Part II SALES FORCE ACTIVITIES

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Part IISALES FORCE ACTIVITIES

• Chapter 4
• Account Relationship Management

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Account Relationship Management Concepts
Account Purchasing Process
The Buying Center
Building Account Relationships
Account Relationship Binders
Figure 4-1 Account Relationship Management
Concepts
3
Implementation and Evaluation
Purchase Decision
Evaluation of Options
Recognition of Needs
Value Added Role of Sales Force
Figure 4-2 The Typical Purchasing Process
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PURCHASING - Survey Results
Do you track supplier performance?
Do you single out certain suppliers as preferre
d?
9 N.A.
Yes 55
No 36
( of respondents)
( of respondents)
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PURCHASING - Survey Results
Do you have multiple tiersfor ranking suppliers
?
No 40
Yes 51
9 N.A.
( of respondents)
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PURCHASING - Survey Results
Have any suppliers attained and lost top-level s
tatus?
No 23
Yes 77
( of respondents)
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PURCHASING - Survey Results
Traits of Top-Performing Suppliers
( of respondents)
. . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . Others
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . Good Management . . .
. . . . . . . . . . . . . . . . Good
Response/Flexibility . . . . .
. . . . . . . . . . . . . . . ISO 9000
Certification .
. . . . . . . . . . . . . . . . . . . . . . . .
Service . .
. . . . . . . . . . . . . On-Time Delivery

Quality
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Figure 4-3Tiering of Suppliers
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Standard Questions in a Value Analysis Study

• Value Analysis Focus TOTAL COST
• Can the item be eliminated?
• If item not standard, can standard item be used?
• If item standard, does it completely fit
  application or misfit?
  
• Does item have greater capacity than required?
• Can its weight be reduced?
• Is there a similar item in inventory that can be
  substituted?
  
• Are tolerances specified closer than necessary?
• Is unnecessary machining performed on the item?

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Standard Questions in a Value Analysis Study

• Value Analysis Focus (continued)
• Are unnecessary fine finishes specified?
• Is commercial quality specified?
• Can item be manufactured cheaper in-house
• If manufactured in-house can it be purchased
  cheaper?
  
• Is item classified to obtain lowest shipping
  rate?
  
• Can packaging costs be reduced?
• Are suppliers asked for suggestions to reduce
  costs?

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Total Cost of Repetitively Used Items
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Determine the Decision-Making Process

• Nothing is more important to driving an accurate
  selling strategy than understanding your clients
  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 peoples
  votes count more than others.
  
• Know who gets a straw vote and who gets a real
  one.

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Determine the Decision-Making Process

• 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 youve been chosen.
  
• Analyze each stakeholder based on pain,
  preference, power, and the part he or she plays
  in the decision-making process.
  
• Dont resort to price or discounts to create a
  sense of urgency.
  
• In negotiation, power lies in alternatives,
  weakness in deadlines.

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Buying Center Members
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Economic Buying Influence
ROLE 4 Asks Why 4 Gives final approval C
HARACTERISTICS 4 Access to money
4 Can release money 4 Veto power FOCUS 4 To
tal organization 4 Bottom line 4 The Future
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User Buying Influence
ROLE 4To decide on how a purchase will affec
t job performance CHARACTERISTICS 4Implement
ation oriented 4Use or supervise use of produc
t or service FOCUS 4Tactical, not strategic
4The job to be performed
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Technical Buying Influence
ROLE 4To eliminate alternatives 4To recommend
CHARACTERISTICS 4Focuses on quantifiable as
pects of product and service
4Gatekeeper 4Can only say no, not yes
FOCUS 4Product specifications 4Asks What,
not Why
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Advocate
ROLE 4Helps guide the sale CHARACTERISTICS
4May be inside or outside of the buying
organization 4Furnishes and interprets inform
ation FOCUS 4Your success
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AdvocateWhy Your Winning is a Personal Win
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AdvocateWays 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.

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Figure 4-4 Stages in a Buyer-Seller Relationship
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Business Expansion Questions
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Thomass Five Conflict Management Approaches
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Dissolution Stage Warning Signals

• Missing information
• Uncertainty about information
• Uncontacted buying influence
• Customer personnel new to the job
• Reorganization

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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 companys net
profit of 20 to below 10.
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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
theyd remember and thank me later with new
business. I think the concessions were
justified.
How would you respondto Rogers if you were
hissales manager?

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Account RelationshipsExploration Stage Pricing
Flexibility

• Consider the followingSalesforce Market
  Conditions
  
• 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

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Account RelationshipsExploration Stage Pricing
Flexibility

• Alternative Management Systems
• Low Pricing AuthorityManagement approval
  required forall price discounts
  
• Medium Pricing AuthorityA specific limit placed
  on discounting (e.g., 10 below list price)
  
• High Pricing AuthorityBase commissions on gross
  margins to control price discounting

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Account RelationshipsPricing Flexibility
Research Results
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ConsiderationsWhen Choosing a Partner
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Account Relationships

• Relationship Enhancers
• Creating ValueAcceptable conduct and
  performance
  
• Meeting ExpectationsMeasures of performance
  levels
  
• Building TrustImportance of trust

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Customer Value Creationin the Purchasing Process
Figure 4-5 Customer Value Creation in the
Purchasing Process
High Customer Value Low
Relationships ___ Enterprise ---- Consultative
..... Transactional
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Figure 4-6 Account Intelligence

• Market Intelligence
• Which of the customers 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?

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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?

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Figure 4-7 Account Relationship Strategy and
Relationship Binders
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Accuracy of SalespeoplesCustomer Perceptions

• Measures of Performance Levels
• 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 ()

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Accuracy of SalespeoplesCustomer Perceptions

• Results
• Salespeoples 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.

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The Importance of Trust Selected Research
Findings

• 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
Sellers Trustworthiness and Bargaining
Toughness, Journal of Consumer Research,11
(March), 939-953. ²John Swan and Frederick Trawic
k,Jr. (1987), Building Customer Trust in the
IndustrialSalesperson Process and Outcomes,
Advances in Business Marketing, 2, 81-113.
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Earning Buyer TrustWhat is Most Important?
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Account Relationships
Source Hawes, Mast Swan (1989) JPSSM 193
Salespeople 173 Purchasing Agents
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A Valued Customer

• Jacobs is about to close the sale when the buyer
  mentions, Theres been 5,500 worth of breakage
  because of your lousy packaging, but Im willing
  to split it with you if you give the word right
  now. Ive another appointment beginning in a
  few minutes. Jacobs suspects that the breakage
  was the fault of the buyers 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?