Performance Impact of Selling and Customer Orientation

Literature Review


Term Paper (Advanced seminar), 2019

21 Pages, Grade: 1,0


Excerpt

Table of Contents

Introduction

The SOCO scale
Customer orientation:
Selling orientation:
Customer Orientation vs. Selling Orientation

Other Concepts and Measures
Performance
Adaptive Selling
Selling Skills
Value-based selling
Customer Attitude/ Satisfaction
Job stress and engagement
Learning Orientation
Performance Orientation

Research Design and Hypotheses

Research Outcomes

Discussion of Results

Research Implications and Limitations

Managerial Implications and Conclusion

References

Introduction

In the course of globalization, immense economic growth and new communication technologies, companies are more and more challenged when it comes to the acquisition of customers. Especially, the developments in the communication technology made it a requirement to be present in multiple marketplaces also in foreign countries which raises the question which sales strategies are particularly effective (Paunov and Rollo, 2015). As sales are the backbone of almost every company and a first estimator of firm performance and profitability, it has major practical implications for managers. Salespeople need to excel at a range of activities in order to be successful including prospecting new customers, influencing decision-makers to consider and ultimately select their products as well as to retain existing customers (Plouffe et al, 2009). There have been many suggestions regarding the benefits of conducting business in a customer-centered fashion. Indeed, in recent years, customer orientation has been the preferred way of handling customers in order to secure orders and elevate customer satisfaction (Wachner et al. 2009). Companies prefer long-lasting customer relationships, high loyalty and customer satisfaction, also because it is more predictable and sustainable to business, but is that fully justified? (Wachner et al, 2009)

In order to facilitate the research of the effects of selling behavior on sales performance, Saxe and Weitz (1982) proposed the SOCO-scale which has become a fundamental concept in marketing and sales literature. SOCO is short for “Customer Orientation – Selling Orientation”. Customer orientation (CO) cares for delivering the best possible product or service to the businesses’ clients, while selling orientation (SO) is denoted by a self-interest of the salesperson to make as many sales as possible (Saxe and Weitz, 1982).

Management guru Peter Drucker (1954) once said that the only purpose of a business is to create a customer. In the light of the previously shown two orientations, salespeople can create a customer in two ways. For the simple case of a real estate agent: Should the agent make every effort to find the perfect property for his customer in order to create high value and satisfaction to finally stimulate a purchase (CO)? Or should he use hard selling strategies, persuasion and even pressure customers into buying a property (SO)? This is a comparatively simple and distinct example of choosing a sales strategy, but what will be more successful on average and what can salespeople do to become more effective? In this paper, the relationship between SOCO and performance will be examined. In addition, also other influences and mediators such as selling skills, job engagement and adaptive selling will be discussed. Therefore, the research question is as follows: What is the performance impact of selling and customer orientation?

The SOCO scale

In 1982, Saxe and Weitz state that customer-oriented sales behaviors have been described by researchers as beneficial to securing sales and customer satisfaction, but little has been examined empirically. In order to look at the effectiveness of customer orientation and other surrounding factors, they developed the SOCO measure which is a conceptualized scale comprising 24 rated items. The underlying questionnaire consists of 12 positively stated items (CO) and 12 negatively stated items (SO) that are reverse-scored. All items are rated on a scale from one to nine, where one stands for "FALSE/NEVER" and nine for "TRUE/ALWAYS". SOCO has become one of the most widely used constructs for measuring salespeople behavior and, despite its age, is still highly viable and relevant to research. As a matter of fact, it has been named one of the most influential sales articles of the twentieth century (Leigh et al, 2001).

Today, often Thomas, Soutar and Ryan’s (2001) short form of the original SOCO scale is used. They reduced the number of items queried from 24 to 10 and showed that there was only a small information loss. This makes the scale more reliable and valid, as response fatigue and acquiescence bias can be reduced (Thomas, Soutar and Ryan, 2001). This also allows for more extensive research as more multiple item scales can be combined in larger studies. The proposed short form is used throughout many of the articles examined in this paper. In addition, they showed that selling and customer orientation are “distinct, although related” constructs. (Thomas, Soutar and Ryan, 2001, p. 67).

Throughout the next paragraphs more elaborate definitions of the key variables are given. These will set the boundaries of this work. Table 1 will break down the single articles into the concepts that are used. It can be used as a guidance throughout the rest of the paper and will give a first glance at what will be examined. The concepts will then be defined in the text. Following the idea of Webster and Watson (2002), the table is augmented with a unit of analysis. Especially for performance, the unit of analysis is of importance as there are several measures of performance for example of objective and subjective nature. It has also use for selling and customer orientation whether the concept is on an individual salesperson or on an organizational level. Overall the paper will focus on the relationship of SOCO, performance and some of its mediators without touching too many concepts on the outside like organizational antecedents, moderators and other control variables which would go beyond the scope of the main research question.

Abbildung in dieser Leseprobe nicht enthalten

Table 1

Customer orientation:

Customer oriented selling refers to the extent to which a salesperson helps his customers to make a purchase decision that maximizes their utility and satisfaction (Saxe and Weitz, 1982). Salespeople that are highly customer-oriented try to meet a customer's needs and interests and ensure long-term customer satisfaction. They are also more willing to maintain long-term relationships with their customers. On the strategic side, customer-oriented salespeople are unlikely to apply high pressure and will avoid actions that sacrifice customer needs and satisfaction in order to make an immediate sale (Saxe and Weitz, 1982). Often, such customer-oriented behaviors lead to a loss of immediate revenue gains in favor of building and/or maintaining longer-term relationships (Wachner et al, 2009). Customer-oriented salespeople are also unlikely to make use of deceptive or manipulative tactics. Therefore, CO contrasts the traditional high-pressure approach for sales. Generally, SOCO is seen as two ends of a scale in which customer orientation represents high concern for others and selling orientation represents a high concern for self (Blake and Mouton, 1970). In addition, CO is also associated with “an emphasis on learning, natural curiosity and opportunity recognition” (Goad and Jaramillo, 2014, p. 285).

Selling orientation:

Selling or Sales orientation (SO) refers to the kind of selling that aims to generate short-term revenue by (artificially) stimulating demand for products or services. Selling-oriented salespeople are denoted by a concern for themselves and often use assertive, sometimes even deceiving sales methods that lead to short-term gains at the expense of customer satisfaction and long-term relationships (Saxe and Weitz, 1982). A salesperson who pursues a sales-oriented strategy would prefer a quick and relatively effortless sale (Wachner et al, 2009). On the personality side, sales orientation is associated with impulsiveness and a preference for immediate gratification (Bagozzi et al, 2012). In addition, selling-oriented salespeople continuously rely on the ability to influence, manipulate and work toward the completion of the sale, regardless of how well the proposed solution meets customer needs (Wachner et al, 2009). Selling orientation tries to maximize short-term profits and satisfies the performance desires of the salesperson. If salespeople are evaluated on the basis of outcomes, they are much more likely to use a sales orientation to achieve performance thresholds and benefit from monetary rewards and financial incentives (Schwepker, 2003). Therefore, a selling-oriented salesperson places much less emphasis on learning about his customers or their needs but adores immediate satisfaction and the financial gains of closing a deal (Goad and Jaramillo, 2014).

Customer Orientation vs. Selling Orientation

Based on the previous concept, sales orientation marks a self-denoted and opportunistic selling behavior while customer orientation suggests a cooperative, attentive selling behavior. One would have to believe that CO is indispensable for long-term firm success, but the answer is often not that simple. Saxe and Weitz (1982) point out that when salespeople follow a customer-oriented sales approach, opportunity costs arise when short-term sales are sacrificed for potential future sales and customer satisfaction. Clearly, often times the impact of an immediate sale outweighs the potential future impact. The same applies to the time spent on customer background research and tailoring individual solutions, while one could use this time to persuade the customer (Saxe and Weitz, 1982). Therefore, the usage of customer-oriented sales strategies should not automatically rule out potential use cases for SO strategies aimed at short-term goals (Goad & Jaramillo, 2014). Guenzi, De Luca, and Troilo (2011) claim that sales managers expect their salespeople to engage in both strategies depending on the customer profile and that “the widespread bad reputation of SO may not be justified” (p.280).

Other Concepts and Measures

Performance

1. Sales Performance (subjective vs. objective)

Sales performance is mainly about the achievement of very tangible long-term sales objectives. This includes targets set by sales management or maximizing the potential inherent in the sales territory (Wachner et al, 2009). An 11-point Likert-type scale proposed by Behrmann and Perrault (1982) is a common scale used to measure self-reported performance relative to other peers (Wachner et al, 2009). Subjective or self-reported performance has the advantage that the performance can be compared across companies (Homburg et al, 2012). Additionally, for objective performance, the type of sales performance data can vary a lot between companies which makes it hard to compare. Across the articles examined, performance provided by sales managers included total sales volume in the running fiscal year (YTD), total earnings, the number of products sold, the percentage of quota achieved as well as a ranking of a salesperson’s value to the organization. As a result, many authors rely on self-reported performance as it creates comparable datasets.

2. Firm/Market Performance

Firm or market performance is mainly about increasing the firm value i.e. the value of the businesses’ operations. Terho et al. (2015) define market performance as “a firm’s performance in terms of the development of the number of products or services sold, which in turn is captured by customer loyalty, the acquisition of new customers, and the achievement of the desired market share and growth rate” (p. 15). They argue that sales strategy, or the extent to which salespeople overall engage in customer-oriented selling, will lead to superior market performance (Terho et al, 2015).

3. Customer value creation and customer satisfaction

The main goal of market orientation which is broadly defined as customer orientation on the firm level (Guenzi et al, 2011) is to increase the level of customer satisfaction especially by creating superior value for the customers (Guenzi et al, 2011; Narver and Slater, 1990). It describes the “ability to creatively, proactively and rapidly create and transfer benefits to customers, as well as to solve customer problems, thus reducing what they perceive as sacrifice” (Guenzi and Troilo, 2007, p. 101). High customer satisfaction will eventually lead to customer loyalty and profitable long-term relationships (Stock and Hoyer, 2005)

Adaptive Selling

Adaptive selling characterizes the acknowledgement of salespeople that different approaches are required for different customers. Salespeople who are able to perceive situational differences and are capable of adjusting their behavior and strategy to the requirements of the selling situation will have a substantially higher performance (Plouffe et al, 2009). Adaptive selling can be described as a proactive process of utilizing learned selling behaviors to enhance performance involving the processes of information gathering, creating custom solutions, communicating and employing (Goad and Jaramillo, 2014; Eckert, 2006). Adaptive selling is expected to have a positive impact on performance regardless of the underlying cognitive motivation as the characteristic response to the situation is not dependent upon the concern for self or others (Goad and Jaramillo, 2014). Spiro and Weitz (1990) introduced the 16-item adaptive selling scale “ADAPTS” which has 5 sub-dimensions and is used to link adaptive selling to performance.

Selling Skills

Selling skills have been stated as one of the five critical determinants of effectiveness in the salespeople role and has been shown to have the single greatest impact on salesperson performance (Walker et al, 1977). In 2002, Rentz et al. further developed the concept of selling skills and divided it into three skill-based sub-dimensions. These are (1) interpersonal skills, (2) salesmanship skills and (3) technical skills. Interpersonal skills are the level of proficiency in verbal and non-verbal communication. Salesmanship skills delineate the sales presentation ability as well as persuasion and tactics. Technical skills denote the salesperson’s knowledge of his product portfolio including technical capabilities and features (Plouffe et al, 2009).

Value-based selling

Value-based selling can be defined as the “degree to which the salesperson works with the customer to craft a market offering in such a way that benefits are translated into monetary terms, based on an in-depth understanding of the customer’s business model, thereby convincingly demonstrating their contribution to customer’s profitability” (Terho et al, 2012, p. 178). It also tries to capture the degree of cooperation between seller and customer as well as the value co-creation potential. For salespeople, value-based selling focuses on proactively crafting and promoting market offerings that bring customers great potential in adding value to their bottom line through cost saving and performance enhancing activities (Terho et al, 2015). When the offer brings substantial value to a customer’s operation, he should have good reason to agree to the offer, even if delivered at a price premium. Terho et al. (2015) developed a new scale for value-based selling and came up with 7 items which exhibit discriminant validity.

Customer Attitude/ Satisfaction

Customer satisfaction describes a positive evaluation that needs have been met by the purchasing process and the quality of the supplied product or service (Stock and Hoyer, 2005). Customer satisfaction implies that customers form attitudes. First, customers exhibit a learned predisposition to respond to the salesperson in a positive or negative way. Second, customers form judgements regarding the suppliers’ products and exhibit a learned predisposition to respond to the suppliers’ products in a positive or negative way. Then, these two constructs are linked to the customer’s overall attitude and evaluation of the purchase and consumption which is defined as “customer satisfaction” (Homburg et al, 2011).

Job stress and engagement

Job stress represents a salesperson’s role conflict and ambiguity and has shown to have implications on health and performance. Role ambiguity refers to a salesperson’s uncertainty of expectations and consequences of their performance. Role conflict refers to conflicts of expectations between the salesperson and his surroundings, especially conflicts with customers and management. (Zablah et al, 2012). Job engagement represents a salesperson’s job satisfaction and organizational commitment. Employee satisfaction refers to a positive emotional state resulting from his or her valuation of job experiences (Locke, 1976). Organizational commitment shows the strength of the employee’s psychological bond and identification with his or her employing organization (Hunt et al, 1985). Zablah et al. (2012) use JD-R theory as the basis for measuring job demands and resources. Job demands are features of the job that are crucial to fulfilling the job role while job resources are individual features that allow salespeople to achieve their job requirements.

Learning Orientation

Learning orientation suggests that one’s approach to learning is a specific personality construct and linked to effective performance (Furnham et al, 1999). Salespeople with a learning orientation not only enjoy learning but are able to apply their learned knowledge in their job. Characteristically, learning-oriented salespeople appreciate the process of learning how to sell effectively, value the feeling of personal growth, want to tackle challenges and are open to new approaches (Sujan et al, 1994). Learning orientation includes values such as developing abilities and personal growth which indicate a tendency towards long-term achievements (Zweig and Webster, 2004).

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Details

Title
Performance Impact of Selling and Customer Orientation
Subtitle
Literature Review
Grade
1,0
Author
Year
2019
Pages
21
Catalog Number
V539388
ISBN (eBook)
9783346180506
ISBN (Book)
9783346180513
Language
English
Tags
customer, impact, literature, orientation, performance, review, selling
Quote paper
Henry Müller (Author), 2019, Performance Impact of Selling and Customer Orientation, Munich, GRIN Verlag, https://www.grin.com/document/539388

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