Ch02 - Strategy And Sales Program Planning
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Part I
THE BIG PICTURE Chapter 2:
Strategy and Sales Program Planning
The natural progression How to make sales force and sales program decision
LEVEL 1 Top Management Decisions
Business Strategy
Marketing Strategy
Customer
LEVEL 2 Strategy Implementation Decisions
LEVEL 3 Sales Force Program Decisions
Go-to-Market Relationship Strategy Management (CRM) Product Development Supply Chain Management Management (SCM) (PDM)
Str
ies t i v ti
Ac
uct u
Com pet
Account Relationship Strategy
re
enc
ies
Figure 2-1 The Sales Force Decision Sequence
Lea
sh der
ip
Business Strategy
Environmental constraints Legal & regulatory Demographics Economic Conditions Technology Competitive conditions Sociocultural factors Distinct competencies Marketing Financial Technology Information
Strategic Management Planning
Resources Financial R&D Personnel Brand Equity Production
Firm’s history management culture
Figure 2-2: Factors Influencing Strategic Management
Marketing Strategy
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
A Look into What Companies Want . . . .
What Goals are Most Important to You?
70
66.1%
60 50 40 30
29.8%
31.9%
20 10 0
14.0% 7.7%
Building Enhancing Increasing Investor Saving Brand of credibility sales/ relations costs Company/ of company revenue product product
7.8%
Other
How Successful Were You at Reaching Your Goals? 100
94%
93% 83%
80
72%
68% 58%
60
42% 40
32%
28%
20
17% 6%
0
Building Enhancing Increasing Investor Saving Brand of credibility sales/ relations costs Company/of company revenue product product
7% Other
Types of Strategies (Generic) and Their Effect on Sales Programs
Low Cost Strategy:
High Profit Sales Programs:
Vigorous pursuit of cost reductions from experience and tight cost control.
• Extensive use of independent sales agents • Focused on transactional customer relationships • Structured so that managers supervised a large number of salespeople • Compensation was largely incentive based • Salespeople were evaluated primarily on their sales outcome performance
Differentiation strategy:
High Profit Sales Programs:
Creating an offering perceived as being • Selective use of independent sales agents unique leading to high brand loyalty and • Focused on long-term customer relationships low price sensitivity. • Structured so that managers intensely supervised a limited number of salespeople • Compensation was largely salary based • Salespeople were evaluated on their behaviors as well as their outcomes.
Niche Strategy:
High Profit Sales Programs:
Servicing a target market very well, focusing all decisions with the target market needs in mind, dominating sales with the segment.
Experts in the operations and opportunities associated with a target market. Otherwise the firm adopted the program characteristics associated with the appropriate value creation strategy above.
Figure 2-4: Business Strategies and High Profit Sales Force Programs
Marketing Strategies
Sales Strategies
Build Strategy
Hold Strategy
Harvest Harvest Strategy
Divest Strategy
Expand market share in a highgrowth market
Maintain market share at the lowest costs possible
Reduce costs and focus on profit, not market share
Reduce inventory at lowest cost possible Divest
Secure Added Distribution
Call on targeted current customers
Add new customers Provide high presale services Provide product & market feedback
Focus on volume growth
Increase service to current customers
Call on targeted new customers Build current relationships
Focus on account penetration
Call on most profitable accounts only
Reduce overall service levels Reduce inventory levels Maintain distribution Invest as little time as necessary
Eliminate services Offer exceptional pricing Focus on one time sales Minimize time commitment
Figure 2-4: Business Portfolio Analysis and Sales Force Strategy
Sales Force Ranking and Sales Growth: Pharmaceuticals (1988-1990) 10% 8%
Growth
6% 4% 2% 0%
5
6
Low
7
8
High
Sales Force Ranking
Sales Force Ranking and Sales Growth: Computers (1988-1990) 15%
10%
Growth 5%
0%
5
6
Low
7
8
High
Sales Force Ranking
A More Detailed Look at Marketing Strategy
The Three Major Functions of Marketing: – – –
Segmentation Targeting Positioning
Strategic Implementation Decisions
Steps in Developing a Go-to-Market Strategy 1. What is the best way to segment the market? 2. What are the essential activities required by each segment? 3. What group of go-to-market participants should perform the essential activities? 4. Which face-to-face selling participants should be used?
Figure 2-6 Essential Activities Interest Creation
Post-Purchase
Pre-Purchase
Purchase
A Framework for Defining Essential Activities Customer Size and Opportunity
Large
Small
Buying Process
Account Maintenance:
Effectiveness Selling:
Continue high-quality service Electronic Data Entry (EDI) Prompt delivery Enhance value proposition Relationships Friendship
Solve and consult Cooperation Customization Integration Partnership
Efficiency Selling:
Targeted Selling:
Take orders Secure distribution Consider self-ordering (lower price)
Quick needs assessment and solution Explain features and benefits Economic evaluation
Low Information, Low Solution Needs
High Information, High Solution Needs
Figure 2-7 Potential Go-to-Market Participants
Customers and Prospects
Agents Direct Sales Distributors Integrators Force Retailers Direct
Alliances
Advertising Promotion Direct Mail
Telemarketing
Internet
Indirect Sales Force Options
Non-Sales Force Options
Company
gure 2-8 Comparing Various Go-to-Market Alternative
Low Cost per Exposure
Advertising Direct Mail Internet
Efficiency Telemarketing
Sales Force
Effectiveness
High Sales per Exposure
Go-to-Market Strategy: A Large Computer Manufacturer Telemarketing
Direct Sales Force
Industry Teams Account Teams
Inbound
Outbound
Geographic Sales Force
Customer Base
Partners
Internet
Go-to-Market Strategy: A Large Chemical Company Direct Sales Force
Account Teams
Telemarketing
Inbound
Customer Base
Go-to-Market Strategy: A Pharmaceutical Company Direct Sales Force
Account Teams
Geographic Sales Force
Telemarketing
Inbound
Customer Base
Partners
Go-to-Market Strategy: An Industrial Distributor Direct Sales Force
Telemarketing
Inbound
Account Teams
Outbound
Geographic Sales Force
Customer Base
Internet
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
Figure 2-10 Supply Chain Management Subprocess 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
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
Three Steps in Leveraging the Customer Base Shareholder Value Driver of Cash Flow & EVA
Business Driver of Profits
Sales Driver of Revenue
• 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 • 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 • 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
Figure 2-12 Sales Force Program Marketing MarketingObjectives, Objectives,Strategy, Strategy,and and Strategy Implementation Program Strategy Implementation Program Estimates Estimatesofofsales sales potential potentialand and sales forecast sales forecast
Account AccountRelationship RelationshipStrategy Strategy
Desired DesiredSelling SellingActions Actions and Behaviors and Behaviors
Estimates Estimatesofofsales salesforce force size and budget size and budget
Organizational OrganizationalStructure Structure
Competency CompetencyDevelopment DevelopmentProgram Program
Leadership LeadershipSystem System Feedback
Sales Force Program Elements – Cont. • How long is the selling cycle? Account • How much time is spent on customer need Relationship discovery? Strategy • 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 • What are their non-selling responsibilities? Sales Force competitor once the relationship is established? • How much customer face-time will salespeople
Selling Activities
• • • •
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?
Sales Force Program Elements – Cont. • Will the sales force be specialized by product, Organizational customer, or function? Structure • 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?
Competency • Experience level of new salespeople? Development • Length and purpose of initial training program? Program • Nature of continuing 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?
ise ip r rp sh e t n En atio l Re
Investment by Supplier
ve i t lta ship u ns tion o C ela R
al n o cti ship a s on n a i Tr elat R
Investment by Customer
Figure 2-13: Alternative Types of Account Relationships
Different Sales Orientations
Sales Argume nt Profile of Sales Custom er Contact s Offerin g
Product Sales
Solution Sales
Value Sales
Best products
Solutions to your needs
Impact on your business results
“Product Expert”
“Solution provider”
“business consultant”
Narrow Space (e.g., purchasing)
Function/ department
All levels
Valuable solutions to Product and service Best products with a support competitive advantage solutions to customer needs competitive price
Success Product excellence and/ or cost leadership Factors
Understanding the customer’s needs
Driving customer profits and EVA
gure 2-14: Changes in Customer Expectations of Suppliers Traditional Relationships
Enterprise Relationships
• Little recognition of credit for past performance
• Recognition of past performance and track record.
• No responsibility for supplier’s profit margins
• Recognition of suppliers’ need to make a fair profit
• Little support for feedback from suppliers
• Feedback from suppliers encouraged.
• No guarantee of business relationship beyond the contract.
• Expectations of business relationship beyond the contract.
• No Performance expectations beyond the contract.
• Considerable performance expectations beyond the contract.
• Adversarial, zero-sum game.
• Cooperative and trusting, positivesum game.
Good 27% Very Good 10%
Fair 10%
Poor 53%
Partnering Effectiveness Index
THE BIG PICTURE Chapter 2:
Strategy and Sales Program Planning
The natural progression How to make sales force and sales program decision
LEVEL 1 Top Management Decisions
Business Strategy
Marketing Strategy
Customer
LEVEL 2 Strategy Implementation Decisions
LEVEL 3 Sales Force Program Decisions
Go-to-Market Relationship Strategy Management (CRM) Product Development Supply Chain Management Management (SCM) (PDM)
Str
ies t i v ti
Ac
uct u
Com pet
Account Relationship Strategy
re
enc
ies
Figure 2-1 The Sales Force Decision Sequence
Lea
sh der
ip
Business Strategy
Environmental constraints Legal & regulatory Demographics Economic Conditions Technology Competitive conditions Sociocultural factors Distinct competencies Marketing Financial Technology Information
Strategic Management Planning
Resources Financial R&D Personnel Brand Equity Production
Firm’s history management culture
Figure 2-2: Factors Influencing Strategic Management
Marketing Strategy
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
A Look into What Companies Want . . . .
What Goals are Most Important to You?
70
66.1%
60 50 40 30
29.8%
31.9%
20 10 0
14.0% 7.7%
Building Enhancing Increasing Investor Saving Brand of credibility sales/ relations costs Company/ of company revenue product product
7.8%
Other
How Successful Were You at Reaching Your Goals? 100
94%
93% 83%
80
72%
68% 58%
60
42% 40
32%
28%
20
17% 6%
0
Building Enhancing Increasing Investor Saving Brand of credibility sales/ relations costs Company/of company revenue product product
7% Other
Types of Strategies (Generic) and Their Effect on Sales Programs
Low Cost Strategy:
High Profit Sales Programs:
Vigorous pursuit of cost reductions from experience and tight cost control.
• Extensive use of independent sales agents • Focused on transactional customer relationships • Structured so that managers supervised a large number of salespeople • Compensation was largely incentive based • Salespeople were evaluated primarily on their sales outcome performance
Differentiation strategy:
High Profit Sales Programs:
Creating an offering perceived as being • Selective use of independent sales agents unique leading to high brand loyalty and • Focused on long-term customer relationships low price sensitivity. • Structured so that managers intensely supervised a limited number of salespeople • Compensation was largely salary based • Salespeople were evaluated on their behaviors as well as their outcomes.
Niche Strategy:
High Profit Sales Programs:
Servicing a target market very well, focusing all decisions with the target market needs in mind, dominating sales with the segment.
Experts in the operations and opportunities associated with a target market. Otherwise the firm adopted the program characteristics associated with the appropriate value creation strategy above.
Figure 2-4: Business Strategies and High Profit Sales Force Programs
Marketing Strategies
Sales Strategies
Build Strategy
Hold Strategy
Harvest Harvest Strategy
Divest Strategy
Expand market share in a highgrowth market
Maintain market share at the lowest costs possible
Reduce costs and focus on profit, not market share
Reduce inventory at lowest cost possible Divest
Secure Added Distribution
Call on targeted current customers
Add new customers Provide high presale services Provide product & market feedback
Focus on volume growth
Increase service to current customers
Call on targeted new customers Build current relationships
Focus on account penetration
Call on most profitable accounts only
Reduce overall service levels Reduce inventory levels Maintain distribution Invest as little time as necessary
Eliminate services Offer exceptional pricing Focus on one time sales Minimize time commitment
Figure 2-4: Business Portfolio Analysis and Sales Force Strategy
Sales Force Ranking and Sales Growth: Pharmaceuticals (1988-1990) 10% 8%
Growth
6% 4% 2% 0%
5
6
Low
7
8
High
Sales Force Ranking
Sales Force Ranking and Sales Growth: Computers (1988-1990) 15%
10%
Growth 5%
0%
5
6
Low
7
8
High
Sales Force Ranking
A More Detailed Look at Marketing Strategy
The Three Major Functions of Marketing: – – –
Segmentation Targeting Positioning
Strategic Implementation Decisions
Steps in Developing a Go-to-Market Strategy 1. What is the best way to segment the market? 2. What are the essential activities required by each segment? 3. What group of go-to-market participants should perform the essential activities? 4. Which face-to-face selling participants should be used?
Figure 2-6 Essential Activities Interest Creation
Post-Purchase
Pre-Purchase
Purchase
A Framework for Defining Essential Activities Customer Size and Opportunity
Large
Small
Buying Process
Account Maintenance:
Effectiveness Selling:
Continue high-quality service Electronic Data Entry (EDI) Prompt delivery Enhance value proposition Relationships Friendship
Solve and consult Cooperation Customization Integration Partnership
Efficiency Selling:
Targeted Selling:
Take orders Secure distribution Consider self-ordering (lower price)
Quick needs assessment and solution Explain features and benefits Economic evaluation
Low Information, Low Solution Needs
High Information, High Solution Needs
Figure 2-7 Potential Go-to-Market Participants
Customers and Prospects
Agents Direct Sales Distributors Integrators Force Retailers Direct
Alliances
Advertising Promotion Direct Mail
Telemarketing
Internet
Indirect Sales Force Options
Non-Sales Force Options
Company
gure 2-8 Comparing Various Go-to-Market Alternative
Low Cost per Exposure
Advertising Direct Mail Internet
Efficiency Telemarketing
Sales Force
Effectiveness
High Sales per Exposure
Go-to-Market Strategy: A Large Computer Manufacturer Telemarketing
Direct Sales Force
Industry Teams Account Teams
Inbound
Outbound
Geographic Sales Force
Customer Base
Partners
Internet
Go-to-Market Strategy: A Large Chemical Company Direct Sales Force
Account Teams
Telemarketing
Inbound
Customer Base
Go-to-Market Strategy: A Pharmaceutical Company Direct Sales Force
Account Teams
Geographic Sales Force
Telemarketing
Inbound
Customer Base
Partners
Go-to-Market Strategy: An Industrial Distributor Direct Sales Force
Telemarketing
Inbound
Account Teams
Outbound
Geographic Sales Force
Customer Base
Internet
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
Figure 2-10 Supply Chain Management Subprocess 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
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
Three Steps in Leveraging the Customer Base Shareholder Value Driver of Cash Flow & EVA
Business Driver of Profits
Sales Driver of Revenue
• 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 • 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 • 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
Figure 2-12 Sales Force Program Marketing MarketingObjectives, Objectives,Strategy, Strategy,and and Strategy Implementation Program Strategy Implementation Program Estimates Estimatesofofsales sales potential potentialand and sales forecast sales forecast
Account AccountRelationship RelationshipStrategy Strategy
Desired DesiredSelling SellingActions Actions and Behaviors and Behaviors
Estimates Estimatesofofsales salesforce force size and budget size and budget
Organizational OrganizationalStructure Structure
Competency CompetencyDevelopment DevelopmentProgram Program
Leadership LeadershipSystem System Feedback
Sales Force Program Elements – Cont. • How long is the selling cycle? Account • How much time is spent on customer need Relationship discovery? Strategy • 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 • What are their non-selling responsibilities? Sales Force competitor once the relationship is established? • How much customer face-time will salespeople
Selling Activities
• • • •
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?
Sales Force Program Elements – Cont. • Will the sales force be specialized by product, Organizational customer, or function? Structure • 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?
Competency • Experience level of new salespeople? Development • Length and purpose of initial training program? Program • Nature of continuing 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?
ise ip r rp sh e t n En atio l Re
Investment by Supplier
ve i t lta ship u ns tion o C ela R
al n o cti ship a s on n a i Tr elat R
Investment by Customer
Figure 2-13: Alternative Types of Account Relationships
Different Sales Orientations
Sales Argume nt Profile of Sales Custom er Contact s Offerin g
Product Sales
Solution Sales
Value Sales
Best products
Solutions to your needs
Impact on your business results
“Product Expert”
“Solution provider”
“business consultant”
Narrow Space (e.g., purchasing)
Function/ department
All levels
Valuable solutions to Product and service Best products with a support competitive advantage solutions to customer needs competitive price
Success Product excellence and/ or cost leadership Factors
Understanding the customer’s needs
Driving customer profits and EVA
gure 2-14: Changes in Customer Expectations of Suppliers Traditional Relationships
Enterprise Relationships
• Little recognition of credit for past performance
• Recognition of past performance and track record.
• No responsibility for supplier’s profit margins
• Recognition of suppliers’ need to make a fair profit
• Little support for feedback from suppliers
• Feedback from suppliers encouraged.
• No guarantee of business relationship beyond the contract.
• Expectations of business relationship beyond the contract.
• No Performance expectations beyond the contract.
• Considerable performance expectations beyond the contract.
• Adversarial, zero-sum game.
• Cooperative and trusting, positivesum game.
Good 27% Very Good 10%
Fair 10%
Poor 53%
Partnering Effectiveness Index
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