CHAPTER 5

Part Three: Analyzing Customers and Markets

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

Chapter 5

Sales Management: Shaping Future Sales Leaders

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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
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Understanding B2B Purchasing Decisions

Personal relationship skills Highly skilled sales force Constant support from other functional groups, especially sales managers Information technology system thats easy to use and gives accurate and near-real-time information

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The Buyers Decision-Making Process

Problem Recognition

Information Search

Evaluation of Alternatives

Purchase Decision

Postpurchase Evaluation

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Organizational Buying Situations

New Buy Occurs when a complex or expensive product is purchased for the first time Purchase of a product or service that is currently being bought, but buyer is considering different vendors or product changes Buying firm moves directly from need recognition (Step 1) to ordering (Step 7)

Modified Re-Buy

Straight Re-Buy

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The Buy-Grid Framework: Participation in the Buying Stages of the B2B Buying Process
Buying Stages 1. Recognize problem 2. Determine product characteristics 3. Determine product specifications 4. Search for suppliers 5. Evaluate proposals 6. Select supplier 7. Specify quantity needed 8. Review the supplier/product performance New Buy Modified Re-Buy Straight Re-Buy Yes Yes Yes Yes Yes Yes Yes Yes Perhaps Perhaps Yes Perhaps Perhaps Perhaps Yes Yes No No Yes No No No Yes Yes

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Understanding the Buyers 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 Quality Delivery Customer Service Totals Weight .5 .3 .2 1.0 Vendor A 9 = 4.5 8 = 2.4 10 = 2.0 8.9 Vendor B 7 = 3.5 9 = 2.7 8 = 1.6 7.8
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Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.

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 makers 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 Copyright 2009 Pearson Education, Inc. 5-10 Publishing as Prentice Hall. information

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?
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Team Selling and Multi-Level Selling

Extended selling team advantages Quicker response to buyer questions Ability to speak to ones counterpart who understands technical language Capability to work as a group to offer multidisciplinary solutions to complex buyer problems Challenges
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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
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Self-Assessment Library
Go to http://www.prenhall.com/sal/
Access code came with your book

Click the following

Assessments
II. Working with Others A. Communication Skills 2. How Good Are My Listening Skills?

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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

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Technology in Sales Management

Technology can help ensure a firms 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.
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Data Mining
Companies data mine information collected in CRM databases Purchase dates, incentives offered the customer, product/services purchased, selling price, the buyers 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.
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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.
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The Nature of B2B Relationships

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

Facilitative Relationships

Trust and cooperation between buyers and sellers is better and can create value for both parties Deepest relationship, where selling firm becomes the buyers sole source supplier Buyers and sellers trust one another and cooperate to reduce costs and advance their mutual goals

Integrative Relationships

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Differences in Key Variables Based on Stage of Relationship

Relationship Trust Communication Value Commitment Feedback Sales programs Profits Competitive advantage Transactional Little trust Buyer-seller bow tie Win-Lose Little expectations beyond current contract Little expectation of feedback Little opportunity to crossor up-sell Little concern for supplier profits Little other than current buy Facilitative Increasing trust A few depts begin communicating Buyer: lower prices Seller: lower costs Growing commitment by buyer & seller Growing acceptance of feedback May switch to inside salesperson More concern Growing competitive advantage Integrative Broad trust Direct communication between all depts Win-Win for both Long-term expectations of partnership Honest feedback expected and sought Expansive opportunity to cross- or up-sell Acknowledgement that supplier must make reasonable profit Customized offering

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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
Arctic Ocean
Banks Island Ellesmere Island Severnaya Zemlya

Arctic Ocean

Greenland (Den.)

Franz Josef Land

Svalbard (Nor.)

Arctic Ocean New Siberian Islands

Jan Mayen (Nor.)

Novaya Zemlya

Wrangel Island

Victoria Island

Baffin Island

U.S.A.

Faroe Is. (Den.) Norway

Iceland

Finland

Canada

Ireland

Island of Newfoundland

North Pacific Ocean

Hawaiian Islands
U. S. A.

French Polynesia (Fr.)

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
United States of America North Atlantic Ocean
N. Korea S. Korea Portugal Tunisia

Estonia Latvia Lithuania Belarus Neth. Poland Germany Bel. Ukraine Czech. Slovak. Aus. Hung. Moldova Kazakhstan France Switz. Slov. Romania Cro. Yugo. Bos. Uzbekistan Georgia Bulgaria Italy Mac. Kyrgyzstan Armenia Azerbaijan Albania Spain Turkmenistan Greece Tajikistan Turkey United Kingdom Den.

Sweden

Russia

60

Aleutian Islands (USA)

Kuril Islands

Mongolia

Morocco

Cyp. Leb. Syria Israel

Japan

Iraq

Iran

Afghanistan

China

North Pacific Ocean

Canary Islands (Sp.)

Jordan

Algeria

Kuwait

The Bahamas

Libya

Pakistan

Nepal

Western Sahara (Mor.)

Egypt

Bhu.

Qatar

Mexico

Cuba

Dominican Republic

Saudi

Guatemala El Salvador

Belize Honduras

Jam.

Mauritania

Mali

U. A. E. Arabia Oman

Bang.

India

Myanmar (Burma) Laos

Taiwan

Haiti Puerto Rico (US) Dominica

Niger

Nicaragua

Barbados

Costa Rica

Panama

Venezuela

Trinidad and Tobago Guyana Suriname French Guiana (Fr.)

Senegal The Gambia Guinea-Bissau Guinea Sierra Leone

Burkina Faso

Chad

Sudan

Eritrea

Yemen

Thailand

Vietnam

Philippines

Benin

Djibouti

Cambodia Andaman Islands (India)

Cte DIvoire

Nigeria

C. A. R.

Ethiopia

Sri Lanka

Federated States of Micronesia

Marshall Islands

Liberia

Colombia

Ghana Togo Eq. Guinea

Cameroon

Maldives

Brunei

Guam (USA)

Uganda

Somalia

Malaysia

Galapagos Islands (Ecuador)

Ecuador

Gabon

Sao Tome & Principe

Rwanda Zaire

Kenya

Singapore

Kiribati

Congo

Burundi Tanzania

Indonesia

Papua New Guinea

Seychelles

Solomon

Islands

Peru

Brazil

Malawi

Angola

Zambia

Mozambique

Bolivia

Zimbabwe Namibia Botswana

Madagascar

Fiji

Paraguay

Mauritius

Indian Ocean

New Caledonia

Swaziland

Australia

South Africa Lesotho

Source: Based on John B. Ford and Earl D. Honeycutt, Jr. (1992). Japanese National Culture as a Basis for Understanding Japanese Business Practices, Business Horizons, 35:6, 2734.
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Socializing (going out at night for karaoke, drinking and talk) allows the Japanese to see the character of the gaijin (foreigner) Antarctica
Argentina
New Zealand Tasmania Falkland Islands (Islas Malvinas) (adm. by UK, claimed by Argentina) les Crozet (France) South Georgia (adm. by UK, claimed by Argentina)

South Pacific Ocean

Uruguay Chile

South Atlantic Ocean

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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) 1 Probability of future purchases 2 Future marketing costs 3 Future contribution margins
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Computing CLV

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Planning Sales Strategy Based on CLV

Low % of Purchase Share
Frequent sales force visits Monthly visits High Lifetime Earning Value Direct mail/telemarketing Optimal contact: biweekly High potential customer value

High % of Purchase Share

Constant sales force interaction Weekly visits Direct mail/telemarketing Optimal contact: weekly Highest customer value

Extended sales force visits

Yearly intervals Low Lifetime Earning Value 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
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Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.

The Stages of B2B Customer Relationship Management

1 Up-sell / cross-sell to existing customers
2 Manage customer relationships to earn higher profits 3 Offer customized solutions to most profitable buyers

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Inspiring Your Team Members to Build 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 buyers reason to purchase Important to express empathy

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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 buyers 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.

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Maximizing the Buyers Value

Value

Benefits = Costs

Functional Benefits + Emotional Benefits

Monetary Costs + Time Costs + Energy Costs + Psychic Costs

Increase value by

1 2 3

Increasing benefits Decreasing costs Both

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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
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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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Why Business Relationships End

Partner is too complacent Goals no longer match Cultures have diverged 1 or both parties have behaved irresponsibly

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Discussion Questions
How can a sales manager minimize the loss of a valued customer? Should the sales manager intervene or should the assigned salesperson try to salvage the relationship? What influence does trust have on customer dissatisfaction? How does a company instill trust in the relationship strategies?
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Role Play: Managing a Sales Team at Alamance Associates

The players
Henry Conner, Sales Manager at Alamance Associates (AA) Jerry Phillips, AA Account Manager for Four Part Solutions Linda Lu, Design Engineer at Alamance Associates Devin Jackson, Service Manager at Alamance Associates

Four Part Solutions asks Jerry to meet about purchasing new line of machinery and installation and services contract

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Role Play: Managing a Sales Team at Alamance Associates

Henry appoints sales team Jerry, Linda (design engineer), Devin Henry has set meeting with team to hear concerns and suggestions about meetings with Four Part Solutions At the conclusion of the meeting, Henry must Appoint a sales team leader Determine what questions the team will propose to Four Part Solutions Decide how he will evaluate the team and structure the members compensation
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Role Play (continued): Action Steps

Break into groups of 4
Each student plays one character

Work individually to summarize a list of concerns and questions that are important to your area of expertise at AA Meet as a group and role-play the meeting between Henry, Jerry, Linda, and Devin
Initial goal is to conclude the meeting with an agreed-upon list of questions that will be discussed at the initial meeting with the Four Part Solutions Buying Team

Work together as a group to determine who should be the team leader, how the team will be evaluated, and what type of compensation each member should receive
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Sales Managers Workshop: Adjusting the Territory Sizes within a Sales District
You are sales manager for a district with 5 sales reps assigned to geographic territories Some territories are growing Several reps dont have time to properly call on new customers while serving old Other territories are stagnant Adjust the sizes of the territories, using appropriate criteria Using Applicor data, compare sales revenue, potential, number of accounts per territory to analyze current workload for each territory Recommend appropriate changes Copyright 2009 Pearson Education, Inc.
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Caselet 5.1: Managing Buying Dynamics at Hughes Aircraft

WRT Electronics sells to Hughes Aircraft Hughes purchasing administrator tells sales rep that WRT will be in a bidding war RFQ Purchasing admin: supplier selected based on price Design engineer: conformity to design tolerance is criteria Quality assurance mgr: initial contract is 6 mos, supplier with fewest quality issues will win multi-year contract

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Caselet 5.1 (continued): Questions

How can Fred explain the motivations of the three Hughes employees to his salesperson, based upon the different buying roles they play? Could Fred explain each buyers weight using the multi-attribute model? What pointers should Fred offer his salesperson to successfully manage this major account? Why?

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Caselet 5.2: Choosing a CRM System for Burlington Mechanical Solutions

BMS wants to introduce customer relationship management strategy Sales force is organized by product and geography Each rep has about 30 customers Spending significant time with B (potential to become key) and C accounts (less profitable) What process should BMS follow to purchase a CRM system? System must be user-friendly, or sales force will oppose it BMS should identify the type of information that will benefit the force Copyright 2009 Pearson Education, Inc. Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall.
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Caselet 5.2 (continued): Questions

How can Puckett (VP Sales) ensure the CRM system is easy for the sales force to load and use? What role can members of the sales force play in making the CRM system user friendly? Is CRM an information-based system, a sales force-based strategy, or both? How does each role vary? In what ways do they vary? Make a list of important information that a CRM should provide to a sales force. How should a sales manager use this information to assist the sales team? What is the likely outcome if CRM information does not help the sales force succeed?
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