Part II SALES FORCE ACTIVITIES

1. Part IISALES FORCE ACTIVITIES Chapter 4: Account Relationship Management

2. Account Relationship Management Concepts Account Purchasing Process The Buying Center Building Account Relationships Account Relationship Binders Figure 4-1: Account Relationship Management Concepts

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

4. No 16% Yes 84% PURCHASING - Survey Results Do you track supplier performance? Do you single out certain suppliers as “preferred”? 9% N.A. Yes 55% No 36% (% of respondents) (% of respondents)

5. PURCHASING - Survey Results Do you have multiple tiersfor ranking suppliers? No 40% Yes 51% 9% N.A. (% of respondents)

6. PURCHASING - Survey Results Have any suppliers attained and lost top-level status? No 23% Yes 77% (% of respondents)

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

8. Figure 4-3:Tiering of Suppliers

9. Standard Questions in a Value Analysis Study Value Analysis – Focus: TOTAL COST • Can the item be eliminated? • If item not standard, can standard item be used? • If item standard, does it completely fit application or misfit? • Does item have greater capacity than required? • Can its weight be reduced? • Is there a similar item in inventory that can be substituted? • Are tolerances specified closer than necessary? • Is unnecessary machining performed on the item?

10. Standard Questions in a Value Analysis Study Value Analysis – Focus: (continued) • Are unnecessary fine finishes specified? • Is commercial quality specified? • Can item be manufactured cheaper in-house • If manufactured in-house can it be purchased cheaper? • Is item classified to obtain lowest shipping rate? • Can packaging costs be reduced? • Are suppliers asked for suggestions to reduce costs?

11. Total Cost of Repetitively Used Items

12. Determine the Decision-Making Process • Nothing is more important to driving an accurate selling strategy than understanding your client’s decision-making process. • Project teams typically have a well-defined evaluation process, but not a well-defined decision-making process. • In the law of algebraic democracy, some people’s votes count more than others. • Know who gets a straw vote and who gets a real one.

13. Determine the Decision-Making Process • A salesperson must understand how a decision will be reached even more clearly than the client does. • You must also understand the approval process once you’ve been chosen. • Analyze each stakeholder based on pain, preference, power, and the part he or she plays in the decision-making process. • Don’t’ resort to price or discounts to create a sense of urgency. • In negotiation, power lies in alternatives, weakness in deadlines.

14. Buying Center Members

15. Economic Buying Influence ROLE: 4 Asks “Why” 4 Gives final approval CHARACTERISTICS: 4 Access to money 4 Can release money 4 Veto power FOCUS:4 Total organization 4 Bottom line 4 The Future

16. User Buying Influence ROLE:4To decide on how a purchase will affect job performance CHARACTERISTICS:4Implementation oriented 4Use or supervise use of product or service FOCUS: 4Tactical, not strategic 4The job to be performed

17. Technical Buying Influence ROLE: 4To eliminate alternatives 4To recommend CHARACTERISTICS:4Focuses on quantifiable aspects of product and service 4Gatekeeper 4Can only say “no,” not “yes” FOCUS:4Product specifications 4Asks “What,” not “Why”

18. Advocate ROLE:4Helps guide the sale CHARACTERISTICS:4May be inside or outside of the buying organization 4Furnishes and interprets information FOCUS:4Your success

19. Advocate:Why Your “Winning” is a Personal “Win”

20. 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.

21. Figure 4-4: Stages in a Buyer-Seller Relationship

22. Business Expansion Questions

23. Thomas’s Five Conflict Management Approaches

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

25. A “Reasonable” Salesperson Fortkamp Construction had a major contract delayed due to equipment failure. With a deadline quickly approaching the company called Rogers, a salesperson for Acme Supply. They requested an immediate delivery of replacement supplies so that Fortkamp could meet its promised deadline. Eager to break into this new account, Rogers agreed to generous credit terms and to absorb air freight charges to get the equipment to the customer as quickly as possible. These concessions, however, reduced his company’s net profit of 20% to below 10%.

26. A “Reasonable” Salesperson When asked by his sales manager why the sale should be made at such a low profit margin, Rogers explained, “I felt I needed to be reasonable with this account. I wanted their business in the future. I was there when they needed help, the deal was struck quickly, and they’d remember and thank me later with new business. I think the concessions were justified.” How would you respondto Rogers if you were hissales manager?

27. Account RelationshipsExploration Stage: Pricing Flexibility Consider the followingSalesforce Market Conditions: • Demand is highly price elastic • Product/service offering is complex • A heterogeneous customer base • Large number of product lines • Products are perishable Which of the following is the best alternative:

28. Account RelationshipsExploration Stage: Pricing Flexibility • Alternative Management Systems • Low Pricing Authority:Management approval required forall price discounts • Medium Pricing Authority:A specific limit placed on discounting (e.g., 10% below list price) • High Pricing Authority:Base commissions on gross margins to control price discounting

29. Account RelationshipsPricing Flexibility: Research Results

30. ConsiderationsWhen Choosing a Partner

31. Account Relationships • Relationship Enhancers • Creating Value:Acceptable conduct and performance • Meeting Expectations:Measures of performance levels • Building Trust:Importance of trust

32. Customer Value Creationin the Purchasing Process Figure 4-5:Customer Value Creation in the Purchasing Process High Customer Value Low Relationships: ___ Enterprise ---- Consultative ..... Transactional

33. Figure 4-6 Account Intelligence Market Intelligence: Which of the customer’s products are most important in terms of revenue and profit contribution? What markets do they serve, and which are the most important? Who are their major competitors? Financial Intelligence: When does the annual capital budgeting process begin? When does it end? Who initiates capital project requests? What hurdle rate is required to win approval? What is the projected capital spending for the year? Organizational Intelligence: What reporting relationships in each department influence purchasing decisions? What are the top business objectives each relevant department manager is expected to achieve in the current year?

34. Figure 4-6 Continued Operational Intelligence: What are the details of the process used by Operations to produce results (e.g., raw materials coming in, processing equipment, budget to produce finished goods, etc.)? Are there specific measures of performance for your products or services? Personnel Intelligence: Who are the people having a direct or indirect influence on buying decisions for your products? What are their formal responsibilities? How often have you met with them in the past year? What is your relationship with each person? Who are their friends and enemies with the account? Competitive Intelligence: Which of your competitors have an installed bas position in the account? What is the account share for each competitor? Which ones are likely to gain share?

35. Figure 4-7: Account Relationship Strategy and Relationship Binders

36. Accuracy of Salespeople’sCustomer Perceptions Measures of Performance Levels • Number of sales calls per year • Advance notice on price change (days) • Average lead time for custom products (days) • Acceptable delay for custom products (days) • Acceptable delay for stock items (days) • Minimum acceptable fill rate for stock items (%) • Hold inventory for project delays (days) • Premium for emergency order (%)

37. Accuracy of Salespeople’sCustomer Perceptions Results • Salespeople’s estimates of expected performance levels are not very accurate (average of 50% error). • The performance of individual salespeople was directly related to the accuracy of their estimates. • Telemarketers were more accurate in their estimates of performance expectations than outside salespeople. • Salesperson age and industry experience level were inversely related to performance expectation accuracy. • The amount of sales training a salesperson received was directly related to their estimate accuracy.

38. The Importance of TrustSelected Research Findings • 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 IndustrialSalesperson: Process and Outcomes,” Advances in Business Marketing, 2, 81-113.

39. Earning Buyer TrustWhat is Most Important?

40. Account Relationships Source: Hawes, Mast & Swan (1989) JPS&SM: 193 Salespeople; 173 Purchasing Agents

41. A “Valued” Customer Jacobs is about to close the sale when the buyer mentions, “There’s been $5,500 worth of breakage because of your lousy packaging, but I’m willing to split it with you if you give the word right now. I’ve another appointment beginning in a few minutes.” Jacobs suspects that the breakage was the fault of the buyer’s handling equipment, but cannot prove it. Thinking that splitting the difference is always a reasonable way out, Jacobs decides to agree with the buyer and to get the contract signed. Do you agree with Jacobs’ reasoning? What would you advise Jacobs to have done, if you were her sales manager?