part three: analyzing customers and markets copyright © 2009 pearson education, inc. publishing as...

Part Three:Analyzing Customers and Markets

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.5-1

Sales Management: Shaping Future Sales Leaders

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.5-2Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Business-to-Business (B2B) Sales and Customer Relationship Management

Chapter 5

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

Learning Objectives

Recognize how people make organizational purchasing decisions

Describe and explain the three buying situations

Identify the different roles played by buying center members

Understand individual forces that influence the B2B buying process

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 successful customer relationships


Understanding B2B Purchasing Decisions

Personal relationship skills

Highly skilled sales force

Constant support from other functional groups, especially sales managers

Information technology system that’s easy to use and gives accurate and near-real-time information


The Buyer’s Decision-Making Process

Problem Recognition

Information Search

Evaluation of Alternatives

Purchase Decision

PostpurchaseEvaluation


Organizational Buying Situations

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 or product changes

New Buy Occurs when a complex or expensive product is

purchased for the first time


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

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

1. Recognize problem Yes Perhaps No

2. Determine product characteristics Yes Perhaps No

3. Determine product specifications 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/product performance Yes Yes Yes


Understanding the Buyer’s Criteria

A multi-attribute matrix is used to evaluate vendors by assigning an importance weight to categories like price, product conformance, delivery time, and manufacturing 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


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

Initiator: starts the purchase process by recognizing a need

Decision maker: person/committee that makes the final decision

Purchaser: any person who actually buys the product

Controller may approve or set budget for purchase

Influencers: individuals who affect the decision maker’s final choice through recommendations about which vendors to include or which products will best meet needs

Users: their jobs require that they implement and evaluate what was purchased

Gatekeepers: control information Screens and filters

Discussion Questions

Why is it important for a salesperson to correctly identify the decision-maker in a buying center?

How can a sales manager coach the salesperson to find out who the decision maker is?

What is likely to happen IF the salesperson misidentifies buying center roles?

Do buying center members always know their roles?



Team Selling and Multi-Level Selling

Extended selling team advantages

Quicker response to buyer questions

Ability to speak to one’s counterpart who understands technical language

Capability to work as a group to offer multidisciplinary solutions to complex buyer problems

Challenges Coordination, communication, and compensation challenges More expensive


Team Selling and Multi-Level Selling

Multi-level selling occurs when two or more people from 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 to market total systems

Value-added reseller (VAR) purchases products from manufacturers and assembles them into a system before delivering the package to specialized customer segments


B2B Customer Relationship Management

Customer Relationship Management

Identifying and grouping customers in order to develop an appropriate relationship strategy

So the organization can acquire, retain, and grow the business


Technology in Sales Management

Technology can help ensure a firm’s sales are profitable

Programs analyze orders for profitability as they 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.


Data Mining

Companies data mine information collected in CRM databases Purchase dates, incentives offered the customer,

product/services purchased, selling price, the buyer’s position in the organization, number of rep visits between buys, and samples and promotional materials requested

Allows identification of important relationships or “connections” that might not be readily apparent

Can conduct competitive analyses that result in higher sales revenues, lower order entry errors, and increased acquisition of new customers


Customer-Centric Sellers

CRM technology helps firms become more market- or customer-oriented

Firms practice a market orientation when business processes and functions are aligned to maximize effectiveness in the marketplace

A market-oriented selling firm places the buyer at the center of all of the strategic decisions


The Nature of B2B Relationships

IntegrativeRelationships

Deepest relationship, where selling firm becomes the buyer’s sole source supplier

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

FacilitativeRelationships

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

TransactionalRelationships

Buyer-seller relationship can be adversarial when either party views the situation from a purely economic perspective


Differences in Key Variables Based on Stage of Relationship

Relationship Transactional Facilitative Integrative

Trust Little trust Increasing trust Broad trust

Communication Buyer-seller “bow tie” A few depts begin communicating

Direct communication between all depts

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

Commitment Little expectations beyond current contract

Growing commitment by buyer & seller

Long-term expectations of partnership

Feedback Little expectation of feedback

Growing acceptance of feedback

Honest feedback expected and sought

Sales programs Little opportunity to cross-or up-sell

May switch to inside salesperson

Expansive opportunity to cross- or up-sell

Profits Little concern for supplier profits More concern

Acknowledgement that supplier must make reasonable profit

Competitive advantage

Little other than current buy

Growing competitive advantage Customized offering

S o u th A tlan tic O ce an S o u th P ac if ic O cean

N o rth P ac ific O cean

N o rth A tlan tic O ce an

In d ia n O c ean

A rc tic O ce an A rc tic O ce an A rc tic O ce an

N o rth P ac ific O cean

U n ited S ta te s o f A m erica

U .S .A .

C an a d a

M e x ic o

B raz il

U . S . A .

F re n c h P o ly n e s ia (F r.)

A rg e n tin a U ru g u a y

P a ra g u a y

C h ile

B o liv ia

P e ru

E c u a d o r

C o lo m b ia

Ve n e z u e la F re n c h G u ia n a (F r.)

S u rin a m e G u y a n a

T h e B a h am a s

C u b a D o m in ica n R e p u b lic

P a n a m a C o s ta R ic a

N ica ra g u a

H o n d u ra s G u ate m a la

E l S a lv a d o r

T rin id a d a n d To b ag o

Ja m . H a iti P u e rto R ic o (U S )

G re e n la n d (D e n .)

Ic e la n d

M a d a g a sc a r

S o u th A fr ic a L e so th o

S w a z ila n d

M o z a m b iq u e

Ta n z a n ia

B o tsw a n a N a m ib ia Z im b a b w e

A n g o la

Z a ire

Z a m b ia

M a la w i

B u ru n d i

K e n y a R w a n d a

U g a n d a

C o n g o

G a b o n

S o m a lia

E th io p ia

S u d a n

D jib o u ti

B e liz e

E g y p t L ib y a

C h a d

N ig e r

A lg e ria

M a li

T u n is ia

N ig e r ia

C a m e ro o n C . A . R .

B e n in

To g o G h an a

B u rk in a F a so B a rb a d o s

D o m in ica

C ô te D ’Iv o ire

L ib e ria

S ie rra L e o n e

G u in e a G u in e a -B issa u

S e n e g a l T h e G a m b ia

M a u rita n ia

W es te rn S ah a ra (M o r.)

M o ro c c o

F in la n d

N o rw a y

S w e d e n E sto n ia L a tv ia

L ith u a n ia

P o lan d

R o m a n ia

B u lg a r ia

T u rk e y G re e c e

C z ec h .

H u n g .

I ta ly A lb a n ia

P o rtu g a l

F ra n c e

S p a in

A u s. S w itz .

U n ite d K in g d o m

Ire la n d

D e n .

G e rm an y N e th .

B e l.

C y p .

Ye m e n

O m a n S a u d i A ra b ia U . A . E .

Q a ta r

I ra n I ra q

S y ria

Jo rd a n

Isra e l L e b . C h in a

M o n g o lia

R u ss ia

A fg h a n is ta n

P a k is ta n

In d ia

S ri L an k a M a ld iv e s

N e p a l B h u .

M y a n m a r (B u rm a ) B a n g .

A n d a m a n Is la n d s (In d ia )

T h ai la n d

In d o n e s ia

M a la y s ia

B ru n e i

P h ilip p in e s

Ta iw a n

C a m b o d ia

V ie tn a m

L a o s

A u stra lia

P a p u a N ew G u in e a

N e w Z e a la n d

F ij i

N e w C a led o n ia

S o lo m o n Is la n d s

K ir ib a ti

M a rs h a ll Is lan d s F e d e ra te d S ta te s o f M ic ro n es ia

G u am (U S A )

Ja p a n

N . K o re a

S . K o rea

K u ri l Is la n d s

W ra n g e l Is la n d

A leu tian Is lan d s (U S A )

N e w S ib e r ia n Is la n d s

S e v e rn a y a Z e m ly a

N o v a y a Z e m ly a

F ra n z Jo se f L a n d S v a lb a rd (N o r.)

Ja n M a y en (N o r.) B a n k s Is lan d

Vic to r ia Is la n d B a ffin Is la n d

E lle sm e re Is la n d

Is lan d o f N e w fo u n d lan d

A n ta rc tic a

Î le s C ro ze t (F ra n ce )

Tasm an ia

S o u th G e o rg ia (a d m . b y U K , c la im e d b y A rg e n tin a )

F a lk la n d Is la n d s (Is la s M a lv in a s) (a d m . b y U K , c la im e d b y A rg e n tin a )

K u w a it C a n a ry Is la n d s (S p .)

S a o To m e & P rin c ip e

S in g a p o re E q . G u in e a

F a ro e Is . (D en .)

K a z a k h s ta n

B e la ru s

U k ra in e

M o ld o v a

G e o rg ia A rm e n ia A z e rb a ija n

T u rk m e n is ta n

U z b e k is ta n K y rg y z sta n

Yu g o .

M a c .

S lo v. C ro .

B o s .

S lo v a k .

E ri tre a

Ta jik is ta n

H aw a iian Is lan d s

G a la p ag o s Is la n d s (E cu a d o r)

M a u rit iu s

S e y c h e lle s

6 0 °


Global Sales Management: Forming Business Relationships in Other Cultures

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

In Japan, the process of forming a relationship requires a significant amount of effort that involves proving to your Japanese customers that you can be trusted to provide them with the products or services they need to keep their businesses running

Socializing (going out at night for karaoke, drinking and talk) 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 aBasis for Understanding Japanese Business Practices,” Business Horizons, 35:6, 27–34.


Customer Lifetime Value (CLV) Strategies

Customer lifetime value: profitability of partnering with a buyer for an extended period of time

3 criteria to compute CLV (future customer profitability)

Probability of future purchases1

Future marketing costs2

Future contribution margins3


Computing CLV


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/telemarketing

Optimal contact: biweekly

High potential customer value

Constant sales force interaction

Weekly visits


Optimal contact: weekly

Highest customer value

Low Lifetime Earning Value

Extended sales force visits

Yearly intervals


Optimal contact: quarterly

Low value customer

Infrequent sales force visits

6-month intervals


Optimal contact: bimonthly

Low potential customer value


The Stages of B2B Customer Relationship Management

Up-sell / cross-sell to existing customers

1

Manage customer relationships to earn higher profits

2

Offer customized solutions to most profitable buyers

3

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 make “REAL”

connections 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 buyer’s reason to purchase Important to express empathy


Inspiring Your Team Members (continued)

Accountability Easy to identify a goal; harder to commit to achieving Sales manager should set goals and communicate their progress Discuss importance of accountability with team members

Likeable Inspire team members to see themselves from buyer’s

perspective – 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

must come from within!


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


Maximizing the Buyer’s Value

Benefits

Costs

Functional Benefits + Emotional Benefits

Monetary Costs + Time Costs + Energy Costs + Psychic Costs=

Value

Increase value by

Increasing benefits1

Decreasing costs2

Both3


Risk and the Organizational Buyer

Easiest and least expensive way to reduce risk is by sharing information CRM system provides

common information within the sales organization that can improve the probability of higher customer service levels


Important Salesperson Behaviors

Fostering a long-term perspective

Being honest and sincere

Understanding customer needs and problems

Meeting commitments

Providing after-sales service


Why Business Relationships End

Partner is too complacent

Goals no longer match

Cultures have diverged

1 or both parties have behaved irresponsibly

part three: analyzing customers and markets copyright © 2009 pearson education, inc. publishing as...

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