SALES FORCE

MANAGEMENT
MKT 205
Main references
Joseph F. Hair (Jr.), Rolph E. Anderson, Rajiv Mehta, Barry J. Babin (2020) Sales Force
Management, Wiley.
Johnston, Mark W. and Marshall, Greg W. (2016) Sales Force Management, 11th ed,
McGraw-Hill

1
 CHAPTER 2:

CUSTOMER RELATIONSHIP MANAGEMENT

AND BUILDING PARTNERSHIPS

2
Learning objective

• Master the different ways that companies interact with customers.

• Build customer relationships that lead to long-term repeat business.
• Relate customer loyalty to customer lifetime value.
• Apply CRM to the selling process.
• Use technology successfully in CRM programs.
• Know how marketing automation affects CRM

3
Introduction
• What is Customer Relationship Management (or CRM)?

• What is the nature of CRM?

• What are the tenets of CRM?

• How can CRM be applied to sales force management? and

• How can CRM be used to build close, long-term customer relationships?

4
Relationship Orientations and CRM
Businesses develop customer relationships in four different ways:

4.
One-to-One
Marketing

3. Relationship 1.
Niche Orientation Mass
Marketing and CRM Marketing

2.
Differentiated
Marketing

5
Production versus Marketing Orientation
Among the many business philosophies, two contrasting ones are:
1. Production orientation, and
2. Market orientation.

1. 2.
Orientation
Production Orientation Marketing Orientation

6
CRM and Repeat Business
CRM is based on the premise of serving customers over an extended period, thus generating
repeat business through multiple buyer-seller relationship interactions (i.e., transactions or
exchanges) between firms.

3 Levels of Buyer-Seller
Relationship Interactions

Low Medium High

Transactional Selling Relationship Selling Strategic Partnerships

7
Mechanisms That Govern Exchanges

• Transactional exchanges are controlled by market forces.

• Relational exchanges are governed by contracts.

• It includes arrangements for sharing information and tasks between
the buying and selling firm, but falls short of spelling out specific
obligations for each party.

• Strategic partnerships are governed by a mechanism known as

relational governance.

8
9
CRM, Customer Loyalty, and Lifetime Value

Sources of sales revenues are:

1. New customers, and
2. Current customers.

• Finding new customers is expensive due to high search

costs

• Selling to existing buyers is less costly, but it is crucial to

build customer loyalty.

10
CRM, Customer Loyalty, and Lifetime Value
Customer Loyalty: a function of two components
• 1. Customer share
• 2. Customer commitment
• Customer share refers to the proportion of resources that a customer spends with one
among a set of competing suppliers. High customer share is an important component of
true loyalty because it’s based on actual behavior.

• Customer commitment is the bond between a customer and a sales firm that builds up
over time as a customer continues to have rewarding sales exchanges with a supplier.

11
Computing the Value of a Customer

• Hotels, casinos and credit-card firms use CRM processes

to develop long-term customer relationships by offering
rewards programs include.

• An important way to ascertain if selling to existing buyers

is advantageous, sales managers can actually quantify
Customer Lifetime Value.

12
Computing the Value of a Customer

p
CLVi   Rt  Ct 
t 1

Where:
• CLV = Customer lifetime value,
• R = Revenue gained from the customer in a time period, and
• C = Cost of the sales and service effort directed at the customer.

13
Computing the Value of a Customer

• CLV can also be computed for firms that take a

transactional view by using the following formula:

CLV1  R1  C1 
Where:
• CLV = Customer lifetime value,
• R = Revenue generated by this particular sale (R), and
• C = Costs associated with selling to and serving this customer.

14
Risk of Relationship selling
Although relational selling and strategic partnerships have advantages, there are
many disadvantages, including:

 Increased dependency on a major buyer

 Loss of flexibility to capitalize on future business opportunities with new
customers
 Company complacency about current customer(s) and becoming less creative

15
CRM and Selling

• But what exactly is value?

• Value is often narrowly used as a synonym for low price.

• Value is an individual’s selective perception of the worth of

some product, activity, object, or idea.

16
The Salesperson and Managing Customers

• Some ways a salesperson can create value by:

1. Gathering important data about the customer and the market

2. Identifying the types of data needed to give the customer better
service
3. Managing the relationship between the firm and the customers to
whom the salesperson is assigned

17
Product Portfolios
• A product portfolio contains a set of products that a salesperson is responsible for
selling.
• Narrowing down the range of products for a salesperson to sell based on product
knowledge will allow customers to be better served.

Customer Portfolios
• Customer portfolios are sets of customers that have common traits, e.g., assigning
salespeople based on medical specialties such as pediatrics or cardiology.
CRM and Production
• There are two types of CRM systems:
• 1. Analytical
• 2. Operational

18
CRM and Production Systems
There are two types of CRM systems.

1. 2.
Types Of
Analytical Operational
CRM Systems
Systems Systems

Analytical CRM focuses on aggregating Operational CRM is more focused on using information to
customer information electronically, thus improve internal efficiencies, such as scheduling logistical
enabling the company to better identify and production operations.
target markets and opportunities for
cross-selling
19
Marketing Automation and CRM Programs

• Recent advances in marketing automation and data CRM data

analysis systems.

• AI refers to cognitive-like functions such as problem solving and

learning that are performed by computer systems.

• Machine Learning is a closely related term that can be defined

as the ability for computer systems to take actions without
being specifically programed to perform that action.

20
Marketing Automation and CRM Programs

AI and machine learning—part of marketing automation—is transforming CRM as follows:

1. Better data integrity – machine learning processes are taking the place of manual
data entry
2. Better data ingestion – software is now able to capture and code all communication
with individual customers, which subsequently enhances salesperson effectiveness.
3. Account-specific recommendations provided – the output suggests to salespeople
what actions to take with a specific customer and why to take those actions resulting
in a more trusted relationship.

21
Marketing Automation and CRM Programs
Technological components that are deployed in a CRM include:

1. CRM 2.
Sales Force Automation Technological Components CRM Hardware

3.
CRM Software

22
Sales Force Automation
• Sales Force Automation (SFA) refers to an integrated
system of computer software and hardware that
performs routine sales functions.

• An integrated SFA system ties together some or all of

the following functions:
1. Generate expense reports
2. Using presentation software
3. Scheduling sales calls
4. Managing territories
5. Generating proposals

23
 Technology and CRM Programs
The most important CRM hardware components include:

4.
Data
Mining

3. 1.
CRM
Data PDAs, laptops,
Hardware
Warehouse and servers

2.
Database
Marketing

24
Technology and CRM Programs
4.
• Multivariate statistical tools that can be Automatic
used quantitatively analyze sales data Interaction
Detection
include, but are not limited to:
1. Cluster analysis
2. Discriminant analysis CRM
3. 1.
3. Multiple regression, and Multiple
Software
Cluster
Statistical
4. Automatic interaction detection Regression
Tools
Analysis

• Note: Multivariate data analysis concepts

are not covered, but you can take advanced 2.
courses on these topics. Discriminant
Analysis

25
Technology and CRM Programs
CRM software is central to CRM technology and applications.

4.
Advanced
analytics

1.
3. CRM Software
Flexible sales
Easy data Applications and
effectiveness processes
access Considerations

2.
Easy
coaching

26
CRM Successes and Failures

• Despite CRM’s popularity, its adoption is no guarantee of

success.

• CRM is not for firms using a transactional approach.

• CRM is also not for firms whose customers won’t realize

added value from the benefits provided by the CRM process.

27
Read Jobber ( pg Microcom pg 275)
When the buyer moves on does the relationship end?
Discussion questions
1 Advise senior management on the appropriateness of adopting a relational approach to
selling.
2 Suggest and justify tactics that could be used.
3 How would you advise Microcom in developing a strategy to implement relationship
marketing
and selling?

28