Part I THE BIG PICTURE Chapter 2: Strategy and Sales Program Planning

The natural progression How to make sales force and sales program decision

Business Strategy Business Strategy Marketing Strategy Marketing Strategy Go-to-Market Strategy Supply Chain Management (SCM) Customer Relationship Management (CRM ) LEVEL 2 Strategy Implementation Decisions Product Development Management (PDM) LEVEL 1 Top Management Decisions Figure 2-1 The Sales Force Decision Sequence Structure Competencies Leadership LEVEL 3 Sales Force Program Decisions Activities Account Relationship Strategy

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 Management Planning Strategic Management Planning Resources Financial R&D Personnel Brand Equity Production Resources Financial R&D Personnel Brand Equity Production Firm’s history management culture Firm’s history management culture

Marketing Strategy

Figure 2-3: Hierarchy of Sales Objectives Corporate goals Maximize shareholder wealth Corporate goals Maximize shareholder wealth Business unit objectives 12% revenue growth Grow pre-tax profits by 18% 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% 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 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 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 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% Major account objective Achieve sales revenues of $95,000 in product A Obtain an average gross margin of 80%

A Look into What Companies Want....

% 31.9% 66.1% 7.7% 14.0% 7.8% Building Brand of Company/ product Enhancing credibility of company product Increasing sales/ revenue Investor relations Saving costs Other What Goals are Most Important to You?

Building Brand of Company/ product Enhancing credibility of company product Increasing sales/ revenue Investor relations Saving costs 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

Build Strategy Expand market share in a high- growth market Harvest Divest Secure Added Distribution Add new customers Provide high presale services Provide product & market feedback Focus on volume growth Build current relationships Call on targeted current 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 Marketing Strategies Sales Strategies Hold Strategy Maintain market share at the lowest costs possible Harvest Strategy Reduce costs and focus on profit, not market share Divest Strategy Reduce inventory at lowest cost possible Eliminate services 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 ( ) LowHigh Sales Force Ranking Growth

Sales Force Ranking and Sales Growth: Computers ( ) LowHigh 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-Purchase Post-Purchase

Large Small Low Information, Low Solution Needs High Information, High Solution Needs Buying Process Customer Size and Opportunity A Framework for Defining Essential Activities

Direct Sales Force Direct Sales Force Agents Distributors Retailers Agents Distributors Retailers Integrators Alliances Advertising Promotion Direct Mail Advertising Promotion Direct Mail Tele- marketing Tele- marketing Internet DirectIndirectNon-Sales Force OptionsSales Force Options Company Customers 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 Sales per Exposure Low Cost per Exposure

Customer Base Account Teams Geographic Sales Force Direct Sales Force Industry Teams Outbound Inbound TelemarketingPartnersInternet Go-to-Market Strategy: A Large Computer Manufacturer

Customer Base Account Teams Direct Sales Force Inbound Telemarketing Go-to-Market Strategy: A Large Chemical Company

Customer Base Account Teams Geographic Sales Force Direct Sales Force Inbound TelemarketingPartners Go-to-Market Strategy: A Pharmaceutical Company

Customer Base Account Teams Geographic Sales Force Direct Sales Force Outbound Inbound TelemarketingInternet 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 Value Driver 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 Business Driver 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 Sales Driver of Revenue Three Steps in Leveraging the Customer Base

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 Force Selling 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.

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

Leadership Program 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.

Investment by Supplier Investment by Customer Transactional Relationship Consultative Relationship Enterprise Relationship Figure 2-13: Alternative Types of Account Relationships

Different Sales Orientations Sales Argument Profile of Sales Customer Contacts Offering Success Factors Best products “Product Expert” Narrow Space (e.g., purchasing) Best products with a competitive price Product excellence and/ or cost leadership Product Sales Solutions to your needs “Solution provider” Function/ department Product and service solutions to customer needs Understanding the customer’s needs Solution Sales Impact on your business results “business consultant” All levels Valuable solutions to support competitive advantage Driving customer profits and EVA Value Sales

Figure 2-14: Changes in Customer Expectations of Suppliers

Partnering Effectiveness Index