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Chapter 2: Strategy and Sales Program Planning
Part I THE BIG PICTURE Chapter 2: Strategy and Sales Program Planning
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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
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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
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Figure 2-3: Hierarchy of Sales Objectives
Corporate goals Maximize shareholder wealth Business unit objectives 12% revenue growth Grow pre-tax profits by 18% Marketing objectives Increase product A’s market share by 2 points Grow contributions after sales & marketing by 20% Sales department objectives Achieve sales revenue of $210 million Grow contributions after sales expenses by 25% Sales district objective Achieve sales revenue of $10.5 million in product A Obtain $7 million contributions after direct selling Salesperson objective Achieve sales revenues of $1.2 million in product A Obtain $0.8 million in gross margin dollars Major account objective Achieve sales revenues of $95,000 in product A Obtain an average gross margin of 80% Figure 2-3: Hierarchy of Sales Objectives
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What Goals are Most Important to You?
70 66.1% 60 50 40 31.9% 29.8% 30 20 14.0% 7.8% 7.7% 10 Building Brand of Company/ product Enhancing credibility of company product Increasing sales/ revenue Investor relations Saving costs Other
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How Successful Were You at Reaching Your Goals?
100 94% 93% 83% 80 72% 68% 58% 60 32% 42% 28% 6% 17% 7% 40 20 Building Brand of Company/ product Enhancing credibility of company product Increasing sales/ revenue Investor relations Saving costs Other
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Sales Force Ranking and Sales Growth: Pharmaceuticals (1988-1990)
Low High Sales Force Ranking
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Sales Force Ranking and Sales Growth: Computers (1988-1990)
Low High Sales Force Ranking
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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?
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Figure 2-6 Essential Activities
Interest Creation Post-Purchase Pre-Purchase Purchase
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A Framework for Defining Essential Activities
Customer Size and Opportunity Large Small Buying Process Low Information, Low Solution Needs High Information, High Solution Needs
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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
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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
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Customer Base Go-to-Market Strategy: A Large Computer Manufacturer
Account Teams Geographic Sales Force Direct Sales Force Industry Outbound Inbound Telemarketing Partners Internet Customer Base
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Customer Base Go-to-Market Strategy: A Large Chemical Company Account
Teams Direct Sales Force Inbound Telemarketing Customer Base
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Customer Base Go-to-Market Strategy: A Pharmaceutical Company
Account Teams Geographic Sales Force Direct Sales Force Inbound Telemarketing Partners Customer Base
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Customer Base Go-to-Market Strategy: An Industrial Distributor Account
Teams Geographic Sales Force Direct Sales Force Outbound Inbound Telemarketing Internet Customer Base
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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
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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
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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
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Three Steps in Leveraging the Customer Base
From P&L to balance sheet: Customers viewed as assets CRM;s Task: To increase shareholder value by leveraging the customer base. Focus on understanding cash flow effects and risk management Shareholder Value Driver of Cash Flow & EVA CRM integrated in the business process and yearly planning process Improving the profitability of customers seen as a driver of business profit Focus on customer selection Business Driver of Profits CRM viewed as a tool to achieve a bigger customer share through cross-selling and up-selling Typical in multi-product, multi-divisional environments Focus on account planning and organizational alignment Sales Driver of Revenue
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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
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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
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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?
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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
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Different Sales Orientations
Solutions to your needs “Solution provider” Function/ department Product and service solutions to customer needs Understanding the customer’s needs Solution Sales Product Sales Impact on your business results “business consultant” All levels Valuable solutions to support competitive advantage Driving customer profits and EVA Value Sales Sales Argument Best products “Product Expert” Narrow Space (e.g., purchasing) Best products with a competitive price Product excellence and/ or cost leadership Profile of Sales Customer Contacts Offering Success Factors
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Figure 2-14: Changes in Customer Expectations of Suppliers
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Partnering Effectiveness Index
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