Determinants of salesforce effectiveness: perceptions of field managers versus senior sales executives.
The rising cost of maintaining a salesforce has been a concern for most sales managers in today's increasingly competitive markets. In many industrial firms, direct selling costs account for almost half of all marketing expenses (Ryans and Weinberg, 1981). Often, the cost of maintaining the salesforce is greater than advertising and promotion costs and exceeds 14 per cent of a typical firm's revenues (O'Connell and Keenan, 1990). The median cost of a business-to-business call is around $250 in the USA. (Anderson and Rosenbloom, 1992). Therefore, sales managers have the crucial responsibility to make sure that their salesforces contribute to the organization's objectives effectively and efficiently. The current economic environment has prompted significant cost savings especially in manufacturing and has led to demands for more accountability. In turn, there have been calls for evaluating the contribution of the marketing function to the firm. Within the marketing department, sales managers are becoming increasingly concerned about justifying their investment and are facing stiff competition against each other in competing for scarce resources, such as additional salespeople. Yet, an area that has received relatively little attention is the activities and perceptions of field sales managers. As Bagozzi (1980) has pointed out, very little is known about those who manage salespeople, even though field managers represent an important link between salespeople and senior management. Field sales managers (FSMs) are an important link within the firm since they help translate sales and marketing strategy into implementation, co-ordinate these activities, monitor and evaluate performance, motivate salespeople and reward them. Therefore, studies that investigate the activities and attitudes of FSMs can provide senior sales managers (SSEs) with important insights and contribute towards filling an important gap in the literature.
Objectives of the study
The purpose of this study is to examine the importance of selected factors in improving the overall effectiveness of the sales organization as reported by senior sales executives (SSEs) and first level FSMs. Identification of the factors that have an impact on overall effectiveness can serve as a benchmark against which firms can compare and evaluate their own criteria. Establishing benchmarks is important both for comparisons among different regions and districts within the firm as well as between a firm and its competitors. External comparisons can provide useful clues about profitability and market share. Internal comparisons of performance measures have the additional benefit of differentiating among regions or districts that are competing for the firm's scarce resources. Furthermore, we will examine if there are differences between the following groups of respondents:
1 FSMs and SSEs and
2 high versus low performance firms. It is useful to determine if measures of salesforce effectiveness are evaluated differently based on seniority and company performance.
Based on agency theory, SSEs are the principals who have delegated responsibility and authority to the FSMs who must manage the salesforce to achieve the organization's objectives. A critical component of agency theory is the divergence of activities, priorities or preferences among organizational members. Therefore, we will investigate the level of divergence between the SSEs (principals) and the FSMs (agents) with regard to the factors that influence sales performance. The extent to which FSMs choose to engage in certain field activities and the SSE's approval of these activities reveal their importance to the firm. Differences between the two groups of managers are important in highlighting the success with which the strategies selected by the executives are implemented since translating strategy into action is a very crucial aspect of management. According to one management thinker (Bonoma, 1984), "the critical need of top management lies not in new answers to strategic questions but increased attention to marketing practice." Therefore, investigating the differences between the FSMs and SSEs is important in identifying the gap between them in terms of the importance they attach to these activities. Firms that understand the differences between the SSEs and FSMs can become more effective in reducing role conflict, ambiguity and sales turnover. The longer the salespeople or the FSMs remain unaware of the fact that they are not able to carry out the activities and results expected of them, the more harmful and debilitating the consequences are on the organization (Tyagi, 1985a). When FSMs and SSEs hold more similar attitudes, information and perceptions about the performance of the salesforce; the motivation and the performance of the salesforce are likely to be higher. This is due to "hierarchical influence" which is the degree to which subordinates feel their supervisor is successful in getting management to recognize their problems as well success (Tyagi, 1985b).
Our objective is to investigate the effectiveness of the salesforce which is related to and is often confused with the salesperson performance. As depicted in Figure 1, sales organization effectiveness is influenced by the performance of the salespeople but is more comprehensive since it includes many other factors that are not controlled by the salesperson. For example, territory design, quality of supervision and territory potential are not under the control of the salesperson. Therefore, the effectiveness (or performance) of the individual salesperson should be separated from the effectiveness of the sales organization. The former should attempt to consider differences between territories, the level of competition and sales support (such as advertising expenditures) in comparing different salespeople. While the difference between the two forms of effectiveness as outlined in Figure 1 was introduced nearly two decades ago by Walker et al. (1979), recent writings still lament the degree of confusion and the slow adoption of the concept (see for example Cravens et al., 1993).
[Figure 1 ILLUSTRATION OMITTED]
Sales executives of 250 firms, included among the largest 1,000 Canadian firms, were invited to participate in this study together with two of their field managers. SSEs who agreed to participate received their own personalized surveys and two others that they were asked to pass on to the field managers. Address labels were provided with instructions to the field managers to mail the completed surveys directly to the author. The senior executives were also promised a copy of the summary results to entice them to participate. This approach appears to have created much interest and the willingness to participate might have been lower otherwise.
The scale used to measure salesforce effectiveness was part of a detailed survey that covered other areas such as sales activities, territory design, sales organization and commitment. Both groups of managers were asked to indicate their assessment about the impact of a battery of 21 factors on the effectiveness of their sales unit. Each factor was evaluated using a response scale anchored by 1 (No impact) and 7 (High impact) at the two extremes. The scale has very good internal reliability (Cronbach alpha = 0.79) and further analysis showed that every one of the 20 factors contributes meaningfully to the measurement of salesforce effectiveness.
Forty-two senior sales executives and 96 field sales managers have participated in this study. It is not meaningful to calculate the usual response rate since some firms which had accepted our initial invitation subsequently wrote back to inform us that they do not employ two field sales managers. Others were excluded from the study because they use independent selling and manufacturer's agents. Analysis of the first half of the surveys based on chronological order of receipt versus the second half did not produce any significant differences based on type of industry, market share or profitability for either group of respondents. Therefore, we can conclude that the results are not biased due to response error and the sample is representative of the top 1,000 firms in Canada. Furthermore, our investigation of the firms outside the top 1,000 indicated strongly that they are not large enough to have field managers who report to a senior sales executive.
Owing to the requirement that the respondents must have at least two FSMs reporting to a senior sales executive, the respondents represent some of the larger Canadian firms. Sixty per cent of the respondents feel that their market share is larger than the nearest competitor and 70 per cent carry a full product line with a relatively broad coverage. The field sales managers have an average of 17 salespeople reporting to them and have been in that position on average for 4.5 years. The typical compensation plan suggests that these are not the "sink or swim" type of salesforces. Therefore, they should have adequate systems in place to monitor salespeople's activities as well as evaluating determinants of overall performance of their sales unit.
Analysis of effectiveness factors
The average responses of all the managers to the battery of 21 questions used to measure effectiveness are presented in Table I. There are no significant variations among the respondents based on firm characteristics such as number of salespeople, sales growth rate and type of industry.
Table I Improving the effectiveness of the sales organization Factor statement Mean Encouraging the salesforce to build 5.91 long-term relationships with customers Increasing the amount of selling 5.49 training for salespeople Improving product/service quality 5.40 Providing information system capabilities 5.31 Increasing training provided to field managers 5.25 Increasing coordination with other departments 5.16 Increasing product/service training for salespeople 5.16 Decreasing response time from order receipt to delivery 5.04 Increasing the number of new products 4.85 Developing team selling approaches 4.83 Improving salesforce compensation systems 4.82 Providing computer ordering and 4.61 order status information to customers Increasing advertising/sales promotion expenditures 4.57 Increasing incentive compensation 4.53 Increasing the amount of sales 4.48 management direction Reducing our selling prices 4.19 Providing telemarketing support 4.01 Increasing the size of the salesforce 4.01 Increasing product specialization 3.90 of the salesforce Changing territory/customer assignments 3.53 Increasing the sales of 3.44 other firms' products
Investigation of Table I reveals that the most important factor in improving the effectiveness of the salesforce is encouraging the salesforce to build long-term relations. Obviously, these managers are very aware of the importance of relationship marketing in the 1990s. Therefore, it is not surprising that selling training and product training for the salespeople as well as training for field managers are all deemed to be important. There is also emphasis on quality of the offering and speed of delivery to the customer. These responses suggest that customer-orientation is crucial which is to be expected given that the Canadian market is quite competitive. When markets are characterized by sophisticated buyers with rising expectations (Anderson and Rosenbloom, 1992), sellers have to emphasize product and customer service by employing knowledgeable salespeople who are sensitive to the needs of their customers. Salespeople who are collaborating with their customers to formulate integrative, win-win solutions (Dion and Banting, 1988), who are sensitive to the needs of their customers and have technical competence are likely to be more successful but need training to achieve it. Especially in trying to establish long-lasting relationships, the importance of training cannot be overemphasized. Regardless of firm size, the impact of product training and selling training for salespeople and training for field managers is higher for firms whose average annual sales per salesperson are lower. While training seems to help increase the effectiveness of the salespeople, it is not inexpensive. The cost of training a salesperson has jumped from $11,000 to $14,435 in the USA in a decade and continues to rise.
Likewise, overall effectiveness is very much influenced by improvements in the quality of the offering to the customers and by increasing the number of new products to deliver satisfaction and to combat the advances of the competitors. As these salesforces sell to other businesses rather than to the final consumer, decreasing the response time between the receipt of the order and delivery is critical to providing customer satisfaction. This requires providing information system capabilities to the salespeople and co-ordination between the departments that play a vital role in the delivery of the product. The impact of advances in telecommunications and computer technology through portable computers, electronic data exchanges, videotape presentations and other technological innovations are all too familiar to most salespeople and their managers. A study of computer salespeople using laptop computers found that they spent 27 per cent more time and achieved three times as much productivity as the salespeople who did not use laptops (Anderson and Rosenbloom, 1992). Computer ordering should be analysed together with information system capabilities since the two are integrated. Firms can gain a competitive edge by providing their salesforces with better computer access to enable them to do a better job in order processing, communication and sales analysis (Manssen, 1990).
It is important to note that reducing price, increasing the size of the salesforce and even increasing the level of advertising expenditures are not among the more important factors. Other studies have also found that price competition is increasingly playing a lesser role among industrial firms (Dion and Banting, 1988; Tyagi, 1985a). Again, there is reason to believe that these firms are trying to establish long-term relations based on delivery of service and customer satisfaction instead of price competition or frequent customer switching. Their sales management basics appear to be sound since assignment to territories and salesforce size are rated low in terms of their impact.
Differences between sales executives and field managers
To determine if there are any differences between the FSMs and the SSEs, multivariate analysis of variance (MANOVA) was conducted using all the variables in Table I. MANOVA is a more powerful method of testing for differences between the two groups than conducting a series of t-tests for each statement. The FSMs and the SSEs are significantly different (alpha [is less than] 0.1) in terms of their overall ratings.
The specific factors that are rated differently between the two groups are indicated in Figure 2 in decreasing order of importance according to the level of significance (alphas). Both the FSMs and the SSEs rate these variables as having an important impact on the effectiveness of their salesforces since the lowest group average is 4.17 out of 7. The differences occur as a result of the relative importance (and perhaps the priority) the FSMs attach to them compared to the SSEs. It should be noted that the FSMs rated every variable in Figure 2 higher than the SSEs. One possible explanation might be the FSMs are more familiar with the daily activities of the salespeople and the impact of the factors listed in Table I on their effectiveness than the senior executives. For instance, it is not uncommon in a firm for senior executives in any functional area to perceive a higher degree of willingness to co-operate at the policy level than what the experiences of the FSMs might be at the implementational level.
[Figure 2 ILLUSTRATION OMITTED]
Team selling, product quality, building long-term relations and co-ordination among the departments are the most significant differences (alpha [is less than] 0.01). These are followed by provision of computer ordering and order status information to customers, decreasing response time from order receipt to delivery, increasing product training for salespeople at alpha = 0.05 and providing information system capabilities to salespeople (alpha = 0.10). Factors that are traditionally matters of contention between the SSEs and FSMs such as improving compensation systems, price reductions, increasing advertising and promotion expenditures, increasing the size of the salesforce and changing territory assignments do not produce significant differences between the SSEs and FSMs. Furthermore, the ratings for these variables tend to be low for both groups as evidenced by the fact that increasing the size of the salesforce is a rather low average of 4.07 and 3.86 respectively for the FSMs and the SSEs. The significant differences tend to be process- or behaviour-related variables rather than output factors. Perhaps, the field sales managers are more appreciative of the importance of relationship marketing and delivery of service to the customer than the SSEs who are not as close to the customer as the FSMs and the salespeople they direct.
Investigation of the differences between the two groups might be useful in revealing potential areas of conflict and inefficiency. Differences between the SSEs and FSMs could be a significant source of role ambiguity and role conflict for the FSMs as well as the salespeople. Salespeople who are getting different signals from their field managers versus the senior executives are likely to experience role conflict. Knowing what the job entails and how it will be evaluated creates "role clarity" and has been found to be a very important determinant of job satisfaction (Donnelly and Ivancevich, 1975), motivation and performance (Tyagi, 1985b). Therefore, reducing the gap between the SSEs and the FSMs helps to provide intrinsic (job characteristics) and extrinsic (organizational rewards) satisfaction to the FSMs and the salespeople.
Differences based on firm performance
It is possible that managers employed by firms that exhibit better sales performance evaluate these factors differently. Therefore, we investigated the differences in the perceptions of the managers based on performance of the firms using sales volume, market share, profitability and customer satisfaction. Each one of these four variables was measured at two levels: relative to their competitors as well as company objectives. This approach has been used in the literature to reduce the impact of differences among firms due to size (Cravens et al. 1992, 1993). These eight performance factors were employed in a cluster analysis to form two groups of firms that identified the high versus the lower performance firms in our sample.
Differences between the high and low performers (Figure 3) are so significant that just the five significant factors are sufficient to correctly classify 72 per cent of the high versus lower performance firms using discriminant analysis. Team selling is again the most significant difference and four of the five significant factors are common between Figures 2 and 3. Whether we are looking at differences between FSMs and SSEs or managers of high versus lower performing firms, these four factors always seem to have an impact on effectiveness of the salesforce. Among the high performance firms, providing information system capabilities is now second instead of improving product quality that is fourth. Encouraging the salesforce to build long-term relations is third on both lists. Perhaps, managers feel that it is difficult to build meaningful relationships with their customers unless the different experts involved in a sale co-operate as a team.
[Figure 3 ILLUSTRATION OMITTED]
The interesting finding is that the managers of high performance firms consider training of the field managers to be very important rather than training of the salespeople. This is true for both the SSEs and the FSMs of high performance firms. However, FSMs of lower performance firms have given an even lower rating to training than their own SSEs. FSMs who spend more time selling themselves rated the impact of training low, possibly due to their own time constraints. Not surprisingly, field managers of high performance firms spend appreciably less time selling and more time directing and coaching their salesforces. Spending less time on selling seems to allow them the opportunity to train their salespeople better. This is important because salespeople prefer a management style based on providing direction and training that helps them control their own activities (Hire and Belizzi, 1986). Naturally, better trained field managers are more capable of both managing and training their own salespeople. Higher information system capabilities of the high performance firms are instrumental in allowing them to provide better service, more effective sales coverage, better sales forecasting, time management and allows managers to improve planning, monitoring and evaluation of salespeople (Hughes, 1983).
High effectiveness firms appear to have a higher span of control in that their field supervisors manage 8.9 salespeople versus 6.3 for the others. Our results support the finding of a study comparing Australian and US sales managers that having fewer people decreases efficiency and a span of control between 8 to 10 is ideal (Cravens et al., 1992).
Conclusions and implications
Sales management has a significant impact on the overall effectiveness of many firms. Understanding the factors that influence sales performance can help to explain the reasons why some firms are more successful than others. Furthermore, comparison of a firm's performance against others acts as a useful benchmark and provides important insights. Respondents identified building long-term relations, inter-departmental coordination, training for salespeople and field managers and information capabilities as the most important factors (Table I). It is important to note that factors such as price, advertising, salesforce size are not at the top of the list and are not considered to be important by the more successful firms. While traditional selling has relied on aggressiveness and persuasion, relationship selling calls for open two-way communication and co-operation between buyers and sellers. The emphasis on long-term relations and information capabilities seem to increase the awareness of high performance firms to provide better training for their managers.
Establishing long-term relationships is rated highly across the board but some SSEs lag behind their own FSMs. More SSEs need to appreciate the impact of this factor to help improve the performance of the firm and to decrease the possible gap with the FSMs. The latter is important in increasing the motivation of the FSMs as well as the salespeople. The emphasis on long-term relations over territory variables, price reductions and salesforce size suggests that for most respondents behaviour-based aspects of managing the salesforce are becoming more important than simply measuring outcome-based factors such as sales. Coupled with increased information system capabilities, building long-term relations with the customers showed a significant impact on the ability of the firm to retain its existing customers. This is an important point as more firms emphasize the importance of increasing sales to existing customers rather than trying to obtain new customers at a high cost to achieve their profitability objectives.
Inter-departmental co-ordination has always been recognized by executives as a key aspect of productivity in engineering, manufacturing and logistics operations. Our respondents have indicated that it is a critical component of salesforce effectiveness. Further analysis revealed that firms that rate their salesforces highly on co-ordination feel strongly that this has resulted in lower sales expenses. For example, close co-ordination between the salespeople and the technical staff offers the potential to install the product more efficiently, provide satisfactory training to the buyer and leads to higher overall satisfaction. Many buyers and users of industrial products are painfully aware of the frustrations associated with dealing with salespeople and other members of the technical staff on an individual basis when these efforts are not co-ordinated by the seller.
Information systems capabilities are rated very high by all the respondents. This is an excellent way to improve the effectiveness of the firm especially in areas such as order taking, processing and customer service. Its importance is further highlighted by the fact that higher performance firms and FSMs who are closer to the salespeople rate it among the crucial factors. SSEs need to allocate the necessary funds to upgrade their existing systems both to provide an advantage to their salespeople and to close the gap with the more effective firms in their industries. Together with establishing long-term relations, information capability is an important determinant of service quality and how quickly orders are filled. In an age of quality and service-conscience customers, these are very important considerations. The SSEs certainly have a significant impact on sales and marketing strategy and on the allocation of resources within the firm. They determine the level of service that the customer will get from the firm. Therefore, SSEs of lower performance firms must take steps to catch up with their more successful competitors.
Salespeople and field managers must be trained better. Businesses are clearly operating in an environment that requires having knowledgeable salespeople and "world-class sales managers" (Anderson and Rosenbloom, 1992). Naturally, these trends increase the demand for training salespeople both in terms of product knowledge and selling techniques. Our findings also indicate strongly that training is critical for sales managers who have to direct and coach the salespeople. The cost of training an industrial salesperson may be approximately $10,000 to $12,000 in Canada and higher for training sales managers. However, the cost of losing existing customers or not achieving the firm's sales potential with them is far bigger as it represents a stream of profits that are lost over the life of the offering.
As a final note, our respondents felt very strongly that improvements in team selling would lead to better overall performance, higher average sales per salesperson, lower sales expenses and higher proportion of customers retained. In practice, it would seem likely that firms that do much team selling are also more proficient in their efforts to achieve inter-departmental co-ordination. There is a strong correlation between team-selling and interdepartmental co-ordination. Team members from different departments seem to facilitate efforts to enhance coordination in their respective departments.
Lower performance firms have an important challenge in catching up with the higher performance firms. Areas such as training, building relations with customers and information system capabilities require more than just spending money. They require time and commitment and must become part of the culture of the firm as they are accepted by everyone. Therefore, firms that fall behind have to act quickly to close the gap. Otherwise, higher performance firms are poised to become even more successful at the expense of the lower performance firms.
SSEs need to pay more attention to these changes in the business environment and must help the FSMs manage their salesforces by allocating more scarce resources to training and information systems. Failure to do so is likely to lead to motivation problems among the FSMs and the salesforce as they get discouraged in competing against other firms. Consequently, customer satisfaction is bound to suffer and impact negatively on sales volume, market share and profits.
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|Author:||Barker, A. Tansu|
|Publication:||Marketing Intelligence & Planning|
|Date:||Jun 1, 1997|
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