Transcript Document 7914637

Part II
SALES FORCE ACTIVITIES
Chapter 4:
Account Relationship
Management
Account Relationship
Management Concepts
Account
Purchasing
Process
The
Buying
Center
Building
Account
Relationships
Account
Relationship
Binders
Figure 4-1: Account Relationship Management Concepts
Recognition
of Needs
Evaluation
of Options
Purchase
Decision
Implementation
and Evaluation
Value Added Role of Sales Force:
Help customers
recognize a need
or problem and to
define them in a
new or different
way.
Identify options,
provide superior
solutions and
approaches and
help overcome
obstacles to
acquisition
Make the
purchasing process
convenient,
hassle-free and
inexpensive.
Figure 4-2: The Typical Purchasing Process
Support the
purchase decision
by showing
customers how to
install and use the
product, replenish,
and evaluate
value.
PURCHASING - Survey Results
Do you track
supplier
performance?
Do you single out
certain suppliers
as “preferred”?
9%
N.A.
No
16%
Yes
84%
(% of respondents)
No
36%
Yes
55%
(% of respondents)
PURCHASING - Survey Results
Do you have
multiple tiers
for ranking
suppliers?
No
40%
Yes
51%
9%
N.A.
(% of respondents)
PURCHASING - Survey Results
Have any suppliers
attained and lost
top-level status?
No
23%
Yes
77%
(% of respondents)
PURCHASING - Survey Results
Traits of Top-Performing Suppliers
(% of respondents)
<5% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Others
0
5%
. . . . . . . . . . . . . . . . . . . . . . . . . . . . Good Management
7%
. . . . . . . . . . . . . . . . . . . Good Response/Flexibility
8%
. . . . . . . . . . . . . . . . . . . . ISO 9000 Certification
12%
. . . . . . . . . . . . . . . . . . . . . . . . . Service
14%
. . . . . . . . . . . . . . . On-Time Delivery
28%
Quality
5
10
15
20
25
30
Figure 4-3:
Tiering of Suppliers
Tier
Type of Supplier
Nature of the Relationship
1
In

2
Preferred

3
Extended

4
Partner
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Traditional “arms length” relationship, usually
established at an individual level over time.
Standardized, non-strategic, products for which
there are may qualified suppliers.
Relationship centers on suppliers’ products and
services, but there is a high level of familiarity and
trust between the supplier and the customer.
The relationship typically involves a breadth of
products and services and usually crosses numerous
sites. Usually involves several collaborative
processes – product design, inventory
management, sales force training, etc. Supplier is
viewed best in class.
Supplier is viewed as key to the customer’s ongoing
competitive position. The business relationship is
rarely challenged and is treated as exclusive along
some dimension, critical along other dimensions,
and , in general, special.
Standard Questions in a
Value Analysis Study
Value Analysis – Focus: TOTAL COST
1. Can the item be eliminated?
2. If item not standard, can standard item be used?
3. If item standard, does it completely fit application
or misfit?
4. Does item have greater capacity than required?
5. Can its weight be reduced?
6. Is there a similar item in inventory that can be
substituted?
7. Are tolerances specified closer than necessary?
8. Is unnecessary machining performed on the item?
Standard Questions in a
Value Analysis Study
Value Analysis – Focus: (continued)
9.
Are unnecessary fine finishes specified?
10.
Is commercial quality specified?
11.
Can item be manufactured cheaper in-house
12.
If manufactured in-house can it be purchased cheaper?
13.
Is item classified to obtain lowest shipping rate?
14.
Can packaging costs be reduced?
15.
Are suppliers asked for suggestions to reduce costs?
Total Cost of
Repetitively Used Items
INVOICE
COST
The cost per item as listed on the invoice a
customer receives.
POSSESSION
COSTS
Costs associated with stockpiling items between
delivery and use. These costs include the building
and maintenance of storage areas, inventory control,
insurance, taxes, pilferage, and interest charges on
money borrowed to pay for inventory.
ACQUISITION
COSTS
Costs associated with generating an order and
processing a delivery. These costs include order
origination, inter-viewing salespeople, expediting
deliveries, receiving and editing invoices, and
follow-up on late or inaccurate deliveries.
Determine the
Decision-Making Process
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Nothing is more important to driving an accurate
selling strategy than understanding your client’s
decision-making process.
Project teams typically have a well-defined evaluation
process, but not a well-defined decision-making
process.
In the law of algebraic democracy, some people’s
votes count more than others.
Know who gets a straw vote and who gets a real one.
Determine the
Decision-Making Process

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A salesperson must understand how a decision will
be reached even more clearly than the client does.
You must also understand the approval process once
you’ve been chosen.
Analyze each stakeholder based on pain, preference,
power, and the part he or she plays in the decisionmaking process.
Don’t’ resort to price or discounts to create a
sense of urgency.
In negotiation, power lies in alternatives,
weakness in deadlines.
Buying Center Members
MARKETING
When a purchasing decision has an effect on the
marketability of a firm’s product, such as altering the
product’s materials, packaging, or price.
MANUFACTURING Manufacturing is responsible for determining the feasibility
and economic considerations of producing
end products.
RESEARCH AND
DEVELOPMENT
Is involved in the initial development of products and
processes and set broad specifications for component and
materials criteria, minimum end-product performance
standards, and occasionally manufacturing techniques.
GENERAL
MANAGEMENT
Top management is likely to be involved when the
purchase situation is unusual for the firm or when the
decision is likely to have major consequences on the firm’s
operation.
PURCHASING
Purchasing agents are specialists who have negotiation
expertise, knowledge of buying products, and close
working relationships with suppliers. They tend to
become most involved in the purchasing situation in the
later stages of a “new buy” situation. Are generally the
dominant decision makers in repetitive buying situations.
Economic Buying Influence
ROLE:
4 Asks “Why”
4 Gives final approval
CHARACTERISTICS:
4 Access to money
4 Can release money
4 Veto power
FOCUS:
4 Total organization
4 Bottom line
4 The Future
User Buying Influence
ROLE:
4To decide on how a
purchase will affect job
performance
CHARACTERISTICS:
4Implementation oriented
4Use or supervise use of
product or service
FOCUS:
4Tactical, not strategic
4The job to be performed
Technical Buying Influence
ROLE:
4To eliminate alternatives
4To recommend
CHARACTERISTICS:
4Focuses on quantifiable
aspects of product and
service
4Gatekeeper
4Can only say “no,”
not “yes”
FOCUS:
4Product specifications
4Asks “What,” not “Why”
Advocate
ROLE:
4Helps guide the sale
CHARACTERISTICS: 4May be inside or outside
of the buying organization
4Furnishes and interprets
information
FOCUS:
4Your success
Advocate:
Why Your “Winning” is a Personal “Win”
PERSONAL
Wants you to win because they know you,
they like you, and they’d like to see you be
successful.
PROFESSIONAL
Wins by doing their job better, achieving
their goals, and helping their companies
meet objectives.
RECOGNITION
Wins by receiving recognition from their
own organization.
NEGATIVE
Really wants someone else to lose.
Advocate:
Ways in Which an Advocate can Help

Recommend selling strategies.

Build a groundswell of interest.

Refer you to other advocates.

Review your presentation.

Gain access to decision-makers.
Figure 4-4:
Stages in a Buyer-Seller Relationship
Relationship
Stage
Description
AWARENESS
EXPLORATION
EXPANSION
Recognition that a supplier may be
able to satisfy an important need.
A tentative, initial trial with limited
commitments by both parities.
This trail period may go on for an
extended period of time.
Expanding the rewards for each
party in the relationship
Key Selling Objectives
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
COMMITMENT
The commitment by both the
buyer and seller to an exclusive
relationship
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
DISSOLUTION
Total disengagement from the
relationship. This may occur at any
point in the relationship.

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Gain customer’s attention
Demonstrate how the
product/service can satisfy a need
Gain initial acceptance.
Build a successful relationship.
Get to know customers and their
businesses better.
Expand ways to help the customer.
Interaction at levels between the
buyer’s and seller’s organizations.
Early supplier involvement in
development process.
Long-term focus to the relationship.
Look for warning signals.
Attempt to reinitiate the relationship.
Business Expansion Questions
EXISTING
USE
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POSSIBLE
NEEDS
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POSSIBLE
SOLUTIONS
POSSIBLE
NEW USES
DECISION
CRITERIA
What limits current operations?
What makes them more difficult than they need to be?
Which of these are most important?
What do managers see as their worst problems?
What do managers need to make their
operations better?
What do they want to make their life easier
and more pleasant?
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What does the client think might be possible?
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Which do they favor?
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What new operations do they believe might be possible?
Which do they favor?
In supporting any solution, what would the business
and personal criteria be?
Thomas’s
Five Conflict Management Approaches
A
S
S
E
R
T
I
V
E
N
E
S
S
• Confrontation
• Confrontation
• Compromise
• Avoidance
• Accommodation
COOPERATION
Dissolution Stage: Warning Signals
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Missing information
Uncertainty about information
Uncontacted buying influence
Customer personnel new to the job
Reorganization
A “Reasonable” Salesperson
Fortkamp Construction had a major contract delayed
due to equipment failure. With a deadline quickly
approaching the company called Rogers, a salesperson
for Acme Supply. They requested an immediate
delivery of replacement supplies so that Fortkamp
could meet its promised deadline.
Eager to break into this new account, Rogers agreed to
generous credit terms and to absorb air freight
charges to get the equipment to the customer as quickly
as possible. These concessions, however, reduced his
company’s net profit of 20% to below 10%.
A “Reasonable” Salesperson
When asked by his sales manager why the sale
should be made at such a low profit margin, Rogers
explained, “I felt I needed to be reasonable with this
account. I wanted their business in the future. I was
there when they needed help, the deal was struck
quickly, and they’d remember and thank me later with
new business. I think the concessions were justified.”
How would you respond
to Rogers if you were his
sales manager?
Account Relationships
Exploration Stage: Pricing Flexibility
Consider the following
Salesforce Market Conditions:
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Demand is highly price elastic
Product/service offering is complex
A heterogeneous customer base
Large number of product lines
Products are perishable
Which of the following is the best alternative:
Account Relationships
Exploration Stage: Pricing Flexibility
Alternative Management Systems
 Low Pricing Authority:
Management approval required for
all price discounts
 Medium Pricing Authority:
A specific limit placed on discounting
(e.g., 10% below list price)
 High Pricing Authority:
Base commissions on gross margins
to control price discounting
Account Relationships
Pricing Flexibility: Research Results
LOW
AUTHORITY

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
MEDIUM
AUTHORITY
HIGH
AUTHORITY
Highest gross margins
Highest sales growth
Highest return on assets

Highest sales/salesperson
Average return on assets
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Lowest gross margins
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Lowest sales growth
Lowest return on assets
Considerations
When Choosing a Partner
POTENTIAL
FOR IMPACT

COMMON VALUES

GOOD
ENVIRONMENT
FOR PARTNERING
CONSISTENCY
WITH SUPPLIER’S
GOALS

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Is there some real value for both parties that
can come out of partnering that could not be
achieved from a traditional supplier relationship?
Is there sufficient commonality of values? In
particular, it is important that both companies be
ethical and look at quality and the quality
process similarly.
How does each party look upon the partnership
long-term relationship versus profit on the sale,
future oriented or present? Are there frequent
interaction and transactions between the two
companies?
Is a partnering relationship with this customer
consistent with our own product and market
strategy, and with our overall direction as a
company?
Account Relationships
Relationship Enhancers
 Creating Value:
Acceptable conduct and performance
 Meeting Expectations:
Measures of performance levels
 Building Trust:
Importance of trust
Customer Value Creation
in the Purchasing Process
Figure 4-5: Customer Value Creation in the Purchasing Process
High
Customer
Value
Low
Relationships:
___ Enterprise
---- Consultative
..... Transactional
Recognition
of Needs
Evaluation of
Alternatives
Purchase
Decision
Implementation
and Evaluation
Figure 4-6 Account Intelligence
Market Intelligence:
Which of the customer’s products are most important in
terms of revenue and profit contribution? What markets
do they serve, and which are the most important? Who
are their major competitors?
Financial Intelligence:
When does the annual capital budgeting process begin?
When does it end? Who initiates capital project requests?
What hurdle rate is required to win approval? What is the
projected capital spending for the year?
Organizational Intelligence:
What reporting relationships in each department influence
purchasing decisions? What are the top business
objectives each relevant department manager is expected
to achieve in the current year?
Figure 4-6 Continued
Operational Intelligence:
What are the details of the process used by Operations to
produce results (e.g., raw materials coming in, processing
equipment, budget to produce finished goods, etc.)? Are
there specific measures of performance for your products
or services?
Personnel Intelligence:
Who are the people having a direct or indirect influence on
buying decisions for your products? What are their formal
responsibilities? How often have you met with them in the
past year? What is your relationship with each person?
Who are their friends and enemies with the account?
Competitive Intelligence:
Which of your competitors have an installed bas position in
the account? What is the account share for each
competitor? Which ones are likely to gain share?
Figure 4-7: Account Relationship
Strategy and Relationship
Binders
Transactional
Relationship
Consultative
Relationship
Enterprise
Relationship
Create Value
A good product that can
be conveniently
purchased.
A solution to an
important problem
A supplier that will
increase the share
holder value of the
organization.
Meet
expectations
Buyer has a clear set of
expectations as to the
conduct of the
relationship.
Buyer knows a problem
exists but is unsure of
the solution of what will
be involved in
addressing the problem.
Buyer’s expectations are
strategic in nature,
though the process for
achieving strategic
objectives may not be
known.
Build Trust
A supplier would do what
has been promised.
A supplier will do what is
necessary to solve the
problem.
A supplier will do
everything possible to
increase the buyer’s
competitive advantage in
the marketplace.
Accuracy of Salespeople’s
Customer Perceptions
Measures of Performance Levels
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Number of sales calls per year
Advance notice on price change (days)
Average lead time for custom products (days)
Acceptable delay for custom products (days)
Acceptable delay for stock items (days)
Minimum acceptable fill rate for stock items (%)
Hold inventory for project delays (days)
Premium for emergency order (%)
Accuracy of Salespeople’s
Customer Perceptions
Results
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Salespeople’s estimates of expected performance levels are
not very accurate (average of 50% error).
The performance of individual salespeople was directly
related to the accuracy of their estimates.
Telemarketers were more accurate in their estimates of
performance expectations than outside salespeople.
Salesperson age and industry experience level were inversely
related to performance expectation accuracy.
The amount of sales training a salesperson received was
directly related to their estimate accuracy.
The Importance of Trust
Selected Research Findings
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Research has established that trust facilitates cooperation. A
recent experiment demonstrated that when a seller was
expected to be more trustworthy, there was also a higher level
of buyer-seller cooperation.¹
Once a salesperson has gained customer trust, the role of the
salesperson changes to less emphasis on sales and more on
service.²
Once trust is gained, the customer:
–
–
–
–
–
Becomes more cooperative;
Becomes more receptive to suggestions;
Allows more time for sales presentations;
Allows more access to other people in the organization; and
Informs the salesperson about future buying needs.²
¹Paul Schurr and Julie Ozanne (1985), “Influences on Exchange Processes: Buyers’ Perceptions of a Seller’s
Trustworthiness and Bargaining Toughness,” Journal of Consumer Research,11 (March), 939-953.
²John Swan and Frederick Trawick,Jr. (1987), “Building Customer Trust in the Industrial
Salesperson: Process and Outcomes,” Advances in Business Marketing, 2, 81-113.
Earning Buyer Trust
What is Most Important?
Trust Earning
Components
Sample Questions
LIKEABLE
 “The manufacturers’ rep is an individual who
people enjoy knowing.”
COMPETENT
 “The manufacturers’ rep knows what he/she is
talking about.”
DEPENDABLE
 “The manufacturers’ rep is very dependable.”
CUSTOMER
ORIENTED
 “The manufacturers’ rep puts the buyer’s
interest ahead of his/her own.”
HONEST
 “The manufacturers’ rep is one of the most
honest persons in the business.”
Account Relationships
Relationship Enhancers Earning Buyers Trust
Trust Earning
Components
Sales People
Buyers
LIKEABLE
5
5
COMPETENT
2
2
DEPENDABLE
1
1
CUSTOMER ORIENTED
3
3
HONEST
4
4
Source: Hawes, Mast & Swan (1989) JPS&SM: 193 Salespeople; 173 Purchasing Agents
A “Valued” Customer
Jacobs is about to close the sale when the buyer mentions,
“There’s been $5,500 worth of breakage because of your lousy
packaging, but I’m willing to split it with you if you give the word
right now. I’ve another appointment beginning in a few
minutes.” Jacobs suspects that the breakage was the fault of
the buyer’s handling equipment, but cannot prove it.
Thinking that splitting the difference is always a reasonable
way out, Jacobs decides to agree with the buyer and to get the
contract signed.
Do you agree with Jacobs’ reasoning?
What would you advise Jacobs to have
done, if you were her sales manager?