Hands on Approach
Relevant Benefit Approach
Curiosity Approach:
You should know something about the prospect,
Ask questions whose answers will reflect favorably on your product/service
Question Approach:
Quickly establishes 2-way communication,
Suggests interest in the prospect's problems,
Allows you to apply your benefits
Qualifying Question Approach:
Seeks commitment from a prospect,
Determine if the prospect is cold, lukewarm, or red-hot
Complement Approach:
Signals your honest interest in the prospect,
Make it sincere, specific, and of genuine interest
Referral Approach:
Helps you establish leverage by borrowing the influence of someone the prospect trusts and respects
Education Approach:
Show your knowledge of trends in their industry or market,
Would work well in a virtual meeting Feel, felt, found:
Answer by referring to a 3rd party and using that experience as your proof,
Provide new facts which allow the prospect to reevaluate your proposition
Compensation or counterbalance method:
Admit the objection is valid,
Describe some counterbalancing benefit,
Relate a case history or testimonial
Ask "Why?" or a specific question:
Excellent for separating excuses from real objections,
Ask questions that turn a broad general objection into a specific concern that can be answered
Remove a misconception:
Useful when the prospect clearly has the wrong information,
If buyer resistance is not valid, there may be no other option than to refute it by providing accurate information,
Be firm in stating your beliefs; be sincere and don't be defensive
Boomerang method:
Initially agree with the concern but make a statement that turns it into a selling point,
Convert the objection into a reason to buy,
Works well when the prospect lacks complete information,
Try the tongue-in-cheek method—an adaptation of the Boomerang Method
Curiosity method:
This method works because of your relationship-driven approach to professional selling,
Prospects may be mentally comparing their present product or a competing product with yours,
Demonstrate a "genuine" curiosity about their objection,
After all, you have been asking questions all along People:
Superiors, co-workers, other staff, customers, family/friends
Paper:
Notes, reports, projects, newsletters, other messages
Environmental:
Emails, phone calls, visual distractions, comfort factors (temp, lighting, clothing, etc.) QUESTIONSoutheastern Steel Company (SSC) was formed 5 years ago to exploit a new continuous casting process. SSC’s founders, Donald Brown and Margo Valencia, had been employed in the research department of a major integrated-steel company; but when that company decided against using the new process (which Brown and Valencia had developed), they decided to strike out on their own. One advantage of the new process was that it required relatively little capital compared to the typical steel company, so Brown and Valencia have been able to avoid issuing new stock and thus own all of the shares. However, SSC has now reached the stage in which outside equity capital is necessary if the firm is to achieve its growth targets yet still maintain its target capital structure of 60% equity and 40% debt. Therefore, Brown and Valencia have decided to take the company public. Until now, Brown and Valencia have paid them-salves reasonable salaries but routinely reinvested all after-tax earnings in the firm; so the firm’s dividend policy has not been an issue. However, before talking with potential outside investors, they must decide on a dividend policy. Assume that you were recently hired by Arthur Adamson & Company (AA), a national consulting firm, which has been asked to help SSC prepare for its public offering. Martha Millon, the senior AA consultant in your group, has asked you to make a presentation to Brown and Valencia in which you review the theory of dividend policy and discuss the following questions: a. 1. What is meant by the term dividend policy? 2. Explain briefly the dividend irrelevance theory that was put forward by Modigliani and Miller. What were the key assumptions underlying their theory? 3. Why do some investors prefer high-dividend-paying stocks, while other investors prefer stocks that pay low or nonexistent dividends? b. Discuss (1) the information content, or signaling, hypothesis; (2) the clientele effect; (3) catering theory; and (4) their effects on dividend policy. c. 1. Assume that SSC has an $800,000 capital budget planned for the coming year. You have determined that its present capital structure (60% equity and 40% debt) is optimal, and its net income is forecasted at$600,000. Use the residual dividend model to determine SSC’s total dollar dividend and payout ratio. In the process, explain how the residual dividend model works. Then explain what would happen if expected net income was $400,000 or$800,000. 2. In general terms, how would a change in investment opportunities affect the payout ratio under the residual dividend model? 3. What are the advantages and disadvantages of the residual policy? (Hint: Don’t neglect signaling and clientele effects.) d. Describe the series of steps that most firms take in setting dividend policy in practice. e. What is a dividend reinvestment plan (DRIP), and how does it work? f. What are stock dividends and stock splits? What are the advantages and disadvantages of stock dividends and stock splits? g. What are stock repurchases? Discuss the advantages and disadvantages of a firm’s repurchasing its own shares. QUESTIONFisher-Gardner Corporation (FGC) began operations 5 years ago as a small firm serving customers in the Chicago area. However, its reputation and market area grew quickly. Today FGC has customers all over the United States. Despite its broad customer base, FGC has maintained its headquarters in Chicago, and it keeps its central billing system there. On average, it takes 7 days from the time customers mail in payments until FGC can receive, process, and deposit them. FGC would like to set up a lockbox collection system, which it estimates would reduce the time lag from customer mailing to deposit by 2 days—bringing it down to 5 days. FGC receives an average of $2,300,000 in payments per day. a. How much free cash would FGC generate if it implemented the lockbox system? Would this be a one-time cash flow or a recurring one, assuming the company ceases to grow? How would growth affect your answer? b. If FGC has an opportunity cost of 6%, how much is the lockbox system worth on an annual basis? c. What is the maximum monthly charge FGC should pay for the lockbox system?