Chapter 2: Strategy and Sales Program Planning Part I THE BIG PICTURE Chapter 2: Strategy and Sales Program Planning

Figure 2-1 The Sales Force Decision Sequence LEVEL 1 Top Management Decisions Business Strategy Marketing Strategy Go-to-Market Strategy Supply Chain Management (SCM) Customer Relationship Management (CRM) LEVEL 2 Implementation Decisions Product Development Management (PDM) Structure Competencies Leadership LEVEL 3 Sales Force Program Decisions Sales Process Activities Account Relationship Strategy Figure 2-1 The Sales Force Decision Sequence

Business Strategy Strategic planning is employed to make better use of company resources and to create and to sustain an advantage over the competition. Business strategy involves defining and articulating an overall business mission, developing specific business goals and designing a strategy for achieving these goals.

Business Strategy Both marketing and sales personnel should be involved in an organization’s strategic planning process , why ? _ Because they understand the customer’s requirements and the sales force is often responsible for implementing the key aspects of a firm’s strategic plan.

Business Mission A well defined business mission provides a sense of direction to employees and helps guide them towards fulfilment of the firm’s potential. The basic character of an organization’s business is defined by the three C’s ( customers, competitors and the company itself) A business mission statement should include information regarding:

Business Mission The types of the customers it wishes to serve The specific needs to be fulfilled The activities and the technologies by which it will fulfil these needs

Figure 2-2: Factors Influencing Strategic Management Environmental constraints Legal & regulatory Demographics Economic Conditions Technology Competitive conditions Sociocultural factors Resources Financial R&D Personnel Brand Equity Production Distinct competencies Marketing Financial Technology Information Strategic Management Planning Firm’s history management culture Figure 2-2: Factors Influencing Strategic Management 1

Establishing Goals Once the mission for an organization has been decided , the next step is to translate the mission into the organization’s goals ( specific objectives by which performance can be measured) These objectives are stated in terms of profit, sales revenue , unit sales , market share and social responsibility

Strategies Once business objectives have been identified , the next step is to translate them into strategies. A strategy is the means an organization uses to achieve its objectives One of the most popular is a Porter’s generic business strategy, according to Porter, all successful businesses focus on creating superior customer value by achieving one of the following market positions

Marketing strategy Is the set of integrated decisions and actions a business undertakes to achieve its marketing objectives by addressing the value requirements of its customers. Marketing strategy is concerned with decisions related to market segmentation and target marketing, as well as development and communication of positioning strategy

Segmentation and target marketing Market segmentation involves aggregating customers into groups that: Have one or more common characteristics Have similar needs Will respond similarly to a marketing program Target marketing refers to the selection and prioritizing of segments to which the company will market

Positioning strategy Having settled on specific marketing goals and indentified the target market, the third step in the planning process is to develop and implement a positioning strategy based on the 4 P’s decisions. Positioning occurs in the mind of the customers and refers to how the consumer perceives the product , brand and company.

Positioning strategy Some of the fundamental questions that customers ask about brands are : Who are you ? ( Brand identity) What are you ? (Brand meaning) What do I think or feel about you ? (brand responses) What kind of association and how much of a connection would I like to have with you ? ( Brand relationships)

Strategic implementation decisions Refer to a set of processes that organization will develop to create customer value and achieve a competitive advantage. The fundamental decisions that most companies will have to make include: How will customer be accessed? ( Go-To-market strategy ) How will new offerings be developed and existing products be improved? ( Product development management )

Strategic implementation decisions 3. How will physical products be created and delivered to the customer ? ( supply chain management ) 4. How will customer relationships be enhanced ? ( Customer relationship management)

Steps in Developing a Go-to-Market Strategy What is the best way to segment the market? What are the essential activities required by each segment? What group of go-to-market participants should perform the essential activities? Which face-to-face selling participants should be used?

Segmenting the market Market segmentation involves identifying different groups of customers with similar characters, product needs and responsiveness to marketing efforts. Customer characteristics used to segment a market for purposes of developing a go-to-market strategy include, but aren’t limited, the following

Segmenting the market Industry: what business is the customer in ? Size : what is the revenue size of the customer ? How many employees ? Geography : where is the customer located? Behavior: who are the key decision makers? Does the customer use our product ?

Sales Process Activities The sales process activities consist of all the activities needed to serve a customer properly. Essential activities can be divided into four groups: interest creation , PrePurchase, purchase and post purchase. Interest creation include all the ways that customer can learn about the benefits of the product and the company.

Figure 2-6 Essential Activities Interest Creation Post-Purchase Pre-Purchase Purchase

Sales Process Activities PrePurchase activities include explaining the features and benefits , assessing customer needs and cooperating in problem solving Purchase phase includes the set of activities culminating in the a purchase such as writing proposals The post purchase activities may include delivery , installation, providing information about the new features , etc..

Go-To-Market Participants Including the internet , telemarketing , advertising, promotion , direct mail , and face to face selling ( including a direct sales force , independent agents , distributors , integrators and alliances)

Customers and Prospects Figure 2-7 Potential Go-to-Market Participants Customers and Prospects Direct Sales Force Agents Distributors Retailers Integrators Alliances Advertising Promotion Direct Mail Tele- marketing Internet Direct Indirect Sales Force Options Non-Sales Force Options Company

Advertising and promotion consists of instruments such as broadcast media, magazines , newspaper , and direct mail. Advertising and direct mail is very efficient in that its inexpensive per customer contact Although advertising and direct mail are efficient but aren’t always very effective.

Figure 2-8 Comparing Various Go-to-Market Alternatives Low Cost per Exposure Advertising Direct Mail Internet Telemarketing Efficiency Sales Force High Sales per Exposure Effectiveness

Telemarketing Refers to customer contact utilizing telecommunications technology for personal selling without direct , face-to-face contact.

Internet The extensive use of the internet to gather information and to make purchase is a key business go-to-market development. The internet can be used in all phases of essential activities that need to be performed. Many companies are finding that internet is able to increase the effectiveness of their sales force.

Face – to – Face selling alternatives A company must address the question of should the selling be performed by a direct company sales force , a selling partner or some combination?

Independent sales Agents An important alterative to the direct sales force is to hire independent sales agents ( referred to manufacturer’s Reps, Reps , or brokers ) to perform the selling function. Independent sales agent are not employees, but rather independent businesses given exclusive contracts to perform the selling function within specific geographic area

Resellers Resellers are channel members , retailers and distributors , who take title to the offerings they sell to end-users. They perform many functions within the Channel, including warehousing and providing information, but one of their primary functions is to market their supplier’s offerings to their own customers

Integrators In a number of industries new channel members have arisen called integrators. An integrator is a service supplier unaffiliated with specific products , whose advice the end customer has sought to help them with a complex choice.

Alliances An increasingly popular alternative for accessing markets is to establish an alliance with another organization is a joint venture to sell products to specific markets.

Product Development Management (PDM) The success of company often depends on how it develops , produces and markets new product offerings. The sales force plays an important role in launching new products into the market place , so many companies make changes in the sales force programs such as motivation , compensation and sales structure.

Figure 2-9 Product Development Management Sub processes 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

Supply chain Management (SCM) Is the integration and organization of information and logistics activities across firms in a supply chain for the purpose of creating and delivering good and services that provide value to the customer. In short , supply chain management is about producing world-class products that are available at the right time , at the right place and in the right form and condition

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

Customer relationship management (CRM) What ‘s CRM ? Although its implementation may differ among companies , it’s essentially a comprehensive set of processes and technologies for managing relationships with Potential and current customers and business partners across marketing, sales and services regardless of the communication channels.

Customer relationship management (CRM) Successful CRM efforts depend on a combination of people , processes, technology , and knowledge. At the heart of CRM process is Information. The processes involved in customer relationship affected by CRM technology include:

Customer relationship management (CRM) Marketing : targeting and acquiring prospects through data mining, campaign management and distributing leads to sales and service. Sales : Developing effective selling processes , knowledge management tools, contact managers and forecasting aids. Service: addressing service and support issues with sophisticated Call Center applications.

Figure 2-11 Customer Relationship Management Sub processes 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

Sales force program Decisions Is a tool for planning how the sales force will perform its role in achieving the firm’s objectives

Sales Force Program Elements – Cont. Account Relationship Strategy How long is the selling cycle? How much time is spent on customer need discovery? Will the offering be customized for each customer? 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? How much customer face-time will salespeople have? How will sales leads be generated? 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 Selling Activities

Sales Force Program Elements – Cont. Organizational Structure Will the sales force be specialized by product, customer, or function? 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? Experience level of new salespeople? Length and purpose of initial training program? Nature of continuing development program? Competency Development Program

Sales Force Program Elements – Cont. Leadership Program Mix of salary, bonus, and commission compensation? 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?

Account relationship strategy Refers to the type of relationship it intends to develop with its customers. This decision encompasses plans for acquiring , maintaining and developing customers. Selection of the right customers for the right type of relationship is strategic for both the customer and the supplier.

Figure 2-13: Alternative Types of Account Relationships Investment by Supplier Enterprise Relationship Consultative Relationship Transactional Relationship Investment by Customer Figure 2-13: Alternative Types of Account Relationships

Transactional Relationship Most business to business transactions take place as part of an ongoing relationship between supplier and customer. A transactional relationship is one in which the relationship is based on the need for a product of acceptable quality, competitively priced , and a process and relationship convenient for the buyer and the seller.

Transactional Relationship What distinguishes the transactional relationship from the others is that its usually based on a personal relationship between individual buyers and sellers. Consumer goods firms and large organizations are most likely to emphasize transactional type relationship with their customers.

Consultative relationship A quite common relationship in industrial markets, is based on the customer’s demand and willingness to pay for a sales effort that creates new value and provides additional benefits outside of the product itself. The sales force attempts to create value for customer in three ways:

Consultative relationship Helping customers understand their problems and opportunities in a new or different ways Helping customers develop better solutions to their problems than they would have discovered on their own. Acting as a customer’s advocate inside the supplier’s organization , ensuring the timely allocation of resources to deliver unique solutions to meet the customer’s needs.

Consultative relationship A consultative relationship is most appropriate when one or more of the following conditions are present: The product or service can be differentiated from competitive alternatives The product or service can be adapted to the need of the customer

Consultative relationship 3. The customer is not clear about how the product or service provides solutions or adds value 4. The delivery, installation of use of the product or service requires coordinated support from the selling organization 5. The benefits of the product or service justify the high cost of consultative relationships.

Enterprise relationship Is one in which the primary function is to leverage any and all corporate assets of the supplier in order to contribute to the customer’s strategic success. In recent years, customers have been downsizing their suppliers, increasing the number of customers and competitors

Why Forecast? One of the keys to success is knowing where customers are located and being able to predict how much they will buy. Firms found that sales data are necessary in developing the sales program, assigning quotas , developing budgets and comparing the sales performance of individual salespeople.

What is Market Potential? Is an estimate of maximum demand in a time period based on the number of potential users and their purchase rate. Company sales potential is a portion of total industry demand. It’s a maximum amount the firm can sell in a time period under optimum conditions. Company sales is less than the industry sales. The ratio of company sales to industry sales is a measure of the market share of an organization.

Estimating Potentials All estimates of potential are based on two key components : The number of possible users of the product The maximum expected purchase rate. Note: Purchase rates are usually derived from the trade organizations and government agencies for existing products

Buying Power Index Method The index combines estimates of population, income and retail sales to give a composite indicator of consumer demand in many geographic areas. BPI values are used to help managers allocate selling efforts across geographic regions.

Qualitative sales forecasting Sales forecasting is concerned with predicting future levels of demand. Sales forecasts for new products are often based on executive judgment, sales force projections, surveys and market tests.

Sales Force composite A favorite forecasting technique for new and existing products is the sales force composite. With this procedure, salespeople project volume for customers in their own territory and the estimated are aggregated and reviewed at a higher management levels.

Sales Force composite This technique is favored by industrial concerns because they have limited number of customers and salespeople are in a good position to assess the customer’s needs.

Jury of executive Opinion This technique involves soliciting the judgment of a group of experienced managers to give the sales estimates for proposed and current products The main advantages of this method are that it is fast and it allows the inclusion of many subjective factors such as the competition, economic climate, and the weather…

Leading Indicator It can be a useful guide in preparing the sales forecast. Leading indicators are sensitive to changes in the business environment. Examples!!!

When should the Qualitative forecasting methods be used It can be used when : The numerical data is too little to incorporate into the forecasts. New products Intensive competition When managers are adept in predicting the sales revenues When the market disrupted by wars, disasters..

Quantitative Sales Forecasting / seasonal adjustment Sales forecasts are often prepared monthly or quarterly, and seasonal factors are responsible for many of the short term changes in volume.

Naive forecasts Is the simplest numerical forecasting technique and is often used as a standard for comparison with other procedures. This method assumes that nothing is going to change and that the best estimate for the future is the current level of sales.

MAPE Mean absolute percentage error. MAPE calculates the percentage forecasting error for each period without regard to whether the errors are positive or negative.

Trend Projections The use of trends to project sales is a popular technique among business firms. With this method analyst estimates trends from past data and adds this figure to current sales to obtain a forecast.

Moving Average With the moving average method , the average revenue achieved in several recent period is used as a prediction of sales in the next period.

Exponential smoothing An important feature of exponential smoothing is the ability to emphasize recent information and discount the old one.

Time Series Regression The relationship between the sales (Y) and a period of time ( e.g week , month , quarter, or year ) (x) can represented by a straight line . Y = a + bx

Multiple regression and turning Points With multiple regression a computer model is used to build forecasting model based on historical relationship between sales and several independent Variables. A sudden change is a trend is a called a turn point, a decline in sales after several years of growth will be considered a turning point.

When should quantitative forecasting methods be used When we have access to historical data When we have more than a product line “ hundreds or thousands of products”

Finding the right sales force size The workload approach: Number of salespeople = Number of accounts * frequency of the sales calls * length of a sales call / selling time available for one salesperson

Finding the right sales force size Percentage of sales approach: Expected sales *field sales expense ratio = sales budget * percent of sales force= availability for sales people.

Where to spend it ? Sales force salaries, commission and bonuses. Social security Retirement plans Hospitalization and life insurance Automobile Travel , meals and entertainment Sales managers salaries Office supplies

Where to spend it ? 9. Office rent and utilities 10. Clerical and secretarial services 11. Recruiting and training 12. Samples and other sales aids.