Transcript Chapter 2(A)

Part I
THE BIG PICTURE
Chapter 2:
Strategy and Sales
Program Planning
The natural progression
How to make sales force and sales
program decision
LEVEL 1
Top
Management
Decisions
LEVEL 2
Strategy
Implementation
Decisions
LEVEL 3
Sales Force
Program
Decisions
Business
Strategy
Marketing
Strategy
Go-to-Market
Strategy
Customer
Relationship
Management (CRM)
Product Development
Supply Chain
Management
Management (SCM)
(PDM)
Account Relationship
Strategy
Figure 2-1 The Sales Force Decision Sequence
Business Strategy
Environmental constraints
Legal & regulatory
Demographics
Economic Conditions
Technology
Competitive conditions
Sociocultural factors
Distinct competencies
Marketing
Financial
Technology
Information
Strategic Management
Planning
Resources
Financial
R&D
Personnel
Brand Equity
Production
Firm’s history
management culture
Figure 2-2: Factors Influencing Strategic Management
Marketing Strategy
Corporate goals
Maximize shareholder wealth
Business unit objectives
12% revenue growth
Grow pre-tax profits by 18%
Marketing objectives
Increase product A’s market share by 2 points
Grow contributions after sales & marketing by 20%
Sales department objectives
Achieve sales revenue of $210 million
Grow contributions after sales expenses by 25%
Sales district objective
Achieve sales revenue of $10.5 million in product A
Obtain $7 million contributions after direct selling
Salesperson objective
Achieve sales revenues of $1.2 million in product A
Obtain $0.8 million in gross margin dollars
Major account objective
Achieve sales revenues of $95,000 in product A
Obtain an average gross margin of 80%
Figure 2-3: Hierarchy of Sales Objectives
A Look into What
Companies Want . . . .
What Goals are Most Important to You?
70
66.1%
60
50
40
30
29.8%
31.9%
20
14.0%
7.7%
10
0
Building
Brand of
Company/
product
Enhancing Increasing
credibility
sales/
of company revenue
product
Investor
relations
Saving
costs
7.8%
Other
How Successful Were You at Reaching Your Goals?
100
94%
93%
83%
80
72%
68%
58%
60
42%
40
32%
28%
20
17%
6%
0
Building Enhancing Increasing
Brand of credibility
sales/
Company/ of company revenue
product
product
Investor
relations
7%
Saving
costs
Other
Types of Strategies (Generic)
and Their Effect on Sales
Programs
Low Cost Strategy:
High Profit Sales Programs:
Vigorous pursuit of cost reductions from
experience and tight cost control.
 Extensive use of independent sales agents
 Focused on transactional customer
relationships
 Structured so that managers supervised a
large number of salespeople
 Compensation was largely incentive based
 Salespeople were evaluated primarily on their
sales outcome performance
Differentiation strategy:
High Profit Sales Programs:
Creating an offering perceived as being
unique leading to high brand loyalty and
low price sensitivity.
 Selective use of independent sales agents
 Focused on long-term customer relationships
 Structured so that managers intensely
supervised a limited number of salespeople
 Compensation was largely salary based
 Salespeople were evaluated on their behaviors
as well as their outcomes.
Niche Strategy:
High Profit Sales Programs:
Servicing a target market very well,
focusing all decisions with the target
market needs in mind, dominating sales
with the segment.
Experts in the operations and opportunities
associated with a target market. Otherwise the
firm adopted the program characteristics
associated with the appropriate value creation
strategy above.
Figure 2-4: Business Strategies and High Profit Sales Force Programs
Marketing
Strategies
Sales
Strategies
Build Strategy
Hold Strategy
Harvest
Harvest
Strategy
Divest Strategy
Expand market
share in a highgrowth market
Maintain market
share at the
lowest costs
possible
Reduce costs
and focus on
profit, not market
share
Reduce
inventory
at lowest cost
possible
Divest
Secure
Added
Distribution
Call on targeted
current
customers
Add new
customers
Increase service
to current
customers
Provide high
presale
services
Provide
product
& market
feedback
Focus on
volume
growth
Call on
targeted new
customers
Build current
relationships
Focus on
account
penetration
Call on most
profitable
accounts only
Eliminate
services
Reduce overall
service levels
Offer
exceptional
pricing
Reduce
inventory levels
Maintain
distribution
Invest as
little time as
necessary
Focus on
one time
sales
Minimize
time
commitment
Figure 2-4: Business Portfolio Analysis and Sales Force Strategy
Sales Force Ranking and Sales Growth:
Pharmaceuticals (1988-1990)
10%
8%
Growth
6%
4%
2%
0%
5
Low
6
7
8
High
Sales Force Ranking
Sales Force Ranking and Sales Growth:
Computers (1988-1990)
15%
10%
Growth
5%
0%
5
Low
6
7
8
High
Sales Force Ranking
A More Detailed Look at
Marketing Strategy

The Three Major Functions of
Marketing:
–
–
–
Segmentation
Targeting
Positioning
Strategic Implementation
Decisions
Steps in Developing a Go-to-Market Strategy
1. What is the best way to segment the market?
2. What are the essential activities required by
each segment?
3. What group of go-to-market participants should
perform the essential activities?
4. Which face-to-face selling participants should
be used?
Figure 2-6 Essential Activities
Interest Creation
Post-Purchase
Pre-Purchase
Purchase
A Framework for Defining Essential Activities
Customer Size
and
Opportunity
Large
Small
Buying
Process
Account Maintenance:
Effectiveness Selling:
Continue high-quality service
Electronic Data Entry (EDI)
Prompt delivery
Enhance value proposition
Relationships
Friendship
Solve and consult
Cooperation
Customization
Integration
Partnership
Efficiency Selling:
Targeted Selling:
Take orders
Secure distribution
Consider self-ordering (lower price)
Quick needs assessment and solution
Explain features and benefits
Economic evaluation
Low Information,
Low Solution Needs
High Information,
High Solution Needs
Figure 2-7 Potential Go-to-Market Participants
Customers and Prospects
Agents
Direct Sales
Distributors Integrators
Force
Retailers
Direct
Alliances
Advertising
Promotion
Direct Mail
Telemarketing
Internet
Indirect
Sales Force Options
Non-Sales Force Options
Company
Figure 2-8 Comparing Various Go-to-Market Alternatives
Low Cost
per Exposure
Advertising
Direct Mail
Internet
Efficiency
Telemarketing
Sales Force
Effectiveness
High Sales
per Exposure
Go-to-Market Strategy: A Large Computer Manufacturer
Telemarketing
Direct Sales Force
Industry
Teams
Account
Teams
Inbound
Outbound
Geographic
Sales Force
Customer Base
Partners
Internet
Go-to-Market Strategy: A Large Chemical Company
Direct Sales Force
Account
Teams
Telemarketing
Inbound
Customer Base
Go-to-Market Strategy: A Pharmaceutical Company
Direct Sales Force
Account
Teams
Geographic
Sales Force
Telemarketing
Inbound
Customer Base
Partners
Go-to-Market Strategy: An Industrial Distributor
Direct Sales Force
Telemarketing
Inbound
Account
Teams
Outbound
Geographic
Sales Force
Customer Base
Internet
Figure 2-9 Product Development Management
Subprocesses
Identify customer needs for better solutions
Discovering and designing new product solutions
Developing new solution prototypes
Managing internal departmental priorities and involvement
Designing activities to speed-up development process
Launching new and redesigned offerings
Figure 2-10 Supply Chain Management Subprocesses
Selecting and managing supplier relationships
Managing inbound logistics
Managing internal logistics
Managing outbound logistics
Designing product assembly and batch manufacturing
Managing process technology
Order, pricing, and terms management
Managing channel partners
Managing product installation and maintenance
Figure 2-11 Customer Relationship Management
Subprocesses
Identifying high value prospects
Learning about product usage and application
Developing and executing advertising and promotion programs
Developing and executing sales programs
Developing and executing customer service programs
Acquiring and leveraging customer contact information systems
Managing customer contact teams
Enhancing trust and customer loyalty
Cross-selling and upselling of offerings
Three Steps in Leveraging the Customer Base
Shareholder Value
Driver of Cash Flow
& EVA
Business
Driver of Profits
Sales
Driver of Revenue
• From P&L to balance sheet: Customers viewed as assets
• CRM;s Task: To increase shareholder value by
leveraging the customer base.
• Focus on understanding cash flow effects and risk
management
• CRM integrated in the business process and yearly
planning process
• Improving the profitability of customers seen as a driver
of business profit
• Focus on customer selection
• CRM viewed as a tool to achieve a bigger customer share
through cross-selling and up-selling
• Typical in multi-product, multi-divisional environments
• Focus on account planning and organizational alignment
Figure 2-12 Sales Force Program
Marketing
MarketingObjectives,
Objectives,Strategy,
Strategy,and
and
Strategy
Implementation
Program
Strategy Implementation Program
Estimates
Estimatesofofsales
sales
potential
and
potential and
sales
salesforecast
forecast
Account
AccountRelationship
RelationshipStrategy
Strategy
Desired
DesiredSelling
SellingActions
Actions
and
Behaviors
and Behaviors
Estimates
Estimatesofofsales
salesforce
force
size
and
budget
size and budget
Organizational
OrganizationalStructure
Structure
Competency
CompetencyDevelopment
DevelopmentProgram
Program
Leadership
LeadershipSystem
System
Feedback
Sales Force Program Elements – Cont.
•
Account •
Relationship •
Strategy •
•
How long is the selling cycle?
How much time is spent on customer need discovery?
Will the offering be customized for each customer?
Will other functional areas be involved in the sale?
How much will we need to invest in the individual
customer relationship?
• How easily can the customer switch to a competitor
once the relationship is established?
Sales Force
Selling
Activities
•
•
•
•
•
•
What are their non-selling responsibilities?
How much customer face-time will salespeople have?
How will sales leads be generated?
How much time will be spent with new prospects?
How will business with existing customers be grown?
With whom in the customer’s organization will the
sales force interact?
• What support will be needed to consummate a sale?
• How will customers be serviced?
Sales Force Program Elements – Cont.
• Will the sales force be specialized by product,
Organizational
customer, or function?
Structure • How many salespeople will be needed?
• What is the span of control for management?
• How many levels of management will be needed?
• How will territories by designed?
• What is the location of salespeople and managers?
• Will telemarketing support be needed?
Competency • Experience level of new salespeople?
Development • Length and purpose of initial training program?
Program • Nature of continuing development program?
Sales Force Program Elements – Cont.
Leadership
Program
•
•
•
•
•
•
•
•
•
Mix of salary, bonus, and commission compensation?
Total compensation level?
What additional incentive programs will be needed?
What benefits will be needed?
Use of quotas?
How much will be spent on sales meetings?
Behavioral-based evaluation metrics?
Performance-based evaluation metrics?
Required sales force information system?
Investment
by
Supplier
Investment by Customer
Figure 2-13: Alternative Types of Account Relationships
Different Sales Orientations
Product Sales
Solution Sales
Best products
Solutions to your needs
Impact on your
business results
Profile of
Sales
“Product Expert”
“Solution provider”
“business consultant”
Customer
Contacts
Narrow Space
(e.g., purchasing)
Function/ department
All levels
Offering
Best products with a
competitive price
Product and service
solutions to customer needs
Valuable solutions to
support competitive advantage
Success
Factors
Product excellence and/
or cost leadership
Understanding the
customer’s needs
Driving customer
profits and EVA
Sales
Argument
Value Sales
Figure 2-14: Changes in Customer Expectations of Suppliers
Traditional Relationships
Enterprise Relationships
 Little recognition of credit for past
performance
 Recognition of past performance
and track record.
 No responsibility for supplier’s profit
margins
 Recognition of suppliers’ need to
make a fair profit
 Little support for feedback from
suppliers
 Feedback from suppliers
encouraged.
 No guarantee of business
relationship beyond the contract.
 Expectations of business
relationship beyond the contract.
 No Performance expectations
beyond the contract.
 Considerable performance
expectations beyond the contract.
 Adversarial, zero-sum game.
 Cooperative and trusting, positivesum game.
Good
27%
Very
Good
10%
Fair
10%
Poor
53%
Partnering Effectiveness Index