TELEPHONE SALES GAINING FAVOR IN RETAIL COVERAGE

JAMES TENSER

NEW YORK -- Telephone sales -- more often associated with marketing direct to consumers -- are gaining favor among leading brand marketers as a strategy for improving retail coverage.

Telephone sales are seen by leading-edge suppliers as a cost-effective way to capture sales from smaller retail accounts that might otherwise slip through the cracks due to infrequent calls and the diversion of scarce resources to key accounts.

Sources in the market identify Procter & Gamble, Campbell Soup Co., SmithKline Beecham Consumer Brands, Pepsi Cola and Warner-Lambert's American Chicle division among the growing number of companies building their capabilities in this area.

While Brand Marketing confirmed the existence of "tele-sales" programs through calls to executives at those companies, none provided further details about their activities.

"Few companies want to talk about this," said Walt Williams, executive vice president at Neo, a consulting firm in Shelton, Conn., who suggested that such guardedness was an indication of the high strategic value of tele-sales.

Jeffrey Hill, managing director of Meridian Consulting Group, Westport, Conn., said he too is detecting an increasing focus on this area in the packaged goods industry. "We are seeing hard and fast quantitative numbers established in the industry that suggest that those customers that are below a certain dollar number will be outsourced or addressed by a tele-sales technique," he said.

Williams had a similar observation: "The general idea is to offer cost-effective coverage to accounts who are below the line as far as being able to pay out on a sales call."

As Burt Flickinger III, principal with the A.T. Kearny consulting firm, New York, explained, the arithmetic of field sales coverage is impelling many companies toward using tele-sales to bridge the coverage gap.

"Market Metrics has 260,000 stores on its data base," he said. "The best a national sales force can hope to cover on a regular basis in each of the top-52 Information Resources Inc. markets in the United States is the top 1,400 stores."

In addition, Flickinger estimated that the dead net cost of sending a salesperson on a call averages between $60 and $100. "Telemarketing can sell a case for between $1 and $3. If more than one case is sold, the cost comes in between 50 cents and $1.40. So the economics are extremely compelling not only for manufacturers but also for wholesalers and jobbers."

It is not uncommon, Flickinger explained, when sales are made via a telemarketing contact, for the product to be delivered from the customer's usual wholesaler or distributor.

The growth of tele-sales is intertwined with the widespread restructuring of sales forces, which has also resulted in increased outsourcing of field-sales activities to third-party service companies and brokers, explained Hill.

As manufacturers refocus their sales resources on their top 20 to 25 accounts without increasing their total costs of selling, they are turning to tele-sales as a low-cost way to continue selling independent grocers, convenience stores, mom-and-pop stores and others who must be serviced out of an ever-shrinking fraction of the sales budget.

Those smaller accounts collectively may add up to as much as 30% of the sales volume, depending on the product category, Williams estimated. "The problem is that there may be 20,000 stores."

In his experience working with major packaged goods companies, Williams said, he often recommends a combination of various methods including brokers, direct mail and telephone coverage.

"Tele-sales can dramatically drop your costs of sales and typically increase revenues in that 30% share of your business. It can also improve customer satisfaction. That is a strategic advantage," he said.

"This is a brilliant idea," said Chris Hoyt, managing director of Reach Marketing West, a consulting firm. "It is easy to get through to these customers on the phone. Computer support makes it easy to refer to purchasing records. It is highly cost effective relative to making a personal sales call and highly effective."

In rare instances, brand marketers have established in-house facilities to handle telephone sales and service. Pepsi-Cola's customer service center in Winston-Salem, N.C., is one such example. As reported earlier this year, the company is several months along in a pilot test of sophisticated computer software systems designed to support the sales and service effort against smaller accounts.

The general manager of the Pepsi facility, Sally Price, told Brand Marketing that the pilot affects "tens of thousands" of Pepsi's smaller accounts in the New England area. Its goal is to recapture sales previously missed due to out-of-stocks and infrequent service calls.

Also, American Chicle has been operating a tele-sales unit for at least one year, leveraging off experience accrued by sister divisions at Warner-Lambert.

More often, however, manufacturers have turned to third-party providers for tele-sales services. This is the approach taken so far by Procter & Gamble, which has worked with several tele-marketing suppliers, including Matrix Marketing, a unit of Cincinnati Bell, according to sources familiar with the activity.

P&G began experimenting with tele-sales as early as 1988, said Flickinger, who participated in those early investigations.

"We learned that smaller retailers and owner-operators did not want to be bothered with lengthy sales calls. They liked doing it over the phone," he said.

Although it has been using tele-sales since 1990-91, Flickinger said, P&G has very aggressively made it part of doing business at the beginning of its current fiscal year, 1993-94, which ends June 30.

In contrast, John Kressaty, director of customer service at S.C. Johnson Wax Consumer Products North America, said his company has used a third-party telemarketing firm in this manner for nearly a decade. "Our supplier is a separate company, but closely tied to us with representatives who are dedicated just for S.C. Johnson, so they know our customer base well," he said.

Flickinger said that while 30% or more of accounts today fall below the direct-sales-call-payout threshold, in the future as many as 45% of accounts could be sold and serviced entirely via tele-sales. Said Neo's Williams, "Establishing telephone coverage with smaller customers is the first step down the information highway. From there it is not such a big step to the next level of interactivity."