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Chapter 3

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Linking Strategies and the Sales


Role in the Era of Customer
Relationship Management

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Learning Objectives
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• Understand and outline the key components and goals of CRM
• Explain the importance of market orientation and how a
market orientation is fostered within the firm
• Identify the key steps in developing and implementing
strategies
• Describe the role of personal selling in marketing strategy
• Outline the stages in developing strategic partnership
relationships between organizations
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• Discuss the actions salespeople can take to ensure a long-
term buyer-seller relationship
Key Terms
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• marketing concept •data warehouse

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•customer delight
• marketing mix •data mining •upgrading
• marketing communication mix •return on customer investment
(promotion mix) •full-line selling
•strategic direction

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• market orientation •cross-selling
•mission statement •preferred supplier
• customer orientation •goals
• customer-centric •total quality management
•objectives (TQM)
• formalization •strategic business units
• customer relationship •integrated marketing
•sustainable competitive advantage communication
management (CRM)
•distinctive competencies •pull strategy
• touchpoints
•generic strategies •push strategy
• mass marketing
•market opportunity •just-in-time reorder and
• target marketing
•marketing program delivery
• customer marketing
•market exchanges •category management
• one-to-one marketing
•functional relationships •supply chain alliances
• customer value
•strategic partnerships •efficient consumer response
• customer loyalty
•trust (ECR)
• lifetime value of a customer
• firing a customer •selling team 3
•top-to-top selling
Key Terms
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• Marketing concept (pg. 73)
– Turning to consumers themselves for input in making strategic decisions about what
products to market, where to market the products and how to get them to market, at
what price, and how to communicate with consumers about the products.
• Marketing mix (pg. 73)
– The four elements of product, distribution, price, and promotion.
• Marketing communication mix (promotion mix) (pg. 73)
– The promotional message used by a firm to communicate with customers
• Personal selling
• Advertising
• Sales promotion
• Direct marketing 4
• Public relation/publicity
Key Terms
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• Market orientation (pg. 73)
– The implementation of the marketing concept.
• Customer orientation (pg. 73)
– The firm places the customer in the center of all strategic decisions
and firm activities.
• Customer-centric (pg. 73)
– Firms high in customer orientation because they have the customer
at the center of their business model.
• Formalization (pg. 73)
– The process of setting up structure, processes and tools, and
managerial knowledge and commitment in support of the market 5
oriented or customer-centric culture.
Key Terms

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• Customer Relationship Management (CRM) (pg. 73)
– The most prevalent formalization of a customer-centric culture in
which the comprehensive business model for increasing revenues
and profits focuses on customers. Three goals of CRM are
customer retention, acquisition and profitability.
• Touch-points (pg. 74)
– The intersection of business events via a channel using a medium
where the selling firm touches the customer in some way, thus
allowing for information about customers to be collected.
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Key Terms
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• Customer marketing (pg. 74)
– Focusing on developing relationships with individuals.
• One-to-one marketing (pg. 74)
– Ability to customize offerings for individual users.
• Customer value (pg. 75)
– When customer weighs the costs (monetary and otherwise) of a
relationship with a seller, the benefits realized from that relationship
outweigh the costs.
• Customer loyalty (pg. 75)
– When customers are highly satisfied with the relationship and the
product offering, and are very unlikely to switch to another company
and its products or brands. 7
Key Terms

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• Lifetime value of a customer (pg. 76)
– Pay off in terms of cost savings, revenue growth, profits, referrals,
and other important business success factors. It is possible to
calculate an estimate of the projected financial returns from a
customer, providing a very useful strategic tool for deciding which
customers deserve what levels of investment of various resources
(money, people, time, information, etc.)
• Firing a customer (pg. 76)
– This can occur when a customer exhibits a low predicted lifetime
value and resources are better used elsewhere.
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Key Terms
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• Data warehouse (pg. 76)
– The compilation of information obtained from touch-points and
transformation of that information into useful information for
customer strategy development.

Data mining (pg. 76)
– The use of software techniques to learn more about current and
potential customers from large data warehouses of information.
• Return-on-customer-investment (pg. 78)
– Related to the lifetime value of a customer, this is the financial
evaluation of a customer relationship. 9
Key Terms
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• Strategic direction (pg. 82)

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– The mission and goals on which a firm’s marketing strategy may be
built and implemented.

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• Mission statement (pg. 82)
– The answer to the most basic questions about a firm’s reason for
being.
• Goals (pg. 83)
– Coming from the mission statement, goals are more specific targets
the firm wishes to meet.
• Objectives (pg. 83)
– More specific targets than goals. Objectives should be specific,
measurable, and realistically attainable.
• Strategic business units (SBUs) (pg. 83)
– Multiple divisions of a company likely to have its own objectives and
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a distinct strategy for accomplishing them.
Key Terms

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• Sustainable competitive advantage (SCA) (pg. 83)

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– This is the keystone of a business-level strategy about how a
business will compete it its market based on the set of distinctive
competencies exhibited by the firm, the quality or attribute of the
organization that sets it apart from its competitors.
• Distinctive competencies (pg. 83)
– The quality or attribute of the organization that sets it aside from its
competitors. How is it, or how will it be, different from the rest of the
pack.
• Generic strategies (pg. 83)
– Common strategies pursued by business units across a variety of
industries. Most common are low cost, differentiation, and niche or
focus. 11
Key Terms

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• Market opportunity (pg. 83)
– Exists whenever some human need is unsatisfied.
• Marketing program (pg. 86)
– A combination of elements from the marketing mix to implement the
strategy. It reflects a particular allocation of financial and human
resources.
• Market exchanges (pg. 87)
– One-shot transactions that occur between a buyer and seller
without much thought of future interaction.
• Functional relationships (pg. 88)
– Long-term relationships between buyer and seller based upon close
personal friendships. 12
Key Terms

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• Strategic partnerships (pg. 88)
– Long-term relationships in which the partners make significant
investment to improve profitability of both companies and jointly
achieve strategic objectives.
• Trust (pg. 90)
– Important part of developing long-term relationships, and
represents confidence that a salesperson’s word or promise can be
believed and that the salesperson has the long-term interests of the
customer at the core of his/her approach to doing business.

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Key Terms
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• Customer delight (pg. 90)
– Exceeding customer expectations to a surprising degree. This is a
powerful way to gain customer loyalty.
• Upgrading (pg. 91)
– Convincing the buyer to use a higher-quality product or newer
product (similar to generating repeat sales.)
• Full-line selling (pg. 91)
– Selling the entire line of associated products.
• Cross-selling (pg. 92)
– Similar to full-line selling but reflects selling products that may not
be related. 14
Key Term
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• Preferred supplier (pg. 92)
– In general the supplier is assured a large percentage of the buyer’s
business and will get the first opportunity to earn any new business.
• Total quality management (TQM) (pg. 92)
– The process of continually working to eliminate errors and defects
in all aspects of a company’s products and processes.
• Integrated marketing communications (IMC) (pg. 93)
– Various ways a firm strategically communicates its message about
its products to the marketplace. 15
Key Terms

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• Pull strategy (pg. 96)

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– Attempts by a firm to build strong customer demand for its brand.
Key Terms

• Push strategy (pg. 96)


– Attempts to build reseller support, by offering direct inducements to
potential wholesalers and retailers to encourage them to stock the
product.
• Just-in-time reorder and delivery (pg. 96)
– Process to help resellers reduce their investments in inventory and
improve inventory turnover. 16
Key Terms

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• Category management (pg. 96)
– Manufacturers work with resellers to maximize sales volumes and
margins in the product categories in which the selling firm’s
products are represented.
• Supply chain alliances (pg. 97)
– Used to strengthen relationships with major customers, by involving
customers in the development of joint information and reorder
systems.

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Key Terms

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• Efficient consumer response (ECR) (pg. 97)

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– An automated system in which sales information from stores is sent
directly to computers, which figure out automatically when to
replenish each product and schedule deliveries direct to each store.
This paperless exchange minimizes mistakes and bill-backs,
minimizes inventory, decreases out-of stocks, and improves cash
flow.
• Selling team (pg. 98)
– A group of representatives from various functional departments of
the company assigned to a single customer.
• Top-to-top selling (pg. 98)
• Executives at the very top of firms (even CEOs) are directly involved in
selling to major strategic partner customers 18
CRM is…
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• a comprehensive business model for increasing revenues and profits
by focusing on customers.
• both an overarching business philosophy and a process tool to facilitate
a truly customer-driven enterprise.

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CRM is…
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“…a journey of strategic, process, organizational

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and technical change whereby a company seeks to

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better manage its enterprise around customer

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behaviors. This entails acquiring knowledge about
customers and deploying this information at each
touchpoint to attain increased revenue and
operational efficiencies.”
PriceWaterhouse Coopers

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Customer Orientation
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• Continues to move toward being customer-centric.
• Builds upon…
– The marketing concept which overarches all business strategy
– Use of the marketing mix as a “tool kit” for marketing strategy
creation
– Consumers information fueling strategic decisions about products
– Aligning all business processes and functions to maximize the
firm’s success.

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Customer-Centric Cultures Include…

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• Adopting a partnership business model with mutually shared risks and
rewards
• Defining selling as customer business consultation
• Formalizing customer analysis processes and agreements
• Being proactive in educating customers about value chain and cost
reduction opportunities
• Focusing on continuous improvement principles stressing customer
satisfaction

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Marketing Evolution

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MASS MARKETING

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Evolved in the early 1900s and dominated marketing management

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for decades

TARGET MARKETING
In the ‘60s, many firms began to apply the principles of
segmentation to different customer groups.

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Marketing Evolution
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CUSTOMER MARKETING

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In 1980, the focus shifted towards developing customer
relationships.

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ONE-TO-ONE MARKETING
Technology allows firms to customize offerings to individual users.

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Objectives of CRM

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• Customer Retention - retain loyal and profitable customers and
channels
• Customer Acquisition - acquire customer based on known
characteristics which drive growth and increase margins
• Customer Profitability - increase individual customer margins by
offering the right product at the right time

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Advantages of CRM
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• Reduces advertising costs
• Increases awareness of customer needs
• Tracks the effectiveness of promotional campaigns
• Allows competition for customers based on service, not prices
• Prevents overspending on low-value clients and under spending on
high-value ones
• Speeds the time it takes to develop and market a product
• Improves use of the customer channel

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10 Critical Questions in
Customers
CRM
2. Who are our customers?
3. What
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4. What is the value potential of our customers?

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The Relationship

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7. What kind of relationship do we want to build?
8. How do we foster exchange?

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9. How do we work together and share control?

Managerial Decision Making


12.Who are we?
13.How do we organize to move value closer to our
customers?
14.How do we measure and manage our performance?
15.How do we increase our capacity for change?

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The Importance of Market
Orientation
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Successful salespeople think beyond “selling”

• Market-driven companies do better market sensing


• Market-drive companies develop stronger relationships with
customers and channels
• Internal partnering is a critical component of market
orientation

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Process of Strategy
Development
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• The mission statement answers the most basic questions
about an organization’s reason for being.
• Firms should define their mission in terms of broad human
needs to be satisfied.
• This approach makes it easier to identify attractive market
opportunities.

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Process of Strategy
Development
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Goals – flow from the firm’s mission statement and represent
specific targets the firm intends to hit.

Objectives – more specific than goals and should always be:


– Specific
– Measurable
– Realistically attainable

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SBU Strategy
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Business-level strategy involves how the business will compete in
its industry to achieve a sustainable competitive advantage
(SCA)

An SCA focuses on distinctive competencies

Porter’s Three Generic Strategies:


• Low Cost
• Differentiation
• Niche
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Personal Selling’s Role in
Marketing Strategy
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Market exchanges - one-shot transactions occurring between a
buyer and seller with limited thought of future consideration

Roles of salespeople in market exchanges


• Create new value
• Adapt
• “Make the market”
• Exit
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Personal Selling’s Role in
Marketing Strategy
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Functional relationships create a climate of cooperation, with
open and honest communication.

• Functional relationships engender a high level of personal


trust in well managed business activities.
• One danger is what happens when one party is the
relationship leaves.

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Personal Selling’s Role in
Marketing Strategy
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Strategic Partnerships are long-term relationships where both
parties make significant investments.

• This relationship requires direct communication with


production, production designers, and others.

• Salespeople serve two roles-- relationship manager and


general manager.

• Strategic partnerships work best with clients large enough to


make investments worthwhile. 39
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Stages in Relationship
Development
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Stage I – Exploration
• Determine value, build trust, set expectations, monitor
Stage II – Expansion
• Generate repeat sales, full-line selling, cross-selling
Stage III – Commitment
• Build loyalty, become a preferred supplier, engage in

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Role of Personal Selling in
IMC
An Integrated Marketing Communications (IMC) strategy
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effectively integrates personal selling, advertising and other
communications options

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Advantages of Selling in IMC

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• Face-to-face contact

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• More persuasive
• More demonstrative
• Customization opportunities

Disadvantages of Selling in IMC


• Limited ability to duplicate
• More costly

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Customer Satisfaction and
Feedback
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Maintaining customer loyalty is one outcome of customer
orientation.

Loyal customers. . .
1. Tend to concentrate on their purchases.
2. Provide positive word-of-mouth and customer referrals.
3. May be willing to pay premium prices for the value they
receive.

Satisfaction measures need to be supplemented with


examinations of customer behavior, such as annual retention
rate, frequency of purchases and percentage of the 47
customer’s total purchases captured by the firm.
Summary
• Firms today strive to create a market-
oriented, customer-centric culture.
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Within such a culture, the role of
personal selling is vital to the successful

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development and implementation of

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marketing strategies.
• CRM provides the firm with necessary

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formalization for success. That is, a well-
implemented CRM business model offers
structure, processes and tools, and
managerial knowledge and commitment
in support of the customer-centric
culture. With these things in place,
marketing strategies and programs may
be successfully developed and executed 48
toward the goals related to customer