Edition Vitale and Giglierano Chapter 11 Business-to-Business Selling: Developing and Managing the Customer Relationship Prepared by John T. Drea, Western Illinois University

2 Both Sellers and Buyers Are “Boundary Personnel” Boundary Personnel Boundary Personnel Individuals in the organization who span the boundaries of their own organizations and those of customers. Boundary personnel serve as the liaison with other key organizations – they can be a major asset in the buyer-seller relationship.

3 Exhibit 11-1 Business-to-Business Selling Characteristics 1. Repeated, ongoing relationships 2. Solution-oriented, total system effort 3. Long time period before selling effort pays off 4. Continuous adjustment of needs 5. Creativity in problem solving often demanded by buyer of seller

4 1. Repeated, ongoing relationships The relationship between the seller and buying center members is a series of dyadic interactions –One-to-one meetings or interactions between stakeholders in the buying center and the seller or other individuals in the selling organization’s value chain.

5 2. Solution-oriented, total system effort Customers buy solutions, not technologies or core products. –The seller and the selling organization must understand the needs of the customer. –The seller must also understand the different motivating elements between members of the customer buying center.

6 3. Long time period before selling effort pays off In business-to-business selling, the outcome of the sales effort may not be known for months (or years!) –It is important to use the development period to reinforce the value offering relative to competitive offerings. –Reduce buyer perceptions of risk by reinforcing the total value of the offering.

7 4. Continuous adjustment of needs It is important to be flexible and responsive to the changing needs of customers. Customer needs evolve as they learn more about the sellers offering and how the offering can be applied to their needs.

8 5. Creativity in problem solving often demanded by buyer of seller Customization of the offering to meet the specific needs of the buyer is expected, especially by large customers. Approaching each customer’s problem in such a way that the customer perceives the offering as unique is particularly advantageous. –Can relieve the seller of concerns relative to pricing

9 What Constitutes a “Relationship” in Relationship Marketing? Discrete Exchange Multiple Transactions Collaboration/ Partnering Differentiating an Undifferentiated Product

10 Philosophies of Marketing Production Era Production Era Societal/ Partnering/ Value Network Era Societal/ Partnering/ Value Network Era Sales Era Sales Era Marketing Era Marketing Era

11 Four Forms of Seller Roles Order Taker Primary role is taking orders and ensuring timely delivery of products.

12 Four Forms of Seller Roles Order Taker Persuader/ Sustainer Primary role is taking orders and ensuring timely delivery of products. Updates customers about offerings, attempts to convince customers of offering value.

13 Four Forms of Seller Roles Order Taker Persuader/ Sustainer Motivator/ Problem Solver Primary role is taking orders and ensuring timely delivery of products. Updates customers about offerings, attempts to convince customers of offering value. Assists customers in maximizing product value by providing advice and customer education.

14 Four Forms of Seller Roles Order Taker Persuader/ Sustainer Motivator/ Problem Solver Relationship/ Value Creator Primary role is taking orders and ensuring timely delivery of products. Updates customers about offerings, attempts to convince customers of offering value. Assists customers in maximizing product value by providing advice and customer education. Creates a partnership with the buying center that stimulates customers. Often built by sales and marketing teams.

15 Culture Buying Center and Buying Patterns Channels Competitors Markets and Customers Products Sellers must know and understand the customers’… Technologies

16 Other Types of Selling Roles Missionary Sellers/Field Marketers –Critical in finding new customers, new market segments, and developing business within existing accounts. Post-Sale Customer Service –Effective customer service can reinforce the purchase decision and create superior value for a customer.

17 Exhibit 11-2 Organizational Relationship - Field Sales and Field Marketing

18 Organizational buyers and sellers have three needs to satisfy: 1. The needs of the job function 3. The individual needs of the buyer and seller. 2. The needs of the organization

19 Direct Sales Force Field sellers directly employed by the supplier of the offering Manufacturers’ Representative An independent businessperson who does not take title and usually represents several non-competing producers Distributors Represents a manufacturer’s goods by taking ownership and providing local inventory Selling Structure

20 Top-Down and Bottom-Up Forecasts Top-Down: The result of research efforts to forecast market Potential, then Reducing it to Segments in question Bottom-Up: Begins with an analysis of how much product can be sold to each customer in a particular territory.

21 Sales Force Compensation Straight Commission Straight Commission Combination Plans Combination Plans Straight Salary Straight Salary

22 Straight Commission Straight Commission Most appropriate where repeat efforts are necessary to sustain customer purchases. Rewards are linked to short-term, repeated performance. Sellers will likely concentrate on customers that have a patterns of frequent and substantial purchases. Inappropriate during new product introductions. May not work well for sophisticated products where missionary work is needed. Compensation variability/volatility may create problems for the sellers. Sales Force Compensation Methods

23 Management is able to exercise greater control over the sales force (compared to straight commission). Appropriate when personnel in selling roles are required to provide design and engineering assistance. Motivator/problem solver and relationship/value creator roles are appropriate for straight salary compensation. Creates stability of sales employees. Does not tie financial rewards to sales results – may attract personnel who are security oriented instead of achievement oriented. Sales Force Compensation Methods Straight Salary Straight Salary

24 Combination Plan Combination Plan Most frequently used form of compensation. Salary portion of compensation corresponds to management’s needs for the sales staff to perform administrative duties, while the commission portion encourages increased selling effort. The commission portion of the compensation is paid as it is earned, as opposed to a bonus (most likely paid on a quarterly or annual basis). Sales Force Compensation Methods

25 Manufacturers Representatives Memo to reps: Reps are compensated when the sale is culminated. In most instances, this occurs when the customer has paid the invoice. When is a sale booked? Why are fixed costs important? Memo to reps: Rep compensation is a variable cost. Reps cover the fixed costs through commissions earned on all products represented. Adding more related products helps cover fixed costs.

26 Direct Sales or Mfg. Representatives? Appropriate for direct sales force –Product is technically complex –Control is important –Missionary work needed to build relationships –Concentrated customer base –Explicit customer feedback desired Appropriate for mfg. representatives –Product is generic or standardized –Control is less important –Reps have other complimentary lines –Market is dispersed and matches rep’s existing call patterns –Direct customer feedback is less critical