The Effect of Sales Technology Usage on Sales Performance and Relationship Quality: a conceptual model development

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1 The Effect of Sales Technology Usage on Sales Performance and Relationship Quality: a conceptual model development Cheong Teck Min Michael & Song Yang, University of South Australia Abstract The past decade witnessed a surge of ST (sales technology) applications in sales force management. Logically, the application of ST in the sales force should potentially improve sales efficiency and effectiveness. However, empirical research evidence consistently revealed that the failure rate of ST implementation is rather high, ranging from 55% to 80%. To-date, there is still little clarity about the rationale underlying the success and failure of ST implementation and its contribution to sales performance. This current research attempts to explore some possible variables which could play mediating or moderating roles in the link between ST adoption and sales efficiency. A conceptual model has been developed with justifications and research hypotheses. Introduction Given the importance of information technology tools in sales management, research on ST has received much attention in recent years (Speier & Ventkatesh 2002). ST includes the broad range of customer relationship management (CRM) and sales force automation (SFA) tools that are used by salespeople in their sales tasks e.g. mobile communications, mobile personal computing, spreadsheets, database programs, sales forecasting tools, sales management systems, presentation graphics software, electronic mail and the Internet (Hunter & Perreault 2007). Although research has been done to study the antecedents of ST adoption and its impact on sales performance, no conclusive answer has emerged in the literature. A relatively high failure rate of ST implementation, ranging from 55% to 80%, highlights the necessity to examine the rationale underlying ST functions and their impact on sales performance (Block et al. 1996; Blodgett 1995; Galvin 2002). The causal relationship between ST use and sales efficiency seems far more complex and ambiguous which merits further investigation. Previous research outcomes tend to support the argument that adoption of ST is only a necessary but not sufficient condition for performance improvement (Hunter & Perreault 2007; Speier & Ventkatesh 2002). This means that adoption of ST may not necessarily lead to success in sales performance. Therefore, to explore how to use ST more effectively may be more important than just to adopt it. The relationship between ST implementation and sales performance has been explored extensively (e.g. Avlonitis & Panagopoulos 2005; Engle & Barnes 2000; Ko & Dennis 2004; Rivers & Dart 1999). However, conflicting empirical results suggest that the contribution or benefit of ST to sales performance still remains unclear. We may still be in the early stage to understand the link between ST functions, their implementation environment and their real impacts on the complexity of a sales process. To fill the gaps identified in ST research literatures, this study attempts to explore the possible variables which may play mediating or moderating roles in the link between ST implementation and sales performance. Literature review and conceptual model development Theoretically, the benefits of ST use have long been recognised in sales practices. ST is designed to assist salespeople in acquiring and retaining customers while at the same time reducing administrative time and enabling the efficient management of customer accounts (Speier & Venkatesh 2002). Considering the high costs of ST implementations and their 1

2 associated failure rates, sales management scholars and practitioners have given ST implementation research a high priority for decades (Leigh and Marshall 2001). Studies on ST adoption and implementation can be grouped into two clusters, one focusing on identifying the antecedents of ST adoption (e.g. Jones, Sundaram & Chin 2002; Ko & Dennis 2004; Morgan & Inks 2001; Parthasarathy & Sohi 1997; Speier & Ventkatesh 2002; Ventkatesh 2000); another on investigating the relationship between ST usage and sales performance improvement (e.g. Ahearne, Srinivasan & Weistein 2005; Avlonitis & Panagopoulos 2005; Robinson, Marshall & Stamp 2005). Studies on ST adoption have accounted for much of the research effort in ST applications. Comparatively lesser research has been conducted to explore the rationale underlying ST implementation and sales force productivity and the research outcomes are inconclusive. For example, Engle & Barnes (2000) investigated ST usage and perceptions using a large multinational firm in Germany, the U.S. and the U.K. and found that ST usage explained only 16.4% of sales performance variance across countries. Avlonitis & Panagopoulos (2005) studied the antecedents and consequences of information technology acceptance on sales performance and found insignificant effects of many antecedent variables in the research model on sales performance. In another study, Ahearne et al. (2005) provided empirical evidence of a curvilinear relationship showing diminishing return between a salesperson s task performance and usage level. Their findings also revealed that poor performance salespersons had either very little or large amount of interaction with ST, suggesting that heavy reliance on ST may not necessarily lead to better performance. The intricate relationship between ST implementation and sales performance indicates that there could be some mediating and moderating variables which have not been fully explored in ST studies. The current research selects salesperson s communication styles and adaptive selling behaviour as mediating variables, and customer information sharing as a moderator in the model to explore the ST effectiveness in the selling process. Communication Style: Communication style refers to the way in which a person verbally or para-verbally interacts to signal how literal meaning should be taken, filtered or understood (Norton 1978). Based on Sheth (1976) work on buyer-seller relationship, Williams & Spiro (1985) classified salespeople s communication style as task oriented, interaction oriented or self oriented. In an attempt to examine the role of ST in relationship building, Hunter & Perreault (2007) took a different position in understanding the impact of ST on sales performance through relationship marketing and organisation learning perspectives. They were the first to investigate relationship forging tasks as potential link between three different uses of ST: accessing, analyzing and communicating information (Huber 1991) and key aspects of salesperson performance. Even though their findings supported the relationship-forging theory and demonstrated that relationship-forging tasks predicted 57% of the variances in sales performance, one limitation of their model is that all three aspects of ST use accessing, analyzing and communicating information, were accorded equal magnitude and treated equally in the analysis. However, in the context of relationship marketing, communication is a vital ingredient in building better buyer-seller relationship (Anderson & Narus 1990; Mohr & Nevin 1990). Gronroos (2004) also identified communication as a key process of relationship marketing. In ST research, the role of communication has received very little attention to-date, especially salespeople communication styles. The customer-salesperson interaction is a dyadic process involving communication exchange and the aim of communication is to share information between parties involved in the process. Soldow & Thomas (1984) argued that selling success is dependent upon the interaction between the buyer and seller based on their level of relational communication. Empirical evidence derived from previous studies also suggested that a salesperson s communication styles are significant in explaining variances in sales performance (Dion & Notarantonio 1992; Sheth 1976; Williams & Spiro 1985). The findings in Ahearne et al. (2005) implied that even with heavy reliance on ST, salesperson may 2

3 not necessarily achieve good sales performance, suggesting possible mediating factors. Our study, therefore, takes a different approach from the work of Hunter & Perreault (2007). While retaining the conceptualization of ST use as Accessing and Analyzing information in line with Huber (1991) s work on organisational learning theory, we are contending that the extent of information access and analyzing via ST could potentially affect the manner in which a salesperson communicates with his customer. For example, a salesperson who uses ST to analyse information extensively could adopt an interaction-oriented communication approach. Communication styles, therefore could mediate the effects of ST use on sales performance and buyer-seller relationship quality. Our study may be the first to incorporate the mediating role of communication styles in ST research. Two hypotheses are put forward: Hypothesis 1: The more a salesperson relies solely on using the ST function of accessing information, the less likely she or he will be engaged in interaction-oriented communication (H1a) and the more likely she or he will be engaged in task and self-oriented communication (H1b). Hypothesis 2: the more a salesperson uses ST for information analysis, the more likely she or he will be engaged in the interaction-oriented communication. Adaptive Selling: Spiro & Weitz (1990) suggest that salespeople who practise effective adaptive selling are able to gather information about customer situations. The ability to adapt is dependent very much on the salesperson s categorised knowledge regarding different selling situations and their ability to apply declarative and procedural knowledge related to the particular situation (Weitz 1981). Empirical evidence was provided by Sujan & Weitz (1986) and Giacobbe (1991) suggesting that the practice of adaptive selling is positively correlated with sales performance. However, the relationship between adaptiveness and sales performance is still empirically underreported in the marketing literature (Boorom, Goolsby & Ramsey 1998). In ST research, the concept of adaptive selling behaviour is similarly under-studied. Notable exceptions, however, are Robinson, Marshall & Stamps (2005) and Ahearne, Jones, Rapp & Mathieu (2008). Through adaptive selling, the salesperson may use different sales presentations across different selling encounters based on the information collected. He is able to draw on past learning and make the necessary adjustments to increase his sales effectiveness in the present situation. In line with Ahearne et al. (2008), this study is also putting forward the assertion that adaptive selling behaviour may serve as a mediating mechanism between ST use and sales performance. Salespeople can use ST databases and tools to collect large amount of customer information which they can access and analyse for better customization of solutions for different customers. ST use can help facilitate information capture and analysis and hence, improve adaptive selling. Hypothesis 3: the more a salesperson uses ST to access and analyse information, the more likely she or he will be engaged in adaptive selling Customer Participation: The basic tenet of relationship marketing is that customers like to reduce choices by engaging in a continual relationship with the marketer (Sheth & Parvatiyar 1995). When the customer participates in the buying process and interacts with the salesperson, they understand and appreciate each other s needs and constraints better and are more inclined to build relationships. Such relationship engagement entails the customer sharing information with the salesperson. Information the product of communication is the tie that binds any relationship, including business relationships with customers (Duncan & Moriarty 1998). Therefore, how well a salesperson uses ST to manage information may very well depend to a large extent on the amount of information he receives from the customer. Such information may include personal particulars, use of existing products, cost considerations, current and future needs. In the sales context, the salesperson requires such information so that he can store it in his database for future access and analysis. In a recent review paper on ST research, Clark, 3

4 Rocco & Bush (2007) considered customer participation an important aspect in ST application. While the concept of customer participation has been studied extensively in the service and retail settings (e.g. Bitner, Faranda, Hubbert & Zeithaml 1996; Harris, Harris & Baron 2001; Kelley, Donnelly & Skinner 1990), it has been a largely ignored factor in ST research. Bendapudi & Leone (2003) suggested that customer satisfaction in a production of goods and services may depend on whether a customer participates in the production. Customer participation has also been posited to play an important role in determining the effectiveness and efficiency of the service process (Fließ & Kleinaltenkamp 2004). Being a dyadic process, selling requires both the customer and salesperson to communicate and share information. It is logical to posit that two-way exchanges of information are a necessary condition for salespeople to utilise ST effectively in relationship management. While a salesperson may have the most sophisticated ST tools available for use, how well he utilizes these tools will depend very much on the amount of information he receives from the customer. In the current study, the level of customer participation is defined in terms of customer information sharing. We posit that the level of customer information sharing may moderate the extent of ST use (access and analyse), namely the higher the level of customer information sharing, the bigger the contribution of ST use on relationship quality and sales performance. As customer participation plays a key role in the customer s satisfaction and outcome of a sales process (Bendapudi & Leone 2003; Fließ & Kleinaltenkamp 2004), this study also put forward the proposition that the salesperson s ability to adjust his communication style and adaptive selling behaviour may be moderated by the amount of information he has acquired from the customer. Williams & Spiro (1985) suggests that the successful salesperson is able to recognise different customer styles and adapts his communication styles suitably to interact with the customer. From a communication perspective, Thayer (1968) suggests that one of the processes in a dyadic communication is acquiring information (e.g. obtaining information about customer s needs). More information offered by the customer will allow the salesperson to convert this information into knowledge and adapt his selling behaviour to fit the selling situation. Therefore, the more a customer willingly participates in the interaction by offering information about himself, the greater will be the salesperson s ability to alter his communication style and practise adaptive selling. The logical outcome is that there will be a significant impact on relationship quality and sales performance. The following hypotheses are put forward: Hypothesis 4: the use ST to access and analyse information will be moderated by the level of customer information sharing. The higher the level of customer information sharing, the bigger the contribution of ST use will be on relationship quality (H4a) and sales performance (H4b). Hypothesis 5: the effect of a salesperson s communication style on relationship quality and sales performance will be moderated by the level of customer information sharing. The higher the level of customer information sharing in the sales process, the stronger the positive effect of communication styles will be on relationship quality (H5a) and sales performance (H5b). Hypothesis 6: the effect of adaptive selling behaviour on relationship quality and sales performance will be moderated by the level of customer information sharing. The higher the level of customer information sharing in the sales process, the stronger the positive effect of adaptive selling behaviour on relationship quality (H6a) and sales performance (H6b). Therefore, while a salesperson may be able to make good use of ST to retrieve and analyse information about his customers (albeit moderated by the customer s willingness to share information), the result of such actions will be largely mediated by both the salesperson s communication style as well as his ability to customise his selling behaviour according to 4

5 different customers needs. To fill these gaps our current research sought to answer the following three questions: 1. How does customer information sharing affect a salesperson s extent of ST use in the selling process? 2. How would ST use affect a salesperson s communication style and adaptive selling behaviour in the selling process? 3. How do a salesperson s communication style and adaptive selling behaviour impact a buyer-seller relationship quality and sales performance? The conceptual model for this study is presented in Figure 1. Method A multinational insurance firm with a large sales force using ST has agreed to participate in this study. The context of insurance sales is appropriate as this is an industry that utilizes ST to a large extent in the selling process. Previous ST studies have also used the insurance industry as a focal point of research (e.g. Jones, Sundaram & Chin 2002; Lapsiri & Speece 2004; Morgan & Inks 2001) We proposed to carry out the data collection in two stages. In the first stage, interviews would be conducted with a small group of salespeople to collect qualitative data to fine-tune the constructs. In the second stage, a survey would be carried out with a larger group of salespeople to measure the constructs. After completing the data collection, we will perform data analysis using structural equation modelling. This analysis tool will allow us to understand the relational linkages among the constructs in the model. Conclusion This study will draw together the various streams of knowledge in the areas of sales technology, relationship marketing, communication and organisational learning in a single integrated conceptual model to address the research gaps identified earlier. This research will make an original contribution to ST literature by exploring the moderating effect of customer information sharing on ST use as well as examining the twin mediating effects of salespeople s adaptive selling behaviour and communication styles on sales performance and relationship quality. This study seems to be the first one in the literature which tries to link ST use to salespeople s communication styles and adaptive selling behaviour and to investigate the significance and relevance of customer information sharing. The results will generate insights to advance the understanding of ST use and its impact on salespeople s behaviour changes. Customer information sharing ST use: (Accessing) Communication Styles Sales Performance ST use: (Analyzing) Adaptive Selling Relationship Quality Figure 1 5

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