Part IISALES FORCE ACTIVITIESChapter 4:Account Relationship Management

AccountPurchasingProcessFigure 4-1: Account Relationship Management ConceptsThe BuyingCenterBuildingAccountRelationshipsAccountRelationshipBindersAccount Relationship Management Concepts

Implementationand EvaluationValue Added Role of Sales Force:Figure 4-2: The Typical Purchasing ProcessPurchaseDecisionEvaluation of OptionsRecognitionof Needs

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

Figure 4-3:Tiering of Suppliers

TierType of SupplierNature of the RelationshipAInTraditional arms length relationship, usually established at an individual level over time. Standardized, non-strategic, products for which there are may qualified suppliers.BPreferredRelationship centers on suppliers products and services, but there is a high level of familiarity and trust between the supplier and the customer.CExtendedThe relationship typically involves a breadth 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.DPartnerSupplier is viewed as key to the customers 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 StudyValue Analysis Focus: TOTAL COSTCan the item be eliminated?If item not standard, can standard item be used?If item standard, does it completely fit application or misfit?Does item have greater capacity than required?Can its weight be reduced?Is there a similar item in inventory that can be substituted?Are tolerances specified closer than necessary?Is unnecessary machining performed on the item?

Standard Questions in a Value Analysis StudyValue Analysis Focus: (continued)Are unnecessary fine finishes specified?Is commercial quality specified?Can item be manufactured cheaper in-houseIf manufactured in-house can it be purchased cheaper?Is item classified to obtain lowest shipping rate?Can packaging costs be reduced?Are suppliers asked for suggestions to reduce costs?

Determine the Decision-Making ProcessNothing is more important to driving an accurate selling strategy than understanding your clients 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 peoples votes count more than others.Know who gets a straw vote and who gets a real one.

Determine the Decision-Making ProcessA salesperson must understand how a decision will be reached even more clearly than the client does.You must also understand the approval process once youve been chosen.Analyze each stakeholder based on pain, preference, power, and the part he or she plays in the decision-making process.Dont resort to price or discounts to create a sense of urgency.In negotiation, power lies in alternatives, weakness in deadlines.

Figure 4-4:Organization Level and Need Indicators

LevelNeed IndicatorCEOEPSCFOROI, EBITDAVP OperationsCost of Goods SoldPlant ManagerMachine AvailabilityMaintenance ManagerMaintenance ExpenseMachine OperatorOil on the Floor

Buying Center Members

MARKETINGWhen a purchasing decision has an effect on the marketability of a firms product, such as altering the products materials, packaging, or price.MANUFACTURING

Manufacturing is responsible for determining the feasibility and economic considerations of producing end products.RESEARCH AND DEVELOPMENTIs involved in the initial development of products and processes and set broad specifications for component and materials criteria, minimum end-product performance standards, and occasionally manufacturing techniques.GENERAL MANAGEMENTTop management is likely to be involved when the purchase situation is unusual for the firm or when the decision is likely to have major consequences on the firms operation.PURCHASINGPurchasing 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:4 Asks Why4 Gives final approval

CHARACTERISTICS:4 Access to money4 Can release money4 Veto power

FOCUS:4 Total organization4 Bottom line4 The Future

User Buying Influence

ROLE:4To decide on how a purchase will affect jobperformance

CHARACTERISTICS:4Implementation oriented4Use or supervise use ofproduct or service

FOCUS:4Tactical, not strategic4The job to be performed

Technical Buying Influence

ROLE:4To eliminate alternatives4To recommend

CHARACTERISTICS:4Focuses on quantifiableaspects of product andservice4Gatekeeper4Can only say no, not yes

FOCUS:4Product specifications4Asks What, not Why

Advocate

ROLE:4Helps guide the sale

CHARACTERISTICS:4May be inside or outside of the buying organization4Furnishes and interprets information

FOCUS:4Your success

Advocate:Why Your Winning is a Personal Win

PERSONALWants you to win because they know you, they like you, and theyd like to see you be successful.PROFESSIONAL

Wins by doing their job better, achieving their goals, and helping their companies meet objectives.RECOGNITIONWins by receiving recognition from their own organization.NEGATIVEReally wants someone else to lose.

Advocate:Ways in Which an Advocate can HelpRecommend selling strategies.Build a groundswell of interest.Refer you to other advocates.Review your presentation.Gain access to decision-makers.

Figure 4-5: Stages in a Buyer-Seller Relationship

Relationship StageDescriptionKey Selling ObjectivesAWARENESSRecognition that a supplier may be able to satisfy an important need.Gain customers attentionDemonstrate how the product/service can satisfy a needEXPLORATIONA tentative, initial trial with limited commitments by both parities. This trail period may go on for an extended period of time.Gain initial acceptance.Build a successful relationship.EXPANSIONExpanding the rewards for each party in the relationshipGet to know customers and their businesses better.Expand ways to help the customer.COMMITMENTThe commitment by both the buyer and seller to an exclusive relationshipInteraction at levels between the buyers and sellers organizations.Early supplier involvement in development process.Long-term focus to the relationship.DISSOLUTIONTotal disengagement from the relationship. This may occur at any point in the relationship.Look for warning signals.Attempt to reinitiate the relationship.

ConsiderationsWhen Choosing a Partner

POTENTIAL FOR IMPACTIs there some real value for both parties that can come out of partnering that could not be achieved from a traditional supplier relationship?COMMON VALUES

Is there sufficient commonality of values? In particular, it is important that both companies be ethical and look at quality and the quality process similarly.GOOD ENVIRONMENT FOR PARTNERINGHow does each party look upon the partnership long-term relationship versus profit on the sale, future oriented or present? Are there frequent interaction and transactions between the two companies?CONSISTENCY WITH SUPPLIERS GOALSIs a partnering relationship with this customer consistent with our own product and market strategy, and with our overall direction as a company?

Account RelationshipsRelationship Enhancers

Creating Value: Acceptable conduct and performance Meeting Expectations: Measures of performance levels Building Trust: Importance of trust

High

CustomerValue

LowFigure 4-6: Customer Value Creation in the Purchasing ProcessCustomer Value Creationin the Purchasing ProcessRelationships:___ Enterprise---- Consultative..... Transactional

Recognition of NeedsEvaluation of AlternativesPurchase DecisionImplementation and Evaluation

Figure 4-7 Account IntelligenceMarket Intelligence: Which of the customers products are most important in terms of revenue and profit contribution? What markets do they serve, and which are the most important? Who are their major competitors? Financial Intelligence: When does the annual capital budgeting process begin? When does it end? Who initiates capital project requests? What hurdle rate is required to win approval? What is the projected capital spending for the year?Organizational Intelligence: What reporting relationships in each department influence purchasing decisions? What are the top business objectives each relevant department manager is expected to achieve in the current year?

Figure 4-7 ContinuedOperational Intelligence: What are the details of the process used by Operations to produce results (e.g., raw materials coming in, processing equipment, budget to produce finished goods, etc.)? Are there specific measures of performance for your products or services?Personnel Intelligence: Who are the people having a direct or indirect influence on buying decisions for your products? What are their formal responsibilities? How often have you met with them in the past year? What is your relationship with each person? Who are their friends and enemies with the account?Competitive Intelligence: Which of your competitors have an installed bas position in the account? What is the account share for each competitor? Which ones are likely to gain share?

Figure 4-8: Account Relationship Strategy and Relationship Binders

Transactional RelationshipConsultative RelationshipEnterprise RelationshipCreate ValueA good product that can be conveniently purchased.A solution to an important problemA supplier that will increase the share holder value of the organization.

Meet expectationsBuyer has a clear set of expectations as to the conduct of the relationship.Buyer knows a problem exists but is unsure of the solution of what will be involved in addressing the problem.Buyers expectations are strategic in nature, though the process for achieving strategic objectives may not be known.

Build TrustA supplier would do what has been promised.A supplier will do what is necessary to solve the problem.A supplier will do everything possible to increase the buyers competitive advantage in the marketplace.

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