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CHAPTER 5

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Part Three:Analyzing Customers and Markets

Copyright 2009 Pearson Education, Inc.

Publishing as Prentice Hall.5-2

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Sales Management: Shaping Future Sales Leaders


Publishing as Prentice Hall.5-3Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Business-to-Business(B2B) Sales andCustomer RelationshipManagementChapter 5

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Learning Objectives

Recognize how people make organizational purchasingdecisions

Describe and explain the three buying situations

Identify the different roles played by buying center members

Understand individual forces that influence the B2B buyingprocess

Comprehend how buyer-seller relationships are established

and maintained

Explain success factors that apply to buyer-seller relationships

Discuss seller performance factors that lead to successfulcustomer relationships

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Understanding B2B PurchasingDecisions

Personal relationship skills

Highly skilled sales force

Constant support from

other functional groups,especially sales managers

Information technologysystem thats easy to use

and gives accurate andnear-real-time information

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The Buyers Decision-Making Process

ProblemRecognition

InformationSearch

Evaluation ofAlternatives

PurchaseDecision

PostpurchaseEvaluation

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Organizational BuyingSituations

Straight Re-Buy

Buying firm moves directly from need recognition (Step

1) to ordering (Step 7)

Modified Re-Buy Purchase of a product or service that is currently being

bought, but buyer is considering different vendors orproduct changes

New Buy Occurs when a complex or expensive product is

purchased for the first time

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The Buy-Grid Framework: Participation in the BuyingStages of the B2B Buying Process

Buying Stages New Buy Modified Re-Buy Straight Re-Buy

1. Recognize problem Yes Perhaps No

2. Determine productcharacteristics

Yes Perhaps No

3. Determine productspecifications

Yes Yes Yes

4. Search for suppliers Yes Perhaps No

5. Evaluate proposals Yes Perhaps No

6. Select supplier Yes Perhaps No

7. Specify quantity needed Yes Yes Yes

8. Review the supplier/productperformance

Yes Yes Yes

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Understanding the BuyersCriteriaAmulti-attribute matrixis used to

evaluate vendors by assigning animportance weight to categories like price,

product conformance, delivery time, andmanufacturing capacity

Attribute Weight Vendor A Vendor B

Quality .5 9 = 4.5 7 = 3.5

Delivery .3 8 = 2.4 9 = 2.7

Customer Service .2 10 = 2.0 8 = 1.6

Totals 1.0 8.9 7.8

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Buying Center, or Group, Purchases:Roles of the Decision-Making Unit

Initiator: starts thepurchase process byrecognizing a need

Decision maker:person/committee thatmakes the final decision

Purchaser: any person

who actually buys theproduct

Controller may approveor set budget for purchase

Influencers: individualswho affect the decisionmakers final choicethrough recommendationsabout which vendors toinclude or which productswill best meet needs

Users: their jobs requirethat they implement andevaluate what waspurchased

Gatekeepers: controlinformation

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Discussion Questions Why is it important for a

salesperson to correctly identifythe decision-maker in a buyingcenter?

How can a sales manager coachthe salesperson to find out whothe decision maker is?

What is likely to happen IF thesalesperson misidentifies buyingcenter roles?

Do buying center members always

know their roles? Copyright 2009 Pearson Education, Inc.Publishing as Prentice Hall.

5-11

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Team Selling and Multi-Level

SellingExtended selling team advantages

Quicker response to buyer questions

Ability to speak to ones counterpart whounderstands technical language

Capability to work as a group to offermultidisciplinary solutions to complex buyer

problems

Challenges

Coordination, communication, and compensationchallenges

More expensive

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Team Selling and Multi-Level Selling

Multi-level selling occurs when two or more peoplefrom the selling firm make a sales call to their functional

counterparts at the buying organization Marketing alliances 2+ companies combine their

technologies, unique resources, skills and products tomarket total systems

Value-added reseller (VAR) purchases products frommanufacturers and assembles them into a system beforedelivering the package to specialized customer segments

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Self-Assessment Library

Go to http://www.prenhall.com/sal/

Access code came with your book

Click the following

Assessments

II. Working with Others

A. Communication Skills

2. How Good Are My Listening Skills?

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B2B Customer Relationship Management

Customer Relationship Management

Identifying and grouping customers in orderto develop an appropriate relationshipstrategy

So the organization can acquire, retain, andgrow the business

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Technology in SalesManagement

Technology can help ensure a firms salesare profitable

Programs analyze orders for profitability asthey are placed

Companies are dropping losing product

lines and unprofitable customers

Source: Based on Jaclyne Badal (2006). A Reality Check for the Sales Staff, Wall Street Journal,

October 16, B3.

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Data Mining

Companies data mine information collected in CRMdatabases

Purchase dates, incentives offered the customer,

product/services purchased, selling price, the buyersposition in the organization, number of rep visitsbetween buys, and samples and promotional materialsrequested

Allows identification of important relationships orconnections that might not be readily apparent

Can conduct competitive analyses that result in highersales revenues, lower order entry errors, andincreased acquisition of new customers

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Customer-Centric Sellers

CRM technology helps firmsbecome more market- orcustomer-oriented

Firms practice a marketorientation when businessprocesses and functions arealigned to maximize

effectiveness in themarketplace

A market-oriented sellingfirm places the buyer at thecenter of all of the strategic

decisions

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The Nature of B2BRelationships

Integrative

Relationships

Deepest relationship, where selling firm becomes thebuyers sole source supplier

Buyers and sellers trust one another and cooperate toreduce costs and advance their mutual goals

Facilitative

Relationships

Trust and cooperation between buyers and sellers is betterand can create value for both parties

Transactional

Relationships

Buyer-seller relationship can be adversarial when eitherparty views the situation from a purely economicperspective

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Differences in Key Variables Based on Stage ofRelationship

Relationship Transactional Facilitative Integrative

Trust Little trust Increasing trust Broad trust

Communication Buyer-seller bow tieA few depts begincommunicating

Direct communicationbetween all depts

Value Win-Lose Buyer: lower pricesSeller: lower costs Win-Win for both

CommitmentLittle expectations beyondcurrent contract

Growing commitment bybuyer & seller

Long-term expectations ofpartnership

FeedbackLittle expectation offeedback

Growing acceptance offeedback

Honest feedbackexpected and sought

Sales programsLittle opportunity to cross-

or up-sell

May switch to inside

salesperson

Expansive opportunity to

cross- or up-sell

ProfitsLittle concern for supplierprofits

More concernAcknowledgement thatsupplier must makereasonable profit

Competitiveadvantage

Little other than currentbuy

Growing competitiveadvantage

Customized offering

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South Atlantic OceanSouth Pacific Ocean

North Pacific Ocean

North Atlantic Ocean

Indian Ocean

Arctic Ocean Arctic OceanArctic Ocean

North Pacific Ocean

United States of America

U.S.A.

Canada

Mexico

Brazil

. S. A.

French Polynesia (Fr.)

Argentina Uruguay

Paraguay

Chile

Bolivia

Peru

Ecuador

Colombia

VenezuelaFrench Guiana (Fr.)

SurinameGuyana

The Bahamas

Cuba Dominican Republic

PanamaCosta Rica

Nicaragua

HondurasGuatemala

El Salvador

Trinidad and Tobago

Jam.HaitiPuerto Rico (US)

Greenland (Den.)

Iceland

Madagascar

South AfricaLesotho

Swaziland

Mozambique

Tanzania

BotswanaNamibia Zimbabwe

Angola

Zaire

Zambia

Malawi

Burundi

KenyaRwanda

Uganda

Congo

Gabon

Somalia

Ethiopia

Sudan

Djibouti

Belize

EgyptLibya

Chad

Niger

Algeria

Mali

Tunisia

Nigeria

CameroonC. A. R.

Benin

TogoGhana

Burkina FasoBarbados

Dominica

Cte DIvoire

Liberia

Sierra Leone

GuineaGuinea-Bissau

SenegalThe Gambia

Mauritania

Western Sahara (Mor.)

Morocco

Finland

Norway

Sweden EstoniaLatvia

Lithuania

Poland

Romania

Bulgaria

TurkeyGreece

Czech.

Hung.

ItalyAlbania

Portugal

France

Spain

Aus.Switz.

United Kingdom

Ireland

Den.

GermanyNeth.

Bel.

Cyp.

Yemen

OmanSaudi ArabiaU. A. E.

Qatar

IranIraqSyria

Jordan

IsraelLeb. China

Mongolia

Russia

Afghanistan

Pakistan

India

Sri LankaMaldives

NepalBhu.

Myanmar (Burma)

Bang.

Andaman Islands (India)

Thailand

Indonesia

Malaysia

Brunei

Philippines

Taiwan

Cambodia

Vietnam

Laos

Australia

Papua New Guinea

New Zealand

FijiNew Caledonia

Solomon Islands

Kiribati

Marshall IslandsFederated States of Micronesia

Guam (USA)

Japan

N. Korea

S. Korea

Kuril Islands

Wrangel Island

Aleutian Islands (USA)

New Siberian Islands

Severnaya Zemlya

Novaya Zemlya

Franz Josef LandSvalbard (Nor.)

Jan Mayen (Nor.)Banks Island

Victoria Island Baffin Island

Ellesmere Island

Island of Newfoundland

Antarctica

les Crozet (France)

Tasmania

South Georgia (adm. by UK, claimed by Argentina)

Falkland Islands (Islas Malvinas) (adm. by UK, claimed by Argentina)

KuwaitCanary Islands (Sp.)

Sao Tome & Principe

SingaporeEq. Guinea

Faroe Is. (Den.)

Kazakhstan

Belarus

Ukraine

Moldova

GeorgiaArmenia Azerbaijan

Turkmenistan

UzbekistanKyrgyzstan

Yugo.

Mac.

Slov.Cro.

Bos.

Slovak.

Eritrea

Tajikistan

Hawaiian Islands

Galapagos Islands (Ecuador)

Mauritius

Seychelles

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Global Sales Management: Forming BusinessRelationships in Other Cultures

In many cultures around the world, it takes years toform a relationship with a person one does not know

In Japan, the process of forming a relationship

requires a significant amount of effort that involvesproving to your Japanese customers that you can betrusted to provide them with the products or servicesthey need to keep their businesses running

Socializing (going out at night for karaoke, drinking andtalk) allows the Japanese to see the character of the gaijin(foreigner)

Source: Based on John B. Ford and Earl D. Honeycutt, Jr. (1992). Japanese National Culture as a

Basis for Understanding Japanese Business Practices,Business Horizons, 35:6, 2734.

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Customer Lifetime Value (CLV)Strategies

Customer lifetime value: profitability ofpartnering with a buyer for an extended periodof time

3 criteria to compute CLV (future customerprofitability)

Probability of future purchases1

Future marketing costs2

Future contribution margins3

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Computing CLV

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Planning Sales Strategy Based on CLV

Low % of Purchase Share High % of Purchase Share

High Lifetime

Earning Value

Frequent sales force visits

Monthly visits

Direct mail/telemarketingOptimal contact: biweekly

High potential customer value

Constant sales forceinteraction

Weekly visits

Direct mail/telemarketing

Optimal contact: weekly

Highest customer value

Low LifetimeEarning Value

Extended sales force visits

Yearly intervalsDirect mail/telemarketing

Optimal contact: quarterly

Low value customer

Infrequent sales force visits

6-month intervalsDirect mail/telemarketing

Optimal contact: bimonthly

Low potential customer value

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The Stages of B2B CustomerRelationship Management

Up-sell / cross-sell to existing

customers

1

Manage customer relationships to

earn higher profits

2

Offer customized solutions to mostprofitable buyers

3

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Inspiring Your Team Members toBuild Business Relationships

According to a recent Sales & Marketing Management article:

B2B salespersons are becoming strategic advisors

Point of differentiation is ability to form successful relationships

How can sales managers inspire their sales team to form genuine

relationships? Sales managers must help salespersons makeREALconnections

Release the outcome

The end result does not define the salesperson

Best to focus on what is learned during the sales process

Emotions Connect emotionally to the buyers reason to purchase

Important to express empathy



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Inspiring Your Team Members(continued)

Accountability

Easy to identify a goal; harder to commit to achieving

Sales manager should set goals and communicate theirprogress

Discuss importance of accountability with team members Likeable

Inspire team members to see themselves from buyersperspective assess their behaviors

Get team members to think positively and congratulate

themselves for expanding their comfort zones

First and most important step in building relationships mustcome from within!



Based on: Rick Wnuk, Keep Your Team Members Real, Sales & Marketing Management,September/October 2008, 16-17.

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Maximizing the Buyers Value

Benefits

Costs

Functional Benefits + Emotional BenefitsMonetary Costs + Time Costs + Energy Costs + Psychic Costs

=

Value

Increase value by

Increasing benefits1

Decreasing costs2

Both3

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Risk and the Organizational Buyer

Easiest and leastexpensive way toreduce risk is bysharing information

CRM systemprovides commoninformation withinthe sales

organization that canimprove theprobability of highercustomer service

levels

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Important SalespersonBehaviors

Fostering a long-term perspective

Being honest and sincere

Understanding customer needs and problems

Meeting commitments

Providing after-sales service

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Why Business Relationships

End Partner is toocomplacent

Goals no longer match

Cultures have diverged

1 or both parties havebehaved irresponsibly

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Discussion Questions

How can a sales manager minimize theloss of a valued customer?

Should the sales manager intervene orshould the assigned salesperson try tosalvage the relationship?

What influence does trust have on

customer dissatisfaction?

How does a company instill trust in therelationship strategies?



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Role Play: Managing a Sales Teamat Alamance Associates

The players

Henry Conner, Sales Manager at Alamance Associates (AA)

Jerry Phillips, AA Account Manager for Four Part Solutions Linda Lu, Design Engineer at Alamance Associates

Devin Jackson, Service Manager at Alamance Associates

Four Part Solutions asks Jerry to meet about

purchasing new line of machinery and installationand services contract

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Role Play: Managing a Sales Teamat Alamance Associates

Henry appoints sales team

Jerry, Linda (design engineer), Devin

Henry has set meeting with team to hear concerns and

suggestions about meetings with Four Part Solutions At the conclusion of the meeting, Henry must

Appoint a sales team leader

Determine what questions the team will propose to

Four Part Solutions Decide how he will evaluate the team and structure

the members compensation

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Role Play (continued): Action Steps Break into groups of 4

Each student plays one character

Work individually to summarize a list of concerns andquestions that are important to your area of expertise at

AA

Meet as a group and role-play the meeting betweenHenry, Jerry, Linda, and Devin

Initial goal is to conclude the meeting with an agreed-upon list of

questions that will be discussed at the initial meeting with the FourPart Solutions Buying Team

Work together as a group to determine who should be theteam leader, how the team will be evaluated, and what

type of compensation each member should receive

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Sales Managers Workshop: Adjusting theTerritory Sizes within a Sales District

You are sales manager for a district with 5 sales repsassigned to geographic territories

Some territories are growing

Several reps dont have time to properly call on newcustomers while serving old

Other territories are stagnant

Adjust the sizes of the territories, using appropriate

criteria Using Applicor data, compare sales revenue, potential,

number of accounts per territory to analyze currentworkload for each territory

Recommend appropriate changes

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Caselet 5.1: Managing BuyingDynamics at Hughes Aircraft

WRT Electronics sells to Hughes Aircraft

Hughes purchasing administrator tells sales rep that WRTwill be in a bidding war

RFQ Purchasing admin: supplier selected based on price

Design engineer: conformity to design tolerance iscriteria

Quality assurance mgr: initial contract is 6 mos,supplier with fewest quality issues will win multi-yearcontract

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Caselet 5.1 (continued):Questions

How can Fred explain the motivations ofthe three Hughes employees to his

salesperson, based upon the differentbuying roles they play?

Could Fred explain each buyers weight

using the multi-attribute model? What pointers should Fred offer his

salesperson to successfully manage this

major account? Why?

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Caselet 5.2: Choosing a CRM System forBurlington Mechanical Solutions

BMS wants to introduce customer relationshipmanagement strategy

Sales force is organized by product and geography

Each rep has about 30 customers Spending significant time with B (potential to

become key) and C accounts (less profitable)

What process should BMS follow to purchase a CRM

system? System must be user-friendly, or sales force will

oppose it

BMS should identify the type of information that will

benefit the force

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Caselet 5.2 (continued):Questions How can Puckett (VP Sales) ensure the CRM system is easy for the

sales force to load and use?

What role can members of the sales force play in making the CRMsystem user friendly?

Is CRM an information-based system, a sales force-based strategy,or both?

How does each role vary? In what ways do they vary?

Make a list of important information that a CRM should provide to asales force.

How should a sales manager use this information to assist thesales team?

What is the likely outcome if CRM information does not help thesales force succeed?

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All rights reserved. No part of this publication may be reproduced, stored in a

retrieval system, or transmitted, in any form or by any means, electronic,

mechanical, photocopying, recording, or otherwise, without the prior written

permission of the publisher. Printed in the United States of America.

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