Chapter 2 Sales Force Management

Chapter 2

0011 0010 1010 1101 0001 0100 1011

2

1

4

The Process of Selling and Buying

1

Learning Objectives 0011 0010 1010 1101 0001 0100 1011

• • • • • • • • • •

2

1

4

Recognize key drivers of change in selling and sales management. Understand best practices in selling. Explain historical basis for stereotypical views of selling. Point out reasons why sales jobs can be highly satisfying. Identify and explain key success factors for salesperson performance. Discuss and give examples of different types of selling jobs. List and explain roles of participants in an organizational buying center. Describe relationship between buying centers and selling centers and the nature of team selling. Outline stages in organizational buyer decision making. 2 Point out the nature of different organizational buying situations.

Key Terms 0011 0010 1010 1101 0001 0100 1011

• • • • • • • • • • • • • • • •

drivers of change best practices autonomy sales activities job variety intrinsic rewards extrinsic rewards work-family conflict telecommute virtual office adaptive selling job enlargement cost of a sales call retail selling end-user consumer business-toconsumer (B2C) market

•seller •detailer •technical seller •new business seller •buying center •initiator •user •influencer •gatekeeper •buyers •decider business-tobusiness (B2B) market •industrial selling •trade service •missionary •controller •perceived risk

2

1

•selling center •team selling •matrix organization •key account •organizational buying •decision stages •derived demand •single-source suppliers •commodity products •slotting allowances •new-task purchases •modified re-buy •straight re-buy •repeat purchases •out supplier

4

3

Drivers of Change in Selling and Sales Management 0011 0010 1010 1101 0001 0100 1011

• • • • • •

2

1

4

Building long-term relationships with customers. Creating sales organizational structures that are more nimble and adaptable to the needs of different customer groups. Gaining greater job ownership and commitment from salespeople. Shifting sales management style from commanding to coaching. Leveraging available technology for sales success. Better integrating salesperson performance evaluation.

4

Best practices 0011 0010 1010 1101 0001 0100 1011

2

1

4

– Look to the conduct of world-class sales organizations as indicators of important agents for change in selling.

5

Autonomy 0011 0010 1010 1101 0001 0100 1011

2

1

4

– The freedom of action and opportunities for personal initiative. – The degree of independence the salesperson can exercise in making his or her own decisions in the day-todayoperation of the job.

6

Key-Terms 0011 0010 1010 1101 0001 0100 1011

•

•

2

1

Sales activities (pg. 38) – Multifaceted and challenging activities that are part of the job of a salesperson, such as searching out leads, writing up orders, and learning about the product. Job variety (pg. 39) – Sales jobs are seldom boring because of the different customer needs and problems for which the salesperson can work to develop unique solutions.

4

7

Key-Terms 0011 0010 1010 1101 0001 0100 1011

•

• •

•

2

1

Intrinsic rewards (pg. 39) – Rewards inherent to satisfaction derived from elements of the job or role itself. Extrinsic rewards (pg. 39) – Rewards bestowed on the salesperson by the company. Work-family conflict (pg. 42) – A lack of balance between one’s work life and family life such that work is encroaching on the family. Telecommute (pg. 42) – Working from a remote or virtual office, often at home, and seldom traveling to company offices.

4

8

Key-Terms 0011 0010 1010 1101 0001 0100 1011

•

2

1

4

Virtual office (pg. 42) – A location outside the company’s offices where a salesperson works (often his or her home). • Adaptive selling (pg. 47) – The altering of sales behaviors during a customer interaction or from one situation to another based on information the sales rep gathers about the nature of the selling situation. • Job enlargement (pg. 50) – The fact that the sales role today is broader and contains substantially more activities than it once did. • Cost of a sales call (pg. 50) 9 - Summation of non-selling activities and selling activities

Key-Terms 0011 0010 1010 1101 0001 0100 1011

• • • •

•

2

1

4

Retail selling (pg. 51) – Involves selling goods and services to end-user consumers for their own personal use. End-user consumer (pg. 51) – The ultimate user of the goods and services for personal use. Business-to-consumer (B2C) market (pg. 51) – The sale of goods and services to end-user consumers (retail selling). Business-to-business (B2B) market (pg. 51) – Previously called industrial selling. – The sale of goods and services to buyers who are not the end-users. – Relationship selling is much more predominant in the B2B market than in the B2C market. 10 Industrial selling (pg. 51) – An old term for business-to-business (B2B) selling.

Key-Terms 0011 0010 1010 1101 0001 0100 1011

•

• •

2

1

4

Trade servicing (pg. 52) – A type of B2B sales job in which the sales force’s primary responsibility is to increase business from current and potential customers by providing them with merchandising and promotional assistance. Missionary seller (pg. 52) – Salespeople to increase business from current and potential customers by providing them with product information and other personal selling assistance. Detailer (pg. 52) – Missionary salespeople often do not take orders from customers directly but use “detailers” to persuade customers to buy their firm’s product from distributors or other wholesale suppliers.

11

Key-Terms 0011 0010 1010 1101 0001 0100 1011

•

•

2

1

4

Technical seller (pg. 52) – Salespeople increase business from presently identified customers and potential customer by providing them with technical and engineering information and assistance. New business seller (pg. 52) – Salespeople identify and obtain business from new customers.

12

Key-Terms 0011 0010 1010 1101 0001 0100 1011

•

2

Buying center (pg. 57) – All the people who participate in buying a particular product or service. – Initiators (pg. 57) • The people who perceive a problem or opportunity that may require the purchase of a new product or service and thereby start the buying process. – Users (pg. 57) • The people in the organization who must use or work with the product or service. – Influencers (pg. 58) • The people who provide information for evaluating alternative products and suppliers. – Gatekeepers (pg. 58) • The people who control the flow of information to other people involved in the purchasing process. – Buyers (pg. 58) • The people who actually contact the selling organization and place the order. – Deciders (pg. 58) • The people with the final authority to make a purchase decision. 13 – Controllers (pg. 58) • The people who determine the budget for the purchase.

1

4

Key-Terms 0011 0010 1010 1101 0001 0100 1011

•

•

•

2

1

4

Perceived risk (pg. 59) – For a firm when buying a particular product affects the makeup and size of the buying center. – It is based on the complexity of the product and situation, the relative importance of the purchase, time pressure to make a decision, and the degree of uncertainty about the product’s efficiency. Selling center (pg. 59) – Brings together individuals from around the organization (marketing, customer service, sales, engineering, and others) to help salespeople do their jobs more effectively. Team selling (pg. 59) – These structures commonly make the salesperson responsible for working with the entire selling team in order to manage the customer relationship.

14

Key-Terms 0011 0010 1010 1101 0001 0100 1011

•

•

2

1

4

Matrix organization (pg. 59) – An organization of direct reports and supporting internal consultants who bring their collective expertise to bear for a client. Key account (pg. 60) – One of a firm’s largest customers (especially one with a buying center) whose potential business over time represents enough dollars and entails enough crossfunctional interaction among various areas of both firms to justify the high costs of the team approach. Key accounts generally have a senior salesperson as the key account manager (KAM).

15

Key-Terms 0011 0010 1010 1101 0001 0100 1011

•

• •

•

2

1

4

Organizational buying decision stages (p. 60) – (1) Anticipation or recognition of a problem or need, (2) determination and description of the characteristics and the quantity of the needed item, (3) search for and qualification of potential suppliers, (4) acquisition and analysis of proposals or bids, (5) evaluation of proposals and selection of suppliers, (6) selection of an order routine, and (7) performance evaluation and feedback. Derived demand (pg. 60) – A firm’s demand for goods and services. Single-source suppliers (pg. 61) – Only one vendor used by a firm for a particular good or service to minimize the variation in quality of production inputs. Commodity products (pg. 62) – Standardized, non-technical items.

16

Key-Terms 0011 0010 1010 1101 0001 0100 1011

•

•

•

2

1

4

Slotting allowances (pg. 62) – Fees retailers charge sales organizations for guaranteed shelf space. – They cover the cost of setting up a new item in their IT system, programming it into inventory, and ultimately distributing it in stores. New-task purchases (pg. 63) – Customer is buying a relatively complex and expensive product or service for the first time. Modified re-buy (pg. 63) – Buyer is interested in modifying the product specifications, prices, or other terms it has been receiving from existing suppliers and is willing to consider dealing with new suppliers.

17

Key-Terms 0011 0010 1010 1101 0001 0100 1011

• •

•

2

1

4

Straight re-buy (pg. 63) – Customer is reordering an item it has purchased many times. Repeat purchases (p. 63) – Occurs when a customer buys the same product under the same circumstances again and again. – It tends to be much more routine than new-task purchase or modified rebuy. Out supplier (pg. 64) – Potential supplier not on a buyer’s approved list.

18

Drivers of change 0011 0010 1010 1101 0001 0100 1011

2

1

4

– Six have been identified in reinventing sales organization’s so they can compete successfully. • Building long-term relationships with customers. • Creating sales organizational structures that are more nimble and adaptable to the needs of different customer groups. • Gaining greater job ownership and commitment from salespeople. • Shifting sales management style from commanding to coaching. • Leveraging available technology for sales success • Better integrating salesperson performance evaluation..

19

What Customers Expect 0011 0010 1010 1101 0001 0100 1011

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

2

1

4

Knowledge of products and customer applications. Customer advocacy; partnership development. Ability to keep customer up-to-date. Quality product/service. Offer of technical support. Offer of local or easily accessible representation. Responsiveness to needs, problems; provides service. Ability to provide a total solution. Understanding of customer’s business. Competitive price.

20

How Sellers are Responding 0011 0010 1010 1101 0001 0100 1011

• • • • • • • •

2

1

4

Establishing a customer-driven culture. Market segmentation. Market adaptability. Information technology. Customer feedback and measuring customer satisfaction. Sales, service, and technical support systems. Recruiting and selecting salespeople. Training and development.

21

Attractiveness of Sales Careers 0011 0010 1010 1101 0001 0100 1011

• • • • •

2

1

4

Autonomy and opportunities for personal initiatives A variety of challenging activities Financial rewards Favorable working conditions Excellent opportunities for development and advancement

22

0011 0010 1010 1101 0001 0100 1011

2

1

4

Source: Christine Galea, “2002 Salary Survey,” Sales & Marketing Management, May 2002, pp. 32–36. © 2002 VNU Business Media. Used with permission. 23

0011 0010 1010 1101 0001 0100 1011

2

1

4

24

Selling Success Factors 0011 0010 1010 1101 0001 0100 1011

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

2

1

4

Listening skills Follow-up skills Ability to adapt sales style to situation Tenacity Well organized Verbal communication skills Able to interact with people at all levels of an organization Ability to overcome objections Closing skills Personal planning and time management skills

25

0011 0010 1010 1101 0001 0100 1011

2

1

4

26

Selling Activities 0011 0010 1010 1101 0001 0100 1011

Selling

Attending conferences and meetings

Working with others

Servicing the product

Training and recruiting

Entertaining

Managing information

2

Servicing the account

1

4

Traveling

Distribution

27

0011 0010 1010 1101 0001 0100 1011

2

1

4

28

Matrix of New Selling Activities Communication

Sales

Relationship

Team

Email Dictaphone Internet Laptop (CD) Voicemail Cell Phone Pager Web page Newsletters Audiovideo conference Provide tech info Overnight services Maintain virtual office

Set up appts Script sales pitch from database Use software for customer background Laptop for presentation VCR for presentation Provide tech ability to customers

Web page

Conference calls

Practice language skills

Adaptive selling Conduct research at customers’ site Avoid potential litigation Plan for multiple calls to close deal Sell value-added services Respond to referrals Write thank-yous Target key accounts Pick up sales supplies Consultative sales Listen Ask questions Read body language Sell unique competencies

Bring in vendor/alliance Develop relationship Hand-hold customer Write thank-yous Purchase dealers Call on CEOs Build rapport w/ buying center Network Build trust Train brokers

Mentor Make sale and turn over to someone else Coordinate with sales support

Technology

0011 0010 1010 1101 0001 0100 1011

Database

Collect new information Enter information on laptop Update customer files

Nontechnology

2

1

4

29

0011 0010 1010 1101 0001 0100 1011

2

1

4

30

B2C versus B2B Selling 0011 0010 1010 1101 0001 0100 1011

• •

2

1

4

Most salespeople are involved in retail selling – selling goods and services to ultimate consumers (B2C) A much larger volume of sales is accounted for by industrial selling, recently referred to as business-to-business selling (B2B): – Sales to resellers – Sales to business users – Sales to institutions

31

Types of B2B Jobs 0011 0010 1010 1101 0001 0100 1011

• • • •

2

1

Trade selling – increase business by providing customers with merchandising and promotional assistance Missionary selling – persuade customers to buy products from distributors or other wholesale suppliers Technical selling – increase business from by offering current customers technical/engineering assistance New business selling – identify and obtain business from new customers

4

32

Stages in the Selling Process 0011 0010 1010 1101 0001 0100 1011

Prospectin g for Customers

Opening the Relationship Qualifying the Prospect

Presenting the Sales Message

2

1

4

Closing the Sale

Servicing the Account

33

Prospecting for customers is… 0011 0010 1010 1101 0001 0100 1011

• • • • • • •

A core competency A sales fundamental Critical to increasing sales Hard work Carries a delayed payoff Requires design and discipline Enhanced by software

2

1

4

34

Opening the Relationship 0011 0010 1010 1101 0001 0100 1011

• • • •

2

1

4

Often referred to as “the approach.” Determine who is likely to have the greatest influence to initiate the purchase process Generate enough interest to obtain the information needed to become a qualified prospect Identify key decision makers, desires, and relative influence

35

Qualifying the Prospect 0011 0010 1010 1101 0001 0100 1011

• • • •

2

1

4

Is the prospect a worthwhile customer? Does the prospect have need for my product? Can I prospect so aware of that need that I can make a sale? Will the sale be profitable to my company?

36

Sales Presentation 0011 0010 1010 1101 0001 0100 1011

•

•

2

1

4

Purpose – Transmit information – Persuade the prospect to become a customer Common complaints about sales presentations: – Running down competitors – Being to aggressive or abrasive – Have inadequate knowledge of competitors’ products and services – Inadequate knowledge of client’s business/organization – Poor delivery

37

Closing the Sale 0011 0010 1010 1101 0001 0100 1011

• • • • • •

2

1

4

Begins with the first contact Requires “asking for the order” Can be tested throughout the presentation—Trial Close Requires understanding the prospect and buying process Should be paced by the salesperson Requires continual improvement

38

Servicing the Account 0011 0010 1010 1101 0001 0100 1011

• •

•

2

1

4

Excellent service after the sale bolsters customer loyalty Follow up on each sale to check satisfaction with – Product – Installation – Training – Maintenance – Billing Satisfied customers = Repeat customers

39

Participants in the Buying Process 0011 0010 1010 1101 0001 0100 1011

• • • • • • •

2

1

4

Initiators – perceive a problem or opportunity requiring a new product of service Users –must use or work with the product or service Influencers –provide information for evaluating alternative products or suppliers Gatekeepers – control the flow of information to others Buyers – actually contact the selling organization and place the order Deciders – final authority to purchase Controllers – determine the budget

40

Organizational Buying Decision Stages 0011 0010 1010 1101 0001 0100 1011

1. 2. 3. 4. 5. 6. 7.

2

1

4

Anticipate or recognize a problem or need Determine and describe the traits and quality needed Search for and qualify potential suppliers Acquire and analyze proposals/bids Evaluate proposals and select suppliers Select an order routine Perform evaluation and give feedback

41

0011 0010 1010 1101 0001 0100 1011

2

1

4

42

*IBM •

The major components of IBM’s approach to getting close to its customers are:

0011 0010 1010 1101 0001 0100 1011

– – –

–

•

Being more accessible and more visible to customers. Training salespeople to be industry experts. Organizing sales teams for more efficiency and with a single sales method, which allows management to hold the sales teams more accountable, creates seamless information flow, establishes a common culture, and uses reps as resources to the client with a whole team to back them up. Selling solutions, not products.

2

1

4

Because IBM offers technology-based products and services, customer needs change rapidly and IBM’s products and services change accordingly. The sales structure must adapt to this dynamic business environment. Also, IBM must use training to keep the expertise of its salespeople current.

43

IBM 0011 0010 1010 1101 0001 0100 1011

• • • • • • •

2

1

4

The six critical drivers of change in relationship selling are: Building long-term relationships with customers. Creating sales organizational structures that are more nimble and adaptable to the needs of different customer groups. Gaining greater job ownership and commitment from salespeople. Shifting sales management style from commanding to coaching. Leveraging technology for sales success. Evaluating salesperson performance more accurately.

44

UPS 0011 0010 1010 1101 0001 0100 1011

•

•

•

2

1

4

UPS has undergone many changes in recent years, and two of the drivers of change (no pun intended) are (1) the need to create sales organizational structures that are more nimble and adaptable to the needs of different customer groups, and (2) the need to leverage technology for sales success. UPS does not just deliver packages anymore. It provides, among other things, comprehensive supply chain solutions to companies, which include logistics and distribution, transportation and freight (ground, sea, air, rail), international trade management and customs brokerage. Like IBM, UPS’s sales teams have had to adapt to these changing technologies and services in order to provide industry expertise in a multitude of areas such as retail, healthcare, high tech, consumer goods, manufacturing, and automotive. UPS also promotes itself as offering integrated supply chain solutions, not simply products or services, to clients. In addition, UPS has used technology to its advantage to add to its sales success. For example, UPS offers “UPS Internet Shipping,” which provides client organizations and their employees quick access to a Web-based shipping application. The Web-application allows users to prepare domestic and international shipments using their UPS account number or credit card, determine rates, schedule a pickup, find drop-off locations, and track their 45 shipments.

Nimble Firms 0011 0010 1010 1101 0001 0100 1011

• • • •

• • • • •

2

1

Constantly monitor and communicate with customers. Are proactive instead of reactive in meeting customer needs. Practice adaptive selling by carefully sensing customer needs in each interaction and adapting the form and message of the communication to those needs. Are flexible at all times and open to creative, outside-the-box solutions.

4

IBM is becoming more nimble by having: Its salespeople work as teams rather than individuals. This approach decreases confusion for customers and allows salespeople to drive sales through the pipeline faster. Every salesperson follows the same seven-step selling method. This approach keeps all members of the organization on the same page regarding sales and ensures consistency. One universal reporting system that takes the guesswork out of numbers. This approach allows sales teams and managers to concentrate on the selling functions rather than debating numbers. A structure that requires fewer meetings. This approach allows sellers to be in the field 46 more with customers.

Pro: 0011 0010 1010 1101 0001 0100 1011

• • • • • •

2

1

Job autonomy – The salesperson is free to get the job done in his or her own way and spend time as he or she chooses, as long as he or she gets good results. Job variety – Selling is a complex job that requires creative thinking. The salesperson will never get bored. Financial rewards – These awards can be intrinsic (a feeling of being satisfied) and extrinsic (more money in the salesperson’s pocket). Favorable working conditions – It is often easier to work from home and telecommute rather than go into a corporate office. Telecommuting helps to ease the potential for work-family conflict. Highly visible results – A great thing when the results are good, as recognition and rewards follow. Ability to move up in the organization – There are promotion opportunities along a sales management or marketing track. A salesperson can also be given a more attractive territory or key account as a promotion. 47

4

Con: 0011 0010 1010 1101 0001 0100 1011

• • • •

2

1

4

Stigma or negative stereotype associated with selling – May cause lack of respect or misunderstanding from others. Pressure – Constant pressure to make numbers, especially if the salesperson is being paid on a straight commission. Highly visible results – Not such a great thing if a salesperson is not making quota or is in the bottom ranks of performance. His or her job could quickly be in jeopardy. Frequent travel – It can be difficult on family relationships if frequent overnight travel is required.

48

0011 0010 1010 1101 0001 0100 1011

2

1

4

49

Summary • Selling is a great career path that can also lead to significant upward mobility professionally, 0011 0010 1010 1101 0001 0100 in 1011 especially to sales management. • The drivers of change we talked about in this chapter all translate into opportunities for salespeople to contribute a high level of value to their customers and their own organizations. • Salespeople and their managers can and should benchmark their own approaches to managing customer relationships against the best practices of world-class sales organizational. • Selling today is so far removed from the stereotypical societal view of old-style selling as to bear no resemblance whatsoever. The key success factors needed in relationship selling all point to professionalism, strong skills, and broad and deep content knowledge that allow the salesperson to maximize his or her performance50

2

1

4

Summary • It is especially interesting to examine the sales activities performed by salespeople today. Quite a few been added in recent years, driven 0011 0010new 1010activities 1101 0001have 0100 1011 largely by technology and the move form transactional to relationship selling approaches. It is valuable to understand the process of selling through identification of its six stages. • Customers are the primary focus of relationship sellers, gaining knowledge about the world of organizational buying greatly enhances the effectiveness of a salesperson in is or her role as a customer relationship manager. • Salespeople must carefully study each of their customers to learn what dynamics are at play within each buying center situation. Often, selling firm form selling centers and initiate team-selling approaches to better serve buying centers, especially with large and complex customers (key accounts). Salespeople need to fully understand and appreciate the stages of the organizational buying decision process that each of 51 their customers goes through so the salesperson can

2

1

4