Sales effectiveness and firm performance: a small firm perspective.
The purpose of this exploratory study was to examine the relationship between sales effectiveness and small firm performance in a time when a proliferation of technological innovations are available for use by salespeople. One such innovation, CRM systems, will be focused on in this study. A multi-item construct of sales effectiveness was linked to three non-financial performance measures. Over sixty sales representatives were surveyed and the regression analysis was used to examine the data. The results suggested that different sales effectiveness variables--resource management, perceived usefulness, perceived ease of use, general attitude toward technology and comfort level are significantly and positively associated with small firm performance.
The number of small business startups has continued to rise in the 21st century. Statistics collected by the U.S. Small Business Administration reveal that over 23 million companies have been classified as "small" and responsible for the creation of three-quarters of the country's net job growth (Acs and Arrington 2003). However, government statistics have also suggested that the staying power and ultimate survival of these businesses is still an ongoing concern. More specifically, it is estimated that about two-thirds of new small firm ventures have survived at least two years, while only half continue to exist after at least four years. While many of the firms closing their doors were profitable and thriving, the overwhelming majority of these firms shut down due their inability to garner the resources needed to sustain their competitiveness (Headd 2001).
Based on the continued reliance on and prominent role of the small business sector for economic development, it is essential to understand how resources utilized by small firms help them to remain competitive. The head of the Small Business Adminstration, Hector Barreto, has set forth a challenge to all of the firms under his domain to find innovative ways for becoming more customer-centric (Guadalupe 2003). He, himself, has openly discussed plans for his organization to be at the forefront of the utilization of technological innovations in order to create a more customer-focused Small Business Administration. Integral to his plans is the implementation of the appropriate configuration of information and communication technologies needed to increase his organization's responsive to the needs of his small-business customer base.
Technological advancements are allowing businesses of all sizes to develop the means for becoming more customer-driven. For instance, the transformation of the traditional marketplace into a vast marketspace now facilitates relations between buyers and sellers devoid of time, place, and occasionally costs constraints (Brannback 1997). The enabling role of information and communication technologies (ICT) has helped to simplify business processes and made it easier for sellers to supply information to current and potential customers, process their orders, as well as conduct the necessary business activities that promote long-term customer relationships. This can be particularly beneficial to the many small companies which strive to emulate the responsiveness and professionalism of larger firms that have the luxury of having more resources.
Over the past decade, several studies have concluded that the enabling role and use of technological advancements in the sales job has profoundly impacted the field of selling (Moncrief et. al. 1991; Marshall et. al. 1999). Communication with customers has been enhanced with products ranging from cellular phones to virtual meeting rooms, and information of all types can now be accessed with the push of a button. This is especially noteworthy due to the fact that salespeople often serve as the primary linkage between marketers and their customers.
By and large, an increased presence of technological offerings has altered the manner in which conventional sales activities are performed while facilitating the creation of many new sales activities. The growth in the utilization of such technological advancements in the performance of the sales function coincides with the mounting focus on strengthening relationships with customers. Salespeople are the primary conduit between firms and their customers, and it is mostly due to their actions that successful business relationships arise (Peterson 1999).
Marketers of customer relationship software have taken notice of the challenges sales representatives in small firms face in managing relationships with customers. Vendors such as Oracle, SAP AG, Microsoft and Salesforce.com, among others, are now aggressively targeting small firms with scaled-down versions of their CRM software applications (with embedded sales force automation tools) that were originally developed to enhance the relationship management capabilities of large corporations. Spending by small businesses on CRM/sales force automation products is expected to drastically increase over the next few years (Anonymous 2004).Yet; the diffusion of such feature-rich applications in the small business environment could be stifled if the ultimate users of such software do not realize their benefits.
Since the activities of the sales force have been found to be directly tied to customer satisfaction and relationship marketing in many firms (Smith and Barclay 1997), it is important to examine how the viewpoints of salespeople impact the use of the technological tools that they are given to perform their jobs and their relative impact on firm performance. Several studies conducted have focused on a similar line of inquiry by looking at both technology-based and nontechnology-based sales tools in large company settings. The purpose of this exploratory study, therefore, is to provide insights to small firms on whether the technological advancements integrated into their sales processes positively impact the performance of their sales representatives as well as overall business performance.
The results of this research can help small business managers and owners better support the efforts of their salespeople in meeting both customer and company needs. Additionally, vendors can use the results to develop appropriate strategies for designing and selling technological products and services to small companies often deemed reluctant to spend money on, install and update information and communications technologies (Hopkins 2001).
An underlying question that all firms must consider is how to sustain competitiveness. The field of strategic management is replete with theories on this topic, one of which is rooted in understanding how the organizational strengths and weaknesses of firms might build enduring advantages (Wernerfelt 1984). An important element of this particular school of thought is the creation of firm specific capabilities that serve as key determinants of firm performance. Stack, Evans, and Shulman (1992) concluded that successful outcomes are possible when 1) key resources, such as technologies and organizational processes, are transformed into strategic capabilities that deliver superior value, and 2) firms invest in a support infrastructure to build such capabilities. This perspective looks at capabilities as a basis for determining how efficiently and effectively an organization carries out its business activities. Success is achieved if a firm manages to gain the appropriate resources for developing the capabilities which allow it to perform in a superior manner.
This standpoint coincides with Barney's (1991) notion that resources and capabilities are valuable when they allow firms to formulate or implement strategies that enhance business performance. Given that each firm builds its own configuration of business resources, and the fact that some of these resources have more strategic value than others (Barney 1996), businesses that exploit their resources to develop superior capabilities stand to positively impact their performance. This is because resource-based capabilities enable companies to build and execute strategies that increase organizational efficiency and effectiveness. Thus, when viewing the sales function from a resource-based perspective, a firm's sales processes as well as the resources supporting the sales function should be integral to competitive positioning.
Sales Activities Research
Studies delineating activities performed by sales representatives' date back to the 1960s when McMurray (1961) and Newton (1973) performed seminal research to examine the widely held notion that sales professionals, in general, carry out a distinct set of activities that are fundamental to any sales job. While both were able to categorize salespeople into distinct groupings, it remained unclear as to how sales activities differed among their classification schemas. Follow-up studies were conducted in the 1970s that began to shed light on the defining elements of the sales job. Upon interviewing the sales force of a large corporation and identifying approximately 60 activities performed by their sales professionals, Lamont and Lundstrum (1974) found the results could not be generalized to sales positions in other firms. Likewise, Churchill, Ford, and Walker (1978) uncovered an operative set of tasks executed by sales representatives that fell short in explaining the specific activities performed in different sales jobs.
Noting the lack of specificity in previous research, Moncreif (1986) used a cross-industry perspective to generate a comprehensive list of tasks regularly performed by sales personnel. An analysis of data obtained from one-on-one interviews and focus groups resulted in a list of 121 specific sales activities considered mutually exclusive by the researcher. The activities cited included a wide-range of actions such as 1) prospecting, preparing sales presentations and other undertakings traditionally associated with the personal selling and relationship marketing processes; 2) politicking within the company and other internal selling duties; 3) a myriad of territory management and administrative responsibilities; 4) knowledge acquisition, training, and additional professional development activities and 5) many other meaningful activities.
In 1999, Moncreif et. al. updated the list of sales activities to account for changes in the selling environment. Global competition, partnering relationships, multiple sales channels and the like have had a profound impact on the sales job which has become more complicated. As sales representatives have struggled to handle complexities, 49 new sales activities were discovered in the more recent study that did not materialize beforehand. Further analysis of the data revealed substantial use of technology-based sales tools in performance of selling tasks.
Subsequently, sales activities significantly impacted by technology were placed into five main categories--communication, sales, relationships, teambuilding/ team-selling, and database management. Each category is discussed below.
Effective communication between sales professionals and key business constituents is essential for addressing customer needs. Overall, technologies have allowed salespeople to become more mobile while decreasing the "downtime" they have often experienced due to nonproductive periods caused by travel, waiting, and other disruptions. Cell phones and/or pagers have become a prerequisite for performance of the sales job. Today's sales representatives are often armed with laptop computers usually configured with e-mail, fax, and Internet access as well as other features used to maintain virtual offices. These communication tools allow salespeople to stay connected to their customer and coordinate actions required to satisfy their needs.
The sales category has a strong connection with the communication category. Laptops can be equipped with calendaring and other software features used to set up sales appointments, develop presentations and proposals, and assess customer information. Research suggest that sales representatives believe that technology has had a profound effect on the level and quality of information they are able to present to customers in sales calls and in their overall professionalism (Moncrief et. al. 1999).
The third category, relationship, is viewed as a mechanism for both a relationship development and maintenance. Srirojanant and Thirkell (1998) provided a framework for assessing key elements of relationship marketing and the interactive potential of web pages. It was posited and found that sites offering greater levels of interactivity were better equipped to manage and nurture customer relationships in a manner that was more satisfying to customers.
Technology also is a critical element of team selling. Conference calls facilitate the coordination of activities among members of the sales team dispersed in various locations and businesses. It should be noted that team selling often includes alliance partners whose efforts must be integrated with the selling firm's in a cohesive manner.
Lastly, the ability to gather and disseminate information within the sales process is critical for managing accounts and organizational decision making. Sales personnel have indicated that database management tools on their personal computers and laptops were critical for updating customer account information, passing on market information and observations, and obtaining up-to-date intelligence.
Technically, the functionality implicit in information and communication technologies should allows sales professionals to be more productive and effective. Firms that develop a technological platform that supports and drives sales activities are expected to be better positioned to satisfy their customers and maintain relationships with them.
Sales Activities and Technologies
Resource-based theorists have proposed that the competitive position of firms can be enhanced with the use of information and communication technology resources (Grant 1991, Bharadwaj 2000, Valentin 2001). Since investments in ICT resources can be easily replicated across the competitive landscape, firms must decide how to exploit these investments to create distinctive capabilities.
In this regard, an ICT resource-based view of sales activities appears to be a valuable framework for discerning how sales activities can be aligned with technologies to facilitate superior business performance in smaller enterprises. This involves viewing the sales job as a collection of activities focused on enhancing small firm operations, and understanding how technological advancements can be embedded into sales processes in order to build firm competencies.
Holland (2004) noted that the sales function in firms has historically contested the use of company-wide computer systems. In the 1990s, corporations made major investments in CRM applications that were to provide a structured and centralized approach to managing customer information used to drive company performance. Some firms developed their CRM systems on their own, while others hired vendors to develop them. The latter has become popular in this new century as firms focus more on their core competencies and outsource other important tasks. As small firms consider jumping on this bandwagon, especially in the area of sales, it is imperative that they consider issues that facilitate the implementation and use of such systems.
Characteristics of Technology Affecting Small-Firm Sales Effectiveness
Upon evaluating the "unique characteristics" of small firms, Telem (1989) proposed a technology integration framework involving different levels of technology growth. This model defined a process allowing small ventures to gradually incorporate various technological innovations into their business operations over a period of time until a mature technological platform existed and deemed central to internal and external small-firm functioning. A key aspect of the resultant technology-based infrastructure is the greater level of interactivity provided to facilitate increased customer interaction, real-time collaboration, ongoing information exchanges and alternative sales channels. Srirojanant and Thirkell (1998) asserted that the Internet has become a viable means for firms of all sizes to exploit in order to interact more efficiently and effectively with business constituents. Application Service Providers (ASPs) have used it to offer small firms a means to obtain CRM/sales force automation tools for organizational use.
Research has shown that the information and knowledge needed to conduct business is often distributed among many individuals (Rathnam, Mahajan and Whinston 1995). As a result, information required to address customer needs and meet ongoing business requirements must constantly be exchanged among salespeople and other intra- and interfirm personnel. Without mature ICT systems, sales representatives engaged in a high variety of interdependent activities must access data from various manual or computerized systems, and then develop a process for consolidating the data. These types of information silos have often been found to permeate in small-business environments (Igbaria, Zinatelli, Cragg, and Cavaye 1997). Studies have suggested that the development of an integrated technology-based platform can be looked upon as a resource management issue (Duncan 1995; Karimi, Gupta, and Somers 1996). The implication here is that the planning, implementation, and control of all relevant IT resources serves as the foundation for building critical firm capabilities.
The fact that IT-based CRM capabilities are provided to a sales force doesn't guarantee they will be utilized. Davis et. al. (1989) developed the Technology Acceptance Model to examine the acceptance of new information technologies by end users. Driving factors affecting technology acceptance in small firms include beliefs about usefulness, ease of use, and comfort level (Igbaria, Zinatelli, Cragg, and Cavaye 1997). Additionally, when analyzing the factors impacting the utilization of Internet purchasing in small firms, Olson and Boyer (2003) found that the attitude of some purchasers impacted organizational performance.
Based on the above discussion, five factors--resource management, usefulness, ease of use, and comfort level--will be used to conceptualize sales effectiveness and assess its impact on small firm performance. The following section will outline the research methodology.
The 62 salespeople surveyed were attended training seminars conducted by a value-added reseller (VAR) with office throughout the U.S. The VAR provided a distribution list with contact names for about 500 small firms they worked with to develop IT systems containing CRM/sales force automation tools. The primary contact at each firm, usually the business owner or manager, was asked to fill out a short survey for the VAR and asked to provide their salespeople a link to an online survey. Salespeople were asked to complete the survey within a two week period. The composition of responding firms across industrial classifications was: 19% retail, 16% manufacturing, 24% business services, 21% other services, 9% nonprofit and 11% other industrial. The average age of participants was 39 and over 80% were college educated.
Mechanisms commonly used to enhance response quality and rates were used. The questionnaire was formulated drawing on the expertise of small-business sales professionals representing seven different product and service industries, a Small Business Development Center officer, VAR sales representatives and a small business consultant. The results of these interviews were especially critical to the development of measures of small-firm performance.
Measures of the four technological acceptance variables were taken from Davis et. al. (1989) and Olson and Boyer (2003). The remaining independent variable, resource management, was measured using a scale developed by Karimi, Gupta, and Somers (1996). Subjective measures of firm performance, the dependent variable, were taken by looking at three items: the level of customer satisfaction compared to last year, level of customer loyalty compared to last year, and improvement in sales rep's morale.
Seven point Likert scales were used for all questionnaire items. Table 1 provides a profile of the scales used for the independent variables in this study.
The intent of this research was to empirically explore the relationship between the level of acceptance of a current technological innovation diffusing in the small firm environment, CRM/sales force automation. Using three measures of small firm performance as dependent variables and five measures of sales effectives as independent variables, a multiple regression analysis was conducted. Table 2 highlights pertinent data pertaining to the independent variables. The significant coefficients associated with each component of sales effectiveness lend support to the convergent validity of the construct.
Three sets of analyses were completed with the sales effectiveness components as independent variables in each case. The three dependent variables were small firm performance measures based on customer satisfaction, customer loyalty and productivity improvements associated with sales job.
Table 3 presents the regression results. The findings provide evidence of a significant and positive relationship between all of the sales effectiveness components and customer satisfaction. Resource management was found to be the best predictor of variations in customer satisfaction, followed sequentially by perceived usefulness, comfort level, perceived ease of use and general attitude. In other words, salespeople who view their CRM/sales force automation systems as effective report higher levels of customer satisfaction than the sales reps that do not. Overall, 69 percent of the variation in customer satisfaction is accounted for by sales effectiveness.
The middle column in Table 3 depicts the findings related to sales effectiveness dimensions on customer loyalty. Four of the five sales effectiveness variables demonstrate a significant and positive relationship with customer loyalty. Perceived usefulness had the greatest predicting power, followed by resource management, perceived ease of use and general attitude about technology. Although the association between comfort level and customer loyalty was not significant, the correlation was positive. Thus, with and without this dimension sales effectiveness explained 55 and 49 percent respectively of the variation in customer loyalty. Stated differently, salespeople who view their CRM/sales force automation systems as effective show report higher levels of customer loyalty than the salespersons that do not.
The final regression analysis of the sales effectiveness components on salesperson morale is exhibited in the last column of Table 3. The results provide evidence of a significant and positive relationship between all of the sales effectiveness components and the dependent variable, improved morale of sales reps. The predicting power of the variables from strongest to weakest was as follows--perceived usefulness, perceived ease of use, resource management, general attitude and comfort level. Together, the variables explained 63 percent of the total variation in improved productivity.
This study found support for the proposition that the factors used to conceptualize sales effectiveness contributed significantly to the three measures of small firm performance examined. In general, how technology is managed by a firm and accepted by the participants in this study influences various elements of business performance. The technological innovation central to this study was CRM/sales force automation systems.
The perceived usefulness of such systems had the strongest predicting value for two out of the three dependent variables. When talking to several of the research participants in follow-up conversations, it was mentioned that one of the major concerns for salespeople working for small companies encompasses "spreading ourselves to thin." The findings of this research suggests that when technological tools are designed to facilitate productivity improvements, from the perspective of those whom will be using them, that end users are more inclined to use them.
Vendors often prefer to sell small firms "canned packages" because it is less likely that they would be a resource drain on their firms. However, salespeople can only perceive CRM tools to be useful if they are customized to coincide with the specific sales process within each firm. Some of the sales reps interviewed and the owners of the firms employing them expressed concerns that vendors spend more time telling them how they should conduct their business as opposed to addressing how their products could meet any small firm's particular requirements.
Another integral component to sales effectiveness was resource management. Small firms get superior benefits from the utilization of CRM systems when their salespeople believe that management actively supports the use of these systems; and are able to envision how the implementation of these systems is aligned with company goals. This implies that it might be advantageous for small firms to include their sales personnel in the development of their overall strategies. A win-win situation is crafted when salespeople view the implementation of CRM systems as nothing more than a tactical move used to implement a strategy and drive business performance. It is also helpful when small firms make sales representatives part of the process for selecting CRM tools and functionality.
The exploratory nature of this research has paved the way for additional undertakings. First, as the customer is the final arbiter of how firms perform, it would be useful to ascertain if customer and/or management perceptions of performance are the same as their sales representative. Next, how does the sales process differ in marketing a particular product to large versus small businesses? Lastly, how are financial measures of performance impacted by sales effectiveness?
Technological advancements will continue to diffuse through the marketplace and provide small firms and their sales personnel with a myriad of options for business use. Thus the question comes to mind, how do small firms select their selling tools and what role do salespeople play in the process? Do salespeople have to play the role of internal salesperson to make management understand the importance of CRM/sales force automation tools? Do lower levels of sales effectiveness lead to higher turnover rates among sales personnel?
The need for small firms to sustain their competitiveness is evident more today than ever. Customers are more demanding and new sales channels such as the world wide web have increased the intensity of competition. Companies must select selling tools and use them effectively in order to enhance their performance. As the primary link to the customer, salespeople in small firms should play an integral role in the development of strategies and tactics used to enhance performance.
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Doris M. Shaw, Northern Kentucky University
Table 1: Scale Reliability (sales effectiveness) Dimension Number of items Cronbach Alpha 1) Resource Management 11 0.872 2) Perceived Usefulness 8 0.816 3) Perceived Ease of Use 6 0.793 4) Comfort Level 4 0.723 5) General Attitude 4 0.706 Table 2: Dimensions of Sales Effectiveness--Regression Coefficients Independent Variables Coefficients p value 1) Resource Management 0.266 0.032 2) Perceived Usefulness 0.241 0.040 3) Perceived Ease of Use 0.298 0.026 4) Comfort Level 0.219 0.043 5) General Attitude about Technology 0.252 0.033 Table 3: Dimensions of Sales Effectiveness-Regression Analysis Dependent Variables Beta (p value) Independent Variables Customer Customer Improved Retention Loyalty Morale 1) Resource Management 0.24 (0.01) 0.23 (0.02) 0.21 (0.03) 2) Perceived Usefulness 0.24 (0.02) 0.24 (0.02) 0.25 (0.02) 3) Perceived Ease of Use 0.21 (0.03) 0.22 (0.03) 0.24 (0.02) 4) Comfort Level 0.22 (0.02) 0.12 (0.30) 0.20 (0.03) 5) General Attitude about 0.20 (0.03) 0.21 (0.04) 0.20 (0.04) Technology [R.sup.2] 0.69 0.55 0.63
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|Author:||Shaw, Doris M.|
|Date:||Jan 1, 2005|
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