Part II

SALES FORCE
ACTIVITIES

Chapter 4:

Account
Relationship
Management
 The Key Aspects of
Business-to-Business
Relationships
 Account Relationship
Management Concepts

Account The Building Account

Purchasing Buying Account Relationship
Process Center Relationships Binders

Figure 4-1: Account Relationship Management Concepts

(1) The Purchasing
Process
 Recognition Evaluation Purchase Implementation
of Needs of Options Decision and Evaluation

Value Added Role of Sales Force:

Help customers Identify options, Make the Support the
recognize a provide superior purchasing purchase
need solutions and process decision by
or problem and approaches and convenient, showing
to define them in help overcome hassle-free and customers how
a new or obstacles to inexpensive. to install and use
different acquisition the product,
way. replenish, and
evaluate value.

Figure 4-2: The Typical Purchasing Process

 Evidence from the real
world regarding account
purchasing
PURCHASING - Survey Results

Do you track
supplier Do you single
performance? out certain
suppliers as
“preferred”?
9%
No N.A.
16%

Yes
Yes No 55%
84% 36%

(% of respondents) (% of respondents)
PURCHASING - Survey Results

Do you have
multiple tiers
for ranking
suppliers?

Yes No
51% 40%

9%
N.A.

(% of respondents)
PURCHASING - Survey Results

Have any
suppliers
attained and No
lost top-level 23%
status? Yes
77%

(% of respondents)
 PURCHASING - Survey Results
Traits of Top-Performing Suppliers
(% of respondents)

<5% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5% . . Others
7% . . . . . . . . . . . . . . . . . . . . . . . . . . . . Good
8% Management
12% . . . . . . . . . . . . . . . . . . . Good
14% Response/Flexibility
28% . . . . . . . . . . . . . . . . . . . . ISO 9000
Certification

0 5 10 . . . . . . .20
15 . . . . . . .25
. . . . . . 30
....
. Service
. . . . . . . . . . . . . . . On-Time
Figure 4-3:

Tiering of Suppliers
Tier Type of Nature of the Relationship
Supplier
1 In  Traditional “arms length” relationship, usually
established at an individual level over time.
Standardized, non-strategic, products for
which there are may qualified suppliers.
2 Preferred  Relationship centers on suppliers’ products
and services, but there is a high level of
familiarity and trust between the supplier and
the
The customer.
relationship typically involves a breadth
3 Extended 

of products and services and usually crosses

numerous sites. Usually involves several
collaborative processes – product design,
inventory management, sales force training,
etc. Supplier is viewed best in class.
4 Partner  Supplier is viewed as key to the customer’s
ongoing competitive position. The business
relationship is rarely challenged and is
treated as exclusive along some dimension,
critical along other dimensions, and , in
general, special.
Standard Questions in a
Value Analysis Study
Value Analysis – Focus: TOTAL
COST
2. Can the item be eliminated?
3. If item not standard, can standard item be used?
4. If item standard, does it completely fit application
or misfit?
5. Does item have greater capacity than required?
6. Can its weight be reduced?
7. Is there a similar item in inventory that can be
substituted?
8. Are tolerances specified closer than necessary?
9. Is unnecessary machining performed on the item?
Standard Questions in a
Value Analysis Study
Value Analysis – Focus: (continued)
2. Are unnecessary fine finishes specified?
3. Is commercial quality specified?
4. Can item be manufactured cheaper in-house
5. If manufactured in-house can it be purchased
cheaper?
6. Is item classified to obtain lowest shipping rate?
7. Can packaging costs be reduced?
8. Are suppliers asked for suggestions to reduce
costs?
Total Cost of
Repetitively Used Items
INVOICE The cost per item as listed on the invoice a
COST customer receives.
POSSESSION Costs associated with stockpiling items
COSTS between delivery and use. These costs
include the building and maintenance of
storage areas, inventory control, insurance,
taxes, pilferage, and interest charges on
money borrowed to pay for inventory.

ACQUISITION Costs associated with generating an order and

COSTS processing a delivery. These costs include
order origination, inter-viewing salespeople,
expediting deliveries, receiving and editing
invoices, and
follow-up on late or inaccurate deliveries.
Some important points
regarding the sale
Determine the
Decision-Making Process
 Nothing is more important to driving an
accurate selling strategy than understanding
your client’s decision-making process.
 Project teams typically have a well-defined
evaluation process, but not a well-defined
decision-making process.
 In the law of algebraic democracy, some
people’s votes count more than others.
– Know who gets a straw vote and who gets a real one.
Determine the
Decision-Making Process
 A salesperson must understand how a decision
will be reached even more clearly than the
client does.
 You must also understand the approval
process once you’ve been chosen.
 Analyze each stakeholder based on pain,
preference, power, and the part he or she
plays in the decision-making process.
 Don’t resort to price or discounts to create a
sense of urgency.
– In negotiation, power lies in alternatives,
weakness in deadlines.
(2) The Buying
Center
Buying Center Members
MARKETING When a purchasing decision has an effect on the
marketability of a firm’s product, such as altering
the product’s materials, packaging, or price.
MANUFACTURIN Manufacturing is responsible for determining the
G feasibility and economic considerations of
producing
end products.
RESEARCH AND Is involved in the initial development of products
DEVELOPMENT and processes and set broad specifications for
component and materials criteria, minimum end-
product performance standards, and occasionally
manufacturing techniques.
GENERAL Top management is likely to be involved when the
MANAGEMENT purchase situation is unusual for the firm or when
the decision is likely to have major consequences
on the firm’s operation.
PURCHASING Purchasing agents are specialists who have
negotiation expertise, knowledge of buying
products, and close working relationships with
suppliers. They tend to become most involved in
the purchasing situation in the later stages of a
“new buy” situation. Are generally the dominant
decision makers in repetitive buying situations.
Economic Buying
Influence
ROLE: Asks “Why”
Gives final approval

CHARACTERISTICS: Access to money

Can release money
Veto power

FOCUS: Total organization

Bottom line
The Future
User Buying Influence

ROLE: To decide on how a

purchase will affect job
performance

CHARACTERISTICS: Implementation oriented

Use or supervise use of
product or service

FOCUS: Tactical, not strategic

The job to be performed
Technical Buying
Influence
ROLE: To eliminate alternatives
To recommend

CHARACTERISTICS: Focuses on quantifiable

aspects of product and
service
Gatekeeper
Can only say “no,”
not “yes”

FOCUS: Product specifications

Asks “What,” not “Why”
Advocate

ROLE: Helps guide the sale

CHARACTERISTICS: May be inside or outside

of the buying organization
Furnishes and interprets
information

FOCUS: Your success

Advocate:
Why Your “Winning” is a Personal
“Win”
PERSONAL Wants you to win because they know
you, they like you, and they’d like to
see you be successful.

PROFESSIONAL Wins by doing their job better,

achieving their goals, and helping
their companies meet objectives.

RECOGNITION Wins by receiving recognition from

their own organization.

NEGATIVE Really wants someone else to lose.

Advocate:
Ways in Which an Advocate can
Help
 Recommend selling strategies.
 Build a groundswell of interest.
 Refer you to other advocates.
 Review your presentation.
 Gain access to decision-makers.
(3) Building Account
Relationships
Figure 4-4: Stages in a Buyer-Seller Relationship
Relationshi
p Stage Description Key Selling Objectives
AWARENESS Recognition that a supplier may  Gain customer’s attention
be able to satisfy an important  Demonstrate how the
need. product/service can satisfy a
EXPLORATIO A tentative, initial trial with  need
Gain initial acceptance.
N limited commitments by both  Build a successful relationship.
parities.
This trail period may go on for
EXPANSION an extended
Expanding period
the of time.
rewards for each  Get to know customers and their
businesses better.
party in the relationship  Expand ways to help the
COMMITMENT The commitment by both the  customer. at levels between
Interaction
buyer and seller to an exclusive the buyer’s and seller’s
relationship organizations.
 Early supplier involvement in
development process.
DISSOLUTION Total disengagement from the

 Long-term focus to
Look for warning the
signals.
relationship. This may occur at relationship.
 Attempt to reinitiate the
any point in the relationship. relationship.
Business Expansion Questions
EXISTING  What limits current operations?
USE  What makes them more difficult than they need
to be?
 Which of these are most important?
POSSIBLE

 What
What do
do managers
managers see
needastotheir
make worst
theirproblems?
NEEDS operations better?
 What do they want to make their life easier
and more pleasant?
POSSIBLE  What does the client think might be possible?
SOLUTION  Which do they favor?
S
POSSIBLE  What new operations do they believe might be
NEW USES possible?
 Which do they favor?
DECISION  In supporting any solution, what would the
CRITERIA business
and personal criteria be?
Thomas’s
Five Conflict Management
Approaches
A
S
S
• Confrontatio
n • Confrontation
E
R
T
I • Compromise
V
E
N
E
• Avoidance • Accommodatio
n
S
S

COOPERATION
A “Reasonable”
Salesperson
Fortkamp Construction had a major contract delayed
due to equipment failure. With a deadline quickly
approaching the company called Rogers, a salesperson
for Acme Supply. They requested an immediate
delivery of replacement supplies so that Fortkamp
could meet its promised deadline.

Eager to break into this new account, Rogers agreed to

generous credit terms and to absorb air freight
charges to get the equipment to the customer as quickly
as possible. These concessions, however, reduced his
company’s net profit of 20% to below 10%.
A “Reasonable”
Salesperson
When asked by his sales manager why the sale
should be made at such a low profit margin, Rogers
explained, “I felt I needed to be reasonable with this
account. I wanted their business in the future. I was
there when they needed help, the deal was struck
quickly, and they’d remember and thank me later with
new business. I think the concessions were justified.”

How would you respond

to Rogers if you were his
sales manager?
Account Relationships
Exploration Stage: Pricing
Flexibility
Consider the following
Salesforce Market Conditions:
 Demand is highly price elastic
 Product/service offering is complex
 A heterogeneous customer base
 Large number of product lines
 Products are perishable

Which of the following is the best

alternative:
Account Relationships
Exploration Stage: Pricing
Flexibility
Alternative Management Systems
 Low Pricing Authority:
Management approval required for
all price discounts

 Medium Pricing Authority:

A specific limit placed on discounting
(e.g., 10% below list price)

 High Pricing Authority:

Base commissions on gross margins
to control price discounting
Account Relationships
Pricing Flexibility: Research
Results
LOW  Highest gross margins
AUTHORITY  Highest sales growth
 Highest return on assets

MEDIUM  Highest sales/salesperson

AUTHORITY  Average return on assets

HIGH  Lowest gross margins

AUTHORITY  Lowest sales growth
 Lowest return on assets
Considerations
When Choosing a Partner
POTENTIAL  Is there some real value for both parties
FOR IMPACT that can come out of partnering that could
not be achieved from a traditional supplier
COMMON  relationship?
Is there sufficient commonality of values?
VALUES In particular, it is important that both
companies be ethical and look at quality
and the quality process similarly.
GOOD  How does each party look upon the
ENVIRONMENT partnership long-term relationship versus
FOR profit on the sale, future oriented or
PARTNERING present? Are there frequent interaction
and transactions between the two
CONSISTENCY  companies?
Is a partnering relationship with this
WITH SUPPLIER’S customer consistent with our own product
GOALS and market strategy, and with our overall
direction as a company?
Dissolution Stage: Warning
Signals

 Missing information
 Uncertainty about information
 Uncontacted buying influence
 Customer personnel new to the job
 Reorganization
(4) Account
Relationship Binders
Account Relationships

Relationship Enhancers
 Creating Value:
Acceptable conduct and performance

 Meeting Expectations:
Measures of performance levels

 Building Trust:
Importance of trust
 Customer Value Creation
in the Purchasing
Process
High

Custom
er
Value

Low

Recognition Evaluation of Purchas Implementati

of Needs Alternatives e on
Decision and
Evaluation

Figure 4-5: Customer Value Creation in the Purchasing Process

Accuracy of Salespeople’s
Customer Perceptions
Measures of Performance Levels
 Number of sales calls per year
 Advance notice on price change (days)
 Average lead time for custom products
(days)
 Acceptable delay for custom products
(days)
 Acceptable delay for stock items (days)
 Minimum acceptable fill rate for stock
items (%)
 Hold inventory for project delays (days)
Accuracy of Salespeople’s
Customer Perceptions
Results
 Salespeople’s estimates of expected performance
levels are not very accurate (average of 50% error).
 The performance of individual salespeople was
directly related to the accuracy of their estimates.
 Telemarketers were more accurate in their estimates
of performance expectations than outside
salespeople.
 Salesperson age and industry experience level were
inversely related to performance expectation
accuracy.
 The amount of sales training a salesperson received
was directly related to their estimate accuracy.
The Importance of Trust
Selected Research Findings
 Research has established that trust facilitates
cooperation. A recent experiment demonstrated that
when a seller was expected to be more trustworthy,
there was also a higher level of buyer-seller
cooperation.¹
 Once a salesperson has gained customer trust, the role
of the salesperson changes to less emphasis on sales
and more on service.²
 Once trust is gained, the customer:
– Becomes more cooperative;
– Becomes more receptive to suggestions;
– Allows more time for sales presentations;
– Allows more access to other people in the organization; and
– Informs the salesperson about future buying needs.²
¹Paul Schurr and Julie Ozanne (1985), “Influences on Exchange Processes: Buyers’ Perceptions
of a Seller’s Trustworthiness and Bargaining Toughness,” Journal of Consumer Research,11
(March), 939-953.
²John Swan and Frederick Trawick,Jr. (1987), “Building Customer Trust in the Industrial
Salesperson: Process and Outcomes,” Advances in Business Marketing, 2, 81-113.
Earning Buyer Trust
What is Most Important?
Trust
Earning
Components Sample Questions
LIKEABLE  “The manufacturers’ rep is an individual
who people enjoy knowing.”
COMPETENT  “The manufacturers’ rep knows what
he/she is talking about.”
DEPENDABLE  “The manufacturers’ rep is very
dependable.”
CUSTOMER  “The manufacturers’ rep puts the buyer’s
ORIENTED interest ahead of his/her own.”

HONEST  “The manufacturers’ rep is one of the

most honest persons in the business.”
 Account Relationships
Relationship Enhancers Earning Buyers
Trust
Trust Earning
Components Sales People Buyers

LIKEABLE 5 5

COMPETENT 2 2

DEPENDABLE 1 1

CUSTOMER ORIENTED 3 3

HONEST 4 4

Source: Hawes, Mast & Swan (1989) JPS&SM: 193 Salespeople; 173 Purchasing Agents
A “Valued” Customer
Jacobs is about to close the sale when the buyer mentions,
“There’s been $5,500 worth of breakage because of your lousy
packaging, but I’m willing to split it with you if you give the word
right now. I’ve another appointment beginning in a few
minutes.” Jacobs suspects that the breakage was the fault of
the buyer’s handling equipment, but cannot prove it.

Thinking that splitting the difference is always a reasonable

way out, Jacobs decides to agree with the buyer and to get the
contract signed.
Do you agree with Jacobs’
reasoning?
What would you advise Jacobs to
have done, if you were her sales
manager?