Session 8 Final MB

7/25/2019 Session 8 Final MB

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Managing for Value creationSession 8

Putting it All Together: Execution

The Role of Sales in Creating Value


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Lecture Schedule

2


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Topics for today

Putting it together topics for today..

The role of sales in creating value

Sales is focused on connecting to customers!. how do customersperceive your offering?

Winning customer orders

Understanding the customer:How do (business) customers purchase?


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The role of sales in creating value


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The (changing) role of sales in the

organisation

Weitz & Bradford, JAMS, 1999


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What is the role of sales?

Sales functions asa bridge

Connecting thesales team,marketing and thecustomer.

This results ininterfaces whereinformation is

shared (or getslost)

Interfacemarketing- sales


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Marketing & Sales: Alignment


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The Marketing-sales interface

Homburg, Christian, Ove Jensen, and Harley Krohmer (2008), "Configurations of marketing and

sales: a taxonomy," Journal of Marketing, 72 (2), 133-54.


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Different thought worlds of Marketing and

sales: What differences make a diference?

Homburg, Christian and Ove Jensen (2007), "The thought worlds of marketing and sales: which differences make adifference?," Journal of Marketing, 71 (3), 124-42.


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Cooperation worsens as thought worlds differ - market performance improves with alignment


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Conclusions from the study: Thought worlddifferences are useful: Provided one side (sales or marketing) plays a customer-

advocate role and the other side a product-advocate role.

Provided one side plays the advocate of short-termconsiderations while the other plays the advocate of long-term considerations.

Thought world differences lead to worse outcomes

when product knowledge and interpersonal skills differ.


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Motivating the sales force

Motivation is often equated to providing incentivesbut evidence suggests this is not a tremendousmotivator in itself (e.g. Gilliland toward a business-to-business channel incentives classification scheme,IMM 2003)


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The interface role of sales (2)


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Vrooms expectancy theory

Motivating salespeople:Vrooms theory behaviorresults from consciouschoices among alternativeswhose purpose it is tomaximize pleasure and to

minimize pain.

Vroom realized that anemployee's performance isbased on individual factorssuch as personality, skills,knowledge, experience andabilities.


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Managing the own salesforce

DirectingSalespeople MotivatingSalespeople

Identify Customer Targets& Set Norms

Develop Prospect Targets

Use Sales Time Efficiently Annual Call Schedule Time-and-Duty Analysis

Sales Force Automation

Organizational Climate

Sales Quotas

Positive Incentives

Monetary

Re/Awards

Promotion


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Performance of sales managers

Typically measured on output dimensions such assales made, win rate etc.

For products that are harder to sell or whererelationships matter, other criteria are used in

addition: Attempts

Contacts

Conversations

Appointments Scheduled

New Meetings

Proposals

Conversions


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Effective sales people need to!!!

..categorize customers and adapt to it

..use market research information

..organize (unitize) information around sales situations

..learn from excellent salespeoples experiences

..find reward in the work itself (rather than in extrinsic rewards)

..focus on the content of their work (rather than on consequences)

..learn from diagnostic feedback (cause rather than outcome)

..learn from their own mistakes and success (self-attributed)

..self-manage

..benefit from a climate of mutual commitment

What dimensions do you see in the above?

Sujan et al. (1988)


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The independent Salesforce


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Independent salesforces are common


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Independent Sales Forces


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The independent sales organisation:

How to motivate these parties to carry yourproduct and not competitive products? ->Issue of motivation

recent changes with WebJet and TigerAir


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Firms provide incentive systems


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Wh t i ti id d?


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What incentives are provided?

Pledges, sales support, and others


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Why use multiple incentives?

Incentives are used toreduce differentconcerns

Flexibility vs. stability Internal vs. external

focus


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Incentives address concerns:


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Winning customer orders

What if we take the perspective of the


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What if we take the perspective of the

customer?

Understanding Customers Order Winning


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Understanding Customers Order-Winning

Criteria

All potential

Customers Order-QualifyingScreen

Order-WinningScreen

SuccessfulCompetitor

QualifiedCompetitors


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Value Creation & Delivery

Understanding customers order-winning criteria

Value creation requires the ability to:

Distinguish between order-qualifying criteria and order-winning criteria in each segment

Deliver competitiveness on order-qualifying criteria,together with significant leadership on selected order-winning criteria

Understanding Customers


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Understanding Customers

Order-Winning Criteria

The Order-Winning tests

A customer-value dimension will be order-winningonly if the customer:

Cares about the dimension

Is able to judge performance

Believes there are large differences between competitors

Believes the differences will last

Understanding Customers Order Winning


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Criteria:International Students

Order-Qualifying Screen


Interest

Employment Outcomes

Level

Affordability

Influenced by family,peers and social

environment

Country First* Security International recognition

Home country recognition

Quality of educators Destination employment

opportunities

Visa requirements (studyand work)

Migration opportunities

Affordability Family connections

* Appears to be little cannibalisationbetween countries

choosing a university



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Criteria: International Students

SuccessfulCompetitor


Institution

Rankings & reputation

International recognition(especially by employers)

Course structure Fees Location Links to employers Alumni

Benefits sought Hands on experience Acquisition of skills to

enhance employment in

home country

Link to globalisation

Enriching personal and

professional experience

Stepping stone tomigration

Gate-keepers Influencers and Decision


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Gate-keepers, Influencers, and Decision

Makers

What is the Decision Making Unit? (DMU)

Gatekeepers control the flow of information to the DMU

Initiator(begin the purchase

Process)Influencer

(supply informationand advice. Outsiderssuch as consultants

sometimes performthe role.)

User(mayinitiate

the purchase process

and/or developproduct

specifications

Decider(have the authority

to approvethe purchase.)

PurchasingDecision

Purchaser

(choose suppliersand negotiate purchase

terms often reducingthe actual purchase

to a clerical task)


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Whos Who?

Which buying center participant is most likely to make each of the

following statements?a buyer, decider, gatekeeper, influencer, or user?

This adhesive better be good, because I have to put thisproduct together.

I specified this adhesive on another job, and it worked forthem.

Without an appointment, no sales rep gets in to see Mr.Johnson.

I dont see any reason why we cant use this adhesive on thenext job.

Okay, it is a deal well buy it.

Ill place the order first thing tomorrow.


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Understanding the customer:how do (business) customers purchase?


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Purchasing Process

Define what to purchase (1)

Request for Quotations (2)

Select Best Supplier (3)

Purchase Order (4)

Receive & Inspect Goods (5)


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Routine task

Low risk

New task

High risk

Straight rebuy Modified rebuy New task

Based on the internal customer!what do our final

customers need!derived demand

Define what to purchase

D fi h t t h


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Define what to purchase

Agree on either/or:

Functional specification: Describes the functionalitywhich the product must have for the user

Potential suppliers are challenged to give adviceusing their expertise and experience

Stimulates innovation

Creates reference to evaluate suppliers against

Detailed technical specification Describes the technical properties and

characteristics of the product as well as theactivities to be performed by the supplier in detail

R t f t ti


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Request for quotations

Informal or formal way of asking for offers

Types

A private exchange (private industrial networks)

PHILIPS e-DIAMOND andVWGroupSupply.com

Net marketplaces (e-hubs)

Exostar or ChemConnect.com

Exchanges are independent third party electronicmarketplaces that connect thousands ofsuppliers and buyers for spot purchasing

FoodTrader.com or Alibaba.com

Request for proposals (RFP)

S l t th b t li


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Select the best supplier

Selection removes friction from the exchange/enhance outcomes.

Critical to remove friction through various tools:

Vendor evaluation

Sampling Quality assurance: ISO etc.

Vendor rating

Sustainability/Ethics

Selection processes also manage / reduce risk

S l t th b t li


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Select the best supplier

Critical for end outcomes:

von Hippel (1988) finds that in certain industriestwo-thirds of innovations can be traced back toideas and suggestions made by other (supplying)

firms.

In the automotive industry, evidence suggests thatthe supplier involvement in developing new cars

can be as high as 30% (Clark and Fujimoto)

S l t th b t li St d d


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Select the best supplier: Standards

S l t th b t li P f M it i


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Select the best supplier: Performance Monitoring

Developing a purchasing strategy


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Developing a purchasing strategy

Dr. Peter Kraljic: key to developing a

purchasing strategy is matching the

correct purchase strategy to the current situation.

A firms supply strategy should depend on two dimensions:

profit impact

Volume purchased/ percentage of total purchased cost/impact on product quality or business growth

supply risk

Availability/number of suppliers/competitive demand/

make-or-buy opportunities/ storage risks/ substitutionopportunities

Classification of Required Items


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Classification of Required Items

Bottleneck items

Suppliers technology criticalDifficult to substituteUnique requirements

Strategic items

Unique specificationsSuppliers technology criticalDifficult to substitute

Non-critical items

Many suppliers availableEasy-to-find substituteproducts

Leverage items

Large volume purchasesCan find substitutesMany suppliers available

Low Profit impact High

Supply

risk

High

Low

How to match required products


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q p

to purchasing strategies?

Consider the item and sort themin terms of profit impact andsupply risk.

Office chairs?

Advertising?

Database systems?


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Assessyour

strength

relative to

themarket

Kraljics Matrix of Purchasing Sophistication


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Kraljic s Matrix of Purchasing Sophistication

Materials managementFocus on

*Leverage items*Cost/price and materials flow*Multiple (local) suppliers*1-2 years time horizon*commodities/specialized

Supply abundant

Decentralized authority

Supply managementFocus on

*Strategic items*Long-term availability (not only cost)*Established global suppliers*Long time horizon*Scarce & high-value materials

Natural scarcity

Centralized authority

Purchasing managementFocus on*Noncritical items*Functional efficiency*Local suppliers*Short time horizon*Mostly commodities

Abundant supply

Decentralized authority

Sourcing managementFocus on*Bottleneck items*Cost management and reliable sourcing*Global/high tech suppliers*Specified materials

Production scarcity

Decentralized/centralized control

Low Complexity of supply market High

Low

Importanceofpurc

hasing

High


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Kraljics learnings


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Kraljic s learnings

Example


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Example

Imagine you need to source office supplies such as

pencils, printers etc.

What can office supply companies do (using theideas of Kraljic) to win the order?


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Returning to sales and execution

The customer mindset


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The customer mindset

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Strongly

Disagree

Strongly

Agree

Want to Think Like a Customer?


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Avoid!

Wasting a customers time

Lacking empowerment to handle problems now

Not knowing a customers business

Bringing problems, not solutions

Do try to create value:


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Do try to create value:

Value - bundle ofbenefits a customerderives from apurchase

Give-get ratio

Value creation -adding value for acustomer beyond anisolated transaction

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Do match customer expectations/needs to

h t ff


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what you offer!.

Transactional

Buyers mainly interested in price and convenience

Suppliers bring no additional benefits

Suppliers reduce resources allocated to selling

Relationship

Consultative Buyers willing to pay for new value and additional benefits

Enterprise

Strategically important customers demand extraordinary

value creation

Requires cross-functional teams to execute

Enterprise Example:

W l t l ti hi & P t d G bl


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Walmarts relationship & Proctor and Gamble

The relationship is worth US $12 billion.

Involves:

Joint planning for the long (5 year) term to set shared salesgoals.

P&G uses integrated technology to provide Wal-Mart with

just-in-time delivery of products.

Involves category information/market research done by P&Gto benefit Walmart.

Representatives from many functional areas within P&G arerequired to make this enterprise selling effort successful

High pressure to reduce prices (requiring a high degree ofinnovation)

Do match customer expectations/needs to

h t ff


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what you offer!.

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Time Invested

Developing Understandingof Buyers Needs

Presenting a

solution

Closing the Sale

Biggest Challenge?

Shift to Value Added Selling


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Shift to Value-Added Selling

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Johnston and Marshall 2013

Lecture Schedule


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Documents

Session 8 Final MB