Selling

MARKETING MATERIAL

Territory Management Geographical Territories Sales Professional

Individual Sales Management Territory Sales Plan Customers Forecasts

Sales Objectives Numbers Game Complex Sale Decision-Makers & Influencers

Organizational Buying Situations Win-Win Relationship Management

Account Planning

9441 MARKETING Chapter 11

- Selling and Sales Management

Introduction

Although it is given relatively little prominence in most

textbooks, selling and sales management are generally the most

important elements of marketing for the majority of

organizations. An understanding of sales, in its widest sense,

and of sales management is, therefore, an essential requirement

for most managers.

The sales role itself revolves around a variety of management

processes. The basic building block is territory management, the

territory being in many respects a small business in its own

right. This involves a considerable degree of resource

management; but the most important element is that of managing

customers and prospects --though project management is also

required.

The heart of the sales process which, accordingly, is explained

in some detail, is the sales `call'. However, this often has more

to do with myth than reality; particularly in the `complex sale',

where `relationship management' (and `account management') comes

to the fore.

At the sales management level, people management skills are most

important, if little recognized in practice. Recruitment,

motivation, control and training all have their part to play, in

an area of management which poses considerable challenges.

In most organizations more money is spent on personal selling

than on advertising and sales promotions combined --in

acknowledgement of its effectiveness. Accordingly, many

organizations are prepared to spend a high proportion of their

communications budget on personal selling (which also indicates

just how expensive it is).

'On the other hand, use of the salesforce is qualitatively

different from almost all other aspects of marketing, being much

more dependent upon relationships between individuals; between

sales personnel and customers, and between sales management and

their sales personnel'. It is generally the management of

these human relationships, rather than the logistics, which is

most important.

As with most other management tasks, the management of this

selling process (at the sales management level) starts with a

definition of how the sales activities are to be organized.

Territory Management and Planning

The most important, first decision is how responsibilities are to

be allocated within the sales team; and the now traditional basis

for this uses the building block of the individual territory.

In fact, the concept of sales professionals being entitled

to their own territory is a relatively recent one. It was only

just before the First World War that John Patterson instituted

the concept of territories as a fundamental aspect of the NCR

sales operation; and shortly afterwards Thomas J. Watson, then at

NCR, took it to IBM --and there used it as a basis for building

that company's legendary salesforce. Prior to that time, there

had been no `territories': all prospects were fair game for all

salesmen; and their main competitors could just as easily be from

the same company as themselves.

Although such territories are normally thought of as geographical

areas, there can be a number of bases for the way they are

structured:

Geographical Territories

Most territories are based on a geographical area, ranging from a

whole country downwards to a single postal district. One

advantage of such an approach is that the areas are relatively

easy to define, and hence should avoid unnecessary contention. On

the other hand, very few sales professionals rigorously check

what their territory is; and this situation may be complicated by

the fact that such territories often split along main roads, with

one sales professional calling on the businesses on one side and

another on the opposite-ide.

'By industry'. A territory split which is used much less

frequently than geography is that by industry, but this can be a

very powerful choice. For many years, IBM split its main business

by industry; and this had the great benefit that the sales

professionals dedicated to each industry were steeped in the

knowledge and folklore of that industry --although their

geographical range was wider.

'By product'. This approach is often necessary because it

may be time-consuming to get to know the products in sufficient

depth, and sales personnel may not have the personal resources to

apply equal expertise to all products in the range.

The Sales Professional

The basic building block of all sales operations is the individual sales professional. His or her actions will build up to produce the overall sales impact. The next part of this chapter will, therefore, look at individual sales activities. These are conventionally not treated as management activities, but they are as much `tools' of marketing as any of the other techniques I have described. Accordingly, you should appreciate what they imply; and thus what lies behind one of the most important operations of almost all commercial organizations (and, probably under a different name -- such as `client services' --of many non-profit organizations as well).

Individual Management of Sales

As I have said above, the traditional view of selling has been

that it is a `professional' role rather than a management one

(very few sales professionals manage teams of subordinates). In

practice, much of the sales professional's role 'is'

actually concerned with management. The typical, competent, sales

professional should manage a number of resources and processes:

'Territory'. The sales professional is typically solely

responsible for his or her territory. He or she is responsible

for everything that happens in this territory; for all

activities, with the range of responsibilities comparable with

those normally assumed by a brand manager, or even by the chief

executive of a subsidiary.

'Sales plan'. In particular, within that territory he or

she has to create a sales plan; a `cut down' and probably

simplified version of the marketing plan. Performance against

that plan will have to be monitored, and tactics changed to allow

for deviations against target --just as in the overall

organizational plan.

'Organizational resources'. Every sales professional will

have some organizational resources at his or her command;

including service support, marketing support and, possibly, even

budgeted amounts of territory-based promotional funding. All of

these resources will have to be managed in exactly the same way

as the rest of the organization's resources.

'Support personnel'. It is conventionally assumed that sales

professionals do not manage people: indeed, as mentioned earlier,

very few do actually have formal responsibility for subordinates.

Yet many indirectly control the activities of support personnel.

What is more, they have to achieve this management control, often

under difficult circumstances on customer premises, without any

formal authority.

'Customer interface'. Above all, the sales professional

manages the `customer interface', that most important asset of

any organization, the `goodwill'. This demands a great deal of

skill and is a role which contains many of the key elements of

management.

The Territory Sales Plan

The sales plan for an individual sales territory should contain,

either formally or informally, most of the following elements:

Defining the Customer and Prospect Sets

At this stage the customer and prospect database will usually be

built, since each of these will, to some extent, require

individual attention:

Customers

Without any doubt, the most important split on almost all

territories is that between customers and prospects. Customers

are almost universally more productive than prospects; and indeed

more productive than many sales professionals (or their

management) allow for. What is more, assuming that the

organization has previously offered good service, customers are

already tied to it; and competitors will have to justify breaking

these links before they can even begin their selling process. In

such customers the organization already has an existing base on

which it is natural to build.

However, many --if not most --sales professionals devote little

time to customers. The `macho' image, the stereotype discussed

later in this chapter, persuades them to spend their time

unproductively; touting for new business, when common sense

should tell them to spend at least adequate time defending, and

developing, their customer base.

This problem was particularly evident in the earlier days of the

personal computer market. All of the research showed that the one

group who were almost guaranteed to buy a new system were the

existing customers, who had already bought a previous system --

typically within the past year. On the other hand, cold prospects were

unlikely to show a better than 10 per cent chance of buying a

system. Yet most sales professionals still sadly neglected their

customers; the industry had an appalling reputation of poor

service to customers.

Therefore the first priority of any sales professional must be to

allocate resources to the 'customer' set; but also to

differentiate between customers according to what they are worth.

Some will be `bankers' and will bring in a large part of the easy

80 per cent of business --and these investments must be

cosseted. On the other hand, some will be totally unproductive,

demanding resource for little return, and in these cases the plan

must be to contain the `bleeding'.

`A' prospects

The sales team should know their customers well enough to be able

to predict the sales performance of each. But the real skill

comes in being able to separate out the sheep from the goats

among the prospects. The question of which are the 10 per cent or

so who will bring in 50+ per cent of the new business is partly a

function of their size (in terms of potential business) and

partly of their probability of closing. These are the prospects

who should have first claim on the resources left after the

planned support of customers.

`B' prospects

Similarly, the sales team will have to determine the remaining

prospects who will bring in the remaining 50 per cent of new

business. This needs careful planning, and a ruthless

determination to control resource exposures, in order to ration

out the small amount of resource remaining after customers and

`A' prospects have been catered for.

Losers

All others have to be treated as outcasts. No matter how much

they plead, the productive salesforce will have to be ruthless

and refuse to fritter away resource on unproductive areas. The

main danger is that they will allocate some of their precious

resources to `tyre-kickers' (in the jargon of the sales

discipline --which does not always hide its questionable origins

in the used car trade), happy for the sales professional to spend

considerable time talking to them --indeed demanding this --but

never really likely to buy. The true professional must be

ruthless and insist that they 'prove' their good intentions.

This sounds like the reverse of good salesmanship, but at times

good salesmanship is as much about managing scarce resources as

it is about winning friends and influencing people.

As indicated earlier, husbanding resources, for the 20 per cent

of accounts that will bring in 80 per cent of business, is a

critical aspect of all territory and account planning. It is one

of the `management' aspects of professional salesmanship that

many sales professionals find most difficult to implement; they

more naturally `shoot from the hip', rushing to the account that

immediately demands attention, without considering the long-term

implications. Planning is essential to the sales professional,

and is often the activity that distinguishes him from his less

professional juniors.

Forecasts of Business

The most productive phase of any planning usually starts with the

forecasts of where the business, usually in the relatively near

future, will come from:

Bankers

The easiest part of any forecast should be to deal with the

`bankers', those accounts that the sales personnel know will soon

complete the formality of signing the order.

Even then, forecasting exactly 'when' they will sign is not

necessarily that easy. Paradoxically, it is somewhat more

difficult to control if they have already stated that they

'will' be placing the order. As far as they are concerned,

they have already given their sales contact the order; and see

their formal signature as a petty administrative detail. However,

bankers are still the easiest to predict, and should form the

core of any forecast.

Probables versus possibles

Looking at the forecasts of sales professionals it has been my

own experience that probables and possibles fall into three main

groups. Those accounts labelled `80 per cent chance of closing'

can usually be regarded as genuine `probables'; sales

professionals tend to be unduly optimistic, but an 80+ per cent

confidence level is usually indicative of a good chance of

success.

Below 50 per cent, however, the `possibles' that most sales

professionals would hope for are more normally `likely losers'.

The main question to be asked of this category is whether it is

worth putting any more resource into them. The experienced sales

professional (and, in particular, his or her manager) will

usually include in the overall forecast only the business rated

to have a better than 50 per cent chance.

In any event, the wise sales manager will then still divide the

aggregated forecasts of the sales team by a factor of two when

making his or her own submission to senior management.

AUDIT 13.2

In the context of the above topics, what are your observations of

your own organization's salesforce?

Sales Objectives

The specific sales objectives should be derived in part from

these investigations, but they will also emerge from the overall

marketing plan, which will be discussed later. They should

include at east three major elements:

'Total sales to be achieved'. This is quoted in terms of

volume or value, or possibly both; for example, 400 cases

(volume) or £2,000,000 (value).

'Product mix'. This is the relative contribution of each

product to total sales: for example, 80 per cent of sales to be

product A, 15 per cent to be product B, and 5 per cent to be

product C.

'Market mix'. This is the proportion of total sales in each

market: for example, 10 per cent in France, 20 per cent in the UK

and 70 per cent in Benelux; or 80 per cent to the financial

services sector, 15 per cent to retailers, and 5 per cent to the

rest of industry.

Call targets

The basic building block of any sales campaign has to be its calls. Generally speaking a number of calls are needed to get the business; and itis certainly true that

This is often described in sales circles as the "numbers game". I prefer to call it the 'numbers mountain', for each level must rest firmly on the one below if you are to be able to climb to the peak.

Thus, for every 1000 mailshots sent out there will be a certain percentage of returns which justify a sales professional calling personally; and telesales and cold calling will also generate proportional results. From these subsequent calls a proportion will turn into serious prospects (some of whom will progress to demonstrations and proposals). And out of these serious prospects a proportion will place orders, and a proportion (hopefully a good proportion) will place those orders with the organisation undertaking these activities rather than with its competitors.

At each stage, therefore, there is a conversion ratio. It is clearly the sales professional's personal skills (backed by sound account management) which ensure that this conversion ratio; is as high as it can be. Converting a good prospect into a customer requires all the skills a sales professional possesses, but it is a basic fact of the sales game that providing the raw material, the numbers of prospects to feed into the 'machine' which eventually converts them into business, is just sheer hard work. The more mailshots sent out, the more teleselling done and the more cold calls made, the greater the raw material for the conversion process. The eventual outcome is almost directly proportional to the numbers that are fed in.

AUDIT 13.3

What performance targets are set for the sales personnel of your

organization?

How is actual performance against these targets measured? What

targets do you think should be set?

The Complex Sale

The sales professional, a growing proportion of sales personnel,

is more likely to come into contact with the `complex sale', in

which a number of individuals are involved in the buying

decision, and the sales campaign extends over a number of calls.

Miller, Heiman and Tuleja - 9 - define it as follows:

A Complex Sale is one in which several people must give their

approval before the sale can take place.

However, they go on to expand this comment:

In a complex sale, you have short-term and long-term objectives.

In the short term, you must close as many individual deals as you

possibly can, and as quickly as possible. In the long term, you

want to maintain healthy relations with the customers signing the

deals, so they'll be willing to make further purchases in the

months and years to come. It would be great if these two

objectives always coincided, but you know that they don't.

Thus, in many ways this environment is very different from that

of the single call sale, which has been the staple diet of many

(if not most) sales trainers; though it is a rapidly declining

aspect of selling. The environment was described in more detail

in chapter 3.

As Miller, Heiman and Tuleja - 10 - put it:

Because most sales-training programs emphasize tactical rather

than strategic skills, even very good salespeople sometimes find

themselves cut out of a sale at the last minute because they

failed to locate or cover all the real decision makers for their

specific sale.

Decision-makers and Influencers

Perhaps the most obvious difference is the complexity introduced

by the multiplicity of `buyers' involved. It is no longer

sufficient to persuade just one buyer: instead, sales

professionals have to convince a whole range of individuals, all

with different (and often contradictory) requirements.

Identifying the buyers

The first problem that this poses is quite simply that of

identifying who the various buyers are. In a complex sale it is

no longer an easy task: the `buyers' involved can range from the

Chief Executive to members of the typing pool.

The convention is to split these `buyers' into `decision-makers'

and `influencers'; with the clear implication that the small

group of `decision-makers' should be the prime target --although

`influencers' should not be neglected. This is a useful

distinction, in that it correctly focuses the sales

professional's attention on the key decision-makers, and forces

him or her to contact them; whereas too many sales personnel

remain bogged down among the `influencers'. It was certainly

true, in the early days of the personal computer market, that

dealer salesmen rarely contacted more than one person in their

prospect (even in the larger corporations). He or she was usually

a buyer in the purchasing department, and was usually only an

`influencer'. The real decisions were taken elsewhere, untroubled

by the attentions of salesmen; though, because the only sales

message was price, the lack of face-to-face contact with the

`decision-maker' was not really a critical factor.

The problem with this two-way split is that both `decision-

makers' and `influencers' are very general categories; probably

too general (and too confined within the sales perspective) to

best help the sales professional to home in on the exact

decision-making structure. In their book, Miller, Heiman and

Tuleja - 11 - seem to offer a better (if at times much more

complex) structure. They identify four `buying influences', the

first three of which relate to the more conventional structure:

'Economic buyer'

The `economic buyer' is the ultimate decision-maker. He is a

single entity, usually a single person (but possibly a group,

such as a board). He holds the purse strings, and 'must'

approve the decision. Clearly this buyer is the most important in

the whole structure:

Almost by definition you don't find people who give final

approval far down on the corporate ladder.

'User buyers'

These are the people who are going to use whatever is being

offered. In the more conventional model they would lie

uncomfortably between `decision-makers' and `influencers'; and a

virtue of the more complex model is that it allows sales

professionals to handle this important group most effectively:

The role of the User Buyer is filled by someone who will actually

use (or supervise the use of) your product or service. The role

of the User Buyer is to make judgments about the impact of that

product or service on the job to be done.

'Technical buyers'

These are the true `influencers' of the simpler model; but with a

powerful power of veto, which could still be fatal for the sale.

They vet the specification for technical conformance.

Paradoxically, in many complex sales situations (certainly in the

case of computers of any sort) the purchasing department falls

into this category.

The Technical Buyers role is to screen out. They're

gatekeepers. - 12 -

Miller, Heiman and Tuleja make the important point that these

categories are not a function of the titles on the doors; they

are a result of specific relationships to the `purchase'. Even

more importantly, these authors emphasize the fact that the

structure is not fixed. The relationships change for different

purchases; and people move from one category to another.

In practice, the decision-making process is normally deeply

embedded in the `user' process. Users have a great deal of

delegated power. In many cases, although the final decision may

have to be approved by higher authority, it is in reality only a

power of veto (any board that saddles its user departments with

an unwelcome choice is asking for trouble).

Miller, Heiman and Tuleja's special contribution to this search

is to identify a fourth category of `buying influence', the

`coach'. This is a powerful concept, but it is quite a way

removed from the more traditional approaches. In essence, it says

that the sales professional should identify one or more contacts

who can (and are willing to) guide them through the complexities

of the sale:

The role of a coach is to guide you in the sale by giving you the

information you need to manage it to a close that guarantees you

not only the order, but satisfied customers and repeat business

as well. - 13 -

AUDIT 13.4

Take one or two of your organization's leading customers or

clients. For each of them, can you identify the three categories

--economic buying influence, user buying influence and technical

buying influence --of buyers?

Organizational Buying Situations

Some writers, such as Robinson, Faris and Wind, - 14 - also

identify different buying situations:

'Straight rebuy'. This is the repeat purchase of an existing

product or service which has given satisfactory performance: no

new information is needed for the buying decision. The `sitting

tenant', the existing supplier, is usually difficult to displace

in such situations. Webster and Wind - 15 - postulated a

`source-loyalty' model, which maintained that buyers favour

existing (known risk) suppliers, since much of their buying is

routine.

'Modified rebuy'. The buyer may be dissatisfied with the

existing product or service, and in this case the buying decision

has to be re-evaluated. This is the occasion when new suppliers

are most likely to make changes to existing purchasing patterns.

However, it does imply that in many markets it is the existing

supplier who loses the business, by incompetence or inattention,

and not the new one who wins it.

'New task buying'. In this situation there is no previous

history, so the buyer has to start from scratch; and all

suppliers begin with the same chance.

Inter-organizational Relations

Selling has traditionally been seen as a 'confrontational'

activity, with the salesperson `hierarchically' subservient to

the buyer --the former trying to persuade the latter to buy

something not wanted or needed. It is seen as a `zero-sum game',

in which each of the participants can gain only at the expense of

the other.

In recent years, however, it has been argued that the most

productive relationship in such sales deals is based on a `win-

win' approach, in which it is expected that both sides will gain

from the deal (albeit in different ways), so that they start out

with the intention of producing a mutually beneficial

arrangement. An increasing number of organizations have, indeed,

come to see the relationship as one of 'interdependence';

where the two sides adopt a `peer-to-peer' relationship. The

sales role here is sometimes described as 'relationship

management'.

As this type of relationship requires a higher level of personal

support, from a more skilled sales professional (a `relationship

manager'), it will typically be limited to the five or ten most

important customers.

Win-Win

Miller, Heiman and Tuleja - 16 - have encapsulated this

philosophy in terms of the `win-win matrix' (see overleaf).

In practice, this is something of a gimmick, since their comments

show that all of the remaining quadrants tend to be unstable; and

degenerate into the lose-lose situation. Even the lose-win

situation degenerates, since it sets up unrealistic expectations

for the future. On the other hand, the win-win concept is very

powerful; and the only real alternative, of lose-lose, serves to

highlight this. Partnership, or win-win, must always be looked

for.

Dave Ulrich - 17 - puts the same point in a rather different

way, in a longerterm perspective:

In the turbulent and increasingly competitive 1990s, firms need

to go beyond customer satisfaction. Firms earn customer

satisfaction in the short term by assessing and meeting needs;

they earn customer commitment in the long term through hundreds

of small, heroic acts that create loyalty and devotion ...

committed customers look beyond short term pleasures and develop

an allegiance to the firm ... committed customers become

interdependent with the firm through shar%d resources and

values.

Relationship Management

Indeed, as Theordore Levitt - 18 - says:

The relationship between a seller and a buyer seldom ends when

the sale is made. In a great and increasing proportion of

transactions, the relationship actually intensifies subsequent to

the sale. This becomes the critical factor in the buyer's choice

of the seller the next time around ... . The sale merely

consummates the courtship. Then the marriage begins. How good the

marriage is depends on how well the relationship is managed by

the seller.

He illustrates the point by comparing the typical reactions of

the seller versus those of the buyer (table 13.2). Regular

contact is essential in order to maintain rapport, to maintain

the partnership. It is also very productive in terms of developing the account. Buck Rodgers - 19 - says:

Successful salespeople understand the importance of long term

customer corrections. The size of their paycheck is determined to

a large extent by their ability to develop sound, lasting

relationships with enough customers. For the best of them, it's

easy enough. They are respectful and thoughtful and go out of

their way to be helpful.

The emphasis that IBM places on this aspect is demonstrated by

the example of account planning, also described by Buck Rodgers:

What IBM calls account-planning sessions are conducted annually.

Here, both line and customer-support people spend from three days

to a week reviewing the entire status of an account. With a major

customer like Citibank or General Motors, as many as fifty IBM

people could be involved. In the case of a small account, the

session might include a handful of IBMers ... The customer has a

well documented action plan that covers the upcoming year as well

as years to come.

The investment in a satisfied customer may not show on the

balance sheet, but it contributes handsomely to the bottom-line

profit.

AUDIT 13.5

What philosophy does your organization adopt in terms of its

dealings with its customers? Could it be described as `win-win'?

If not, what changes would a `win-win' approach require, and what

would the outcome be?

Account Planning

As usual in marketing, the most important activity in developing

these key relationship accounts is the development of a sound

plan; the 'account plan'. However, unlike the overall sales

plan, which will deal with groups of customers, each account plan

(or `key account plan') deals quite specifically with a

'single' customer.

For each of these key accounts, a unique plan should be

developed, which matches (at least in its scope of content) the

overall marketing plan. It should detail the specific objectives,

which will be individually related to the customer's needs and

wants, and the activities that are planned to meet these

objectives, and to build the `relationship'.

If such a plan is produced internally within the selling

organization it will be a productive exercise. If it is produced

in co-operation with the customer, so that the resulting plan

becomes a shared plan, it may make a major contribution to the

development of that business relationship; so that it becomes a

genuine peer-to-peer relationship. Such an account plan is the

basis of much of IBM's success in selling to its large accounts.

As I have already stressed, I also believe that account

management (in its most general sense, covering prospects as well

as customers) is the essence of professional salesmanship.

Customer account management, in particular, is the epitome of

this. It is probably the most important single skill (apart from

selling itself) required of a sales professional; and yet,

perhaps typically, it is almost entirely neglected by sales

trainers.