Saturday, November 12, 2011

Pradeep Bhardwaj, Assistant Professor, Marketing Division, Sauder School of Business

An Interview with Pradeep Bhardwaj
Assistant Professor, Marketing Division, Sauder School of Business

In this month’s Vartalaap we have with us Dr. Pradeep Bhardwaj. He is British Columbia Innovation Council Chair in Sales & Sales Management and Associate Professor in the Marketing Division at the Sauder School of Business, University of British Columbia. He was earlier with UNC, Chapel Hill and UCLA where he received the Most Valued Professor Award. His areas of expertise are Sales Force Management, Designing Channels of Distribution and Customer Lifetime Value. He holds an MBA from the Simon Fraser University and a PhD from the University of Toronto

Q1: How can a MBA student hone himself to become an effective personal selling agent/ negotiator?
In my experience and interaction over the years, the foremost quality for an effective personal selling agent is to be a very good listener. Most agents are in a hurry to sell their product rather than listening to what the customer wants. The seller should also prepare for different situations and every possible situation that is likely to be encountered. Understanding the business, clients and the trends affecting the industry helps a seller understand the different situations.
Another important thing is to genuinely understand the problems of the buyer and the implications of the problems. Looking out for ideas to counter those implications would ensure a good sale. If we consider an example of selling supplies to a hospital, that is facing a problem of say, overstocking. The cause for overstocking might be because the individual divisions in the hospital could be ordering separately, from separate vendors perhaps. If the seller can demonstrate understanding of the hospital’s problems, and the implications of overstocking (example lower budget available for hiring qualified doctors) and then address the needs, it is a win-win situation for both the parties.

Q2: With your industry experience, what do you feel are the key differences in services marketing?
Services are intangible and are about providing a good experience/interaction to the consumer. Services can also be customised to suit the consumer’s needs. Service quality differs from product quality as service quality is often based on reputation rather than tangible attributes. This reputation often arises from the client’s interactions with a single individual. For example, a firm which offers financial advisory services depends on its personal selling agents to create the firm’s reputation among the clients; the branding is on a personal level than on an organisational level. Services marketing is all about building long term relationships which are profitable to the company. Products are generally returnable but not services. However, the firms need to be aware of the reputation effect. In services the pricing varies a lot unlike in the products where the pricing is quite standard.

Q3: What is your take on umbrella branding? Does it dilute the parent brand or strengthen it?
Umbrella branding is the proverbial ‘double edged sword’. It can prove to be quite useful if the company can capitalise and build on economies of scope. For a company like Toyota which caters to different segments with its Corolla, Camry and Sion, umbrella branding facilitates new product introduction and also goes a long way in building its acceptance in the market.
Umbrella Branding also imposes a greater burden on the entire product line. Even if one of the products in the family is compromised it can potentially affect the sales of the other products as well. For umbrella branding to be successful, the product line should have similar quality levels and should not have a very wide spectrum to which it caters. When Toyota wanted to enter the higher end car market, it decided to use the Lexus name rather than use the Toyota name.

Q4: While on paper it makes sense to build long term customer relationships, often customers change preferences and are not loyal despite best efforts of marketers. Does focus on long term relationships really make sense in the dynamic and chaotic business environment of today?
Any consumer when changing to a newer product or service looks at minimising the switching costs. For a PC user, switching to Mac entails costs related to newer applications, devices in addition to the cost of a Mac. The consumer always evaluates the alternatives and chooses what he/she feels is the best for his/her needs. It is important to build relations with the customers so that you can cross-sell or up-sell your products.
There are also some customers who are inherently variety seeking in nature and do not stick to one single product or brand. Trying to build relations with these sorts of customers doesn’t come easy.
Companies should try to narrow down on consumers who might be spending less, but are very influential in the communities of which they are a part. An example of that is a tourism company, here in Vancouver, which identified people who had successful blogs on tourism. They were targeted and in turn provided good publicity for the company via their blogs because they had a good time with the tourism company.
Understanding the dynamic nature of the consumers and the evolution of their needs would provide a company with great opportunities. Every consumer moves on eventually and the company should look out for newer ways to fulfil these new needs.

Q5: What have been your learning’s from managing multi product sales force?
Managing a multi-product sales force is a challenging task and needs intelligently framed sales policies. The nature of multi product teams needs to be decided depending on whether the products are substitutes or complementary to each other. An organisation should determine how it wants the selling time to be devoted among the various products and communicate the same to the sales agents. If the agents work in 8 hours shifts, there has to be a certain amount of time devoted to each of the product.
Designing an appropriate compensation and evaluation plan for a multi-product team is also essential. These packages should be aligned with how the selling time has been divided among the products. If the compensation package is skewed, the agents might end up selling only the products, which give them a good margin and ignore the rest of the products.
The sales team also should keep track of each product individually and the number of sales prospects, number of customers in the sales funnel and how the prospects are progressing through the funnel must be managed well.

Q6: How should a beginner approach design of channels of distribution? What are the key considerations for the same?
There is no single approach to designing the channels of distribution. They depend on the kind of product being marketed, the company’s objectives and expectations from launching the product and a host of other factors. The channel design is a part of the Go-To-Market strategy for that particular product.
Some of the key considerations for a distribution channel would be customer attraction and retention activities and bulk breaking of the product. The information and logistics needs for a particular product have to be kept in mind when designing the channels.
For designing a channel, we also need to identify what kind of a channel portfolio will fit the product. The various channels can be Direct Selling, Franchises, distributors, retailers, telesales and sales over the internet. The different portfolios’ relevance to the product needs to be identified and then the company can decide on what different channels it should use for its products. Evaluating the efficiency and effectiveness of each of these alternatives objectively will give a clear picture of which sales channel is best suited for a particular product.

Q7: How can customer lifetime value data be used effectively by marketing managers? What are the limitations in using customer lifetime value while taking sales decisions?
CLV data is a very useful tool used for segmenting the consumers into different brackets according to how profitable they are to the company. It also helps in pointing out the high acquisition costs faced for some of the consumers. This said, CLV might often result in looking for short term gains and miss out on long term profitability. For example, a customer usually turns profitable for an online book seller only after an average of 5-6 years and things like these have to be kept in mind when looking at CLV data.
There seems to be a disconnect between the objectives and the metrics of CLV data. Most of the times, the focus is on retention of customers since it is assumed that these customers are more profitable. The companies’ should understand that every retained consumer might not give a higher share of the wallet. The objective should be to look out for profitable customers and not just loyal customers. Even if 80% of the customers are retained, they might not end up spending much and hence the company loses out.

Q8: What should be the aim of a marketing enthusiast while pursing MBA? There are multiple trade-offs to be made in terms of time and effort. What should be the focus during this period of education?
For any management graduate, one thing of prime importance is to understand how to deal with ambiguity. There needs to be a critical evaluation of a situation or an activity and identify whether it is good or bad.
In the classroom, case studies are used and in these case studies the problem is very explicitly stated and the student hardly has to spend time in identifying the key problem/s. In the real world, the problems are always ambiguous and have to be identified. If the sales of a product are going down, you need to dig deep to understand why it is happening and also how it can be tackled.
For a marketing enthusiast, apart from a sound marketing knowledge, it is important to have a thorough understanding of the other areas like Supply Chain, Finance etc to have a holistic view of the company. A marketing person should be able to explain decisions to other departments and this can happen only if he/she understands their perspectives as well.

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