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1 The Oxford Handbook of Edited by David W. Cravens, Kenneth Le Meunier-Fitzhugh, Nigel E. Piercy Oxford University Press (2011) ISBN-10: , 595 pages Theme of the Book The competitive and rapidly changing global The role of sales in the business environment requires a strategic sales delivery of strategic goals response, not just a tactical one. In addition, has never been more the numbers of staff and the expenditure essential. involved in the sales function highlight how important it is to achieve the right approach to sales. This book offers a state- of-the-art perspective on sales management and sales strategy. Knowledge Interchange Book Summaries 1

2 Key Learning Points The sales organisation has a strategic responsibility for the management of the links between a company and its market. One of the most critical roles of the strategic sales organisation is managing processes of customer value definition, development and delivery that cut across functional interfaces and organisational boundaries to build real customer focus. The challenge for the strategic sales organisation is to develop, deploy and sustain new skills and capabilities in market sensing. Strategic sales management is likely to fail without careful attention to the internal marketplace. Successful strategic sales leadership will depend on the utilisation of leadership styles that fit best with the current environment, A sales force structure is defined by two main decisions: the specialisation and reporting decisions Two of the most important elements in sales management are providing the tools for salespeople to improve critical skills and creating a reward platform that motivates them to succeed. By improving sales territory design, most companies can add 2-7 percent to their revenues every year The learning role of the sales force must be clearly delineated and balanced against the requirements of the demand generation role The activities of the sales and marketing functions are inextricably linked. A carefully formulated market-focused strategy will be ineffective unless the sales force executes it well. Knowledge Interchange Book Summaries 2

3 Contents PART 1: SALES STRATEGY AND ENVIRONMENT In this section several important aspects of sales force strategy are examined, with the underlying premise that sales force strategy is linked to business strategies in an interconnected manner. Also considered are the dynamic sales environment and a global perspective concerning selling and sales management. PART 2: SALES MANAGEMENT A review of up-to-date techniques and developments, since sales management has changed out of all recognition over the past twenty years, partly due to increasing competition and spiralling costs of running a sales team, but also due to rapid development of communication technologies. PART 3: THE SALES FORCE AND THE CUSTOMER Discussion takes the perspective that the sales force is an invaluable intermediary between the organisation and customers, who are becoming more discerning and demanding more from their suppliers. PART 4: THE ORGANISATION AND SALES RELATIONSHIPS Examines the sales organisation's relationships with other functions and the business, since sales force strategy is linked to business units and marketing strategies in an interconnected way. Knowledge Interchange Book Summaries 3

4 Part 1: Sales Strategy and Environment 1.1. EVOLUTION OF THE STRATEGIC SALES ORGANISATION The sales organisation has a strategic responsibility for the management of the links between a company and its market. Understanding and enhancing the ways in which sales resources add value and nurture customer relationships is becoming of strategic importance. To the extent that a marketing strategy depends on strong and sustained customer relationships, there is an implicit reliance on strategic sales capabilities. Moreover, to the extent that a sales force has built and sustains strong customer relationships by creating value for customers, it provides a strategic resource for the company. The challenge to sellers is to implement effective marketing strategies in a dramatically changing world of sophisticated buyers. Changing the sales organisation to achieve better customer value requires significant change: Involvement in strategy: sales involvement in the generation of marketing strategy rather than just being a tactical operation responsible for implementing strategies created by others. Integration of customer-facing activities: One of the most critical roles of the strategic sales organisation is likely to be managing processes of customer value definition, development and delivery that cut across functional interfaces and organisational boundaries to build real customer focus. Knowledge Interchange Book Summaries 4

5 Intelligence capabilities and resources: the capability of the sales organisation for building customer knowledge as a strategic resource critical to strategy formulation. Superior market-sensing is becoming one of the most critical processes for building and enhancing strategic capabilities reflecting how well managers understand their customers and markets. Internal Marketing of Customer Priorities: the role of the strategic sales organisation selling the customer to employees and managers to enhance internal understanding of customer priorities and the importance of meeting them STRATEGIC LEADERSHIP IN SALES Today s salespeople often engage in three distinct roles: 1. Competence deployment: activity designed to support the existing strategic plan. Salespeople must conform to the formal strategic plan and implement established strategies and processes. 2. Competence modification: activity encouraging engagement in adaptive behaviour i.e. the salesperson may be expected to question the organisation s existing strategy and to respond to environmental challenges on the fly. 3. Competence definition: salespeople may engage in this type of activity to the extent that they learn and improve, initiate autonomous initiatives, and experiment and take risks. Knowledge Interchange Book Summaries 5

6 The relative importance of the three roles depends on the environmental conditions that the sales organisation faces. Successful strategic sales leadership will depend on the utilisation of leadership styles that fit best with the current environment, salesperson roles, and strategic direction of the organisation. Three matching modes of strategic leadership are suggested; Command style with competence deployment transactional; providing clear direction; evaluation and control. Coach style with competence modification transformational leadership; clear vision; motivate, empower and inspire; output and clan control. Sponsor style with competence definition bottom up approach to strategy; endorse and support; remove obstacles and create opportunities for salesperson; clan control 1.3. ACHIEVING SALES ORGANISATION EFFECTIVENESS Sales management and the sales force are core determinants of the effectiveness of the sales organisation. Key aspects of sales management include management processes used by sales managers, the structure of the sales organisation, and the performance of each sales manager. Importantly, managers capabilities should correspond to the management process required by the organisation. Knowledge Interchange Book Summaries 6

7 Key sales force factors include salesperson skills, structure, and performance. The type of selling situation determines the required skills of the sales force. Sales may range from transactional to a collaborative focus. Salesperson structure refers to the role of the salesperson in the buyer-seller relationship e.g. working alone with the buyer or sales teams comprising people with different capabilities (product specialist, service expert, salesperson). Ultimately the salesperson s impact on sales organisation effectiveness is through his/her performance. The salesperson may be evaluated in terms of selling behaviour (activities relating to generating sales) and/or sales outcomes (sales, new customers, customer retention). Part 2: Sales Management 2.1. STRUCTURING SALES FORCES FOR CUSTOMER AND COMPANY SUCCESS The structure of a sales force defines roles and reporting relationships for salespeople and their managers. A sales force structure is defined by two main decisions: The specialisation decision defines the mix of generalist and specialist sales roles. In some sales force structures, salespeople are generalists who perform all selling activities and sell the company s full product and service line to all types of customers in a territory. In other structures, salespeople specialise in specific selling activities, products or markets. Many structures include a mix of specialists and generalists. The criteria is Knowledge Interchange Book Summaries 7

8 of course to organise in a way that best enables the sales force to meet customer needs and achieve company objectives. The reporting decision defines how sales activity will be coordinated and controlled. When salespeople are generalists, reporting structures are typically defined geographically. When sales roles are specialised around products, markets or selling activities the reporting structure decision becomes more complex. The right sales structure enables the Sales force structure affects many sales force to carry out the company s sales force systems, programs and business strategy by executing a processes e.g. sales force size, sales process that delivers an territory alignment, recruiting, effective value proposition to every training, culture, goal setting, sales targeted market segment manager selection, data and tools, incentive compensation, and performance management Consequently sales leaders should consider how these downstream sales force needs will be affected when they make sales force structure decisions SALES FORCE-GENERATED MARKETING INTELLIGENCE Among firms that strive to distinguish themselves in the quality of their customer relationships, the sales force is particularly valuable as a source of information on customer needs and market responses to the selling firm s offerings. MIS is dramatically enhanced by a fully engaged sales force that clearly sees the strategic value rewards of their role in marketing information acquisition and dissemination. This is no easy challenge since any distraction from salesgenerating activity may be seen as non-productive and outside the Knowledge Interchange Book Summaries 8

9 salesperson s job description. In addressing this issue management has used tools such as: Instilling organisational cultures that commit to intelligence gathering and promote its value to the enterprise Using a sales control approach that measures and rewards/recognizes MIS engagement by the sales force Integrating the role of securing marketing intelligence into the sales training and salesperson job description coupled with a suitable recognition and reward system MANAGEMENT OF A CONTRACTED SALES FORCE Strategic decisions concerning whether the selling function should be performed using a company sales force or an outsourced partner will have an important impact on a firm s competitive advantage. Gaining an understanding of the important decision criteria as to whether to outsource the sales force and how to manage the outsourced sales organisation relationship involves consideration of, for instance, the following key questions: is it possible to build committed relationships between a manufacturer and independent sales reps? If so how is such commitment built? What, if any, benefits are realized in such relationships? In particular, managing independent reps will require a different set of management competencies from those used in leading an in-house sales force. Knowledge Interchange Book Summaries 9

10 2.4. TRAINING AND REWARDS Two of the most important elements in sales management are providing the tools for salespeople to improve critical skills and creating a reward platform that motivates them to succeed. When determining sales training needs, consideration must be given to: who should be trained (new recruits different types of training for different salespeople, ongoing training for salespeople)? What should be the primary emphasis in the training program (company/product/customer knowledge, or selling skills)? How should the training process be structured (on the job, experience versus formal, web- or instructor-based, in-house versus outside training programmes)? Three basic questions drive successful rewards systems for salespeople: 1. Which reward method is most appropriate for motivating specific kinds of selling activities in specific selling situations? 2. How much of a salesperson s total reward should be earned through incentive programs? 3. What is the appropriate mix of financial and non-financial reward for motivating the sales force? 2.5. SIZING THE SALES FORCE AND DESIGNING SALES TERRITORIES FOR RESULTS The size of the sales force and the design of sales territories affect customers, salespeople, and company results e.g. if the sales force is too small, it will be unable to serve the needs of customers effectively, salespeople are likely to Knowledge Interchange Book Summaries 10

11 be overworked, and the company will miss key sales opportunities; too large and customers are inconvenienced by too much attention, salespeople are not sufficiently challenged, running costs will be high and productivity low. The same productivity challenges can exist in sales forces that are right size but have poorly designed sales territories. If the workload and opportunity in every territory is not well-matched to the capacity of the salesperson or team assigned to it, some customers will get too little attention while others get more than is justified by their potential, some salespeople will be overworked while others are under-utilised, and sales and profits will fall short of what the company could achieve. Sales leaders should use a market-focused By improving sales territory approach to determine the best sales force design, most companies can add 2-7 per cent to their size. This involves understanding and revenues every year without segmenting customers according to their needs adding sales people. and then determining what sales process and how much sales force time is required to meet their needs. By aggregating the time required across all customer segments, sales leaders can estimate the necessary sales force size. Determining the right sales force size and level of coverage is critical to maximizing profits. Thereafter, design of sales territories must match account workload and market opportunity to the capacity of each salesperson or sales team. Knowledge Interchange Book Summaries 11

12 Part 3: The Sales Force and the Customer 3.1. CUSTOMER SELECTION TO ACQUIRE, RETAIN AND GROW There is not a single metric that allows organisations to easily identify the right customers for their marketing efforts. The most common and potentially useful metrics to consider when identifying right customers include customer satisfaction, customer loyalty, purchase history, share of wallet, customer advocacy, customer profitability, and, most particularly, customer lifetime value (CLV). CLV represents the present value of all future profits achieved from a specific customer during the length of the customer s relationship with the organisation. One key challenge lies in predicting the expected duration of a customer relationship. A common approach is to limit it to a 3-5 range CUSTOMER RELATIONSHIP MANAGEMENT (CRM) AND THE SALES FORCE The customer intimacy model of CRM best fits those firms that have adopted a matching enterprise strategy that stresses genuine customer relationships and learning. The role of the sales force in a CRM model depends on how the firm decides it can best manage its dialogue with desired customers. In thinking about the role of the sales force, demand generation is a fundamental CRM process. This is the agentic role or the involvement of the sales force in generating and managing customer demand. Customer knowledge and learning will also be a fundamental CRM process as well, and, the learning role of the sales force must be clearly delineated and balanced against the requirements of the agentic role. Knowledge Interchange Book Summaries 12

13 3.3. SALES TECHNOLOGY Sales technology (ST) refers to information technologies that can facilitate or enable the performance of sales tasks e.g. sales-based CRM (customer relationship management) and SFA (sales force automation) applications. Technology solutions are intended to improve the efficiency (e,g, administrative performance) and effectiveness (e.g. relationship-building performance) of the sales process. Technology has automated many tasks that Sales technology is one of previously were handled at least primarily by the most pervasive and salespeople. That said, technology does not dominant catalysts of necessarily displace salespeople but instead change in modern sales supports them in their performance of organisations. assigned sales tasks. For example, it enables salespeople to do things that in the past were slow, difficult, or impossible to accomplish e.g. salespeople in KAM roles often use sophisticated demand forecasting logarithms made possible through technology applications that simplify inputs and interpret outputs. Technology requires ongoing alterations in skills and abilities required of sales leaders and salespeople and even culture. Knowledge Interchange Book Summaries 13

14 Part 4: The Organisation and Sales Relationships 4.1. ORGANISATIONAL COMMITMENT TO SALES Sales personnel are on the front line of organisations and are therefore in the best position to facilitate the company s learning about changing customer preferences and needs. Organisational Initiatives such as CRM and SFA help to develop superior market-sensing and customer-linking capabilities; to provide the structures, systems, routines, and practices needed to embed that learning in the organisation; and, most importantly, to facilitate the sharing of contact information and increased coordination across the firm s various customer service functions THE STRATEGIC ROLE OF THE SELLING FUNCTION Three selling function resources are identified that are likely to have an important influence on a firm s ability to garner a strategic advantage over competitors. 1. Human capital: includes selling expertise, knowledge of the sales force, and the sales force s reputation among its customers with respect to being trustworthy and dependable. 2. Social capital: reflected in both the external and internal social networks that the sales function builds, manages, and maintains on behalf of the firm. Knowledge Interchange Book Summaries 14

15 3. Cultural capital: includes beliefs and attitudes held by people involved in the selling function regarding enthusiasm, ethics, entrepreneurial behaviour, and identification with the organisation. It is frequently the case that there is a barrier, a wall, if you will, between the inside organisation and the more outward-looking selling function. It is, therefore, important that the organisation is properly configured (culturally as well structurally) to fully benefit from its selling capabilities SALES FORCE AGILITY Agility means being flexible and quick to Agile sales people reflect the respond. It is key to the creation of timely ability of the firm to focus facilities, resources and value propositions in response to marketplace staff. change and must be made manifest through the entire organisation. Salespeople are best positioned to receive customer signals and highly effective organisations listen to their sales forces. This is the hallmark of agile selling THE IMPORTANCE OF EFFECTIVE WORKING RELATIONSHIPS BETWEEN SALES AND MARKETING One of the most important cross-functional relationships is the salesmarketing one. They are expected to work together to deliver value to customers, yet they often operate as functional silos with different cultures, objectives, and values. Knowledge Interchange Book Summaries 15

16 Organisations try to reduce the risk of poor co-operation by using formal policies and procedures to control and channel the appropriate behaviour e.g. joint incentives and rewards, cross-functional teams etc. Whilst there is an important role for formal coordination to improve the interface between Sales and Marketing it is likely that informal factors such as interpersonal trust are equally powerful if not more powerful than the formal factors MARKETING: THE ANCHOR FOR SALES The activities conducted by the firm s sales force and marketing are inextricably linked. A carefully formulated market-focused strategy will be ineffective unless the sales force executes it well. A hard-working, highly motivated sales force will not achieve its potential unless guided by a marketing strategy well-tuned to environmental realities. The sales strategy must implement the market Marketing is the architect strategy. Accordingly the sales force must and the sales force is the understand how the firm develops a market builder; their activities are strategy so that sales can creatively work closely linked and within that framework to design and implement interdependent. an effective sales strategy. Ideally, in the market strategy development process, sales management should have a seat at the table. Only by ensuring sales participation in strategy formulation can marketing hope to get the sort of cooperation it requires to achieve its performance objectives. Knowledge Interchange Book Summaries 16

17 Editors David W. Cravens is Emeritus Professor of Marketing, Neely School of Business, Texas Christian University Kenneth Meunier- Fitzhugh is a Lecturer in Sales and Marketing at Cranfield School of Management. Ken obtained a PhD from the University of Warwick in Marketing and Strategic Management after spending 20 years working in senior management, sales and marketing for a range of organisations, including Yamaha and Thorn/EMI. His research interests include the exploration of the interface between sales and marketing. Nigel F. Piercy is Professor of Marketing and Strategy and Associate Dean at Warwick Business School, Warwick University. He was formerly Professor of Strategic Marketing at Cranfield School of Management. Knowledge Interchange Book Summaries 17

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