Part II

SALES FORCE ACTIVITIES

Part II

SALES FORCE ACTIVITIES

Chapter 4:Chapter 4:

Account Account Relationship Relationship ManagementManagement

AccountAccountPurchasingPurchasing

ProcessProcess

AccountAccountPurchasingPurchasing

ProcessProcess

Figure 4-1:Figure 4-1: Account Relationship Management Concepts Account Relationship Management Concepts

The The BuyingBuyingCenterCenter

The The BuyingBuyingCenterCenter

BuildingBuildingAccountAccount

RelationshipsRelationships

BuildingBuildingAccountAccount

RelationshipsRelationships

AccountAccountRelationshipRelationship

BindersBinders

AccountAccountRelationshipRelationship

BindersBinders

Account Relationship Account Relationship Management ConceptsManagement Concepts

Purchasing ProcessPurchasing Process

A key determinant of the nature of the purchasing process is the buying situation faced by an account.

Three different types of situations are possible each of which will influence the nature if the four steps in the purchasing process and the opportunity for the seller to provide value to the customers.

Purchasing ProcessPurchasing Process

1. The straight Re-buy purchasing situation: the product has been purchased and there is no change desired in the product or the offering, the seller can add value for the customer by making the purchase easy and convenient.

Purchasing ProcessPurchasing Process

2. A modified Re-buy purchasing situation: occurs when some changes are anticipated in a product that the buyer has been purchasing.

3. The most complex purchasing decision is the new buy purchasing situation: the seller has the opportunity to add value for the buyer during the three of the four stages of the purchasing process

ImplementationImplementationand Evaluationand Evaluation

ImplementationImplementationand Evaluationand Evaluation

Value Added Role of Sales Force:Value Added Role of Sales Force:

Figure 4-2:Figure 4-2: The Typical Purchasing ProcessThe Typical Purchasing Process

PurchasePurchaseDecisionDecisionPurchasePurchaseDecisionDecision

Evaluation Evaluation of Optionsof OptionsEvaluation Evaluation of Optionsof Options

RecognitionRecognitionof Needsof Needs

RecognitionRecognitionof Needsof Needs

Help customersrecognize a needor problem and to define them in a new or differentway.

Identify options, provide superior solutions and approaches and help overcome obstacles to acquisition

Make the purchasing process convenient, hassle-free and inexpensive.

Support the purchase decision by showing customers how to install and use the product, replenish, and evaluate value.

Recognition of NeedsRecognition of Needs

The first stage in the purchasing process occurs when the account recognizes that a need exists.

Derived demand: refers to the dynamic in which the demand for a product or service is derived from the demand for the customer’s products and services.

Evaluation of OptionsEvaluation of Options

Businesses may spend considerable time and money in searching and evaluating the alternative supplier, depending on the strategic significance of the purchase.

Its especially critical for the seller of premium priced products and services to develop an effective process for helping customers to evaluate the total value of the offering.

SpecificationsSpecifications

The development of a precise statement referred to as a product’s specifications. The stage is critical for the suppliers because final specification will dictate the cost to produce the product and can favor one supplier’s product over another.

SpecificationsSpecifications

In transactional type , customers have developed their own product specifications before the supplier get involved in the process.

In more consultative and enterprise relationship , customers and suppliers work together to develop product specifications.

ProposalsProposals

A sales proposal is a written offer by a seller to provide a product or services to a purchasing organization.

On the other hand , proposal may result from receiving a Request for Proposal (RFP) from a buyer, which is a notice that the customer sends out to qualified suppliers asking them to bid on a project with certain specifications

Purchase DecisionPurchase Decision

The purchase decision is the final flurry of activity culminating in a sale.

Purchasing activities involve writing orders , persuading , negotiating , finalizing terms and closing the sale.

To facilitate the straight Rebuy type purchase, many companies are turning to Extranet.

Purchase DecisionPurchase Decision

Extranet link the trading partners internal , internet company networks to provide a secure private electronic environment for real time communication.

A related development is the open purchasing process on the internet which known as ( E-procurement)

Implementation and Implementation and evaluationevaluation The purchasing process doesn’t end

with the purchase, during the immediate post purchase phase , the seller obligation is to ensure that all the promises are fulfilled and customer expectations are met or exceed.

This will include making sure that the product has no defects , arrives on time as promised and on the right place.

Implementation and Implementation and evaluationevaluation Warranties are honored, repairs or

exchanges are handled quickly and smoothly, needed information is provided and adequate training is provided.

Value analysisValue analysis

Many organizations evaluate their suppliers by a formal value analysis or vendor analysis which is a detailed analysis of a product , it focuses on the relative cost of providing a function or service at the desired time and place with the necessary quality.

Vendor analysisVendor analysis

Is similar to the value analysis but focuses on the vendor by looking at such items as delivery reliability,product quality , price ,service and technical competence

Supplier TiersSupplier Tiers

Companies are segmenting their suppliers base according to the importance of the supplier’s product and difficulty of finding alternative sources for the products

Some suppliers are much more important than others in their success.

TierTier Type of Type of SupplierSupplier

Nature of the RelationshipNature of the Relationship

1 In Traditional “arms length” relationship, usually established at an individual level over time. Standardized, non-strategic, products for which there are may qualified suppliers.

2 Preferred Relationship centers on suppliers’ products and services, but there is a high level of familiarity and trust between the supplier and the customer.

3 Extended The relationship typically involves a breadth of products and services and usually crosses numerous sites. Usually involves several collaborative processes – product design, inventory management, sales force training, etc. Supplier is viewed best in class.

4 Partner Supplier is viewed as key to the customer’s ongoing competitive position. The business relationship is rarely challenged and is treated as exclusive along some dimension, critical along other dimensions, and , in general, special.

Figure 4-3:Figure 4-3:

Tiering of SuppliersTiering of Suppliers

Buying CenterBuying Center

Refers to all the people formally and informally involved in the purchasing decision.

Buying center changes over time and it is not a formal department in the organization.

A purchase role: refers to the set of issues or concerns that a member of the buying center will consider when deciding whether to approve or recommend either a purchase or a specific supplier.

Buying CenterBuying Center

For purposes of clarification and simplification , these concerns maybe grouped into one of three purchasing role :

1. Economic Buyer2. User Buyer3. Technical Buyer

Economic buyerEconomic buyer

Is the person or committee with the power to give final approval to buy your product or service.

The focus of the economic buyer is not on the price or technology but is also on performance.

The economic buyer role in the sale in Unique , as this is the person who :

Economic buyerEconomic buyer

Establish the priority of projects Is concerned about the economic health

of the business Focuses on the future Asks why ? Can say “yes” even if everyone says

“no” Can also say “No” even if everyone says

“yes”

Economic Buying Economic Buying InfluenceInfluence

ROLE: Asks “Why”Gives final approval

CHARACTERISTICS: Access to moneyCan release moneyVeto power

FOCUS: Total organizationBottom lineThe Future

User BuyerUser Buyer

The role of the user buyers is to determine the impact of the purchase on the job that they or their people perform.

Their focus is much narrower than that of the economic buyer.

Users Typically are:1. Are personnel whose daily work

will be affected by your product or service.

User BuyerUser Buyer

2. Are implementation Oriented3. Take a tactical view versus a

strategic one4. Focus on the past and the present

rather than the future , expect to ask

“How will this affect me ?”

User Buying InfluenceUser Buying Influence

ROLE: To decide on how a purchase will affect jobperformance

CHARACTERISTICS: Implementation orientedUse or supervise use of

product or service

FOCUS: Tactical, not strategicThe job to be performed

Technical buying Technical buying influenceinfluence The role of the technical buying

influence is to act as “gatekeepers” by screening out products and suppliers that don’t meet the needs of the buying organization.

These buyers are called technical influence because they focus on quantifiable aspects of the products and services as they relate to the product’s specifications

Technical buying Technical buying influenceinfluence A technical buying influence may :1. Be able to say “ No” but need to get

approval before saying yes2. Be able to recommend3. Be a key influencer to the decision

maker4. Be concerned about the product specs

and financial5. Be focused on the present6. Ask what and not why ?

Technical Buying Technical Buying InfluenceInfluenceROLE: To eliminate alternatives

To recommend

CHARACTERISTICS: Focuses on quantifiableaspects of product andservice

GatekeeperCan only say “no,”

not “yes”

FOCUS: Product specificationsAsks “What,” not “Why”

AdvocateAdvocate

The role of the advocate is to help guide you in the sale by providing critical information about the organization and the people involved in the purchase decision.

These people may be internal or external to the buying organization

AdvocateAdvocate

ROLE: Helps guide the sale

CHARACTERISTICS: May be inside or outside of the buying

organizationFurnishes and interprets information

FOCUS: Your success

AdvocateAdvocate::Why Your “Winning” is a Personal Why Your “Winning” is a Personal “Win”“Win”PERSONAL Wants you to win because they know

you, they like you, and they’d like to see you be successful.

PROFESSIONAL Wins by doing their job better, achieving their goals, and helping their companies meet objectives.

RECOGNITION Wins by receiving recognition from their own organization.

NEGATIVE Really wants someone else to lose.

AdvocateAdvocate::Ways in Which an Advocate can Ways in Which an Advocate can HelpHelp Recommend selling strategies.

Build a groundswell of interest.

Refer you to other advocates.

Review your presentation.

Gain access to decision-makers.

Evolution of Evolution of RelationshipsRelationships Many marketers would like to establish

a long term relationship with their customer to ensure a stream of purchases.

Growing relationship evolve through five general stages:

1. Awareness2. Exploration3. Expansion4. Commitment5. Dissolution

RelationshiRelationship Stagep Stage DescriptionDescription Key Selling ObjectivesKey Selling Objectives

AWARENESS Recognition that a supplier may be able to satisfy an important need.

Gain customer’s attention Demonstrate how the

product/service can satisfy a need

EXPLORATION

A tentative, initial trial with limited commitments by both parities. This trail period may go on for an extended period of time.

Gain initial acceptance. Build a successful relationship.

EXPANSION Expanding the rewards for each

party in the relationship

Get to know customers and their businesses better.

Expand ways to help the customer.

COMMITMENT The commitment by both the buyer and seller to an exclusive relationship

Interaction at levels between the buyer’s and seller’s organizations.

Early supplier involvement in development process.

Long-term focus to the relationship.

DISSOLUTION Total disengagement from the relationship. This may occur at any point in the relationship.

Look for warning signals. Attempt to reinitiate the

relationship.

Figure 4-4:Figure 4-4: Stages in a Buyer-Seller Stages in a Buyer-Seller RelationshipRelationship

Relationship BindersRelationship Binders

Certain factors drive parties whether individuals or organizations, to progress a fully committed relationship. Sales people should be aware of these three factors which are:

1. Creating Value2. Meeting expectations3. Building trust

Account RelationshipsAccount Relationships

Relationship EnhancersRelationship Enhancers

Creating Value:Acceptable conduct and performance

Meeting Expectations:Measures of performance levels

Building Trust:Importance of trust

1. Creating Value1. Creating Value

Value refers to the perception that the reward exceed the cost associated with establishing and/or expanding the relationship.

Value to the buyer isn’t always the lowest list price

It may involve the opportunity to save time and labor , or it may result in higher sales of the customer’s products.

High

Customer

Value

Low

Figure 4-5:Figure 4-5: Customer Value Creation in the Purchasing ProcessCustomer Value Creation in the Purchasing Process

Customer Value CreationCustomer Value Creationin the Purchasing in the Purchasing ProcessProcess

Recognitionof Needs

Evaluation of Alternatives

Purchase

Decision

Implementation

and Evaluation

Relationships:

___ Enterprise

---- Consultative

..... Transactional

2. Meeting 2. Meeting expectationsexpectations In any relationship, the involved parties

developed expectations , sometimes referred to as rules or norms , with respect to acceptable conduct and performance. Acceptable behavior varies by individual preferences, company policies and national cultures.

Salespeople must be careful not to encourage unfavorable buyer expectations as a result of present behavior.

2. Meeting 2. Meeting expectationsexpectations Expectations also develop with

respect to the performance. Customer performance expectations include the performance of the product , as well as the number of service activities such as the frequency of the sales call.

3. Building Trust3. Building Trust

Trust refers to the opinion that an individual’s word or promise can be believed and that the long term interests of the customer will be served.

Trust in salespeople and their companies is essential to buyer’s evaluation of the quality of the relationship and to establishing working partnerships.

3. Building Trust3. Building Trust

Salespeople whom buyers trust possess the following five attributes:

1. Honesty : salespeople who tell the truth.

2. Competence: salespeople who know what they are talking about

3. Dependability: Salespeople who follow through on their promises

3. Building Trust3. Building Trust

4. Customer Orientation: salespeople who put buyers’ interest ahead of their own

5. Likeability: salespeople whom the buyer enjoys knowing.

These three relationship binders are needed to build lasting relationships with customers.

Figure 4-7: Account Figure 4-7: Account Relationship Strategy and Relationship Strategy and Relationship BindersRelationship Binders

Transactional Relationship

Consultative Relationship

Enterprise Relationship

Create Value

A good product that can be conveniently purchased.

A solution to an important problem

A supplier that will increase the share holder value of the organization.

Meet expectations

Buyer has a clear set of expectations as to the conduct of the relationship.

Buyer knows a problem exists but is unsure of the solution of what will be involved in addressing the problem.

Buyer’s expectations are strategic in nature, though the process for achieving strategic objectives may not be known.

Build Trust A supplier would do what has been promised.

A supplier will do what is necessary to solve the problem.

A supplier will do everything possible to increase the buyer’s competitive advantage in the marketplace.