Part I

THE BIG PICTURE

Chapter 2:

Strategy and Sales Program Planning

The natural progression

How to make sales force and sales program decision

BusinessStrategy

BusinessStrategy

MarketingStrategy

MarketingStrategy

Go-to-MarketStrategy

Supply Chain Management (SCM)

CustomerRelationship

Management (CRM)LEVEL 2StrategyImplementationDecisions

Product DevelopmentManagement

(PDM)

LEVEL 1Top ManagementDecisions

Figure 2-1 The Sales Force Decision Sequence

Structure

Competencies Leadership

LEVEL 3Sales ForceProgramDecisions

Activities

Account RelationshipStrategy

Business Strategy

Figure 2-2: Factors Influencing Strategic Management

Distinct competencies Marketing Financial Technology Information

Distinct competencies Marketing Financial Technology Information

Environmental constraints Legal & regulatory Demographics Economic Conditions Technology Competitive conditions Sociocultural factors

Environmental constraints Legal & regulatory Demographics Economic Conditions Technology Competitive conditions Sociocultural factors

Strategic ManagementPlanning

Strategic ManagementPlanning

Resources Financial R&D Personnel Brand Equity Production

Resources Financial R&D Personnel Brand Equity Production

Firm’s historymanagement culture

Firm’s historymanagement culture

Marketing Strategy

Figure 2-3: Hierarchy of Sales Objectives

Corporate goalsMaximize shareholder wealth

Corporate goalsMaximize shareholder wealth

Business unit objectives12% revenue growth

Grow pre-tax profits by 18%

Business unit objectives12% revenue growth

Grow pre-tax profits by 18%

Marketing objectivesIncrease product A’s market share by 2 points

Grow contributions after sales & marketing by 20%

Marketing objectivesIncrease product A’s market share by 2 points

Grow contributions after sales & marketing by 20%

Sales department objectivesAchieve sales revenue of $210 million

Grow contributions after sales expenses by 25%

Sales department objectivesAchieve sales revenue of $210 million

Grow contributions after sales expenses by 25%

Sales district objectiveAchieve sales revenue of $10.5 million in product AObtain $7 million contributions after direct selling

Sales district objectiveAchieve sales revenue of $10.5 million in product AObtain $7 million contributions after direct selling

Salesperson objectiveAchieve sales revenues of $1.2 million in product A

Obtain $0.8 million in gross margin dollars

Salesperson objectiveAchieve sales revenues of $1.2 million in product A

Obtain $0.8 million in gross margin dollars

Major account objectiveAchieve sales revenues of $95,000 in product A

Obtain an average gross margin of 80%

Major account objectiveAchieve sales revenues of $95,000 in product A

Obtain an average gross margin of 80%

A Look into What Companies Want . . . .

0

10

70

60

50

40

30

20

29.8% 31.9%

66.1%

7.7%14.0%

7.8%

BuildingBrand of

Company/product

Enhancingcredibility

of companyproduct

Increasingsales/

revenue

Investorrelations

Savingcosts

Other

What Goals are Most Important to You?

0

100

60

80

40

20

BuildingBrand of

Company/product

Enhancingcredibility

of companyproduct

Increasingsales/

revenue

Investorrelations

Savingcosts

Other

How Successful Were You at Reaching Your Goals?

68%

58%

72%

94%83%

93%

32%

42%

28%

6%17%

7%

Types of Strategies (Generic) and Their Effect on Sales Programs

Low Cost Strategy: Vigorous pursuit of cost reductions from experience and tight cost control.

High Profit Sales Programs: 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: Creating an offering perceived as being unique leading to high brand loyalty and low price sensitivity.

High Profit Sales Programs: Selective use of independent sales agents Focused on long-term customer relationships 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: Servicing a target market very well, focusing all decisions with the target market needs in mind, dominating sales with the segment.

High Profit Sales Programs: 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

Build Strategy

Expand market share in a high-growth market

Harvest

Divest

Secure Added

Distribution

Add newcustomers

Provide highpresale services

Provide product& marketfeedback

Focus onvolume growth

Build current relationships

Call on targetedcurrent

customers

Increase service to current customers

Call on targeted new

customers

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

MarketingStrategies

SalesStrategies

Hold Strategy

Maintain market share at the lowest costs possible

Harvest Strategy

Reduce costs and focus on profit, not market share

Divest Strategy

Reduce inventoryat lowest costpossible

Eliminateservices

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)

0%

2%

4%

6%

8%

10%

5 6 7 8

Low High

Sales Force Ranking

Growth

Sales Force Ranking and Sales Growth: Computers (1988-1990)

0%

5%

10%

15%

5 6 7 8

Low High

Sales Force Ranking

Growth

A More Detailed Look at Marketing Strategy The Three Major Functions of

Marketing:– Segmentation– Targeting– Positioning

Strategic Implementation Decisions

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?

Steps in Developing a Go-to-Market Strategy

Figure 2-6 Essential Activities

Interest Creation

Purchase

Pre-PurchasePost-Purchase

Account Maintenance:

Continue high-quality service Electronic Data Entry (EDI) Prompt delivery Enhance value proposition Relationships Friendship

Effectiveness Selling:

Solve and consult Cooperation Customization Integration Partnership

Efficiency Selling:

Take orders Secure distribution Consider self-ordering (lower price)

Targeted Selling:

Quick needs assessment and solution Explain features and benefits Economic evaluation

Large

Small

Low Information,Low Solution Needs

High Information,High Solution Needs

BuyingProcess

Customer Sizeand

Opportunity

A Framework for Defining Essential Activities

Direct SalesForce

Direct SalesForce

AgentsDistributors

Retailers

AgentsDistributors

RetailersIntegratorsIntegrators AlliancesAlliances

AdvertisingPromotionDirect Mail

AdvertisingPromotionDirect Mail

Tele-marketing

Tele-marketing InternetInternet

Direct Indirect

Non-Sales Force OptionsSales Force Options

CompanyCompany

Customers and ProspectsCustomers and Prospects

Figure 2-7 Potential Go-to-Market Participants

Figure 2-8 Comparing Various Go-to-Market Alternatives

Advertising

Direct Mail

Internet

Telemarketing

Sales Force

Effectiveness

Efficiency

High Salesper Exposure

Low Costper Exposure

Customer BaseCustomer Base

AccountTeams

GeographicSales Force

Direct Sales Force

IndustryTeams OutboundInbound

Telemarketing Partners Internet

Go-to-Market Strategy: A Large Computer Manufacturer

Customer BaseCustomer Base

AccountTeams

Direct Sales Force

Inbound

Telemarketing

Go-to-Market Strategy: A Large Chemical Company

Customer BaseCustomer Base

AccountTeams

GeographicSales Force

Direct Sales Force

Inbound

Telemarketing Partners

Go-to-Market Strategy: A Pharmaceutical Company

Customer BaseCustomer Base

AccountTeams

GeographicSales Force

Direct Sales Force

OutboundInbound

Telemarketing Internet

Go-to-Market Strategy: An Industrial Distributor

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 Subprocesses

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

• 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

Shareholder ValueDriver of Cash Flow& EVA

• 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

BusinessDriver of Profits

• 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

SalesDriver of Revenue

Three Steps in Leveraging the Customer Base

Figure 2-12 Sales Force Program

Marketing Objectives, Strategy, andStrategy Implementation Program

Marketing Objectives, Strategy, andStrategy Implementation Program

Account Relationship StrategyAccount Relationship Strategy

Desired Selling Actionsand Behaviors

Desired Selling Actionsand Behaviors

Organizational StructureOrganizational Structure

Competency Development ProgramCompetency Development Program

Leadership SystemLeadership System

Estimates of salespotential and sales forecast

Estimates of salespotential and sales forecast

Estimates of sales forcesize and budget

Estimates of sales forcesize and budget

Feedback

Account Relationship

Strategy

• How long is the selling cycle?• How much time is spent on customer need

discovery?• 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

competitor once the relationship is established?Sales ForceSelling

Activities

• What are their non-selling responsibilities?• How much customer face-time will salespeople

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?• What support will be needed to consummate a

sale?• How will customers be serviced?

Sales Force Program Elements – Cont.

Sales Force Program Elements – Cont.

Organizational Structure

• Will the sales force be specialized by product, customer, or function?

• 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?

• Experience level of new salespeople?• Length and purpose of initial training program?• Nature of continuing development program?

Competency Development

Program

LeadershipProgram

• 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?

Sales Force Program Elements – Cont.

Investmentby

Supplier

Investment by Customer

Transac

tional

Relatio

nship

Consulta

tive

Relatio

nship

Enterpris

e

Relatio

nship

Figure 2-13: Alternative Types of Account Relationships

Different Sales Orientations

SalesArgument

Profile of SalesCustomerContactsOffering

SuccessFactors

Best products

“Product Expert”

Narrow Space(e.g., purchasing)

Best products with acompetitive price

Product excellence and/or cost leadership

Product Sales

Solutions to your needs

“Solution provider”

Function/ department

Product and servicesolutions to customer needs

Understanding thecustomer’s needs

Solution Sales

Impact on yourbusiness results

“business consultant”

All levels

Valuable solutions tosupport competitive advantage

Driving customer profits and EVA

Value Sales

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, positive-sum game.

Figure 2-14: Changes in Customer Expectations of Suppliers

Good27%

Fair10%

Poor53%

Very Good10%

Partnering Effectiveness Index