1. Part II SALES FORCE ACTIVITIES Chapter 4: Account Relationship Management

2. Building a Long Lasting Relationship:

3. Learning Objectives Describe the steps in the professional purchasing process. Identify the different buying influences in the buying center. Explain how relationships are likely to evolve. Describe factors critical to gaining commitment to a relationship.

4. Chapter Outline Purchasing Process. Buying Center. Evolution of Relationship. Relationship Binders.

5. AccountPurchasingProcessAccountPurchasingProcess Figure 4-1: Account Relationship Management Concepts TheBuyingCenterTheBuyingCenterBuildingAccountRelationshipsBuildingAccountRelationshipsAccountRelationshipBindersAccountRelationshipBinders Account Relationship Management Concepts

6. Purchasing Process: 1. Recognition of Needs. 2. Evaluation of Options. 3. Purchase Decision. 4. Implementation and Evaluation.

7. Recognition of Needs: Help the account recognizes that a need exists. Immediate need, resolving problems. Derived Demand, understanding the needs of the customers’ customers.

8. Evaluation of Options: Helping customers to evaluate options. Determining product specifications. Proposal development.

9. Purchase Decision: Writing orders. Persuading. Negotiating. Finalizing Terms. Closing the sale. The role of Price in business to business marketing.

10. Implementation and Evaluation: Immediate Post-Purchase Activities. Customer Retention and Growth Activities. Value Analysis. Vendor Analysis. Supplier Tiers.

11. Implementation and Evaluation Implementation Value Added Role of Sales Force: Figure 4-2: The Typical Purchasing Process PurchaseDecisionPurchaseDecisionEvaluation of Options Evaluation Recognition of Needs Recognition 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.

12. (% of respondents) PURCHASING - Survey Results Yes55% 9%N.A. No16% Yes84% No36% (% of respondents) Do you track supplier performance? Do you single out certain suppliers as “preferred”?

13. PURCHASING - Survey Results Yes51% 9%N.A. No40% (% of respondents) Do you have multiple tiers for ranking suppliers?

14. Yes77% No23% PURCHASING - Survey Results (% of respondents) Have any suppliers attained and lost top-level status?

15. Traits of Top-Performing Suppliers (% of respondents) PURCHASING - Survey Results <5% 5% 7% 8% 12% 14% 28%.......................................... Others............................ Good Management................... Good Response/Flexibility.................... ISO 9000 Certification......................... Service............... On-Time Delivery Quality.......................................... Others............................ Good Management................... Good Response/Flexibility.................... ISO 9000 Certification......................... Service............... On-Time Delivery Quality

16. Tier Type of Supplier Nature of the Relationship 1In Traditional “arms length” relationship, usually established at an individual level over time. Standardized, non-strategic, products for which there are may qualified suppliers. 2Preferred Relationship centers on suppliers’ products and services, but there is a high level of familiarity and trust between the supplier and the customer. 3Extended 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. 4Partner 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. Figure 4-3: Tiering of Suppliers

17. Buying Center: The term buying center refers to all of the people formally or informally involved in the purchasing decision.

18. Buying Center Members MARKETING When a purchasing decision has an effect on the marketability of a firm’s product, such as altering the product’s materials, packaging, or price. MANUFACTURING Manufacturing is responsible for determining the feasibility and economic considerations of producing end products. RESEARCH AND DEVELOPMENT Is involved in the initial development of products and processes and set broad specifications for component and materials criteria, minimum end-product performance standards, and occasionally manufacturing techniques. GENERAL MANAGEMENT Top management is likely to be involved when the purchase situation is unusual for the firm or when the decision is likely to have major consequences on the firm’s operation. PURCHASING Purchasing agents are specialists who have negotiation expertise, knowledge of buying products, and close working relationships with suppliers. They tend to become most involved in the purchasing situation in the later stages of a “new buy” situation. Are generally the dominant decision makers in repetitive buying situations.

19. Purchasing Role: Economic Buyer. User Buyer. Technical Buyer. Advocate.

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

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

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

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

24. 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.

25. Evolution of Relationships: 1. Awareness. 2. Exploration. 3. Expansion. 4. Commitment. 5. Dissolution.

26. Awareness:

27. Exploration:

28. Expansion:

29. Commitment:

30. Dissolution:

31. Relationship Stage Description Key Selling Objectives AWARENESSRecognition that a supplier may be able to satisfy an important need. Gain customer’s attention Demonstrate how the product/service can satisfy a need EXPLORATIONA 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. EXPANSIONExpanding the rewards for each party in the relationship Get to know customers and their businesses better. Expand ways to help the customer. COMMITMENTThe 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. DISSOLUTIONTotal disengagement from the relationship. This may occur at any point in the relationship. Look for warning signals. Attempt to reinitiate the relationship. Figure 4-4: Stages in a Buyer-Seller Relationship

32. Dissolution Stage: Warning Signals Missing information Uncertainty about information Uncontacted buying influence Customer personnel new to the job Reorganization

33. Relationship Binders: Creating Value. Meeting Expectations. Building Trust.

34. 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.

35. Trust Earning Components Sample Questions LIKEABLE  “The manufacturers’ rep is an individual who people enjoy knowing.” COMPETENT  “The manufacturers’ rep knows what he/she is talking about.” DEPENDABLE  “The manufacturers’ rep is very dependable.” CUSTOMER ORIENTED  “The manufacturers’ rep puts the buyer’s interest ahead of his/her own.” HONEST  “The manufacturers’ rep is one of the most honest persons in the business.” Earning Buyer Trust What is Most Important?

36. Research has established that trust facilitates cooperation. A recent experiment demonstrated that when a seller was expected to be more trustworthy, there was also a higher level of buyer-seller cooperation.¹ Once a salesperson has gained customer trust, the role of the salesperson changes to less emphasis on sales and more on service.² Once trust is gained, the customer: – Becomes more cooperative; – Becomes more receptive to suggestions; – Allows more time for sales presentations; – Allows more access to other people in the organization; and – Informs the salesperson about future buying needs.² ¹Paul Schurr and Julie Ozanne (1985), “Influences on Exchange Processes: Buyers’ Perceptions of a Seller’s Trustworthiness and Bargaining Toughness,” Journal of Consumer Research,11 (March), 939-953. ²John Swan and Frederick Trawick,Jr. (1987), “Building Customer Trust in the Industrial Salesperson: Process and Outcomes,” Advances in Business Marketing, 2, 81-113. The Importance of Trust Selected Research Findings