T501 – S&Sales & Marketing Best Practices to Increase Market … · 2012-03-29 · T501 –...
Transcript of T501 – S&Sales & Marketing Best Practices to Increase Market … · 2012-03-29 · T501 –...
S &T501 – Sales & Marketing Best Practices to Increase Market ShareUnderutilized resources and weakened competition have mandated growth as the overriding priority. Distributors must grow to achieve ROI on their investments and the opportunity is here.
This workshop explores best practices in sales & p p pmarketing as applied to growing market share. We will discuss findings from our research and demonstrate real world case studies from cutting edge firms.
F. Barry Lawrence, Ph.D., Texas A&M University3/11/2010, 2:15 p.m.
Session Objectives
• Demonstrate Best Practices in Sales and Marketing
• Utilize Case Studies to Apply Principles
• Link to ROI• Link to ROI
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Return on Investment Opportunity
• Most Distributors are Underutilizing Their Resources
• Increasing Sales Offers a Very High ROI at this Time
• Competition has Lessened• Competition has Lessened
• ROI Expectations has Increased Due to Perceived Higher Risk and Tightened Credit
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Additional Resources
• “Optimizing Distributor Profitability” available from the NAW.– http://www.naw.org/optimizdistprof
• Educational Programs from the Thomas and Joan Read Center for Distribution Research and Education at– http://readcenter.tamu.edu
• Pricing Optimization• Optimizing Distributor Profitability• Optimizing Distributor Profitability• Certificate in Distribution Management• Custom Programs
• Research from the Supply Chain Systems Laboratory– http://supplychain tamu edu/http://supplychain.tamu.edu/
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Presentation Overview
• Sales and Marketing Optimization (SMO) Consortium Overview• SMO Key Processes• Best Practices Overview
– Market SegmentationCustomer Stratification– Customer Stratification
– Sales Force Stratification– Sales Force Compensation
• Net Steps and Questions
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Consortium Members
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Consortium Methodology
1. Assess Sales & Marketing Processes
(Workshops)
2. Research Best Practices
(Methodolog De elopment and Testing(Methodology Development and Testing
through volunteer data sets)
3. Link Best Practices to Shareholder Value
4. Document Best Practices
5. Deliver Educational Sessions
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Business Process Framework
Key Performance Indicators
Source Stock Store Sell Ship
Supply Chain Planning
Supplier CustomerSource Stock Store Sell Ship
• Information TechnologyH R M tS pport Ser ices • Human Resource Management
• Finance ManagementSupport Services
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Sales & Marketing Optimization (SMO) – Key Processes
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Market
Market Segmentation
Source Stock Store Sell Ship
Supply Chain Planning
CustomerSource Stock Store Sell Ship Customer
Customer 2
Sales
StratificationSales Force
Stratification
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Sales Force
Sales Force Compensation
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Compensation
1.Market Segmentation
SMO Key 2. Customer 4. Sales force yProcesses
2. Customer Stratification
4. Sales force Compensation
3. Sales force Stratification
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Stratification
1.Market Segmentation
SMO Key 2. Customer 4. Sales force yProcesses StratificationCompensation
3. Sales force Stratification
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Market Segmentation
The Market
Criteria – SIC Code, Size Buyer Type / End Size, Buyer Type / End
Use, etc.
Macro-segment 1
Macro-segment 2 …
Criteria – Critical Success Factors
Micro- 1
Micro- 2
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segment 1 segment 2 …
How to define macro-segments?
• Criteria –– SIC code– End use– Buying organization type– GeographyGeography– Customer size
• Data sources –– Government / trade association statistics– Interview with sales, marketing, customer service and operations staffInterview with sales, marketing, customer service and operations staff– Market survey results, if any
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Macro Segments – Examples
• Building Materials Distributor (End use based)– Residential, Commercial, Institutional, Government
• Fluid Power Distributor (SIC based)Energy Agriculture Construction Defense– Energy, Agriculture, Construction, Defense
• Electrical Distributor (End use based)( )– Industrial, Contractor, Datacomm, Utility, Commercial, Institutional
S i lt Di t ib t (C t i b d)• Specialty Distributor (Customer size based)– National accounts, Regional accounts, Low volume
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How to identify micro-segments?
• Determine critical success factors (Why customers buy from you?)y )–Functionality – Technical specifications–Quality–Delivery reliability–Availability
Breadth of product applications–Breadth of product applications–Perceived strength of the supplier (brand)–Technical supportpp–Channel preference–Shipping accuracy–Credit terms
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Micro Segment – Example
Key Buying Criteria
Low Volume Accounts
RegionalAccounts
National Accounts
Technologygy
Lead time
Technical support
Brand (supplier preference) Yes and No
Deliverysupport
Quality Low Low and High HighQuality Low Low and High High
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MARKET MACRO SEGMENTS
12Based on
SIC and
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End use
Based on critical successcritical success
factors
A
CB
F
ClusteringC
DE
Clustering similar
segments
17MICRO SEGMENTSCLUSTERED MICRO SEGMENTS
Target Market Selection
ALIGNMENT with company objectives
MEASURE segment
UNDERSTANDcompany
capability –DETERMINE
required ASSESS EVALUATE
ROI potential –revenue &
cost-to-serve
capability –critical success factors
required investment
and resources
ASSESS Risk
ROI (shareholder
value)
( )(Revenue – Expenses)
Net Assets
Return On Investment=
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Net Assets
Segment ROI
Potential
C biliRi k CapabilityRisk
Investment
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Segment Selection Matrix
Micro-segments
A C DB
Potential
Capabilityia Capability
InvestmentCri
teri
Risk
C
ROI
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1 M k t 1.Market Segmentation
SMO Key 2 Customer 4 Sales force S O ey Processes
2. Customer Stratification
4. Sales force Compensation
3. Sales force
21Stratification
Customer Stratification Model
Customer Life (Loyalty)
High ProfitLow CTSHi h V l
High ProfitLow CTS
gin
Cost To
O C
High VolumeSustained Relations
Low VolumeNo Relationship
ross
Mar
g Serve (CT
OPPORTUNISTIC
MARGINAL
CORE
SERVICE DRAIN
N R l i hi S t i d R l tiGr TS)No Relationship
Low ProfitHigh CTS
Low Volume
Sustained RelationsLow ProfitHigh CTSHigh Volume
Sales Volume
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Sales Volume
1 Market 1.Market Segmentation
SMO Key P
2. Customer Stratification
4. Sales force Compensation Processes StratificationCompensation
3. Sales force Stratification
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Sales Force Stratification
Corporate Goals / Objectives
Qualitative Analysis
Quantitative Analysis
Combination Model
Reports & Results
Analysis Analysis Modelsharing
1 2 3 4
Based on:• Skill• Personality tests
Performance driven:• # of new accounts
Helps develop:• Strategy• Tools• Training
Helps develop:• Healthy competition
• Drivestests• Willingness to perform
accounts• GP$• Revenue $, etc
• Training needs
• Rewards
• Drives performance
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Quantitative Analysis
F R•
Hi h / t
FARMERS RAINMAKERSun
t
• High revenue/account• Low # of new accounts
• High revenue/account• High # of new accounts
P /
Acco
u
DEFENDERS HUNTERS
ue a
nd G
• Low revenue/account• Low # of new accounts
• Low revenue/account• High # of new accounts
Rev
enu
# of New Accounts
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Sales Force Stratification – DEMO
• Building materials distributor–Total # sales persons (outside) : 23–Total # accounts handled : 956–Total Sales $ : $ 54,380,468
T t l G M i $ $ 11 047 744–Total Gross Margin $ : $ 11,047,744–Timeline : Jan 08 – Dec 08
• Factors–Revenue per accountp–Average number of new accounts/year
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Sales Force Stratification
Average # of new accounts per year
B AB A
A AB AARAINMAKERSFARMERS
> $ 54 000Revenue
per
A AB AA
DEFENDERS HUNTERS
> $ 54,000
accountB BB BA
DEFENDERS HUNTERS<= $ 54,000
> 4 Accounts<= 4 Accounts
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Analysis Results
# S l A #Final Rank # Sales persons Avg Sales $ / acct Avg # new
accounts / yearRainmakers 4 76,556$ 43Farmers 5 127,154$ 4Hunters 7 32,045$ 87Defenders 7 29,638$ 19Defenders 7 29,638$ 19
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1 Market 1.Market Segmentation
SMO Key P
2. Customer St tifi ti
4. Sales force C ti Processes StratificationCompensation
3. Sales force Stratification
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Company Objectives
Sales Force Stratification
•FARMERS RAINMAKERS
Customer Life (Loyalty)
Customer Stratification
• High revenue/account• Low # of new accounts
• High revenue/account• High # of new accounts
DEFENDERS HUNTERS
ue a
nd G
P /
Acco
unt
oss
Mar
gin
Cost To Serve (C
T
OPPORTUNISTIC
MARGINAL
CORE
SERVICE DRAIN
High ProfitLow CTSHigh VolumeSustained Relations
High ProfitLow CTS
Low VolumeNo Relationship
• Low revenue/account• Low # of new accounts
• Low revenue/account• High # of new accounts
Reve
nu
# of New Accounts
Gro
Sales Volume
TS)No RelationshipLow ProfitHigh CTS
Low Volume
Sustained RelationsLow ProfitHigh CTSHigh Volume
Sales ForceCustomer Sales ForceCustomerSales Force Compensation
Salary‐Incentive Mix
Metrics
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Metrics
Linking Compensation to Customer Stratification
Example• Compensation Type: Salary plus commission
$• Annual Salary = $35,000• Commission = 8% of Gross Margin $
Gross Margin $ Split
Who is more aligned with company objectives?
Sales Person Revenue $ Gross
Margin $ Comp. $ Core Opp. Service Drain Marginal
g $ p
X 2 MM 400K 35K + 32K = 67K 60% 5% 15% 20%
Y 2 MM 400K 35K + 32K = 67K 20% 5% 60% 15%
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Linking Compensation to Customer Stratification
What real world data says?
Example – HVAC/PVF Distributor
Gross Margin $ Split
Core Opportunistic Marginal Service DrainSales Person 1 70% 3% 14% 14%Sales Person 2 51% 12% 36% 2%Sales Person 3 86% 0% 5% 10%Sales Person 4 78% 0% 22% 0%
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Action Plan
• Step 1: Properly segment your market opportunities.
• Step 2: Execute a Customer Stratification process.
• Step 3: Execute a Sales Force Stratification• Step 3: Execute a Sales Force Stratification
• Step 4: Establish actions and goals for the sales force and marketing team.
• Step 5: Match Sales Force Compensation with goals.
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Summary
• Growth is the overriding objective now.
• Sales and Marketing processes need more extensive analysis.
• Market Segmentation needs to be matched with Customer Stratification• Market Segmentation needs to be matched with Customer Stratification.
• Sales Force Compensation needs to be matched with Stratification techniques to achieve objectives.
• Information Systems need to take over more of the “art” of salesInformation Systems need to take over more of the art of sales.
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Thank You For Attending
• T501 – Sales & Marketing Best Practices to Increase Market Share
• F. Barry Lawrence, Ph.D.
• Please submit the Session Feedback Form• Please submit the Session Feedback Form– To receive NASBA credits, please be sure to complete the Session Feedback
Form and sign the class roster in the back of the room
“Total Solutions For Industrial Distributors and Manufacturers”
Thank You!
35For more info please visit:
http://supplychain.tamu.edu