales forecast and the sales budget. Section III dis-
cusses the four types of quotas and how they are set and finally, Section
IV outlines the two major requirements for an effective administration
of the quota system.

18.4 Objectives in Using Quotas

The general objective sales management has in mind when it decides to
use quotas is to facilitate and improve control over the sales effort. Sales
control is facilitated through the setting of quotas for use in appraising
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performances of specific sales organizational units, such as a particular Notes

sales region or even an individual member of the sales force. Sales control
is tightened through the setting of quotas over expenses and profitability
of sales volume. A skilled management uses the quotas that have been
set to motivate personnel to achieve desired performance levels. When
management sets quotas it firms up its expectation with respect to desired
performance levels; when these expectations are communicated to those
whose performances are to be appraised, motivational forces are put into
operation which hopefully, will result in the required extra efforts. More
specifically, quotas are set for the following four objectives:
(1) To Provide Quantitative Performance Standards: Quotas provide a
means for determining which sales personnel, other units of the sales
organization, or distributive outlets are doing an average, below-
average, or above-average job. Territorial sales-volume quotas, for
instance, are yardsticks for measuring territorial sales performance,
making it possible to evaluate the effectiveness of sales personnel.
Comparisons of quotas with sales performance identify weak and
strong points; but management must dig deeper to uncover reasons
for performance variations. A well-designed quotas system combined
with sales analysis can help, for example, in assuring that a bad
showing in selling one product in a territory is not hidden by good
showings in selling other products. Sales performances vary product
by product, territory by territory and salesperson by salesperson.
Quotas identify the strong and weak points, but additional analysis
of performance data is needed to uncover reasons for performance
differentials.
(2) To Obtain Lighter Sales and Expense Control: Control over expenses
and the profitability of sales is tightened through use of quotas.
Some companies reimburse sales expenses only up to a certain
percentage of sales volume, the expense quota being expressed as
a percentage of sales. Others set rupee expense quotas and inform
sales personnel that their effectiveness is being appraised, in part,
by their success in staying within assigned expense limits. Still
others establish quotas for the rupee profit or profit percentage on
sales. All of these so-called “budget” quotas shift the emphasis
away from just making sales and toward increasing the profitability
of sales. Such quotas are particularly appropriate when additional
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Notes sales volume is obtainable only at greatly increased expense; thus

profits can be increased only by improving selling efficiency (either
by reducing selling expenses or by making sales more profitable).
(3) To Motivate Desired Performance: Quotas motivate sales personnel,
distributive outlets and others engaged in the sales operation to achieve
certain performance levels. As a matter of fact, some managements
use quotas solely for inspirational purposes, basing them almost
entirely upon what they think different individuals can be inspired
to achieve. Unfortunately, because of the high degree of subjectivity
used in setting such quotas, they frequently turn out unrealistically
high, thus losing much inspirational value. Most sales executives
agree that for those to whom they are assigned, quotas should be
attainable goals that can be achieved with justifiable pride. For quotas
to be inspirational, it must be attainable, and the salesperson must be
convinced of that fact. The salesperson should believe so strongly in
the attainability of the assigned quota that he or she will not easily
give up with the excuse that it cannot be reached. Sales personnel
should feel that they must reach assigned quotas, and they should
be confident that management will recognize their achievements.
(4) To use in Connection with Sales Contests: Companies using sales
contests frequently use “performance against quota” as the main
basis for making awards. Sales contests are more powerful incentives
if all participants feel they have equal chances of winning. By
basing awards on percent of quota fulfillment, the desired “common
denominator” feature is built into the contest. Adjustments are made
for differences among territories (as in coverage difficulty and
competitive position) and for differences among sales personnel
(as in experience with the company and in the territory). Generally,
contest quotas are designed solely for use in the contest, the thinking
being that “special quotas” stimulate extra special effort, causing
average sales personnel to turn in above average performances.

18.5 Quotas, the Sales Forecast, and the Sales Budget

Relationships among quotas, the sales forecast, and the sales budget vary
from company to company. These relationships depend not only upon the
procedures used in forecasting budgeting, and quota setting, but also upon
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the degree to which planners integrate these three procedures. The greater Notes
the degree of integration, the more potential effectiveness quotas have
as devices for controlling sales efforts. Planning a company sales effort
should begin with a sales forecast and evolve naturally into a sales budget,
thus setting the stage for the controlling phase, which involves, among
other things, determination of quotas for use as performance standards.
A review of this process is in order. Basically, a sales forecast is a sales
estimate tied to a particular marketing program and assuming a given set
of environmental factors. When management arrives at the sales estimate,
it has, in effect, decided the company’s sales-volume objective then, after
determining the probable expenses of obtaining this sales level, man-
agement computes the indicated net-profit contribution, brings all these
figures together into a sales budget, and sett the company objective for
net profit on selling operations. The sales planning process thus far then,
has resulted in selling sales volume and other objectives for the company
as a whole. In planning how to reach these objectives, management must
decide how much of the estimated sales volume should come out of each
territory, how much expense should be incurred in each, and how much
profit contribution should be expected from each. Here management fac-
es the problem of determining specific quantitative objectives, such as
quotas, to assign to individual sales personnel (or to other organizational
units of the sales department, or to distributive outlets). However, as will
be made clear later, setting quotas is not necessarily a matter of simply
dividing company-wide estimates into smaller parts.

18.6 Types of Quotas and Quota Setting Procedures

There are four types of quotas:
(1) Sales volume, (2) Budget,
(3) Activity and (4) Combination.
(1) Sales-Volume Quotas: The sales-volume quota is the oldest and
most common type. Management regards it as an important standard for
appraising the performances of individual sales personnel, other units
of the sales organization, and distributive outlets. Sales-volume quotas
communicate management’s expectations as to “how much for what pe-
riod.” Sales-volume quotas are set for geographical areas, product lines,

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Notes or marketing channels, or for one or more of these in combination with

any unit of the sales organization, the exact design depending upon what
facets of the selling operation management wants to appraise or motivate.
Generally, the smaller the selling unit for which a quota is set, the more
effective it is device for directing and controlling sales operations. Setting
a sales-volume quota for a sales region, for example, assists in obtaining
some direction and control; but setting sales-volume quotas for each sales
territory in the region obtains a much greater amount. Setting sales-vol-
ume quotas for smaller selling units, in other words, makes it less likely
that good or bad sales performance in one aspect of the selling operation
will be obscured by offsetting performance in other aspects.
Sales-volume quotas are used extensively, and it is easy to understand
why. They are set by sales executives and, from the sales department’s
standpoint, achieving the sales-volume objective takes precedence over
other objectives. Before any profits at all can be earned, some sales-vol-
ume level must be attained to standards for sales volume performance.
Furthermore, sales personnel have little difficulty in grasping the signif-
icance of sales-volume quotas. This is not to say, of course, that sales
management should de-emphasize the importance of earning profits or
conserving on selling expense. Modern sales management recognizes that
sales volume alone, although important, is not sufficient as profits are
necessary for survival of the firm itself.
Procedures for Setting Sales-volume Quotas
(i) Sales-volume Quotas Derived from Territorial Sales Potentials:
It seems logical that a sales-volume quota should derive from the
sales potential present, for example, in a territory. A sales-volume
quota, in one sense at least, sums up management’s evaluation of
the amount of selling effort that should be expended by a particular
selling unit; and its sales potential, by definition, represents the
maximum possible sales opportunities open to the same selling unit.
Many managements, grasping the logic of this relationship, derive
sales-volume quotas directly from sales potentials.
(ii) Sales-volume Quotas Derived from Total Market Estimates: In
some companies, management has neither statistics on territorial
sales potentials nor sales-force estimates for such potentials. These
companies reply mainly on top-down planning and forecasting

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procedures to obtain the sales estimate for the company as a whole; Notes
hence, if management desires to set volume quotas, it generally
must derive them through similar procedures.
(iii) Sales-volume Quotas Based on Past Sales Experience Alone:
One of the crudest procedures for setting sales-volume quotas is
to base them sorely on past sales experience. One company, for
instance, simply takes last year’s sales for each territory, increases
them by an arbitrary percentage, and uses the results as sales
volume quotas. A second averages past sales for each territory over
several years, adds arbitrary amounts, and thus sets quotas for sales
volume. The second company’s procedure is the better of the two
i.e., by averaging sales figures, management recognizes that the
sales trend is at least as important as last year’s sales experience.
The averaging procedure, in other words, evens out the distorting
effects of abnormally good and bad years.
(iv) Sales-volume Quotas Based on Executive Judgement Alone:
Sometimes, sales-volume quotas are based solely on executive
judgement. Such arbitrariness is justified when there is little or
no information to use in setting quotas. There may be no sales
forecast, no practical way to determine territorial sales potentials.
The product may be new and its probable rate of market acceptance
unknown; the territory may not yet have been opened, or a newly
recruited salesperson may have been assigned to a new territory. In
these situations, management may choose to set sales-volume quotas
solely on a judgement basis. Certainly, however, such quotas can be
of no higher quality than the judgement of executives setting them.
Judgement, like past sales experience is an important ingredient in
the determination of quotas, but it is not the only ingredient.
(v) Letting Sales Personnel Set their Own Sales-volume Quotas: A
few companies turn the problem of setting sales-volume quotas over
to the sales staff, who are placed in the position of determining
their own performance standards. The ostensible reason management
has for making this move is that sales personnel, being closest to
the territories, know them best and therefore should set the most
realistic sales-volume quotas. The real reason, however, usually is that
management itself is seeking to shirk the quota-setting responsibility

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Notes and turns the whole problem over to the sales staff, thinking that
they will complain less if they set their standards. There is indeed,
a certain ring of truth in the argument that having sales personnel
set their own objectives, may cause them to complain less, and to
work harder to attain them. But it must be recognized that sales
personnel are seldom dispassionate in setting their own quotas. Some
are reluctant to obligate themselves to achieve what they regard
as “too much”, others may overestimate their capabilities and set
unrealistically high quotas for themselves. Quotas set unrealistically
high or low by management or by the sales force are potential causes
of dissatisfaction and low sales force morale. Management has, or
should have, access to better information; therefore, it should make
the final quota decision. How, for instance, can sales personnel be
expected to adjust for changes management makes in price, product,
promotion, and other policies?
(2) Budget Quotas: Budget quotas are set for various units in the sales
organization to control expenses, gross margin, or net profit. Generally,
the intention in setting budget quotas is to make it clear to sales personnel
that their jobs consist of something more than obtaining sales volume.
Budget quotas aim to make personnel more conscious that the company is
in business because it hopes to make a profit. Expense quotas emphasize
keeping expenses in alignment with sales volume, thus indirectly providing
control over gross margin and net profit contributions. Gross-margin or
net-profit quotas emphasize margin and profit contributions, thus indirectly
providing control over sales expenses.
(i) Expense Quotas: Frequently, management seeks to provide sales
personnel with financial incentives to control their own expenses.
This is done either by tying performance against expense quotas
directly to the compensation plan, or by offering sales personnel
“expense bonuses” for incurring lower expenses than the quotas.
Expense quotas are related, directly or indirectly, to estimates in
territorial sales budgets. But, to reduce the administrative burden and
possible misunderstandings, expense quotas are generally expressed
not in rupees but as percentages of sales volume, thus directing
attention both to sales volume and the costs of achieving it.

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Certain problems are met in setting expense quotas in terms of Notes

percentages of sales volume. For one thing, variations in coverage
difficulty and other environmental factors, as well as in sales
potentials, make it impractical to set identical expense percentages
for all territories. For another, different sales personnel sell different
mixes of products, so some incur higher expenses than others, again
making the setting of identical expense percentages impractical. But
probably most important is the fact that selling expense does not
vary in direct proportion to sales volume, as is implicitly assumed
with the expense percentage quota.
Clearly, then, management should not arbitrarily set percentage expense
quotas. Considerable analysis of territorial differences, the product
mixes likely to be represented in individual sales, and variations
in the expenses of securing sales at various volume levels should
precede actual quota setting. Furthermore, because of difficulties
in making precise adjustments for these and other factors, and
because of possible changes in territorial conditions during the
operating period, administering an expense quota system calls for
great flexibility.
From sales management’s standpoint, the chief attraction of the expense
quota is that it tends to make sales personnel more cost-conscious
and aware of their responsibilities for expense control. They are
less apt to regard expense accounts as “swindle (deceptive) sheets”
or convenient vehicles for padding take-home pay. Instead, they
should view the expense quota as one standard that management
uses in evaluating their performance.
However, unless expense quotas are carefully set and intelligently
administered, a danger exists that sales personnel may become
overly cost-conscious i.e. they may stay at third-class restaurants,
and avoid entertaining customers. Sales personnel should understand
that, although expense money is not to be wasted, management
anticipates they will make all reasonable expenditures. Well-managed
companies, in fact, expect their sales personnel to maintain standards
of living in keeping with those of their customers.
(ii) Gross-margin or Net-profit Quotas: Companies not setting sales-
volume quotas because of the fear of overemphasizing the importance

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Notes of making sales often use gross-margin or net profit quotas, shifting
the emphasis to the making of contributions to gross margin or
profit. The rationale is that sales personnel operate more efficiently
if they recognize that sales increases, expense reductions, or both,
are important only if increased margins and profits result.
Problems are met both in setting and administering gross-margin or
net-profit quotas. If gross-margin quotas are used, management must
face the fact that sales personnel generally do not set prices and
have no control over manufacturing costs; therefore, they cannot
be held fully responsible for gross margins. If net profit quotas are
used, management must recognize that certain selling expenses,
such as those involved in operating a branch office, are beyond
the salesperson’s power to influence.
To overcome these complications, companies frequently set quotas
in terms of “expected contribution” margins, thus avoiding arbitrary
allocations of expenses not under the direct control of sales personnel.
Arriving at expected contribution margins for each salesperson,
however, is a complicated process. Even if a company solves these
accounting type problems, it faces further problems in administration.
Sales personnel may have difficulties in grasping technical features of
quota-setting procedures, and management may spend considerable time
in ironing out misunderstandings. In addition, special records must be
set up and maintained to gather the needed performance information.
Finally, because some expense factors are always partially beyond
the control of certain sales personnel, arguments and disputes are
inevitable. The company using gross margin or net profit quotas must
be prepared to assume increased clerical and administrative costs.
(3) Activity Quotas: Management’s desire to control how sales personnel
allocate their time and efforts among different activities explains the use
of activity quotas. A company using such quotas starts by defining the
important activities sales personnel perform; then it sets target performance
frequencies. Activity quotas are set for total sales calls, calls on particular
classes of customers, calls prospects, number of new accounts, missionary
calls, product demonstrations, placement or erection of displays, making
of collections and the like. Before setting activity quotas management
should have time-and-duty studies made of how sales personnel actually
apportion their time, making additional studies to determine how sales
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personnel should allocate their efforts. Ideally, management should have Notes
time-and-duty studies made for every salesperson and sales territory, but
of course this is seldom practical.
Activity quotas are appropriate when sales personnel perform important
non-selling activities. For example, activity quotas are much used in insur-
ance selling, where sales personnel must continually develop new contacts.
They are also common in drug detail selling, where sales personnel spend
time calling on doctors and hospitals to explain new products and new
applications of both old and new products. The unique attraction then, of
activity quotas is that they permit management not only to control but to
give recognition to sales personnel for performing non-selling activities
and for maintaining contacts with customers who may buy infrequently,
but in substantial amounts.
Together with the rather large amount of clerical and record-keeping work
involved, the main problem in administering an activity-quota system
is that of inspiring the sales force to perform the specified activities
effectively. The danger is that sales personnel will merely go through
the motions and not perform activities effectively. Activity quotas used
alone can reward sales personnel for quantity of work, irrespective of
quality, for a dangerously long time. This is less likely to happen when
activity quotas are used with sales volume or expense quotas; still ad-
equate supervision and close personal contact with sales personnel are
administrative necessities.
(4) Combination and Other Point-System Quotas: Combination quotas
are used to control sales-force performance of both selling and non-selling
activities. Such quotas overcome the difficulty of using different mea-
surement units to appraise different aspects of performance (for example,
rupees to measure sales volume, and number of calls on prospects to mea-
sure attention given to developing new business). Because performances
against combination quotas are computed as percentages, these quotas are
also known as point systems, the points being percentage points.
Combination quotas summarize overall performances of sales personnel
in a single measure, but they present some problems. Sales personnel
may have difficulties in understanding them and in appraising their own
achievements. Combination quotas also have a built-in weakness in that
design imperfections may cause sales personnel to place too much em-
phasis on one component activity.
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Notes
18.7 Administering the Quota System
Skill in administering the quota system is basic not only to realizing
the full benefit for control purposes but to securing staff co-operation in
making the system work. Most critical is securing and maintaining accep-
tance of the quotas by those to whom they are assigned. Few people take
kindly to having yardsticks applied to appraisals of their performance.
Constitutionally, most sales personnel oppose quotas; and anything that
makes them doubt the accuracy, fairness, or attainability of those quotas
makes them even less willing to accept them, thus reducing the system’s
effectiveness for control purposes.
1. Accurate, Fair and Attainable Quotas: Quotas should be accurate,
fair, and attainable. Obtaining accurate quotas is largely a function
of the quota-setting procedure; the more closely quotas are related
to territorial potentials, the greater the chances for accuracy. But,
in addition, regardless of the type of quota-sales volume, budget,
activity, or combination, sound judgement is important in analysing
pertinent market data, adjusting for contemplated changes in selling
and marketing policy (and for conditions unique to each territory),
and appraising changes in personnel capabilities, as well as in setting
the final quotas. Accurate quotas result from skillful blending of
planning and operating information with sound judgement. Setting a
fair quota involves determining the proper blend of market potential
and previous experience.
Admittedly, whether quotas are both fair and attainable depends
not only upon the quality of managements’ judgement but upon
the capabilities and motivations of sales force. Sometimes, perhaps
even usually, the extent to which a salesperson’s quota is fair and
attainable can only be ascertained after his or her performance
has been recorded. Even then, management must exercise care in
appraising variations in performance from the quota as to what
extent they are attributable to quota inaccuracies and to what extent
to salesperson inadequacies. After all, quotas are not absolute
performance standards, and errors are made in setting them.
If management believes its quota-setting procedure produces accurate
quotas and is confident individual sales personnel are being assigned

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fair quotas, then quotas should be at attainable. Most quota-setting Notes

errors are those of judgement, most traceable to setting quotas
slightly above each salesperson’s expected performance to provide
an incentive for improvement. Quotas that some sales personnel
fail to attain are not necessarily unfair and whether they are or
not depends on who fails to attain them. One executive offers
this general rule. “You have set equitable quotas if your weaker
people fail to attain them, and if your belter people either reach
or slightly exceed them.” Thus, in ascertaining the fairness of
quotas, management faces a possible dilemma because the quotas
themselves are the performance standards most used for appraising
the quality of sales personnel. Clearly, subjective evaluations of
sales personnel according to qualitative performance criteria are
required if management is to ascertain whether quotas are fair.
2. Securing and Maintaining Sales Personnel’s Acceptance of Quotas:
Beyond making certain that quotas are accurate, fair, and attainable,
management must make certain that sales personnel understand quotas
and the quota setting procedure. Conveying this understanding, in
fact, is a critical step in securing staff acceptance of quotas. If sales
personnel do not understand the procedure used in establishing quotas,
they may suspect, for example, that the quotas are a management
technique to obtain extra effort from them at no cost to the company.
This attitude, of course, destroys the quota’s effectiveness as an
incentive. It is equally important that sales personnel understand the
significance of quotas as communicators of “how much for what
period”, but, if they also understand the quota-setting procedure, they
are more likely to consider their quotas accurate, fair, and attainable.
The quota-selling method, in other words, should be simple enough
for sales personnel to understand, yet sufficiently sophisticated to
permit the achievement of acceptable accuracy. Sometimes, this
means that management, faced with choosing between two quota-
setting procedures, may choose the less sophisticated because it can
be more easily explained to, and understood by, the sales staff. More
sophisticated procedures should not be ruled out, but management
using them must take pains to explain them to the sales force.
(a) Participation by Sales Personnel in Quota Setting: If
management provides ways for sales personnel to participate
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Notes in quota selling, the task of explaining quotas and how they
are determined is simplified. With sales personnel helping to
set their own quotas, management has more assurance that the
procedure as well as the reasoning behind it will be understood.
How much staff participation should be solicited depends
upon, among other factors, management philosophy, types of
quotas being set, information available, sophistication of the
quota-setting procedure, and the caliber of the sales force. It
is not advisable to turn the whole quota-setting job over to the
sales staff; but some sales-force participation can help obtain
more accurate and realistic quotas. Sales personnel have some
information about their territories that management does not
have, and it can contribute to quota accuracy. Furthermore,
when sales personnel participate in quota setting, even if it
amounts only to commenting on basic data, they are more
easily convinced of the fairness of quotas.
(b) Keeping Sales Personnel Informed: Management should keep
sales personnel informed of their progress relative to quotas.
All sales personnel should receive frequent reports detailing
how their performance to date compares to the quotas. This
permits them to analyze their own strong and weak points
and take corrective action. Of course, sales personnel need
encouragement, advice, and, occasionally, warnings, in deciding
to take measures to improve their performance. Reaping full
benefits from keeping sales personnel informed requires frequent
personal contact by supervisors, as well as regular reports.
(c) Need for Continuous Managerial Control: In administering
any quota system, there is a need for continuous monitoring of
personnel performance. Arrangements must be made to gather
and analyze performance statistics with minimum delay. Charts
recording each salesperson’s performance against quota on a
monthly, or even weekly, basis facilitate this analysis. Not
all sales executives agree that such charts should be posted
for all to see, but most provide each person with information
about his or her own performance.

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 UNIT - VII
Sales Force Management

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 L E S S O N

19
Recruiting and Selecting
Sales Personnel
Shri Raman Chawla
Bhagat Singh College (E)

STRUCTURE
19.1 Sources of Sales Force Recruits
19.2 7KH 5HFUXLWLQJ (ৼRUW
19.3 The Selection System

There are three main steps in recruiting and selecting a sales force. Step one is to evaluate
the sources from which sales personnel with good potential are obtainable. Step two is
to tap the identified recruiting sources and build a supply of prospective sales personnel.
Step three is to select from among these prospective sales personnel those who have the
highest probability of success.

19.1 Sources of Sales Force Recruits

(a) Sources with the Company
1. Company Sales Personnel: Many individuals apply for sales jobs because they know
company sales personnel; and sales people’s recommendations may constitute an
excellent source. Often such applicants already know something about the job and
about company policies, and the fact that they apply indicates a favourable disposition
towards the company. Sales people typically have wide circles of acquaintances,
since both on and off the job they continually meet new people and generally have
many friends with similar interests. Many of their contacts have good potential as
sales personnel. However, some sales people are not very discriminating in their
recommendations, and their recommendations need careful appraisal. One situation
in which sales people are a valuable source of recommendations is when jobs must
be filled in remote territories; sales personnel in the same or adjacent areas may

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Notes know considerably more about unique territorial requirements and

local sources of personnel then home-office executives.
2. Company Executives: Recommendations of the sales manager, the
president, and other company executives are frequently an important
source. Sales executives’ personal contacts may yield top-caliber
people because of their understanding of the needed qualifications.
Other executives’ recommendations, by contrast, often are based
upon personal friendships and represent less objective appraisals.
Experience is the way to evaluate each executive’s worth as a source
of recruits.
3. Internal Transfers: Two additional internal sources are other department
and the non-selling section of the sales department. Employees
desiring transfers are already familiar with company policies, and the
personnel department should have considerable detailed information
about them. While little is generally known about their aptitude for
selling, they often possess excellent product knowledge. Aptitude for
selling, of course, can be tested formally or by trial assignment of
the field. Transfers are good prospects for sales positions whenever
product knowledge makes up a substantial portion of sales training,
since it may be possible to accelerate field assignments.
(b) Sources Outside the Company
1. Direct Unsolicited Applications: Most companies receive some
uninvited “walk-in” and “write-in” applications for sales positions.
Some sales managers favour immediate hiring of applicants who
take the initiative in seeking sales jobs, the reasoning being that
this indicates selling aggressiveness. Others reject direct applications
automatically because they believe the proportion of qualified
applicants from this source is low. The most logical policy is
to treat volunteer applications the same as invited applications.
Applicants not meeting minimum requirements as set forth in job
specifications should be eliminated at once; those meeting these
requirements should be processed together with other applicants.
The selection system, if it works well, should result in hiring the
best qualified applicants regardless of the sources from which they
come. It should be noted that direct uninvited applications cannot

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 RECRUITING AND SELECTING SALES PERSONNEL

be relied upon to provide a steady flow of applicants as the volume Notes

fluctuates with changing business conditions.
2. Employment Agencies: Sales managers traditionally regard employment
agencies as unpromising sources. Many use agencies only after other
sources are exhausted. Many believe, usually with little evidence that
good sales people neither need nor will use an agency’s services.
Experience, unfortunately, tends to reinforce such altitudes, because
frequently agency referrals fail to meet sales’ job specifications.
Sometimes this can be traced to agency deficiencies (such as
the overzealous desire to receive placement fees); but at least as
often the fault is that of prospective employer, who may be using
unrealistically high job specifications, may not make the company’s
requirements clear, and so on. Sales managers are unwise as well
as unjustified to generalize from unsatisfactory experiences with
one or a few agencies whether they are privately operated or local
offices of state employment services. Experiences with individual
agencies need reviewing periodically.
3. Salespeople Making Calls on the Company: The purchasing director
is in contact with sales personnel from other companies and is
in a strategic position to evaluate their on-the-job performances.
The purchasing director meets high caliber salespeople for whom
jobs with the company would be attractive both financially and in
other respects. In well-managed companies the purchasing director,
serving as a “center of influence” continually contributes names to
the pre-recruiting records.
4. Employees of Customers: Some companies regard their customers
as a recruiting source. Customers recommend people in their
organizations who have reached the maximum potential of their
existing jobs. Such transfers may have a favorable effect upon
morale in the customer’s organization. Since customer goodwill is
of prime importance, a customer’s employees should be recruited
only with the prior approval of the customer.
5. Sales Executives’ Clubs: Many sales executives’ clubs operate
placement services. Sales persons seeking new positions submit
personal data sheets that the duplicated and forwarded to members.

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Notes Al club meetings sales executives have opportunities for informal

discussion and exchange of placement information.
6. Sales Forces of Noncompeting Companies: Individuals currently
employed as salespersons for noncompeting companies are often
attractive recruiting prospects. Such people already have selling
experience, some of which may be readily transferable, and for those
who have worked for companies in related industries as there is the
additional attraction of knowing something about the product line.
7. Sales Forces of Competing Companies: Because of experience
gained in selling similar products to similar markets, personnel
recruited from competitors’ sales forces may require only minimal
initial training. However, competing sales forces are often costly
sources, since generally premium pay must be offered to entire sales
personnel to leave their present positions. Furthermore, some sales
executives, as a matter of policy, restrain from hiring competitors’
salespersons as they feel that an individual hired away from one
organization for higher pay or other inducements may be similarly
tempted in the future. However, most sales executives will consider
for employment individuals who have worked previously for
competitors even though they now are either working somewhere
else or are unemployed.
8. Educational Institutions: This source includes colleges and universities,
community colleges, vocational technical institutes, business colleges
and high schools. It is reasonable to expect that graduates have
attained certain minimum educational levels, the amount depending
upon the type of school. Moreover many have training in general
business, marketing, and sales techniques. Schools are a fruitful
source of new sales personnel at graduation time, and some maintain
year-round placement services for graduates seeking job changes.
Most recent graduates represent net additions to the labor market
and, consequently, need not be attracted away from other jobs.
Colleges and universities have become increasingly important sources of
sales and management trainees, and competition is keen for their gradu-
ates. Often the graduating senior is in a position to choose from among
several attractive job offers. Companies not maintaining close relations
with the colleges are at a disadvantage, frequently being unable to obtain

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appointments on overcrowded campus recruiting schedules, and finding Notes

it difficult to attract students away from companies better known to the
college. Even better known companies face stiff competition with each
other in hiring the cream of the graduates. A few companies offer sales
training programs to outstanding juniors during vacation periods. Thus,
the trainee and the company have an opportunity to evaluate each other,
and trainees who prove satisfactory are offered jobs upon graduating.

19.2 The Recruiting Effort

There are two main kinds of recruiting efforts:
1. Personal Recruiting and 2. Indirect Recruiting.
1. Personal Recruiting: Personal recruiting is chiefly used for recruiting
graduates of educational institutions. Campus interviewing is
often planned as a company-wide affair, because this avoids much
duplication of effort. Representatives of different departments do the
interviewing, and the personnel department plans and coordinates
the recruiting drive.
College recruiting requires planning well in advance of the campus
visit. Statements of trainee requirements should be mailed to college
well in time. The list of principal colleges, based primarily upon
past interviewing experience, is updated, and letters are sent out
requesting interview dates.
College placement officers schedule a 20 to 30-minute interview
for each student. All interested students are granted interviews few
companies prescreen college applicants. Generally, interviews are
the only screening devices used. The most promising candidates
are invited to company offices for follow-up interview. However,
many campus interviewers have authority to do actual hiring if it
appears that promising candidates will be lost through delay.
2. Indirect Recruiting: Advertisements in classified and other sections of
newspapers and trade journals have long been in use in recruiting sales
personnel. Until recently, however, advertisements were considered
useful only for hiring low-grade sales personnel for trade selling
jobs. Even for this grade of personnel, the proportion of qualified

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Notes to unqualified respondents from a given advertisement was often

small; and it was time-consuming and costly to screen all applicants.
Furthermore, most sales executives believed that high-caliber people
would not seek employment offered in such an impersonal way.
Nevertheless, a change in thinking has been Occurring. Today, city
newspapers carry numerous advertisements publicizing openings for
sales personnel and even for sales executives.
The number of prospective job candidates reached by a single
advertisement is so great that companies often must take steps
to reduce the volume of applications. If the employer is willing
to publish details about the company and job, fewer persons who
obviously are not qualified will answer the advertisement. Specific
details vary with the company and its situation and these should be
in the ad if it is to attract good applicants. Some ads mention the
compensation range of successful company sales personnel. Others
explain that the person selected is to replace a regular salesperson
in an established territory with active accounts. Still others specify
that only highly-qualified professional salespeople need to apply.
Information of this sort helps convince promising applicants that
the opening represents a legitimate established job.

19.3 The Selection System

Selection systems range from simple one-step systems, consisting per-
haps of nothing more than an informal personal interview, to complex
multiple-step systems incorporating many diverse mechanisms designed
to gather information about applicants for sales jobs. It is helpful to
visualize a selection system as a set of successive “screens,” at any of
which the applicant may be dropped from further consideration.
Companies using multiple-step selection systems differ both as to the
number of steps and their order of inclusion in the system. Each com-
pany should design its selection system to fit its own information needs
and to meet its own budgetary limitations. A selection system fulfills
its main mission if it improves management ability to estimate success
and failure probabilities. Management, in other words, because it has
available the information gathered through the selection system, should

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be able to make more accurate estimates of the chances that a particular Notes
applicant will succeed in a company sales position. As applicants “sur-
vive” through succeeding steps in the system, the additional increments
of information provided management should enable increasingly accurate
estimates to be made of success and failure probabilities. It should be
recognized, however, that no selection system is infallible; all eliminate
some who would have succeeded as salespeople and recommend hiring
some who fail.
Steps in the Selection Process
1. Pre-Interview Screening and Preliminary Interview: Initial screening
before the first formal interview is for the purpose of eliminating
obviously unqualified applicants, thus saving the time both of
interviewers and applicants. During pre-interview screening the
applicant is provided information about the company and general
details about selling positions in it a well-prepared recruiting brochure
does this effectively and does not require an employee’s time for
anything other than to hand it to the applicant. Also, during the
pre-interview screening, most companies ask applicants to complete
interview application forms, which are designed to obtain information
on the applicant’s basic qualifications, education experience, health,
and the like. No interview application form should be longer than
two pages, and it should be possible for the applicant to complete it
in a few minutes. The interview application form serves its purpose
if it enables management to detect in an applicant the presence or
absence of predetermined minimum qualification. Applicants not
possessing this minimum qualification do not receive appointments
for interview and are notified that “unfortunately you cannot be
considered further. Thank you for applying”. In as much as the
preliminary interview can be handled by a relatively low paid clerk
or secretary, this is generally the lowest cost selection step.
Commonly the preliminary interview is short, perhaps no more than
20 minutes. Questions about the company and the job are answered
while the company employee determines whether the applicant meets
minimum qualifications. If this hurdle is passed and the applicant
expresses interest, he or she is asked to fill out a formal application
form, and an appointment is made for one or more formal interviews.

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Notes 2. Formal Application Form: The formal application form serves as

a central record for all relevant information collected during the
selection process. A formal application filled out after a preliminary
interview indicates that a job candidate has a promise as a company
salesperson. The application form may be filled out by the applicant
personally or by an interviewer who records the applicant’s responses.
Ideally each company should prepare its own formal application
form, since no two companies have precisely the same information
requirements. Information significant for one may be useless for
another. But if a company has only a small sales force, and recruits
relatively few people, the time and cost of preparing its own application
form may allow for the choice of a standard form. Companies using
standard forms ignore items inappropriate for them and obtain during
interviewing needed additional information not included in the form.
Certain items of information are almost always relevant to selection
decisions, and these are conveniently assembled on the application
form. These items include present job, dependents, education,
employment status, time with last employer, membership in organization,
previous positions, records of earnings, reasons for leaving last job,
net worth, living expenses, and length of job-hunting period.
3. The Interview: The interview is the most widely used selection step
and in some companies, it comprises the entire selection system.
Some personnel experts criticize the interview as an unreliable
tool, but it is an effective way to obtain certain information. No
other method, for instance, is quite so satisfactory in judging an
individual as to ability in oral communication, personal appearance
and manners, attitude toward selling and life in general, reaction to
obstacles presented face to face, and personal impact upon others.
Interviewers should avoid covering the same ground as other selection
devices. Each interviewer should review the completed application
form before the interview in order to restrain from asking questions
already answered. Perusal (inspection) of the completed application
should indicate areas that require further questioning.
It is important to sell the applicant on the company particularly when
there is a scarcity of sales personnel, but there are more efficient
ways of accomplishing this than through personal interviewing. One

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is by providing the applicant with a recruitment brochure (booklet). Notes

Another may be used when several applicants are to be interviewed
continuously, as in college recruiting. Here, the interviewer holds
preliminary meetings with the whole group, and describes general
company policies. But even after such orientation, it is necessary to
answer additional questions during individual interviews. Nevertheless,
most of the interview should be used for obtaining information
about the applicant.
The job interview can be a trying experience for the applicant. Even
for experienced salespersons accustomed to selling themselves and
their products daily to strangers, the great importance attached to job
change and the unfamiliarity of the situation may cause nervousness.
One way to relieve tension is for the interviewer to begin with
questions on the person’s family and educational background,
subjects about which most people talk freely. It is the task of the
interviewer to persuade the applicant that the firm is a desirable
employer. Generally, the job interview impresses the applicant as an
investigation so that the applicant’s nervousness spoils the results.
Throughout the interview, a pleasant rapport between interviewer
and job applicant should be maintained.
4. References: References are used to secure information on the
applicant not available from other sources. The value of references
is denied by some employers, who contend that references generally
hesitate to criticize personal friends, or even ex-employees. But the
experienced employer reads between the lines, and sees where, for
example, the weak candidate is not praised.
Personal contact is the best way to obtain information from references,
since facial expressions and voice reveal a great deal, and most
people are franker orally than in writing. When a reference is located
at a distance, a telephone call may substitute for personal contact.
Invitation of written recommendations is the weakest approach and
should be a last resort.
Applicants tend to name as references those on whom they can
rely to speak in their favour. In addition, there is a tendency for
references to be biased in favour of an applicant. These tendencies
can be partially offset by contacting persons not listed as references

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 ADVERTISING AND SALES MANAGEMENT

Notes but who know the applicant. Such individuals often are excellent
sources for unbiased appraisals of the candidate.
5. Psychological Tests: Three types of psychological tests are used in
selection systems for sales personnel: tests of ability, of habitual
characteristics, and of achievement. Tests of ability measure how
well a person can perform particular tasks with maximum motivation
(tests of best performance). Tests of habitual characteristics try to
see how prospective employees act in their daily work normally
(tests of typical performance). Achievement tests measure how
much individuals have learned from their experience, training, or
education.
(a) Tests of Ability: Tests of ability include tests of mental ability
(intelligence tests) and tests of special abilities (aptitude
tests). Tests of mental ability, or intelligence tests are used
satisfactorily in a wide range of applications and have higher
validity and reliability than most psychological tests. However,
they measure primarily abilities that make for success in
educational or training situations, namely, language usage and
comprehension, and abstract reasoning or problem-solving
ability. They do not measure creativeness, originally, or insight.
Therefore, they should be regarded more as measures of
mental aptitude are timed tests, they provide an indication of
an applicant’s ability to learn quickly and to arrive at accurate
answers under pressure.
(b) Tests of Habitual Characteristics: These include attitude,
personality and interest tests. Attitude tests are more appropriate
as morale-measuring techniques than as selection aids. They
are used to ascertain employees, feelings toward working
conditions, pay, advancement opportunities, and the like. They
are also used as sales personnel selection devices as they
make limited contributions by identifying abnormal attitudes
on such broad subjects as big business, labour unions, and
government. Their validity is questionable, since people often
advocate socially acceptable attitudes they do not actually
have. In addition, attitude tests do not measure the intensity
with which particular attitudes are held.

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(c) Achievement Tests: Achievement tests seek to determine Notes

how much individuals know about a particular subject. Few
standardized Achievement tests are used by industry because
special job skills require different types of knowledge. Tests
of clerical and stenographic ability are one exception and civil
service examinations are another. For the employer deciding that
it is worthwhile to custom design a test for sales applicants,
achievement tests can provide an assessment of the knowledge
applicants possess in such areas as the product, marketing
channels, and customer relations. However, as with other
psychological tests, such test designing is a job for an expert.
Conclusions on Testing: There are some precautions to observe when
incorporating psychological tests into a sales personnel selection
system. It is essential to have accurate job specifications, derived
from up-to-date and complete job descriptions, to make certain that
the specific abilities required of a good salesperson are known. A
qualified expert’s services are required in selecting tests and in
devising new ones, when necessary, in determining test validity and
in detecting differential validity, in administering the tests themselves,
and in interpreting the significance of results. In addition, sales
executives need to recognize the fact that psychological testing,
although capable of making a valuable contribution, is only one
step in a sales personnel selection system.
6. Physical Examination: Since good health is important to a salesperson’s
success, most companies require physical examinations of all
applicants seriously considered for sales positions. Because of the
relatively high cost, the physical examination generally is one of
the last steps in the selection system. However, if physical condition
is critical to job performance such as the ability to carry a sales
portfolio weighing twenty kilos, then a physical examination is
positioned early in the selection system. Even in companies requiring
entrance physical examinations, poor health often accounts for some
separations. But when the examinations are not compulsory, the
number of separations is higher. It is advantageous to the applicant
as well as to the company to identify physical ailments that may
later prevent attainment of full productivity.

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 L E S S O N

20
Planning Sales Training
Programs
Shri Raman Chawla
Bhagat Singh College (E)

STRUCTURE
20.1 Building Sales Training Programs

The general purpose of all sales training is improved job performance. In the absence of
training, the quality of job performance tends to improve with experience. To the extent
that training serves as a substitute for, or a supplement to, experience, sales personnel
given training should reach higher job performance levels earlier. In most companies, the
rate of sales personnel turnover is higher for new personnel than for experienced peo-
ple. Often inexperienced sales personnel find themselves unprepared to perform their job
satisfactorily, become discouraged, and leave the company. If sales training succeeds in
helping new sales personnel to perform their jobs satisfactorily, the rale of sales personnel
turnover declines, recruitment and selection costs fall, and the overall efficiency of the
company’s personal-selling operation rises.
The overall efficiency of a company’s personal-selling operation is also influenced by
the sure of relations with customers and prospects. The sales force plays a crucial role in
moulding and maintaining these relations. Contrasted with inexperienced sales personnel,
generally experienced sales personnel maintain better continuing relations with established
accounts and make better impressions on prospects. Sales training contributes through
accelerating (for the newly-recruited sales personnel) the process of learning through
experience.

20.1 Building Sales Training Programs

There are several types of sales training programs. Generally, the most comprehensive and
longest is the initial sales training program for newly recruited personnel. More intensive

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and shorter programs on specialized topics, as well as periodic refresher Notes

courses (collectively known as continuing sales training), are presented
for experienced sales personnel. In addition, many companies present
sales training programs designed especially for the sales personnel of
their distributors and/or dealers. Some programs are designed to develop
individuals as sales trainers (full or part-time) or as union-level sales
executives (district or branch sales managers). Each type of program
serves a different purpose, and its content and the trainees participating
in it reflect that purpose.
Building a sales-training program of any type requires five major decisions.
The specific aims of the training must be defined, program content decided,
training methods selected, arrangements made for program execution, and
procedures set up to evaluate the results. Some sales training specialists
refer to these decisions as the A-C-M-E-E decisions - Aim, Content, Method,
Execution, and Evaluation. These five decisions are discussed one by one:
(A) Defining Training Aims: Regardless of the type of sales training
program, defining its aims (the A in A-C-M-E-E) as specifically as pos-
sible is the first step in its planning. Defining the program’s general aim
is not sufficient. Although, for example, we may want to increase the
sales force’s productivity through training, we must identify what must
be done to achieve the general aim of increasing productivity. General
aims must be translated into specific aims phrased in operational terms
before it is possible to work out other details of a training program.
The process of specific aim definition begins with a review of general
aims and the means currently employed to attain them. The process cannot
be completed until sales management perceives the training needs from
which specific training aims derive directly. Training needs, then, must
be identified. The following discussion focuses on factors management
should consider as it seeks to identify training needs for (1) initial sales
training programs and (2) continuing sales training programs.
(1) Identifying Initial Training Needs: Determining the need for, and
specific aims of, an initial sales training program requires analysis of
three main factors: job specifications, individual trainee’s background
and experience, and the company’s sales-related marketing policies.
(a) Job Specifications: The qualifications needed to perform the job
satisfactorily are detailed in the job specifications. Few people

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Notes over possess all these qualifications at the time of hiring. The
set of job specifications needs scrutinizing for clues to the
points on which new personnel are most likely to need training.
Other information also related to job performance needs to be
considered: How should salespeople apportion their time? Which
duties require the greatest proportion of time? Which tend to be
neglected? Why? Which selling approaches are most effective?
Answers to these and similar questions help in identifying
specific training needs of newly recruited sales personnel.
(b) Trainee’s Background and Experience: Each individual enters
an initial sales training program with a unique educational
background and experience record. The gap between the
qualifications in the job specifications and those a trainee
already has represented the nature and amount of needed
training. But it is not practical to adjust training precisely to
individual differences in background and experience. Time
and money are saved by pulling all recruits through identical
programs. In some organisations, where training mechanisms
are more flexible, information about trainees’ qualifications
makes possible some tailoring of programs to individuals,
increasing both trainee satisfaction and program efficiency. In
all organizations, determining recruits’ real training needs is
essential to developing initial training programs of optimum
benefit to company and trainee alike.
(c) Sales-related Marketing Policies: To determine initial sales
training needs, sales-related marketing policies must be analyzed.
Differences in products and markets mean differences in selling
practices and policies, which, in turn, point to needed differences
in initial sales training programs. For instance, selling a line
of machine tools requires emphasis on product information and
customer applications, whereas selling simple, non-technical
products demands emphasis on sales techniques. Differences in
promotion, price, marketing channel, and physical distribution
all have implications for the initial sales training. In the case
of promotion, for example, if advertising is not used or used
relatively little, sales training should prepare sales personnel

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to handle considerable promotional work; but, if advertising Notes

is used extensively to supplement the ‘ sales force’s efforts,
new sales personnel need to learn how to coordinate their
activities with advertising.
(2) Identifying Continuing Training Needs: Determining the specific
aims for a continuing sales training program requires identification
of specific training needs of experienced sales personnel. Basic
changes in products and markets give rise to a need for training, as
do changes in company sales-related marketing policies, procedures,
and organization. But even though products and markets change
little and company policies, procedures, and organizations remain
relatively stable, sales personnel change, in some respects for the
better (as they gain experience), but in other respects for the worse
(as they develop, for example, careless or poor working habits).
Consequently, sales management must know a great deal about how
sales personnel perform in order to identify their training needs
and, in turn, to define specific aims for continuing training. How
can management gain this knowledge? There are many approaches
management can take in identifying these training needs. Sales
personnel can be surveyed for suggestions. Salespersons’ reports can
be scrutinized for symptoms of needed training. Sales records can
be inspected to uncover performance weaknesses. Sales personnel
can be observed personally with a view to detecting deficiencies.
And details contained in the sales job description can be compared
with the qualifications possessed by individual sales personnel.
(B) Deciding Training Content: The content (the C in A-C-M-E-E) of a
sales-training program, whether an initial or continuing program, should
derive from the specific aims that management, after analyzing its training
needs, formulates. Initial sales-training programs generally are broader
in scope and coverage than continuing programs. Initial programs must
provide instruction covering all important aspects of performance of the
salesperson’s job; continuing programs concentrate on specific aspects of
the job where experienced persons have deficiencies. Therefore, the fol-
lowing discussion relates to the content of initial sales-training programs.
For an initial sales-training program to contribute maximally toward pre-
paring new recruits as sales personnel, it must cover all key aspects of

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Notes the salesperson’s job. Content varies from company to company, because
of differences in products, markets, company policies, trainees’ ability
and experience, organizational size, and training philosophies. No two
programs are, or should be, alike. Different companies tend to cover the
same general topics despite the fact that variations exist in exact content
and in relative time devoted to each topic. But every initial sales-training
program should devote some time to each of four main areas - product
data, sales technique, markets, and company information.
1. Product Data: Some product training is basic to any initial sales-
training program. Companies with technical products commonly devote
more than half of their programs to product training. But in many
situations, especially with standardized products sold routinely, new
sales personnel require only minimal product training. In all cases,
management must make certain that new salespeople know enough
about the products, their uses, and applications to serve customers’
information needs adequately and promptly. Product knowledge is basic
to a salesperson’s self-confidence and enthusiastic job performance.
Understanding product uses and applications is especially important.
Trainees should receive instruction on customers’ problems and
requirements and should learn how company products can solve
these problems and meet these requirements. Training should
provide them with full appreciation for buyer’s viewpoints. New
salespersons need to learn how to relate company products to the
fulfillment of customers’ requirements, thus equipping themselves
for effective selling and handling of sales resistance.
Many companies, especially those with technical products, include a
period of initial sales training at the factory. Trainees have opportunities
to observe and study the products during the various manufacturing
and testing alongside factory personnel. The benefits are through
product knowledge and increased confidence in demonstrating products
to customers. Inordinate time, however, should not be devoted to
technical production detail - such detail is important only insofar
as it helps the salesperson in actual selling situations.
Some training on competitors’ products is desirable, particularly
in highly competitive industries. Salespeople should know the

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important characteristics of competitors’ products and their uses and Notes

applications. They should know how the strengths and weaknesses
of competitive products compare with those of company products.
Thus informed, salespersons gain a decided advantage. They can
structure sales presentations to emphasize superior features of the
company’s product and they are prepared to answer customers’
questions and objections. Training on competitor’s products must
be continuous, the focus shifting as changes are made in both
competitive and company products.
2. Sales Techniques: Most new sales personnel need instruction in sales
techniques. Some sales managers still believe, however, that careful
selection of sales personnel and product training are sufficient to
ensure effective selling. They believe, in other words, that if an
individual has an attractive personality, good appearance and voice,
reasonable intelligence, and knows the product, he or she will be
able to sell it easily. But the predominant view is that new sales
personnel need basic instruction in how to sell.
3. Markets: The new salesperson must know who the customers are,
their locations, the particular products in which they are interested,
their buying habits and motives, and their financial condition. In
order to sell, in other words, the salesperson needs to know not
only who buys what but, more important, why and how they buy.
When trainees are not given adequate instruction on the market, they
take years to acquire the needed understanding. During this trial-
and-error learning, through no fault of their own, their productivity
is lower than it should be. In fact, left to their own devices, some
trainees never gain important market information. For instance, a
salesperson who is unaware of certain classifications of prospects’
potentials as buyers may neglect completely them. Markets are
always changing, so training in this area should be continuous, the
content changing with market changes.
4. Company Information: Certain items of company information
are essential to the salesperson on the job; others, not absolutely
essential, contribute to overall effectiveness. The training program
should include coverage of all sales-related marketing policies and
the reasoning behind them. The salesperson must know company

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Notes pricing policy, for instance, in order to answer customers’ questions

about it. The salesperson also needs to be fully informed on other
policies, such as those relating to product services, spare parts and
repairs, credit extension, and customer relations.
The initial training program must equip the salesperson to perform such
tasks as recording and submitting customer’s orders for processing and
delivery, preparing expense and other reports, handling inquiries, follow-
ing up on customer’s requests, and so forth. Each firm develops its own
systems and procedures for handling these and similar tasks. If trainees
are to perform them properly from the start of their field assignments,
the initial sales-training program must provide the needed instruction.
Otherwise, company systems and procedures are learned, if at all, through
a costly and time-consuming process of trial and error.
The sales department’s personnel policies also should be explained in the
initial sales training program. Coverage should include selection procedures,
training programs, compensations and incentive systems, advancement
requirements and opportunities, savings and requirement plans, medical
and insurance plans, and the like. Having such information contributes
to employee morale and job effectiveness. Not having it shows up in
employee uncertainty and excessive sales personnel turnover rates.
Contributing also to the building of morale among new employees is
“general company information.” This concerns the company’s history, its
importance in the industry and economy, and its relations with Stock-
holders, unions, competitors, government, and other groups. Knowing
something about the personality, or image, of the company should bolster
the recruit’s confidence in its products, which they will shortly be selling.
(C) Selecting Training Methods
Having defined training aims and decided program content, the planners
next select training methods (the M in A-C-M-E-E). There is a wide
variety of methods from which to choose, but the nature of the program
content often limits those that are appropriate. If, for example, the content
is a new company policy on vacations and holidays, the training method
selected almost certainly will be the lecture supplemented, perhaps, with
visual aids of some sort. In this instance, such methods as role playing
and demonstration would be ruled out completely. It is important to se-
lect those training methods that will most effectively and economically

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convey the desired content. The sales manager can select any one or Notes
more of the following ten methods of training:
1. The Lecture: This ancient instructional method, in use before the
invention of printing, is used extensively in sales training. Trainees
mainly watch and listen, although some versions of lecturing permit
questions and other interruptions. Generally, however, the lecture
features passive, rather than active, trainee participation. Its main
weakness is that teaching is emphasized more than learning. But a
lecture can be effective, provided the lecturer is able and enthusiastic
and makes liberal use of examples, demonstrations, and visual aids.
Compared with other training methods the lecture is economical in
terms of the time required to cover a given topic.
Many professional business teachers, perhaps most, regard lecturing
as the least effective group instructional method. Professional sales
trainers seem, by and large, to agree. Estimates are that the average
trainee can immediately recall less than 10 percent of what he or
she hears in a non-illustrated lecture, and no more than half of what
he or she sees and hears in a lecture using visual aids. Furthermore,
because of the absence of immediate participant feedback, no lecturer
has any immediate or objective means for gauging the effectiveness
of a lecture but must rely on a personal appraisal of its reception,
or on volunteered comments by participants.
When it is necessary to use the lecture method, the learning
process can be considerably improved by using a carefully planned
multimedia approach. The lecture room is equipped with two to six
projectors and screens, and the entire lecture is projected visually on
succeeding screens across the front of the room. Further support is
provided by projecting illustrations, charts, and graphs, and through
sound effects. Tests show that this version of the lecture method
significantly increases attention, comprehension, and retention.
2. The Personal Conference: The potential of this sales training
method often goes unrecognized, probably because many sales
executives assume that learning occurs only in structured situations.
Psychological research, however, has demonstrated that learning occurs
in structured and unstructured, formal and informal situations. In
personal conference instruction the trainer (often a sales executive

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Notes or sales supervisor) and trainee jointly analyze problems, such as

effective use of selling time, route planning and call scheduling, and
handling unusual selling problems. Personal conferences are held in
offices, restaurants, bars, motel rooms, and elsewhere. One special
version is the curbstone conference, which takes place immediately
after the trainee (accompanied by the trainer) has called upon a
customer or prospect. The personal conference is an unstructured
and informal method, its nature varies with the personalities of the
trainer and the trainee and the topics under discussion.
3. Demonstrations: A highly appropriate method for conveying information
on such topics as new products and selling techniques is the
demonstration. Demonstrating how a new product works and its uses
can be extremely effective, much more so than presenting the same
material by way of a lecture (often the method used). Or, in the
initial sales training for new personnel, demonstrating the various
techniques to use in “closing sales” is more effective than lecturing
on the same subject. Effective sales trainers use demonstrations to
the maximum possible extent. Demonstrations are generally used
in conjunction with other training methods. They can enliven an
otherwise dull lecture, and they can reinforce considerably the
interchange that takes place in a curbstone conference on, for
instance, how you should inform your next customer that the price
is going to increase shortly.
4. Role Playing: This training method requires trainees to act out parts
in contrived problem situations. The role-playing session begins with
the trainer describing the situation and the different personalities
involved. The trainer provides all needed props, then designates
trainees to play the salesperson, prospect, and other characters.
Each plays his or her assigned role and afterward they, together
with other group members and the trainer, appraise each player’s
effectiveness and suggest how each might have improved his or
her performance.
In another version of role playing, one of the groups is given a bit
of information on, for example, a buyer’s, objection to a particular
product and then is asked by the trainer to extemporize a solution.
Called a “sweat session,” this provides individual trainees a chance

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to apply what they have learned. Postmortem critiques afford Notes

opportunities to reinforce what has been learned through participating
in, or viewing, the role playing.
Role playing presents comparatively few problems, but there are
some. Those playing roles must become actively and emotionally
identified with the characters they portray; audience interest must be
maintained throughout, even though spontaneous reactions should be
suppressed. Achieving these conditions is not easy, it becomes even
more difficult when there is laughter or other involuntary audience
reaction. Nonparticipants’ comments should be saved for later,
usually until the role playing is completed, or occasionally during
“cuts” called by the trainer. If note taking is permitted as the play
unfolds, some players tend to be detracted. This tendency, however,
is overcome with repeated use of the method. These problems can
be minimized, provided that trainees are thoroughly briefed on what
is and is not permissible, the group is limited in size (perhaps to
no more than ten or twelve trainees), the trainer exercises discipline
and control throughout, and role-playing assignments are realistic
enough to make their learning potentials clear.
More than offsetting the few problems are the many training benefits
flowing from successful use of this training method. It provides
realistic practice in applying what has been learned in other training
or by experience. It is a highly flexible training method in that there
is extreme diversity in role-playing situations. Experience shows,
too, that role-playing tends itself to easy adjustment for training
new personnel, experienced salespeople, or even mixed groups.
Other benefits incidental to or derived from role-playing include
the following:
(i) Trainees learn to accept criticism from others, and the group
soon recognizes that sound suggestions benefit everyone.
(ii) When a trainee criticizes another’s performance, that individual
has an incentive not to perform similarly later.
(iii) Role players practice self appraisal through participating in
the appraisal of their own performances. The increasing use
of videotaping makes self-criticism even more beneficial and
objective.

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Notes (iv) The free-wheeling nature of role playing is conducive to

generating new ideas and approaches. Defects inherent in
many stereotyped solutions become apparent.
(v) In role-playing sessions for mixed groups, junior people have
a chance to learn valuable tricks and experienced personnel
are kept alert as a matter of personal pride.
(vi) Role players gain acting experience, which may be of great
value to them later in handling difficult selling situations.
5. Case Discussion: This training method, originated by professional
business educators as a partial substitute for learning by experience,
is widely used in sales training. Write-ups of selling and other
problems encountered on the job provide the basis for group
discussion. Sometimes, the cases, particularly when they are
rather comprehensive (that is, long and complete), are assigned in
advance. If this is the situation, then it is absolutely imperative that
participants come prepared for the session - otherwise, valuable
time is wasted in describing the situation. In most sales training
situations, however, the cases used are rather short (one or two pages
at most) and trainees are given ten or fifteen minutes to read them
before group discussion starts. Each case should either describe a
real selling problem or be developed around a situation sufficiently
real to stimulate emotional involvement by the trainees.
Trainees participating in a case discussion should be required to
identify the issue(s), arrange the relevant facts, devise specific
alternatives, and choose the one they consider most appropriate.
Most trainers believe that securing a thorough grasp of the problem
situation is more essential to learning than the rapid production of
solutions. To derive maximum benefit from case discussion, each
session should conclude with the drawing of generalizations on
lessons learned.
6. Impromptu Discussion: This training method (i.e. discussion without
notes or any advance preparation) begins with the trainer, group leader,
or some member of the sales force making a brief oral presentation on
a problem faced by sales-force members in their everyday work. This
is followed by a general give-and-take discussion. Group members gain
an understanding of many problems that otherwise might be acquired

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only through long personal experience if at all. Many complexities Notes

and implications that might go undetected by individuals are revealed
to all; and trainees learn a valuable lesson - fixed selling rules and
principles are often less important than analysis and handling of
specific situations. Impromptu group discussion of problems improves
the salesperson’s ability to handle those problems.
For maximum benefit from the impromptu discussion, certain conditions
must be followed. One such condition is that an effective leader or
moderator is essential so that the discussion is not deviated from the
matter at hand. The discussion leader must command the trainee’s
respect, be skilled in dealing with people, and be well-informed on
the subjects under discussion and on the salesperson’s job. Even the
room arrangement is important as it helps in generating discussion,
for instance, if all trainees can sec each other. Besides, another
important condition is that someone should draw conclusions at the
close of the discussion, that is, summarize the meeting for everyone.
7. Gaming: This training method, also known as simulation, which
somewhat resembles role playing, uses highly structured and invented
situations, based on reality, in which players assume decision-making
roles through successive rounds of play. A unique feature is that
players receive information feedback. In one game, for example,
trainees play the roles of decision makers in customers’ organizations,
using data ordinarily available to make decisions on the timing and
size of orders, managing sales forces and advertising efforts, and
so on. The results of these decisions then are calculated by referees
(generally using electronic computers) and fed back for the players
to use in their next round of decisions.
Games used in sales-training programs have tended to be restricted
to groups being prepared for management positions. These can be
used in other programs also. The main reason for not using games
more extensively is difficulty in preparing them.
Preparation requires research to dig out the needed facts, the
incorporation of those into a game model, development of detailed
instructions for players and referees, and the writing of a computer
program. Expertness and substantial investments in time and money,

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Notes then, are required, but partially offsetting this is the fact that, once
prepared, a game may be used repeatedly in many training programs.
Among the advantages of gaming as a training method are: (1) Participants
learn easily because they involve themselves enthusiastically in game
play: (2) Players develop skill in identifying key factors influencing
decisions; (3) Games lend themselves readily to demonstrations of
the uses and values of such analytical techniques as inventory and
other planning models; and (4) In contrast to other training methods,
games, with their built-in information feedback features, are effective
in emphasizing the dynamic nature of problems situations and their
interrelationships.
Among the limitations of gaming are: (1) Some minimum time is
required for playing, usually three or four hours, to generate sufficient
decision “rounds” to provide the desired learning experience; (2)
Since game designs generally are based on ordinary decision-making
processes, their rules often prevent payoffs on unusual or novel
approaches; and (3) Players may learn some things that aren’t so,
a limitation applying especially to poorly designed games. These
limitations may be partly or wholly overcome through careful game
design and administration.
8. On-the-Job Training: This method, also called the coach-and-
pupil method, is a combination of telling, showing, practicing, and
evaluating. The coach, who may be a professional sales trainer but
more often a seasoned salesperson, begins by describing to the
trainee particular selling situations, explaining various techniques
and approaches that might be used effectively. Next, accompanied
by the pupil, the coach makes a number of actual sales calls,
discussing each with the trainee afterward. Then, under the coach’s
supervision, the trainee makes sales calls, each one being followed
by discussion and appraisal. Gradually, the trainee works more and
more on his or her own but with continuing, although increasingly
less frequent, coaching sessions.
The instructional effectiveness of this method depends mainly upon
the coach’s qualifications. Given a qualified coach, the trainee starts
off on the right foot, using selling techniques that the company wants
to use. Early deficiencies are corrected before they harden into habits

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that are difficult to change. If, however, the coach is not qualified, the Notes
trainee probably will learn the coach’s bad habits as well as skills.
Many seasoned salespeople, otherwise qualified for coaching, are
unwilling to devote the necessary time and effort to training. This
is especially true in companies whose sales personnel are pain
commissions on sales. The problem of recruiting competent coaches,
nevertheless, can be resolved through such means as paying bonuses
for each person coached, or “overriding” commissions on pupils’
sales for a certain period.
On-the-job training should be an important part of most initial sales-
training programs. No more effective way exists for learning a job
than by actually doing it. This method is uniquely appropriate for
developing trainees’ skills in making sales presentations, answering
objections, and closing sales. Training in these aspects of selling
requires practice, and this method provides expertly supervised
practice.
9. Programmed Learning: This training method requires the breaking
down of subject matter into numbered instructional units called
frames, which are then incorporated into a book or microfilmed for
use with a leaching machine. Each frame contains an explanation of
a specific point, plus a question or problem for the trainee to use
in testing his or her understanding. Trainees check their answers
by referring to another designated frame. If the answer is correct,
the trainee is directed to new material; if it is incorrect, additional
explanation is provided, and the trainee is retested on the point before
going on to new material. Thus, trainees check their own progress
as they work through the materials and move through them at their
own speed. Companies using programmed instruction, however,
generally regard formal examinations as necessary incentives for
the trainees.
Programmed instruction has not been widely adopted for sales
training purposes. Most applications have been aimed at providing
needed information. This method is not used for training in sales
techniques and market information because of difficulties in preparing
appropriate programmed instructional materials. Preparation requires
expert skills and thorough grounding in the psychology of learning.

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Notes 10. Correspondence Courses: This training method is used both in initial
and continuing sales-training programs. In the insurance field, for instance,
it is used to acquaint new salespeople with industry fundamentals
and for instruction in basic sales techniques. In some companies with
highly technical products and small but widely deployed sales forces,
correspondence courses acquaint experienced salespeople with new
product developments and applications. Occasionally, too, this method
is used for training non-company sales personnel, such as distributors’
salespersons, to improve their knowledge of the manufacturer’s product
line and selling techniques. But, despite these varied applications, few
companies used this training method exclusively.
For most companies, correspondence training is most appropriate as an
interim-training method when trainees are scattered geographically,
but groups are assembled periodically for lectures, seminars, role
playing and other instruction. Initial sales training, for example,
might be by correspondence courses begun at different times and
places; continuing, or follow-up training might come later through
group methods at a central location. Preparing a standardized
correspondence course covering technical product data, general
company information, selling techniques and markets presents few
difficulties other than those of choosing, organizing and writing
up the material. In many companies, particularly in the insurance
field, instructional materials are also put on cassette players.
Successful use of the correspondence method requires administrative
skill. The greatest problem is that of providing motivation for
trainees to complete assignments on schedule. Not only are enrollees
engaged in full-time work requiring that correspondence lessons be
completed after hours, but few people have sufficient self-discipline
to study without some direct supervision. Usually, it is necessary
to provide regularly scheduled examinations, prized for completing
work by given dates, or other incentives. Nor does this method
provide answers to individual enrollees’ questions: hence, the most
successful users arrange for periodic face-to-face discussions. Similar
problems are met in processing trainees’ completed assignments, in
evaluating their work and in correcting errors. If these administrative
problems are solved, correspondence instruction serves as a useful
supplement to other sales-training methods.
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21
Executing Sales Training
Programme
Shri Raman Chawla
Bhagat Singh College (E)

STRUCTURE
21.1 Who will be the Trainees?
21.2 Who will do the Training?
21.3 When will the Training Take Place?
21.4 Where will the Training Site Be?
21.5 Evaluating Sales Training Programs

The execution step of A-C-M-E-E (the first E) requires four key organizational decisions:
(1) Who will be the trainees? (2) Who will do the training? (3) When will the training
take place? and (4) Where will the training site be?

21.1 Who will be the Trainees?

Identifying the trainees is more complex for continuing than for initial sales training
programs. A company identifies the trainees for its initial sales training programs when
it firms up sales job descriptions and hires sales job applicants. While continuing sales
training programs are prescribed for all personnel in some companies, the general prac-
tice is to select trainees according to some criterion. Four criteria are in common use: (1)
reward for good performance, (2) punishment for poor performance, (3) convenience (of
trainee and trainer) and (4) seniority (the greater the seniority, the greater the opportunity
for added training). Whichever criterion is used should be known to those selected for
continuing training.

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Notes
21.2 Who will do the Training?
(a) Initial Sales Training: Initial sales training is a line function in
some companies, a staff function in others. If considered a line
function, responsibility for initial sales training is assigned to the
top sales executive. If regarded as a staff function, responsibility
for initial sales training is given to the personnel director and sales
management plays only an advisory role. Actually, both executives
should participate in initial sales training programs (the sales executive
because of expertise on selling and the personnel director because
of expertise on training).
How a particular company should decide placement of responsibility
for initial sales training depends upon the comparative costs. If
much initial training of new sales personnel parallels that of other
new employees, cost considerations cause primary responsibility to
be assigned to the personnel director. If little of the initial sales
training parallels other new employee training, primary responsibility
is assigned to the sales executive.
(b) Continuing Sales Training: Responsibility for continuing sales
training definitely resides with the top sales executive. Introduction
of new products, adoption of revised sales policies, perfection of
improved selling techniques and similar developments call for training
action. The top sales executive should be in the best position to
recognize the need, and design and execute appropriate sales training
programs. Sales training is a never-ending process and, regardless
of who is responsible for initial sales training, the sales executive
has continuing responsibility.
(c) Sales Training Staff: Top sales executives usually delegate actual
performance of the sales training function to subordinates. Large sales
organizations often have a full-time sales-learning director, reporting
directly to the top sales executive. The director personally conducts
some training and coordinates that given on a decentralized (and
usually part-time) basis by regional and district sales managers. In
smaller organisations, some top sales executives handle some training
themselves, but, in most cases, they rely upon others. Such as assistant
sales managers or district managers, to do most of the training. Even

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companies without sales, training directors often have full-time or Notes

part-time sales trainers, or both. The large sales organization makes
efficient use of a full-time sales-training director and sometimes even
a full-time staff, but the small organization must rely on executives
to do sales training in addition to other duties. Because of specialized
knowledge requirements, the tendency is for companies to train their
own sales trainers rather than to recruit outsiders.
(d) Training the Sales Trainers: No training program, however carefully
designed can be more effective than the people conducting it.
Consequently, many companies have a special training programme
for sales trainers. The starting point is to identify the subjects that
trainers should know thoroughly; the company and its policies, the
products, the customers, and their problems, the salesperson’s job, and
sales techniques. If the potential trainers are not already experienced
salespeople, they should be given field selling experience to provide
a realistic feel for sales problems. Subjects presented formally should
be handled by personnel already skilled as trainers, using instructional
techniques similar to those the trainers will use later.
(e) Outside Experts: Many companies hire outside experts to conduct
portions of sales training programs, generally portions relating to
sales techniques. Numerous outside training consultants specialize in
presenting sessions on sales techniques (for instance, on prospecting,
selling by telephone, or basic ways to meet objections) and, through
broad and long experience achieve high degrees of effectiveness.
Other outside experts, including university professors and similar
“moonlighters”, also offer this instructional service. For the most
part, outside experts are true professionals charging substantial fees,
but when spread over several participants these fees are reasonable
enough.

21.3 When will the Training Take Place?

(a) Training Initial Sales Training Programs: The timing of initial
sales training depends upon the number of new personnel who must
be trained each year, and this, in turn, depends upon the size of
the sales force, sales personnel turnover, and management’s plans

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Notes for changing the size of the sales force. When the number of new
personnel is large, comprehensive highly structured programs are
scheduled several times a year, dates being set after consideration of
recruiting quotas and deadlines. When the number if small, formal
initial training programs, if held at all, are infrequent.
There is an optimum number of trainees who may be effectively
trained in particular initial sales training program. It depends upon
training aims, content, methods, and the amount and availability of
training talent, individualized training may be indicated in some
situations; although it is expensive per individual trained, its liming
can be flexible, depending only upon availability of trainees and
trainers. In most situations, however limitations of training funds and
talent dictate that recruits be trained in groups, programme being
scheduled whenever the backlog of untrained people approximates the
optimum. How large is an optimum-sized training group? Experience
indicates that, for most companies, groups smaller than twelve to
fifteen involve inordinately high costs, while those larger than thirty
to forty incur losses in training (that is, learning) effectiveness too
great to be tolerated.
(b) Timing Continuing Sales Training Program: Modern sales management
is firm in its conviction that all training and all learning must be
continuous - new information must be assimilated, and older concepts
modified in the light of new developments. New products, new
refinements of selling techniques, new product applications and uses,
new customer problems, new selling aids, new selling suggestions all
these and other developments require that each salesperson’s training
continue as long as he or she is on the job. In some situations,
sales personnel are kept abreast of new developments informally,
perhaps through field distribution of information bulletins. But
when new developments accumulate and are unusually important,
or imply a need for significant changes in salespersons’ attitudes
and behaviours patterns, a formal retraining program should be
scheduled. Many companies integrate retraining programs into a
series of sales meetings or a single sales convention.
Continuing sales training programs should be designed and “sold” as
a means of helping salespeople do their jobs more effectively. Unless

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sales personnel are convinced of the value of continuing training, Notes

its results will fall short of what otherwise could be reasonably
expected. If it is demonstrated that training results in more take-home
pay and increased job satisfaction, most salespeople are motivated.
When salespeople believe that these benefits are obtainable through
the continuing sales-training program, its chances of successful
execution are enhanced.

21.4 Where will the Training Site Be?

Some companies hold group initial sales-training programs at the central
offices and plant; others conduct separately executed programs at some
or all branch offices. Each plan has advantages and disadvantages. The
centralized program held at a manufacturing plant generally provides
better product training, but higher costs are incurred in bringing train-
ees to the central point and housing them there. In many companies the
small number of trainees does not justify decentralized initial training
programs, and central location is a necessity. Numerous large companies,
by contrast, do have the option of decentralized initial training programs.
They can train new salespeople in or near the territories to which they
are later assigned, and thus can, acquaint them early with field selling
problems. However, decentralized product training often requires the
substitution of motion pictures, slides, and working models, so it may
be less realistic, less interesting and less effective than training given at
a factory. Decentralized programs suffer from even more serious defects.
Unless closely supervised by higher management their execution tends
to be poor; and the trainers, who commonly have other responsibilities
and regard training as a diversionary sideline, often turn in poor teaching
performances. Generally, then except in a company with a vast pool of
administrative and training skills and other resources, initial sales-training
programs should be held at central locations.
Retraining programs for seasoned sales personnel also may be held either
at centralized or decentralized points. Because these programs are often
short, the decision may hinge almost entirely upon where the needed
instructional talent is available and whether it is more convenient and
economical to transport and house the trainers or the trainees. If retrain-
ing programs are timed to coincide with sales conventions, they may

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Notes be held nationally (either at the home office or convention headquarters

elsewhere), or regionally on a decentralized basis.

21.5 Evaluating Sales Training Programs

The evaluation step (the second E in A-C-M-E-E) focuses upon measuring
program effectiveness. A sales training program represents investments
of time, money and effort and sales management should expect returns
commensurate with the total investment. However, measuring sales training
effectiveness is not easy. Notwithstanding the measurement problem, it
is possible to gauge, somewhat roughly, program effectiveness.
The starting point is to compare the program’s aims (the A in A-C-M-
E-E) with the results, but the core of the measurement difficulty is in
determining training results. Results, such as improved selling perfor-
mance, for instance, may not show up until months after program com-
pletion. Management can approach the measuring problem by making
certain comparisons, such as the length of time new sales personnel
(who have completed the initial sales training program) take to attain
the productivity level of the average experienced salesperson; the per-
formance against standards of trained and untrained sales personnel; and
the respective training histories of the best and worst performers on the
sales force. Some companies plot each salesperson’s sales records on
a before-and-after training basis, generally converting these records to
market-share percentages.
At best, however, any evaluation of training effectiveness based on sales
records is only an approximation. Territorial sales volume is influenced
not only by personal selling efforts but by advertising impact, compet-
itors’ activities economic fluctuations, and similar factors. No known
analytical technique exists for precise isolation of the influence of any
of these factors.
Several other approaches to measuring programme effectiveness are in
use. Some companies use written tests (on a before-and-after training
basis) to determine how much trainees have learned. This is appropriate
for measuring improvements in amount and depth of product knowledge,
for instance, but reveals little about the trainee’s ability to apply this
knowledge in the field. Other firms send out skilled observers to work

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on the job with sales personnel who have completed training programs Notes
and to report the extent to which trainees are applying what was taught
in programs. Still other companies seek customers for their reactions to a
salesperson’s performance after training. Clearly, none of these approaches
to measuring training results produces precise evaluative data. But they do
provide indications as to whether results of particular training programs
were positive or not.
Management should measure the effectiveness of sales training programs
both while they are in progress and upon completion. The purpose is to
obtain insight for improving the effectiveness of future programs. Tests
and examinations are used for measuring trainee retention of materials
presented, most appropriately when trainees are to memorize certain
information, as product specifications and applications. There is little
value in using tests and examinations for evaluating the effectiveness of
training in sales techniques; performance in role-playing assignments is
a better approach to appraising whether trainees have learned and, more
importantly, whether they are able to apply what they have learned. Train-
ers in some companies rate each trainee’s performance in sessions such
as in role playing, panels and other discussion in which he or she takes
an active part. Necessarily, these are subjective performance ratings, but
they provide learning incentives.

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22
Motivating Sales Personnel
Shri Raman Chawla
Bhagat Singh College (E)

STRUCTURE
22.1 Motivational “Help” From Management
22.2 Theories of Motivation
22.2.1 Hierarchy of Needs
22.2.2 Motivation-Hygiene Theory
22.2.3 Achievement-Motivation Theory
22.2.4 Expectancy Model
22.3 Motivation and Leadership
22.4 Motivation and Communications

High productivity in a sales force comes about neither naturally nor accidentally, some
sales personnel are self-starters, requiring little external incentive to perform effectively,
but they are the exceptions. The great majority of sales personnel require motivational
help from management in order to reach and maintain satisfactory job performance levels.

22.1 Motivational “Help” From Management

Most sales personnel require additional motivational “help” from management in order to
reach and maintain acceptable levels of job performance. They require additional motivation
both as individuals and as group members. As individuals they are targets for personalized
motivational efforts by their superiors. As members of the sales force, they are targets
for sales management efforts aimed toward welding them into an effective selling team.
Four aspects of the salesperson’s job effect the quality of its performance. The following
discussion focuses on these aspects. Each aspect is an important reason why most sales
personnel require additional motivation to perform their jobs satisfactorily.

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Inherent Nature of the Sales Job: Although sales jobs vary from com- Notes
pany to company, sales jobs are alike in certain respects. To a greater
or lesser extent, each sales job involves a succession of ups and downs,
a series of experiences resulting in alternating feelings of happiness and
depression. In the course of a day’s work salespersons interact with many
pleasant and courteous people; but they meet some who are unpleasant
and rude, with whom it is difficult to deal. They are frequently frustrated,
particularly when aggressive competing sales personnel are competing for
the same business, and they meet numerous turndowns. Furthermore, sales
personnel spend not only working time but considerable after-hours time
away from home, causing them to miss many of the most attractive parts
of family life. These conditions can cause an individual salesperson to
become discouraged, to achieve low performance levels, or even to seek
a non-selling position. The inherent nature of the sales job, then, often
is the reason that additional motivation is required to assure acceptable
job performance.
Salesperson’s Boundary Position and Role Conflicts: The salesperson
occupies a “boundary position” in the company and must try to satisfy the
expectations of people both within the company (in the sales department
and elsewhere) and in customer organizations. There is linkage with four
distinct groups (1) the sales management group, (2) the balance of the
company organization who must be depended upon for order fulfillment,
(3) the customers, and (4) other company sales personnel. Each group
imposes certain behavioral expectations on the salesperson and, in playing
these different roles, the salesperson faces role conflicts, such as:-
1. Conflict of identification arises out of multigroup membership. As
the salesperson works with the customer, it is reasonable to expect
identification with the customer rather than the company. However,
on returning to the company, the salesperson must drop identification
with the customer and identify with the company.
2. Advocacy conflict arises when the salesperson has identified with
the customer, and seeks to aid the customer by advocating the
customer’s position to other groups in the company organization.
Although this may be important and may be encouraged by the sales
management group, it places the advocator in a difficult position.

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Notes 3. Conflict is inherent in the salesperson’s dual role as an advocate for

both the customer and the company, and the salesperson’s monetary
interest as an entrepreneur. As an entrepreneur paid directly or indirectly
on the basis of sales volume, the salesperson has a decided interest
in selling as much as possible in the shortest possible time. However,
the salesperson may uncover facts overlooked or unknown to the
customer, indicating that difficulties in the customer’s organization
will limit the product’s usefulness. If the salesperson informs the
customer of these conditions and that, in all probability, the product
will not fully meet the customer’s needs, the salesperson runs the
risk of losing the sale and the income that goes with it.
Thus, there is existence of role conflicts traceable to the salesperson’s
linkage with group that often has divergent interests. This is another
reason why additional motivation may be required to elicit acceptable
job performance.
Tendency Toward Apathy: Many sales personnel have a natural tendency
to become indifferent. Those who, year after year, cover the same territory
and virtually the same customers, tend to lose interest and enthusiasm.
Gradually their sales calls degenerate into routine order taking. Because
they feel they know the customers so well, they come to believe that
good salesmanship is no longer necessary. Many salespeople require ad-
ditional motivation to maintain continuing enthusiasm for their work or
to generate renewed interest in it.
Maintaining a Feeling of Group Identity: The salesperson, working alone
for the most part, finds it difficult to develop and maintain a feeling of
group identity with other company salespeople. Team spirit, if present at
all, tends to be weak. Thus, the contagious enthusiasm that is conducive
to improving the entire group’s performance does not develop.
If sales management, through providing added motivation, succeeds in
developing and maintaining team spirit, individual sales personnel strive
hard to meet group performance standards. Few people who consider
themselves members of the sales team want to appear as poor performers
in the eyes of their colleagues on the sales force. Providing the kind of

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working atmosphere in which all members of the sales force feel they Notes
are participating in a cooperative effort is not easy. Effective sales man-
agement works continuously to achieve and maintain it.

22.2 Theories of Motivation

22.2.1 Hierarchy of Needs

A.H. Maslow, a psychologist, developed a theory of motivation based on
the nation, that an individual seeks to fulfill personal needs according to
some hierarchy of importance. He suggests the general priority of need
fulfillment shown in Figure. Maslow suggests that after an individual
has gratified basic physiological needs, he or she proceeds to strive to
fulfill safety and security needs, then belongingness and social relations
needs, and so on. The individual’s level of aspiration rises as needs on
higher levels are satisfied. Not every individual and certainly not every
salesperson, of course, would establish the order of priority of need ful-
fillment suggested by Maslow. Some sales personnel, for instance, appear
to assign earlier priority to filling the esteem need (for self-respect) than
they do to filling the need for social relations within a group.
After meeting basic physiological needs, it probably is impossible for most
individuals to satisfy fully their needs on any higher level. Needs seem to
multiply along with efforts to satisfy them. As a particular need is satisfied,
it loses its potency as a motivator of behaviour; but other unfulfilled needs,
some of them new, gain in potency. Individuals continually try to fulfil
ever-large portions of their need structures, and the unsatisfied portions
exert the strongest motivational pull.
What then, motivates salespeople in their work? Sales persons’ motives
for working vary according to the nature and potency of the unsatisfied
portion of their individual hierarchy of needs.

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Notes

Figure 22.1: Hierarchy of Human Needs as Visualized

by A.H. Maslow
We must also recognize, however, that some of the salespeople’s needs
are filled off the job as well as on it. One salesperson works because of
the need for money to feed a family, another because she views her job
as a means for gaining esteem of others; still another because of a need
to achieve (self-actualization) to the maximum of his abilities, seeing his
job performance as a means to that end.
If sales management knew the makeup of the unsatisfied portion of a
salesperson’s hierarchy of needs at a particular time, it could determine
the best incentives to use in motivating performance. The fact that an
individual has needs causes him or her consciously or not, to formulate
goals in terms of them. If management can succeed in harmonizing the
individual’s goals with those of the organisation, then individual behaviour
can be channelled along lines aimed at achieving both sets of goals. For
a salesperson worried about providing for a child’s education, an import-
ant individual goal becomes that of obtaining more money to remove
the uncertainty. If management sees how furnishing the salesperson with
an opportunity to earn more money will also further the attainment of
organizational goals (perhaps that of increasing the size of orders) than
offering the salesperson the chance to earn more money for obtaining
larger orders is a powerful incentive.
Money, however, rapidly loses its power as an incentive once an individ-
ual has gratified physiological needs and most safety and security needs.

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Other incentives (for example, a chance for promotion to a position of Notes

higher status, which is one way to fulfill esteem and self-respect needs)
become increasingly effective. The promise of more money becomes
progressively weaker as an incentive the further up in the hierarchy a
particular individual’s unfulfilled needs are pushed. Whatever power a
larger income retains is related most closely to unfulfilled esteem and
self-actualization needs and the extent to which income can satisfy them.
Of course, to, the threat or likelihood of receiving a lower income, a form
of negative incentive, endangers the fulfilled part of an individual’s need
structure; and to the extent that this threat exists, money continues to
have power as an incentive. The important point is that whereas motives
are internal to the individual, incentives are external. Sales management
can influence the behavioral patterns of sales personnel only indirectly
through the incentives that it chooses to offer.

22.2.2 Motivation-Hygiene Theory

Frederick Herzberg and a group of his co-researchers developed the
motivation-hygiene theory. According to his theory the factors that lead
to motivation and job satisfaction are not the same as those leading to
indifference and job dissatisfaction. In other words, the contention is that
job dissatisfaction is not the opposite of job satisfaction. Two separate
groups of needs are involved, one related mostly to job satisfaction and
the other largely to job dissatisfaction. While most needs have potentials
for influencing both the relief of job dissatisfaction and the increase
of job satisfaction, each need serves predominantly either a hygiene or
motivator purpose.
Deficiencies in fulfilling the hygiene needs cause job dissatisfaction. These
needs relate to the working environment, compensation, fringe benefits,
type of supervision, and other factors external to the job. Fulfilling the
hygiene needs does not lead to job satisfaction, but in the achievement
of a neutral point known as a fair day’s work. Performance at this point
does not in any way result from motivation.
At the “fair day’s work” point, the individual is ripe for being influenced
by the motivation factors, ones inherent in the job itself. These are factors
that reflect needs for personal growth including achievement, recognition,

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Notes nature of the job itself, responsibility and opportunities for advancement.
The motivation factors represent needs which, when fulfilled, lead to job
satisfaction.
Motivation-hygiene theory has two important implications for sales
management. The first is that management must see to it that the job
provides the conditions that prevent job dissatisfaction (in order to get
a fair day’s work from the salesperson). This means that management
needs to provide an acceptable working environment (to the extent pos-
sible), fair compensation, adequate fringe benefits, fair and reasonable
supervision, and some measure of job security. The second implication is
that management must provide opportunities for achievement, recognition,
responsibility, and advancement (in order to motivate performance levels
beyond that of a fair day’s work).

22.2.3 Achievement-Motivation Theory

David McClelland, in association with a number of other researchers,
developed achievement-motivation theory. According to this theory, if a
person spends considerable time thinking about doing his or her job better,
accomplishing something unusual and important, or advancing his or her
career, that individual has a high need for achievement. Those who have
high need for achievement (nAch) (1) like problem situations in which
they take personal responsibility for finding solutions, (ones in which the
possibilities of reaching them are reasonable); (2) tend to set attainable
achievement goals and (3) want feedback on how they are doing. In
practical terms, nAch is a motivation to exceed some standard of quality
in personal behaviour. Individuals who are self-motivated and who con-
tinually strive to improve their performance are in this category. Many
individuals of this type are attracted to personal selling jobs, especially
those where compensation is largely in the form of commissions. Such
are jobs characterized by opportunities to influence outcomes through
personal efforts, challenging risks, and rapid feedback of results.
There are some important implications of achievement-motivation theory
for the sales management. If individuals with high nAch would probably
be the best performers in the company’s sales jobs, then management
might target its effort toward recruiting such people. McClelland and

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his coinvestigators used the Thematic Apperception Test (TAT) in their Notes
research on achievement. So management might consider including the
TAT in the sales personnel selection system. But management would want
to make certain that the sales job environment provided the essential
conditions in which high achievers flourish.
Furthermore, the fact that nAch drives individuals to act on the basis
of an internally induced stimulus is noteworthy. People with high nAch
are self-starters. They require little external incentive to succeed on their
jobs, constantly challenge themselves to improve their own performanc-
es. Such people do not require motivation from management other than
that of providing the right kind of job environment. Understanding the
concepts behind nAch, and the conditions that individuals high in nAch
seek in their jobs, should help sales executives explain and predict the
behaviour of sales personnel.

22.2.4 Expectancy Model

The expectancy model, developed by Vroom, conceptualizes motivation
as a process governing choices of behavioral activity. The reasoning is
that the strength of a tendency to act in a certain way depends upon
the strength of an expectation that the act will be followed by a given
outcome and on that outcome’s attractiveness to the individual. Put dif-
ferently, an individual’s desire to produce at a given time depends on
that individual’s specific goals and perception of the relative worth of
performance alternatives as paths to attainment of those goals.
The strength of an individual’s motivation to behave in a certain way (in
terms of efforts) depends upon how strongly that individual believes that
these efforts will achieve the desired performance patterns (or level). If
the individual achieves the desired performance, then how strongly does
the individual believe that the organization’s rewards and punishments
will be appropriate for that kind of performance, and to what extent will
this satisfy the individual’s needs (goals)?
The expectancy model raises several motivational issues of concern to
sales management. Does the company reward structure provide what
sales personnel want? Do individual sales personnel perceive clearly the
kinds and amounts of effort management anticipates that they will make

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Notes to attain set performance levels? How convinced are individuals’ sales
personnel that given performance patterns lead to given rewards?
Sales management, however, must recognize that this model is concerned
with expectations. Sales personnel require counselling to help them view
their own competencies realistically. They also need sales management’s
support in developing the skills that lead to improved job performances.

22.3 Motivation and Leadership

Effective sales executives are leaders, rather than drivers, of sales per-
sonnel. They earn and retain the voluntary cooperation of members of
the sales organization, motivating them, individually, and as a group, to
exert efforts required to reach the sales department’s goals. They know the
motivations, desires, and ambitions of those they lead, and they use this
knowledge to guide their followers into the necessary activities whether
they be learning or performing.
One aspect of leadership closely related to motivation has to do with
the handling of relationships with sales personnel. Attaining skill in
this area is not easy, but experience, maturity, and common sense are
necessary attributes. Among other things, sales executives should treat
sales personnel fairly, particularly as to assignments, promotions, and
changes in pay. They should commend salespeople for jobs well done;
but if performances are not up to par, they should privately call that to
the subordinates’ attention. When it is necessary to discuss a salesperson’s
weakness, sales executives should also make it clear that they are aware
of the individual’s strong points. Before making changes affecting sales-
people’s jobs, sales executives should consult those affected; this helps
to prevent the damaging impact of rumors upon morale. The sales force
should be convinced, individually and collectively, that when right is on
their side, the sales executive can be expended upon, if the need arises,
to carry their case to top management. And, above all, sales executives
must not lose sight of the fact that they are managing the sales staff. The
sales executive must be certain that sales personnel are “sold” on plans,
policy changes, and anything else that affects them. Real sales personnel
are all the more sold on their jobs when sales executives habitually apply
good sales techniques in their relationships with them.

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Notes
22.4 Motivation and Communications
In sales management it is important that good communications exist
between each salesperson and his or her superior. Unless it does, there
will be depressed morale and low productivity. The salesperson with
accumulated grievances, real or imagined, is likely to display both low
morale and unsatisfactory performance. Similarly, the salesperson, like
everyone else, occasionally comes up against personal problems, such as
sickness in the family, inability to pay overdue bills, or marital troubles,
all of which can adversely affect morale and performance.
Communications should allow for free discussion of all problems related
to the salesperson’s job and, to the extent needed, of any personal prob-
lems that, left unsolved, may hurt job performance. For the salesperson,
the existence of good communication means freedom of self-expression
- freedom to talk over problems, business and personal, with the supe-
rior in a friendly atmosphere. For the superior, it means ease in finding
occasions for talking with the salesperson not only to determine what,
if anything, is bothering him or her, but also to provide assistance in
solving any problems that come to light.
Interpersonal Contact: Interpersonal contact is one way to communicate
with and thereby to motivate sales personnel. Management should use
such contacts to make probing and comprehensive evaluations of individ-
ual salespeople’s morale. Interpersonal contacts provide opportunities for
learning of financial, family or other personal worries that have important
impacts upon job performance.
Although interpersonal contact is the best way to keep in touch with the
sales staff, other communications media sometimes must be used. It is
physically impossible to be in close contact with all sales personnel all of
the time. Unfortunately, too often the least-effective salespeople demand
a greater share of the personal attention. When this happens, executive
contact with the more effective salespeople tends to be largely through
written means. Confronted with this situation, many sales executives
prefer to keep in touch with their better people, not through letters, but
through regular telephone calls.
On some occasions, sales personnel should be contacted personally, or by
telephone, rather than by letter. A drop in performance that the executive

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Notes suspects was caused by family conflict is not only difficult but also awk-
ward to discuss in writing. When a disapproval is necessary, a face-to-face
meeting is better than a letter that could lead to further complications.
Personal and disciplinary problems are best handled by interpersonal con-
tact and not through the mail. In exceptional cases, a clear and carefully
phrased letter can avoid misinterpretations and misunderstandings. But the
executive is still advised to follow up with personal contacts.
It is difficult for a sales executive to motivate a salesperson whom the
sales executive knows only casually. A special effort needs to be made
to know each salesperson well, and to learn what is important to each
if subsequent efforts to motivate improved performance are to be pro-
ductive. Sales executives must develop sincere understanding with their
subordinates.
Written Communication: Sales personnel are also kept informed through
letters, announcements, bulletins and other mailed pieces. Unfortunately,
written communications tend to become routine and deadening, that is,
increases in volume and frequency often destroy their value. Some sales
executives who think nothing of spending hours planning every detail
to ensure the effectiveness of a sales meeting almost wholly neglect any
attempt to appraise the probable motivational impact of their correspon-
dence. No single letter or bulletin is likely to have as strong a motivational
effect as a sales meeting; yet the total impact of written communication
effectively used, can be much greater.
The executive writing personal letters and bulletins to salespeople should
avoid using generalities and concentrate upon specific helpful suggestions.
Sales executives should specialise in writing letters which are designed
to cheer up and stimulate salespeople in the field.
A letter is superior to interpersonal contact for purposes of congratulating
a salesperson for a piece of particularly good work. A letter provides
lasting evidence that the salesperson’s performance has been recognized.
Such letters have prolonged beneficial effect on morale, but, of course,
they are poor substitutes for deserved promotions or compensation in-
creases. A commendation letter should be supported, whenever possible,
by a personal expression that management recognizes, and is pleased
with the salesperson’s performance.

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 L E S S O N

23
Compensating Sales
Personnel
Shri Raman Chawla
Bhagat Singh College (E)

STRUCTURE
23.1 Requirements of a Good Sales Compensation Plan
23.2 Devising a Sales-Compensation Plan
23.3 Types of Compensation Plans
23.4 Reimbursement of Sales Expenses Policies and Practices
23.5 )ULQJH %HQH¿WV

The sales compensation plan is an essential part of the total program for motivating sales
personnel. A sales compensation plan, properly designed, has three important motivational
roles to play: (1) providing a living wage, (2) providing a mechanism for adjusting pay
levels to performance, thereby demonstrating a relationship between job performance and
rewards and (3) providing a mechanism for demonstrating the congruency between attaining
company goals and individual goals.
A properly-designed sales compensation plan is drafted to fit a company’s special needs
and problems, and from it flows attractive returns for both the company and its sales
personnel. Sales and growth goals are reached at low cost, and profits are satisfactory.
Sales personnel receive high pay as a reward for effective job performance.
Sales compensation plans are aids to, rather than substitutes for, effective motivation of
sales personnel. No plan should constitute the entire motivational program, for such a
plan would be based on the naive hypothesis that sales personnel are totally mercenary.
Nor should a compensation plan operate so as to conflict with what may be important
motives - to conform, to be like others, to belong, to be liked by one’s peers - for exam-
ple, what do you suppose the motivational impact is of having a big earner branded as
an apple polisher? The basic appropriateness of a compensation plan is important, but so

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Notes is the way it is implemented and administered it is not too uncommon

for a fundamentally poor compensation plan to work satisfactorily when
a skilled executive administers it.
In established companies it is rarely necessary to design completely new
sales-compensation plans, and sales executives concern themselves mainly
with revising plans already in effect. Most changes are minor, instituted
to bring the plan and marketing objectives into closer alignment. If, for
example, additional sales effort is needed for the factory to operate at
optimum capacity, an adjustment in the compensation plan may bring
forth the extra effort required. This could mean paying bonuses on sales
over the quota, paying additional compensation for larger orders or for
securing new accounts, or revising commission rate schedules. Any such
change, of course, could be either temporary or permanent.
Generally, it is wise to avoid major changes in the compensation plan.
Like most people, sales personnel tend to resist sweeping changes, partic-
ularly when they are required to alter accustomed ways of doing things.
When a firm decides to switch from paying straight salaries to straight
commissions, for instance, some people find it exceedingly difficult to
adjust their living and spending habits.
Opinions vary as to how far-reaching changes, when required, should
be implemented. Some executives think that to introduce them gradually
minimizes interference with established habits and elicits less resistance
from sales personnel. Others claim that major changes should be made
quickly; because continual changes have a deteriorative effect upon
salespeople’s morale. Whether a change should be made in one step or in
many depends upon the specific circumstances surrounding the particular
situation and no easy generalization on this point is possible. Explanation
of impending changes is important, so a careful program of orientation
should precede them.
Two situations involving established companies in which complete over-
hauling of compensation plans is in order should be mentioned. One sit-
uation involves the company whose sales force already has low morale,
perhaps because of the current compensation plan. If the plan is at the
root of the morale problem, then drastic change is appropriate. A second
situation in which a complete revamping of the sales-compensation plan
may also be appropriate is in a company anticipating the cultivation of

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new and different markets. The problems in these two situations resemble Notes
those of the newly organized company, which must build its sales-com-
pensation plan from scratch - in both cases management must consider
many factors, the nature and number of which vary with the company and
the situation but usually include the types of customers, the marketing
channels, characteristics of the products, intensity of competition, extent
of the market and complexity of the selling task.
This chapter is divided into four sections. Section I deals with the re-
quirements of a good sales compensation plan. Section II explains the
eight steps involved in designing good compensation plans. Section III
discusses the types of compensation plans, and Section IV deals with
reimbursement of sales expenses and provision of fringe benefits.

23.1 Requirements of a Good Sales Compensation Plan

Most good sales compensation plans meet seven requirements. First, as
already indicated, it provides a living wage, preferably in the form of a
guaranteed income. Individuals worried about money matters generally
cannot concentrate on doing their jobs well. Second, the plan should fit
with the rest of the motivational program - it should not conflict with
other motivational factors, such as the intangible feeling of belonging
to the sales team. Third, the plan should be fair - it should not penalize
sales personnel because of factors beyond their control - within the lim-
its of seniority and other special circumstances, sales personnel should
receive equal pay for equal performance. Fourth, it should be easy for
sales personnel to understand - they should be able to calculate their own
earnings with no difficulty. Fifth, the plan should provide for easy adjust-
ments of pay when performance changes occur. Sixth, the plan should be
economical to administer. Seventh, the plan should help in attaining the
objectives of the sales organization. In designing new plans or modifying
old ones, management should compare the prototypes considered with
these seven requirements.

23.2 Devising a Sales-Compensation Plan

Whether contemplating major or minor changes or drafting a completely
new sales compensation plan, the executive should approach the project

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Notes systematically. Good compensation plans are built on solid foundations.

A systematic approach assures that no essential step is overlooked.
1. Define the Sales Job: The first step is to reexamine the nature of
the sales job. Up-to-date written job descriptions are the logical
place to start. If job descriptions are outdated, or if they are not
accurate and complete descriptions of the sales job objectives and
work, revision is in order. The sales executive should ask: Does
this description convey a realistic picture of what the salesperson
is supposed to accomplish and to do? If there are no written sales
job descriptions, they should be prepared.
Other aspects of company operations should be considered in relation
to their impact upon the sales job. Sales department objectives
should be analyzed for their effect on the salesperson’s job. Sales
volume objectives, for instance, whether in money terms, units
of product, or numbers of dealers and distributors, are translated
ultimately into what is expected of the sales personnel, as a group
and individually. The impact of sales-related marketing policies
should be determined. Distribution policies, credit policies, price
policies, and other policies affect the salesperson’s job. Current
and proposed advertising and sales promotional programs should be
evaluated as to their significance for sales personnel. This review
of company objectives, policies, and promotional programs should
assist in clarifying the nature of the salesperson’s goals, duties, and
activities.
2. Consider the Company’s General Compensation Structure:
Most large companies, and many smaller ones, use systems of job
evaluation to determine the relative value of individual jobs. Job
evaluation procedure is not scientific: it is an orderly approach
based on judgement. It focuses on the jobs, without considering the
ability or personality of individuals who do the work. Its purpose
is to arrive at fair compensation relationships among company jobs.
Traditionally, sales executives have opposed the use of formal job
evaluation methods for determining the compensation levels of sales
personnel. Their opposition is on the ground that compensation levels
for sales personnel are more closely related to external supply-
and-demand factors than to conditions inside the company. Sales

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personnel enjoy greater job mobility than most other employees, Notes
and are in everyday contact with potential employers.
If a company has formal job evaluation program that includes the jobs
of sales personnel, there should be sales department representation
on the committee that arrives at quantitative evaluations for the
various factors. If it does not cover sales personnel in the formal
job evaluation program or does not have a formal program, it is
still important for the sales executives to establish the value of sales
jobs relative to other company jobs. This precaution helps assure
that the monetary attractiveness of sales positions is no less than
it is for comparable jobs elsewhere in the company.
3. Determine Compensation Level: Management must determine the
amount of compensation a salesperson should receive on the average.
Although the compensation level might be set through individual
bargaining, or on an arbitrary-judgement basis, neither expedient
is recommended. Management should ascertain whether the caliber
of the present sales force measures up to what the company would
like to have. If it is too low, or if the company should have lower
grade people than those currently employed, management should
determine the market value of sales personnel of the desired grade.
Management should also weigh the worth of individual persons to
the company through estimating the sales and profit that would be
lost if particular salespeople resigned. Still another consideration
in setting the sales compensation level is the amount the company
can afford to pay. The result of examining these and other factors
pertinent to the situation of the individual firm, is a series of
estimates for the total cost of salespeople’s compensation. It is
excellent practice to plot each cost estimate on a break-even style
chart. When the several plots are compared with the company’s cost
goals, the sales volume needed to break even at each compensation
level is revealed. The compensation levels for individual sales people
under the proposed plan also should be plotted in break-even style
In some firms, company-wide formal job evaluation programs are
used to set compensation levels for sales positions. The procedure
recommended earlier serves as a check on the compensation levels
prescribed through job evaluations. Any discrepancies should be

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Notes reconciled. When the job evaluation program is sound, there should
be few, if any, discrepancies.
It is not unusual to find that two companies operate under similar
selling conditions but with different sales compensation levels. Sales
personnel in one company earn more than those who do essentially
the same work in another company. Relatively speaking, the first
group of salespeople is overcompensated. Sometimes, management
does not know the true worth of individual sales personnel. In other
cases, management regards some sales personnel as indispensable, or
managerial inertia prevents adjustment of the compensation level in
accordance with changes selling conditions. It still other cases, sales
managers are biased in favour of high compensation for selling jobs.
4. Provide for the Various Compensation Elements: A sales compensation
plan has as many as four basic elements: (1) a fixed element,
either a salary or a drawing account, which is intended to provide
some stability of income; (2) a variable element (For example, a
commission, bonus, or profit-sharing arrangement); designed to
serve as an incentive; (3) an element providing for reimbursement
of expenses or payment or expense allowances; and (4) an element
covering the “plus factors”, such as paid vacations, sickness and
accident benefits, life insurance, pensions, and the like. Any
company does not want, or should not include all four elements.
Management should select the combination of elements that best
fit the requirements of the firm’s selling situation. The proportions
that different elements should bear to each other vary with the
particular situation.
Special Company Needs and Problems
Although a sales compensation plan is no remedy for marketing
ills, it is often possible to construct a plan that increases marketing
effectiveness. A firm might have a small-order problem. It is possible
to design compensation plans that encourage sales personnel to write
larger orders. Commission rates can be graduated so that higher
rates apply to larger orders.
As still another example, a company may want to obtain more
displays or local advertising by retailers. Oftentimes, the presence

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or absence of point-of-purchase displays can spell the difference Notes

between marketing success or failure. Under such conditions,
securing retail displays of company products is important. This is
a task that sales personnel may neglect, especially if they are paid
commissions based on sales volume. To overcome this tendency, an
incentive payment for obtaining retail displays is often incorporated
into the compensation plan.
There are many possibilities for using the compensation plan to
help solve special company problems. Plans may be designed to
assist in securing new customers and new business, improving the
quality of salespeople’s reports, controlling expenses of handling
complaints and adjustments, eliminating price shading by the sales
staff, reducing traveling and other expenses, and making collections
and gathering credit information. However, management should
recognize that other means are there for dealing with such problems
which are generally transitory in nature. Repealed tampering with
the sales-compensation plan in an effort to solve many and various
problems frequently results in complex and difficult-to-administer
plans.
5. Consult the Present Sales Force: Management should consult the
present sales personnel, in as much as may grievances have roots
in the compensation plan. Sales personnel should be asked for
their likes and dislikes about the current plan and for suggested
changes in it. Their criticism and suggestions should be appraised
relative to the plan or plans under consideration. But at this point
management should compare the caliber of the present sales force
with that of the people whom it would like to have. If the present
salespeople are not of the grade that the company wishes to attract,
their criticisms and suggestions may be of limited usefulness. Since,
however, nearly every sales force has some people of the desired
caliber, more weight can be attached to their opinions than to those
of others.
6. Reduce Tentative Plan to Writing and Pretest it: For clarification,
and to eliminate inconsistencies that have crept in the tentative plan
should be put in writing. Then it should be pretested. The amount
of testing required depends upon the extent to which the new plan

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Notes differs from the one in use. The greater the difference, the more
thorough should be testing.
To conduct a pilot test, several territories representative of different
sets of selling conditions are selected. The proposed plan is applied
in each one sufficiently long to detect how it works under current
conditions. Pilot tests are invaluable for spotting possible sources
of trouble and in uncovering other deficiencies.
7. Revise the plan: After test results have been analysed, the plan is
revised to eliminate trouble spots or deficiencies. If alterations are
extensive the revised plan goes through further pretests and perhaps
another pilot test. But if changes have been only minor, further
testing is not necessary.
8. Implement the Plan and Provide for Follow-Up: At the time the
new plan is implemented, it should be thoroughly explained to sales
personnel. Management should convince them of its basic fairness
and logic. The sales personnel should understand what management
hopes to accomplish through the new plan and how this is to be
done. Details of changes from the old plan, and their significance,
require explanation. All sales personnel should receive copies of the
new plan, together with written examples of the method used for
calculating earnings. If the plan is at all complex, special training
sessions should be held and aimed at teaching sales personnel
how to compute their own earnings. When sales personnel do not
understand the plan or certain of its features, such as quotas and
variable commission bases, they are prone to think that the company
is taking unfair advantage of them. Inadequate understanding of
the sales compensation plan is common and often a cause of low
morale. No effort should be spared to make certain that everyone
on the sales force fully comprehends the compensation plan and
its workings.
Provisions for follow-up should be made, in order to ascertain how the
plan is working out in practice. From periodic check-ups, need for further
adjustments is detected. Periodic checks provide evidence of the plan’s
accomplishments, and they help uncover weaknesses needing correction.

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Notes
23.3 Types of Compensation Plans
The four elements of compensation are combined into hundreds of dif-
ferent plans, each more or less unique. But if we disregard the “expense
reimbursement” and “fringe benefit” elements - as is entirely reasonable,
since they are never used along-there are only three basic types of com-
pensation plans: straight salary, straight commission, and a combination
of salary and variable elements.
1. Straight-Salary Plan: The straight salary is the simplest compensation
plan. Under it, salespersons receive fixed sums at regular intervals (usu-
ally each week or month but sometimes every two weeks), representing
total payments for their services. The straight salary was once the most
popular sales compensation plan, but it has been declining in importance
for many years.
In spite of the trend away from its use, the straight-salary plan is still
appropriate in certain situations. It is the logical compensation plan when
the selling job requires extensive missionary or educational work, when
salespeople service the product or give technical and engineering advice
to prospects or users, or when salespeople do considerable sales promo-
tion work. If non-selling tasks bulk large in the sales person’s total time
expenditure, the straight-salary plan is worthy of serious consideration.
Straight-salary plans are commonly used for compensating salespeople
heavily engaged in trade selling. These jobs, in which selling amounts
to mere order taking, abound in the wholesale and manufacturing fields,
where consumer necessities are distributed directly to retailers. Frequently,
too, the straight-salary method issued for paying driver-salespersons selling
liquor and, beverages, milk and bread, and similarly-distributed products.
From management’s standpoint, the straight-salary plan has important
advantages. It provides strong financial control over sales personnel, and
management secures maximum power to direct their activities along the
most productive lines. Component tasks making up salespersons’ jobs
can be recast with minimum opposition from those affected; so there is
flexibility in adjusting field sales work to changed selling situations. If
sales personnel are expected to prepare detailed reports, follow up numer-
ous leads, or perform other time-consuming tasks, they tend to cooperate

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Notes more fully if paid straight salaries rather than commissions. Straight-salary
plans are economical to administer, because of their basic simplicity and,
compared with straight-commission plans, accounting costs are lower.
The main attraction of the straight-salary plan for sales personnel is that
stability of income frees one from financial uncertainties inherent in other
plans. In addition, sales personnel are relieved of much of the burden
of planning their own activities (the practice of providing detailed in-
structions - for example, on routing and scheduling-generally goes along
with the straight-salary plan). And, because of its basic simplicity, sales
personnel have no difficulty in understanding straight-salary plans.
The straight salary plan, however, is not without weaknesses. Since
there are no direct monetary incentives, many salespeople do only an
average rather than an outstanding job. They may pass up opportunities
for increased business. Management becomes aware of them and orders
the required actions. Unless the plan is skillfully administered, there is a
tendency to undercompensate productive salespeople and to overcompen-
sate poor performers. If pay inequities exist for long, the turnover rate
rises; and it is often the most productive people who leave first. This
situation results in increased costs for recruiting, selecting, and training.
Other problems are encountered in maintaining morale as arguments
occur on pay adjustments for ability, rising living costs, and length of
service. Because all the selling expense is fixed, it is difficult to adjust
to changing conditions - a particularly knotty problem during business
downswings, when selling expenses can be reduced only by cutting sal-
aries or releasing personnel. Moreover, during business upturns, there
is difficulty in securing the company’s share of rising industry volume,
because salespeople paid straight salaries commonly are not disposed to
exceed previous sales records by any large amount. However, many of the
straight-salary plan’s weaknesses can be avoided or minimized through
good administration.
In administering a straight-salary plan, individual sales personnel should
be paid, insofar as possible, according to their relative performance. The
difficulty is in measuring performance. Management needs to define
“performance” and the meanings of good, average, and poor perfor-
mance. When management has these definitions and develops methods
for performance measurements, individual salaries can be set fairly and

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intelligently. Users of the salary plan should define performance as total Notes
job performance, not merely success in securing sales volume or in per-
forming some other aspect of the job and this definition is theoretically
correct because the payers of salaries assume they can exercise maximum
direction and control over the way salary receivers perform all aspects
of the jobs. Some salary plan users attempt to measure performance by
relating the salesperson’s total selling expense (including salary) to total
sales. While it is desirable to control selling expenses, using the expense-
to-sales ratio as the sole criterion of performance overemphasizes the
importance of cost control.
In the absence of well-defined quantitative performance standards, and few
companies have them, the sales job description, if up to date and com-
plete, is the place to start in appraising performances of sales personnel.
All sales personnel should be rated not only on their achievement of sales
and cost goals but on their performance of each assigned duly. The total
evaluation of an individual, then, is a composite of the several ratings,
weighted according to relative importance. Persons rated as average should
be paid average salaries. Salaries of below-average and above-average
sales personnel should be scaled to reflect the extent to which their per-
formance varies from the average. Each individual’s performance should
be regularly reviewed and upward adjustment made for those showing
improvements, and if possible, downward adjustments made for those
with deteriorating performances.
2. Straight-Commission Plan: The theory supporting the straight-commission
plan is that individual sales personnel should be paid strictly according to
productivity. The assumption underlying most straight-commission plans
is that sales volume is the best productivity measure and can, therefore,
be used as the sole measure. This is a questionable assumption.
The straight-commission plan, at least in its purest form, is almost as
simple as the straight-salary plan, but many commission systems develop
into complex arrangements. Some provide for progressive or regressive
changes in commission rates as sales volume rises to different levels.
Others provide for differential commission rates for sales of different
products, to different categories of customers, or during given selling
seasons. These retirements make straight-commission plans more complex
than most straight-salary plans.

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Notes Most straight-commission plans fall into one of two broad classifications:
1. Straight Commission with sales personnel paying their own expenses.
Advances may or may not be made against earned Commissions.
2. Straight commission with the company paying expenses, with or
without advances against earned commissions.
The straight-commission plan has several advantages. The greatest is that it
provides maximum direct monetary incentive for the salesperson to strive
for high-level volume. The star salesperson is paid more than he or she
would be under most salary plans, and low producers are not likely to be
overcompensated. When a commission system is first installed, the sales
personnel turnover rate accelerates, but usually the departure is among the
low producers. These remaining work longer and harder and with more
income to show for their efforts. Straight-Commission plans, in addition,
provide a means for cost control-all direct selling expenses, except for
travelling and miscellaneous expenses (which are reimbursable in some
plans), fluctuate directly with sales-volume changes and sales compen-
sation becomes virtually all variable expense. The straight-commission
plan also is characterized by great flexibility by revising commission
rates applying to different products, for instance, it is possible to stimu-
late sales personnel to emphasize those with the highest gross margins.
However, the straight-commission method has weaknesses. It provides
little financial control over salespeople’s activities, a weakness further
compounded when they pay their own expenses. Salespersons on straight
commission tend to feel that they are discharging their full responsibili-
ties by continuing to send in customers’ orders. They are careless about
transmitting reports, often neglect to follow up leads, resist reductions
in the size of sales territories, consider individual accounts their pri-
vate property, are tempted to shade prices to make sales, and may use
high-pressure tactics with consequent loss of customer goodwill. Moreover,
unless differential commission rates are provided, some sales person-
nel push the easiest-to-sell low-margin items and neglect harder-to-sell
high-margin items. If management seeks to correct this through using
differential commission rates, it incurs increased record-keeping expenses.
Under any straight-commission plan, in fact, the costs of checking and
auditing salespeople’s reports and of calculating payrolls are higher than
under the straight-salary method. Finally, some salespersons’ efficiency

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may decline because of income uncertainties. If a sales force has many Notes
financially-worried salespeople, management may have to invest consid-
erable time, effort, and money to uplift their spirits.
3. Combination Salary-and-Incentive Plan
Salary Plus Commission: Most Sales compensation plans are combi-
nations of salary and commission plans. Most developed as attempts to
capture the advantages and offset the disadvantages of both the salary
and commission systems. Where the straight-salary method is used, the
sales executive lacks a financial means for stimulating the sales force
to greater effort. Where the straight-commission system is used, the ex-
ecutive has only weak financial control over non-selling activities. By a
judicious blending of two basic plans, management hopes to obtain both
the required control and motivation. These results are not always forth-
coming, as actual results depend upon management’s skills in designing
and administering the plan. Unless there is an extremely fine adjustment
of the salary and commission element, weaknesses evident in both basic
systems reappear.
Use of Bonuses: Bonuses are different from commissions. A bonus is an
amount paid for accomplishing specific sales tasks; a commission varies
in amount with sales volume or other commission base. Bonuses may be
paid for attaining a certain percentage of the sales quota; performing giv-
en promotional activities, obtaining a specified number of new accounts,
following up on a certain number of leads, selling up an assigned quota of
displays or carrying out other assigned tasks. The bonus, in other words,
is an additional financial reward paid to the salesperson for achieving
results beyond a predetermined minimum.
Bonuses are never used alone. They always appear in conjunction with one
of the three main sales compensation methods. If used with the straight
salary, the resulting compensation plan resembles the combination plan.
If used with the straight commission, the result is a commission plan to
which an element of managerial control and direction has been added.
When used with a combination salary and commission plan, the bonus
simply becomes a portion of the incentive income which is calculated in
a different way than the commission.
Several administrative actions are crucial to success when a bonus feature
is included in the compensation plan. At the outset, the bonus conditions

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Notes should be thoroughly explained, and management must make certain that
all sales personnel understand them. Provision must be made for setting up
and maintaining the necessary records. Procedures should be established
to keep sales personnel abreast of their current standings relative to the
goals that qualify them for bonuses. In addition, any misunderstandings
or grievances arising as a result of the bonus feature should be dealt with
fairly and with the utmost tact.
Strengths and Weaknesses of Combination Plans: A well-designed
and administered combination plan provides significant benefits. Sales
personnel have both the security of stable incomes and the stimulus of
direct financial incentive. Management has both financial control over
sales force activities and the apparatus to motivate sales efforts. Selling
costs are composed of fixed and variable elements. Thus, greater flexibility
for adjustment to changing conditions exists than under the commission
method. Nevertheless, selling costs fluctuate to some extent with the
volume of business produced. There may also be beneficial effects upon
sales force morale. Disagreements on pay increases and territorial changes
should be less violent than under a straight-commission plan. Further if
salespeople realize that the company shares their financial risks, a coop-
erative spirit should develop between them and the company.
The combination plan, however, has certain disadvantages. Clerical costs
are higher than for either a salary or a commission system. More records
have to be maintained and in greater detail. There are risks that the plan
will become complicated and that sales personnel will not understand it.
Sometimes a company seeking both to provide adequate salaries and to
keep selling costs down uses such low commission rates that the incentive
feature is insufficient to elicit needed effort by sales personnel. But, if the
incentive portion is increased, salespeople may neglect activities for which
they are not directly paid. Therefore, the ratios that the base salary and
the incentive portion bear to the total compensation are critical factors.

23.4 Reimbursement of Sales Expenses Policies and Practices

The two general policy alternatives on reimbursing sales expenses are: (1)
require sales personnel to pay their own expenses or (2) reimburse sales
personnel for all or part of the expenses they incur. The first alternative

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is the simpler by far, but few companies choose it. Those that do are Notes
organizations, by and large, that regard sales personnel as independent
business people and most of these organizations also use straight-commission
plans. The main advantage of the “pay-your-own-expenses” policy, from
management’s standpoint, is that no company special expense records are
necessary in as much as the sales personnel are the ones whose desire to
control expenses is stimulated. But in successful applications, the level
of other compensation reflects the fact that sales personnel bear their
own expenses. It is essential that their regular commission be sufficient
to permit them to further the company’s best interest. Even when the
compensation level takes into account salespeople’s probable expenses,
some still cut down on expenses, to the company’s detriment. They
stay in second and third-rate hotels, economize on meals, dry cleaning,
laundry and other traveling expenses. and avoid entertaining customers
and prospects. Furthermore, they resist or ignore many of management’s
directives and instructions. Little management control can be exercised
over their call and route schedules, especially in regard to accounts lo-
cated in out-of-the-way places. Most sales personnel who pay their own
expenses neglect non-sales-producing activities. They avoid missionary
duties and follow up on sales leads only when no additional expenses are
involved. They “high spot”, that is, they call only on large accounts that
can be depended upon to give orders and they feel justified in adding
“side-lines” other manufacturer’s product sold to the same general classes
of trade. Except in rather unusual marketing circumstances, it is unwise
to require sales personnel to pay their own expenses.
Most firms choose the second policy alternative full or partial reimburse-
ment of sales expenses. When all or some sales expenses are reimburs-
able, sales management must be concerned directly with expense control.
Funds used to settle sales expenses represent deductions from gross
profits. The costs of keeping sales personnel on the road are higher than
commonly supposed. Many factors influence sales expenses, including
territorial size and characteristics, caliber of sales personnel, nature and
breadth of product line, managerial efficiency, intensity of competition,
and mode of travel.
Two commonsense principles guide management in formulating expense-re-
imbursement polices. Reimbursable expenses should be large enough to

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Notes ‘permit the performance of assigned duties in the manner expected. All
expenses incurred because sales personnel are away from home on com-
pany business should be reimbursable.
Expense-reimbursement policies should take into account the customary·
standards of living of the salesperson and of the customers, but the em-
phasis should be on the latter. The salesperson should eat in restaurants
and stay at hotels of the class ordinarily patronized by the customers,
In some instances, different salespeople in the same company should be
allowed different amounts for expenses, reflecting deviations in customers’
standards of living. Another reason for different-sized expense accounts
in that actual expenses vary a great deal from one territory to another.
Reimbursement policies should operate to keep expenses within a rea-
sonable range; they should not be allowed to cause bad feeling among
the sales staff. It is desirable that they be economical to administer; that
is, only minimum supervision and record keeping should be required.
However, the desire for economy in administration should not result in
adoption of unfair procedures.
Both in formulating reimbursement policies and in establishing proce-
dures for implementation, management needs to guard against the natural
tendency to over-economize. Sales personnel should not be forced to cut
down to the point of impairing selling efficiency. Nor should they have
to dip into their own pockets to pay legitimate expenses. Reimbursement
policies and procedures should be based upon the reasonable needs of
those incurring the expenses: for enforcement, they should rely largely
upon each person’s inherent honesty.

23.5 Fringe Benefits

Fringe benefits, which do not bear direct relationships to job performance,
tend to range from 25 to 40 per cent of the total sales compensation
package. Some are required by law. Most, however, are provided by the
company for other reasons; to be competitive with other companies in
the industry or community, to furnish additional reasons for employees
to remain in the company’s service, and to comply with practices that
have come to be accepted and expected by all employees.
Fringe benefits, like monetary compensation are not motivating factors.

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In the Maslow hierarchy of needs, fringe benefits contribute mostly to Notes

fulfillment of safety and security needs, though some (such as payment
of country club dues) contribute to fulfillment of esteem and other high-
er order needs. Since fringe benefits are given to all in the company’s
employ and do not vary with job performance, they contribute to the
prevention of job dissatisfaction but not to job satisfaction (in line with
Herzberg’s motivation-hygiene theory).
An increasing number of companies are offering “cafeteria” approaches
to fringe benefits. In such an approach, the company offers a core of
basic benefits - the benefits required by· law plus other traditional ben-
efits including paid vacations, medical, disability, and death benefits and
a retirement program. Employees then use credits (based on age, pay.
family, status, and years of company service) to obtain optional benefits
not included in the core; this lets employees select those benefits that best
fit their needs. Because needs for benefits change, employees are given
opportunities to change their selections periodically. Companies using
the cafeteria approach also have “awareness programs” aimed at making
certain that employees are aware of and understand the benefits available.

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