Part II SALES FORCE ACTIVITIES

Part IISALES FORCE ACTIVITIES Chapter 3: Sales Opportunity Management

Sales opportunity management • One way to increase productivity is to focus sales force time on those prospects that have a probability of becoming an important customers.

Sales Opportunity Management Generating New Accounts Managing Existing Accounts Sales Versus Profits Personal Time Management

A process for generating new accounts • Business places a lot of emphasis on growing by getting closer to the present customers. Although this is an important opportunity to businesses , many companies focus on finding new customers to achieve their growth objectives.

A process for generating new accounts • No matter how strong your products , how great your customer service , or how aggressive your sales force, business lose customers every year when companies are bought and sold , management changes and global economies fluctuate.

A process for generating new accounts • The key to building sales through prospecting is to spend time with prospects that are likely to become good customers. So an important first step in acquiring new customers is for the salespeople to build a good prospects profile.

What CreatesSatisfied Customers? Mergers and Acquisitions 10% Acquiring New Customers 42% Introducing New Products 15% 42% Increasing Business with Existing Customers Figure 3-1: What’s the Best Way to Grow?

Building a prospect Profile • Not all businesses will want or need your products and services, some prospects will be a waste of your time, while others will not buy enough to make it worth your time. • The salespeople should decide what factors determine who is a good prospects. That’s mean building a prospect profile.

Building a prospect Profile • A profile of what the best prospect looks like. • There are many factors help in building the prospect profile include the following: • Size of the business • Age of the equipment to be replaced • Geographic distance from shipping points • Product line specialty

Building a prospect list • The next step is to develop a list of prospects matching the profile developed in the first step. • The traditional way in generating prospects through cold canvassing • Cold Canvassing: Involves contacting prospective customers without appointment.

Building a prospect list • Salespeople selling office supplies , paper supplies use this approach as the target markets for these products are fairly broad. • The drawback is that the salesperson could waste time soliciting low quality prospects, Canvassing maybe more efficiently accomplished by phone.

Building a prospect list • There are many methods used to identify the good prospects include direct inquiries, trade shows, Directories, internet and referrals

Building a prospect list • Direct mail _ All companies receive direct inquiries about products or services from potential customers. _ Direct mail is an excellent way for locating prospective customers. _ The use of e-mail inquiries has made it possible to increase the speed with which companies can respond to a direct mail inquiry, which helps to increase the rate at which inquiries are converted to sales.

Building a prospect list • Trade shows _ Are also an excellent way for generating good prospects. _ There are two reasons in growing the popularity of the trade shows which are: • Low cost per customer contact. • The organization can project a coherent and consistent message to all the prospects Note : trade shows don’t permit the writing of orders.

Building a prospect list • Directories _ Special direct inquiry directories and open to bid announcement are important sources of leads for many firms. • Internet _ It has revolutionized the process of selling and qualifying prospects.

Building a prospect list • Referrals _ With referrals, a satisfied customers is asked to provide the names of others who might be interested in the product. _ The person may also supply an introduction of the salesperson to the prospects. _ The advantage of referrals is that the person can say things about the salesperson and the product line that might not be as credible coming directly from the salesperson.

Qualifying Prospects • Qualify a prospect: determine if the prospect is likely to be converted to a buying customer. • Salesperson needs information about customer needs , buying authority and ability to pay.

Qualifying Prospects • Needs: _ Qualified leads are those that have a use for the seller’s goods or services and are planning to buy in the near future. _ A prospect that is satisfied with the present supplier and has no desire to change is going to be very difficult to convert into the customer.

Qualifying Prospects • Buying Authority: _ Business to Business salespeople often have problems identifying who has the authority to buy within an organization because of the number of people involved in making a purchasing decision.

Qualifying Prospects • Ability to Pay: _ Finding prospects that want a product and also have the authority to buy will not be productive if they lack the financial resources to buy. _ Salespeople should make an initial screening of prospects on their ability to buy, the objective is to eliminate prospects who represent too high a credit risk.

Managing existing account • Generating new customer is important, but many sales and marketing managers feel that the companies that will prosper will be ones that maintain strong customer loyalty

When is an account too small? • An important starting point in managing existing account is determining the minimum opportunity on which the salespeople should spend their time. • Salespeople who are supplied with the necessary direct selling expense information are in an excellent position to perform a minimum account size analysis.

When is an account too small? • This analysis involves two steps: • Calculating a personal cost per sales call • Breakeven sales volume.

Cost per call • Is a function of the numbers of call the salespeople make per day, the number of days available to call on customers , and your direct selling expenses include such expenses as compensation , travel, entertainment and communications, these expenses are referred to as direct selling expenses.

Table 3-1Computing the Cost per Call for an Industrial Products Salesperson

Breakeven sales Volume • Is the sales volume necessary to cover the direct selling expenses, it’s necessary to calculate the breakeven sales volume in order to determine the minimum size customer that should be pursued. • Calculating the breakeven volume requires that we know the number of calls necessary to close a sale and what direct selling expenses are budgeted to be as a percentage of total sales.

Sales Opportunity ManagementKey to Productivity Breakeven Sales Volume (Cost per Call) x (Number of Calls to Close) Sales Calls as a % of Sales

Table 3-2Selected Statistics on Cost per Call and Number of Calls Needed to Close a Sale

Sales Opportunity ManagementSelected Break-Even Results

I can’t afford to lose this business • Many factors should be considered before dropping a customer or reducing the selling effort. For example the sales customers may be growing , which may be due to one of two causes: • The customer’s business is growing rapidly , so its need for suppliers is also increasing. • Your sales to this account is increasing because you are getting a larger share of the customer’s business.

Methods for setting account priorities • Breakeven account analysis provides a starting place from which to determine the minimum size account that should be called on. But this analysis doesn’t address the issue of how much time should be allocating to each prospects. • There are four methods for setting account priorities along with the situation

1. Single-Factor Model • The easiest and the most widely used model for allocating salespeople’s time is the single factor model • This model examines the single customer characteristics , usually the sales volume to arrive at the allocation of the sales calls.

Table 3-3: ABC Account Classification No. of Total Sales Total Total calls Sales ($) Account Accts. Accts. (000) Sales Per Classif. Per Call Classification (1) (2) (3) (4) (5) (6) A 21 15% $910 65% 105 $8,667 B 28 20 280 20 140 2,000 C 91 65 210 15 455462 Totals 140 100% $1,400 100% 700 $2,000 (Avg)

1. Single-Factor Model • The main limitation of this models is that they mayn’t include all the factors that should be considered when evaluating an account’s sales potential. • Single factor model is likely to be used in the mature markets, when demand and competition are stable, and it will be appropriate for sales force program with transactional type.

2. Portfolio Model • Attempt to overcome the limitations of the single factor models by considering multiple factors when determining the attractiveness of the individual accounts within a territory. • The portfolio model classifies accounts into one of four categories by determining the account attractiveness based on two criteria

2. Portfolio Model • Account Opportunity: refers to the magnitude of an account’s present and future need for the salesperson’s offering • Competitive position : based on the outcome measures such as the account’s total gross profit dollars.

Figure 3-2: PortfolioModel Competitive Position Weak Strong Core Accounts Accounts are very attractive. Invest heavily in selling resources. Growth Accounts Accounts are potentially attractive. May want to invest in heavily High Account Opportunity Drag Accounts Accounts are moderately attractive. Invest enough to maintain current position. Problem Accounts Accounts are very unattractive. Minimal investment of selling resources. Low

2. Portfolio Model • Portfolio models offer several benefits: • Help the sales team to identify the important customer issues • Facilitate the communication between salespeople and sales manager • Help isolate the information gaps and set priorities for customer data collection • Force the sales team to think about the future.

2. Portfolio Model • Are most likely used in sales force programs with more of consultative type account relationship strategy where understanding the customer needs and the strength of the relation are very critical

3. Decision Models • Although portfolio models have the advantage of using multiple characteristics to classify accounts, several shortcomings remain: • Accounts must be grouped into four quadrants for the purpose of allocating the sales calls, difference between firms aren’t taken into consideration. • The process doesn’t arrive an optimum allocation of the sales calls

3. Decision Models • Decision models for allocating sales calls overcome these two shortcomings by focusing on the response of each account to the number of the sales calls made over a period of time, these models consist of only two parts, the first part develops the relationship between the number of the sales calls over a period of time and sales to particular account. This is referred to as a Sales Response Function.

$20,000 Dollar Sales per Quarter $10,000 1 2 3 4 5 6 Number of Sales Calls Per Quarter Figure 3-3: Number of Sales Calls Response Function

3. Decision Models • The second part of these models uses the individual response function to allocate calls so as to maximize sales. • Essentially, these models continue to allocate sales calls to an account until more sales can be generated by calling on another account.

4. Sales Process Models • Despite the advantages of sophisticated call allocation programs , they aren’t appropriate for all the situations. • Sales process models focus on where the opportunity is currently classified in the selling process. • An example of this model is the sales Funnel, this system categorizes the sales opportunities not accounts, this is necessary because the sales team may have multiple selling objectives at one account at the same time.

4. Sales Process Models • Each sales opportunity is categorized based on the level of uncertainty in meeting the opportunity: • Unqualified Opportunities: data suggest that a possible need exists but this need hasn’t verified with key people in the account. • Qualified Opportunities: must meet four criteria

4. Sales Process Models • The need has been verified with at least one of the buying influences. • There is a confirmed intention to buy a new product or service , replace an existing one, or switch suppliers • Funding of the purchase already exists • There is an identified time frame within which the purchase will be made

4. Sales Process Models 3. Best few Opportunities: all the buyers have been contacted and their needs identified and in your judgment have been developed to make the sale.

17 7 8 2 1 3 6 5 21 15 23 22 13 24 11 10 18 9 14 12 4 19 20 16 Unqualified 50% closure probability Qualified 75% closure probability 90% closure probability Best few Figure 3-4: The Sales Funnel

Sales Versus profits • Customers may pay different prices for similar products and services, in other words large customers can demand and get lower prices because a seller cant afford to lose their businesses. • Other customers are simply able to get lower prices because of their negotiation skills and still other customers exploit deals and promotions more than others and “ Forward Buy” which means they buy a large amount of their annual needs at one time when the product is on discount.

Customer lifetime value (CLV) • Marketers are starting to adopt customer lifetime value (CLV) as an appropriate metric for measuring marketing performance. • Calculating the CLV requires knowing or making judgments about the following inputs: 1. The company’s discount rate ( Cost of Capital )

Part II SALES FORCE ACTIVITIES