Part I

THE BIG PICTURE

Chapter 2:
Strategy and Sales
Program Planning
The natural progression

How to make sales force and sales

program decision
LEVEL 1
Top Business
Business Marketing
Marketing
Management Strategy
Strategy Strategy
Strategy
Decisions

Customer
Go-to-Market
LEVEL 2 Relationship
Strategy Management (CRM)
Strategy
Implementation Supply Chain Product Development
Decisions Management (SCM) Management
(PDM)

Str
vi ties uct
i u
LEVEL 3 Act re
Sales Force Account Relationship
Program Com Strategy
Decisions pet r ship
en de
cies Lea

Figure 2-1 The Sales Force Decision Sequence

Business Strategy
 Environmental
Environmentalconstraints
constraints
Legal
Legal&&regulatory
regulatory
Demographics
Demographics
Economic
EconomicConditions
Conditions
Technology
Technology
Competitive
Competitiveconditions
conditions
Sociocultural
Socioculturalfactors
factors

Distinct Resources
Resources
Distinctcompetencies
competencies Financial
Marketing Strategic Financial
Marketing StrategicManagement
Management R&D
R&D
Financial
Financial Planning
Planning Personnel
Personnel
Technology
Technology
Information Brand
BrandEquity
Equity
Information Production
Production
Firm’s
Firm’shistory
history
management
managementculture
culture

Figure 2-2: Factors Influencing Strategic Management

Marketing Strategy
 Corporate
Corporategoals
goals
Maximize
Maximize shareholderwealth
shareholder wealth

Business
Businessunit
unitobjectives
objectives
12%
12% revenuegrowth
revenue growth
Grow
Grow pre-tax profitsby
pre-tax profits by18%
18%

Marketing
Marketingobjectives
objectives
Increase
Increase product A’s marketshare
product A’s market shareby
by22points
points
Grow
Grow contributions after sales & marketingby
contributions after sales & marketing by20%
20%

Sales
Salesdepartment
departmentobjectives
objectives
Achieve
Achieve sales revenue of$210
sales revenue of $210million
million
Grow
Grow contributions after sales expensesby
contributions after sales expenses by25%
25%

Sales
Salesdistrict
districtobjective
objective
Achieve
Achieve sales revenue of $10.5million
sales revenue of $10.5 millionininproduct
productAA
Obtain
Obtain$7
$7million
millioncontributions
contributionsafter
afterdirect
directselling
selling

Salesperson
Salespersonobjective
objective
Achieve
Achieve sales revenues of $1.2million
sales revenues of $1.2 millionininproduct
productAA
Obtain
Obtain$0.8
$0.8million
millioniningross
grossmargin
margindollars
dollars

Major
Majoraccount
accountobjective
objective
Achieve
Achieve sales revenues of $95,000ininproduct
sales revenues of $95,000 productAA
Obtain
Obtainananaverage
averagegross
grossmargin
marginofof80%
80%

Figure 2-3: Hierarchy of Sales Objectives

A Look into What
Companies Want . . . .
 What Goals are Most Important to You?

70
66.1%
60

50

40

29.8% 31.9%
30

20
14.0%
7.7% 7.8%
10

0
Building Enhancing Increasing Investor Saving Other
Brand of credibility sales/ relations costs
Company/ of company revenue
product product
How Successful Were You at Reaching Your Goals?
100
94% 93%
83%
80
68% 72%

60
58%

42%
40
32%
28%

20
17%
6% 7%
0
Building Enhancing Increasing Investor Saving Other
Brand of credibility sales/ relations costs
Company/ of company revenue
product product
Types of Strategies (Generic)
and Their Effect on Sales
Programs
Low Cost Strategy: High Profit Sales Programs:
Vigorous pursuit of cost reductions from  Extensive use of independent sales agents
experience and tight cost control.  Focused on transactional customer
relationships
 Structured so that managers supervised a
large number of salespeople
 Compensation was largely incentive based
 Salespeople were evaluated primarily on their
sales outcome performance

Differentiation strategy: High Profit Sales Programs:

Creating an offering perceived as being  Selective use of independent sales agents
unique leading to high brand loyalty and  Focused on long-term customer relationships
low price sensitivity.  Structured so that managers intensely
supervised a limited number of salespeople
 Compensation was largely salary based
 Salespeople were evaluated on their behaviors
as well as their outcomes.

Niche Strategy: High Profit Sales Programs:

Servicing a target market very well, Experts in the operations and opportunities
focusing all decisions with the target associated with a target market. Otherwise the
market needs in mind, dominating sales firm adopted the program characteristics
with the segment. associated with the appropriate value creation
strategy above.

Figure 2-4: Business Strategies and High Profit Sales Force Programs
 Build Strategy Hold Strategy Harvest
Harvest Strategy Divest Strategy
Marketing Expand market Maintain market Reduce costs Reduce
share in a high- share at the and focus on inventory
Strategies lowest costs profit, not market at lowest cost
growth market
possible share possible
Divest

Secure Call on targeted Call on most

Added current profitable
Eliminate
Distribution customers accounts only services

Add new Reduce overall Offer

Sales Increase service
service levels
customers to current exceptional
Strategies customers pricing
Provide high Reduce
presale Call on inventory Focus on
services targeted new levels one time
customers sales
Provide Maintain
product distribution
Build current Minimize
& market
relationships time
feedback Invest as
commitment
little time as
Focus on necessary
volume Focus on
growth account
penetration

Figure 2-4: Business Portfolio Analysis and Sales Force Strategy

Sales Force Ranking and Sales Growth:
Pharmaceuticals (1988-1990)

10%

8%

6%
Growth
4%

2%

0%
5 6 7 8

Low High
Sales Force Ranking
Sales Force Ranking and Sales Growth:
Computers (1988-1990)

15%

10%

Growth
5%

0%
5 6 7 8

Low High
Sales Force Ranking
A More Detailed Look at
Marketing Strategy
 The Three Major Functions of
Marketing:
– Segmentation
– Targeting
– Positioning
Strategic Implementation
Decisions
Steps in Developing a Go-to-Market Strategy

1. What is the best way to segment the market?

2. What are the essential activities required by

each segment?

3. What group of go-to-market participants

should perform the essential activities?

4. Which face-to-face selling participants should

be used?
 Figure 2-6 Essential Activities

Interest Creation

Post-Purchase Pre-Purchase

Purchase
A Framework for Defining Essential Activities

Customer Size
and
Opportunity
Account Maintenance: Effectiveness Selling:
Continue high-quality service Solve and consult
Electronic Data Entry (EDI) Cooperation
Large Prompt delivery Customization
Enhance value proposition Integration
Relationships Partnership
Friendship

Efficiency Selling: Targeted Selling:

Small
Take orders Quick needs assessment and solution
Secure distribution Explain features and benefits
Consider self-ordering (lower price) Economic evaluation

Buying Low Information, High Information,

Process Low Solution Needs High Solution Needs
 Figure 2-7 Potential Go-to-Market Participants

Customers
Customersand
andProspects
Prospects

Agents
Agents Advertising
Advertising
Direct Sales
Direct Sales Distributors Integrators Tele-
Tele-
Distributors Integrators Alliances
Alliances Promotion
Promotion marketing Internet
Internet
Force
Force marketing
Retailers
Retailers Direct
DirectMail
Mail

Direct Indirect

Sales Force Options Non-Sales Force Options

Company
Company
Figure 2-8 Comparing Various Go-to-Market Alternatives

Low Cost
per Exposure Advertising

Direct Mail

Internet
Efficiency
Telemarketing

Sales Force

High Sales
Effectiveness
per Exposure
Go-to-Market Strategy: A Large Computer Manufacturer

Direct Sales Force Telemarketing Partners Internet

Industry Inbound Outbound

Teams

Account Geographic
Teams Sales Force

Customer
Customer Base
Base
Go-to-Market Strategy: A Large Chemical Company

Direct Sales Force Telemarketing

Account Inbound
Teams

Customer
Customer Base
Base
Go-to-Market Strategy: A Pharmaceutical Company

Direct Sales Force Telemarketing Partners

Account Geographic Inbound

Teams Sales Force

Customer
Customer Base
Base
 Go-to-Market Strategy: An Industrial Distributor

Direct Sales Force Telemarketing Internet

Inbound Outbound

Account Geographic
Teams Sales Force

Customer
Customer Base
Base
Figure 2-9 Product Development Management
Subprocesses

Identify customer needs for better solutions

Discovering and designing new product solutions

Developing new solution prototypes

Managing internal departmental priorities and involvement

Designing activities to speed-up development process

Launching new and redesigned offerings

Figure 2-10 Supply Chain Management Subprocesses

Selecting and managing supplier relationships

Managing inbound logistics

Managing internal logistics

Managing outbound logistics

Designing product assembly and batch manufacturing

Managing process technology

Order, pricing, and terms management

Managing channel partners

Managing product installation and maintenance

Figure 2-11 Customer Relationship Management
Subprocesses

Identifying high value prospects

Learning about product usage and application

Developing and executing advertising and promotion programs

Developing and executing sales programs

Developing and executing customer service programs

Acquiring and leveraging customer contact information systems

Managing customer contact teams

Enhancing trust and customer loyalty

Cross-selling and upselling of offerings

 Three Steps in Leveraging the Customer Base
• From P&L to balance sheet: Customers viewed as assets
Shareholder Value • CRM;s Task: To increase shareholder value by
Driver of Cash Flow leveraging the customer base.
& EVA • Focus on understanding cash flow effects and risk
management

• CRM integrated in the business process and yearly

Business planning process
Driver of Profits • Improving the profitability of customers seen as a driver
of business profit
• Focus on customer selection

• CRM viewed as a tool to achieve a bigger customer share

through cross-selling and up-selling
Sales • Typical in multi-product, multi-divisional environments
Driver of Revenue • Focus on account planning and organizational alignment
Figure 2-12 Sales Force Program
Marketing
MarketingObjectives,
Objectives,Strategy,
Strategy,and
and
Strategy Implementation Program
Strategy Implementation Program

Estimates
Estimatesofofsales
sales
potential and
potential and Account
AccountRelationship
RelationshipStrategy
Strategy
sales
salesforecast
forecast

Desired
DesiredSelling
SellingActions
Actions
and Behaviors
and Behaviors

Estimates
Estimatesofofsales
salesforce
force Organizational
OrganizationalStructure
Structure
size and budget
size and budget

Competency
CompetencyDevelopment
DevelopmentProgram
Program

Leadership
LeadershipSystem
System
Feedback
 Sales Force Program Elements – Cont.

• How long is the selling cycle?

Account • How much time is spent on customer need discovery?
Relationship • Will the offering be customized for each customer?
Strategy • Will other functional areas be involved in the sale?
• How much will we need to invest in the individual
customer relationship?
• How easily can the customer switch to a competitor
once the relationship is established?

• What are their non-selling responsibilities?

Sales Force
• How much customer face-time will salespeople have?
Selling
• How will sales leads be generated?
Activities
• How much time will be spent with new prospects?
• How will business with existing customers be grown?
• With whom in the customer’s organization will the
sales force interact?
• What support will be needed to consummate a sale?
• How will customers be serviced?
 Sales Force Program Elements – Cont.

• Will the sales force be specialized by product,

Organizational
customer, or function?
Structure • How many salespeople will be needed?
• What is the span of control for management?
• How many levels of management will be needed?
• How will territories by designed?
• What is the location of salespeople and managers?
• Will telemarketing support be needed?

Competency • Experience level of new salespeople?

Development • Length and purpose of initial training program?
Program • Nature of continuing development program?
 Sales Force Program Elements – Cont.

Leadership • Mix of salary, bonus, and commission compensation?

Program • Total compensation level?
• What additional incentive programs will be needed?
• What benefits will be needed?
• Use of quotas?
• How much will be spent on sales meetings?
• Behavioral-based evaluation metrics?
• Performance-based evaluation metrics?
• Required sales force information system?
 rise ip
te rp s h
n
En atio
l
Investment Re
by ti ve
u lta ship
Supplier ns tion
o
C ela
R
n al
o
a cti ship
n s on
a i
Tr elat
R

Investment by Customer

Figure 2-13: Alternative Types of Account Relationships

 Different Sales Orientations

Product Sales Solution Sales Value Sales

Sales Best products Solutions to your needs Impact on your
Argument business results

Profile of “Product Expert” “Solution provider” “business consultant”

Sales

Customer Narrow Space Function/ department All levels

Contacts (e.g., purchasing)

Best products with a Product and service Valuable solutions to

Offering solutions to customer needs support competitive advantage
competitive price

Success Product excellence and/ Understanding the Driving customer

or cost leadership customer’s needs profits and EVA
Factors
Figure 2-14: Changes in Customer Expectations of Suppliers

Traditional Relationships Enterprise Relationships

 Little recognition of credit for past  Recognition of past performance

performance and track record.
 No responsibility for supplier’s profit  Recognition of suppliers’ need to
margins make a fair profit
 Little support for feedback from  Feedback from suppliers
suppliers encouraged.
 No guarantee of business  Expectations of business
relationship beyond the contract. relationship beyond the contract.
 No Performance expectations  Considerable performance
beyond the contract. expectations beyond the contract.
 Adversarial, zero-sum game.  Cooperative and trusting, positive-
sum game.
 Good Fair
27% 10%

Very
Good
Poor
10%
53%

Partnering Effectiveness Index