Part II SALES FORCE ACTIVITIES Chapter 4: Account Relationship Management

Account Relationship Management Concepts Purchasing Process The Buying Center Building Account Relationships Account Relationship Binders Figure 4-1: Account Relationship Management Concepts

Purchasing 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 Process 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 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

Value Added Role of Sales Force: Recognition of Needs Evaluation of Options Purchase Decision Implementation and Evaluation Value Added Role of Sales Force: Help customers recognize a need or problem and to define them in a new or different way. 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. Figure 4-2: The Typical Purchasing Process

Recognition 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 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.

Specifications 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.

Specifications 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.

Proposals 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 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 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 evaluation 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 evaluation Warranties are honored, repairs or exchanges are handled quickly and smoothly, needed information is provided and adequate training is provided.

Value 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 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 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.

Figure 4-3: Tiering of Suppliers Type of Supplier Nature 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.

Buying 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 Center For purposes of clarification and simplification , these concerns maybe grouped into one of three purchasing role : Economic Buyer User Buyer Technical Buyer

Economic 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 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 Influence ROLE: 4 Asks “Why” 4 Gives final approval CHARACTERISTICS: 4 Access to money 4 Can release money 4 Veto power FOCUS: 4 Total organization 4 Bottom line 4 The Future

User 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: Are personnel whose daily work will be affected by your product or service.

User Buyer 2. Are implementation Oriented 3. Take a tactical view versus a strategic one 4. Focus on the past and the present rather than the future , expect to ask “How will this affect me ?”

User Buying Influence ROLE: 4To decide on how a purchase will affect job performance CHARACTERISTICS: 4Implementation oriented 4Use or supervise use of product or service FOCUS: 4Tactical, not strategic 4The job to be performed

Technical buying influence 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 influence A technical buying influence may : Be able to say “ No” but need to get approval before saying yes Be able to recommend Be a key influencer to the decision maker Be concerned about the product specs and financial Be focused on the present Ask what and not why ?

Technical Buying Influence ROLE: 4To eliminate alternatives 4To recommend CHARACTERISTICS: 4Focuses on quantifiable aspects of product and service 4Gatekeeper 4Can only say “no,” not “yes” FOCUS: 4Product specifications 4Asks “What,” not “Why”

Advocate 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

Advocate ROLE: 4Helps guide the sale CHARACTERISTICS: 4May be inside or outside of the buying organization 4Furnishes and interprets information FOCUS: 4Your success

Advocate: Why Your “Winning” is a Personal “Win” 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.

Advocate: Ways 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.

Evolution of Relationships 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: Awareness Exploration Expansion Commitment Dissolution

Figure 4-4: Stages in a Buyer-Seller Relationship Relationship Stage Description Key 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.

Relationship 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: Creating Value Meeting expectations Building trust

Account Relationships Relationship Enhancers Creating Value: Acceptable conduct and performance Meeting Expectations: Measures of performance levels Building Trust: Importance of trust 15 15

1. 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.

Customer Value Creation in the Purchasing Process Figure 4-5: Customer Value Creation in the Purchasing Process High Customer Value Low Relationships: ___ Enterprise ---- Consultative ..... Transactional Recognition of Needs Evaluation of Alternatives Purchase Decision Implementation and Evaluation

2. Meeting expectations 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 expectations 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 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 Trust Salespeople whom buyers trust possess the following five attributes: Honesty : salespeople who tell the truth. Competence: salespeople who know what they are talking about Dependability: Salespeople who follow through on their promises

3. 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 Relationship Strategy and Relationship 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.