SALES SALES STRATEGYSTRATEGY

PRESENTED BYPRESENTED BY

NIDHI SINGHNIDHI SINGH

DEFINATIONDEFINATION

Sales strategy defines Sales strategy defines who a firm sells to, who a firm sells to, what the customer offering is,what the customer offering is, and and how the selling is done.how the selling is done. Successful sales strategies define Successful sales strategies define

effective yet effective yet efficient sales processes efficient sales processes that deliver the right products and that deliver the right products and services to the right customers.services to the right customers.

The Three Major ActivitiesThe Three Major ActivitiesRequired for Sales Strategy Development:Required for Sales Strategy Development:

Activity 1: Activity 1: Segment marketsSegment markets

Activity 2: Activity 2: Determine Determine product/service product/service offeringoffering

Activity 3: Design Activity 3: Design sales processsales process

Activity 1: Segment Activity 1: Segment marketsmarkets

The first step in developing a The first step in developing a successful sales strategy is to successful sales strategy is to segment the firm’s customers and segment the firm’s customers and prospects into meaningful, prospects into meaningful, actionable clusters.actionable clusters.

AdvantagesAdvantagesCustomer segmentation helps Customer segmentation helps

companies meet the needs of diverse companies meet the needs of diverse customerscustomers

Customers are different types like:Customers are different types like:-- Some are large and some are small. Some are large and some are small. Some want the best price, others the best service. Some want the best price, others the best service. Some are early adopters, eager to try the latest Some are early adopters, eager to try the latest

innovation, while others prefer well-tested solutions. innovation, while others prefer well-tested solutions. Some customers are interested in many of the products Some customers are interested in many of the products

and services a company has to offer whereas others want and services a company has to offer whereas others want only a select few.only a select few.

Some customers make purchasing decisions centrally, Some customers make purchasing decisions centrally, others delegate purchasing to individual departments or others delegate purchasing to individual departments or locations. locations.

Some have a single point of control for purchases and Some have a single point of control for purchases and others have many people influencing the buying decision.others have many people influencing the buying decision.

Range of Granularity of Customer Range of Granularity of Customer Segmentation ApproachesSegmentation Approaches

Successful sales strategies exploit customer differences to Successful sales strategies exploit customer differences to enhance sales impact and efficiencyenhance sales impact and efficiency

Customer segmentation organizes a large universe of Customer segmentation organizes a large universe of customers and potential customers into groups with customers and potential customers into groups with common characteristics so that customers can be common characteristics so that customers can be prioritized, and sales and marketing efforts can be prioritized, and sales and marketing efforts can be customized.customized.

Mass marketing places all customers into the same segment Mass marketing places all customers into the same segment and plans one standard sales strategy for all customers.and plans one standard sales strategy for all customers.

The individual customer approach tailors sales strategies to The individual customer approach tailors sales strategies to the needs of individual customers.the needs of individual customers.

Segmented market approaches where there are a few Segmented market approaches where there are a few meaningful, actionable segments.meaningful, actionable segments.

Micro-market approaches where the segments are further Micro-market approaches where the segments are further subdivided to the point where each segment has just a few subdivided to the point where each segment has just a few members are practical alternatives that allow companies to members are practical alternatives that allow companies to plan effective yet efficient selling strategies for large plan effective yet efficient selling strategies for large numbers of diverse customersnumbers of diverse customers

Example segmentation of hospitals for IVAC Example segmentation of hospitals for IVAC Medical SystemsMedical Systems

IVAC’s main products were infusion IVAC’s main products were infusion pumps to deliver fluids and drugs into the body. The pumps to deliver fluids and drugs into the body. The useful life of a pump was about five years, and a useful life of a pump was about five years, and a hospital typically decided to replace the pumps in hospital typically decided to replace the pumps in most or all of the hospital departments at the same most or all of the hospital departments at the same time. About 20 percent of pumps in use were replaced time. About 20 percent of pumps in use were replaced in any given year in the market. A hospital would in any given year in the market. A hospital would complete a significant amount of planning and complete a significant amount of planning and evaluation before deciding which product line to evaluation before deciding which product line to purchase.purchase.

IVAC identified three segmentation IVAC identified three segmentation dimensions that influenced the appropriate sales dimensions that influenced the appropriate sales process for each hospital: process for each hospital:

The size of the hospital,The size of the hospital, The type of hospital, and The type of hospital, and The status of the hospital. The status of the hospital.

Possible status choices were:Possible status choices were:

SecureSecure – a current IVAC customer that would not be buying – a current IVAC customer that would not be buying new pumps in the next year.new pumps in the next year.

VulnerableVulnerable – a current IVAC customer that would be buying – a current IVAC customer that would be buying new pumps in the next year.new pumps in the next year.

OpportunityOpportunity – a current customer of a competitor that would – a current customer of a competitor that would be buying new pumps in the next year.be buying new pumps in the next year.

PotentialPotential– a current customer of a competitor that would not – a current customer of a competitor that would not be buying new pumps in the next year.be buying new pumps in the next year.

ADVANTAGEADVANTAGE The customer segmentation used at IVAC drove many The customer segmentation used at IVAC drove many

sales force design decisions. sales force design decisions. It helped the company determine It helped the company determine Which hospitals to target, Which hospitals to target, What sales message to communicate, What sales message to communicate, How to allocate sales force time, How to allocate sales force time, How many salespeople to have, andHow many salespeople to have, and How to design sales territories with manageable How to design sales territories with manageable

workloads.workloads.

Customer segmentation provides a Customer segmentation provides a framework for actionframework for action

Good customer segmentation creates a foundation uponGood customer segmentation creates a foundation upon which a company can make sales and marketing decisions which a company can make sales and marketing decisions

and take action.and take action. It helps the company understand customers, define the It helps the company understand customers, define the

sales process, allocate resources more effectively, andsales process, allocate resources more effectively, and Design a sales force of the right structure and size.Design a sales force of the right structure and size.

How to Segment MarketsHow to Segment Markets

Three types of customer segmentation Three types of customer segmentation criteriacriteria

Profile CriteriaProfile Criteria--Profile criteria are sometimes called demographics Profile criteria are sometimes called demographics or “firmographics” in business-to-business markets. or “firmographics” in business-to-business markets. For example, For example, medical equipment company IVAC chose size and type of hospital as medical equipment company IVAC chose size and type of hospital as profile criteria because the values of these variables affect their sales profile criteria because the values of these variables affect their sales process. Large hospitals require more time to sell. They have more process. Large hospitals require more time to sell. They have more departments and more people involved in the buying decision than departments and more people involved in the buying decision than small hospitals. The type of hospital also influences sales activities. For small hospitals. The type of hospital also influences sales activities. For example, a teaching hospital is more likely to migrate quickly to a new example, a teaching hospital is more likely to migrate quickly to a new technology than a community hospital.technology than a community hospital.

Behavioral Criteria-Behavioral Criteria- Behavioral criteria can be a powerful way to Behavioral criteria can be a powerful way to segment customers because they are based on what a customer actually segment customers because they are based on what a customer actually does.does.

Needs Criteria-Needs Criteria- Customer needs shape opportunity and behavior. Customer needs shape opportunity and behavior. To the extent that these needs can be understood in terms of products, To the extent that these needs can be understood in terms of products, services, and buying processes, they are the most powerful and services, and buying processes, they are the most powerful and actionable way to segment customers. actionable way to segment customers. For example, IVAC Medical For example, IVAC Medical Systems based its customer segments, in part, on whether or not a Systems based its customer segments, in part, on whether or not a hospital would need to purchase new infusion pumps in the coming hospital would need to purchase new infusion pumps in the coming year. Approximately 20 percent of all hospitals would have this need in year. Approximately 20 percent of all hospitals would have this need in any given year. Thus, using customer needs as a basis for segmentation any given year. Thus, using customer needs as a basis for segmentation was a very good way to direct sales force effort to the segments with was a very good way to direct sales force effort to the segments with the greatest expected return.the greatest expected return.

Two approaches to developing customer Two approaches to developing customer segmentssegments

The a The a prioripriori (also called ex ante) approach uses a (also called ex ante) approach uses a hypothesis about how the marketplace should be divided hypothesis about how the marketplace should be divided into segments. This hypothesis is usually developed by a into segments. This hypothesis is usually developed by a group of managers or other personnel and is based on group of managers or other personnel and is based on available data, intuition, and organizational experience. available data, intuition, and organizational experience. The group uses known criteria that they feel are relevant, The group uses known criteria that they feel are relevant, such as customer size and industry to create segments. such as customer size and industry to create segments. The hypothesis is tested by analyzing these segments and The hypothesis is tested by analyzing these segments and working forward to see if the segments have distinct working forward to see if the segments have distinct behaviors or needs, seek different benefits, enable viable behaviors or needs, seek different benefits, enable viable product or service differentiation, and/or require different product or service differentiation, and/or require different sales processes.sales processes.

Two approaches to developing customer Two approaches to developing customer segmentssegments

The The post hocpost hoc or “after the fact” approach to or “after the fact” approach to segmentation allows analysis of primary customer segmentation allows analysis of primary customer data to drive the discovery of the relevant data to drive the discovery of the relevant segmentation criteria. Analytical techniques are used segmentation criteria. Analytical techniques are used to identify groups of customers that have similar to identify groups of customers that have similar needs and behaviors, seek the same benefits, and/or needs and behaviors, seek the same benefits, and/or require the same sales process. Then the analysis require the same sales process. Then the analysis works backwards to see if these groups can be works backwards to see if these groups can be defined in terms of demographic or other standard defined in terms of demographic or other standard profile dimensions.profile dimensions.

Customer segments evolve over timeCustomer segments evolve over time

Developing a good segmentation scheme typically requires Developing a good segmentation scheme typically requires multiple iterations. The firm’s experience grows and its multiple iterations. The firm’s experience grows and its information evolves and improves with time.information evolves and improves with time.

In addition to companies getting smarter with the way they In addition to companies getting smarter with the way they segment their customers, customers evolve and move to segment their customers, customers evolve and move to new segments with time. This is particularly true when new segments with time. This is particularly true when segments are based on behavioral criteria. In fact, the segments are based on behavioral criteria. In fact, the whole goal of marketing and sales is to change the whole goal of marketing and sales is to change the behavior of the customer.behavior of the customer.

Sales Potential is an Important Sales Potential is an Important Segmentation CriterionSegmentation Criterion

1.1. Accounts with larger potential typically warrant greater Accounts with larger potential typically warrant greater levels of sales and marketing investment.levels of sales and marketing investment.

2.2. By combining sales potential data with sales data, it is By combining sales potential data with sales data, it is possible to calculate the level of penetration into an possible to calculate the level of penetration into an account and to evaluate sales performance.account and to evaluate sales performance.

3.3. The extent of penetration can help define the required The extent of penetration can help define the required sales process. sales process.

How to estimate the sales potential of an How to estimate the sales potential of an accountaccount

Sources of Data for Market SegmentationSources of Data for Market Segmentation

Association sources:Association sources: Directories in Print and Directories in Print and Encyclopedia of Associations.Encyclopedia of Associations.

General business information guide source:General business information guide source: Encyclopedia of Business Information Sources.Encyclopedia of Business Information Sources.

Leading US business data vendors:Leading US business data vendors: Dun & Bradstreet, Dun & Bradstreet, American Business Information, Database America, IMS, American Business Information, Database America, IMS, Trinet, R. L. Polk, TRW, Infobase, and Equifax.Trinet, R. L. Polk, TRW, Infobase, and Equifax.

US Government sources:US Government sources: US Census Bureau, Bureau of US Census Bureau, Bureau of Economic Analysis, Bureau of Labor Statistics, Economic Analysis, Bureau of Labor Statistics, www.fedstats.govwww.fedstats.gov