part three: analyzing customers and markets copyright © 2009 pearson education, inc. publishing as...
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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
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.5-4
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
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.5-5
The Buyer’s Decision-Making Process
Problem Recognition
Information Search
Evaluation of Alternatives
Purchase Decision
PostpurchaseEvaluation
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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
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.5-7
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
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.5-8
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
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.5-9
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?
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.5-10
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.5-11
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
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.5-12
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
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.5-13
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
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.5-14
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.
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.5-15
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
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.5-16
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
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.5-17
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
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.5-18
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 °
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.5-19
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.
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.5-20
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
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.5-22
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
Direct mail/telemarketing
Optimal contact: weekly
Highest customer value
Low Lifetime Earning Value
Extended sales force visits
Yearly intervals
Direct mail/telemarketing
Optimal contact: quarterly
Low value customer
Infrequent sales force visits
6-month intervals
Direct mail/telemarketing
Optimal contact: bimonthly
Low potential customer value
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.5-23
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
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.5-24
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!
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.5-25
Based on: Rick Wnuk, “Keep Your Team Members Real,” Sales & Marketing Management, September/October 2008, 16-17.
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.5-26
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
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.5-27
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
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.5-28
Important Salesperson Behaviors
Fostering a long-term perspective
Being honest and sincere
Understanding customer needs and problems
Meeting commitments
Providing after-sales service
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