Session 8 Final MB
Transcript of 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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Different thought worlds of Marketing and
sales: What differences make a diference?
Cooperation worsens as thought worlds differ - market performance improves with alignment
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Different thought worlds of Marketing and
sales: What differences make a diference?
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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Understanding Customers Order-Winning
Criteria:International Students
Order-Qualifying Screen
QualifiedCompetitors
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
Understanding Customers Order-Winning
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Understanding Customers Order-Winning
Criteria: International Students
SuccessfulCompetitor
QualifiedCompetitors
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
1-59
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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