Organizational Drivers of Customer-Oriented Selling

1. Organizational Drivers of Customer-Oriented Selling Paolo Guenzi, Gabriele Troilo Bocconi University, Milano, Italy Luigi M. De Luca Aston Business School, Birmingham, UK

2. Overview • Introduction • Literature review • Knowledge gaps and research goals • Model and hypotheses • Method • Findings • Discussion and contribution • Limitations and Directions for future research

3. Are salespeople customer-oriented?

4. Why is customer-oriented selling important?

5. Introduction • In 1982, Saxe and Weitz defined customer-oriented selling as the implementation of the marketing concept at the level of the individual salesperson • The importance of that study is witnessed by the fact that Saxe and Weitz’s (1982) article on SOCO was rated as one of the top ten articles in the sales literature of the twentieth century (Leigh, Pullins and Comer, 2001).

6. Literature Review • COS is widely recognized as an important class of relational selling behaviours (Williams, 1998; Flaherty, Dahlstrom and Skinner, 1999; Keillor, Parker and Pettijohn, 2000; Schultz and Good, 2000; Martin and Bush, 2003) • A sales force’s COS plays a key role in implementing a company’s market orientation (Siguaw, Brown and Widing, 1994; Menguc, 1996; Langerak, 2001). • However, much less is known about how a market-oriented philosophy is implemented within a firm and translated into employees’ behaviours (e.g. Carr and Burnthorne Lopez, 2007; Kennedy, Lassk and Goolsby, 2002, p. 159)

7. Knowledge gaps and research goals • Little is known about the factors companies can use to foster COS  the first goal is to design and test a model incorporating many relevant organizational factors which may act as potential drivers of COS. • Mixed findings on the impact of COS on performance  the second goal is to test the relationship between COS and a relevant organizational outcome (i.e. superior customer value creation) using managers as key informants • The SOCO scale incorporates two sub-scales, i.e. selling orientation and customer orientation, but these two factors have rarely been investigated separately  a third goal of our study is to test the relationship between the variables included in our model and COS and SO, respectively • Very few studies on COS have been run outside the US  a fourth goal of our study is to contribute to expanding knowledge on SOCO, its antecedents and consequences outside the US.

8. Research rationale • COS is a learned behaviour that can be influenced by environmental factors (Saxe and Weitz, 1982) • The working environment influences the behaviours of salespeople (e.g. Boles et al., 2001). • We consider variables which refer to different facets of the organizational environment (7S Model): • corporate customer orientation belongs to company culture (i.e. Shared values) • long-term orientation is a facet of the company’s strategy • the sales force type, the sales department’s influence over market-related decisions and the functional role clarity are aspects of the firm’s organization structure • the use of interaction mechanisms between Marketing and Sales departments is a manifestation of managerial systems

9. Conceptual model (Dotted lines show tested relationships for which no specific hypothesis was developed)

10. Method: data collection • Pre-test of the questionnaire (20 managers). Final version distributed to 870 managers attending courses for Marketing and/or Sales executives at the same business school over a 9 months time frame (e.g. Coviello et al. 2002) • Respondents were asked to refer to their company or, in the case of multi-business firms, to the SBU they work in • 326 usable questionnaires were collected • No significant differences in the means of the key constructs between marketing and sales executives, or among different industries and product types (pure goods versus pure services). Therefore, we pooled the data for subsequent analyses

11. Method: data analysis • Remedies against the risk of common method bias (Podsakoff et al., 2003) and inclusion of the common method factor (Carson, 2007) • EFA and CFA • Reliability, convergent validity and discriminant validity tests (e.g. Bagozzi, Yi and Phillips, 1991; Fornell and Larcker, 1981) • Multiple regression

12. Findings: Measures Correlations, Descriptive Statistics, and Variance Decomposition

13. Findings Positively related to COS and negatively related to SO Positively related to COS but not significantly related to SO

14. Findings • All hypotheses are supported • Customer-oriented culture, the use of a direct sales force and long-term strategic orientation are positively related to COS and negatively related to salespersons’ SO • Sales department influence over market-related decisions, functional role clarity and Marketing–Sales interaction are positively related to COS, but do not affect salespersons’ SO • Positive and significant impact of COS on superior customer value creation, whereas SO does not show a significant impact on superior customer value • Direct impact of customer-oriented culture on superior customer value creation

15. Discussion and contribution • Many organizational factors are related to salespeople’s COS • Salespeople’s COS and SO should not be considered as polar opposites in the same continuum. Rather, they are different (although related) constructs which can probably co-exist in the same organizations and are not necessarily characterized by opposite relationships with antecedents and consequences. • Salespeople’s COS is positively related to superior customer value, and SO might not necessarily be detrimental to organizational performance • Further validation (the first one outside the US) of the parsimonious, ten-item scale of SOCO • One of the first studies which tested outside the US the relationship between COS and relevant organizational antecedents and consequences • Significant impact of some control variables

16. Limitations and Directions for future research • Longitudinal research design • Other variables as drivers and consequences of COS and SO • In-depth investigation of SO’s consequences • Test models across different industries, as well as in different geographical and cultural contexts • Multiple informants

17. Thank you! Q&A

18. H1: A company’s customer-oriented culture is positively related to salespeople’s COS • Customer-oriented culture is a key component of market orientation (Deshpandé, Farley and Webster, 1993). A company’s customer-oriented culture shapes organizational members’ behaviours by developing and disseminating shared values and behavioural norms that put customers’ interest first • Customer-oriented companies may hire customer-oriented people, reward customer-oriented behaviours and focus sales training on customer orientation at the level of both the supervisors and the salespeople • Based on social learning theory, some researchers have argued that companies with a strong customer orientation typically have customer-oriented leaders who can act as role models to inspire salespeople’s customer-oriented behaviours (Stock and Hoyer, 2002).

19. H2: The use of a direct sales force is positively related to salespeople’s COS • A direct sales force may be a better option when the selling company wants to be customer oriented, i.e. to provide assistance and service to the customer base (Dishman, 1996) • In contrast, independent sales reps are mainly (if not exclusively) paid on straight commission and may therefore prefer to maximize immediate sales, sometimes adopting hard selling techniques, at the expense of value-adding relationship selling approaches (Hawes, Strong and Winick, 1996) • Mixed arguments from the literature on sales force control systems (e.g. Cravens et al., 1993; vs. Anderson and Onyemah, 2006)

20. H3: The adoption of a long-term strategic orientation is positively related to salespeople’s COS • Long-term strategic orientation is a company’s tendency to place more importance on long-term decisions, objectives and results than on short-term ones (Guenzi and Troilo, 2007). • The Sales unit is often primarily focused on tactical, short-term objectives and activities (e.g. Cross et al, 2001; Homburg and Jensen, 2007; Strahle, Spiro and Acito, 1996). Therefore, salespeople need to be stimulated to adopt COS. • Because a customer-oriented salesperson would defer short-term returns for long-term ones, salespeople will more probably engage in customer-oriented selling when their company’s strategy focuses on the long term

21. H4: The Sales department’s influence over market-related decisions is positively related to salespeople’s COS • Market-related activities (e.g. advertising, pricing, distribution) are increasingly allocated to different functional groups • Functional influence is the degree of decision-making power of a functional unit over market-related decisions (Krohmer, Homburg and Workman, 2002) • A high level of the Sales department’s influence over market-related decisions should increase salespeople’s job autonomy and empowerment, which are positively associated with COS (e.g. Martin and Bush, 2006) and should increase the sales force’s willingness and ability to solve customer problems, provide solutions and adapt to changing customer needs(Thomas and Velthouse, 1990; Bowen and Lawler, 1992),

22. H5: Marketing and Sales functional role clarity is positively related to salespeople’s COS • Marketing and Sales functional role clarity is the extent to which the roles, goals and responsibilities of the Marketing and Sales units are respectively clearly defined • Functional clarity will decrease dysfunctional conflict between the two functions, and, in turn, increase inefficiency and effectiveness of decision making, as well as execution of activities • A better alignment between marketing strategies, sales management processes and sales force activities will foster salespeople’s ability and willingness to engage in COS (Evans and Schlacter, 1985; Viswanathan and Olson, 1992; Strahle, Spiro and Acito, 1996; Colletti and Chonko, 1997)

23. H6: The use of interaction mechanisms between Marketing and Sales units is positively related to COS • The existence of good interaction mechanisms between Marketing and Sales departments will increase formal and informal communication processes and information flows (Kahn and Mentzer, 1998; Dewsnap and Jobber, 2000; Ellinger, 2000). • Interaction between Marketing and Sales fosters the development of marketing capabilities, like market sensing, market learning and customer relating (Guenzi and Troilo, 2006) • As a result, the possibility and willingness of salespeople to engage in COS should increase, since they will possess more information of better quality which can be used to develop customized solutions.

24. H7: Salespeople’s COS is positively related to superior customer value • Jaramillo et al.’s (2007) meta-analysis found that salespeople’s customer orientation increases performance, but Franke and Park’s (2006) meta-analysis on COS partially failed to support this evidence • The reason behind these mixed findings may be the different types of outcome variables considered. • The creation of superior value for the customer is the best performance variable one can use to evaluate COS’s consequences, since the key goal of market orientation (and hence of COS) is to increase customer satisfaction by creating superior value for the customers (Narver and Slater, 1990; Slater and Narver, 1995; Homburg and Pflesser, 2000).

25. Method: items • SOCO: Thomas, Soutar and Ryan, 2001 • Customer-oriented culture: Deshpandé, Farley and Webster (1993) • Use of a direct sales force: percentage of employees out of the total number of salespeople in the company (score between 0% and 100%) • Long-term orientation: Guenzi and Troilo, 2007 • Influence of Sales department over market-related decisions: adapted from Krohmer, Homburg and Workman (2002). We assessed the influence of five functional units (Marketing, Sales, R&D, Manufacturing, Finance/Accounting) over nine market-related decisions (i.e. new product/service development; strategic pricing; expansion into new geographic markets, etc.). For each decision, we asked informants to distribute one hundred points among the five subunits in order to reflect their “share” of influence. We then used the average scores attributed to the Sales department across the nine market-related decisions • Functional role clarity: based on Singh (1993)  extent to which there is a clear distinction of roles, goals and responsibilities between Marketing and Sales • Marketing–Sales interaction mechanisms: five items based on Kahn and Mentzer (1998) • Superior customer value: Guenzi and Troilo (2007)