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 Business Marketing
Management Strategy Strategy
Decisions

Customer
Go-to-Market Relationship
LEVEL 2
Strategy Management (CRM)
Strategy
Implementation Supply Chain Product Development
Decisions Management (SCM) Management
(PDM)

Str
v i t ies uct
LEVEL 3 Acti ure
Sales Force Account Relationship
Program Strategy
Com
pet sh ip
Decisions enc der
ies Lea

Figure 2-1 The Sales Force Decision Sequence

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

Distinct competencies Resources

Marketing Financial
Strategic Management
Financial R&D
Planning
Technology Personnel
Information 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

29.8% 31.9%
30

20
14.0%
7.7% 7.8%
10

0
Building Enhancing Increasing Investor Saving Other
Brand of credibility sales/ relations costs
Company/ of company revenue
product product
How Successful Were You at Reaching Your Goals?
100
94% 93%
83%
80
68% 72%

60
58%

42%
40
32%
28%

20
17%
6% 7%
0
Building Enhancing Increasing Investor Saving Other
Brand of credibility sales/ relations costs
Company/of company revenue
product product
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: 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
 Build Strategy Hold Strategy Harvest
Harvest Strategy Divest Strategy
Marketing Expand market Maintain market Reduce costs Reduce
share in a high- share at the and focus on inventory
Strategies lowest costs profit, not market at lowest cost
growth market
possible share possible
Divest

Secure Call on targeted Call on most

Eliminate
Added current profitable
Distribution customers accounts only services

Add new Reduce overall Offer

Sales Increase service
service levels
customers to current exceptional
Strategies customers pricing
Provide high Reduce
presale Call on inventory levels Focus on
services targeted new one time
customers sales
Provide Maintain
product distribution
Build current Minimize
& market
relationships time
feedback Invest as
commitment
little time as
Focus on necessary
volume Focus on
growth account
penetration

Figure 2-4: Business Portfolio Analysis and Sales Force Strategy

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

10%

8%

6%
Growth
4%

2%

0%
5 6 7 8

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

15%

10%

Growth
5%

0%
5 6 7 8

Low 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
Account Maintenance: Effectiveness Selling:
Continue high-quality service Solve and consult
Electronic Data Entry (EDI) Cooperation
Large Prompt delivery Customization
Enhance value proposition Integration
Relationships Partnership
Friendship

Efficiency Selling: Targeted Selling:

Small
Take orders Quick needs assessment and solution
Secure distribution Explain features and benefits
Consider self-ordering (lower price) Economic evaluation

Buying Low Information, High Information,

Process Low Solution Needs High Solution Needs
 Figure 2-7 Potential Go-to-Market Participants

Customers and Prospects

Agents Advertising
Direct Sales Tele-
Distributors Integrators Alliances Promotion Internet
Force marketing
Retailers Direct Mail

Direct 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

High Sales
Effectiveness
per Exposure
Go-to-Market Strategy: A Large Computer
Manufacturer

Direct Sales Force Telemarketing Partners Internet

Industry Inbound Outbound

Teams

Account Geographic
Teams Sales Force

Customer Base
Go-to-Market Strategy: A Large Chemical
Company

Direct Sales Force Telemarketing

Account Inbound
Teams

Customer Base
Go-to-Market Strategy: A Pharmaceutical
Company

Direct Sales Force Telemarketing Partners

Account Geographic Inbound

Teams Sales Force

Customer Base
 Go-to-Market Strategy: An Industrial
Distributor

Direct Sales Force Telemarketing Internet

Inbound Outbound

Account Geographic
Teams Sales Force

Customer Base
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
• From P&L to balance sheet: Customers viewed as assets
Shareholder Value • CRM;s Task: To increase shareholder value by
Driver of Cash Flow leveraging the customer base.
& EVA • Focus on understanding cash flow effects and risk
management

• CRM integrated in the business process and yearly

Business planning process
Driver of Profits • 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
Sales • Typical in multi-product, multi-divisional environments
Driver of Revenue • 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 Account
AccountRelationship
RelationshipStrategy
Strategy
sales forecast
sales forecast

Desired
DesiredSelling
SellingActions
Actions
and Behaviors
and Behaviors

Estimates
Estimatesofofsales
salesforce
force Organizational
OrganizationalStructure
Structure
size and budget
size and budget

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
have?
Activities
• 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 • Mix of salary, bonus, and commission

Program 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?
 rise ip
t e rp sh
n
En atio
l
Investment Re
by t ive
u lta ship
Supplier ns tion
o
C ela
R
n al
o
a cti ship
n s on
a i
Tr elat
R

Investment by Customer

Figure 2-13: Alternative Types of Account Relationships

 Different Sales Orientations

Product Sales Solution Sales Value Sales

Sales Best products Solutions to your needs Impact on your
Argume business results
nt
Profile “Product Expert” “Solution provider” “business consultant”
of
Sales
Custom Narrow Space Function/ department All levels
er (e.g., purchasing)
Contact
s Valuable solutions to
Best products with a Product and service
Offerin solutions to customer needs support competitive advantage
competitive price
g

Success Product excellence and/ Understanding the Driving customer

or cost leadership customer’s needs profits and EVA
Factors
gure 2-14: Changes in Customer Expectations of Suppliers
Traditional Relationships
• Little recognition of credit for past
performance
• No responsibility for supplier’s profit
margins
• Little support for feedback from
suppliers
• No guarantee of business
relationship beyond the contract.
• No Performance expectations
beyond the contract.
• Adversarial, zero-sum game.
Enterprise Relationships
• Recognition of past performance
and track record.
• Recognition of suppliers’ need to
make a fair profit
• Feedback from suppliers
encouraged.
• Expectations of business
relationship beyond the contract.
• Considerable performance
expectations beyond the contract.
• Cooperative and trusting, positive-
sum game.
 Good Fair
27% 10%

Very
Good
Poor
10%
53%

Partnering Effectiveness Index