T501 – S&Sales & Marketing Best Practices to Increase Market … · 2012-03-29 · T501...

S &T501 – Sales & Marketing Best Practices to Increase Market ShareUnderutilized resources and weakened competition have mandated growth as the overriding priority. Distributors must grow to achieve ROI on their investments and the opportunity is here.

This workshop explores best practices in sales & p p pmarketing as applied to growing market share. We will discuss findings from our research and demonstrate real world case studies from cutting edge firms.

F. Barry Lawrence, Ph.D., Texas A&M University3/11/2010, 2:15 p.m.

Session Objectives

• Demonstrate Best Practices in Sales and Marketing

• Utilize Case Studies to Apply Principles

• Link to ROI• Link to ROI

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Return on Investment Opportunity

• Most Distributors are Underutilizing Their Resources

• Increasing Sales Offers a Very High ROI at this Time

• Competition has Lessened• Competition has Lessened

• ROI Expectations has Increased Due to Perceived Higher Risk and Tightened Credit

3

Additional Resources

• “Optimizing Distributor Profitability” available from the NAW.– http://www.naw.org/optimizdistprof

• Educational Programs from the Thomas and Joan Read Center for Distribution Research and Education at– http://readcenter.tamu.edu

• Pricing Optimization• Optimizing Distributor Profitability• Optimizing Distributor Profitability• Certificate in Distribution Management• Custom Programs

• Research from the Supply Chain Systems Laboratory– http://supplychain tamu edu/http://supplychain.tamu.edu/

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Presentation Overview

• Sales and Marketing Optimization (SMO) Consortium Overview• SMO Key Processes• Best Practices Overview

– Market SegmentationCustomer Stratification– Customer Stratification

– Sales Force Stratification– Sales Force Compensation

• Net Steps and Questions

5

Consortium Members

6

Consortium Methodology

1. Assess Sales & Marketing Processes 

(Workshops)

2. Research Best Practices

(Methodolog De elopment and Testing(Methodology Development and Testing  

through volunteer data sets)

3. Link Best Practices to Shareholder Value

4. Document Best Practices

5. Deliver Educational Sessions

7

Business Process Framework

Key Performance Indicators

Source Stock Store Sell Ship

Supply Chain Planning

Supplier CustomerSource Stock Store Sell Ship

• Information TechnologyH R M tS pport Ser ices • Human Resource Management

• Finance ManagementSupport Services

8

Sales & Marketing Optimization (SMO) – Key Processes

1

Market

Market Segmentation

Source Stock Store Sell Ship

Supply Chain Planning

CustomerSource Stock Store Sell Ship Customer

Customer 2

Sales

StratificationSales Force

Stratification

3

Sales Force

Sales Force Compensation

4

9

Compensation

1.Market Segmentation

SMO Key 2. Customer 4. Sales force yProcesses

2. Customer Stratification

4. Sales force Compensation

3. Sales force Stratification

10

Stratification

1.Market Segmentation

SMO Key 2. Customer 4. Sales force yProcesses StratificationCompensation

3. Sales force Stratification

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Market Segmentation

The Market

Criteria – SIC Code, Size Buyer Type / End Size, Buyer Type / End

Use, etc.

Macro-segment 1

Macro-segment 2 …

Criteria – Critical Success Factors

Micro- 1

Micro- 2

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segment 1 segment 2 …

How to define macro-segments?

• Criteria –– SIC code– End use– Buying organization type– GeographyGeography– Customer size

• Data sources –– Government / trade association statistics– Interview with sales, marketing, customer service and operations staffInterview with sales, marketing, customer service and operations staff– Market survey results, if any

13

Macro Segments – Examples

• Building Materials Distributor (End use based)– Residential, Commercial, Institutional, Government

• Fluid Power Distributor (SIC based)Energy Agriculture Construction Defense– Energy, Agriculture, Construction, Defense

• Electrical Distributor (End use based)( )– Industrial, Contractor, Datacomm, Utility, Commercial, Institutional

S i lt Di t ib t (C t i b d)• Specialty Distributor (Customer size based)– National accounts, Regional accounts, Low volume

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How to identify micro-segments?

• Determine critical success factors (Why customers buy from you?)y )–Functionality – Technical specifications–Quality–Delivery reliability–Availability

Breadth of product applications–Breadth of product applications–Perceived strength of the supplier (brand)–Technical supportpp–Channel preference–Shipping accuracy–Credit terms

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Micro Segment – Example

Key Buying Criteria

Low Volume Accounts

RegionalAccounts

National Accounts

Technologygy

Lead time

Technical support

Brand (supplier preference) Yes and No

Deliverysupport

Quality Low Low and High HighQuality Low Low and High High

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MARKET MACRO SEGMENTS

12Based on 

SIC and 

34

End use

Based on critical successcritical success 

factors

A

CB

F

ClusteringC

DE

Clustering similar 

segments

17MICRO SEGMENTSCLUSTERED MICRO SEGMENTS

Target Market Selection

ALIGNMENT with company objectives

MEASURE segment

UNDERSTANDcompany

capability –DETERMINE

required ASSESS EVALUATE

ROI potential –revenue &

cost-to-serve

capability –critical success factors

required investment

and resources

ASSESS Risk

ROI (shareholder

value)

( )(Revenue – Expenses)

Net Assets

Return On Investment=

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Net Assets

Segment ROI

Potential

C biliRi k CapabilityRisk

Investment

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Segment Selection Matrix

Micro-segments

A C DB

Potential

Capabilityia Capability

InvestmentCri

teri

Risk

C

ROI

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1 M k t 1.Market Segmentation

SMO Key 2 Customer 4 Sales force S O ey Processes

2. Customer Stratification

4. Sales force Compensation

3. Sales force

21Stratification

Customer Stratification Model

Customer Life (Loyalty)

High ProfitLow CTSHi h V l

High ProfitLow CTS

gin

Cost To

O C

High VolumeSustained Relations

Low VolumeNo Relationship

ross

Mar

g Serve (CT

OPPORTUNISTIC

MARGINAL

CORE

SERVICE DRAIN

N R l i hi S t i d R l tiGr TS)No Relationship

Low ProfitHigh CTS

Low Volume

Sustained RelationsLow ProfitHigh CTSHigh Volume

Sales Volume

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Sales Volume

1 Market 1.Market Segmentation

SMO Key P

2. Customer Stratification

4. Sales force Compensation Processes StratificationCompensation

3. Sales force Stratification

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Sales Force Stratification

Corporate Goals / Objectives

Qualitative Analysis

Quantitative Analysis

Combination Model

Reports & Results

Analysis Analysis Modelsharing

1 2 3 4

Based on:• Skill• Personality tests

Performance driven:• # of new accounts

Helps develop:• Strategy• Tools• Training

Helps develop:• Healthy competition

• Drivestests• Willingness to perform

accounts• GP$• Revenue $, etc

• Training needs

• Rewards

• Drives performance

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Quantitative Analysis

F R•

Hi h / t

FARMERS RAINMAKERSun

t

• High revenue/account• Low # of new accounts

• High revenue/account• High # of new accounts

P /

Acco

u

DEFENDERS HUNTERS

ue a

nd G

• Low revenue/account• Low # of new accounts

• Low revenue/account• High # of new accounts

Rev

enu

# of New Accounts

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Sales Force Stratification – DEMO

• Building materials distributor–Total # sales persons (outside) : 23–Total # accounts handled : 956–Total Sales $ : $ 54,380,468

T t l G M i $ $ 11 047 744–Total Gross Margin $ : $ 11,047,744–Timeline : Jan 08 – Dec 08

• Factors–Revenue per accountp–Average number of new accounts/year

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Sales Force Stratification

Average # of new accounts per year

B AB A

A AB AARAINMAKERSFARMERS

> $ 54 000Revenue

per

A AB AA

DEFENDERS HUNTERS

> $ 54,000

accountB BB BA

DEFENDERS HUNTERS<= $ 54,000

> 4 Accounts<= 4 Accounts

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Analysis Results

# S l A #Final Rank # Sales persons Avg Sales $ / acct Avg # new

accounts / yearRainmakers 4 76,556$ 43Farmers 5 127,154$ 4Hunters 7 32,045$ 87Defenders 7 29,638$ 19Defenders 7 29,638$ 19

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1 Market 1.Market Segmentation

SMO Key P

2. Customer St tifi ti

4. Sales force C ti Processes StratificationCompensation

3. Sales force Stratification

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Company Objectives

Sales Force Stratification

•FARMERS RAINMAKERS

Customer Life (Loyalty)

Customer Stratification

• High revenue/account• Low # of new accounts

• High revenue/account• High # of new accounts

DEFENDERS HUNTERS

ue a

nd G

P /

Acco

unt

oss

Mar

gin

Cost To Serve (C

T

OPPORTUNISTIC

MARGINAL

CORE

SERVICE DRAIN

High ProfitLow CTSHigh VolumeSustained Relations

High ProfitLow CTS

Low VolumeNo Relationship

• Low revenue/account• Low # of new accounts

• Low revenue/account• High # of new accounts

Reve

nu

# of New Accounts

Gro

Sales Volume

TS)No RelationshipLow ProfitHigh CTS

Low Volume

Sustained RelationsLow ProfitHigh CTSHigh Volume

Sales ForceCustomer Sales ForceCustomerSales Force Compensation

Salary‐Incentive Mix

Metrics

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Metrics

Linking Compensation to Customer Stratification

Example• Compensation Type: Salary plus commission

$• Annual Salary = $35,000• Commission = 8% of Gross Margin $

Gross Margin $ Split

Who is more aligned with company objectives?

Sales Person Revenue $ Gross

Margin $ Comp. $ Core Opp. Service Drain Marginal

g $ p

X 2 MM 400K 35K + 32K = 67K 60% 5% 15% 20%

Y 2 MM 400K 35K + 32K = 67K 20% 5% 60% 15%

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Linking Compensation to Customer Stratification

What real world data says? 

Example – HVAC/PVF Distributor

Gross Margin $ Split

Core Opportunistic Marginal Service DrainSales Person 1 70% 3% 14% 14%Sales Person 2 51% 12% 36% 2%Sales Person 3 86% 0% 5% 10%Sales Person 4 78% 0% 22% 0%

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Action Plan

• Step 1: Properly segment your market opportunities.

• Step 2: Execute a Customer Stratification process.

• Step 3: Execute a Sales Force Stratification• Step 3: Execute a Sales Force Stratification

• Step 4: Establish actions and goals for the sales force and marketing team.

• Step 5: Match Sales Force Compensation with goals.

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Summary

• Growth is the overriding objective now.

• Sales and Marketing processes need more extensive analysis.

• Market Segmentation needs to be matched with Customer Stratification• Market Segmentation needs to be matched with Customer Stratification.

• Sales Force Compensation needs to be matched with Stratification techniques to achieve objectives.

• Information Systems need to take over more of the “art” of salesInformation Systems need to take over more of the art of sales.

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Thank You For Attending

• T501 – Sales & Marketing Best Practices to Increase Market Share

• F. Barry Lawrence, Ph.D.

• Please submit the Session Feedback Form• Please submit the Session Feedback Form– To receive NASBA credits, please be sure to complete the Session Feedback

Form and sign the class roster in the back of the room

“Total Solutions For Industrial Distributors and Manufacturers”

Thank You!

35For more info please visit:

http://supplychain.tamu.edu