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Chapter 3

Linking Strategies and the Sales Role in the Era of Customer Relationship Management

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Learning Objectives

• Understand and outline the key components and goals of CRM• Explain the importance of market orientation and how a market

orientation is fostered within the firm• Identify the key steps in developing and implementing strategies• Describe the role of personal selling in marketing strategy• Outline the stages in developing strategic partnership

relationships between organizations• Discuss the actions salespeople can take to ensure a long-term

buyer-seller relationship 2

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Key Terms

• marketing concept• marketing mix• marketing communication mix

(promotion mix)• market orientation• customer orientation• customer-centric• formalization• customer relationship management

(CRM)• touchpoints• mass marketing• target marketing• customer marketing• one-to-one marketing• customer value• customer loyalty• lifetime value of a customer• firing a customer

•customer delight•upgrading•full-line selling•cross-selling•preferred supplier•total quality management (TQM)•integrated marketing communication•pull strategy•push strategy•just-in-time reorder and delivery•category management•supply chain alliances•efficient consumer response (ECR)•selling team•top-to-top selling

•data warehouse•data mining•return on customer investment•strategic direction•mission statement•goals•objectives•strategic business units•sustainable competitive advantage•distinctive competencies•generic strategies•market opportunity•marketing program•market exchanges•functional relationships•strategic partnerships•trust

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Key Terms

• Marketing concept (pg. 73)– Turning to consumers themselves for input in making strategic decisions about what products to market, where

to market the products and how to get them to market, at what price, and how to communicate with consumers about the products.

• Marketing mix (pg. 73)– The four elements of product, distribution, price, and promotion.

• Marketing communication mix (promotion mix) (pg. 73)– The promotional message used by a firm to communicate with customers

• Personal selling• Advertising• Sales promotion• Direct marketing• Public relation/publicity

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Key Terms

• Market orientation (pg. 73)– The implementation of the marketing concept.

• Customer orientation (pg. 73)– The firm places the customer in the center of all strategic decisions and firm

activities.• Customer-centric (pg. 73)

– Firms high in customer orientation because they have the customer at the center of their business model.

• Formalization (pg. 73)– The process of setting up structure, processes and tools, and managerial knowledge

and commitment in support of the market oriented or customer-centric culture.

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Key Terms

• Customer Relationship Management (CRM) (pg. 73)– The most prevalent formalization of a customer-centric culture in

which the comprehensive business model for increasing revenues and profits focuses on customers. Three goals of CRM are customer retention, acquisition and profitability.

• Touch-points (pg. 74)– The intersection of business events via a channel using a medium

where the selling firm touches the customer in some way, thus allowing for information about customers to be collected.

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Key Terms

• Customer marketing (pg. 74)– Focusing on developing relationships with individuals.

• One-to-one marketing (pg. 74)– Ability to customize offerings for individual users.

• Customer value (pg. 75)– When customer weighs the costs (monetary and otherwise) of a relationship

with a seller, the benefits realized from that relationship outweigh the costs.• Customer loyalty (pg. 75)

– When customers are highly satisfied with the relationship and the product offering, and are very unlikely to switch to another company and its products or brands.

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Key Terms

• Lifetime value of a customer (pg. 76)– Pay off in terms of cost savings, revenue growth, profits, referrals, and

other important business success factors. It is possible to calculate an estimate of the projected financial returns from a customer, providing a very useful strategic tool for deciding which customers deserve what levels of investment of various resources (money, people, time, information, etc.)

• Firing a customer (pg. 76)– This can occur when a customer exhibits a low predicted lifetime value

and resources are better used elsewhere.

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Key Terms

• Data warehouse (pg. 76)– The compilation of information obtained from touch-points and transformation

of that information into useful information for customer strategy development.•

Data mining (pg. 76)– The use of software techniques to learn more about current and potential

customers from large data warehouses of information.• Return-on-customer-investment (pg. 78)

– Related to the lifetime value of a customer, this is the financial evaluation of a customer relationship.

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Key Terms

• Strategic direction (pg. 82)– The mission and goals on which a firm’s marketing strategy may be built

and implemented.• Mission statement (pg. 82)

– The answer to the most basic questions about a firm’s reason for being.• Goals (pg. 83)

– Coming from the mission statement, goals are more specific targets the firm wishes to meet.

• Objectives (pg. 83)– More specific targets than goals. Objectives should be specific,

measurable, and realistically attainable.• Strategic business units (SBUs) (pg. 83)

– Multiple divisions of a company likely to have its own objectives and a distinct strategy for accomplishing them.

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Key Terms

• Sustainable competitive advantage (SCA) (pg. 83)– This is the keystone of a business-level strategy about how a business

will compete it its market based on the set of distinctive competencies exhibited by the firm, the quality or attribute of the organization that sets it apart from its competitors.

• Distinctive competencies (pg. 83)– The quality or attribute of the organization that sets it aside from its

competitors. How is it, or how will it be, different from the rest of the pack.• Generic strategies (pg. 83)

– Common strategies pursued by business units across a variety of industries. Most common are low cost, differentiation, and niche or focus.

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Key Terms

• Market opportunity (pg. 83)– Exists whenever some human need is unsatisfied.

• Marketing program (pg. 86)– A combination of elements from the marketing mix to implement the

strategy. It reflects a particular allocation of financial and human resources.• Market exchanges (pg. 87)

– One-shot transactions that occur between a buyer and seller without much thought of future interaction.

• Functional relationships (pg. 88)– Long-term relationships between buyer and seller based upon close

personal friendships.

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Key Terms

• Strategic partnerships (pg. 88)– Long-term relationships in which the partners make significant investment to

improve profitability of both companies and jointly achieve strategic objectives.• Trust (pg. 90)

– Important part of developing long-term relationships, and represents confidence that a salesperson’s word or promise can be believed and that the salesperson has the long-term interests of the customer at the core of his/her approach to doing business.

•

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Key Terms

• Customer delight (pg. 90)– Exceeding customer expectations to a surprising degree. This is a powerful

way to gain customer loyalty.• Upgrading (pg. 91)

– Convincing the buyer to use a higher-quality product or newer product (similar to generating repeat sales.)

• Full-line selling (pg. 91)– Selling the entire line of associated products.

• Cross-selling (pg. 92)– Similar to full-line selling but reflects selling products that may not be related.

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Key Term

• Preferred supplier (pg. 92)– In general the supplier is assured a large percentage of the buyer’s

business and will get the first opportunity to earn any new business.• Total quality management (TQM) (pg. 92)

– The process of continually working to eliminate errors and defects in all aspects of a company’s products and processes.

• Integrated marketing communications (IMC) (pg. 93)– Various ways a firm strategically communicates its message about its

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Key Terms

• Pull strategy (pg. 96)– Attempts by a firm to build strong customer demand for its brand. Key

Terms

• Push strategy (pg. 96)– Attempts to build reseller support, by offering direct inducements to

potential wholesalers and retailers to encourage them to stock the product.• Just-in-time reorder and delivery (pg. 96)

– Process to help resellers reduce their investments in inventory and improve inventory turnover.

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Key Terms

• Category management (pg. 96)

– Manufacturers work with resellers to maximize sales volumes and margins in the product categories in which the selling firm’s products are represented.

• Supply chain alliances (pg. 97)

– Used to strengthen relationships with major customers, by involving customers in the development of joint information and reorder systems.

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Key Terms

• Efficient consumer response (ECR) (pg. 97)– An automated system in which sales information from stores is sent

directly to computers, which figure out automatically when to replenish each product and schedule deliveries direct to each store. This paperless exchange minimizes mistakes and bill-backs, minimizes inventory, decreases out-of stocks, and improves cash flow.

• Selling team (pg. 98)– A group of representatives from various functional departments of the

company assigned to a single customer.• Top-to-top selling (pg. 98)• Executives at the very top of firms (even CEOs) are directly involved in selling

to major strategic partner customers

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CRM is…

• a comprehensive business model for increasing revenues and profits by focusing on customers.

• both an overarching business philosophy and a process tool to facilitate a truly customer-driven enterprise.

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CRM is…

“…a journey of strategic, process, organizational and technical change whereby a company seeks to better manage its enterprise around customer behaviors. This entails acquiring knowledge about customers and deploying this information at each touchpoint to attain increased revenue and operational efficiencies.”

PriceWaterhouse Coopers

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Customer Orientation

• Continues to move toward being customer-centric. • Builds upon…

– The marketing concept which overarches all business strategy– Use of the marketing mix as a “tool kit” for marketing strategy

creation– Consumers information fueling strategic decisions about products – Aligning all business processes and functions to maximize the

firm’s success.

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Customer-Centric Cultures Include…

• Adopting a partnership business model with mutually shared risks and rewards

• Defining selling as customer business consultation

• Formalizing customer analysis processes and agreements

• Being proactive in educating customers about value chain and cost reduction opportunities

• Focusing on continuous improvement principles stressing customer satisfaction

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Marketing Evolution

MASS MARKETING

Evolved in the early 1900s and dominated marketing management for decades

TARGET MARKETING

In the ‘60s, many firms began to apply the principles of segmentation to different customer groups.

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CUSTOMER MARKETING

In 1980, the focus shifted towards developing customer relationships.

ONE-TO-ONE MARKETING

Technology allows firms to customize offerings to individual users.

Marketing Evolution

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Objectives of CRM

• Customer Retention - retain loyal and profitable customers and channels

• Customer Acquisition - acquire customer based on known characteristics which drive growth and increase margins

• Customer Profitability - increase individual customer margins by offering the right product at the right time

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Advantages of CRM

• Reduces advertising costs• Increases awareness of customer needs• Tracks the effectiveness of promotional campaigns• Allows competition for customers based on service, not prices• Prevents overspending on low-value clients and under spending on

high-value ones• Speeds the time it takes to develop and market a product• Improves use of the customer channel

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10 Critical Questions in CRMCustomers

1. Who are our customers?2. What do our customers want and expect?3. What is the value potential of our customers?

The Relationship4. What kind of relationship do we want to build?5. How do we foster exchange?6. How do we work together and share control?

Managerial Decision Making7. Who are we?8. How do we organize to move value closer to our

customers?9. How do we measure and manage our performance?10.How do we increase our capacity for change?

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The Importance of Market Orientation

Successful salespeople think beyond “selling”

• Market-driven companies do better market sensing• Market-drive companies develop stronger relationships with

customers and channels• Internal partnering is a critical component of market

orientation

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Process of Strategy Development

• The mission statement answers the most basic questions about an organization’s reason for being.

• Firms should define their mission in terms of broad human needs to be satisfied.

• This approach makes it easier to identify attractive market opportunities.

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Process of Strategy Development

Goals – flow from the firm’s mission statement and represent specific targets the firm intends to hit.

Objectives – more specific than goals and should always be:– Specific– Measurable– Realistically attainable

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SBU Strategy

Business-level strategy involves how the business will compete in its industry to achieve a sustainable competitive advantage (SCA)

An SCA focuses on distinctive competencies

Porter’s Three Generic Strategies:• Low Cost• Differentiation• Niche

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Personal Selling’s Role in Marketing Strategy

Market exchanges - one-shot transactions occurring between a buyer and seller with limited thought of future consideration

Roles of salespeople in market exchanges• Create new value• Adapt• “Make the market”• Exit

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Personal Selling’s Role in Marketing Strategy

Functional relationships create a climate of cooperation, with open and honest communication.

• Functional relationships engender a high level of personal trust in well managed business activities.

• One danger is what happens when one party is the relationship leaves.

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Personal Selling’s Role in Marketing Strategy

Strategic Partnerships are long-term relationships where both parties make significant investments.

• This relationship requires direct communication with production, production designers, and others.

• Salespeople serve two roles-- relationship manager and general manager.

• Strategic partnerships work best with clients large enough to make investments worthwhile.

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Stages in Relationship Development

Stage I – Exploration• Determine value, build trust, set expectations, monitorStage II – Expansion• Generate repeat sales, full-line selling, cross-sellingStage III – Commitment• Build loyalty, become a preferred supplier, engage in

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Role of Personal Selling in IMC

An Integrated Marketing Communications (IMC) strategy effectively integrates personal selling, advertising and other communications options

Advantages of Selling in IMC• Face-to-face contact• More persuasive• More demonstrative• Customization opportunities

Disadvantages of Selling in IMC• Limited ability to duplicate• More costly

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Customer Satisfaction and Feedback

Maintaining customer loyalty is one outcome of customer orientation.

Loyal customers. . .1. Tend to concentrate on their purchases.2. Provide positive word-of-mouth and customer referrals.3. May be willing to pay premium prices for the value they receive.

Satisfaction measures need to be supplemented with examinations of customer behavior, such as annual retention rate, frequency of purchases and percentage of the customer’s total purchases captured by the firm.

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Summary• Firms today strive to create a market-oriented,

customer-centric culture. Within such a culture, the role of personal selling is vital to the successful development and implementation of marketing strategies.

• CRM provides the firm with necessary formalization for success. That is, a well-implemented CRM business model offers structure, processes and tools, and managerial knowledge and commitment in support of the customer-centric culture. With these things in place, marketing strategies and programs may be successfully developed and executed toward the goals related to customer centricity. In general, these goals revolve around establishing and maintaining long-term customer relationships.

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