Part 1: Literature Review on Market Driven Approach
The field of market driven approach and market driven organisations is many decades old. Since the past few years, research indicates that market driven organisations have certain distinctive features. These include the mastery of the market sensing and customer linking firms. Such firms create a change program that enhances these capabilities and include various steps such as identify the capabilities, anticipate future needs for capabilities, redesign the processes using a bottoms up approach while using a top down direction and commitment with creative use of information technology and using a continuous monitoring of progress.
Day (1994) says that until recently, marketing was an article of faith than a structured process of managing a business. Defining features and attributes of the firm perspective were not clear, and manager did not have a clear idea of orienting the firm towards customers and markets. Day speaks of several concepts that define and identify capabilities in market driven organisations. These concepts include perspective on competiveness, distinctive capabilities, capabilities and performance, classifying capabilities, spanning capabilities, market sensing, customer linking, and developing capabilities in market driven firms.
Day (1994) speaks of capabilities as a complex bundle of collective learning and skills brought out by the organisational processes to obtain a higher level of integration between functional activities. A competitive strategy developed from the assets or firm resources, and capabilities that bind these assets and helps the resources to be deployed effectively. Some examples of capability are order fulfilment, new product development, logistics, manufacturing, marketing channels, and others. In some cases, capabilities are tacit and distributed across various departments. Distinctive or core capabilities are the skills that help an organisation to move its services across the value chain in a cost efficient manner and provide performance. While customers may not be aware of the underlying processes that provide them with products of superior value, the management constantly strives to make these distinctive capabilities more effective, and show an excellent performance. The following figure illustrates the relations between capabilities and performance.
Figure 1.1 Core capabilities and firm performance relation (Day, 1994: 40)
Capabilities strengthened when firms use inside out capabilities to cover external opportunities. Outside-in processes have an external emphasis, while inside-out processes have internal processes. Spanning processes cover both these processes and they include market sensing, customer linking, order fulfilment, financial management and others. Market driven firms have a high level of market sensing, customer linking, and channel bonding skills, and these are a part of spanning capabilities. An inside-out process helps the firm to be more market focussed, and sense customers’ demands and the market environment. Market sensing is the ability to learn about customers, rivals, channel, events and trends, and opportunities. Market sensing firms apply systematic methods to anticipate the changes in the market. The following figure illustrates the market sensing and spanning capabilities.
Figure 1.2 Market spanning and market sensing (Day, 1994: 42)
Day (1994) speaks of developing the capabilities of market driven organisations. The objectives should indicate commitment to a set of processes, values, and beliefs that customers initiate the decisions they should be supported by an understanding the customer’s needs and competitors capabilities. Firms should have a strong sense that formal and informal links of functions helps to exchange information while internal feuds reduce effective communications and market sensing. Centralisation avoided and delegation of decision-making should be encouraged. Customer satisfaction methods developed to evaluate and reward managers. Day recommends using TQM methods to understand customer expectations and evaluation if they met. However, TQM methods have not found success due to lack of top management support, poor understanding of principles, impatience, and inadequate methods. Some steps that will make TQM more applicable are customer and competition orientation, implementing change, diagnosing current capabilities with process mapping, anticipating future needs and capabilities, achieving operational excellence, developing customer intimacy and product leadership, and implementing a change program.
Kaworski and Kohli (1993) examine the subject of market orientation and its consequences. Market orientation has three components and these are firm wide generation of market intelligence related to current and future customer needs, dissemination of intelligence across departments, and organisation wide responsiveness. These three components must be integrated and customers must remain the focus of market orientation. The authors address issues such as why are some forms more market oriented, the effect that market orientation has on staff and business performance, and the effect of environment on these activities. The authors indicate that market orientation based on the top management focus on the orientation, the extent of risk aversion, and inter departmental conflict, connectedness, extent of centralisation, and the reward systems in place. Market orientation depends on the business performance, commitment of staff and the organisation, and the loyalty. The link between market orientation and market performance is healthy across different environment and shows susceptibility to market turbulence, intensity of rivals, and changes in technology. The following figure illustrates the antecedents and consequences of market orientation.
Figure 1.3 Antecedents and Consequences of market orientation (Kaworski and Kohli 1993)
The authors framed several hypotheses and tested them. The first hypothesis is that ‘the greater the top management emphasis on a market orientation, the greater the market intelligence generation, intelligence dissemination, and responsiveness of the organisation’. The next hypothesis is ‘the greater the risk aversion of top management, the lower the market intelligence generation, intelligence dissemination, and responsiveness of the firm’. The third hypothesis is ‘the greater the interdepartmental conflict, the lower the market intelligence dissemination and responsiveness of the firm’. The fourth hypothesis is ‘the greater the interdepartmental connectedness, the greater the market intelligence dissemination and responsiveness of the firm’. Hypothesis five states that ‘the greater the formalisation, the lower the intelligence generation, dissemination, and response design, and greater the response implementation. The sixth hypothesis is that ‘greater the centralisation, the lower the intelligence generation, dissemination, and response design, and greater the response implementation. The seventh hypothesis is that ‘the lower the intelligence generation, dissemination, and response design, the greater is the response implementation.’ (Kaworski and Kohli, 1993).
To test the hypothesis, the authors conducted a research with two samples. The first include member firms from the top 1000 companies from Dun and Bradstreet, and 222 business units responded. The second sample from the American Marketing Association and 230 responses obtained. An instrument designed on a 5point scoring format, and different parameters measured. These included business performance, organisational commitment, and independent variables such as market orientation, product quality, competitive intensity, buyer power, supplier power, entry barriers, and substitutes. Responses were studied using regression methods (Kaworski and Kohli, 1993).
The findings indicate the highest score of 0.90 was for Espirit de Corps, and the implication is that people in the business units are genuinely concerned about the needs and problems of others, and that team spirit is important. Organisational commitment received a score of 0.89 indicating the employees intimately connected to the firm, and that staff would make personal sacrifice for the firm. Technology turbulence received a score of 0.88 implying that technology in our industry is changing rapidly and provides opportunities. Marketing orientation implementation received a score of 0,82 along with market orientation dissemination. Market orientation response design received a score of 0.78 and top management emphasis received a score of 0.66, while reward orientation system received a score of 0.73 (Kaworski and Kohli, 1993).
The observations by Day (1994) spoke of theoretical concepts of market orientation. Kaworski and Kohli (1993) empirically examined the factors that contribute to market orientation, and their strength.
Part 2: Literature review on Change Management in Sales Organization
Change management has gained importance with several organisations taking up change management. Hurley (1993) examines radical and transformational change in sales organisations. The author uses case study and ethnography studies along with a literature review to critical factors to manage change in sales organisations. Previous work has focussed on change in the management areas and general approaches to change management, and there is less research on the fine details and differences in managing change in different types of industries and in the functional areas of radical change. Radical change is the changes that are substantial, discontinuous, and create a reorientation of the organisation. Some important properties of sales organisations described as follows, and these considered for change management, Sales personnel are closer to customers than other functional areas. Sales firms have larger workforces of people, spread across multiple locations and levels. Sales staff affect and are affected by quarterly revenue and earnings since their income is from commissions. Sales organisation staff is practical and tactically oriented.
Hurley (1993) obtained data from two sales organisations one with $5 bn revenues, and the other with $4bn revenue, and they a large and stable workforce. The author conducted interviews and meetings with the top management, with field and headquarters sales personnel at different levels, and with staff in critical areas such as HR and marketing. The data was analysed to identify patterns, and a literature review on managing change and properties of sales firms to understand the patterns. The study helped to draw up nine propositions to manage changes in sales organisations. Around two years spent in collecting data.
The nine principles were organised into groups, and steps were designed to meet the principles and to management change. The first three principles are customer-focussed vision, anticipate earnings disruption, and make the abstract practical. The step for managing change was ‘create a vision and strategies’. The fourth principle was ‘develop a sense of urgency with employees at different levels and locations and if necessary with customers. The step was ‘create a sense of urgency and felt need for change’. The fifth principle was ‘involve employees at different levels and locations and if necessary customer.’ The step was ‘involve key people to reduce resistance.’ The sixth principle was ‘use multiple levels.’, and the step was ‘use multiple levers. ‘The seventh principle was to measure progress by levels and/ or locations.’, and the step was ‘build in feedback devices.’ The eight principles were ‘develop change management structures.’, and the step was ‘develop organisational arrangements for transitions.’ The ninth principle was ‘champions at each level and location.’, and the step was ’empower champions.’ These principles and steps mapped to unique aspects of sales organisations for different indicators Hurley (1993). The following table presents the findings.
Figure 2.1 Change management theory with principles (Hurley, 1993: 63)
As per proposition 1, it is important to establish a desired future state and the beginning of the change process along with a vision. This proposition motivates people and directs them to adapt to change. As per proposition 2, sake changes plans can possibly disrupt earnings, leading to distraction, poor quarterly revenues, leading to pressure on the sales change agent. As per proposition 3, sales change indicatives that lead to concrete behaviours, programs and policies are beneficial and successful. Sales staff prefers action to abstraction. As per proposition 4, sales firms change process creates the purpose for change among the staff and customers. Managing the change needs the staff to move forward, and unfreeze, mobilize, and enlist people concept is better. As per proposition 5, sales change processes with clear involvement for the staff and customers have higher success. Peoples resistance is reduced when they become a part of the change process, and their involvement increases their sense of control and fairness. People tend to become less afraid of change when they are in control. The article has given the detailed steps for change in sales organisations.
Jones, Brown, Zoltners et al., (2005) speak of new development, and trends in sales management that create new opportunities, that require adaptation and new approaches for sales organisations. The authors speak of critical dimensions of change in the market environment that influence sales management. The dimensions of change include external environmental changes that affect the sales forces of four categories. These are customers, competitors, technology, and the ethical and regulatory environment. The firm takes efforts to adapt, control, the changes in the external environment, leading to change internal structures and processes. The following figure illustrates these influences. The breadth of communication requires that to effectively serve customers’ needs with increasingly sophisticated products, services, and applications, salespeople must become capable orchestrators of organizational resources. They must be able to appeal to and coordinate the efforts of technical experts and executives in their organisations to assist in efforts to sell and provide service to customers over long periods.
Figure 2.2 Environment influence on sales management firms (Jones et al., 2005: 107)
Customer expectations from sales increase and this is evident in declining customer satisfaction ratings for many organizations Firms invest is process improvements and in CRM applications. Customer expectations increase in relation to the knowledge of salespeople, response sped, quality of communication, offers for customised information, products, and services. Customers’ expectation increase as seen in the marketing strategy research that covers market turbulence, and customers’ changing preferences. Knowledge of sales staff is increasing and they must have technological expertise and product knowledge. Customers’ expectation includes sales staff to know about the information in the public domain and the Internet. Increasing product complexity, customer demands, technological innovation, regulatory oversight, and competition all require salespeople to process, internalise, and manage increasing information loads. Sales research uses established theory regarding scripts and knowledge structures to describe salesperson–customer interactions (Jones et al., 2005).
The increasing complexity of sales environments, and the increase of cognitive demands, is useful to gain greater understanding of the manner in which they meet the information overload. The speed of response is another change driver. Advances in technology of communication with e-mail and the Internet have helped sales people to communicate more effectively with customers and their firms. The same communication advances have increased customer expectations for response time to their requests. The capability to communicate quickly and effectively has encouraged customers to assume that salespeople will use it to meet their requirements more quickly. Customer demands for quick response sometimes overburden the staff, which must look after other activities (Jones et al., 2005).
Depth of communication is important to maintain a strong customer relation; sales staff must handle larger number and variety of individuals within client organizations. Understanding influence dynamics and decision-making processes has become significantly more challenging, as they become more diffuse in teams and networks embedded within the buying organization. Customisation related to the need for more knowledge, communication, and coordination. Customers need custom solutions and many customers and institutions are not willing to accept an off the shelf product. Such customisation needs adaptation to provide a viable solution, and for sellers, they represent lesser profits, easily duplicated products with little differentiation from competitive offerings. Sales firms find ways to move these commodity products up the value chain with some form of differentiation.
Customers as Co producers has gained importance and relationship selling and customisation of products and services to suit customer needs requires involvement of customers as coproduces of services rendered. The value obtained by customers depends on their own efforts and on the sales staff, and the selling organization. Customers’ dissatisfaction can be blamed on the seller, even when service failure occurred because of the customer’s own error or omission.
Part 3: Literature review on developing for market driven capabilities through Sales and marketing integration
This section reviews the work of Guenzi and Troilo (2006), Malshe (2011), and Rehme and Rennhak (2012). Guenzi and Troilo (2006) argue that the ability to create a superior customer value emerges from the marketing capabilities of the firm. Market oriented firms have superior marketing capabilities that provide superior organisational performance. The authors research the issue of marketing-sales integration. Marketing theory considers that market oriented firms can handle requirement of superior customer value and achieve sustainable competitive advantage. Marketing abilities are the integration of processes that apply the collective knowledge, skills, and firm resources to add value to the firm, and help in creating goods and services that take advantage of market opportunities and meet competitive threats.
Guenzi and Troilo (2006) argue that a definitive explanation of the manner in which the marketing processes operate is not clear. Empirical evidence that supports marketing capabilities needs different levels of integration. The authors used a conceptual and empirical analysis with qualitative research design. They used techniques of laddering to reduce the risk of important attributes, benefits that are overlooked in interviews. The authors used the means–end theory, where three categories of meanings are associated. These include concrete meanings, consequences, and personal values. The authors conducted a research with 12 respondents who were interviewed. About 50 variables were constructed in the study. The objective was to study the nature of marketing and sales integration, marketing capabilities, and antecedent and consequences of the integration. Customer value is considered as the ability to solve customer issues with increased knowledge and a broader perspective of the market, thus helping companies to make better decisions and innovate. Integration of marketing and sales is seen as the firm key capability that contributes to the generation of customer value. These findings shed new light on customer value such as the perceptions of the benefits versus buying costs. Communication and mutual understanding are two main components of integration among different departments. Marketing–Sales integration increased customer value by means of increased organisational citizenship. Sales coordination and sharing of knowledge for a common vision as to which customers to serve and which quality standards to provide are important. Create long-lasting relationships with customers is based on marketing and sales strategies and the aims of the product life cycle. The authors conclude that the question has multiple facets and covers many more interrelated entities than those considered. These include information flows, collaboration between two functions, and that the integrated entities influence organisation climate, mutual trust, commitment, and motivation.
Maleshe (2011) examines the sales-marketing interfaces that provide an evaluation of links that allow stronger connection between the two functions. The authors conducted an empirical research of 47 sales staff from different firms and industries. The findings indicate that certain conditions such as organizational hierarchy and time horizon influence the structure, language, and process linkages of the interfaces. Two critical links are identified, soil and philosophical and the contribution of the research is in the importance of vertical and horizontal communication bridges; marketing’s flexibility; interpersonal relationships; and the philosophical bond between the two functions, in forging stronger connections.
According to Malshe (2011), marketing and sales functions are important since they ensure that firms deliver the required results and firm value. An effective sales-marketing interface is important in assessing the extent to which a firm creates, delivers, and communicates its value proposition. The author indicates that the review of literature indicates that the study on sales and marketing interface is descriptive and models are available that specify the dimensions of the link, such as language, structure, and process artefacts. The research focuses on ascertaining the conditions that influence the extent to which language, processes and structure elements may create stronger links in the sales-marketing interface. The author also identifies the linkages of social and philosophical structures.
Malshe (2011) conducted a multi firm study with a grounded theory approach, and he used a qualitative approach to study the events. This approach helped to identify the boundary conditions of extant theory. Data was conducted through in-depth interviews with 25 sales and 22 marketing professional in USA, giving a sample size of 47. The respondents were from all levels such as the national sales manager to the junior marketing executive. The industries covered pharmaceutical, telecom, IT, industrial products, healthcare, and engineering. The data was coded to find common themes and open coded to find out important concepts. Axial coding was used to find relations of different dimensions and facets that emerged from the data to central concepts. The findings indicate that an important role was played by the language, and process elements to integrate sales and marketing. Some of the important elements are language, structure, process artefacts, social links, philosophical links, joint team visibility, vertical and horizontal communications, marketing flexibility, and process ownership. Marketing-sales interface will be stronger when the two functions align on what “value” or “a lead” mean, and specify the other function’s activities. The two boundary conditions decide if achieving such alignment and clarity can benefit firms.
Rehme and Rennhak (2012) examine the conflict between marketing and sales since they are important for all marketing firms. The optimisation between the two functions has achieved important since these two functions have different tasks with different goals. The authors have tried to identify the role and importance of marketing and sales on the value chain, the modelling and marketing and sales interface. Implementing marketing as a strategy in all functions increases customer satisfaction and better revenues. They have common objectives to understand customer needs and solve customers’ problems with an improvement over the competition by giving superior value to customers. The author have examined several concepts such as the value chain, interaction of marketing and sales, Homburg-Jensen-Krohmer framework, potential conflicts between marketing and sales, and potential conflict resolution options.
As per Kotler and Keller value chain, four of the five key processes are directly or indirectly linked to the marketing and sales relation. The market sensing process consider activities such as information management, communicating new insights in the company and to all parts of the chain that have to act accordingly, and there is the ‘new offering realization process’ made of market research, development and realizing new products. Sales create, communicate and deliver value to the customer by managing customer relationships, while marketing is responsible for creating customer and brand awareness, coordination and collaboration and the right organisational culture to manage a value chain successfully.
Holistic marketing has sub-issues such as internal marketing, socially responsible marketing, relationship marketing and integrated marketing. These are included in the marketing information system and the focus is on cC2C communication and on the communication flow from the customer to the company, and within the company. Collaboration is the set of intangible activities where two or more functions work together, while horizontal integration shows the need to combine two or more functions into a single function or process. The Homburg-Jensen-Krohmer framework develops an extensive multidimensional model to evaluate the marketing and sales interfaces, and the variations in these interfaces for different companies and sectors. Five conceptual domains of marketing and sales configurations were identified and these include information sharing, structural linkages, power, orientation and knowledge. The authors note some potential conflicts and these include economic constraint, cultural conflict, informational nature, and organisational nature. Method to resolve the conflict include open communication between the two sides, increased interaction through committees and alliances, structuring process and behaviour, cross-functional project teams for bigger projects, and adopting a balanced strategy. Collaborative motivation systems reduce conflicts, interpersonal skills, job rotation, Physical proximity rather than separation to allow informal information exchange and social integration.
Day, G. S. (1994). The capabilities of Market Driven Organizations. Journal of Marketing, 58(4), 37-52.
Hurley, R. F. (1998). Managing Change: An ethnographic approach to developing research propositions and understanding change in sales organisations. Journal of Personal Selling & Sales Management, XVIII(3), 57-71.
Guenzi, P. and Troilo, G. (2006). Developing marketing capabilities for customer value creation through Marketing–Sales integration. Industrial Marketing Management, 35, 974–988.
Jones, E., Brown, S. P., Zoltners, A. A. and Weitz. B. A. (2005). The changing environment of selling and sales management. Journal of personal selling & sales Management, XXV (2), 105-111.
Kaworski, B. J. and Kohli, A, K. (1993). Market Orientation: Antecedents and Consequences. Journal of Marketing, 57, 53-70.
Malshe, A. (2011). An Exploration of Key Connections Within Sales-Marketing Interface. Journal of Business & Industrial Marketing, 26(1), 45-57.
Rehme, S. and Rennhak, C. (2012). The conflict between marketing and sales. Innovative Marketing, 8(2), 74-90.