Chapter 2 Sales Force Management

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Chapter 2

The Process of Selling and Buying

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Learning Objectives

• Recognize key drivers of change in selling and sales management.• Understand best practices in selling.• Explain historical basis for stereotypical views of selling.• Point out reasons why sales jobs can be highly satisfying.• Identify and explain key success factors for salesperson performance.• Discuss and give examples of different types of selling jobs.• List and explain roles of participants in an organizational buying center.• Describe relationship between buying centers and selling centers and the nature of team selling.• Outline stages in organizational buyer decision making.• Point out the nature of different organizational buying situations.

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Key Terms

• drivers of change• best practices• autonomy• sales activities• job variety• intrinsic rewards• extrinsic rewards• work-family conflict• telecommute• virtual office• adaptive selling• job enlargement• cost of a sales call• retail selling• end-user consumer• business-to-consumer

(B2C) market

•selling center•team selling•matrix organization•key account•organizational buying•decision stages•derived demand•single-source suppliers•commodity products•slotting allowances•new-task purchases•modified re-buy•straight re-buy•repeat purchases•out supplier

•seller•detailer•technical seller•new business seller•buying center•initiator•user•influencer•gatekeeper•buyers•decider business-to-business (B2B) market•industrial selling•trade service•missionary •controller•perceived risk 3

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Drivers of Change in Selling and Sales Management

• Building long-term relationships with customers. • Creating sales organizational structures that are more nimble and

adaptable to the needs of different customer groups. • Gaining greater job ownership and commitment from salespeople. • Shifting sales management style from commanding to coaching. • Leveraging available technology for sales success.• Better integrating salesperson performance evaluation. 4

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Best practices

– Look to the conduct of world-class sales organizations as indicators of important agents for change in selling.

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Autonomy

– The freedom of action and opportunities for personal initiative.

– The degree of independence the salesperson can exercise in making his or her own decisions in the day-today-operation of the job.

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Key-Terms

• Sales activities (pg. 38)– Multifaceted and challenging activities that are part of the job of a

salesperson, such as searching out leads, writing up orders, and learning about the product.

• Job variety (pg. 39)– Sales jobs are seldom boring because of the different customer needs and

problems for which the salesperson can work to develop unique solutions.

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Key-Terms

• Intrinsic rewards (pg. 39)– Rewards inherent to satisfaction derived from elements of the job or

role itself.• Extrinsic rewards (pg. 39)

– Rewards bestowed on the salesperson by the company.• Work-family conflict (pg. 42)

– A lack of balance between one’s work life and family life such that work is encroaching on the family.

• Telecommute (pg. 42)– Working from a remote or virtual office, often at home, and seldom

traveling to company offices.

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Key-Terms

• Virtual office (pg. 42)– A location outside the company’s offices where a salesperson works (often his or her home).

• Adaptive selling (pg. 47)– The altering of sales behaviors during a customer interaction or from one situation to another

based on information the sales rep gathers about the nature of the selling situation.• Job enlargement (pg. 50)

– The fact that the sales role today is broader and contains substantially more activities than it once did.

• Cost of a sales call (pg. 50) - Summation of non-selling activities and selling activities

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Key-Terms

• Retail selling (pg. 51)– Involves selling goods and services to end-user consumers for their own personal use.

• End-user consumer (pg. 51)– The ultimate user of the goods and services for personal use.

• Business-to-consumer (B2C) market (pg. 51)– The sale of goods and services to end-user consumers (retail selling).

• Business-to-business (B2B) market (pg. 51)– Previously called industrial selling.– The sale of goods and services to buyers who are not the end-users.– Relationship selling is much more predominant in the B2B market than in the B2C market.

• Industrial selling (pg. 51)– An old term for business-to-business (B2B) selling.

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Key-Terms

• Trade servicing (pg. 52)– A type of B2B sales job in which the sales force’s primary responsibility is to increase

business from current and potential customers by providing them with merchandising and promotional assistance.

• Missionary seller (pg. 52)– Salespeople to increase business from current and potential customers by providing

them with product information and other personal selling assistance.• Detailer (pg. 52)

– Missionary salespeople often do not take orders from customers directly but use “detailers” to persuade customers to buy their firm’s product from distributors or other wholesale suppliers.

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Key-Terms

• Technical seller (pg. 52)– Salespeople increase business from presently identified

customers and potential customer by providing them with technical and engineering information and assistance.

• New business seller (pg. 52)– Salespeople identify and obtain business from new

customers.

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Key-Terms

• Buying center (pg. 57)– All the people who participate in buying a particular product or service.– Initiators (pg. 57)

• The people who perceive a problem or opportunity that may require the purchase of a new product or service and thereby start the buying process.

– Users (pg. 57)• The people in the organization who must use or work with the product or service.

–Influencers (pg. 58)

• The people who provide information for evaluating alternative products and suppliers.– Gatekeepers (pg. 58)

• The people who control the flow of information to other people involved in the purchasing process.

– Buyers (pg. 58)• The people who actually contact the selling organization and place the order.

– Deciders (pg. 58)• The people with the final authority to make a purchase decision.

– Controllers (pg. 58)• The people who determine the budget for the purchase.

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Key-Terms

• Perceived risk (pg. 59)– For a firm when buying a particular product affects the makeup and size of the buying center.– It is based on the complexity of the product and situation, the relative importance of the

purchase, time pressure to make a decision, and the degree of uncertainty about the product’s efficiency.

• Selling center (pg. 59)– Brings together individuals from around the organization (marketing, customer service, sales,

engineering, and others) to help salespeople do their jobs more effectively.• Team selling (pg. 59)

– These structures commonly make the salesperson responsible for working with the entire selling team in order to manage the customer relationship.

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Key-Terms

• Matrix organization (pg. 59)

– An organization of direct reports and supporting internal consultants who bring their collective expertise to bear for a client.

• Key account (pg. 60)

– One of a firm’s largest customers (especially one with a buying center) whose potential business over time represents enough dollars and entails enough cross-functional interaction among various areas of both firms to justify the high costs of the team approach. Key accounts generally have a senior salesperson as the key account manager (KAM).

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Key-Terms

• Organizational buying decision stages (p. 60)– (1) Anticipation or recognition of a problem or need, (2) determination and description

of the characteristics and the quantity of the needed item, (3) search for and qualification of potential suppliers, (4) acquisition and analysis of proposals or bids, (5) evaluation of proposals and selection of suppliers, (6) selection of an order routine, and (7) performance evaluation and feedback.

• Derived demand (pg. 60)– A firm’s demand for goods and services.

• Single-source suppliers (pg. 61)– Only one vendor used by a firm for a particular good or service to minimize the

variation in quality of production inputs.• Commodity products (pg. 62)

– Standardized, non-technical items.

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Key-Terms

• Slotting allowances (pg. 62)– Fees retailers charge sales organizations for guaranteed shelf space.– They cover the cost of setting up a new item in their IT system, programming it into

inventory, and ultimately distributing it in stores.• New-task purchases (pg. 63)

– Customer is buying a relatively complex and expensive product or service for the first time.

• Modified re-buy (pg. 63)– Buyer is interested in modifying the product specifications, prices, or other terms it has

been receiving from existing suppliers and is willing to consider dealing with new suppliers.

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Key-Terms

• Straight re-buy (pg. 63)– Customer is reordering an item it has purchased many times.

• Repeat purchases (p. 63)– Occurs when a customer buys the same product under the same circumstances again

and again.– It tends to be much more routine than new-task purchase or modified rebuy.

• Out supplier (pg. 64)– Potential supplier not on a buyer’s approved list.

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Drivers of change

– Six have been identified in reinventing sales organization’s so they can compete successfully.

• Building long-term relationships with customers.

• Creating sales organizational structures that are more nimble and adaptable to the needs of different customer groups.

• Gaining greater job ownership and commitment from salespeople.

• Shifting sales management style from commanding to coaching.• Leveraging available technology for sales success• Better integrating salesperson performance evaluation..

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What Customers Expect

1. Knowledge of products and customer applications.2. Customer advocacy; partnership development.3. Ability to keep customer up-to-date.4. Quality product/service.5. Offer of technical support.6. Offer of local or easily accessible representation.7. Responsiveness to needs, problems; provides service.8. Ability to provide a total solution.9. Understanding of customer’s business.10. Competitive price. 20

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How Sellers are Responding

• Establishing a customer-driven culture.• Market segmentation.• Market adaptability.• Information technology. • Customer feedback and measuring customer satisfaction. • Sales, service, and technical support systems. • Recruiting and selecting salespeople. • Training and development.

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Attractiveness of Sales Careers

• Autonomy and opportunities for personal initiatives

• A variety of challenging activities

• Financial rewards

• Favorable working conditions

• Excellent opportunities for development and advancement

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Source: Christine Galea, “2002 Salary Survey,” Sales & Marketing Management, May 2002, pp. 32–36. © 2002 VNU Business Media. Used with permission.

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Selling Success Factors

1. Listening skills2. Follow-up skills3. Ability to adapt sales style to situation4. Tenacity5. Well organized6. Verbal communication skills7. Able to interact with people at all levels of an organization8. Ability to overcome objections9. Closing skills10. Personal planning and time management skills

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Selling Activities

SellingWorking with

others

Attending conferences

and meetings

Training and recruiting

Servicing the product

Managing information

EntertainingTraveling

Servicing the account

Distribution

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Matrix of New Selling ActivitiesCommunication Sales Relationship Team Database

Technology

Email

Dictaphone

Internet

Laptop (CD)

Voicemail

Cell Phone

Pager

Web page

Newsletters

Audiovideo conference

Provide tech info

Overnight services

Maintain virtual office

Set up appts

Script sales pitch from database

Use software for customer background

Laptop for presentation

VCR for presentation

Provide tech ability to customers

Web page Conference calls Collect new information

Enter information on laptop

Update customer files

Nontechnology

Practice language skills Adaptive selling

Conduct research at customers’ site

Avoid potential litigation

Plan for multiple calls to close deal

Sell value-added services

Respond to referrals

Write thank-yous

Target key accounts

Pick up sales supplies

Consultative sales

Listen

Ask questions

Read body language

Sell unique competencies

Bring in vendor/alliance

Develop relationship

Hand-hold customer

Write thank-yous

Purchase dealers

Call on CEOs

Build rapport w/ buying center

Network

Build trust

Train brokers

Mentor

Make sale and turn over to someone else

Coordinate with sales support

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B2C versus B2B Selling

• Most salespeople are involved in retail selling – selling goods and services to ultimate consumers (B2C)

• A much larger volume of sales is accounted for by industrial selling, recently referred to as business-to-business selling (B2B):– Sales to resellers– Sales to business users– Sales to institutions

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Types of B2B Jobs

• Trade selling – increase business by providing customers with merchandising and promotional assistance

• Missionary selling – persuade customers to buy products from distributors or other wholesale suppliers

• Technical selling – increase business from by offering current customers technical/engineering assistance

• New business selling – identify and obtain business from new customers

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Stages in the Selling Process

Servicing the

Account

Closing the Sale

Presenting the Sales Message

Qualifying the

Prospect

Opening the Relationship

Prospecting for

Customers

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Prospecting for customers is…

• A core competency

• A sales fundamental

• Critical to increasing sales

• Hard work

• Carries a delayed payoff

• Requires design and discipline

• Enhanced by software

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Opening the Relationship

• Often referred to as “the approach.”• Determine who is likely to have the greatest influence to initiate the

purchase process• Generate enough interest to obtain the information needed to become a

qualified prospect• Identify key decision makers, desires, and relative influence

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Qualifying the Prospect

• Is the prospect a worthwhile customer?

• Does the prospect have need for my product?

• Can I prospect so aware of that need that I can make a sale?

• Will the sale be profitable to my company?

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Sales Presentation

• Purpose– Transmit information– Persuade the prospect to become a customer

• Common complaints about sales presentations:– Running down competitors– Being to aggressive or abrasive– Have inadequate knowledge of competitors’ products and services– Inadequate knowledge of client’s business/organization– Poor delivery

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Closing the Sale

• Begins with the first contact

• Requires “asking for the order”

• Can be tested throughout the presentation—Trial Close

• Requires understanding the prospect and buying process

• Should be paced by the salesperson

• Requires continual improvement

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Servicing the Account

• Excellent service after the sale bolsters customer loyalty• Follow up on each sale to check satisfaction with

– Product– Installation– Training– Maintenance– Billing

• Satisfied customers = Repeat customers

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Participants in the Buying Process

• Initiators – perceive a problem or opportunity requiring a new product of service

• Users –must use or work with the product or service• Influencers –provide information for evaluating alternative products or

suppliers• Gatekeepers – control the flow of information to others• Buyers – actually contact the selling organization and place the order• Deciders – final authority to purchase• Controllers – determine the budget

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Organizational Buying Decision Stages

1. Anticipate or recognize a problem or need

2. Determine and describe the traits and quality needed

3. Search for and qualify potential suppliers

4. Acquire and analyze proposals/bids

5. Evaluate proposals and select suppliers

6. Select an order routine

7. Perform evaluation and give feedback

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*IBM• The major components of IBM’s approach to

getting close to its customers are:– Being more accessible and more visible to customers.– Training salespeople to be industry experts.– Organizing sales teams for more efficiency and with a

single sales method, which allows management to hold the sales teams more accountable, creates seamless information flow, establishes a common culture, and uses reps as resources to the client with a whole team to back them up.

– Selling solutions, not products.• Because IBM offers technology-based products

and services, customer needs change rapidly and IBM’s products and services change accordingly. The sales structure must adapt to this dynamic business environment. Also, IBM must use training to keep the expertise of its salespeople current.

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IBM

• The six critical drivers of change in relationship selling are:• Building long-term relationships with customers.• Creating sales organizational structures that are more nimble and adaptable

to the needs of different customer groups.• Gaining greater job ownership and commitment from salespeople.• Shifting sales management style from commanding to coaching.• Leveraging technology for sales success.• Evaluating salesperson performance more accurately.

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UPS

• UPS has undergone many changes in recent years, and two of the drivers of change (no pun intended) are (1) the need to create sales organizational structures that are more nimble and adaptable to the needs of different customer groups, and (2) the need to leverage technology for sales success.

• UPS does not just deliver packages anymore. It provides, among other things, comprehensive supply chain solutions to companies, which include logistics and distribution, transportation and freight (ground, sea, air, rail), international trade management and customs brokerage. Like IBM, UPS’s sales teams have had to adapt to these changing technologies and services in order to provide industry expertise in a multitude of areas such as retail, healthcare, high tech, consumer goods, manufacturing, and automotive. UPS also promotes itself as offering integrated supply chain solutions, not simply products or services, to clients.

• In addition, UPS has used technology to its advantage to add to its sales success. For example, UPS offers “UPS Internet Shipping,” which provides client organizations and their employees quick access to a Web-based shipping application. The Web-application allows users to prepare domestic and international shipments using their UPS account number or credit card, determine rates, schedule a pickup, find drop-off locations, and track their shipments.

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Nimble Firms

• Constantly monitor and communicate with customers.• Are proactive instead of reactive in meeting customer needs.• Practice adaptive selling by carefully sensing customer needs in each interaction and

adapting the form and message of the communication to those needs.• Are flexible at all times and open to creative, outside-the-box solutions.

• IBM is becoming more nimble by having:• Its salespeople work as teams rather than individuals. This approach decreases confusion

for customers and allows salespeople to drive sales through the pipeline faster.• Every salesperson follows the same seven-step selling method. This approach keeps all

members of the organization on the same page regarding sales and ensures consistency.• One universal reporting system that takes the guesswork out of numbers. This approach

allows sales teams and managers to concentrate on the selling functions rather than debating numbers.

• A structure that requires fewer meetings. This approach allows sellers to be in the field more with customers.

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Pro:

• Job autonomy – The salesperson is free to get the job done in his or her own way and spend time as he or she chooses, as long as he or she gets good results.

• Job variety – Selling is a complex job that requires creative thinking. The salesperson will never get bored.

• Financial rewards – These awards can be intrinsic (a feeling of being satisfied) and extrinsic (more money in the salesperson’s pocket).

• Favorable working conditions – It is often easier to work from home and telecommute rather than go into a corporate office. Telecommuting helps to ease the potential for work-family conflict.

• Highly visible results – A great thing when the results are good, as recognition and rewards follow.

• Ability to move up in the organization – There are promotion opportunities along a sales management or marketing track. A salesperson can also be given a more attractive territory or key account as a promotion.

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Con:

• Stigma or negative stereotype associated with selling – May cause lack of respect or misunderstanding from others.

• Pressure – Constant pressure to make numbers, especially if the salesperson is being paid on a straight commission.

• Highly visible results – Not such a great thing if a salesperson is not making quota or is in the bottom ranks of performance. His or her job could quickly be in jeopardy.

• Frequent travel – It can be difficult on family relationships if frequent overnight travel is required.

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Summary• Selling is a great career path that can also lead to significant upward mobility professionally, especially

in to sales management.• The drivers of change we talked about in this chapter

all translate into opportunities for salespeople to contribute a high level of value to their customers and

their own organizations.• Salespeople and their managers can and should

benchmark their own approaches to managing customer relationships against the best practices of

world-class sales organizational.• Selling today is so far removed from the stereotypical

societal view of old-style selling as to bear no resemblance whatsoever. The key success factors

needed in relationship selling all point to professionalism, strong skills, and broad and deep content knowledge that allow the salesperson to

maximize his or her performance and thus rewards. 50

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Summary• It is especially interesting to examine the sales activities

performed by salespeople today. Quite a few new activities have been added in recent years, driven largely by

technology and the move form transactional to relationship selling approaches. It is valuable to understand the

process of selling through identification of its six stages.• Customers are the primary focus of relationship sellers,

gaining knowledge about the world of organizational buying greatly enhances the effectiveness of a salesperson

in is or her role as a customer relationship manager.• Salespeople must carefully study each of their customers

to learn what dynamics are at play within each buying center situation. Often, selling firm form selling centers

and initiate team-selling approaches to better serve buying centers, especially with large and complex customers (key

accounts). Salespeople need to fully understand and appreciate the stages of the organizational buying decision process that each of their customers goes through so the

salesperson can work to add value throughout the purchasing process.

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