McGraw-Hill/Irwin Copyright 2006 by The McGraw-Hill Companies, Inc.

McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 3 Linking Strategies and the Sales Role in the Era of Customer Relationship Management

McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. 3-3 Learning Objectives Understand and outline the key components and goals of CRM Explain the importance of market orientation and how a market orientation is fostered within the firm Identify the key steps in developing and implementing strategies Describe the role of personal selling in marketing strategy Outline the stages in developing strategic partnership relationships between organizations Discuss the actions salespeople can take to ensure a long-term buyer-seller relationship

McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. 3-4 CRM is… a comprehensive business model for increasing revenues and profits by focusing on customers. both an overarching business philosophy and a process tool to facilitate a truly customer-driven enterprise.

McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. 3-5 CRM is… “…a journey of strategic, process, organizational and technical change whereby a company seeks to better manage its enterprise around customer behaviors. This entails acquiring knowledge about customers and deploying this information at each touchpoint to attain increased revenue and operational efficiencies.” PriceWaterhouse Coopers

McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. 3-6 Customer Orientation Continues to move toward being customer- centric. Builds upon… –The marketing concept which overarches all business strategy –Use of the marketing mix as a “tool kit” for marketing strategy creation –Consumers information fueling strategic decisions about products –Aligning all business processes and functions to maximize the firm’s success.

McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. 3-7 Customer-Centric Cultures Include… Adopting a partnership business model with mutually shared risks and rewards Defining selling as customer business consultation Formalizing customer analysis processes and agreements Being proactive in educating customers about value chain and cost reduction opportunities Focusing on continuous improvement principles stressing customer satisfaction

McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. 3-8

McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. 3-9 Marketing Evolution MASS MARKETING Evolved in the early 1900s and dominated marketing m a nagement for decades TARGET MARKETING In the ‘60s, many firms began to apply the principles of segmentation to different customer groups.

McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved CUSTOMER MARKETING In 1980, the focus shifted towards developing customer relationships. ONE-TO-ONE MARKETING Technology allows firms to customize offerings to individual users. Marketing Evolution

McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved Objectives of CRM Customer Retention - retain loyal and profitable customers and channels Customer Acquisition - acquire customer based on known characteristics which drive growth and increase margins Customer Profitability - increase individual customer margins by offering the right product at the right time

McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved Advantages of CRM Reduces advertising costs Increases awareness of customer needs Tracks the effectiveness of promotional campaigns Allows competition for customers based on service, not prices Prevents overspending on low-value clients and under spending on high-value ones Speeds the time it takes to develop and market a product Improves use of the customer channel

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McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved Critical Questions in CRM Customers 1.Who are our customers? 2.What do our customers want and expect? 3.What is the value potential of our customers? The Relationship 4.What kind of relationship do we want to build? 5.How do we foster exchange? 6.How do we work together and share control? Managerial Decision Making 7.Who are we? 8.How do we organize to move value closer to our customers? 9.How do we measure and manage our performance? 10.How do we increase our capacity for change?

McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved The Importance of Market Orientation Successful salespeople think beyond “selling” Market-driven companies do better market sensing Market-drive companies develop stronger relationships with customers and channels Internal partnering is a critical component of market orientation

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McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved Process of Strategy Development The mission statement answers the most basic questions about an organization’s reason for being. Firms should define their mission in terms of broad human needs to be satisfied. This approach makes it easier to identify attractive market opportunities.

McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved Process of Strategy Development Goals – flow from the firm’s mission statement and represent specific targets the firm intends to hit. Objectives – more specific than goals and should always be: –Specific –Measurable –Realistically attainable

McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved SBU Strategy Business-level strategy involves how the business will compete in its industry to achieve a sustainable competitive advantage (SCA) An SCA focuses on distinctive competencies Porter’s Three Generic Strategies: Low Cost Differentiation Niche

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McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved Personal Selling’s Role in Marketing Strategy Market exchanges - one-shot transactions occurring between a buyer and seller with limited thought of future consideration Roles of salespeople in market exchanges Create new value Adapt “Make the market” Exit

McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved Personal Selling’s Role in Marketing Strategy Functional relationships create a climate of cooperation, with open and honest communication. Functional relationships engender a high level of personal trust in well managed business activities. One danger is what happens when one party is the relationship leaves.

McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved Personal Selling’s Role in Marketing Strategy Strategic Partnerships are long-term relationships where both parties make significant investments. This relationship requires direct communication with production, production designers, and others. Salespeople serve two roles-- relationship manager and general manager. Strategic partnerships work best with clients large enough to make investments worthwhile.

McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. 3-24

McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved Stages in Relationship Development Stage I – Exploration Determine value, build trust, set expectations, monitor Stage II – Expansion Generate repeat sales, full-line selling, cross-selling Stage III – Commitment Build loyalty, become a preferred supplier, engage in

McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved Role of Personal Selling in IMC An Integrated Marketing Communications (IMC) strategy effectively integrates personal selling, advertising and other communications options Advantages of Selling in IMC Face-to-face contact More persuasive More demonstrative Customization opportunities Disadvantages of Selling in IMC Limited ability to duplicate More costly

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McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. 3-28

McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. 3-29

McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. 3-30

McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved Customer Satisfaction and Feedback Maintaining customer loyalty is one outcome of customer orientation. Loyal customers... 1.Tend to concentrate on their purchases. 2.Provide positive word-of-mouth and customer referrals. 3.May be willing to pay premium prices for the value they receive. Satisfaction measures need to be supplemented with examinations of customer behavior, such as annual retention rate, frequency of purchases and percentage of the customer’s total purchases captured by the firm.

McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved Key Terms marketing concept marketing mix marketing communication mix (promotion mix) market orientation customer orientation customer-centric formalization customer relationship management (CRM) touchpoints mass marketing target marketing customer marketing one-to-one marketing customer value customer loyalty lifetime value of a customer firing a customer customer delight upgrading full-line selling cross-selling preferred supplier total quality management (TQM) integrated marketing communication pull strategy push strategy just-in-time reorder and delivery category management supply chain alliances efficient consumer response (ECR) selling team top-to-top selling data warehouse data mining return on customer investment strategic direction mission statement goals objectives strategic business units sustainable competitive advantage distinctive competencies generic strategies market opportunity marketing program market exchanges functional relationships strategic partnerships trust

McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved Mark W. Johnston Rollins College Greg W. Marshall Rollins College