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Salesforce Motivation and Effective Implementation of a CRM Strategy in the
Pharmaceutical and Health Care Industry in Nigeria.
By
Uduji Joseph Ikechukwu PG/Ph.D/08/47289
A Thesis Presented to the Department of Marketing, Faculty of Business Administration, University of Nigeria, Enugu Campus, In Partial Fulfilment of the Requirement for the Award of
Ph.D Degree in Marketing.
Supervisor: Dr. (Mrs.) Justie O. Nnabuko
July, 2010
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CERTIFICATION
UDUJI, JOSEPH IKECHUKWU, a post graduate student in the Department of
Marketing with Reg. No. PG/Ph.D/08/47289 has satisfactorily completed the
requirements for course and research work for the Degree of Doctor of Philosophy in
Marketing.
I certify that the work embodied in this thesis is original and has not been submitted in
part or in full for any other Diploma or Degree of this or any other University.
____________________________ _________________
UDUJI, JOSEPH IKECHUKWU DATE
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APPROVAL
This thesis has been approved on behalf of the Department of Marketing, University of
Nigeria, Enugu Campus.
_________________________ ___________________________ DR. (MRS.) J.O. NNABUKO DR. (MRS.) G.E. UGWUONAH (Supervisor) (Head of Department)
Date:__________________ Date:__________________
________________________ External Examiner
Date:__________________
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DEDICATION
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ACKNOWLEDGEMENTS
Many scholars contributed directly to the improvements in this study. To the following, I
would like to express my deepest appreciation and affection.
To my Supervisor, Dr. (Mrs.) J.O. Nnabuko, who has contributed greatly to this work.
Her suggestions, constructive criticisms and sometimes even her objections have led to
many changes and improvement in this study. To her and Rich, I am deeply grateful.
To the Department, particularly the Head – Dr. (Mrs.) G.E. Ugwuonah, Prof. I.E. Nwosu,
Prof. J.O Onah, Prof. (Mrs.) D. A. Nnolim, Chief C. B. Achison, Dr. I.C. Nwaizugbo,
Mr. S.C. Moguluwa, Mr. A.E. Ehikwe, Mr. C.E. Obeta, Mr. J.O. Abugu, Mr. C.U.
Ifediora, Mrs. B.O. Obi and others. Their valuable critiques and thoughtful
recommendations in the study have helped to create a better and effective thesis. To
them, I would like to extend my sincere thanks with grateful appreciation.
To the Faculty, including the academic and non-academic staff. Their cumulative efforts
have demonstrated the meaning of synergy. I thank all of you sincerely.
To my wonderful wife Joy and our lovely children who make great sacrifice each time I
embark on a study. I know they gave up some of the time and interaction that we cherish,
to facilitate reasonable level of uninterruption in this study. To them, I feel a deep sense
of gratitude.
And finally, to God the Father, His Son Jesus Christ, and my personal Counselor, the
Holy Spirit. It has been my priviledged to know you, and the offer to serve you.
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ABSTRACT
Customer relationship management (CRM) is a comprehensive business model for increasing revenues and profits by focusing on customers. More specifically, CRM refers to any application or initiative designed to help firms optimize interactions with customers, suppliers, or prospects via one or more touch points – such as a call center, salesperson, distributor, store, branch office, web, or e-mail – for the purpose of acquiring, retaining, or cross-selling customers. However, many pharmaceutical firms in Nigeria are struggling with their CRM initiatives probably because they have bought the sophisticated software, but do not have the culture, structure, leadership, or internal technical expertise to make the initiative successfully. Therefore, this study was undertaken to investigate the impact of a salesforce motivation on effective implementation of a CRM strategy in the pharmaceutical and healthcare industry in Nigeria. The aim was to find the right elements in motivation mix for designing an integrated compensation and incentive program that can be used by managers to influence and direct a salesperson’s behaviour for effective implementation of a company’s strategic CRM plan. Both primary and secondary sources of data were used. Questionnaire was the principal source of the primary data, while interview was complimentary. Taro Yamane formula was used to determine the sample size of 244 out of the population of 624. Data from the study was analyzed using descriptive and inferential approaches. Simple descriptive tables, charts and table of means were employed as descriptive tools. For hypothesis testing, t-test and correlation analysis were used to judge the significance of the obtained result. Regression analysis was used to formulate necessary mathematical model that depicted the relationship among the research variable that predicted the values of dependent variables. SPSS for windows (SPSS WIN Version 15) was used to analyse and process the data generated. Factor analysis was employed in analyzing the data in order to isolate principal components that account for motivation of a salesperson. The analysis of the study indicated that a close relationship exists between a company’s strategic CRM implementation and its salesforce motivation plan. This meant that the salesforce motivation plan has a direct bearing on the successful implementation of a company’s strategic CRM plan. Out of twenty-name (29) components analysed, the result revealed that six principal components account for 85.75% of the data. This suggests that salary compensation, commission incentive, bonus payment, fringe benefits, recognition of awards for outstanding performance, opportunity for promotion and advancement were the major factors that account for salespersons motivation. These components were further used as independent variables to regress customer relationship index, the result showed statistical significant effect of independent variables of the CRM at P � 0.05 level of significant, and a correspondence value of F = 129.925. It suggests that to get its salespeople to aid in successful implementation of its strategic CRM plan, management needs to coordinate its salesforce motivation plans with the company’s strategic CRM plans. It is recommended that sales people should be involved in the CRM planning process from day one to ensure their interests are fully integrated into the system. Sales managers must make sure that each sales person understands what is expected in a CRM strategy implementation. Management should design a reward structure in which greater
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rewards are tied to better implementation of a CRM performance. Sales managers should convince salespeople that the rewards for better performance are worth the extra effort. Management should give rewards that are valued and attempt to sell the worth of these rewards to the salesforce. The study developed a salesforce motivation model that integrated the work of the motivational theorists, in particular Victor Vroom’s expectancy theory. The emerged model suggested how a motivated salesperson can impact a CRM strategic implementation in the pharmaceutical and health care industry in Nigeria. The model offered the sales managers how to motivate the salespeople, and what to expect from the salespeople when they are motivated.
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TABLE OF CONTENTS
Title Fly
Title page ... … … … … … … … … i
Certificate ... … … … … … … … … ii
Approval ... … … … … … … … … iii
Dedication ... … … … … … … … … iv
Acknowledgements ... … … … … … … … v
Abstract ... … … … … … … … … vi
Table of Contents ... … … … … … … … viii
List of Tables ... … … … … … … … … xi
List of Figures ... … … … … … … … xiii
List of Appendices ... … … … … … … … xv
List of Abbreviation … … … … … … … … xvi
CHAPTER ONE: INTRODUCTION … … … … … 1
1.1 Background of the Study … … … … … … … 1
1.2 Statement of the Problem … … … … … … … 4
1.3 Objectives of the Study … … … … … … … 5
1.4 Research Questions … … … … … … … 5
1.5 Research Hypotheses … … … … … … … 6
1.6 Limitations of the Study … … … … … … … 6
1.7 Significance of the Study… … … … … … … 7
1.8 Conceptual and Operational Definition of Terms … … … 9
References … … … … … … … … 15
CHAPTER TWO: REVIEW OF RELATED LITERATURE AND
THEORETICAL FRAMEWORK … … … 18
2.1 The shift to Relationship Marketing … … … … … 18
2.2 Integrating Customer Focus Across the Firm … … … … 31
2.3 Customer Relationship Management (CRM) … … … … 41
2.4 Sales in the Pharmaceutical Industry … … … … 64
2.5 The Nature of Salesforce Motivation … … … … 74
2.6 Model of the Determinants of a Salesperson’s Performance … … 105
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2.7 Expectancy Theory … … … … … … … 106
2.8 Need Theories … … … … … … … … 109
2.9 Equity Theory … … … … … … … … 114
2.10 Goal-Setting Theory … … … … … … … 115
2.11 Learning Theories … … … … … … … 117
2.12 Human Relation Theories … … … … … … 123
2.13 Pay and Motivation … … … … … … … 124
2.14 Theoretical Framework … … … … … … 125
2.15 Summary and Synthesis of the Review … … … … … 126
References … … … … … … … … 129
CHAPTER THREE: RESEARCH METHODOLOGY … … … 146
3.1 Introduction … … … … … … … … 146
3.2 Scope of the Study … … … … … … … 146
3.3 Research Design … … … … … … … 147
3.4 Method of Data Collection … … … … … … 147
3.5 Sampling Procedure … … … … … … … 148
3.6 Questionnaire Administration … … … … … … 150
3.7 Method of Data Presentation and Analysis … … … … 151
3.8 Analytical Framework … … … … … … … 151
References … … … … … … … … 153
CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND
INTERPRETATION … … … … … 154
4.1 Introduction … … … … … … … … 154
4.2 Classification of Data … … … … … … … 154
4.3 Evidence of CRM Process in the Industry … … … … 158
4.4 Extent of CRM Implementation in the Industry … … … 161
4.5 Evidence of Salesforce Motivation in the Industry … … … 163
4.6 Extent of Motivational Tool Usage in the Industry … … … 166
4.7 Relationship Between Salesforce Motivation and CRM Implementation
in the Industry … … … … … … … … 169
4.8 Extent of the Relationship between Salesforce Motivation and CRM
Implementation in the Industry … … … … … 173
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4.9 Principal Components (PC) Extraction and Sufficiently … … 178
4.10 Regression Factor Scores … … … … … … 183
4.11 Linear Association of Observation Variables and PCs … … 190
4.12 Summary and Synthesis of Analysis and Interpretation … … 192
References … … … … … … … … 193
CHAPTER FIVE: DISCUSSION OF RESEARCH FINDINGS
AND MODEL … … … … … … 195
5.1 Introduction … … … … … … … … 195
5.2 Model for Effective CRM Implementation … … … … 195
5.3 Organizational Goals for a CRM Strategy … … … … 197
5.4 Groundwork for a CRM Strategy … … … … … 198
5.5 Salesforce Motivation for a CRM Strategy … … … … 200
5.6 Salesforce Efforts for a CRM Strategy … … … … 206
5.7 Salesforce Performance for a CRM Strategy … … … … 224
5.8 Salesforce Reward for a CRM Strategy … … … … 227
5.9 Salesforce Satisfaction for a CRM Strategy … … … … 238
5.10 Summary and Synthesis of Discussion … … … … 240
References … … … … … … … … 242
CHAPTER SIX: SUMMARY, CONCLUSION AND
RECOMMENDATIONS … … … … 243
6.1 Introduction … … … … … … … … 243
6.2 Summary of Findings … … … … … … … 243
6.3 Conclusion … … … … … … … … 246
6.4 Recommendations … … … … … … … 249
6.5 Further Research Needs … … … … … … 253
Bibliography … … … … … … … … 254
Appendix … … … … … … … … 274
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LIST OF TABLES
2.1 Distinctions Between Selling and Marketing … … … … 21
2.2 Comparing Transaction-based marketing and Relationship Marketing
Strategies … … … … … … … … 35
2.3 Three levels of Relationship Marketing … … … … 37
2.4 Seller’s and Buyer’s Viewpoint Compared … … … … 62
2.5 47 Largest Pharmaceutical and Biotech Companies … … … 69
2.6 20 Largest Pharmaceutical and Biotech Companies … … … 71
2.7 Top Ten Pharmaceutical Companies … … … … … 72
2.8 Transaction and Relationship Orientation Compared … … … 78
2.9 Salespeople’s Perceived Reasons for Failure and their Motivation
Impact … … … … … … … … … 98
2.10 Specific Elements in Motivation Mix … … … … … 100
2.11 Maslow’s Hierarchy of Needs … … … … … … 110
2.12 Alderfer’s ERG Theory … … … … … … 111
2.13 Equity Theory … … … … … … … … 115
3.1 Top Ten Pharmaceutical and Health Care Companies in Nigeria … 146
3.2 The Big Pharmas in Nigeria … … … … … … 148
4.1 Demographic Characteristics of Respondents … … … 154
4.2 Elements of the CRM Process Evident in the Organizations … … 159
4.3 Descriptive Statistics Showing Mean Responses of Respondents on
the Extent of CRM Practices in the Organizations … … … 161
4.4 Elements of Salesforce Motivation Evident in the Organization … 164
4.5 Descriptive Statistics Showing Mean Responses of Respondents
on the Extent of Motivational Tool Usage in the Organization … 167
4.6 Motivational Tool Usage and Implementation of a CRM Strategy
in the Organization … … … … … … … 169
4.7 Description Statistic’s Showing Mean Responses of Respondents
on the Extent of Motivational Tool Usage Influence on Effective
Implementation of a CRM Strategy in the Organization … … 173
4.8 Component Extraction and Total Variance Expected … … … 178
4.9 Component Loading on Variables … … … … … 179
4.10 Rotated Component Matrix … … … … … … 181
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4.11 ANOVA Showing Correspondence Value … … … … 183
4.12 Coefficients Showing Significance level of P � 0.05 … … … 184
4.13 Rating of T-test Showing Implementation of a CRM Factors by
Respondents with the Average Value of 3 … … … … 185
4.14 T-test Showing Independent Sample Test … … … … 187
4.15 Stream of Communalities Indicating Linear Association Between the
Principal Components and Individual Observed Variables … … 190
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LIST OF FIGURES
2.1 A Simple Model of the Marketing Process … … … … 20
2.2 Three Considerations Underlying the Societal Marketing Concept … 28
2.3 Holistic Marketing Dimensions … … … … … 29
2.4 Forms of Buyer-Seller Interactions on a Continuum from Conflict
to Integration … … … … … … … … 33
2.5 Relationships Marketing Orientation … … … … … 36
2.6 Three Steps to Measure Customer Satisfaction … … … 38
2.7 A Simple Flow Model of the Customer Relationship Management
System … … … … … … … … … 44
2.8 Customer-Centric Approach for Managing Customer Interactions … 47
2.9 Key External Touch-Points and Customer Information Requirements
in the CRM System … … … … … … … 50
2.10 Managing Marketing Strategy and the Marketing Mix … … 58
2.11 The Four Ps of the Marketing Mix … … … … … 61
2.12 The Four P Components of the Marketing Mix … … … 63
2.13 Marketing – Mix Strategy … … … … … … 64
2.14 The Salesforce Motivation Equation … … … … … 76
2.15 Types of Sales Jobs … … … … … … … 80
2.16 Selected Activities of Salespeople … … … … … 82
2.17 Sales Management Responsibilities … … … … … 84
2.18 The Executive Ladder in Personal Selling … … … … 87
2.19 Motivational Conditions … … … … … … 91
2.20 The Cycle of Motivation … … … … … … 92
2.21 Maslow’s Hierarchy of Needs and Possible Sales Managers’ Actions 93
2.22 Model of the Determinants of a Salesperson’s Performance … … 105
2.23 Expectancy, Instrumentality, and Valence … … … … 107
2.24 Expectancy Theory … … … … … … … 108
2.25 The Consequences of Behaviour … … … … … 118
2.26 Five steps in OB MOD … … … … … … 121
5.1 Model of an Effective Implementation of a CRM Strategy … … 196
5.2 Organizational Goal for a CRM Strategy … … … … 197
5.3 Essential Qualities for a Successful CRM Strategy … … … 198
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5.4 Principal Components for a Salesforce Motivation … … … 200
5.5. Input Factors of Salesforce Effort for a Successful CRM Implementation 206
5.6 Output Factors of a Salesforce CRM Performance … … … 224
5.7 Salesforce Compensation for Effective CRM Performance … … 227
5.8 Five Components of a Salesforce Satisfaction …. … … 238
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LIST OF APPENDICES
i. Researcher’s Interview Guide … … … … … … 270
ii. Cover Letter used with the Questionnaire … … … … 274
iii. Research Questionnaire … … … … … … 275
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LIST OF ABBREVIATIONS
ANOVA : Analysis of Variance … … … … … 183
CRM : Customer Relationship Management … … … 12
CEO : Chief Executive Officer … … … … 198
ICT : Information and Communication Technology … 170
MBO : Management By Objectives … … … … 13
MCA : Marketing Cost Analysis … … … … 14
OB MOD : Organizational Behaviour Modification … … 14
PC : Principal Component … … … … … 190
SBUs : Strategic Business Units … … … … 12
SFA : Sales-Force Automation … … … … 13
SVA : Sales Volume Analysis … … … … 14
VMS : Vertical Marketing System … … … … 13
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Salesforce Motivation and Effective Implementation of a CRM Strategy in the
Pharmaceutical and Health Care Industry in Nigeria.
By
Uduji Joseph Ikechukwu PG/Ph.D/08/47289
Department of Marketing University of Nigeria
Enugu Campus
July, 2010
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CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
The rising cost of maintaining a salesforce has been a concern for most sales managers in
today’s increasingly competitive markets. In many pharmaceutical firms, direct selling
costs account for almost half of all marketing expenses. Often, the cost of maintaining the
salesforce is greater than advertising and promotion costs and exceeds 14 percent of a
typical firm’s revenues. The median cost of a business-to-business call is about N2,500 in
Nigeria. Therefore, sales managers have the crucial responsibility to make sure that their
salesforces contribute to the company’s objectives effectively and efficiently. The current
economic environment in Nigeria has prompted significant cost savings especially in
pharmaceutical and health care industry, and has led to demands for more accountability.
In turn, there have been calls for evaluating the contribution of the marketing function to
the firm. Within the marketing department, sales managers are becoming increasingly
concerned about justifying their investments and are facing stiff competition against each
other in competing for scarce resources, such as additional salespeople. Yet, an area that
has received relatively little attention, especially in the pharmaceutical and health care
industry in Nigeria, is the assessment of the impact of a salesforce motivation on
effective implementation of a CRM strategy (Moynihan, 2008: 1163; Maduka, 2006: 27-
35).
In the Pharmaceutical Business Environment Ranking, Nigeria is found towards the
bottom of the table featuring fourteen key countries in the Middle East and Africa (MEA)
region. While Nigeria continues to be considered one of the least attractive markets in the
region, its potential beyond the forecast period is relatively considerable, given the sheer
population size and it’s high disease burden. Nigeria’s pharmaceutical market is forecast
to grow to US$ 1.27 billion in 2012, thus more than doubling the 2007 figure of US$ 596
million. In local currency value, five – year growth will be considerably lower, given the
forecast inflation levels. In the meantime, the federal government of Nigeria remains
supportive of the local pharmaceutical and health care industry, despite the fact that it is
failing to meet the target of 70% of domestic supply. The industry growth is imperative
for the National Health Insurance Scheme (NHIS) target of universal health coverage by
2015 (Tungarazer, 2008: 1193-1196; Kang, 2009: 28-34; Odutola, 2008: 43-45).
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Pharmaceutical and health care companies commonly spend a large amount on
advertising and personal selling. In Nigeria, drug and other health care companies spend
about $20 million a year on promotions. They generally employ salespeople (often called
‘medical reps’ or ‘drug reps’) to market directly and personally to physicians and other
health care providers. Physicians, physicians’ assistants, and nurse practitioners are
perhaps the most important players in pharmaceutical and health care sales because they
write the prescriptions that determine which brands will be used by the patient.
Influencing the physician is often seen as the key to prescription of pharmaceutical and
health care sales. A medium–sized pharmaceutical company in Nigeria might have a
salesforce of 50 representatives. The largest companies have about a hundred of
representatives. Currently, they are approximately 5,000 salespersons in Nigeria pursuing
some 7,000 pharmaceutical and health care prescribers. In Nigeria, drug companies spend
millions of naira annually sending salespersons to physician offices. Commercial stores
and pharmacies are a major target on non-prescription sales and marketing for
pharmaceutical and health care companies (Moyniha, 2008: 1163; Myers, 2008: 11698-
11699; Mackenzie, 2006: 27-35).
The shift away from transaction-based marketing, which focuses on short-term, single
exchange, to customer–focused relationship marketing is one of the most important
trends in pharmaceutical and health care marketing today. Companies recognize that they
cannot grow simply by identifying and attracting new customers; to succeed, they must
build loyal, mutually beneficial relationships with existing customers, suppliers,
distributors, and employees. This strategy benefits the bottom line, because retaining
customers costs much less than acquiring new ones. Building and managing long-term
relationships between buyers and sellers is the hallmark of relationship marketing in the
pharmaceutical and health care industry in Nigeria. Relationship marketing is the
development, growth and maintenance of cost-effective, high-value relationships with
individual drug customers, suppliers, distributors, retailers, and other partners for mutual
benefits over time. Recently, emerging from and closely linked to relationship marketing
in this industry is Customer Relationship Management (CRM). This is the combination of
strategies and tools that drive relationship programs, reorienting the entire organization to
a concentrated focus on satisfying drug customers. CRM leverages technology as a
means to manage customer relationships and to integrate all stakeholders into a
company’s product design and development, manufacturing, marketing, sales, and
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customer service processes (Boone and Kurtz, 2004: 164-187; Lamb, Hair and McDaniel,
2004: 640-644).
CRM represents a shift in thinking for everyone involved with the pharmaceutical
company–from the CEO down through and encompassing all other key stakeholders,
including suppliers, dealers, and other partners. All recognize that solid customer
relations are fostered by similarly strong relationships with other major stakeholders.
However, the principles of personal selling as just described are transaction oriented –
their aim is to help salespeople close a specific sale with a customer. But in many cases,
the company is not seeking simply a sale: it has targeted a major customer that it would
like to win and keep. The company would like to show that it has the capabilities to serve
the customer over the long haul in a mutually profitable relationship. The salesforce
usually plays an important role in building and managing customer relationships. Today’s
large customers favour suppliers who can sell and deliver a coordinated set of products
and services to many locations, and who can work closely with customer teams to
improve products and processes. For these customers, the first sale is only the beginning
of the relationship. Unfortunately, some pharmaceutical companies ignore these new
realities. They sale their products through separate salesforces, each working
independently to close sales. Their technical people may not be willing to lend time to
educate a customer. Their engineering design, and manufacturing people may have the
attitude that their job only is to make good products and the salesperson’s to sell them to
customers. Their salespeople focus on pushing products toward customers rather than
listening to customers and providing solutions. But other pharmaceutical companies, such
as those in North America, Great Britain and Western Europe, however recognize that
winning and keeping accounts requires more that making good products and directing the
salesforce to close lots of sales. It requires listening to customers, understanding their
needs, and carefully coordinating the whole company’s efforts to create customer value
and to build lasting relationships with important customers. Salespeople are an important
link within a firm since they help translate sales and marketing strategy into effective
implementation. Therefore, studies that investigate the activities and attitudes of the
salespeople in Nigeria, can provide sales management with important in sights and
contribute towards filling an important gap in the literature..
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1.2 Statement of the Problem
CRM is a comprehensive business model for increasing revenues and profits by focusing
on customers. Many companies are now adopting CRM as a mission-critical business
strategy. These companies are redesigning internal and external business processes and
associated information systems with them. Because the focus of CRM is aligning the
organization’s internal and external systems to be customer – centric, marketing as a
discipline becomes a core contributor to the success of CRM by virtue of its disciplinary
expertise on customers. Specifically, the salesforce is a group within most firms that can
add substantial value to the success of this process. The salesforce can play a pivotal
relationship management role.
More sophisticated approaches to data management are a key enabler of CRM. Yet, it is a
serious mistake to consider CRM as a mere software. In fact, many pharmaceutical firms
in Nigeria are struggling with their CRM initiatives probably because they have bought
the sophisticated software, but do not have the culture, structure, leadership, or internal
technical expertise to make the initiative successful. The biggest mistake is thinking that
CRM is owned by the IT people simply because the process is software – driven. But if
anyone should own CRM, it should be the customer contact team within a firm, which
usually means the salesforce. Problems leading to CRM failure often are traced to
organizational, not software, issues. A recent report from a conference board information
group indicates that half of the companies’ survey in North America and Europe suggest
that lack of salesforce alignment is the leading difficulty in CRM implementation (Myers,
2008: 1173-1178).
Salesforce have a key role to play in fostering successful relationships. They spend a
large amount of time by themselves calling on customers and traveling between accounts.
This means that most of the time they are away from any kind of support from their peers
or leaders, and they often feel isolated and detached from their companies. Consequently,
they usually could require more motivation than is needed for other jobs to reach the
performance level management desires. Salespeople can also be fiercely independent.
Particularly, very successful salespeople may balk at changing their customer approach
substantively when their interests are not integrated into the system. This potential pitfall
of CRM implementation, if not properly addressed, can be devastating to a firm
financially, operationally, and culturally. As stated earlier that if a CRM system fails, the
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first place to look is not within the software but within the ranks of management. This
gave rise to the importance of this study, which was to examine the impact of a salesforce
motivation on effective implementation of a CRM strategy in the pharmaceutical and
healthcare industry in Nigeria.
1.3 Objectives of the Study
The broad objective of this study was investigating the impact of a salesforce motivation
on effective implementation of a CRM strategy in Pharmaceutical and health care
Industry in Nigeria. The specific objectives included:
1. To ascertain if CRM strategy exists in the pharmaceutical and healthcare industry
in Nigeria.
2. To examine if CRM strategy is effectively implemented in the pharmaceutical and
health care industry in Nigeria.
3. To find out if salesforce is motivated in the pharmaceutical and health care
industry in Nigeria.
4. To examine if the elements of the saleforce motivation mix are effectively
implemented in the pharmaceutical and health care industry in Nigeria.
5. To determine if there is any relationship between the saleforce motivation and the
effectiveness of CRM strategy implementation in the pharmaceutical and health
care industry in Nigeria.
1.4 Research Questions
To achieve the purpose of this research, the study was guided by the following
questions:
1. What elements of the CRM process are evident in the pharmaceutical and health
care industry in Nigeria?.
2. What is the extent of the CRM implementation in the pharmaceutical and health
care industry in Nigeria?
3. How motivated is the salesforece in the pharmaceutical and health care industry in
Nigeria?
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4. How effective is the implementation of the salesforce motivation elements in the
pharmaceutical and health care industry in Nigeria?
5. What is the level of relationship between salesforce motivation and effective
implementation of a CRM strategy in the pharmaceutical and health care industry
in Nigeria?
1.5 Research Hypotheses
This study was predicated on the following propositions:
1. Elements of the CRM process are not evident in the pharmaceutical and health
care industry in Nigeria.
2. CRM strategy is not effectively implemented in the pharmaceutical and health
care industry in Nigeria.
3. Salesforce is not motivated in the pharmaceutical and health care industry in
Nigeria.
4. Elements of salesforce motivation are not effectively implemented in the
pharmaceutical and health care industry in Nigeria.
5. There is no significant relationship between salesforce motivation and effective
implementation of a CRM strategy in the pharmaceutical and health care industry
in Nigeria.
1.6 Limitations of the Study
The researcher faced many challenges in the process of executing this work. For instance,
most of the pharmaceutical and health care companies in Nigeria do not have the
confidence that the material supplied by them to researchers would not be misused and as
such they are often reluctant in supplying the needed information to researchers. The
concept of secrecy seems to be sacrosanct to the pharmaceutical and health care industry
in Nigeria that it proves an impermeable barrier to researchers.
Also, the problem of library management and functioning faced the researcher in the
process of executing this work. Library management and functioning is not satisfactory at
many places in this country. Much of the time and energy of the researcher was be spent
24
in tracing out the books, journals, reports, rather than in tracing out relevant materials
from them. There was also the problem that many of the libraries have not been getting
copies of the old and new Acts/Rules, reports and other government documents on the
pharmaceutical and health care industry in Nigeria. This problem is felt more in libraries
which are not located in federal capital territory. However, efforts were made by the
researcher to reach the libraries and offices that have the regular supply of these
documents in the country.
1.7 Significance of the Study
Historically, the practice of sales management in Pharmaceutical and Health care industry
in Nigeria resembled the practice of medicine by tribal witch doctors. Sales managers in
the pharmaceutical and health care industry in Nigeria have often had to rely on large
doses of folklore, tradition, intuition, and personal experience in deciding how to
motivate and direct the performance of their salesforces. While many pharmaceutical
firms do little or nothing to discover why their customers behave the way they do, too
few expend much money or effort on studies of the motivation and behaviour of their
own salespeople. This study is needed to improve Customer Relationship Management
(CRM) in pharmaceutical and health care industry in Nigeria. If a pharmaceutical
company does not acquire this knowledge about salesforce motivation, they could lose
large amounts of money, customers or even go out of business in today’s competitive
Nigerian market. But if they do, they could have great income potential and profit, keep
loyal customers, and gain lots of market share.
Until very recently, there has been insufficient interaction between the university research
departments on one side and business establishments, government departments and
research institutions on the other side. A great deal of primary data of non-confidential
nature remains untouched/untreated by the researchers for want of proper contacts.
Efforts have been made to develop satisfactory liaison among all concerned for better and
realistic researches. There has been the need to develop some mechanisms of a
university–industry interaction programme so that academics can get ideas from
practitioners on what needs to be researched, and practitioners can apply the research
done by the academics. In the pharmaceutical and health care industry in Nigeria, sales
managers received little information or guidance from marketing academicians. Over the
years there was little published theory and even less empirical research concerning the
25
variables influencing one salesperson to perform better than another. This study will
blaze the trail to meet the necessary challenges of salespeople motivation on effective
implementation of a CRM strategy in the pharmaceutical and health care industry, which
is a wide business strategy designed to optimize profitability, revenue, and customer
satisfaction by focusing on highly defined and precise customer groups in Nigeria.
Marketing scholars have not done much in this special field of study. Much of the work
that has found its way into the literature so far has been experiential and unsophisticated.
The shift away from transaction–based marketing, which focuses on short-term, single
exchanges to customer-focused relationship marketing, is one of the most important
trends in the pharmaceutical and health care industry today. This study will explore the
linking strategies and the sales roles in this era of Customer Relationship Management
(CRM). As salespeople are the first line of customer contact, the findings of this study
will contribute immensely on how such customer-centric business model will place the
salesforce in a crucial role in the pharmaceutical and health care industry in Nigeria. The
study will also provide a good overview of CRM and how the salesforce and selling
function interface with strategies and processes in market-oriented, custom-centric firms.
The result of this study will form a good recommendation to marketing students, who
will find it very relevant to the immediate environment in which they will practice after
their course, and to practicing marketing managers who will want to use it to increase
their skills and awareness either through self-study or in connection with marketing
development programmes inside and outside their firms.
Successful organizations today place the customer at the center of firm strategies and
processes. Such customer – centric business models place the salesforce in a crucial role,
as salespeople are the first line of customer contact in most firms. Thus, salespeople and
the selling function are key success factors in modern organizations. Unfortunately, there
is little published information on the linking strategies and the salesperson’s role in this
era of customer relationship management. There is little published theory and even less
empirical research concerning the variables influencing the salesperson to perform better,
especially in pharmaceutical and health care industry.
In an attempt to fill this gap in the literature, this study will provide an overview of CRM
and then proceeds to illustrate how the salesforce and selling function interface with
strategies and process in market-oriented, customer-centric pharmaceutical firms in
26
Nigeria. The process of strategy development and implementation would be examined
and specific analysis would be provided on how personal selling can contribute to
marketing strategy and what salespeople can do to explore the benefit of long-term
relationships. It is vital that sales managers have a clear understanding of salesforce
motivation so that they can maximize the performance potential of the salespeople in the
organization. This study would offer a model for sales managers to understand salesforce
behaviour when they are motivated.
Finally, this study was intended to develop a salesforce motivation model that will
integrate the work of motivational theorists, in particular Victor Vroom’s expectancy
theory. The emerged model would be able to suggest how a motivated salesperson can
impact a CRM strategy implementation in the pharmaceutical and health care industry in
Nigeria. The implications for sales managers would be made available in published form
so that practitioners can apply them in the industry.
1.8 Conceptual and Operational Definition of Terms
Some of the terms that were often used in this study are defined as follows:
Drug Rep.: This term was often used synonymously with specialty sales representative.
It is a term for medical field representative of pharmaceutical companies in Nigeria, USA
and UK. Currently, there are approximately 100,000 pharmaceutical sales reps in the
united Sates pursuing some 830,000 pharmaceutical prescribers. A pharmaceutical
representative will often try to see a given physician every few weeks. Representatives
often have a call list of about 200 physicians with 120 targets that should be visited in 1-2
week cycles (Mackenzie, 2007: 15-19).
Detail Men: This term was used synonymously with traditional sales representative. It is
the older term for the salespeople in the pharmaceutical companies. It is a position in
which the salesperson is primarily an inside order-taker. For example, the retail clerk
standing behind a counter taking detail order of a customer, and ensuring that they are
properly delivered. They market directly and personally to the physicians (Moynihan,
2008: 1163).
Big Pharmas: This term was used synonymously with the population of this study. It is
the term used for the top ten pharmaceutical and health care companies in Nigeria. They
27
spend millions of naira annually sending representatives to physician offices to stimulate
sales. They spend millions of naira also on the service of specialized health care
marketing research companies to perform marketing research among physicians and other
health care professionals (Nierenberg, 2009: 5-53).
Relationship Marketing: This term was used synonymously with cooperation strategy
in marketing. It is long-term, value-added relationships developed over time with
customers and suppliers. This effect represents a major shift from the traditional concept
of marketing as a simple exchange between buyer and seller. The concept of relationship
marketing is the current state of customer-driven marketing (Boone and Kurtz, 2004:
165; Futreu, 2000: 234-242).
Marketing Myopia: This term was used synonymously with product-orientated strategy
in marketing. It is the management’s failure to often recognize the scope of its business.
Product-oriented rather than customer-oriented management endangers future growth. To
avoid marketing myopia, companies must broadly define organizational goals oriented
toward consumer needs. This approach can help a company stand out from others in
highly competitive environments, such as pharmaceutical and health care industry (Lamb,
Hair and McDaniel, 2004: 642; Goutain, 2000:161-172).
Interactive Marketing: This term was used synonymously with point-of-sales in
marketing. It refers to buyer-seller communications in which the customer controls the
amount and type of information received from a marketer. This technique provides
immediate access to key product information when the consumer wants it. Interactive
techniques have been used for more than a decade; point-of-sale brochures and coupon
dispensers are a simple form of interactive advertising (Cravens and Piercy, 2003: 513-
16; Goran, 2002: 574-583).
Strategic Alliance: This term was used synonymously with business alliance in
marketing. It refers to partnership formed to create or maintain a competitive advantage.
The formation of strategic alliances has been on the rise. These take many forms, from
product development partnerships that involve shared costs for research and development
and marketing to vertical alliances in which one company provides a product or
component to another firm who then distributes or sells it under its own brand (Perrault
and McCarthy 2002: 431-433; Coteora and Graham, 2002:514-516).
28
Strategic Planning: This term was used synonymously with middle-level plan in sales
management. It can be defined as the process of determining an organization’s primary
objectives and then adopting courses of action that will eventually achieve these
objectives. This process includes, of course, allocation of necessary resources. Strategic
planning has a critical impact on a firm’s destiny because it provides longterm direction
for its decision makers (Kotler and Keller, 2006: 604-606; Doyle, 2000: 299-311).
Tactical Planning: This term was used synonymously with lower-level plan in sales
management. It guides the implementation of activities specified in the strategic plan.
Unlike strategic plans, tactical plans typically address short-term actions that focus on
current and near-future activities that a firm must complete to implement its larger
strategies. Mistakes in strategic decisions and in tactical planning are usually costly
(Kotler and Armstrong, 2006: 487-489; Donaram, Mowen and Brown, 2004: 124-146).
Environmental Scanning: This term used synonymously with market survey in
marketing research. It is the process of collecting information about the external
marketing environment to identify and interpret potential trends. The goal is to analyze
the information and decide whether these trends represent opportunities or threats to the
company. The firm is then able to determine the best response to a particular
environmental change (Rust, Ambler, Carpenter, Kumar and Srivastava, 2004: 76-89;
Grant, Cravens, Low and Moncrief, 2001: 165-178).
Competitive Environment: This term was used synonymously with free market
environment. It refers to the interactive process that occurs in the market-place among
marketers of directly competitive products, marketers of products that can be substituted
for one another, and marketers competing for the consumer’s purchasing power (Cross,
Hartley and Rudelius, 2001: 199-206; Johnson and Marshall, 2003: 263-265).
Strategic Window: This term was used synonymously with competitive market
opportunity. It refers to limited periods during which the key requirements of a market
and the particular competencies of a firm best fit together. The view through a strategic
window shows planners a way to relate potential opportunities to company capabilities
(Chonko, Dubinsky, Jones and Robert, 2003: 935-946; Erffmeyer and Johnson, 2001:
167-175).
29
Strategic Business Units (SBUs): This term was used synonymously with profit centres.
It is key business units within diversified firms. Each SBU has its own managers,
resources, objectives, and competitors. A division, product line, or single product may
define the boundaries of an SBU. Each SBU pursues its own distinct mission, and each
develops its own plans independently or other units in the organization. SBUs focus the
attention of company managers so that they can respond effectively to changing
consumer demand within Limited markets (Albers, 2002: 248-266; Wilson, 2001:208-
210g; Day, 2003: 77-82).
Time-based Competition: This term was used synonymously with strategic marketing
management. It is the strategy of developing and distributing goods and services more
quickly than competitors. The flexibility and responsiveness of time-based competitors
enable them to improve product quality, reduce costs, and expand product offerings to
satisfy new market segments and enhance customer satisfaction (Sandis, 2000: 35-42;
Aaker, 2005: 168-192; Ahearne, Bhattacharya, and Gruen, 2005: 574-585).
Customer Relationship Management (CRM): This term was used synonymously with
integration strategy in marketing. It is the combination of strategies and tools that drive
relationship programs, reorienting the entire organization to a concentrated focus on
satisfying customers. Leveraging technology, CRM integrates all stakeholders into a
company’s product design and development, manufacturing, marketing design and
development, manufacturing, marketing, sales, and customer service processes
(Donaldson, 2001:518-520; Colletti and Fiss, 2002: 47-49; Galea, 2004: 29-30).
Internal Marketing: This term was used synonymously with staff marketing of a firm. It
refers to the managerial actions that help all members of the organization understand and
accept their respective roles in implementing a marketing strategy. Good internal
customer satisfaction helps organizations to attract, select, and retain outstanding
employees who appreciate and value their role in the delivery of superior service to
external customers (Sarin and Mahajan, 2001: 34-53; Jobber and Lancaster, 2006: 44-47).
Database Marketing: This term was used synonymously with software marketing
strategy of a firm. It is the use of software to analyze marketing information, identifying
and targeting messages toward specific groups of potential customers. It is a particularly
effective tool for building relationships because it allows sellers to sort through huge
quantities of data from multiple sources on the buying habits or preferences of customers
(Lancaster and Massingham, 2001: 436; Churchill, Ford and Walker, 2000: 172-196).
30
Vertical Marketing System (VMS): This term was used synonymously with effective
system marketing strategy of a firm. It is a planned channel system designed to improve
distribution efficiency and cost effectiveness by integrating various functions throughout
the distribution chain. A vertical marketing system can achieve this goal through either
forward or backward integration (Boone and Kurtz, 2004: 447-449; Doyle, 2000: 299-
311).
Guerilla Marketing: This term was used synonymously with monkey-style hustling
marketing strategy. It is innovative, low-cost marketing schemes designed to get
consumers’ attention in unusual ways. It is a relatively new approach used by marketers
whose firms are underfunded for a full marketing program. Many of these firms can’t
afford the huge costs involved in the orthodox media of print and broadcasting, so they
need to find an innovative, low-cost way to reach their market (Aaker, 2005: 216-219;
Goran, 2002: 574-583).
Sales-Force Automation (SFA): This term was used synonymously with mobile office
marketing strategy. It is the application of new technologies to the sales process. Broadly
used, the term refers to the use of everything from pagers and Web-browsing cell phones,
to voice and electronic mail, to laptops and notebook computers. More narrowly used, it
refers to the use of computers by salespeople for activities beyond the use of word
processors, spreadsheets, and connection to order-entry systems (Albers, 2002: 248-266;
Goutain, 2000:161-172).
Missionary Salesperson: This term was used synonymously with Artillery reps in
marketing. It is a sales job intended to build goodwill, perform promotional activities, and
provide information and other services for the customers. A missionary sales
representative is not expected or permitted to solicit an order. An example of this position
is a missionary salesperson for a distiller or detail sales representative for promotion of a
pharmaceutical product (Maduka, 2006: 27-35).
Management by Objectives (MBO): This term was used synonymously with
participative goal-setting sales management technique. It is a supervisory technique used
by many companies to increase the sales staff’s understanding and acceptance of the
criteria by which they will be evaluated. In MBO, the manager and salesperson set
mutually agreed-upon performance goals. Salesperson who participate in an MBO
31
program are more likely to know what is expected of them and to feel that their goals are
attainable and equitable than those who do not take part in such a program (Johnson and
Marshall, 2003: 263-265).
Sales Volume Analysis (SVA): This term was used synonymously with sales summary
of a firm. It is a careful study of a company’s record as summarized in the net sale section
of its profit-and-loss statement. It is a detailed study of the naira or the unit sales volume
by product lines, territories, key accounts, and general classes of customers. A sales’
volume analysis may be expanded to include a corresponding study of cost of goods sold.
The result is an analysis of its gross margin, also broken down into such segments as
products or territories (Lancaster and Massingham, 2001: 435-436).
Marketing Cost Analysis (MCA): This term was used synonymously with cost of sales
summary of a firm. It is a detailed study of a firm’s marketing costs. It is used to discover
unprofitability segments and inefficiently performed functions of the company’s
marketing program. It goes beyond a sales volume analysis to determine the profitability
of various aspects of the marketing operation. Thus, it becomes an important part of an
overall sales performance analysis. In a general sense, a sales volume analysis and a
marketing cost analysis are two component parts of a detailed study of a company’s
operating statement (Churchill, Ford and Walker, 2000: 172-196).
Organizational Behaviour Modificaiton (OB MOD): This term was used
synonymously with salesforce behaviour modification in marketing. Sales managers are
engaging in OB MOD when they systematically apply operant conditioning techniques to
promote the performance of organizational functional behaviour and discourage the
performance of dysfunctional behaviours. It has been successfully used to improve
salesforce productivity, efficiency and effectiveness. (Chouko, Dubinsky, Jones and
Robert, 2003: 935-946). Organization: This term was used synonymously with company or firm in an Industry. It
refers to any business organization or individual engaged in economic activity with the
aim of producing goods or services for sales to others. An organization is a combination
of people, or individual efforts working together in pursuit of certain common purposes
called organizational goals. It is any group of two or more people working to achieve a
goal or goals. The goals may be such a thing as profit (Donavan, Mowen and Brown,
2004:128-146).
32
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Futrell, C.M. (2000) Sales Management, Fort worth, IL: Dryden Press. Galea, C. (2004) “The Compensation Survey” Sales and Marketing Management, May:
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“Measuring Marketing Productivity: Current Knowledge and Future Directors” Journal of Mariketing, 68 (October): 76-86.
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The IEBM Encyclopedia of Marketing, London: Thomson Learning.
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CHAPTER TWO
REVIEW OF RELATED LITERATURE AND THEORETICAL FRAMEWORK
2.1 The Shift to Relationship Marketing
There has been a shift from a transaction to a relationship focus in marketing. Customers
become partners and the firm must make long-term commitments to maintaining those
relationships with quality, service, and innovation. This represents a paradigm shift
within marketing – away from an acquisition/transaction focus toward a
retention/relationship focus. This is a philosophy of doing business, a strategic
orientation, which focuses on keeping and improving relationships with current
customers rather than on acquiring new customers. This philosophy assumes that many
consumers and business customers prefer to have an on-going relationship with one
organization than to switch continually among providers in their search for value.
Building on this assumption and another that suggests it is usually much cheaper to keep
a current customer than to attract a new one, successful marketers are working on
effective strategies for retaining customers. Firm’s relationships with their customers, like
other social relationships, tend to evolve over time. Scholars have suggested that market
exchange relationships between providers and customers often have the potential to
evolve from strangers to acquaintances, to friends, to partners (Beverland, 2001:207-215;
Brown, 2000:119-122).
The market and competitive challenges confronting executives around the world are
complex and rapidly changing. Market and industry boundaries are often difficult to
define because of the entry of new and unfamiliar forms of competition. Customers’
demands for superior value from the products they purchase are unprecedented, as they
become yet more knowledgeable about products (goods and services) and more
sophisticated in the judgetments they make. External influences from diverse pressure
groups and lobbyists have escalated dramatically in country after country. Major change
initiatives are under way in industries ranging from pharmaceutical and health care to
telecommunications. Innovative business models that question the traditional roles of an
industry are defining a new agenda for business and marketing strategy development.
Companies are adopting market-driven strategies guided by the logic that all business
strategy decisions should start with a clear understanding of markets, customers, and
competitors. Increasingly, it is clear that enhancements in customer value provide a
36
primary route to achieving superior shareholder value. Marketing is a social and
managerial process by which individuals and groups obtain what they need and want
through creating and exchanging value with others. In a narrower business context,
marketing involves building profitable, value-laden exchange relationships with
customers. Hence, marketing is the process by which companies create value for
customers and build strong customer relationships in order to capture value from
customers in return (Kotler and Armstrong, 2006: 4-7).
Figure 2.1: Presents a simple five-step model of the marketing process. In the first
four steps, companies work to understand consumers, create customer value, and build
strong customer relationships. In the final step, companies reap the rewards of creating
superior customer value. By creating value for consumers, they in turn capture value
from consumers in the form of sales, profits, and long-term customer equity. As a first
step, marketers need to understand customer needs and wants and the marketplace within
which they operate. The five core customer and marketplace concepts are: needs, wants,
and demands; marketing offers (product, services, and experiences); value and
satisfaction; exchanges and relationships; and markets. The most basic concept
underlying marketing is that of human needs. Human needs are states of felt deprivation.
They include basic physical needs for food, clothing, warmth, and safety; social needs for
belonging and affection; and individual needs for knowledge and self-expression. These
needs were not created by marketers; they are a basic part of the human make-up. Wants
are the form human needs take as they are shaped by culture and individual personality.
A person in Nigeria needs food but wants a soft drink. Wants are shaped by one’s society
and are described in terms of objects that will satisfy needs. When backed by buying
power, wants become demands. Given their wants and resources, people demand
products with benefits that add up to the most value and satisfaction. Outstanding
marketing companies go to great lengths to learn about and understand their customer’s
needs, wants, and demands. They conduct consumer research and analyze mountains of
customer data. Their people at all levels – including top management – stay close to
customers (Kotler and Armstrong, 2006: 6-7; Day, 2003: 77-82; Doyle, 2000: 299-311;
Lehmann, 2004: 73-75).
37
Figure 2.1: A simple model of the marketing process
Source: Kotler, P. and Armstrong, G. (2006), Principles of Marketing, New Jersy:
Pearson Education
Consumer’s needs and wants are fulfilled through a marketing offer – some combination
of products, services, information, or experiences offered to a market to satisfy a need or
want. Marketing offers are not limited to physical products. They also include services,
activities or benefits offered for sale that are essentially intangible and do not result in the
ownership of anything, such as banking and hotel services. More broadly, marketing
offers also include other entities, such as persons, places, organizations, information, and
ideas. Marketing occurs when people decide to satisfy needs and wants through exchange
relationships. Exchange is the act of obtaining a desired object from someone by offering
something in return. In the broadest sense, the marketer tries to bring about a response to
some marketing offer. The response may be more than simply buying or trading products
and services. Marketing consists of action taken to build and maintain desirable exchange
relationships with target audiences involving a product, service, idea, or other object.
Beyond simply attracting new customers and creating transactions, the goal is to retain
customers and grow their business with the company. Marketers want to build strong
relationships by consistently delivering superior customer value (Aaker, 2005:149-152;
Arnette, German and Hunt, 2003: 89-105). The concepts of exchange and relationships lead to the concept of a market. A market is
the set of actual and potential buyers of a product. These buyers share a particular need or
want that can be satisfied through exchange relationships. Marketing means managing
markets to bring about profitable customer relationships. However, creating these
relationships takes work. Seller must search for buyers, identify their needs, design good
marketing offer, set prices for them, promote them, and store and deliver them. Activities
Understand the market place and customer needs and wants
Design a customer-driven marketing strategy
Construct a marketing program that delivers superior value
Build profitable relationships and create customer delight
Capture value from customers to create profits and customer quality
Create value for customers and build customer relationships
Capture value from customers in return
38
such as product development, research, communication, distribution, pricing, and service
are core marketing activities. Once it fully understands consumers and the marketplace,
marketing management can design a customer-driven marketing strategy. We define
marketing management as the art and science of choosing target markets and building
profitable relationships with them. The marketing manager’s aim is to find, attract, keep,
and grow target customers by creating, delivering, and communicating superior customer
value (Coviello, Brodie, Danaher and Johnston, 2002: 33-46; Wood, 2003: 126-132,
Saren, 2001: 794-796). Many people, including some executives, mistakenly think that selling and marketing are
synonymous. However, there are vast differences between the two activities. The basic
difference is that selling is internally focused, while marketing is externally focused for
example, when a company makes a product and then tries to persuade customers to buy
it, that’s selling. In effect, the firm attempts to alter consumer demand to fit the firm’s
supply of the product. But when a firm finds out what the customer wants and develops a
product that will satisfy that need and also yield a profit, that’s marketing. In marketing,
the company adjusts supply to the will of consumer demand. A selling approach may be
successful for a while, but if the customer is not given first priority, problems will occur.
According to Lamb, Hair and McDaniel (2004: 24), some distinctions between selling
and marketing are as follows in table 2.1:
Table 2.1: Distinctions Between Selling and Marketing Selling Versus Marketing
(i) Emphasis is on the product. (ii) Company first makes the product and then
figures, out how to sell it. (iii) Management is sales volume oriented. (iv) Planning is short run oriented, in terms of
today’s products and markets. (v) Needs of seller are stressed.
Emphasis is on customers’ wants. Company first determines customers’ wants and then figures out how to make and deliver a product to satisfy those wants. Management is profit-oriented. Planning is long-run oriented, in terms of new products, tomorrow’s markets, and future growth. Wants of buyers are stressed.
Source: Lamb, Hair, J. and McDaniel, C. (2004) Marketing, Mason: Thomson Learning. The essence of marketing is the exchange process, in which two or more parties give
some thing of value to each other to satisfy felt needs. In many exchanges, people trade
money for tangible goods, intangible services etc. Although marketing has always been a
part of business, its importance has varied greatly. According to Boone and Kurtz, 2004:
39
9-13), four major eras in the history of marketing are identified: (1) the production era,
(2) the sales era, (3) the marketing era, and (4) the relationship era. But we should
understand that these eras depict the general evolution in marketing. Although many
firms have progressed to the fourth era, some are still in the first or second era.
Prior to 1925, most firms – even those operating in highly developed economics in
Western Europe and North America – focused narrowly on production. Manufacturers
stressed production of quality products and then looked for people to purchase them. The
prevailing attitude of this era held that a good product (one with high physical quality)
would sell itself. This production orientation dominated business philosophy for decades;
indeed, business success was often defined solely in terms of production achievements.
The production era did not reach its peak until the early part of the 20th Century. Henry
Ford’s mass – production line exemplifies this orientation. Ford’s slogan, they
(customers) can have any color they want, as long as it’s black, and reflected the
prevalent attitude toward marketing. Production shortages and intense consumer demand
ruled the day. It is easy to understand how production activities took precedence. The
prevailing attitude of the production era states that a good product will sell itself (Dwyer,
Hill and Warren, 2000: 151-159; Gourville and Rangan, 2004: 38-58).
The essence of the production era resounds in a statement made over 100 years ago by
philosophers that if a man writes a better book, preaches a better sermon, or makes a
better mousetrap than his neighbour, though he builds his house in the woods, the world
will make a beaten path to his door. However, a better mousetrap is no guarantee of
success, and marketing history is full of miserable failures despite better mousetrap
designs. In fact, over 80 percent of new products fail. Inventing the greatest new product
is not enough. That product must also solve a perceived marketplace need. Otherwise,
even the best-engineered, highest-quality product will fail (Cardador and Pratt, 2006:
174-184; Homburg, Workman and Jansen, 2000: 459-478).
What philosophy should guide a company’s marketing effort? What relative weights
should be given to the interest of the organization, the customers, and society? Kotler and
Keller (2006:15-20) separated the concept of the production era into two: (i) the
production concept, and (ii) the product concept. The Production Concept holds that
consumers will favour products that are available and highly affordable. Therefore,
management should focus on improving production and distribution efficiency. Managers
40
of production – oriented businesses concentrate on achieving high production efficiency,
low costs, and mass distribution. Although useful in some situations, the production
concept can lead to marketing myopia. Companies adopting this orientation run a major
risk of focusing too narrowly on their own operations and losing sight of the real
objective – satisfying customer needs and building customer relationships. The Product
Concept holds that consumers will favour products that offer the most in quality
performance, and innovative features. Under this concept, marketing strategy focuses on
making continuous product improvements. Some manufacturers believe that if they can
build a better mousetrap, the world will beat a path to their door. But they are often
rudely shocked. Buyers may well be looking for a better solution to a mouse problem but
not necessarily for a better mousetrap.
Production techniques in the United States and Europe became more sophisticated, and
output grew from the 1920s into the early 1950s. Thus, manufacturers began to increase
their emphasis on effective salesforces to find customers for their output. In this era,
firms attempted to match their output to the potential number of customers who would
want it. Companies with a sales orientation assume that customers will resist purchasing
goods and services not deemed essential and that the task of personal selling and
advertising is to convince them to buy. Although marketing departments began to emerge
from the shadows of production, finance, and engineering during the sales era, they
tended to remain in subordinate positions. Many chief marketing executives held the title
of sales manager. The prevailing attitude of the sales era states that creative advertising
and selling will overcome consumers’ resistance and convince them to buy (Chonko,
Dubinsky, Jones and Robert, 2003: 935-946; Cumming, 2001: 87-88; Futrell, 2000: 224-
227).
Many companies follow the selling concept, which holds that consumers will not buy
enough of the firm’s products unless it undertakes a large – scale selling and promotion
effort. The concept is typically practiced with unsought goods – those that buyers do not
normally think of buying, such as insurance. These industries must be good at attracting
down prospects and selling them on product benefits. Most firms practice the selling
concept when they face overcapacity. Their aim is to sell what they make rather than
make what the market wants. Such a marketing strategy carries high risks. It focuses on
creating sales transactions rather than on building long-term, profitable customer
41
relationships (Kotler and Armstrong, 2006: 10; Beverland, 2001: 207-215; Conchar,
Crask and Zinkhan, 2005: 445-460).
A sales orientation is based on the ideas that people will buy more goods and services if
aggressive sales techniques are used and that high sales result in high profits. Not only
are sales to the final buyer emphasized but intermediaries, are also encouraged to push
manufacturers’ products more aggressively. To sales-oriented firms, marketing means
selling things and collecting money. The fundamental problem with a sales orientation, as
with a production orientation, is lack of understanding of the needs and wants of the
marketplace. Sales-oriented companies often find that, despite the quality of their
salesforce, they cannot convince people to buy goods or services that are neither wanted
nor needed. Some sales-oriented firms simply lack understanding of what is important to
their customers. In the era of sales orientation, the term marketing was not in use. Instead,
producers and sales departments headed by executives whose job was to manage a
salesforce. The function of the sales department was simply to sell the company’s output,
at a price set by production and financial executives. Thus the sales-orientation stage was
characterized by a heavy reliance on promotional activity to sell the products the firm
wanted to make (Wagner, Klein and Keith, 2001: 289-306; Voss and Voss, 2000: 67-83).
Personal incomes and consumer demand for goods and services dropped rapidly during
the great depression of the early 1930s, thrusting marketing into a more important role.
Organizational survival dictated that managers pay close attention to the markets for their
goods and services. This trend ended with the outbreak of World War II, when rationing
and shortages of consumer goods became commonplace. The war years, however, created
only a pause in an emerging trend in business: a shift in the focus from products and sales
to satisfying customer needs. According to Moorman and Lehmann (2004: 214-226), at
the end of World War II there was an enormous pent-up demand for consumer goods
created by wartime shortages. As a result, manufacturing plants turned out tremendous
quantities of goods that were quickly purchased. However, the postwar surge in consumer
spending slowed down as supply caught up with demand, and many firms found they had
excess production capacity. In an attempt to stimulate sales, firms reverted to the
aggressive promotional and sales activities of the sales – orientation era. However, this
time consumers were less willing to be persuaded. What the sellers discovered was that
42
the war years had also changed the consumer. The thousands of service men and women
who spent time overseas came home more sophisticated and worldly. In addition, the war
effort brought many women out of the home and into the workforce for the first time.
Because of their experiences, consumers had become more knowledgeable, less naive,
and less easily influenced. In addition, they had more choices. The technology developed
during the war, when converted to peacetime activity, made it possible to produce a much
greater variety of goods. Thus the evolution of marketing continued. Many companies
recognized that to put idle capacity to work they had to produce what consumers wanted.
Moingeon and Soenen (2002: 172-194), wrote that in the marketing orientation stage,
companies identify what customers want and tailor all activities of the firm to satisfy
those needs as efficiently and effectively as possible. In the marketing era, firms are
marketing rather than merely selling. Several tasks that were once associated with other
business functions became the responsibility of the top marketing executive, the
marketing manager or director of marketing. For instance, inventory control,
warehousing, and some aspects of product planning are turned over to the head of
marketing as a way of servicing customers better. For the firm to be most effective, the
top marketing executive must be involved at the beginning of a production cycle, as well
as at the end. In addition, marketing needs to be included in short-term and long-term
company planning. And for a firm’s marketing to be effective, its top executive must
have a favourable attitude towards marketing.
Boone and Kurtz (2004: 11-3), noted that the marketing concept, a crucial change in
marketing management philosophy, can be explained best by the shift from a seller’s
market – one in which there were more goods and services than people willing to buy
them. When World War II ended, factories stopped manufacturing tanks and ships and
started turning out consumer product again, a type of activity that had, for all practical
purposes, stopped in early 1942. The advent of a strong buyer’s market created the need
for consumer orientation in businesses. Companies had to market goods and services, not
just produce and sell them. This realization has been identified as the emergence of
marketing concept. Numes and Drezer (2006: 504-512), remarked that the concept
introduces the marketer at the beginning rather than at the end of the production cycle
43
and integrates marketing into each phase of the business. Thus, marketing, through its
studies and research, will establish for the engineer, the designer, and manufacturing
person, what the customer wants in a given product, what price he or she is willing to
pay, and where and when it will be wanted. Marketing will have authority in product
planning, production scheduling and inventory control, as well as in sales, distribution
and serving of the product. Marketing would no longer be regarded as a supplemental
activity performed after completion of the production process. Instead, the marketer
would play a leading role in product planning. And marketing and selling would no
longer be synonymous terms.
Lichtenthal and Tellefsen (2001L 1-4), observed that the fully developed marketing
concept is a company – wide consumer orientation with the objective of achieving long-
run success. All facets of the organization must contribute first to assessing and then to
satisfying customer wants and needs. The prevailing attitude of the marketing era states
that the consumer rules! Find a need and fill it. Marketers are not the only people
working on this. Accountants in the credit office and engineers designing products also
play important roles. Focusing on the objective of achieving long-run success
differentiates the concept from policies of short-run profit maximization. Since the firm’s
continuity is an assumed component of the marketing concept, company-wide consumer
orientation will lead to greater long-run profits than managerial philosophies geared
toward reading short-run goals.
Urban (2004:77-82), confirmed that a strong market orientation – the extent to which a
company adopts the marketing concept – generally improves market success and overall
performance. It also has a positive effect on new – product development and the
introduction of innovation products. Companies that implement market – driven
strategies are better able to understand their customers’ experiences, buying habits, and
needs. These companies can, therefore, design products with advantages and levels of
quality compatible with customer requirements. Customers more quickly accept the new
products. This is the beginning of customer-driven marketing. Kotler and Keller (2006:
16-18), wrote that the marketing concept emerged in the mid-1950s. Instead of a product
– centered “make and sell” philosophy, business shifted to a customer – centered “sense-
44
and-respond”. The job is not to find the right customers for your products, but the right
products for your customers. The marketing concept holds that achieving organizational
goals depends on knowing the needs and wants of target markets and delivering the
desired satisfactions better than competitors do. Under the marketing concept, customer
focus and value are the paths to sales and profits.
Not long after the marketing concept became widely accepted by many turns, it came
under fire. For more than 20 years critics have persistently charged that it ignores social
responsibility, that although it may lead to an organization achieving its goals, it may at
the same time encourage actions that conflict with society’s best interests. From their
point of view, a firm may totally satisfy its customers, while also adversely affecting
society. Hence, Kotler and Armstrong (2006: 10-12), identifies Societal Marketing
Concept as a principle of enlightened marketing that holds that a company should make
good marketing decisions by considering consumers’ wants, the company’s requirements,
consumers’ long-run interests, and society’s long run interests. The societal marketing
concept questions whether the pure marketing concept overlooks possible conflicts
between consumer short-run wants and long-run welfare. Is a firm that satisfies the
immediate needs and wants of target markets always doing what’s best for consumers in
the long-run? The societal marketing concept holds that marketing strategy should deliver
value to customers in a way that maintains or improves both the consumer’s and the
society’s well-beings. Figure 2.2 shows that companies should balance three
considerations in setting their marketing strategies: company profits, consumer wants,
and society’s interests.
45
Society (Human Welfare)
Figure 2.2: Three considerations underlying the societal marketing concept
Source: Kotler, P. and Armstrong, G. (2006), Principles of Marketing, New
Jersy: Pearson Education Inc.
Setting their marketing strategies: Company profits, consumer wants, and society’s
interests.
Also in this marketing era, Kotler and Keller (2006:16-17), introduced the Holistic
Marketing Concept which is based on the development, design, and implementation of
marketing programs, processes, and activities that recognizes their breadth and
interdependencies. Holistic marketing recognizes that “everything matters” with
marketing – and that a broad, integrated perspective is often necessary. Four components
of holistic marketing are relationship marketing, integrated marketing, internal marketing,
and social responsibility marketing. Holistic marketing is thus an approach to marketing
that attempts to recognize and reconcile the scope and complexities of marketing
activities. Figure 2.3 provides a schematic overview of four broad themes characterizing
holistic marketing.
Societal Marketing Concept
Consumers (want satisfaction)
Company (Profits)
46
Figure 2.3: Holistic Marketing Dimensions
Source: Kotler, P. and Armstrong, G. (2006), Principles of Marketing, New Jersey:
Pearson Education Inc.
The Fourth era in the history of marketing emerged during the last decade of the 20th
century, and continues today into the 21st century. Organizations now carry the marketing
era’s customer orientation one step further by focusing on establishing and maintaining
relationships with both customers and suppliers. This effort represents a major shift from
the traditional concept of marketing as a simple exchange between buyer and seller.
According to Boone and Kurtz (2004: 12-14), relationship marketing by contrast,
involves long-term, value-added relationships developed overtime with customers and
suppliers. The concept of relationship marketing, which is the current state of customer-
driven marketing, is a strategic alliance and partnerships among manufacturers, retailers,
and supplier, often benefit everyone. Ahearne, Bhattcharya and Gruen (2005: 574-585),
explained that attracting new customers to a business is only the beginning. The best
Holistic Marketing
Integrated Marketing Internal
Marketing
Relationship Marketing Social
Responsible Marketing
Marketing Department
Other Departments
Senior Management
Communications Channels
Products & Services
Ethics Community
Legal Environment
Customers Partners
Channel
47
companies view new customer attraction as the launching point for developing and
enhancing a long-term relationship. Companies can expand market share in three ways:
attracting new customers, increasing business with existing customers, and retaining
current customers. Building relationships with existing customers directly addresses two
of the three possibilities and indirectly addresses the other.
Lamb, Hair and McDaniel (2004:12-14), noted that relationship marketing is a strategy
that entails forging long-term partnerships with customers. It begins with developing a
clear understanding of who your customers are, what they value, what they want to buy,
and how they prefer to interact with you and be served by you. Companies then build
relationships with customers by offering value and providing customer satisfaction. They
are rewarded with repeat sales and referrals that lead to increases in sales, market share
and profit. Cost also fall because serving existing customers is less expensive than
attracting new ones. Bhattacharya and Sankar (2003:76-88), recommended that the
internet is an effective tool for generating relationships with customers because of its
ability to interact with the customer. With the internet, companies can use e-mail for fast
customer service, discussion groups for building a sense of community, and database
tracking of buying habits for customizing products. Customers also benefit from stable
relationships with suppliers. Business buyers have found that partnerships with their
suppliers are essential to producing high-quality products while cutting costs. Customers
remain loyal to firms that provide them greater value and satisfaction than they expect
from competing firms. Most successful relationship strategies depend on customer-
oriented personnel, effective training programs, employees with authority to make
decisions and solve problems, and teamwork.
Frankwick, Porter and Crosby (2001: 135-146), demphasized that relationship marketing
increasingly, a key goal of marketing is to develop deep, enduring relationships with all
people or organizations that could directly or indirectly affect the success of the firm’s
marketing activities. Relationship marketing has the aim of building mutually satisfying
long term relationships with key parties – customers, suppliers, distributors, and other
marketing partners – in order to earn and retain their business. Relationship marketing
builds strong economic, technical, and social ties among the parties. Relationship
48
marketing involves cultivating the right kind of relationships with the right constituent
groups. Marketing must not only do customer relationship management (CRM), but also
partner relationship management (PRM) as well. Four key constituents for marketing are
customers, employees, marketing partners (channels, suppliers, distributors, dealers,
agencies), and members of the financial community (shareholders, investors, analysts).
The ultimate outcome of relationship marketing is the building of a unique company asset
called a marketing network. According to Boles, Babin, Brashear and Brooks (2001: 1-3),
a marketing network consists of the company and its supporting stakeholders (Customers,
employees, suppliers, distributors, retailers, ad agencies, university scientists, and others)
with whom it has built mutually profitable business relationships. Increasingly,
competition is not between companies but between marketing networks, with the prize
going to the company that has built the better network. The operating principle is simple:
Build on effective network of relationships with key stakeholders, and profits will follow.
Brashear, Boles, Bellenger and Brooks (2003: 189-199), added that the development of
strong relationships requires of different groups, as well as their needs, goals, and desires.
A growing number of today’s companies are now shaping separate offers, services, and
messages to individual customers. These companies collect information on each
customer’s past transactions, demographics, psychographics, and media and distribution
preferences. They hope to achieve profitable growth through capturing a large share of
each customer’s expenditures by building high customer loyalty and focusing on
customer lifetime value. The ability of a company to deal with customers one at a time
has become practical as a result of advances in factory customization, computers, the
internet, and database marketing software. The importance of understanding customers’
needs and wants encourages the development of long-term collaborative relationships.
The prevailing attitude of the Relationship era states that long-term relationships with
customers and other partners lead to success. Driving the necessity of staying in close
contact with buyers is the reality that customers often have several suppliers of the
products they wish to purchase.
2.2 Integrating Customer Focus Across the Firm
Customer relationship management is the combination of strategies and technologies that
empowers relationship programs, reorienting the entire organization to a concentrated
49
focus on satisfying customers. Made possible by technological advances, it leverages
technology as a means to manage customer relationships and the integrate all
stakeholders into a company’s product design and development, manufacturing,
marketing, sales, and customer service processes. CRM allows firms to manage vast
amounts of data from multiple sources to improve overall customer satisfaction. The
most effective companies approach CRM as a complete business strategy in which
people, processes, and technology are all organized around delivering supervisor value to
customers. By developing buyer-seller relationships, companies work together for their
mutual benefit. Advantages may include lower prices for suppliers, faster delivery of
inventory, improved quality or customized product features, or more favourable financing
terms (Peppers and Rogers, 2004:126).
According to Boone and Kurtz (2004: 26-28), as marketing progresses through the 21st
century, a significant change is taking place in the way companies interact with
customers. The traditional view of marketing as a simple exchange process, or transaction
– based marketing, is being replaced by a different, long-term approach. Traditional
marketing strategies focused on attracting customers and closing deals. Today’s
marketers realize that, although it’s important to attract new customers, it’s even more
important to establish and maintain a relationship with them so they become loyal repeat
customers. These efforts must expand to include suppliers and employees, as well. Brown
(2000:164-169), referred that since the industrial revolution, most manufacturers have run
production-oriented operations. They have focused on making products and then
promoting them to customers in the hope of selling enough to cover costs and earn
profits. The emphasis has been on individual sales or transactions. In transaction-based
marketing, buyer and seller exchanges are characterized by limited communications and
little or no ongoing relationships. The primary goal is to entice a buyer to make a
purchase through such inducements as low price, convenience, or packaging. The goal is
simple and short term: Sell something now.
Some marketing exchanges remain largely transaction based. In residential real estate
sales, for example, the primary goal of the agent is to make a sale and collect a
commission. While the agent may seek to maintain the appearance of an ongoing, buyer-
seller relationship, in most cases, the possibility of future transaction is limited. The best
an agent can hope for is to represent the seller again in a subsequent real estate deal that
50
may be several years down on the line or, more likely, to gain positive referrals to other
buyers and sellers. To a lesser extent, automobile purchases are transaction-based where
many customers shop around for each new car rather than buy from one dealer
exclusively (Colgate and Danaher, 2000: 375-387). While on the other hand, relationship
marketing refers to the development, growth, and maintenance of long-term, cost-
effective exchange relationships with individual customers, suppliers, employees, and
other partners for mutual benefit. It broadens the scope of external marketing
relationships to include suppliers, customers, and referral sources. In relationship
marketing, the term customer takes on a new meaning. Employees serve customers
within an organization as well as outside it; individual employees and their departments
are customers of and suppliers to one another. They must apply the same high standards
of customer satisfaction to intradepartmental relationships they do to external customer
relationships. Relationship marketing recognizes the critical importance of internal
marketing to the success of external marketing plans. Programs that improve customer
service inside a company also raise productivity and staff morale, resulting in better
customer relationships outside the firm (Cannon and Homburg, 2001: 29-43).
Figure 2.4: Forms of Buyer-seller interactions on a continuum from conflict to
integration
Source: Boone, L. and Kurtz, D. (2004) Contemporary Marketing, Mason: Thomson
Learning.
Relationship marketing gives a company new opportunities to gain a competitive edge by
moving customers up a loyalty hierarchy from new customers to regular purchasers, then
to loyal supporters of the firm and its goods and services, and finally to advocates who
not only buy its products but recommend them to others. By converting indifferent
customers into loyal ones, companies generate repeat sales. Effective relationship
Transaction-Based Marketing (Conflict) Relationship Marketing
(Cooperation)
Customer Relationship Management (Integration)
51
marketing relies heavily on information technologies such as computer data-bases that
record customers’ tastes, price preferences, and lifestyles. This technology helps
companies become one-to-one marketers who gather customer-specific information and
provide individually customized goods and services. The firms target their marketing
programs to appropriate groups, rather than having to rely on mass-marketing campaigns.
Companies who study customer preferences and react accordingly, gain distinct
competitive advantages (Cross, Hartley and Rudelius, 2001: 199-206).
Today, many organizations are moving from transaction-based marketing to relationship
marketing. Relationship marketing looks at customers as equal partners in buyer-seller
transactions. By motivating customers to enter a long-term relationship in which they
repeat purchases or buy multiple brands from the firm, marketers are able to obtain a
clearer understanding of customer needs. This process leads to improved products or
customer service, which pays off through better sales and lower marketing costs. The
move from transactions to relationships in reflected in the changing nature of the
interactions between customers and sellers. In interaction-based marketing, exchanges
with customers are generally sporadic, often disrupted by conflict. As interactions
become relationship oriented, however, conflict changes to cooperation, and infrequent
contacts between buyers and sellers become ongoing exchanges. Firms now understand
they must do more than simply create products and then sell the items. With so many
goods and services to choose from, customers look for added value from their marketing
relationships (Chonko, Loe, Roberts and Tanner, 2000: 23-36; Kenny and Acitelli,
2001:439-448). Table 2.2 compared the transaction-based with the relationship marketing
strategies on follows:
52
Table 2.2: Comparing Transaction-based Marketing and Relationship
Marketing Strategies
Characteristic Transaction Marketing Relationship Marketing
1. Time Orientation Short-term Long-term
2. Organizational goal Make the sale Emphasis on retaining customers
3. Customer Service Priority Relatively Low Key component
4. Customer Contact Low to moderate Frequent
5. Degree of Customer Commitment Low High
6. Basis for seller-customer interactions Conflict manipulation Cooperation; trust
7. Source of Quality Primarily from production Company wide Commitment
Source: Boone, L. and Kurtz, D. (2004) Contemporary Marketing, Mason:
Thomson Learning.
Basic Elements of Buyer-Seller Relationship: Relationship marketing depends on the
development of close ties between the buyer – whether an individual or a company – and
the seller. Relationship marketing is based on promises from organizations that go
beyond obvious assurances that potential customers expend. According to Jap (2001:95-
108), a network of promises – outside the organization, within the organization, and
between buyer and seller interactions – determines whether a marketing encounter will be
positive or negative and will either enhance or detract from an ongoing buyer – seller
relationship. Making Promises – most firms make promises to potential customers
through external marketing. These promises communicate what a customer can expect
from the firm’s goods or services. The promises that companies communicate to potential
customers by external marketing must be both realistic and consistent with one another.
A firm that makes unrealistic promises can create a disappointed customer who may not
buy the product again. Enabling Promises – A company can follow through on promises
made to potential customers by external marketing only if it enables these promises
through internal marketing. Internal marketing includes recruiting talented employees and
providing them with tools, training, and motivation they need to do their jobs effectively.
The firm’s structure itself must facilitate rather than hinder the provision of quality
offerings. Efficient systems and processes, empowered front-liner workers, and flat
organizational hierarchy all contribute to a company’s ability to provide quality goods
and services. Keeping Promises – Every customer interactions with a business reaches
the moment of truth when a product is provided to the customer. This third stage in the
buyer-seller-relationship following external and internal marketing, defines the point at
53
which a company keeps its promises. This exchange process will also provide the place
where long-term relationships develop between buyer and sellers. Positive encounters
help to build long-term relationships, with the added benefit of possible positive word-of-
mouth recommendations from satisfied customers to other potential customers. On the
other hand, a company that fails to keep its promises at the exchange point in the
marketing process may destroy any hope of continuing buyer-seller relationships. Even a
single negative encounter can have a devastating effect (Liu and Leach, 2001: 147-156).
Figure 2.5: Relationship Marketing Orientation
Source: Cannon, J.P. and Homberg, C. (2001) “Buyer-supplier Relationships and
customer firm costs” Journal of Marketing 65 (January): 29.
The Relationship Marketing Continuum: Like all other interpersonal relationships,
buyer-seller relationships function at a variety of levels. As individual or firm progresses
from the lowest level to the highest level on the continuum of relationship marketing, as
shown in table 2.3, the strength of commitment between the parties grows. The likelihood
of a continuing, long-term relationship, as well, grows. Whenever possible, marketers
want to more the customers along this continuum, converting them from level I
purchasers, who focus mainly on price, to level 3 customers, who receive specialized
services and value-added benefits that may not be available from another firm (Fan and
Yang, 2000: 629-660; Colgate and Danaher, 2000:375-387).
Customer Service
Marketing
Relationship Marketing
Quality
54
Table 2.3: Three Levels of Relationship Marketing Characteristic Level I Level 2 Level 3
(1) Primary bond Financial Social Structural
(2) Degree of customization Low Medium Medium to high
(3) Potential for sustained competitive advantage Low Moderate High
Source: Colgate, M.R. and Danaher, P.J. (2000) “Implementing a customer
Relationship strategy: The Asymmetric Impact of Poor versus excellent
Execution” Journal of the Academy of Marketing Science, 28 (Summer):
375-387.
First Level – Focus on Price: Interactions at the first level of relationship marketing are
the most superficial and the least likely to lead to a long-term relationship. In the most
prevalent examples of this first level, relationship marketing efforts rely on pricing and
other financial incentives to motivate customers to enter into buying relationships with a
seller. Although these programs can be attractive to buyers, they may not create long-
term buyer relationships. Because the programs are not customized to the needs of
individual buyers, they are easily duplicated by competitors. The lesson here is that it
takes more than a low price or other financial incentive to create a long-term relationship
between buyer and seller (Ahearne, Bhattachary and Gruen, 2005: 574-585). Second level
– social interactions: As buyers and sellers reach the second level of relationship
marketing; their interactions develop on a social level – one that features deeper and less
superficial links than the financially motivated first level. According to Arnette, German
and Hunt (2003: 89-105), sellers have begun to learn that social relationships with buyers
can be very effective marketing tools. Customer service and communication are key
factors at this stage. Third level – Interdependent Partnership: At the third level of
relationship marketing, relationships are transformed into structural changes that ensure
buyer and sellers are true business partners. As buyer and seller work more closely
together, they develop a dependence on one another that continues to grow over time
(Boles, Babin, Brashear and Brooks, 2001: 1-13).
Enhancing Customer Satisfaction: As part of an ongoing relationship with customers,
marketers must continually measure and improve how well they meet customer needs. As
figure 2.6 shows, three main steps are involved in this process: understanding customer
needs, obtaining customer feedback, and instituting an ongoing program to ensure
customer satisfaction (Cannon and Homburg, 2001: 29-43).
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Figure 2.6: Three steps to measure customer Satisfaction
Source: Brown, S.A. (2000), Customer Relationship Management: A strategic
Imperative in the world of E-Business, Toronto: John Wiley. Understanding Customer Needs – Knowledge of what customers need, want, and expect
is a central concern of companies focused on building long-term relationships. This
information is also a vital first step in setting up a system to measure customer
satisfaction. Marketers must carefully monitor the characteristics of their products that
really matter to customers. Satisfaction can be measured in terms of the gaps between
what customers expect and what they perceive they have received. Such gaps can
produce favourable or unfavourable impressions. A product may be better than expected
or worse than expected. To avoid unfavourable gaps, marketers need to keep in touch
with the needs of current and potential customers. They must look beyond traditional
performance measures and explore the factors that determine purchasing behaviour in
order to formulate customer-based missions, goals, and performance standards (Brown,
Dacin, Pratt and Whetten, 2006: 99-106).
Obtaining Customer Feedback – The second step in measuring customer satisfaction is to
compile feedback from customers regarding present performance. Increasingly, most
firms rely on reactive methods of collecting feedback. Rather than solicit complaints,
they monitor discussion groups as a means of tracking customer comments and attitudes
about the value received. Any method that makes it easier for customers to complain
Understanding Customer Needs
Customer Feedback
Ongoing Measurement
56
benefits a firm and may be considered a blessing in disguise. Customer complaints offer
firms the opportunity to overcome problems and prove their commitment to service.
Customers often have greater loyalty to a company after a conflict has been resolved than
if they had never complained at all (Balmer and Greyser, 2002:72-88).
Building Buyer-Seller Relationships: Marketers of consumer goods and services have
discovered that they must do more than simply create products and then sell them. With a
dizzying array of products to choose from, many customers are seeking ways to simplify
both their business and personal lives, and relationships provide a way to do this. One
reason consumers form continuing relationships is their desire to reduce choices. Through
relationships, they can simplify information gathering and the entire buying process as
well as decrease the risk of dissatisfaction. They find comfort in brands that have become
familiar through their ongoing relationships with companies. Such relationships may lead
to more efficient decision making by customers and higher levels of customer
satisfaction. A key benefit to consumers in long-term, buyer-seller relationships is the
perceived positive value they receive. Relationships add value through increased
opportunities for frequent customers to save money through discounts, rebates, and
similar offers; via special recognition from the relationship programs; and through
convenience in shopping. Marketers should also understand why consumers end
relationships. Computerized technologies and the internet have made consumers better
informed than ever before by giving them unprecedented abilities to compare prices,
products, and customer service. If they perceive that a competitor’s products or customer
service are better, customers may switch loyalties. Many consumers dislike feeling that
they are locked into a relationship with one company, and that is reason enough for them
to try a competing item next time they buy. Some customers simply become bore with
their current providers and decide to sample the competition (Zeelenberg and Pieters,
2004: 445-455; Wilson, 2000:53-61; Szymanski and Henard, 2001: 16-35).
How Marketers keep Customers: One of the major forces driving the push from
transaction-based marketing to relationship marketing is the realization that retaining
customers is far more profitable than losing them. Customers usually enable a firm to
generate more profits with each additional year of the relationship. In fact, according to
Brown (2000:221-224), a 5 percent gain in customer retention can pay off with an 80
percent increase in profit. Many different types of companies use frequency programs
57
where rewards for high-frequency customers are not ignored. Frequency Marketing
focuses on a company’s best customers with the goal of increasing their motivation to
buy even more of the same or other products from the seller. The internet is proving a
fertile medium for frequency – marketing initiatives. In addition to frequency programs,
companies use affinity marketing to retain customers. Affinity Marketing program is a
marketing effort sponsored by an organization that solicits involvement by individuals
who share common interests and activities. With affinity programs, organizations create
extra value for members and encourage stronger relationships (Zou and cavusgil, 2002:
40-56).
Database Marketing: The use of information technology to analyze data about
customers and their transactions is referred to as database marketing. The results form the
basis of new advertising or promotions targeted to carefully identified groups of
customers. According to Swift (2001: 179-184), data base marketing is a particularly
effective tool for building relationships because it allows sellers to sort through huge
quantities of data from multiple sources on the buying habits or preferences of thousands
or even millions of customers. Companies are then able to track buying patterns, develop
customer relationship profiles, customize their offerings and sales promotions, and even
personalize customer service to suit the needs of targeted groups of customers. Peppers
and Rogers (2004:113-116), identified that properly used, databases can help companies
in several ways, including these following: (i) discovering their most profitable
customers; (ii) Calculating the lifetime value of each customer’s business; (iii) creating a
meaningful dialogue that builds relationships and encourages genuine brand loyalty; (iv)
improving customer retention and referral rates; (v) reducing marketing and promotion
costs; and (vi) boosting sales volume per customer or targeted customer group.
Where do organizations find all the data that fill these vast marketing databases?
Everywhere! According to Leigh and Marshall (2001: 83-93), credit card applications,
software registration, and product warranties all provide vital statistics of individual
customers. Cash register scanners, customer opinion surveys, and sweepstakes entry
forms may offer not just details of name, address, and income, but information on
preferred brands and shopping habits. Web sites offer free access in return for personal
data, allowing companies to amass increasingly rich marketing information. As database
marketing has become more complex, a variety of software tools and services will enable
58
marketers to target consumers more and more narrowly while enriching their
communications to selected groups. For example, interactive television promises to
deliver even more valuable data-information on real consumer behaviour and attitudes
toward brands. Application Service Providers assist marketers in capturing, manipulating,
and analyzing masses of consumer data. Customer-specific purchasing records and
buying frequency data are immediately accessible via secure internet connections. Once
the technology makes its way into more homes, marketers will have firsthand knowledge
of what kind of programming and products their targeted customers want (Yoram;
Mahaja and Gunther, 2002: 186-194; Varadarajan and Yadav, 2002: 296-312).
2.3 Customer Relationship Management (CRM)
Emerging from relationship marketing, customer relationship management (CRM) is the
combination of strategies and technologies that empowers relationship programs,
reorienting the entire organization to a concentrated focus on satisfying customers. Made
possible by technological advances, it leverages technology as a means to manage
customer relationships and to integrate all stakeholders into a company’s product design
and development, manufacturing, marketing, sales, and customer service processes.
According to Sheth, Sisodia and Sharma (2000: 55-56), CRM represent a shift in thinking
for everyone involved with a firm – from the CEO down through and encompassing all
other key stakeholders, including suppliers, dealers, and other partners. All recognize that
solid customer relations are fostered by similarly strong relationships with other major
stakeholders. Since CRM goes well beyond traditional sales, marketing, or customer
services functions, it requires a top-down commitment and must permeate every aspect of
a firm’s business. Technology makes that possible, allowing firms – regardless of size
and no matter how farm–flung their operations – to manage activities across functions,
locations, and among their internal and external partners. CRM software systems are
capable of marking sense of the vast amounts of customer data that technology allows
firms to collect (Carlson and Pearo, 2004: 48-59; Dorsch, Carlson, Raymond and Ranson,
2001: 157-166).
Business-to-Business Marketing: According to Deshphande and Farley (2000: 353-
362), customer relationship management and relationship marketing are not limited to
consumer goods and services. Building strong buyer–seller relationships is a critical
component of business-to-business marketing as well. Business-to-business marketing
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involves an organization’s purchase of goods and services to support company operations
or the production of other products. Mckenzie (2001: 76-84), noted that buyer-seller
relationships between companies involve working together to provide advantages that
benefits both parties. These advantages might include lower prices for suppliers, quicker
delivery of inventories, improved quality and reliability, customized product features, and
more favourable financing terms. A partnership is an affiliation of two or more
companies that assist each other in the achievement of common goals.
Partnerships cover a wide spectrum of relationships from informal cooperative
purchasing agreements to formal production and marketing agreements. Such links can
involve a single function or activity of production and marketing – for example,
distribution – or all functions, such as product development, manufacturing, and
marketing of a new product. In business-to-business markets, partnerships form the basis
of relationship marketing (Piercy, N., Low, G.S. and Cravens, D, 2004: 255-267; Zoltners
and Lorimer, 2000: 139-150). A variety of common goals motivate firms to form
partnerships. Companies may want to protect or improve their positions in existing
markets, gain access to new domestic or international markets, or quickly enter into new
markets. Expansion of a product line – to fill in gaps, broaden the product line, or
differentiate the product – is another key reason for joining forces. Other motives include
sharing resources, reducing costs, warding off threats of future competition, raising or
creating barrier to entry, and learning new skills.
Evaluating Customer Relationship Programs: One of the most important measures of
relationship marketing programs, whether in consumer or business-to-business markets,
is the lifetime value of a customer: the revenues and intangible benefits such as referrals
and customer feedback that a customer brings to the seller over an average lifetime, less
the amount the company must spend to acquire, market to, and serve the customer. Long-
term customers are usually more valuable assets than new ones, because they buy more,
cost less to serve, refer other customers, and provide valuable feedback. The “average
lifetime” of a customer relationship depends on industry and product characteristics
(Yilmaz and Hunt, 2001: 335-357; Sengupta, Krapted and Pusateri, 2000:253-261).
In addition to lifetime value analysis and payback, companies use many other techniques
to evaluate relationship programs, including: (i) tracking rebate requests, coupon
redemption, credit-card purchases, and product registrations; (ii) monitoring complaints
60
and returned merchandise and analyzing why customers leave; (iii) reviewing reply cards,
comment forms, and surveys; and (iv) monitoring “click-though” behaviour on web sites
to identify why customers stay and why they leave (Donavan, Mowen and Brown, 2004:
128-146; Harris, Mowen and Brown, 2005:19-35). These tools give the organization
information about customer priorities so that managers can make changes to their
systems, if necessary and set appropriate, measurable goals for relationship programs.
Companies large and small are able to implement technology to aid in measuring the
value of customers and the return to investment from expenditures developing customer
relationships. They are able to choose from among a growing number of software
products, many of which are tailored to specific industries or that are flexible enough to
suit companies of varying sizes.
The Customer Relationship Management Cycle: According to Goran (2002: 574-583),
customer relationship management is a company-wide business strategy designed to
optimize profitability, revenue, and customer satisfaction by focusing on highly defined
and precise customer groups. This is accomplished by organizing the company around
customer segments, encouraging and tracking customer interaction with the company,
fostering customer-satisfying behaviours and linking all processes of the company from
its customer through its suppliers. Brown (2000: 62-76), noted that on the surface, CRM
may appear to be a rather simplistic customer service strategy. But while customer
service is part of the CRM process, it is only a small part of a totally integrated, holistic
approach to building customer relationships. CRM is often described as a closed-looped
system that builds relationships with customers. Figure 2.7 illustrates this closed-looped
system, one that is continuous and circular with no predefined starting or end point.
To initiate the CRM cycle, a company must: (i) Establish customer relationships within
the organization. This may simply entail learning who the customers are or where they
are located, or it may require more complex information on the products
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Figure 2.7: A simple flow model of the customer Relationship management system.
Source: Lamb, C., Hair, J. and McDaniel, C. (2004) Marketing, Mason: Thomson
Learning.
and services they are using. For example, a bank may find it very beneficial to determine
all the services a customer is using, such as loans, saving accounts, investment
instruments, and so forth. (ii) Once the company identifies its customers and its popular
products and services, it then determines the level of interaction each customer has with
the company. The bank, for example, would determine how frequently each customer
interacts with the bank and the channel used for the interaction-branch location,
telephone call centre, web, etc. (iii) Based on its knowledge of the customer and his or
her interaction with the company, the company can then acquire and capture all relevant
information about the customer, including measures of satisfaction, response to targeted
promotions, changes in account activity, and even movement of assets.
According to Goutain (2000: 161-172), technology plays a major role in any CRM
system. It is used not only to enhance the collection of customer data, but also to store
and integrate customer data throughout the company. Customer data are the actual
firsthand responses that are obtained from customers through investigation or asking
Establish customer relationships within the organization
Establish and manage interactions with current customer base
Leverage and disseminate customer information throughout the
enterprise
Acquire and capture customer data based on interactions
Analyze data for profitable/unprofitable segments
Use technology to store and integrate customer data
62
direct questions. These initial data, which might include individual responses on
questionnaires, responses on warranty cards, or lists of purchases recorded by electronic
cash registers have not yet been analyzed or interpreted. (iv) A critical component of a
CRM system is the use of the appropriate technology to store and integrate customer
data. The value of customer data depends on the system that stores the data and the
consistency and accuracy of the data captured. Companies can take great stride to
improve their data-collection processes by using data cleansing and accuracy software
such as validity integrity software. Data cleansing software checks for inconsistencies and
extracts them. It then organizes and streamlines the data. Obtaining high-quality,
actionable data from various but complementary sources is a key element in a CRM
system.
Hurley (2002:270-281) remarked that every customer wants to be a company’s main
priority, yet not all customers are equally important in the eyes of a business. Some
customers occupy segments that are simply more profitable for the company than others.
(v) Consequently, the company conducts data mining to determine its profitable and
unprofitable customer segments. Data mining is an analytical process that compiles
personal, pertinent, actionable data about the purchase habits of a firm’s current and
potential customers. Essentially, data mining transforms customer data into customer
information, which consists of data that have been interpreted and to which narrative
meaning has been attached. The data are subjected to a pattern-building procedure that
profiles customers on variable such as profitability and risk. Customers may be
categorized as highly profitable, unprofitable, high risk, or low risk, and these categories
may depend on the customer’s affiliation with the business. For example, the bank might
categorize its customers as long-time customers, commercial clients, customers with little
money in the bank, or customers with several accounts. (vi) According to Lautsch
(2002:23-43), once the customer data are analyzed, they are assigned interpretative
meaning (transformed into information) and disseminated throughout the entire
organization.
A primary objective of the CRM system is to spread customer information across all
functional areas of the business. This is because the customer does not interact with only
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one function of the business (eg. Sales or marketing), but rather with all functions (eg.
Operations, production, accounting etc). A company using a CRM system must view its
customers comprehensively, understanding that they interact, either directly or indirectly,
with all components of the internal business system from suppliers and manufacturers to
wholesalers and retailers (Lichtenstein, Drumwright and Brag, 2004: 16-32; Noble, Sinha
and Kumar, 2002: 25-39). The review of the CRM system has assumed two key points.
First, the customers, as represented by the information about them, take centre stage in
any organization. Focusing a company’s energy in this way results in better customer
understanding, increased customer access, and more efficient customer interactions.
Second, the business must focus on the day-to-day management of the customer
relationship across all points of customer-contact throughout the entire organization. This
factor is the foundation of the shared information through the organization. Keeping these
two points in mind, it is important to look at how a CRM system is implemented as we
follow the simple flow model of the customer relationship management system as
depicted in figure 2.7.
Establishing Customer Relationships Within the Organization: According to Pullins
(2001: 403-413), companies that implement a CRM system adhere to a customer-centric
focus or model. Customer-centric is an internal management philosophy similar to the
marketing concept. Under this philosophy, the company customizes its product and
service offering based on data generated through interactions between the customer and
the company. This philosophy transcends all functional areas of the business (production,
operations, accounting, etc) producing an internal system where all decisions and actions
of the company are a direct result of customer information. A customer-centric company
builds its system on what satisfies and retains valuable customers, while learning those
factors that build long-lasting relations with those customers. CRM is a company-wide
process that focuses on learning, managing customer knowledge and empowerment
(Reinartz and Kumar, 2002: 86-94; Johnson, Barksdale and Boles, 2001:123-134).
Establishing and Managing Interactions With the Current Customer Base: The
interaction between the customer and the organization is the foundation on which a CRM
system is built. Only through effective interactions can organizations learn about the
64
expectations of their customers, generate and manage knowledge about them, negotiate
mutually satisfying commitments, and build long-term relationships. Figure 2.8 illustrates
the customer-centric approach for managing customer interactions. Following a
customer-centric approach, an interaction can occur through a formal communication
channel, such as a phone, or salesperson; through a previous relationship a customer has
had with the organization, such as a past purchase or a response to a marketing research
request; or through some current transaction by the customer, such as an actual product
purchase, a request for repair service, or a response to a coupon offer. In short, any
activity a customer has with an organization, either directly or indirectly, constitute an
interaction (Staple and Blanton, 2004: 860-875; Ulrich and Smallwood, 2004: 119-128).
According to Lee and Aaker (2004: 205-218), companies that effectively manage
customer interactions recognize that customers provide data to the organization that
affect a wide variety of internal and external company touch points. In CRM system,
touch points are those areas in a business where customer data are gathered and used to
guide and direct the decision making within that business unit. Touch points can be both
internal and external to the company. External touch points might include a
Figure 2.8: Customer-centric Approach for Managing Customer Interactions
Source: Lamb, C., Hair, J. and McDaniel, C. (2004) Marketing, Mason: Thomson
Learning.
Customer
Current transaction Channel
Past relationship
Knowledge centre
Requested service/activity
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customer registering for some particular service, a customer communicating with
customer service for product information, a customer completing and returning the
warranty information card for a product, or a customer talking with salespeople, delivery
personnel, and product installers. Data gathered at these external touch points, once
interpreted, provide information that affects internal touch points. An extremely common
and almost standard touch point is the knowledge centre. A knowledge Centre (call
center) is an organization’s internal operational component that manages and fulfils
customer requests. It is the logistical system that reacts to, monitors, and controls the
interaction between the customer and the organization. The knowledge center is
responsible for obtaining customer information, evaluating the information, and directing
the information to the appropriate department (touch point) within the company
(Roggereen and Johar, 2004: 19-30; Maltson, 2001: 150-154; Wensley, 2001: 161-163).
A knowledge center is a passive means of managing customer interactions because the
customer must call to initiate the interaction. Companies themselves must also generate
customer interactions, but doing so is becoming increasingly difficult. Consumers are
often bombarded with unsolicted mailers and surveys that are sometimes viewed as
intrusive. In these cases, consumers are more likely to refuse an opportunity for
interaction than to accept. The rising privacy concerns are forcing companies to rethink
their approaches to generating customer interactions. In a CRM system, the objective is
to obtain this information in a nonintrusive manner and to allow customers to freely relay
information when they want to communicate it, not when the company wants it.
Customer-centric organizations are implementing new and unique interactions
specifically for this purpose, such as web-based interactions, point-of-sale interactions,
and transaction-based interactions. E-mail addresses and web sites are allowing
customers to communicate with companies on their own terms. Instead of wasting time
with phone numbers and mail surveys, companies are beginning to publicize their web
sites as the first touch point for customer interactions. Web users can purchase products,
make reservations, input preferential data, and comment on the organization’s services.
The data from these web-based interactions are then captured at the knowledge center,
compiled, and used to segment customers, refine marketing efforts, develop new
products, and deliver a degree of individual customization to improve customer
relationships. When customers log on to Drug web site, for example, their queries are
recorded and tracked. From that initial touch point, every time they enter the site, their
preferences are shown first. If they purchased any drug in the past, the site will inform
them of any new product from the company. Similarly, if a customer requests a product
66
by a particular company without making a purchase, the customer will still be informed
on a subsequent visit of the new product the company has for sale (Maignan and Ferrel,
2004: 3-19; Peng and Luo, 2000: 486-501; McDonald, 2001: 562-565).
Another method of generating customer interactions is through point-of-sale interaction
in stores or at informational kiosks. Many point-of-sale software packages now allow
customers to willingly reveal information about themselves without feeling violated. The
information is then used in two ways: for marketing and merchandising activities and for
accurately identifying the store’s best customers and types of inventory they buy. The
data collected at point-of-sale interactions are also used to increase customer satisfaction
through the development of in-store services and customer recognition promotions
(Johnson and Bharadwaj, 2005: 3-18; Krishnan, Netemeyer and Boles 2002: 285-295;
Foxall, 2001: 52-56). Transaction-based interactions differ from other interactions in that
they focus on the exchange of information at the point of actual transaction. Through the
use of optical scanning technology and product bar codes, in conjunction with the
payment method used by the customer (credit card check), retailers can create parallel
streams of information on each individual customer. Once a credit card is swiped (or a
check is processed for bank approval), two major streams of information are produced.
First, optical scanning and bar coding allow retailers to capture information about which
products the customer purchased and in what quantity. Second, by swiping a credit card
or processing a bank check, the retailer can obtain all information contained in the
customer’s credit card file or checking account file. Thus the retailer obtains information
on both the customer’s purchases and the customer’s profile. The two streams of
information can then be merged at the point of transaction and used in the retailer’s
knowledge center. To boost their data-collection capabilities, many retailers are offering
customers a visa credit card positioned as a source of convenience for the customer. The
store also benefit, however (Dixon, Spiro and Jamil, 2001: 64-78; Evans, Kleine,
Laundry and Crosby, 2000: 512-526; Piercy and Cravens, 2001: 186-190).
Acquiring and Capturing Customer Data: Vast amounts of data can be obtained from
the interactions between an organization and its customers. Therefore, in a CRM system,
the issue is not how much data can be obtained, but rather what types of data should be
acquired and how they can be effectively be used for relationship enhancement. Thus,
before reviewing the types of data to collect, we must understand how the data will be
used in the CRM system. The guidelines for a CRM system include several group rules
regarding customer data: (i) the customer, as represented by the information obtained via
67
the interaction, takes center stage in the organization; (ii) customer information must be
centralized so that a single definitive source is established, typically within the
knowledge center; (iii) information is retained beyond the initial contact with the
customer and accumulated over the customer’s entire life span with the organization; (iv)
information must define the product and services the customer desires, and services, as
well as contact methods for future interaction (Lamb, Hair and McDaniel, 2004: 650-652;
Morgan and Inks, 2001: 463-472; Specier and Venkatesh, 2002: 98-11; Brown,
2001:810-813).
These CRM guidelines suggest that specific data about customers be collected via
interactions and then, once collected be used in a capacity that will foster future
relationships throughout the entire organization. Figure 2.9 illustrates how these
guidelines operate regarding the collection of customer data. The channel, the transaction,
and the product or service purchased all constitutes external touch points between a
customer and an organization that provide the opportunity for acquiring data from the
customer.
Channel Transaction Product / Service
Customer Information Information Information
Required Required Required
• Store
• Salesperson
• Personal computer
• Phone
• Wireless
• Contact
• Relationship
• Product usage
• Balances
• Channel use
• Transaction Pattern
• Preference Profile
• Lifestyle
• Culture
• Life stage
• Profitability
• Risk profile
• Desirability
• Loyalty profile
• Brands and type
• Volume
• Prices
• Transaction method
• Reporting
• Performance
Figure 2.9: Key External Touch Points and Customer Information Requirements in the CRM System.
Source: Colgale, M.R. and Danaher, P.J. (2000) “Implementing a customer Relationship
strategy: The Asymmetric Impact of Poor Versus Excellent Execution” Journal
of the marketing science, 28 (Summer): 375-387.
68
Once customer data is collected, the question of who owns that data collected becomes
extremely salient. The traditional approach for acquiring data from customers is through
channels. A Channel is a medium of communication through which the customer
interacts with a business at an external touch point. Channels include store visits,
conversations with salespeople, interactions via the web, traditional phone conversations,
and wireless communications, such as cell phone conversations and satellite
communications. What is important is the method of communication used by the
customer, and not the data that can be collected from the channel. In a CRM system,
channel interactions are viewed as prime information sources based on the channel
selected to initiate the interaction, rather than on the data acquired (Smidts, Pruyn and
Riel, 2001: 1051-1062; Zinkham and Verbugge, 2000: 143-148).
A transaction, when viewed as an interaction between the company and the customer,
presents the opportunity to collect vast amounts of data about the customer. The company
can obtain not only simple contact (name, address, phone number), but also data
pertaining to the customer’s current relationship with the organization – past purchase
history, quantity and frequency of purchases, average amount spent on purchases,
sensitivity to promotional activities, and so forth. From the transaction, product usage
information can be obtained, along with the customer’s preferred channel of contact with
the company and preferred transaction pattern – payment by cheque, cash, credit card, or
debit card. Many companies utilizing a CRM system also view the transaction as an
opportunity to collect behavioural data on customers. By examining patterns or historical
data relating to a customer’s transaction, the company can also obtain information about
the customer’s profitability, risk, desirability, and loyalty. Profitability is the actual
amount a particular customer spends on a company’s product over a specific time period.
Risk refers to the amount of investment required to retain a customer. The higher the
investment required to retain a customer, the higher the risk. Customers who, based on a
patter of current and past transactions, exhibit low risk and high profitability to the
organization are highly desirable, as are customers who demonstrate high levels of
loyalty by purchasing the same brand consistently over time. The company will seek to
retain these customers but may choose to make an effort to retain these desirable
customers who exhibit high risk and low profitability (Pratt and Rafaeli, 2001: 93-132;
Slater and Narver, 2000: 69-73).
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The physical, as well as the psychological, consumption of the firm’s product or service
constitutes an additional external touch point for customer interaction. As an interaction
point, it also represents an opportunity to acquire and capture customer data related to the
consumption experience. The unique dimension of the product or service interaction is
that it allows for the collection of customer data during the actual use of the product. As
figure 2.9 indicates, key customer data that can be captured at this interaction include the
various brands and product – types (package variation, sizes, colours, etc) the customer
consumers. The average length of time it takes to consume the product along with the
volume consumed, the price paid, and the preferred transaction method can also be
obtained (Kuhnem and Oyserman, 2002: 492-499; Jacobs, Evans, Kleine and Laundry,
2001: 51-61).
Even more important are data related to the performance of the product and the method
customers use to report performance – related issues. Because the interaction is typically
initiated by the customer, these data are extremely valuable for the organization.
Customers may call in to a company’s knowledge centre requesting information on
product warranties, optional features, repair services, or installation requirements. Once
these data are gathered and stored by the knowledge centre, they can be translated into
critical information and disseminated across all areas of the company. It should be
obvious at this point that a voluminous amount of information can be captured from one
individual customer across several external touch points. Multiply this by the thousands
of customers across all of the touch points (both internal and external) within the
organization, and the volume of data can rapidly become unmanageable for company
personnel. The large volumes of data resulting from a CRM initiative can be managed
effectively only through the use of technology (Mussweiler and Strack, 2000: 23; Rust,
Ambler, Carpenter, Kumar and Srivastava, 2004: 76-89).
Use of Technology to Store and Integrate Customer Data: As previously mentioned,
customer data are only as valuable as the system in which the data are stored and the
consistency and accuracy of the data captured. Customer data gathering is further
complicated by the fact that the data needed by one unit of the organization, such as sales
and marketing, often are generated by another area of the business or even a third-party
supplier, such as independent marketing research firm. Lack of a standard structure and
interface forces organizations to rely on technology to capture, store, and integrate
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strategically important customer information. This process of centralizing data in a CRM
system is referred to as data warehousing. A data warehouse (or information warehouse)
is a central repository of customer data collected by an organization. The data warehouse
contains data from various functional areas of the organization that are stored and
inventoried on a centralized computer system so that the resulting information can be
shared across all functional departments of the business. The end result of the data
warehouse is to provide the company with a system driven toward shared information.
According to Peng (2001;803-829), in a CRM environment, all customer data collected
through customer interaction are stored in the data warehouse. Data pertaining to the
channel, the transaction, and the product or service consumed by the customer are
structured and categorized in the warehouse and made available to all internal touch
points in the organization. To accomplish this task, the data warehouse contains three
optional components: an information-access component, a system-management
component, and a customer-initiated component. The information – access component
provides for the classification of customer data and enables any department of the
business to access the data for any specific purpose. The system-management component
defines and interprets the storage and structure of all data beginning with the initial
contact made by the customer. The customer-initiated component stores and categorizes
data initiated by the customer through various channel contacts (Yoon and Suh, 2003:
597-611; Van, Nico and Janseen, 2002: 1161-1171).
Analyzing Data for Profitable and Unprofitable Segments: As a process strategy,
CRM attempts to manage the interactions between a company and its customers. To be
successful, organizations must identify customers who yield high profits or potential
profits. To accomplish this task, significant amounts of data must be gathered from
customers, stored and integrated in the data warehouse, and then analyzed and interpreted
for commonalities that can produce distinct homogenous segments that target individual
customer needs and wants. Likewise, all customers do not contribute the same or
generate the same revenue for the company. According to Cherry and Fraedrich
(2000:173-188), in a CRM framework, data mining is required to identify the significant
patterns of customer groups. Data mining is the process of finding hidden patterns and
relationships in the customer data stored in the data warehouse. It is a data analysis
procedure that identifies significant patterns of variables and characteristics that pertain
to particular customer or customer groups. Although businesses have been conducting
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such analyses for many years, the procedure were normally performed on small data sets
containing as few as five hundred to a thousand customer respondent records. Today,
with the development of sophisticated data warehouses, thousands and even hundreds of
thousands of respondent records can be analysed. Special data mining tools have been
developed for the specific purpose of analyzing customer patterns and characteristic
relationships found in these extremely large data sets (Wang and Netemeyer, 2002: 217-
228; Thomas, Souter and Ryan, 2001: 63-69).
Data-mining tools analyze significant relationships simultaneously among several
customer dimensions within vast data warehouses. This procedure is conducted when the
decision maker has limited knowledge of a particular subject. Data-mining techniques
would search the data warehouse, capture the relevant data, categorize the significant
attributes, and for in a profile of the high-budget customer. Two major capabilities
associated with data mining are the automated prediction of trends and behaviours, and
automated discovery of previously unknown patterns. Data mining automates the process
of finding predictive customer information in large data warehouse. Questions that
traditionally required extensive hands-on analysis can now be answered directly from the
data. A typical example of a predictive problem is targeting certain customer groups.
Data mining uses information on past customer behaviours to identify those customers
most likely to maximize the return on investment from future marketing campaigns. Data
mining tools also sweep through data warehouses to identify previously hidden patterns
of behaviour that normally would not be recognized. For example, through the analysis of
retail sales data, a drug store might identify a pattern of seemingly unrelated products that
are often purchased together. Using these techniques, a pharmaceutical company can
strategically position its product in the market. Many businesses operating in a CRM
environment are turning to data-mining techniques to build and enhance relationships
with highly profitable customer groups (Albers, 2002: 248-266; Brown, Mowen,
Donavan and Lacata, 2002: 110-119).
Data mining works through a process known as modeling. Modeling is simply the act of
building a model in a situation where the answer is known and then applying the model to
another situation where the answer is unknown. If the necessary information exists in the
data warehouse, the data-mining process can model virtually any customer activity. The
key is to find relevant patterns. Typical unknown situations that data mining could
72
address for a business include the following: which customers are most likely to suspend
their regular orders? What is the probability that a customer will continue to patronize a
particular product? Which potential customers are most likely to respond to a particular
promotion? According to Erffmeyer and Johnson (2001:167-175), data mining builds
models to answer such questions by using existing information from a data warehouse to
predict future customer behaviour. This behaviour might be attrition at the end of a
magazine subscription, purchasing of complementary products, willingness to use a debit
card over a cheque, and so forth. The data-mining model assigns each prediction a score.
The score, a numerical value that is assigned to each record in the data warehouse,
indicates the likelihood that the customer whose record has been scored will exhibit the
behaviour in question. For example, if a model predicts customer attrition, a high score
indicates that a customer is likely to leave, whereas a low score indicates the opposite.
After a set of customers is scored, the numerical values are used to selectively target
individual customers for new marketing techniques. Data-mining technology can be
applicable to most companies looking to leverage a large data warehouse to better
manage their customer relationships. The two critical factors for success with data mining
are (i) a large, well-integrated data warehouse, and (ii) a well-defined understanding of
how the end result of the mining activities will be used and leveraged throughout the
organization (Dacin and Brown, 2002; Grant, Cravens, Low and Moncrief, 2001: 165-
178).
Leveraging and Disseminating Customer Information Through the Organization:
Data Mining identifies the most important (profitable) customers and prospects.
Managers can then design tailored marketing strategies to best penetrate the identified
segments. In CRM this is commonly referred to as leveraging and disseminating
customer information throughout the organization to facilitate development of enhanced
relationships among customers. For example, a pharmaceutical company can analyze its
salesforce activities to improve its targeting of high-value physicians and to determine
which marketing activities would be most effective. Data in this analysis include
competitor marketing activities and information about community health-care systems.
Results of the analysis would be distributed to the salesforce via a wide area network that
can enable the sales representatives to learn the key attributes use by physicians in
selecting pharmaceutical vendors. Ongoing analysis of the data warehouse would enable
the best practices from throughout the organization to be applied in specific sales
73
situations (Gionia, Schultz and Corley, 2000: 63-81; Jones, Sundaram and Chin, 2002:
145-156).
Unilever, a large consumer packaged-goods company, applied data mining to improve
the efficiency of its sales process to key customers in Nigeria. Using data from consumer
panels, order invoices, and information on competitor activities, unilever developed a
model identifying the reasons for brand and product switching behaviour among
consumers. From this analysis, unilever managers developed several unique promotional
strategies to most effectively reach several distinct target segments. This organization
applied data-mining techniques to leverage knowledge about its customers contained in a
data warehouse. The information was then disseminated throughout the appropriate
channels of the organizational structure. Indeed, one of the benefits of a CRM system is
this capacity to share information throughout the organization (Scoth and Lane, 2000: 43-
62; Verbeke and Bagozzi, 2000: 88-102). Through campaign management, all functional
areas of an organization participate in the development of programs targeted to its
customers.
According to Schwepker (2001: 39-52), campaign Management involves concentrating
on outbound communications to customers designed to sell a company’s product or
service. The design of the campaign is based directly on data obtained from customers
through various interactions. Campaign management includes monitoring the success of
the communication based on customer reactions through sales, orders, call-backs to the
company, and the like. If a campaign appears unsuccessful, it must be evaluated and
possibly changed in order to achieve the company’s desired objective. The campaign that
is most successful should be continued, while the other campaigns should be modified to
achieve more positive results. According to Lewin (2001: 151-164), the key to success is
how well the campaign conforms to the expectations of the individual customer while
enhancing the opportunity for future relationships between the company and the
customer. In a CRM context, this is known as personalization. Personalization is an
attempt to develop and manage campaigns that meet the individual needs of a company’s
most profitable customer group.
Zimmerman (2001: 59-63), remarked that campaign management attempts to achieve
personalization by developing customized product and service offerings for the
appropriate customer segments, pricing these offerings attractively, and communicating
74
these offerings in a manner that enhances customer relationships. Customizing product
and service offerings requires managing multiple interactions with customers, as well as
giving priority to those products and services that are viewed as most desirable for a
specifically designated customer. Even within a highly defined market segment,
individual customer differences will emerge. Therefore, interactions among customers
must focus on individual experiences, expectations, and desires. Pricing, distributing, and
communicating must be done on a continuous basis and modified according to the most
recent information obtained from customer interaction (Davies, Chun, Silva and Roper,
2004: 125-146; Homes and Srivastava, 2002: 421-428).
Using information stored in the data warehouse, highly customized, even personalized,
products and services can be developed for customers. Shared information from customer
interactions can also be used to develop an individualized pricing plan for each customer.
According to Tungaraz and Poole (2007:82-83), PSS Would Medical supplies health-care
organizations with more than fifty-six thousand products ranging from bandages and
syringes to test tubes and petri dishes to diagnostic imaging equipment and x-ray
technology. After physicians register with PSS World Medical, they can choose only
products that are relevant to their practice. Once they begin placing orders, PSS maintains
a real-time listing of all the products each physician ordered during the previous eighteen
months, ranked in descending order by quantity and frequency of purchase. Items
purchased most frequently by physicians are given a priority pricing policy, allowing
deep price discount if the physician continues to purchase the item frequently.
Partnering to Build Customer Relationship: The strategic plan defines the company’s
overall mission and objectives. Marketing’s role and activities are shown in figure 2.10,
which summarizes the major activities involved in managing marketing strategy and the
marketing mix.
75
Figure 2.10: Managing Marketing Strategy and the Marketing Mix
Source: Kotler, P. and Armstrong, G. (2006), Principles of Marketing, New Jersey:
Pearson Education Inc.
Consumers stand in the centre. The goal is to build strong and profitable customer
relationships. Next comes Marketing Strategy – the marketing logic by which the
company hopes to achieve these profitable relationships. Through market segmentation,
targeting, and positioning, the company decides which customers it will serve and how. It
identifies the total market, then divides it into smaller segments, selects the most
promising segments, and focuses on serving and satisfying strategy, the company designs
a marketing mix made up of factors under its control – product, price, place and
promotion. To find the best marketing strategy and mix, the company engages in
marketing analysis, planning, implementation, and control. Through these activities, the
company watches and adapts to the actors and forces in the marketing environment. To
succeed in today’s competitive marketplace, companies need to be customer centred.
They must win customers from competitors, then keep and grow then by delivering
Mark
eting
analy
sis
Market
segmen
tation
Product
Place Price
Promotion
Profitablecustomer
relationships
Market positioning
Marketing
control
Marketing
planning
Target m
arket
Mark
eting
imple
mentat
ion
Marketing Competitors Intermediaries Suppliers Publics
76
greater value. But before it can satisfy consumers, a company must first understand their
needs and wants. Thus, sound marketing requires a careful customer analysis. Companies
know that they cannot profitably serve all consumers in a given market-at last not all
consumers in the same way. They are too many different kinds of consumers with to
many different kinds of needs. And most companies are in a position to serve some
segments better than others. Thus, each company must divide up the total market, choose
the best segments, and design strategies for profitably serving choosen segments (Kotler
and Armstrong, 2006: 46-48; Donaldson, 2001: 518-520).
This process involves three steps: market segmentation, target marketing, and market
positioning. The market consists of many types of customers, products, and needs. The
marketer has to determine which segments offer the best opportunity for achieving
company objectives. Consumers can be grouped and served in various ways based on
geographic, demographic, psychographic, and behavioural factors. The process of
dividing a market into distinct groups of buyers with different needs, characteristics, or
behaviour that might require separate products or marketing programs is called Market
segmentation. Every market has segments, but not all ways of segmenting a market are
equally useful. For example, Emzor pharmaceutical would gain little by distinguishing
between male and female users of pain relievers if both respond the same way to
marketing effort. A market Segment consists of consumers who respond in a similar way
to a given set of marketing efforts. In the car market, for example, consumers who want
the biggest, most comfortable car regardless of price make up one market segment.
Customers who care mainly about price and operating economy make up another
segment. It would be difficult to make one car model that was the first choice of
consumers in both segments. Companies are wise to focus their efforts on meeting the
distinct needs of individual market segments (Wind, 2001: 291-293; Kotler, 2003: 279-
300).
After a company has defined market segments, it can enter one or many segments of a
given market. Target Marketing involves evaluating each market segment’s attractiveness
and selecting one or more segments to enter. A company should target segments in which
it can profitably generate the greatest customer value and sustain it over time. A company
with limited resources might decide to serve only one or a few special segments or
Market niches. Such nichers specialize in serving market segments that major
77
competitors overlook or ignore. Alternatively, a company might choose to serve several
related segments-perhaps those with different kinds of customers but with the same basic
wants. Or a large company might decide to offer a complete range of products to serve all
segments. Most companies enter a new market by serving a single segment, and if this
proves successful, they add segments. Large companies eventually seek full market
coverage. The leading company normally has different products designed to meet the
special needs of each segment. After a company has decided which market segments to
enter, it must decide what positions it wants to occupy in those segments. A product’s
position is the place the product occupies relative to competitors in consumers’ minds.
Marketers want to develop unique market positions for their products. If a product is
perceived to be exactly like others on the market, consumers would have no reason to buy
it. Market positioning is arranging for a product to occupy a clear, distinctive, and
desirable place relative to competing products in the minds of target consumers. Thus,
marketers plan positions that distinguish their products from competing brands and give
them the greatest strategic advantage in their target markets. In positioning its product,
they company first identifies possible competitive advantages upon which to build the
position. To gain competitive advantage, the company must offer greater value to target
consumers. It can do this either by charging lower prices than competitors do or by
offering more benefits to justify higher prices. But if the company positions the product
as offering greater value, it must then deliver that greater value. Thus, effective
positioning begins with actually differentiating the company’s marketing offer so that it
gives consumers more value. Once the company has chosen a desired position, it must
take strong steps to deliver and communicate that position to target consumers. The
company’s entire marketing program should support the chosen positioning strategy
(Cravens and Piercy, 2003: 198-220; Perrault and McCarthy, 2002: 62-90).
Developing the Marketing Mix: Once the company has decided on its overall marketing
strategy, it is ready to begin planning the details of the marketing mix, one of the major
concepts in modern marketing. The Marketing Mix is the set of controllable, tactical
marketing tools that the firm blends to produce the response it wants in the target market.
The marketing mix consists of everything the firm can do to influence the demand for its
product. The many possibilities can be collected into four groups of variables known as
the Four Ps: product, price, place and promotion. Figure 2.11 shows the particular
marketing tools under each P.
78
Figure 2.11 The Four Ps of the Marketing Mix
Source: Kotler, P and Armstrong, G (2006), Principles of marketing Now Jersey: Pearson
Education Inc.
Product means the goods-and-services combination the company offers to the target
market. Price is the amount of money customers have to pay to obtain the product. Place
includes company activities that make the product available to targets consumers.
Promotion means activities that communicate the merits of the product and persuade
target customers to buy it. An effective marketing program blends all of the marketing
mix elements into a coordinated program designed to achieve the company’s marketing
objectives by delivering value to consumers. The marketing mix constitutes the
company’s tactical tool kit for establishing strong positioning in target markets. There is a
concern, however, that is valid. It holds that the four Ps concepts take the seller’s view of
the market, not the buyer’s view. From the buyer’s view point, in this age of customer
relationships, the four Ps might be better desribed as the four Cs (Kotler and Armstrong,
2006: 51; Waterschoot, 2001: 319-321). Figure 2.4 compared the seller’s viewpoint and
buyer’s viewpoint as follows:
Target customer
Intended positioning
Price • List price • Discounts • Allowances • Payment period • Credit terms
Product • Variety • Quality • Design • Features • Brand name • Packaging • Services
Place • Channels • Coverage • Assortments • Locations • Inventory • Transportation • Logistics
Promotion • Advertising • Personal selling • Sales promotion • Direct
Marketing • Public relation
79
Table 2.4: Seller’s and Buyer’s Viewpoint Compared (Seller’s Viewpoint) 4Ps Versus 4 Cs (Buyer’s Viewpoint)
i. Product Customer Solution
ii. Price Customer Cost
iii. Place Convenience
iv Promotion Communication
Source: Waterschoot, W.V. (2001) “The Marketing Mix” in Baker M.J. The IEBM
Encyclopedia of Marketing, London: Thomson Learning.
Thus, while marketers see themselves as selling products, customer see themselves as
buying value or solution to their problems. And customers are interested in more than just
the price; they are interested in the total cost of obtaining, using, and disposing of a
product. Customers want the product and service to be as conveniently available as
possible. Finally, they want two-way communication. Marketers would do well to think
through the four Cs first and then build the four Ps on that problem. The marketer’s task
is to devise marketing activities and assemble fully integrated marketing programs to
create, communicate, and deliver value for consumers. The particular marketing variables
under each are shown again in figure 2.12.
Marketing-mix decisions must be made for influencing the trade channels as well as the
final consumers. Figure 2.13 shows the company preparing an offering mix of products,
services, and prices, and utilizing a communication mix of advertising, sales promotion,
events and experiences, public relations, direct marketing, and personal selling to reach
the trade channels and the target customers. The firm can change its
80
Figure 2.12: The four P components of the Marketing Mix
Source: Kotler, P and Keller, K.L. (2006), Marketing Management 12e, New Jersey:
Pearson Education Inc.
price, salesforce size, and advertising expenditures in the short run. It can develop new
products and modify its distribution channels only in the long run. Thus the firm typically
makes fewer period-to-period marketing-mix changes in the short run than the number of
marketing-mix decision variables might suggest.
The four marketing-mix elements are interrelated; decision in one area often affects
actions in another. To illustrate, design of a marketing mix is certainly affected by
whether a firm chooses to compete on the basis of price or on one or more other
elements. When a firm relies on prices as its primary competitive tool, the other elements
must be designed to support aggressive pricing. For example, the promotional campaign
likely will be built around a theme of low, low price. In non-price competition, however,
product, distribution, and/or promotion strategies come to the forefront. For instance, the
product must have features worthy of higher prices,
Marketing Mix
Target Market
Place • Channels • Coverage • Assortments • Locations • Inventory • Transport
Product • Product variety • Quality • Design • Features • Brand name • Packaging • Sizes • Services • Warranties • Returns
Prices • List price • Discounts • Allowances • Payment period • Credit terms
Promotion • Sales promotion • Advertising • Sales force • Public relations • Direct marketing
81
Communication mix
Figure 2.13: Marketing-Mix Strategy
Source: Kotler, P and Keller, K.L (2006), Marketing Management 12e, New Jersey:
Pearson Education Inc.
and promotion must create a high-quality image for the product. Each marketing-mix
element contains countless variables. For instance, an organization may market one
product or many, and they may be related or unrelated to each other. The products may
be distributed through wholesalers, to retailers without the benefit of wholesalers, or even
directly to final customers. Ultimately, from the multitude of variables, management must
select a combination of elements that will satisfy target markets and achieve
organizational and marketing goals (Jones, 2001: 18-21; Wilson, 2001: 208-210, Mintu-
Wimsmatt and Gassenheimer, 2000: 1-9).
2.4 Sales in the Pharmaceutical Industry
The earliest drugstores date back to the middle ages. The first known drugstore was
opened by Arabian pharmacists in Baghdad in 754 AD, and many more soon began
operating throughout the medieval Islamic world and eventually medieval Europe. By the
nineteenth century, many of the drug stores in Europe and North America had eventually
developed into larger pharmaceutical companies. Most of today’s major pharmaceutical
companies were founded in the late nineteenth and early twentieth centuries. Key
discoveries of the 1920s and 1930s, such as insulin and penicillin, became mass-
manufactured and distributed. Switzerland, Germany and Italy had particularly strong
industries, with the UK, US, Belgium and Netherlands following suit. Legislation was
enacted to test and approve drugs and to require appropriate labeling. Prescription and
• Advertising
• Sales Promotion
• Events and
experiences
• Public relations
• Direct marketing
• Personal selling
Target Customers
Distribution Channels
Company
Products Services Prices
Offering mix
82
non-prescription drugs become legally distinguished from one another as the
pharmaceutical industry matured. The industry got underway in earnest from the 1950s,
due to the development of systematic scientific approaches, understanding of human
biology (including DNA) and sophisticated manufacturing techniques (Robinson, 2008:
579-585; Nweze, 2009: 20-27).
Numerous new drugs were developed during the 1950s and mass-produced and marketed
through the 1960s. These included the first oral contraceptive, “The Pill”, cortisone,
blood-pressure drugs and other heart medications. MAO inhibitors, chlorpromazine
(Thorazine), Haldol (Haloperidol) and the tranquilizers ushered in the age of psychiatric
medication. Valium (diazepam), discovered in 1960, was marketed from 1963 and
rapidly became the most prescribed drug in history, prior to controversy over dependency
and habituation. Attempts were made to increase regulation and to limit financial links
between companies and prescribing physicians, including by the relatively new US FDA.
Such calls increased in the 1960s after the thalidomide tragedy came to light, in which the
use of a new tranquilizer in pregnant women caused severe birth defects. In 1964, the
world medical Association issued its Declaration of Helsinki, which set standards for
clinical research and demanded that subjects give their informed consent before enrolling
in an experiment. Pharmaceutical companies became required to prove efficacy in
clinical trials before marketing drugs. Cancer drugs were a feature of the 1970s. From
1978, India took over as the primary centre of pharmaceutical production without patent
protection (Sharfstein 2005: 27-29; Atojoko, 2009:8-15).
The industry remained relatively small scale until the 1970s when it began to expand at a
greater rate. Legislation allowing for strong patents, to cover both the process of
manufacture and the specific products came in the force in most countries. By the mid-
1980s, small biotechnology firms were struggling for survival, which led to the
information of mutually beneficial partnerships with large pharmaceutical companies and
a host of corporate buyouts of the smaller firms. Pharmaceutical manufacturing became
concentrated, with a few large companies holding a dominant position throughout the
world and with a few companies producing medicines within each country. The
pharmaceutical industry entered the 1980s pressured by economics and a host of new
regulations, both safety and environmental, but also transformed by new DNA
chemistries and new technologies for analysis and computation. Drugs for heart disease
83
and for AIDS were a feature of the 1980s, involving challenges to regulatory bodies and a
faster approval process. Managed care and Health Maintenance Organizations (HMOs)
spread during the 1980s as part of an effort to contain rising medical costs, and the
development of preventative and maintenance medications became more important. A
new business atmosphere became institutionalized in the 1990s, characterized by mergers
and takeovers, and by a dramatic increase in the use of contract research organizations for
clinical development and even for basic R&D. The pharmaceutical industry confronted a
new business climate and new regulations, born in part from dealing with world market
forces and protests by activities in developing countries. Animal right activism was also a
problem (Ray, 2003: 1182-1193; Maduka, 2006: 27-35).
Marketing changed dramatically in the 1990s, partly because of a new consumerism. The
internet made possible the direct purchase of medicine by drug consumers and of raw
materials by drug producers, transforming the nature of business. In the US, Direct-to-
Consumer Advertising proliferated on radio and television because of new FDA
regulations in 1997 that liberalized requirements for the presentation of risks. The new
antidepressants, the SSRIs, notably fluoxetine (Prozac), rapidly became bestsellers and
marketed for additional disorders. Drug development progressed from a hit-and-miss
approach to rational drug discovery in both laboratory design and natural-product
surveys. Demand for nutritional supplements and so-called alternative medicines created
new opportunities and increased competition in the industry. Controversies emerged
around adverse effects, notably regarding Vioxx in the US, and marketing tactics.
Pharmaceutical companies became increasingly accused of disease mongering or over-
medicalizing personal or social problems. There are now more than 200 major
pharmaceutical companies, jointly said to be more profitable than almost any other
industry, and employing more political lobbyists than any other industry. Advances in
biotechnology and the human genome project promise ever more sophisticated, and
possibly more individualized, medications (Tungaraz and Poole, 2007: 82-83; Oteri,
2008: 30-33).
Pharmaceutical companies commonly spend a large amount on advertising, marketing
and lobbying. In the US, drug companies spend $19 billion a year on promotion.
Advertising is common in health care journals as well as through more mainstream media
routes. In some countries, notably the US, they are allowed to advertise direct to the
84
general public. Pharmaceutical companies generally employ salespeople (often called
“drug reps” or, an older term, “detail men”) to market directly and personally to
physicians and other health care provider. In some countries, notably the US,
pharmaceutical companies also employ lobbyists to influence politicians. Marketing of
prescription drugs in the US is regulated by the Federal Prescription Drug Marketing Act
of 1987. Physicians, physician assistants, and nurse practitioners are perhaps the most
important players in pharmaceutical sales because they write the prescriptions that
determine which drugs will be used by the patient. Influencing the physician is often seen
as the key to prescription of pharmaceutical sales. A medium-sized pharmaceutical
company might have a salesforce of 1000 representatives. The largest companies have
tens of thousands of representatives. Currently, there are approximately
100,000pharmaceutical sales reps in the United Sates pursing some 120,000
pharmaceutical prescribers. The number doubled in the four years from 1999 to 2003.
Drug companies spend $5 billion annually sending representatives to physicians’ offices.
Pharmaceutical companies use the service of specialized health care marketing research
companies to perform marketing research among physicians and other health care
professionals (Moyniha, 2008: 1163; Myers, 2008: 1169-1172; Mackenzie, 2006: 27-35;
Solenke, 2008: 22).
Private insurance or public health bodies (eg. the NHS in the UK) decide which drugs to
pay for, and restrict the drugs that can be prescribed through the use of formularies.
Public and private insurers restrict the brands, types and number of drugs that they will
cover. Not only can the insurer affect drug sales by including or excluding a particular
drug from a formulary, they can affect sales by tiering or placing bureaucratic hurdles to
prescribing certain drugs as well. In January 2006, the US government instituted a new
public prescription drug plan through its medicare program known as Medicare Part D.
This program engages private insurers to negotiate with pharmaceutical companies for
the placement of drugs on tired formularies. Commercial stores and pharmacies are a
major target of non-prescription sales and marketing for pharmaceutical companies.
Since the 1980s new methods of marketing for prescription drugs to consumers have
become important. Direct – to – consumer media advertising was legalized in the FDA
Guidance for Industry on Consumer-Directed Broadcast Advertisements (Healy, 2007:
42-49; Mordi, 2008: 22-27).
85
There has been increasing controversy surrounding pharmaceutical marketing and
influence. There have been accusations and findings of influence on doctors and other
health professionals through drug reps, including the constant provision of marketing
“gifts” and biased information to health professionals, highly prevalent advertising in
journals and conferences; funding independent health care organizations and health
promotion campaigns; lobbying physicians and politicians (more than any other industry
in the US; sponsorship of medical schools or nurse trainings; sponsorship of continuing
educational events, with influence on the curriculum; and hiring physicians as paid
consultants on medical advisory boards. To help ensure the status quo on US, drug
regulation and pricing, the pharmaceutical industry has thousands of lobbyists in
Washington, DC that lobby congress and protect their interests. The pharmaceutical
industry spent $855 million, more than any other industry, on lobbying activities from
1998 to 2006, according to the Non-partisan center for Public Integrity. Some advocacy
groups, such as No Free Lunch, have criticized the effect of drug marketing to physicians
because they say it biases physicians to prescribe the marketed drugs even when others
might be cheaper or better for the patient. There have been related accusations of disease
mongering (over-medicalizing) to expand the market for medications. An inaugural
conference on that subject took place in Australia in 2006. A 2005 review by a special
committee of the UK Government came to all the above conclusions in a European Union
context, while also highlighting the contributions and needs of the industry (Wise, 2003:
1163:1170; Uche, 2008: 28-30).
There is also huge concern about the influence of the pharmaceutical industry on the
scientific process. Meta-analyses have shown that studies sponsored by pharmaceutical
companies are several times more likely to report positive results, and if a drug company
employee is involved (as is often the case, often multiple employees as co-authors and
helped by contracted marketing companies) the effect is even larger. Influence has also
extended to the training of doctors and nurses in medical schools, which is being fought
(Uduji; 2006: 192-199). It has been argued that the design of the diagnostic and statistical
manual of mental disorder and the expansion of the criteria represents an increasing
medicalization of human nature, or “disease mongering”, driven by drug company
influence on psychiatry. The potential for direct conflict of interest has been raised, partly
because roughly half the authors who selected and defined the DSM-IV psychiatric
disorders had or previously had financial relationships with the pharmaceutical industry.
86
The president of the organization that designs and publishes the DSM, the American
Psychiatric Association, recently acknowledged that in general, American psychiatry has
“allowed the biopsycho – social model to become the bio-bio-bio model” and routinely
accepted “kick backs and bribes” from pharmaceutical companies (Moynihan and
Cassels, 2005; Odutola, 2009: 34).
The role of pharmaceutical companies in the developing world is a matter of some
debate, ranging from those highlighting the aid provided to the developing world, to
those critical of the use of the poorest in human clinical trials, often without adequate
protections, particularly in states lacking a strong rule of law. Other criticisms include an
alleged reluctance of the industry to invest in treatments of diseases in less economically
advanced countries, such as malariea; criticism for the price of patented AIDs
medication, which could limit the rapeutic options for patients in the third world, where
the most people have AIDs. In September 2008, the Open Source Drug Discovery
Network Was launched in India to combat infections diseases common to developing
countries (Keng, 2009: 28-34; Adedeji and Odutola, 2009: 20-23; Manuaka, 2009: 14-
18).
List of Pharmaceutical Companies: The following is a list of the 47 largest
pharmaceutical and biotech companies ranked by health care revenue as of 2006. Some
companies (eg. Johnson & Johnson and Proter & Gamble) have additional revenue not
included here. The phrase Big Pharma is often used to refer to companies with revenue in
excess of $3 billion, and/or R & D expenditure in excess of $500 million, and represents
the first 30 or 40 companies in this list. Table 2.5 shows the 47 largest pharmaceutical
and biotech companies ranking as follows:
Table 2.5: 47 Largest Pharmaceutical and Biotech Companies
Rank Company Country Revenues
($millions)
R & D
($Millions)
Net Income
($millions)
Employees
1. Pfizer (with Wyeth) USA 70,818 NA 12,760 137,127
2. Johnson & Johnson USA 61,095 NA 10,576 119,200
3. Glaxo Smithkline UK 45,447 6,373 10,432 103,483
4. Hoffmann-La Roche Switzerland 40,315 NA 8,135 78,604
5. Sanofi-Aventis France 39,997 NA 7,204 99,495
6. Novartis Switzerland 39,800 NA 11,946 98,200
87
7. Astra Zeneca UK/Sweden 29,559 NA 5,959 67,400
8. Abbott Laboratories USA 25,914 NA 3,606 68,697
9. Merck & Co. USA 23,850 4,678 7,808 74,372
10. Bristol-Myers Squibb USA 19,977 NA 2,165 42,000
11. Eli Lilly & Company USA 18,634 NA 2,953 40,600
12. Amgen USA 14,268 3,366 2,950 48,000
13. Boehringer Ingelheim Germany 13,284 1,977 2,163 43,000
14. Baxter International USA 10,378 614 1,397 38,428
15. Takeda Pharmaceutical Japan 10,284 1,620 2,870 15,000
16. Genentech USA 9,284 1,773 2,113 33,500
17. Procter & Gamble USA 8,964 NA 10,340 29,258
18. Teva Pharmaceutical Ind. Isreal 8,408 495 546 26,670
19. Astellas Pharma Japan 7,850 1,435 1,122 23,613
20. Daiichi Sankyo Japan 7,158 1,459 671 20,100
21. Novo Nordisk Denmark 6,520 1,063 1,086 15,358
22. Eisai Japan 5,583 926 604 14,993
23. Merck KGA Germany 5,175 772 1,258 13,900
24. Alcon USA 4,897 512 1,348 13,500
25. SINOPHARM China 4,700 NA NA NA
26. Akzo Nobel Netherlands 4,694 741 1,449 13,000
27. UCB Belgium 4,426 1,024 492 12,741
28. Nycomed Switzerland 4,264 NA 105 10,533
29. Forest Laboratories USA 3,442 941 454 9,649
30. Solvay Belgium 3,268 533 1,026 9,000
31. Allergen USA 3,063 1,056 127 8,423
32. Gilead Sciences USA 3,026 384 1,190 6,772
33. CSL Australia 2,788 161 454 6,400
34. Chugai Pharmaceutical Co. Japan 2,787 467 328 5,962
35. Biogen Idec USA 2,683 718 218 5,907
36. Bausch & Lomb USA 2,292 197 15 5,830
37. Taiho Pharmaceutical Co. Japan 2,069 244 132 5,191
38. King Pharmaceutical USA 1,989 254 289 5,191
39. Watson Pharmaceuticals USA 1,979 131 445 5,126
40. Mitsubishi Pharma Japhn 1,945 403 208 5,111
41. Shire UK 1,797 387 278 4,958
42. Cephalon USA 1,764 403 145 4,913
43. Dainippon Sumitomo Phm. Japan 1,763 350 193 3,750
44. Kyowa Hakko Kogyo Japan 1,698 268 108 2,895
45. Shionogi Japan 1,640 320 159 2,868
46. Mylan Laboratories USA 1,612 104 217 2,800
47. H. Lundbeck Denmark 1,552 329 186 2,515
Source: Robinson, J. (2008) “UK Parliamentarians put the Pharma Industry under the
spotlight” European Public Health Alliance, April, 38 (4): 579-581.
88
Market Leaders in Terms of Revenue: The following is a list of the 20 largest
pharmaceutical and biotech companies ranked by health care revenue as of 2007. Some
companies (eg. Bayer, Johnson & Johnson and Procter & Gamble) have additional
revenue not included here. The phrase Big Pharma is often used to refer to companies
with revenue in excess of $3 billion, and/or R & D Expenditure in excess of $500 million.
Table 2.6 ranked the 20 largest pharmaceutical and biotech companies and follows:
Table 2.6: 20 largest pharmaceutical and Biotech companies
Rank Company Country Revenues
($millions)
R & D
($Millions)
Net Income
($millions)
Employees
1. Novartis Switzerland 53,324 7,125 11,053 138,000
2. Ptizer USA 48,371 7,599 19,337 122,200
3. Bayer Germany 44,200 1,791 6,450 106,200
4. Glaxosmithkline UK 42,813 6,373 10,135 106,000
5. Johnson & Johnson USA 37,020 5,349 7,202 102,695
6. Sanofi-Aventis France 35,645 5,565 5,033 100,735
7. Hoffmann-La Roche Switzerland 33,547 5,258 7,318 100,289
8. Astra Zeneca UK/Sweden 26,475 3,902 6,063 98,000
9. Merck & Co. USA 22,636 4,783 4,434 74372
10. Abbott Laboratories USA 22,476 2,255 1,717 66,800
11. Wyeth USA 20,351 3,109 4,197 66,663
12. Bristol-Myers Squibb USA 17,914 3,067 1,585 60,000
13. Elililly & Company USA 15,691 3,129 2,663 50,060
14. Amgen USA 14,268 3,366 2,950 48,000
15. Boehringer Ingelheim Germany 13,284 1,977 2,163 43,000
16. Schering-Plough USA 10,594 2,188 1,057 41,500
17. Baxter International USA 10,378 614 1,397 38,428
18. Taked a Pharmaceutical Co. Japan 10,284 1,620 2,870 15,000
19. Genentech USA 9,284 1,773 2,113 33,500
20. Procter & Gamble USA 8,964 NA 10,340 29,258
Source: Tungaraza, T (2008) “IMS Health Forecasts Growth for Global
Pharmaceutical Market” British Medical Journal, Volume 36, issue 7400:
1193-1194.
Market Leaders in Terms of Sales: The top ten pharmaceutical companies by 2007
sales are shown in table 2.7.
89
Table 2.7: Top Ten Pharmaceutical Companies Rank Company Sales
($millions)
Growth (%) Market share (%) Headquarter
Location
1. Pfizer 45,983 2.1 7.3 USA
2. Glaxo Smithkline 37,034 9.7 5.9 UK
3. Sanofi-Aventis 35,638 5.0 5.7 France
4. Novartis 28,880 18.0 4.6 Switzerland
5. Hoffmann-La Roche 26.596 21.8 4.2 Switzerland
6. Astra Zeneca 25,741 10.5 4.1 UK/Sweden
7. Johnson & Johnson 23,267 4.2 3.7 USA
8. Merck & Co. 22,636 2.8 3.6 USA
9. Wyeth 15,683 2.4 2.5 USA
10. Elililly & Company 14,814 7.5 2.4 USA
Source: Myers, D (2008) “Changing the Face of Detailing by Motivating Physicians to
see Pharmaceutical Sales Reps” British Medical Journal, volume 326, issue
7400: 1169.
The Nigeria Pharmaceuticals and Health care: The Nigeria pharmaceuticals and
Health care report provides independent forecasts and competitive intelligence on
Nigeria’s pharmaceuticals and health care industry. Nigeria’s drug market remains
subdued due to readily available counterfeit drugs, poor health care infrasture and the
limited spending power of citizens. The market was estimated to be worth US$ 278
million in 2007 and it should grow at around 5% year-on-year (y-o-y), reaching US$369
million by 2012 (Udoma, 2008:35).
Despite the federal government efforts to promote domestic manufacturing, Nigeria
remains heavily reliant on imported pharmaceuticals. The National Drug Policy sets a
target for 70% of the country’s demand for drugs to be met by local industry. However,
in 2007 BMI estimated that imports supplied 54% of the market. On the whole, domestic
players do not appear ready to manufacture high-tech, so it was expected that imports
would remain dominant (Omotunde, 2008: 12-13). The domestic drug markers seem to
be increasingly looking to diversity into consumer health products, most likely in
response to the difficult operating environment is the core market. In January 2008, both
fidson Health care and Neimeth Pharmaceuticals announced they were to launch
consumer health lines. Neimeth revealed it would do this through two newly created
90
subsidiaries – one concentrating on food and nutraceuticals, the other on herbal remedies
(Kang, 2009: 28-34; Odutola, 2009: 34; Okereocha, 2009: 36-40).
Health care, and in particular how to expand access, continues to be a hot topic
throughout Africa, with a variety of solutions being pursued by national governments –
Nigeria’s solution being the National Health Insurance Scheme (NHIS). There are
encouraging signs for private sector involvement in African health care after the World
Bank’s International Finance Corporation (IFC) unveiled a US $1 billion support package
for the development of private health care on the continent. With the NHIS struggling in
terms of participant members, BMI believes that increasingly popular health saving
accounts (HSAs) can provide a solution for citizens unable to benefit from the NHIS-
Particularly sector (Eni, 2007:26-27; Manuaka, 2009: 14-18). In BMI’s updated Business
Environment Rankings, Nigeria remains in 13th place out of 14 Middle East and Africa
(MEA) countries surveyed. Nigeria’s score continues to be held down by a combination
of low consumer spending power and a weak regulatory environment. Both of these
factors should remain in play over the forecast period, making it unlikely that Nigeria
will overtake Egypt, which is one place ahead. Nigeria’s score in the country structure
category is more promising, suggesting that there is potential market growth if the
previously mentioned weaknesses can be remedied (Adedeji, 2009: 30-31; Igiebor, 2008:
14-16). Some of the Nigeria’s pharmaceutical companies mentioned include the
following: (i) Pfizer; (ii) Novartis; (iii) Sanofi-Aventis; (iv) Glaxo Smithkline (GSK); (v)
Nigeria-German Chemicals Plc. (NGC); (vi) Emzor; (vii) Fidson Health care; (viii)
Archy; (ix) Neros pharmaceuticals; (x) Drugfield Pharmaceuticals Limited; (xi)
Campharm products; and (xii) Tyonex (Uche, 2008: 28-30).
Emzor Pharmaceutical Industries Limited: Emzor Pharmaceutical Industries Limited,
a subsidiary of Emzor Chemist Limited, is a wholly private indigenous pharmaceutical
manufacturing company incorporated in Nigeria in 1984, for the purpose of
manufacturing high quality pharmaceutical products and medical consumables. Its
holding company, Emzor chemists limited opened for retail business in January 1977 at
number 1, Fola Agoro Street, Abule Ijesha, Yaba, and Lagos, Nigeria. The rapid growth
of the retail business encouraged Emzor Chemists Limited to Venture into the
importation and wholesale of assorted pharmaceuticals. The idea to manufacture locally
came later and this was predicated on the need to develop local capability, create jobs and
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provide high quality pharmaceutical products and services to the Nigerian people at
prices that are not only affordable but represent good value (Omotunde, 2008: 12-13).
Emzor Pharmaceutical Industries Limited started pilot production in 1985. And in 1988,
it had become an established pharmaceutical manufacturing company especially with the
introduction of Emzor paracetamol. The factory is located on 2.5 acres of land in the
Isolo industrial estate of Lagos, Nigeria. The factory has facilities to make a wide variety
of high quality pharmaceutical products that meet international standards at affordable
and competitive prices. The factory is registered with the Federal Ministry of Health
under the supervision of Mrs. Stella Okoli, the superintendent pharmacist, managing
director and chief executive officer. The factory was officially commissioned in July
1993, by the then secretary of Health to the Interim National Government, Dr.
Christopher Okojie. Since then, the company has attracted foreign missions, scholars, and
students of pharmacy, microbiology and chemistry. In April, 1999, Prof. Debo Adeyemi,
the Honourable Minister of Health, Commissioned the factory extension. The company
flagged off with only four product lines in 1987, but now they are producing a range of
over fifty product items in the analgesic, anti-malaria, vitamin/haematinics/multivitamin
supplement, anti-helmintic, antibiotics and therapeutic class. The Emzor pharmaceutical
industries limited, has become a trailblazer for indigenous pharmaceutical companies in
Nigeria. It has also become a household name in Nigeria, and among the Big Ten in the
country that are known for their revenue, quality products that sales beyond West African
Coast (Udoma, 2008: 35, Adedeji and Odutola, 2009: 20-23).
2.5 The Nature of Salesforce Motivation
Understanding why salespeople do the things they do on the job is not an easy task for
the sales manager. Predicting their response to management’s latest productivity program
is harder yet. Therefore, enough is yet to be known about salesforce motivation to give
the thoughtful sales manager practical, effective techniques for increasing salespeople’s
effort and performance. Salesforce motivation refers to forces that energize, direct, and
sustain a salesperson’s efforts. All behaviour, except involuntary reflexes like eye blinks
(which have little to do with sales management), is motivated. A highly motivated
salesperson will work hard toward achieving performance goals. With adequate ability
and understanding of the sales job, such a salesperson will be highly productive. Galea
(2004: 29-30) defined salesforce motivation as psychological forces that determine the
92
direction of a salesperson’s behaviour in an organization, a salesperson’s level of effort,
and a salesperson’s level of persistence in the face of obstacles.
Salesforce motivation can come from intrinsic or extrinsic sources. Intrinsically
motivated behaviour is behaviour that is performed for its own sake; the source of
motivation is actually performing the behaviour, and motivation comes from doing the
work itself. Many sales managers are intrinsically motivated; they derive a sense of
accomplishment and achievement from helping their organizations to achieve their goals
and gain competitive advantages. Sales jobs that are interesting and challenging are more
likely to lead to intrinsic motivation than are sales jobs that are boring or do not make use
of a salesperson’s skills and abilities. Extrinsically motivated behaviour is behaviour that
is performed to acquire material or social rewards or to avoid punishment; the source of
motivation is the consequences of the behaviour, not the behaviour itself. A salesperson
who is motivated by receiving a commission on sales made is extrinsically motivated. His
motivation comes from the consequences he receives as a result of his sales behaviour
(Goutain, 2000: 161-172; Albers, 2002: 248-266; (Cherry and Fraedrich, 2000:173-188).
Salespeople can be intrinsically motivated, extrinsically motivated, or both intrinsically
and extrinsically motivated. A sales manager who derives a sense of accomplishment and
achievement from managing a large size of salesforce and strives to reach year – end
targets to obtain a hefty bonus is both intrinsically and extrinsically motivated.
Regardless of whether salespeople are intrinsically or extrinsically motivated, they join
and are motivated to work in organizations to obtain certain outcomes. An outcome is
anything a salesperson gets from a job or organization. Some outcomes, such as
autonomy, responsibility, a feeling of accomplishment, and the pleasure of doing
interesting or enjoyable work, result in intrinsically motivated behaviour. Other
outcomes, such as pay, job security, benefits and vacation time, result in extrinsically
motivated behaviour. Organizations hire salespeople to obtain important inputs. An input
is anything a salesperson contributes to the sales job or organization, such as time, effort,
sales, education, experience, skills, knowledge, and actual sales behaviours. Inputs such
as these are necessary for an organization to achieve its goals. Sales managers strive to
motivate the salesforce of an organization to contribute inputs-through their behaviour,
effort, and persistence – that help the organization achieve its goals (Carlso and Pearo,
2004: 48-59; Brown, Mowen, Donavan and Lacata, 2002: 110:119).
93
Sales managers use outcomes to motivate salespeople to contribute their inputs to the
organization. Giving salespersons’ outcomes when they contribute inputs and perform
well align the interests of the salespeople with the goals of the organization as a whole
because when salespeople do what is good for the organization, they personally benefit.
This alignment between salespeople and organizational goals as a whole can be described
by the salesforce motivation equation depicted in figure 2.14. Sales managers seek to
ensure that salespeople are motivated to contribute important inputs to the organization,
that these inputs are put to good use or focused in the direction of high performance, and
that high performance results in salespeople obtaining the outcomes they desire. Each of
the theories of salesforce motivation focuses on one or more aspects of this equation.
Each theory focuses on a different set of issues that sales managers need to address to
have a highly motivated salesforce. Together, these theories provide a comprehensive set
of guideline for sales managers to follow to promote high levels of salesforce motivation.
Effective sales managers tend to follow many of these guidelines, whereas ineffective
sales managers often fail to follow them and seem to have trouble motivating the
company salesforce (Chonko, Dubinsky, Jones and Robert, 2003: 935-946; Cummings,
2001: 87-88)
Inputs from
salespeople
Performance
Outcomes Received by
Salespeople
Time
Effort
Education
Experience
Skills
Knowledge
Sales behaviour
contributes to
organizational
efficiency,
Organizational
Effectiveness,
and the attainment of organizational goals.
pay
Job Security
Benefits
Vacation time
job satisfaction
Autonomy
Responsibility
A feeling of Accomplishment
The pleasure of doing interesting work
Figure 2.14: The Salesforce Motivation Equation
Source: Jones, G.R. and George, J.M. (2003) Contemporary Management, New York:
McGraw-Hill.
Types of Sales Job: The term marketing mix describes the combination of four
ingredients that constitute the core of a company’s marketing system, when these four-
product, price, distribution, and promotion-are effectively blended; they form a marketing
program that provides want-satisfying goods and services to the company’s market.
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Promotional activities form a separate submix that we call the promotional mix, or the
communication mix, in the company marketing program. The major elements in the
promotional mix are the company’s advertising, sales promotion, and personal selling
effort. Publicity and public relations are also part of the promotional activities, but
typically they are less widely used than the first three elements. In the Nigeria economy,
personal selling is the most important of the big three elements in terms of people
employed, naira spent, or sales generated (Onyema, 2005: 14-15; Uduji and Nnabuko,
2008: 156-183).
In the face of intense competition, companies today are trying to improve their
performance in every dimension of their operations. As a result, companies expect more
from their suppliers. Salespeople who represent these suppliers are expected to make a
contribution to their customers’ success. To do this, salespeople must understand their
customers’ needs and be able to discover and help customers solve their problems. At the
same time, companies are finding it harder to develop or sustain product-based
competitive advantages. Most product-based advantages are soon copied by competitors.
Thus companies must focus on strengthening the value-added components of their
offering. Value-added components are those which augment the product itself, such as
information and service. To understand customer needs and to provide customers with
value-added solutions to their problems, salespeople must develop close, long-term
relationships with their customers. These relationships are built on cooperation, trust,
commitment, and sharing information. The process by which a firm builds long-term
relationships with customers for the purpose of creating mutual competitive advantages is
called relationship marketing, or relationship selling. Salespeople who are engaged in
relationship selling concentrate their efforts on developing trust in a few carefully
selected accounts over an extended period of time, rather than calling on a larger number
of accounts. Relationship selling is distinctive from the traditional transaction selling,
whereby salespeople focus on the immediate one-time sale of the product. These
differences are presented below (Babin, Boles and Robin, 2000: 435-358; Byrenes, 2003:
53-54). Table 2:5 compared Transaction and Relationship orientation as below:
Sales jobs encompass a wide variety of activities and responsibilities. Most sales jobs are
quite different from one another, and sales jobs generally are different from non selling
jobs. Further, most sales jobs today are quite different from those of the past. One useful
95
way to classify the different types of sales job is to look at them on the basis of the
amount of problem solving and selling required, from the simple to the
Table 2.8: Transaction and Relationship Orientation Compared Transaction-Oriented Versus Relationship-Oriented
i. Get new accounts
ii. Get the order
iii. Cut the price to get the sale
iv. Manage all accounts to maximize short-term sales
v. Sell to anyone
Retain existing accounts
Become the preferred supplier
Price for profit
Manage each account for long-term profit.
Concentrate on high profit potential accounts
Source: Babin, B.J; Boles, J.S, and Robin, D.P. (2000) “Representing the Perceived
ethical work climate among marketing employees” Journal of the Academy of
Marketing Science, 28 (Summer): 345.
complex. According to Spiro, Stanton and Rich (2003:94-98), one such classification is
as follows: (i) Driver – Salesperson – A position in which the salesperson primarily
delivers the product – for example, soft drinks, milk, or drugs. The selling
responsibilities are secondary; few of these people originate sales; (ii) Inside Order-taker
– A position in which the salesperson is primarily an inside order-taker-for example, the
retail clerk standing behind a counter. The customers come to the sales–people. Most of
them have already decided to buy; salespeople may help customers decide which of
several products will work best for them. They may also suggest complimentary
products; (iii) Outside Order-taker – A position in which the salesperson is primarily an
outside order-taker, going to the customer in the field. Examples include a packaging
house, soap, or spice salesperson who calls on retail food stores. Both selling and
problem solving are left to executives higher in the organization, while the primary
responsibility of the salesperson is to ensure that their products are getting as much shelf
space and promotional attention as possible; (iv) Missionary Salesperson – A sales job
intended to build goodwill, perform promotional activities, and provide information and
other services for the customers. A missionary salesperson is not expected or permitted to
solicit an order. An example of this position is a missionary salesperson for a distiller or a
drug rep for a pharmaceutical manufacturer; (v) Sales engineer – A position in which an
engineer provides technical advice or assistance with regard to the products and their
application to the customer’s process. Sales engineers may be part of the sales team
brought in to assess customer needs before the sales or after the sales to help solve
96
customer problems; they are not expected to sell the product; (vi) Consultive Salesperson,
tangible goods – A position that involves the consultive selling of tangible goods such as
pharmaceutical products. This sales job often is difficult because salespeople must
thoroughly understand their customers’ business. In order to sell their products,
salespeople must be able to understand customer problems and provide solutions through
the integration of their products with customer needs; (vii) Consultive salesperson,
Services and other intangibles – A position that calls for selling intangibles such as
services, ideas, or social causes, such as insurance, information services. This position
also requires that salespeople understand their customers’ needs. Intangibles are usually
difficult to sell because you can’t see, touch, taste, or smell them. In order to sell those,
salespeople must be able to demonstrate how these services or ideas will contribute to the
customers’ profit or well-being.
Johnston and Marshal (2003:11-16), a that the proceeding seven types of sales jobs may
be regrouped into three categories – sales facilitation, sales support, and sales
development – depending on the activities that the salespersons perform as illustrated in
figure 2.14. People holding sales jobs in the first three of the categories essentially are
order-takers. Their work is fairly routine. They facilitate sales to consumer or to business
accounts which have already been established by taking orders and by delivering the
product. People in categories four and five are sales-support personnel. Their activities
generally support the actual selling done by the salespersons in the other categories.
Support personnel are engaged in building goodwill, performing sales promotional
activities, and working with customers’ salespeople in a training and educational
capacity. The support people who are technical-product specialist – sales engineers –
work with customers to assist with technical problems. These salespeople may help adapt
a customer’s system to the seller’s products or help the seller design new products to fill
the customer’s particular needs. The final two of the seven groups are the sales
developers. They are the ones who do the creative, developmental selling to existing or
new accounts. These are the most difficult types of sales jobs. They require considerable
patience, perseverance, and persuasiveness, as well as product knowledge and an
understanding of the customers’ needs (Spiro, Stanton and Rich, 2003: 11-15; Johnston
and Marshal, 2003: 11-16; Colletti and Fiss, 2002: 72-78; Chun and Daries, 2006: 138-
146).
97
Figure 2.15: Types of sales jobs
Source: Spiro, R.L., Stanton, W.J. and Rich, G.A. (2003) Management of a
salesforce, New Delhi: Tata McGraw-Hill.
Salespeople have different responsibilities because they work for different types of
companies, selling different types or products to different types of customers. For
example, salespeople from Pfizer, GlaxoSmithkline, Novartis, Roche, Orange Drugs,
Proter and Gamble or Reckitt Benckiser sell consumer products to institutions,
wholesalers, retailers, or the final consumers. These Drug reps may be maintenance
salespeople who mainly take orders, developmental salespeople who get orders by
helping solve customer problems, and support product information and promotional
assistance, solving problems, and sometimes delivering merchandise. According to Healy
(2007: 42-49), salespeople from Johnson Wax, Abbott Laboratories, and Eli Lilly
generally sell pharmaceutical products to institutions, wholesalers, hospitals and
government agencies. These Drug reps are usually developmental salespeople and sales
Sales
facilitation
Driver salespers
on
Inside order-taker
Outside order-taker
Sales support
Missionary salesperson
Sales Engineer
Sales
Development
Consultive salesperson:
tangible product
Consultive salesperson: service and
other tangible
Sales jobs
98
support personnel who sell by providing product information and technical assistance and
by solving customer problems. It should be noted that many pharmaceutical and health
care companies, such as Sinopharm, Cephalon, Mylan Laboratories, Watson
Pharmaceuticals, Forest Laboratories and Astellas Pharma employ more than one type of
salesperson because they sell to more than one type of customer (Sarin and Mahajan,
2001: 34-53; Piercy, Cravens, Lane and Vorhies, 2006: 244-262).
How Sales Jobs Differ from other Jobs: Figure 2.16 provides an overview of the
activities for which a salesperson may be responsible. Not all reps perform all these
activities. Which activities they perform depends on the types of products they sell and
the types of customers to whom they sell. A closer look at some of the key differentiating
features of a sales job are as follows: (i) the salesforce is largely responsible for
implementing a firm’s marketing strategies in the field. Moreover, the drug reps generate
the revenues that are managed by the financial people and used by the production people;
(ii) salespeople are among the few employees authorized to spend company funds. They
are responsible for spending company money for entertainment, rooms, food,
transportation, and other business expenses. Their effectiveness in discharging this
responsibility significantly influences marketing costs and profits; (iii) salespeople
represent their company to customers and to society in general. Opinions of the firms and
its products are formed on the basis of impressions made by these people in their work
and outside activities. The public ordinarily does not judge a company by its factory or
office workers; (iv) salespeople represent the customer to their companies. The drug reps
are primarily responsible for transmitting information on customer needs and problems
back to the various departments in their own firms; (v) salespeople operate with little or
no direct supervision and require a high degree of motivation. For success in selling, a
drug rep must work hard physically and mentally, be creative and persistent, and show
99
Generate Sales: Provide Service to
customers:
Territory
Management:
Professional
Development:
Company
Service:
• Precall Planning
• Prospecting
• Make sales
presentations
• Overcome objections
• Close by asking for
the orders
• Arrange for delivery
• Entertain
• Arrange for credit/
financing
• Collect payments
• Participate in trade
shows
• Provide
Management/techni
cal consulting
• Oversee
installations and
repairs
• Check inventory
levels
• Stock shelves
• Provide
merchandising
assistance: co-op.
advertising, point-
of-purchase
displays, brochures
• Oversee product
and equipment
testing
• Train wholesalers
and retailer’s
salespeople
• Gather and
analyse
information on
customers,
competitors’
general market
development.
• Disseminate
information to
appropriate
personnel within
salesperson’s
company.
• Develop sales
strategies and
plans, forecasts,
and budgets
• Participate in:
- Sales meeting
- Professionals
associations
- Training
programs
• Train new
salespeople
• Perform civic
duties
Figure 2.16: Selected Activities of salespeople
Source: Jobber, D. and Lancaster, G. (2006), Selling and Sales Management, New
York: McGraw-Hill Company Inc.
considerable initiate. Salespeople are frequently required to develop innovative solutions
to difficult problems. Salespeople do not get the sale every time. They must be able to
handle the negative feelings that come with “losing the sale; (vi) A salesperson needs
more tact and social intelligence than other employees on the same level in the
organization. Many sales jobs require the Drug rep to socialize with customers, who
frequently are upper-level people in their companies. Considerable social intelligence
may also be needed in dealing with difficulty buyers; and (vii) sales jobs frequently
require considerable travel and time away from home and family. This places an
additional physical and mental burden on salespeople who already face a lot of pressure
and demands (PettiJohn, PettiJohn and Taylor, 2002: 743-757; Wheately, Meyers, Gilbert
Salesperson
100
and Axson, 2000: 821-836; Muss-Weiler, Ruter and Epstude, 2004: 832-844; Jobber and
Lancaster, 2006: 273-296).
Personal selling today is quite different from what it was years ago. The illiterate, joke-
telling salesman is generally gone from the scene. Moreover, his talents and methods are
usually not effective in today’s’ business environment (Shaw, 2001: 28-30). Instead, a
new type of sales representative has emerged – a professional salesperson who is also a
marketing consultant. This new breed works to relay consumer wants back to the firm so
that appropriate products may be developed. They engage in a total consultative,
nonmanipulative selling job and are expected to solve customers’ problems, not just take
orders. For example, Medtronics, a leader in the design and manufacture of high-tech
surgical devices, sells to surgeons. These doctors often want the sales rep to be in the
operating room during surgery to advise them in the best use of the product (Ray, 2003:
1182-1193). Teva pharmaceuticals and Taiho pharmaceuticals managers often bring
together a team of technical advisers, each from a different area of specialty, to find the
best solutions for their customers’ needs (Sharfstein, 2005: 27-29). These are examples of
relationship selling, described earlier, where salespeople succeed by enhancing their
customers’ performance.
The new-style reps also serve as territorial profit managers. They have more autonomy
and more responsibility for making decisions which affect their customers and their own
territory profitability. Many decisions which in the past would have been made by the
sales manager are today made by the salesperson. Salespeople are empowered to act in
the best interests of their firms. They are also responsible for feeding marketing
intelligence back to the firm, and they may participate in recruiting, sales planning in
their territories, and other managerial activities. To a large extent, salespeople have been
empowered by making use of technology to increase the quality of contact and service
provided to their customers, by allowing them to tap into huge data banks of information.
Gilead Sciences, for example, has provided their Detail reps software which gives them
total access to complete cost information so that they can determine the profitability of
every transaction (Wise, 2003: 1163-1170).
Sales Management Responsibilities: During the early stages in the evolution of
marketing management, sales management was narrow in scope. The major activities
were recruiting and selecting a salesforce, and then training, supervising, and motivating
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these people. Today personal selling and sales management have much braoder
dimensions. Many sales executives are responsible for strategic planning, forecasting,
budgeting, territory design, and sales and cost analyses, as well as the more traditional
activities. Sales managers must see that all of these tasks are integrated. Figure 2.17
illustrates how each of the sales management activities is linked with the others. If one of
these activities is performed poorly, it will have a
Figure 2.17: Sales Management Responsibilities
Source: Marshal, G.W. and Micheals, R.E. (2001)
“Research in selling and Sales management in the next millennium: An
Agenda for AMA Faculty Consortium” Journal of Personal selling and
Sales Management, 21 (Winter): 16
ripple effect on the others. For example, if the wrong people are hired, efforts to train and
motivate them will almost always results in failure. Furthermore, it is the sales managers’
responsibility to see that all of the activities which support the sale of products and
services, such as production, advertising, and distribution, are coordinated with the
efforts of the sales department (Ikime, 2007: 88-92; Kissan, 2001: 62-70; Liu and Leach,
2001: 147-156; Luo, Sivakumar and Liu, 2005:50-65).
The primary responsibility of a sales manager is to staff the organization with the right
people. The most important job that any manager has is to select the right person for a
Strategic Planning
Organizing the Sales force
Recruiting, selection, assimilation Training and
Development
Motivation and Supervision
Performance evaluation
•Communication •Coordination •Integration
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given job. If the right people have been hired, even bad plans may be successful. But
more important, the right people will not make many bad plans. Well – selected people
can minimize managerial problems. Good selection is particularly important in sales
management because marketing is an art of implementation. The success of most
marketing plans rests not so much with the plan as with how well it is carried out – how
well the salesforce does its job, and how well the product is made. As the role of the
salesperson has changed, so has that of the sales manager. With high-quality, empowered
salesforces, sales managers are likely to provide support and resources more frequently
than one-on-one coaching. They focus on internal coordination of the sales efforts so that
their salespeople can spend more time with their customers. Increasingly, they will be
asked to manage multiple sales channels – field salespeople as well as telemarketing and
electronic marketing (Armstrong, 2001: 278-281; West, 2001: 255-258; Tiedens and
Linton, 2001: 973-988).
The demanding, controlling, volume-oriented sales manager is a dying breed. Today, the
most successful sales managers are seen as team leaders rather than bosses. They still
direct and advise people, but they do so through collaboration and empowerment rather
than control and domination. According to Lancaser and Massingham (2001: 321-366),
to be successful in the 21st century, sales managers, like salespeople, will need to adapt
their strategies, styles, and attitudes, such as: (i) Developing a more detailed
understanding of customers’ business; (ii) treating salespeople as equal and working in
partnership with them to achieve profitability and customer satisfaction; (iii) applying
flexible motivational tools to a hybrid salesforce of tele-sellers, direct marketers, and
field salespeople, (iv) keeping up-to-date on the latest technologies affecting buyer-seller
relationship; (v) working closely with other internal departments as a member of the
corporate team seeking to achieve customer. Satisfaction; (vi) continually seeking ways
to exceed customer expectations and buying added value to the buyer-seller relationship;
(vii) creating a flexible learning and adopting environment. In terms of abilities, people
skills are more important than analytical and evaluative skills. The ability to develop
team-oriented relationships is particularly important. Today’s sales manager must be
sensitive to individual needs and skills, caring more about communicating and coaching
than monitoring and controlling (Lee and Weeks, 2000: 243-251; Hymman and Mathur,
2005: 373-381; Ivancevich, 2004:72-79; Oliva, 2001: 44-46).
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A sales manager is first and foremost a manager – an administrator – and management is
a distinct skill. Only during the past few decades has management (or administration, as
we often use these terms synonymously) been recognized as a separate body of
knowledge. One of the ironies of salesforce management is that sales managers were
usually promoted into the executive ranks because of their talent as salespeople. But from
then on, their success or failure depended on their administrative skills – skills that may
or may not have been developed during their time as sales representatives. Although
many peoples with outstanding technical abilities make good administrators, there is
considerable evidence that sales talent alone does not make a good manager. This is the
same in many fields. In the sports world, for example, many successful managers and
coaches were only average players. In the sales field, it is widely recognized that the best
salesperson may not even be a passable sales manager (Piercy, Cravens and Lane, 2001:
39-49; Roberts and Dowling, 2002: 1077-1093).
The very factors that create an outstanding salesperson often cause failure as an
administrator. For example, many successful salespeople have strong, aggressive
personalities. This can be a liability when working closely with others in an organization.
Also, the detail and paper work that most salespersonality detests are essential duties of a
sales manager. However, we should not jump to the conclusion that top sales producers
never make good sales managers. A firm’s top salespeople certainly should be considered
when a management opportunity develops. While sales skills alone do not make a good
administrator, some proficiency in the field is needed. It is difficult to imagine a
successful sales manager who has little or no knowledge of selling. Also, the salesforce
must be confident that the sales manager can lead the group; successful sales experience
can inspire such confidence (Bateman and Snell, 2002: 48-62; Churchill, Ford and
Walker, 2000: 172-184; Gomez – Mejia and Balkin, 2002: 224-246).
In the administrative structure of many pharmaceutical firms with outside salesforce,
several executive levels are involved in salesforce management, as shown in figure 2.18.
The title of sales manager may be applied to positions on any of these levels.
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Figure 2.18: The Executive ladder in personal selling.
Source: Nirmalya, K. (2004) Marketing as a strategy: the CEO’s Agenda for
Driving Growth and Innovation, Boston: Harvard Business School Press.
Field Sales Manager is a loosely used term typically applied to any sales executive who
manages an outside (in-the-field) salesforce or to an executive located in branch offices
(in-the-field) away from company headquarters. The entry-level sales management
position, especially in traditional pharmaceutical firms with a large salesforce, is typically
that of an Area Sales Manager. This person provides day-to-day supervision, advice,
training, and managing of a small number of salespeople in a limited geographical area –
usually part of a sales region. In firms that have adopted a team selling approach, the first
managerial position is typically an area sales manager, who coordinates the efforts of
these multifunctional territories. Usually the area sales managers are people with
territorial sales experience. This person manages the activities of salespeople and also
participates in the sales planning and evaluation activities in the area. In most
pharmaceutical firms in Nigeria, the area sales manager is the entry-level management
position. Therefore, they are referred to as the lower-level sales executives (Omotunde,
2008: 12-13; Dobbs, 2000: 124-136).
The middle-level sales executive position usually carries the title of Regional Sales
Manager. This sales executive normally is responsible for managing several sales areas.
Sometimes, this job title is Regional manager, especially when the regional office carries
Sales Director
Regional Sales managers
Area sales managers
Salesperson
Staff assistants available for advice and support at any step along the ladder
105
product inventory and performs physical distribution activities. After this middle-level
sales executive comes the top-level sales executive, which is the highest executive in
sales management. It is most often called the Sales Director. This executive reports
directly to the Chief executive of the company. The sale Director is responsible for
designing an organization’s long-run sales strategies and other companywide strategic
sales planning activities. This executive acts as the sales department’s liason to the top
executives in finance, production, and other major function areas of the pharmaceutical
firm. This executive may be refered to as the national sales manager that heads the
companywide salesforce operations and is the executive to whom the regional managers
report. He also acts as liaison between the strategic planning of top sales and marketing
management and the tactical planning involved in operating regional salesforce (Adedeji,
2009: 30-31; Gurhan-Canli and Batra, 2004: 197-205; Aaker, Kumar and Day, 2005: 72-
86).
It is important to note that, in addition to the sales management positions, most medium
and large-sized companies employ staff executives to head activities that provide
assistance to the sales executive and the salesforce. Sales training, sales planning, and
sales and marketing cost analyses are examples of these staff activities. A key point is
that these executives have only an advisory relationship with the line sales executive and
the salesforce. Sales executives do not have line authority in the sales executive
hierarchy. However, within a staff activity area – sales training, for example – the staff
executives do have line authority over the people in the area (Onah and Thomas, 2004:
474-489).
Probably the most significant differentiating feature of an outside personal selling job is
that the salespeople work away from the company’s main facilities. Thus sales managers
cannot directly supervise each rep’s work in person on a daily basis. The geographical
deployment of an outside salesforce makes sales manager’s job different in several
respects from other management jobs. In sales training, for example, a sales manager can
provide on-the-job training usually to only one person at a time, so other training tools
and methods must be used. Communication with outside salespeople is often more
difficult because it is not face-to-face communication. Similarly, motivating a salesforce
is a problem when a sales manager cannot regularly spend one-on-one time with the
salespeople. Another problem is evaluating a sales rep’s performance when the sales
106
manager cannot personally see the rep’s work. It is also difficult to monitor the ethical
behaviour of workers who are geographically separated from the company. Finally, sales
managers frequently face morale problems among outside salespeople. Being physically
separated from co-workers, the sales reps don’t have the same group morale support
network as do inside employees (Smith, 2003: 1-25; Sparrow and Cooper, 2003: 114-
126).
Salesforce Motivation Conditions: According to Galea (2004: 29-30), all motivation is
self-motivation. Salespeople cannot be satisfied unless they want to be. The challenge for
sales management is to identify, understand, and channel the motivation which their
salespeople possess. A sales manager acts as a catalyst, providing both the stimulation for
salespeople to feel satisfied and the proper rewards so that they continue to feel satisfied.
The sales job consists of a large variety of complex and diverse tasks. Because of this, it
is important that the sales rep’s efforts be channeled in a direction consistent with the
company’s strategic plan. Therefore, the direction of the salesperson’s effort is as
important as the intensity and persistence of that effort. A sales manager concerned with
salesperson’s satisfaction finds that the most complex task is getting them to expend
effort on activities consistent with the strategic planning of the firm. Many salespeople
don’t need external stimulation to work hard and long; their internal needs motivate them
to do so. However, every sales rep must be externally motivated to perform actions that
support the strategic objectives of the firm. For example, if a pharmaceutical company’s
strategic plan calls for changing its customer mix, a sales staff must be motivated to
change its allocation of calls in a way that is consistent with the strategic change (Jones
and George, 2003: 246-258; Lerner, Rogers and Woodburn, 2000: 142-148).
The nature of the sales job, the individuality of salespeople, the diversity of a company
goal, and the continuing changes in the marketplace make salesperson’s satisfaction a
particularly difficult and important task. Salespeople experience a wonderful sense of
exhilaration when they make a sale. But they must also frequently deal with the
frustration and rejection of not making the sale. Even very good reps don’t make every
sale. Also, while many customers are gracious, courteous, and thoughtful in their dealings
with salespeople, some are rude, demanding, and even threatening. Salespeople spend a
large amount of time by themselves calling on customers and traveling between accounts.
This means that most of the time they are away from any kind of support from their pears
107
or leaders, and they often feel isolated and detached from their companies. Consequently,
they usually require more motivation than is needed for other jobs to reach the
performance level management desires (Passyn and Sujan, 2006: 583-589; Hair, Bush
and Ortinau, 2000: 146-154).
Sales reps have their own personal goals, problems, strengths, and weaknesses. Each rep
may respond differently to a given motivating force. Ideally, the company should develop
a separate motivational package for each sales rep; but a totally tailore-made approach
poses major practical problems. In reality, management must develop a motivational mix
that appeals to a whole group but also has the flexibility to appeal to the varying
individual needs. A related point is that the sales reps themselves may not know why they
react as they do to a given motivator, or they may be unwilling to admit what these
reasons are. For example, a salesperson may engage in a certain pharmaceutical product
selling task because it satisfies her ego. Rather than admit this, however, she will say that
she is motivated by a desire to serve her customers and preserve lives. A pharmaceutical
company usually has many diverse sales goals, and these goals may even conflict with
each other. One goal may be to correct an imbalanced inventory and another may be to
have the salesforce do missionary selling to strengthen long-term customer relations.
These two goals conflict somewhat and require different motivating forces. With diverse
goals such as these, developing an effective combination of motivators is difficult (Reyes
and Reyes, 2003:332-347; McDaniel and Gate, 2000: 224-229).
Changes in the market environment can make it difficult for management to develop the
right mix of salesforce motivational methods. What motivates reps today may not work
next month because of changes in market conditions. Conversely, sales executives can
face motivational problems when market conditions remain stable for an extended period
of time. In this situation, the same motivators may lose their effectiveness. Finding an
effective combination of motivators may be easier if a sales executive understands some
of the behavioural factors that affect salesforce motivation. The motivational process
begins with an aroused need, but as depicted in figure 2.19, three conditions must exist
before an unfulfilled need leads to enhance sales performance. First, salespeople must
feel the rewards are desirable – that is, they
108
Yes yes yes
Figure 2.19: Motivational Conditions Source: Sandis, S.S. (2000) “Ineffective Quotas: the Hidden Threat to sales
Compensation Plans” Compensation and Benefits Review, 32 (March/ April): 39.
will satisfy some need. Second, they must believe that gaining these rewards is base on
their performance and they must understand exactly what performance is required to get
the rewards. Finally, sales reps must believe that the performance goals upon which the
rewards are based are attainable. In other words, the drug reps must feel that if they try
(expand effort), they can achieve the goals that have been set for them (McDonald,
Rogers and Woodburn, 2000:320-334; Kumar, 2000:68-72; Kothari, 2004: 172-194)
The discussion so far is trying to bring out that effective motivation is based on a deep
understanding of salespeople as individual, their personalities and value systems. In one
sense, sales managers do not motivate salespeople; they provide the enabling conditions
in which salespeople motivate themselves. Also motivation can be understood through
the relationship between needs, drives and goals. Schultz, Hatch and Larsen (2000:321-
342), stated that the basic process involves needs (deprivations) which set drives in
motion (deprivations with direction) to accomplish goals (anything which alleviates a
need and reduces a driven). For example, the need for money may result in a drive to
work harder in order to receive increase pay. Motivation has been the subject of much
research over many years. Churchill, Ford and Walker (2000:426-448), produced a theory
with the following implications for the motivation of salespeople: (i) Once a need is
satisfied, it no longer motivates; (ii) different people have different needs and values; (iii)
increasing the level of responsibility/ job enrichment, giving recognition of achievement,
and providing monetary incentives work to increase motivation for some people; (iv)
people tend to be motivated if they believe that effort will bring results, results will be
rewarded, and the rewards are valued; (v) elimination of disincentives (such as injustices
or unfair treatment) raises motivational levels; (vi) there is a relationship between the
performance goals of sales managers and those of the salespeople they lead.
Are the rewards
worth the efforts?
Does better performance lead
to greater rewards?
Does more effort lead to better performance?
Greater Effort
The same or less effort
No No No
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Satisfaction Effort
Performance Rewards
Mot
ivat
ion
Cateora and Graham (2002:512-539), Summarized the implication of these findings to
the sales managers as follows: (i) get to know what each salesperson values and what
each one is striving for (unrealized needs); (ii) be willing to increase the responsibility
given to salespeople in mundane jobs; (iii) realize that training can improve motivation as
well as capabilities by strengthening the link between effort and performance; (iv)
provide targets that are believed to be attainable yet provide a challenge to salespeople;
(v) link rewards to the performance they want improved; and (vi) recognize that rewards
can be both financial and non-financial (eg. Praise). Figure 2.20 shows a salesforce
motivation model that integrated the work of some motivational theorists which suggests
that there is a cycle of motivation (Churchill, Ford and Walker, 2000: 436-448; Galea,
2004: 29-30; Ivancevich, 2004: 214-219; Gomez – Mejia and Balkin, 2002: 319-324).
The higher the salesperson’s motivation, the greater the effort resulting in higher
performance. Better performance leads to greater rewards and job satisfaction. The cycle
is completed through higher satisfaction causing still more motivation.
According to Cravens and Piercy (2003:424-445), the implications of the cycle of
motivation for sales managers are that they should: (i) convince salespeople that they will
sell more by working harder or by being trained to work smarter (e.g more
Figure 2.20: The cycle of Motivation Source: Churchill, G.A; Ford, N.M. and Walker, O.C. (2000) Salesforce
Management: Planning, Implementation and Control, Homewood, IL: Irwin.
efficient call planning, developing selling skills); (ii) convince salespeople that the
rewards for better performance are worth the extra effort. This implies that the sales
manager should give rewards that are valued, and attempt to sell the worth of those
rewards to the salesforce. For example, a sales manager might build up the worth of a
holiday prize by stating what a good time he or she personally had when there.
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Managers must know what salespeople’s needs are before determining how to motivate
them to satisfy those needs. Motivational programs often fail because they appeal to the
wrong needs. Two motivational theories offer classification systems that can help
managers recognize and understand different kinds of needs. In his hierarchy of needs
theory, Maslow (1970:248-319), proposed five levels of needs that every individual seeks
to satisfy. These basic needs, presented in figure 2.21, can be satisfied with extrinsic and
intrinsic rewards. Extrinsic rewards (such as pay and recognition) are provided by others.
Intrinsic rewards come from performing the sales task itself. For example, when a
salesperson has feelings of accomplishment because he landed a big account, which is an
intrinsic reward. The bonus he receives for landing that account is an extrinsic reward.
Potential sales management actions or rewards that can help satisfy the needs are also
presented in figure 2.20. Some of these needs are considered more basic than others. For
example, physiological and safety needs
Figure 2.21: Maslow’s Hierarchy of Needs and Possible sales managers’ Actions. Source: Maslow, A.H. (1970) Motivation and Personality, New York: Harper and
Row.
Fulfilled through:
self development, challenges.
Managerial Actions: Provide/offer
advanced training, assignments to special
projects, more responsibility and authority.
Fulfilled through: status, recognition. Managerial Actions: Recognize sales reps
achievements personally and publicity through title changes, commendation letters,
promotions.
Fulfilled through: Affiliation, friendship, acceptance. Managerial Actions: Use team selling, hold social
functions, distribute employee newsletters, hold sales meetings, mentoring.
Fulfilled through: Job security, safety, income, security. Managerial Actions: Provide safe work environment, set
mutually agreed upon performance standards, communicate job performance expectations and consequences of failure
to perform.
Fulfilled through: food, shelter, clothing, healthcare Managerial Actions: Provide/offer, adequate income and
good benefit package.
• Self – actualization needs
• Esteem needs
• Social needs
• Safety needs
• Physiological needs
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are the most basic needs; social needs are more basic than esteem and self actualization
needs. Thus the needs form a hierarchy, as shown in figure 2.21. Until the more basic
needs of safety and security are fairly well satisfied, the higher-order needs will not be
aroused.
Another theory of motivation, developed by Hertzberg, Mausner and Snyder man
(1959:210-221), is also based on the idea that people have needs that they will seek to
satisfy through their behaviour. These theorists grouped sources of satisfaction and
dissatisfaction into two: hygiene factors and motivation factors. Examples of hygiene
factors (which correspond to Maslow’s lower-order needs) are company policies,
supervision, and working conditions. They called hygiene factors because they deal with
the condition of the work environment rather than the work itself. Examples of
motivation factors (which correspond to Maslow’s higher-order needs) are recognition,
responsibility, challenges, and opportunities for growth. These factors are part of the job
itself and are called motivation factors because they must be present for the salesperson
to feel motivated. Pay can be both hygiene and a motivation factor. Adequate and
competitive salary levels overall are considered a hygiene factor, whereas commissions
or raises directly related to performance are viewed as a form of recognition – part of
motivation. Inadequate levels of hygiene factors will likely cause a salesforce to be
dissatisfied. And, while adequate levels of these factors will likely lead to the absence of
(or less) dissatisfaction; they may not serve to motivate the sales reps. Only the higher-
order factors may lead to motivation. (Keenan, 2000: 44-49; Latin, Caroll and Green,
2003: 49-62).
Understanding how to appeal to a salesperson’s needs is a very complex task. Each rep is
unique and has a different combination of needs. Therefore, company rewards and
incentives valued by one sales rep may not be valued by another. Often, sales managers
do not know the relative value placed on various incentives by their salespeople. For
company rewards and incentives to have an impact on motivation, salespeople must value
these rewards. In other words, they must feel that the rewards are worth the effort.
Assume that a given sales rep, reached her sales goal. Suppose the reward is a
congratulatory pat on the back from management and a formal recognition award for the
best sales performance of the period. This rep may say to herself, this honour award
would be fine if I were bucking for a promotion or if I wanted to boost my status with
112
management or my co-workers; but what I really want is more money – a nice bonus or a
salary increase for my outstanding performance. At the end of this thought process, the
rep decides that the reward for reaching her goal is not worth the effort. Management thus
should establish a reward structure that is likely to be attractive to their salesforce. It is
also important for the manager to realize that different people value different rewards.
The more closely the manager can match the assignment and the rewards with what the
individual sales rep values, the more motivated the sales rep will be (Galea, 2004: 29-30;
Albers, 2002: 248-266).
A significant factor in salespeople’s evaluation of rewards are equitable. Reps compare
their performance and rewards with those of their fellow salespeople and ask themselves
whether they are being treated fairly. Equity theory suggests that if a salesperson feels
that reps whose efforts and performance are not as good as his are receiving greater
rewards, he may decrease his efforts. Rewards perceived to be inequitable are unlikely to
be a motivating force. And there is a strong possibility that where significant inequities
are perceived to exist, salespeople will leave rather than continue to be treated unfairly
(Byrenes, 2003: 53-54). Not only must sales reps value rewards; they must feel that
attaining them is conditional upon performance. If the rewards are pretty much the same
regardless of how good or bad that performance is, then these rewards will not be
effective motivators. Salespeople must also understand exactly what they must do to get a
particular reward. This is often difficult because much of their job activity involves
dealing with people outside the company (namely, customers) and because they usually
work with little or no direct supervision. As a result, there can be considerable ambiguity
and conflict in the salesperson’s role (Colletti and Fiss, 2002:72-86).
Often sales reps are not sure what is expected of them. For example, reps may be
uncertain of their authority to meet price competition or to grant credit. They may be
unclear about their organizational relationship with staff executives. A marketing
research manager may ask the reps to perform some duties in the field; the reps may not
know how much time and energy should be devoted to such requests. Role conflict stems
from two sources. One source is a sales rep is trying to serve two masters – the company
and the customer. Because these two often have different and conflicting interests, a rep
can get caught in the middle. For example, a customer wants lenient credit terms, but the
credit manager wants to deal in short-term credit with stringent terms. Or a customer
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expects gifts and lavish entertainment, but the rep’s management, fearful of bribery
accusations, wants to cut back on these items (Day, 2003: 77-82). And another potential
source of conflict lies in the varying demands placed on the sales reps by different groups
within their own companies. For example, the marketing department may push the reps to
follow up on the leads generated by the return of the trade publication reader interest
cards, but the sales department wants the reps to concentrate on existing customers (Jap,
2001:95-108).
Sales managers must make sure that each salesperson understands what is expected.
Writing clear and detailed job descriptions and letting the salesforce participate in setting
their own goals are ways of decreasing role ambiguity and conflict. Management by
objective (MBO) is a supervisory technique used by many companies to increase the
sales staff’s understanding and acceptance of the criteria by which they will be evaluated.
In MBO, the manager and salesperson set mutually agree-upon performance goals. Sales
reps who participate in an MBO program are more likely to know what is expected of
them and to feel that their goals are attainable and equitable than those who do not take
part in such a program. The importance of having the salesforce know what is expected
of them and how to handle various situations goes beyond improved performance.
Research has demonstrated that when salespeople have a clear understanding of their
roles, not only is their performance higher; their job satisfaction is higher and their
propensity to leave is lower (Shaw, 2001: 28-30).
Sales manager must first design a reward structure in which greater rewards are tied to
better performance. The evaluation process should be linked to the reward system, and
sales managers should make every effort to keep the process as objective as possible. The
goals should be clear, concise, and measurable. Every sales rep should be made aware of
the criteria and the process that will be used to evaluate them. Finally, sales managers
must work with each rep on an individual basis to make sure that she or he has accurate
understanding about what is expected and what the rewards are. To be motivated,
salespeople must believe that improved performance will lead to greater rewards.
Salespeople must also believe that if they expend greater effort, it will lead to improved
performance. If they believe this, they will be motivated to put forth greater effort.
Otherwise reps will not expend that effort regardless of the potential for reward. In other
wards, if salespeople don’t believe their additional efforts will make a difference, they
114
won’t try. The accuracy of the sale staff’s perceptions concerning effort and performance
determines whether motivation can lead to improved performance. Suppose, for example,
a salesperson believes that making a greater number of calls will lead to improved
performance, when in fact what the rep really needs to do is to improve the quality of the
calls or to call on a different mix of customers. The salesperson may be motivated to
make the additional calls, but this will not lead to significantly improved performance.
Salespeople must have accurate perceptions of which activities will lead to improved
performance. Similarly, they must correctly understand the reasons for their successes
and failures. Otherwise, it is likely that they will also have inaccurate perceptions of the
effort/performance link (Sarin and Mahajan, 2001: 34-53).
Salespeople usually attribute their success and failures to one or more of the following
reasons: ability, effort, strategy (or tactics), lack, or the difficulty of the task. Sales reps
will be motivated to do different things, depending upon the attributions for success or
failure they have made. For example, if a salesperson feels that he did not reach his goals
beause he did not put forth enough effort; he will be motivated to work harder – to make
more hours and/or to call on more accounts. However, if he feels that he lost sales
because of the particular presentation he was using, he will change his strategy by
adapting his presentation. Changing strategies is sometimes called “working smarter”. If
a sales rep fell their failures are due to lack of ability, they should be motivated to seek
advice or help. But they may instead just become frustrated and make even less effort or
none at all. If they feel that the difficulty of the task contributed to their failure, they may
be motivated to work harder or to work smarter. However, if they feel that the task is
impossible, or that the goal is unreasonable, they will be frustrated and less motivated.
Figure 2.21 summarizes these attributes and their impact on selling behaviour.
Sales managers can help their people recognize which activities lead to improved
performance and help them make correct attributions for success and failure through
training, counseling, and day-to-day coaching. It is also important that attainable goals
are set. More important, sales managers themselves must understand that encouraging
their salespeople to work harder is not the only or necessarily the best path to achieving
good performance. Motivating sales reps to understand customer differences, think about
alternative sales strategies, and are adaptive when the situation calls for it may lead to
better results. Salespeople’s needs, their evaluation of rewards, and their perceptions of
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the conditional links are influenced by the personal characteristics described as follows:
Demographics – Age, family size, income, and
Table 2.9: Salespeople’s Perceive Reasons for Failure and their Motivational
Impact
Motivational Impact Perceived Reasons
Positive Negative
1. Ability Seek help; get additional training; ask for supervisor’s assistance.
Become frustrated and discouraged; give up.
2. Effort Work harder; make more calls; work longer hours. No change in behaviour
3. Strategy Change selling strategy; adapt the presentation. No change in behaviour
4. Task difficulty Work harder; change strategies; or seek help Become frustrated and discouraged; give up.
5. Luck None None
Source: Spiro, R.L; Stanton, W.J. and Rich, G.A. (2003), Management of a
salesforce, New Delhi: Tata McGraw-Hill.
education affect the value that salespeople place on various rewards. For example, sales
reps relatively satisfied with their current income level may be more interested in such
things as status, freedom, and self-development than in pay and benefits. Others, less
satisfied, may be very concerned about their income levels. Salespeople with greater
education may place a higher value on opportunities for training and advancement than
others (Morgan and Inks, 2001:463-472).
Psychological traits – some psychological traits relate to how the sales reps evaluate
rewards. For example, a rep with a high need for achievement will be motivated by
greater responsibility and challenge. Other traits impact the person’s perceptions of the
effort-performance link. Salespeople with high levels of self-esteem, for example, will
feel confident about their efforts to improve performance. Experience – Another factor
that impacts the salespeople’s perception is experience. The more experience they have in
sales, the more understanding reps will have about what kind of effort leads to improved
performance and about what performance levels are necessary to attain the rewards they
desire. Career Stages – studies have shown that salespeople’s needs change as they
progress through their careers. The career stages are related to demographic changes. In
the early exploration stage of their careers, sales reps are very achievement oriented and
are particularly interested in advancement and growth opportunities. During the
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establishment stage of the career cycle, sales reps usually become committed to their
occupation striving to succeed, to get ahead. Typically this is also the time when family
responsibilities become greater. Money and fringe benefits become much more important
during this stage, but status, recognition, and intrinsic job satisfaction are important as
well (Onyemah, 2005: 14-15; Pullins, 2001:403-413).
In the maintenance stage, sales reps are very valuable to the company because they
generally account for a large volume of their company’s sales. Yet they are at a stage
where their performance may begin to level off, and motivating them becomes
particularly important. Salespeople in the maintenance stage are often motivated by job
security, job enrichment, and status enhancement. In the disengagement stage,
salespeople are mentally preparing for retirement. While these reps have adequate
knowledge to perform their jobs, they may have lost the desire to sell. Psychologically
they are withdrawing. This attitude may overwhelm their ability to sell. That is, as they
lose interest in their jobs, their performance will slip. It is very difficult to motivate reps
who have reached the disengagement stage. The best thing the manager can do is to give
them some reason for staying involved and committed. Assignment to special projects
and problems is one way to recognize and use their skills and knowledge. Thus it is very
difficult to predict how any given salesperson will respond to a motivational package. But
sales managers should begin by getting to know each rep as an individual in order to
understand his or her specific needs. Only then will the sales manager design an effective
motivational program. Some companies feel that personal goals are such an important
motivator that they tie the achievement of bonuses to both sales goals and personal goals.
Every motivational program should have some elements within it that can be tailored to
the individual needs (Piercy, Low and Cravens, 2004: 255-267).
Elements in Motivation Mix: For any motivational program to be successful, the sales
reps must understand all aspects of their jobs. The reps should have a detailed job
description and a careful explanation of what is expected of them. They also need
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Table 2.10: Specific Elements in Motivational Mix (a) Financially Based Rewards
1. Basic compensation plan (salary, commissions, bonus payments, fringe benefits)
2. Sales contests
(b) Non Financial Rewards
1. Recognition awards, such as pins, trophies, certificates
2. Praise and encouragement from management
3. job enrichment
4. Opportunity for promotion (this may also be a financial reward
(c) Other Elements
1. Sales meetings and conventions
2. Leadership and supervision
3. Sales training programs – induction and continuation
4. Sales mentoring
5. Sales planning elements (forecasts, budgets, quotas, territories)
6. Evaluation of salesperson’s performance
7. General management elements (organizational structure, management’s leadership style, channels of
Communication)
Source: Spiro, R.L; Stanton, W.J. and Rich, G.A. (2003) Management of a
Salesforce, New Delhi: Tata McGraw-Hill.
to understand how their accomplishments will be evaluated. The key is to establish
specific performance objectives which have been agreed upon and can be measured by
both the manager and the rep. Given a set of performance objectives, management must
determine the most effective combination of methods to motivate their salespeople to
achieve their objectives. Motivational tools may be divided into two categories: financial
based rewards and nonfinancial rewards. Each type is outlined in table 2.10. Note that
many of these are found in the basic sales management tasks of planning, training,
compensating, and evaluating (Spiro, Stanton and Rich, 2003: 223-241).
Financially Based Reward – Money is a powerful motivator. Surveys show that
salespeople prefer pay raises and cash incentives over any other type of motivational
program. These types of rewards are the easiest to administer as well. As a result, many
companies use lump-sum cash awards for their salespeople. On the other hand, salesforce
contests are awards to motivate sales reps to achieve goals specified by management.
Contests are a popular motivational device. A contest should have a clear – cut, definite
purpose, such as something management wants a salesforce to do that it isn’t doing.
Contests are best used to achieve such specific goals as getting new accounts, selling
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specific products, or relieving certain overstocked inventory positions. In planning and
conducting a successful contest, managers must design the contest, select the prizes, and
promote the contest. The contest should be designed so that each person has an equal
opportunity to win. If the average or poor reps learn that the top producers win all the
prizes, they will silently withdraw from the competition. Opportunity to win may be
equalized through the use of quotas or by allowing for differences in territories and
selling abilities. The rep who makes the greatest improvement relative to others is the
winner. In this way, even the poorest salesperson has a chance to win (Marshal and
Michael, 2001: 15-17).
A variation of the design, described above, is an open-ended contest in which there is no
limit to the number of people who can win by meeting their present goals. In this way,
people are competing only with themselves. This is in contrast to a closed-ended contest
in which there are a limited number of winners. Johnson and Johnson (US) has
successfully used an open program, whereas Glaxo Smithkline (UK) recently used a
closed program, which is described in the nearly International Perspective box
(Nierenberg, 2009:51-53). Another method of broadening the opportunity to win is to use
a tiered contest. In this type of program, two or more levels of prizes are awarded. If
salespeople perform at or above a certain level, they get a certain prize-say a trip to
Europe or North America. If they achieve at a lower level, they get a different prize –
may be a trip to South Africa. This can be used in conjunction with an open-ended
contest in which everyone can win. Hoffmann-La Roche (Switzerland), a company that
sells and leases surgical lasers, has an incentive program in which there are eight levels of
prizes with choices at each level (Tungaraza, 2008: 1193-1196).
Contest success depends to a great extent on the attractiveness of the prizes. Cash prizes,
merchandise, and travel are frequently used as incentive. Cash prize have the advantages
of giving the rep the greatest choice in how to use the prize. On the other hand, travel and
merchandise are more visible and interesting to promote and publicize. Also, some
studies have found these noncash prizes to be more effective for motivating sales reps in
developed countries than in developing and undeveloped countries. (Pullins, 2001:403-
413). In the Hoffmann-La Roche contest described above, one of the top prices is a two-
week African safari. One way to increase the choice associated with merchandise is to
use a point system where the winners earn points towards merchandise they may select
from a catalog. The sales contest and the prizes which will be given should be widely and
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continually publicized throughout the duration of the contest. At least 10 percent to 15
percent of the budget for the contest should be spent on promotion. The goal is to keep
everyone excited (Colletti and Fiss, 2002:72-94).
While contest can increase sales and boost morale, they may also have some unintended
effects. Frequently, sales contests lead to undesirable selling methods, such as
overstocking, overselling, and various pressure tactics. In the short-run, such tactics may
enable a sales rep to win the contest, but in the long-run they can cause trouble. Many
executives object to contests on the grounds that they create morale problems. To some
extent, the open-ended and tired programs can alleviate the possible morale problems.
One of the biggest objections to sales contests is that, almost inevitably, a decline in sales
occurs afterwards. The salesforce cannot keep up the high level of creativity indefinitely.
Also, some crafty sales reps “stock pile” orders by getting customers to delay orders in
the period just before the contest begins. Many questions have been raised about the
long-run benefits of a contest. If a contest has achieved wider distribution and new
dealerships, long-run benefits should occur. But if the contest has focused mainly on
sales volume, its long-range value is questionable. Lack of permanent accomplishment is
not necessarily bad, however. For instance, many contests are designed for short-run
purposes such as selling out one overstocked inventory. In summary, then, contests can
be effective motivator, but they must be carefully and thoroughly designed to encourage
participation by the greatest number of people (Churchill, Ford and Walker, 2000: 114-
126).
Nonfinancial Rewards: Managers often assume that financial incentives are the best
motivators and that developing a good compensation package is the only thing they must
do to motivate their salesforce. However, evidence suggests that sales reps are motivated
by both financial and nonfinancial incentives. In fact, there is evidence that money is not
always the best motivator (PettiJohn, PettiJohn and Taylor, 2002: 743-757). A variety of
factors, including job enrichment, recognition, promotion, encouragement, and praise,
motivate performance. These factors are discussed as follows: Job Enrichment –
salespeople thrive on challenge. One way manager can challenge reps is by giving them
greater responsibility, authority, and control over their jobs. Also, most people like to
have variety in their job-related tasks. Doing the same things over and over again quickly
becomes boring to someone who is seeking challenge. If managers vary some aspects of
the sales job, this can provide a stimulus for increased level of motivation. Finally, like
everyone else, salespeople want to feel that they are performing a meaningful task that
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will make a significant contribution to their companies and to those around them.
Managers must make sure that each salesperson understands that importance of his or her
contribution to the company’s performance (Piercy, Cravens, Lane and Vorhies, 2006).
Recognition and Honour Awards – A fundamental principle of good human relations is to
give full recognition to individuals who deserve commendation. Most salespeople enjoy
public recognition of their accomplishments. Plaques, pins, or certificates can be used to
recognize accomplishment levels. It is really difficult to give too much recognition to
anyone. Promotions – Title changes can be another source of motivation. Changing a
rep’s title from sales representative to a senior sales representative, for example can be
used to recognize different levels of accomplishment. Sanofi – Aventis (France)
recognizes eight levels of achievement for career salespeople from detail rep to corporate
product executive. Each level entails a major increase in responsibility (Lucas, 2009: 41).
Of course the possibility of being promoted into management is a motivating factor for
many salespeople. Encouragement and Praise – The easiest and least expensive form of
motivation is personal encouragement and praise from the manager. Small things such as
a word of encouragement, a personal note, a pat on the back, or a thank you for a job well
done go a long way. Most reps like to feel that someone knows and cares about how
much extra effort went into heading off the competitive threat to their largest account or
how hard they tried, even though they didn’t get that new account (Shaw, 2001: 28-30).
Sales Meetings: Sales meetings are one of the most commonly used methods of
motivating salespeople. Most companies have one or more sales meetings a year and
some have them as frequently as once a week. The most important aspect of the sales
meeting is communication. It gives sales reps the opportunity to interact with
management and with fellow reps and makes them feel part of a team (Donavan, Mowen
and Brown, 2004: 128-146). Management can use sales meetings to communicate the
company’s long-term goals and strategic objectives and to explain how important the
salesperson’s role is in achieving these goals. This instills in the sales rep a sense of self-
esteem and pride in and identification with the company. This kind of communication is
particularly important for salespeople, who are so often physically isolated from their
companies. Also, many of them rarely see each other except at sales meetings. Thus the
meetings enable them to develop friendships and build team spirit and solidarity (Jap,
2001:95-108).
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Sales meetings are also used to inform reps about product changes and new products, to
explain new advertising and marketing programs, to provide training, and to inspire the
sales staff to work harder and smarter. Meetings such as these can help the sales staff
understands what is expected, improve their knowledge and skills, and build confidence
in their efforts to succeed. Planning is the key to success. A poorly planned sales meeting
is probably worse than no meeting at all. A boring, tedious meeting in which salespeople
have no opportunity to interact and participate can be demoralizing. This problem can be
avoided by careful planning, by using speakers who are effective communicators, and by
using a variety of communication formats. Videotapes, small-groups discussions, role
playing, demonstrations, and question – and – answer sessions can all be effective
communication methods. Soliciting input from the reps about what they think should be
covered in the meeting can help as well (Johnson and Bharadwaj, 2005: 3-18).
Salesforce Segmentation: It is necessary to stress the importance of recognizing
individual differences of the salespeople. Yet it is impractical to design totally different
motivational programs for each salesperson. On the other hand, using one program to
motivate every rep may not be very effective. Salesforce segmentation offers a balance
between the extreme of individual motivation and blanket motivational approaches. In
this approach, the salesforce is first segmented or divided into several groups. For
example, sales reps can be grouped according to their career stages or their sales
expertise. Compensation, communication, supervision, and recognition incentive
programs can all be tailored to the specific needs of the group. Another approach is for
the company to offer several alternative compensation and benefit packages and let each
rep choose which program he or she wants. The company can even offer a menu of
incentives and benefits, letting reps choose from the list and in effect design their own
programs. Segmentation is a means through which managers can provide rewards that
appeal to all the salespeople rather than just some of them (Chonko, Dubinsky, Jones and
Robert, 2003: 935-946).
It is important to remember that motivation – the desire to expend effort – is not the only
requirement for successful sales performance. Salespeople must have the ability to
perform as well as the motivation to do so. The ability to perform sales tasks can be
acquired or learned through training and experience. Some pharmaceutical companies
hire only experienced, proven salespeople who already have the necessary skills. But
when companies hire inexperienced people, management must provide the training for
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them to gain the necessary skills. It is not enough for the reps to be motivated; they must
also know how to do what is expected of them. Recruiting and selection procedures are
also important. If pharmaceutical companies hire inexperienced people, they must be
certain that those selected have the desired set of skills. It is also importance in both cases
to select people whose needs are consistent with the demands or rewards of the particular
sales job. The motivation program must be integrated with the entire sales management
program. A good motivational program will not compensate for poor recruiting,
selection, and training. Motivational policies must be a part of a well-planned and
executed sales management program (Uduji and Nnabuko, 2008: 172-196).
2.6 Model of the Determinants of a salesperson’s Performance
The literature on industrial and organizational psychology suggests a salesperson’s job
performance is a function of five basic factors: (i) Role perceptions; (ii) Aptitude, (iii)
skill level; (iv) motivation; and (v) personal, organizational, and environmental variables
(PettiJohn, PettiJohn, and Taylor, 2002: 743-757).
Figure 2.22: Model of the Determinants of a Salesperson’s Performance Source: Johnston, M.W. and Marshal, G.W. (2003), Salesforce Management, New
York: McGraw-Hill Company Inc. Johnston and Marshal (2003:237-238) presented an overall model of a salesperson’s
performance in figure 2.22, that includes these factors as primary determinants,
suggesting that the success of any salesperson is a complex combination of these forces,
which can positively or negatively influence his or her performance. Although not
Personal, organizational, and environmental variables
Role perceptions
Aptitude
Skill level
Motivation level
Performance
Rewards: • Internally
medicated • Externally
medicated
Satisfaction:
• Intrinsic • Extrinsic
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pictured in the model, substantial interaction occurs among the determinants. Much of the
published literature, for example holds that the various factors combine and interact to
influence performance. The rationale is that if a salesperson is deficient in any of these
factors, the individual could be expected to perform poorly. If the salesperson had native
ability and the motivation to perform but lacked understanding of how the job should be
done, for example, he or she could be expected to perform at a low level. Similarly, if the
salesperson had the ability and accurately perceived how the sales job should be
performed but lacked motivation, the sales representative is likely to perform poorly. The
theory is somewhat equivocal about just how the factors interact, but it is fairly certain
that the determinants are not independent. Substantial interaction effects exist among and
between them. Although we know little about the form or the magnitude of those
interactions, we need to recognize that they do exist. Therefore, we believe that this is a
good and pertinent theory that could place this study at an advantage, by helping to
provide a rationale basis for explaining and interpreting the reasons for a salesperson’s
performance.
2.7 Expectancy Theory
Expectancy theory, formulated by victor H. Vroom in the 1960s, posits that salesforce
motivation is high when salespeople believe that high levels of effort lead to high
performance and high performance leads to the attainment of desired outcomes.
Expectancy theory is one of the most popular theories of salesforce motivation because it
focuses on all three parts of the salesforce motivation equation: inputs, performance, and
outcomes. Expectancy theory identifies three major factors that determine a salesperson
motivation: expectancy, instrumentality, and valence. This is shown in figure 2.23.
Expectancy is a salesperson’s perception about the extent to which effort (an input)
results in a certain level of performance. A salesperson’s level of expectancy determines
whether he or she believes that a high level of effort results in a high level of
performance. Salespeople are motivated to put forth a lot of effort on their sales jobs only
if they think that their effort will pay off in high performance – that is, if they have a high
expectancy. Think about how a student would be motivated to study for a test if he
thought that no matter how hard he tried he would get an E. Think about how motivated a
marketing manager would be who thought that no matter how hard he or she worked
there was no way to increase sales of an unpopular product. In these cases, expectancy is
low, so overall motivation is also low (Vroom, 1964:86-94).
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Figure 2.23: Expectancy, Instrumentality, and Valence
Source: Vroom, V.H. and Deci, E.L. (1970) Management and
Motivation, Middle sex: Penguin Book Ltd.
Salespeople of an organization are motivated to put forth a high level of effort only if
they think that doing so leads to high performance. In other words, in order for
salespeople’s motivation to be high, expectancy must be high. Thus, in attempting to
influence salesforce motivation, sales managers need to make sure that their salespeople
believe that if they do try hard they can succeed. One way sales managers can boost
expectancies is through expressing confidence in their salespersons’ capabilities. And
another way for sales managers to boost salespeoples’ expectancy levels and motivation
is providing training so that salespeople have all the expertise needed for high sales
performance (Cross, Hartley and Rudelius, 2001:199-206). Expectancy captures a
salesperson’s perceptions about the relationship between effort and sales performance.
Instrumentality, the second major concept in expectancy theory, is a salesperson’s
perception about the extent to which performance at a certain level results in the
attainment of outcomes. According to expectancy theory, salespeople are motivated to
perform at a high level only if they think that high performance will lead (or is
instrumental for attaining) outcomes such as pay, job security, interesting job
assignments, bonus, or a feeling of accomplishment. In other words, instrumentalities
must be high for motivation to be high–salespeople must perceive that because of their
high performance they will receive outcomes (Vroom and Deci 1970:66-68)
Sales managers promote high levels of instrumentality when they clearly link
performance to desired outcomes. In addition, sales managers must clearly communicate
this linkage to salespeople. By making sure that outcomes available in the company are
Expectancy A salesperson’s perception about the extent to which his or her effort will result in a certain level of performance
Instrumentality A salespersons perception about the extent to which performance at a certain level will result in the attainment of outcomes
Valence How desirable each of the outcomes available from a job or organization is to a salesperson
Effort (an important
input)
Performance
Outcomes
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distributed to the salespeople on the basis of their performance, sales managers promote
high instrumentality and salesforce motivation. When outcomes are linked to
salesperformance in this way, high performers receive more outcomes than low
performers. Although all salespeople of an organization must have high expectancies and
instrumentalities, expectancy theory acknowledges that salespeople differ in their
preferences for outcomes. For many salespeople, pay is the most outcome of working.
For other salespeople, a feeling of accomplishment or enjoying one’s work is more
important than pay. The term valence refers to how desirable each of the outcomes
available from a sales job or a company is to a salesperson. To motivate the salespeople,
sales managers need to determine which outcomes have high valence for them – are
highly desired-and make sure that those outcomes are provided when salespeople
perform at a high level. According to Lerner and Keltner (2000:473-493), it appears that
in addition to pay, autonomy, a stimulating work environment, enthusiastic sales
colleagues, and generous benefits are highly valent outcomes for many salespeople in
many organizations in Europe and North America.
According to expectancy theory, high salesforce motivation results from high levels of
expectancy, instrumentality, and valences as in figure 2.24. If any one of these factor is
low, salesforce motivation is likely to be low. No matter how tightly desired outcomes
are linked to sales performance, if a salesperson think it is practically impossible to
perform at a high level, then motivation to perform at a high level is exceedingly low.
Similarly, if a salesperson does not think that outcomes are link to high sales
performance, or if a salesperson does not desire the outcomes that are linked to high sales
performance, then motivation to perform at a high level is low (Vroom and Deci, 1970:
98-102).
Figure 2.24: Expectancy Theory Source: Vroom, V.H. and Deci, EL (1970) Management and Motivation, Middle Sex:
Pengin books Ltd.
Expectancy is High Salespeople perceive that if they try hard, they can perform at a high level
Instrumentality is High Salespeople perceive that high performance leads to the receipt of certain outcomes
Valence is High Salespeople desire the outcomes that result from high performance
High Salesforce Motivation
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2.8 Need Theories
A need is a requirement or necessity for survival and well-being. The basic premise of
need theories is that salespeople are motivated to obtained outcomes at work that will
satisfy their needs. Need theory compliments expectancy theory by exploring in depth
which outcomes motivate salespeople to perform at a high level. Need theories suggest
that to motivate a salesperson to contribute valuable inputs to a sales job and perform at a
high level, a sales manager must determine what needs the salesperson is trying to satisfy
at work and ensure that the salesperson receives outcomes that help to satisfy those needs
when the salesperson performs at a high level and helps the organization achieve its
goals. There are several need theories: Abraham Maslow’s hierarchy of needs, Clayton
Alderfer’s ERG theory, Fredrick Herzberg’s motivator-hygiene theory, and David
McClelland’s needs for achievement, affiliation, and power. These theories describe
needs that salespeople try to satisfy at work. In doing so, they provide sales managers
with insights about what outcomes motivate salespeople of an organization to perform at
a high level and contribute inputs to help the organization achieve its goals.
Maslow’s Hierarchy of Needs: Psychologist Abraham Maslow proposed that all
salespeople seek to satisfy five basic kinds of needs: Physiological needs, safety needs,
belongingness needs, esteem needs, and self-actualization as in table 2.11. He suggested
that those needs constitute a hierarchy of needs, with the most basic or compelling needs
– physiological and safety needs – at the bottom. Maslow argued that these lowest-level
needs must be met before a salesperson strives to satisfy needs higher up in the hierarchy,
such as self-esteem needs. Once a need is satisfied, Maslow proposed, it ceases to operate
as a source of salesforce motivation. The lowest level of unmet needs in the hierarchy is
the prime motivator of behaviour; if and when this level is satisfied, needs at the next
highest level in the hierarchy motivate behaviour (Maslow, 1970: 119-136).
Although this theory identifies needs that are likely to be important sources of salesforce
motivation for many salespeople, research does not support Maslow’s contention that
there is a need hierarchy or his notion that only one level of needs is motivational at a
time (Pullins, 2001:403-413). Nevertheless, a key conclusion can be drawn from
Maslow’s theory: Salespeople try to satisfy different needs at work. To have a motivated
salesforce, sales managers must determine which needs salespeople are trying to satisfy
in organizations and then make sure that salespersons receive outcomes that satisfy their
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needs when they perform at a high level and contribute to organizational effectiveness.
By doing this, sales managers align the interests of salespeople with the interests of the
organization as a whole. By doing what is good for the organization (that is, performing
at a high level), salespeople receive outcomes that satisfy their needs.
Table 2.11: Maslow’s Hierarchy of Needs
Needs Description Examples of How Sales Managers can Help Salespeople Satisfy these Needs at Work
Highest-level needs
self-actualization needs The needs to realize one’s full potential as a human being.
By giving salespeople the opportunity to use their skills and abilities to the fullest extent possible
Esteem needs The needs to feel good about
oneself and one’s capabilities, to be respected by others, and to receive recognition and appreciation.
By granting promotions and recognizing accomplishments.
Belongingness needs Needs for social interaction, friendship, affection, and love
By promoting good interpersonal relations and organizing social functions such as company picnics and holiday parties.
Safety needs Needs for security, stability, and a safe environment
By providing job security, adequate medical benefits, and safe working conditions.
Lowest-level needs (most basic or compelling)
Physiological needs Basic needs for things such as food, water, and shelter that must be met in order for a salesperson to survive
By providing a level of pay that enables a salesperson to buy food and clothing and have adequate housing.
The lowest level of unsatisfied needs motivates behaviour; once this level of needs is satisfied, a salesperson tries to satisfy the needs at the next level
Source: Maslow A.H. (1970) Motivation and Personality, New York: Harper and Row.
In our increasingly global economy, sales managers must realize that citizens of different
countries might differ in the needs they seek to satisfy through work. Some research
suggests, for example that salespeople in Greece and Italy are especially motivated by
safety needs, and that salespeople in Sweden, Norway, and Denmark are motivated by
belongingness needs. In less-developed countries with low standards of living, like
Nigeria, Zimbabwe and Ghana, physiological and safety needs are likely to be the prime
motivators of behaviour. As countries became weltheir and have higher standards of
living, needs related to personal growth and accomplishment, such as estemm and self-
actualization become important as motivators of behaviour (Grant, Cravens, Low and
Moncrief, 2001:165-178; Piercy, Low and Craven, 2004: 255-267; Uduji, 2006: 146-
148).
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Alderfer’s ERG Theory: Clayton Alderfer’s ERG Theory reduced the five categories of
needs in Maslow’s hierarchy into three universal categories – existence, relatedness, and
growth–also arranged in a hierarchy as in table 2.12. Alderfer agrees with Maslow that as
lower–level needs become satisfied, a salesperson seeks to satisfy higher-level needs.
Unlike Maslow, however, Alderfer believes that a salesperson can be motivated by needs
at more than one level at the same time. A salesperson in a pharmaceutical company, for
example, may be motivated both by existence needs and by relatedness needs. The
existence needs motivate the salesperson to come regularly and work harder so that his
sales job will be secure and he will be able to pay his rent and buy food. The relatedness
needs motivate the salesperson to become friends with some of the other salespeople and
have good relationship with the other managers of the firm. Alderfer also suggests that
when salespeople experience need frustration or are unable to satisfy needs at a certain
level, they will focus all the more on satisfying the needs at the next lowest level in the
hierarchy (Alderfer, 1969:142-175).
Table 2.12 Alderfer’s ERG Theory
Needs Description Examples of How Sales Managers can Help Salespeople Satisfy these Needs at Work
highest-level needs
Growth needs The needs for self-development and creative and productive work
By allowing salespeople to continually improve their skills and abilities and engage in meaningful work.
Relatedness
needs The needs to have good interpersonal relations, to share thoughts and feelings and to have open two-way communication.
By promoting good interpersonal relations and by providing accurate feedback.
Lowest-level needs
Existence needs Basic needs for food, water, clothing, shelter, and a secure and safe environment.
By promoting enough pay to provide for the basic necessities of life and safe working conditions.
As lower-level needs are satisfied, a salesperson is motivated to satisfy higher-level needs. When a salesperson is unable to satisfy higher-level needs (or is frustrated), motivation to satisfy lower-level needs increases.
Source: Alderfer, C.P. (1972) Existence, Relatedness, and Growth: Human Needs in
Organizational Settings, New York: Free Press.
As with Maslow’s theory, research does not support some of the specific ideas outline in
ERG theory, such as the existence of the three-level need hierarchy that Alderfer
proposed (Pratt and Rafaeli, 2001:93-132). However, for sales managers, the important
message from ERG theory is the same as that from Maslow’s theory: Determine what
needs your salespeople are trying to satisfy at work, and make sure that they receive
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outcomes that satisfy these needs when they perform at a high level to help the
organization achieve its goals.
Herzberg’s Motivator-Hygiene Theory: Adopting an approach different from
Maslow’s and Alderfer’s, Frederick Herzberg focuses on two factors: (1) outcomes that
can lead to high levels of salesforce motivation and job satisfaction, and (2) outcomes
that can prevent salespeople from being dissatisfied. According to Herzberg’s motivator-
hygiene theory, salespeople have two sets of needs or requirements: motivator needs and
hygiene needs (Herzberg, 1966:72-78). Motivator needs are related to the nature of the
sales job itself and how challenging it is. Outcomes such as interesting sales job,
autonomy, responsibility, being able to grow and develop on the sales job, and a sense of
accomplishment and achievement help to satisfy motivator needs. To have a highly
motivated and satisfied salesforce, Herzberg suggested that sales managers should take
steps to ensure that salespeoples’ motivator needs are being met. Hygiene needs are
related to the physical and psychological context in which the sales job is performed.
Hygiene needs are satisfied by outcomes such as pleasant and comfortable working
conditions, pay, job security, good relationships with co-salespersons, and effective
supervision. According to Herzberg, when hygiene needs are not met, salespeople are
dissatisfied, and when hygiene needs are met, salespeople are not dissatisfied. Satisfying
hygiene needs, however, does not result in high levels of salesforce motivation or even
high levels of job satisfaction. For sales force motivation and job satisfaction to be high,
motivator needs must be met (Herzberg, Mausner and Snyderman, 1959:46-52).
Many research studies have tested Herzberg’s propositions, and by and large, the theory
fails to receive support (Locke, 1976:1297-1349). Nevertheless, Herzberg’s formulations
have contributed to our understanding of salesforce motivation in at least two ways. First,
Herzberg helped to focus researchers’ and sales managers’ attention on the important
distinction between intrinsic motivation (related to motivator needs) and extrinsic
motivation (related to hygiene needs), covered earlier in this review. Second, his theory
prompted researchers and sales managers to study how sales jobs could be designed or
redesigned so that they are intrinsically motivating.
McClelland’s Needs for Achievement, Affiliation, and Power: Psychologist David
McClelland had extensively researched the needs for achievement, affiliation, and power
(McClelland 1985:112-118). The need for achievement the extent to which a salesperson
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has a strong desire to perform challenging tasks well and to meet personal standards for
excellence. Salespeople with a high need for achievement often set clear goals for
themselves and like to receive performance feedback. The need for affiliation is the
extent to which a salesperson is concerned about establishing and maintaining good
interpersonal relations, being liked, and having other salespeople around them get along
with each other. The need for power is the extent to which a salesperson desires to
control or influence others (McClelland, 1978: 201-210).
While each of these needs is present in every salesperson to some degree, their
importance in the sales job depends upon the position each one occupies. For example,
research suggests that high needs for achievement and power are assets for first-line and
middle managers, and that a high need for power is especially important for upper
managers (Numes and Drezer, 2006: 504-512). One study found that salespeople with
relatively high needs for power tended to be especially effective at work (Passyn and
Sujan, 2006: 583-589). A high need for affiliation may not always be desirable in
salespeople because it might lead them to try too hard to be liked by others rather than
doing all they can to ensure that sales performance is as high as it can and should be.
Although most research on these needs has been done in North American and Western
Europe, some studies suggest that the findings may be applicable to salespeople in other
countries as well, such as Nigeria and South Africa (McClelland, 1985:812-825; Morgan
and Inks, 2001:463-472; Sengupta, Krapted and Pusateri, 2000: 253-261; Onyema,
2005:14-15).
Other Needs: Clearly more needs motivate salespeople than the needs described by these
four theories. For example, more and more salespeople are feeling the need for work-life
balance and time to take care of their loved ones while simultaneously being highly
motivated at work. Interestingly sufficient recent research suggests that being exposed to
nature (even just be being able to see some trees from your office window) has many
salutary effects, and a lack of such exposure can actually impair well-being and
performance (Grant, Cravens and Moncrief, 2001:165-178; Mussweiler, Ruter and
Epstude, 2004: 832-844). Thus, having some time during the day when one can at least
see nature may be another important need. Sales managers of successful companies often
strive to ensure that as many of their valued salespeoples’ needs as possible are satisfied
in the work place.
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2.9 Equity Theory
Equity theory is a theory of salesforce motivation that concentrates on salespeople’s
perceptions of fairness of their work outcomes relative to, or in proportion to, their
performance inputs. Equity theory complements expectancy and need theories by
focusing on how salespeople perceive the relationship between the outcomes they receive
from their sales jobs and organizations, and the inputs they contribute. Equity theory was
formulated in the 1960s by J. Stacy Adams, who stressed that what is important in
determining salesforce motivation is the relative rather than the absolute level of
outcomes a salesperson receives and inputs a salesperson contributes. Specifically,
salesforce motivation is influenced by the comparison of a salesperson’s outcome/input
ratio with the outcome/input ratio of a referent (Adams, 1963: 422-436). The referent
could be another salesperson or a group of salespeople who are perceived to be similar to
the salesperson; the referent also could be the salesperson in a previous sales job or his or
her expectations about what outcome/input ratios should be. In a comparison of his or her
outcome/input ratio to a referent’s outcome/input ratio, his/her perceptions outcomes and
inputs (not any objective indicator of them) are key (Kenny and Ancitelli, 2001: 439-
448).
According to equity theory, salespeople develop beliefs about the fairness of the rewards
they receive relative to their sales performance contributions. Equity theory proposes that
salespeoples’ perceptions of fairness depend on their personal assessment of outcomes
and inputs. Outcomes are rewards such as recognition, promotions, and pay. Inputs are
contributions such as effort, education, and special skills. Salespeople have a general
expectation that the outcomes or rewards they receive will be proportionate to the inputs
they provide. Salespeople make this judgment not in an absolute sense but by using
others as a reference point. A comparison salesperson may be a fellow salesperson in the
same firm or another who works for a different company. The relationship is summarized
in the ratio as follows:
Fairness is achieved when the ratios are equivalent. Ratios that are not equivalent produce
a psychological state called Cognitive dissonance, which creates dissatisfaction and
results in attempts to bring the ratios back into balance. Salespeople who perceive that
Inputsoutcome Others'
Versus Inputs
outcome Personal
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they are being inequitably treated can use one of the four methods to attempt to change
the ratios, or they can mentally reassess the situation and decide that it is equitable after
all (Adams, 1963: 424-425). One option is to reduce inputs by cutting back on the level
of effort, and if the inbalance becomes too great, to leave the firm. A second option is to
influence the outcomes. For instance, the salesperson may document what he or she has
accomplished to persuade the boss to provide a raise or a promotion. Third, a salesperson
can decrease others’ outcomes. For instance, a dissatisfied salesperson may spread
rumors about other salespeople in order to reduce their outcomes. Finally, a salesperson
who feels that he or she is getting more than deserved may increase effort levels to reduce
the dissatisfaction resulting from guilt. Table 2.13, shows us the conditions of equity and
the two types of inequity as follows: underpayment inequity and overpayment inequity.
Table 2.13: Equity Theory
Condition Salesperson Referent Example
Equity = (equal to) A salesperson perceives that he contributes more inputs (time and effort), and receives proportionally more outcomes (a higher salary and choice sales job assignments), than his referent.
Under payment
inequity
< (less than) A salesperson perceives that he contributes more inputs but
receives the same outcomes as his referent.
Overpayment Inequity
> (greater than) A salesperson perceives that he contributes the same inputs but receives more outcomes than his referent.
Source: Adams, J.S. (1963) “Toward an Understanding of Inequity” Journal of
Abnormal and Social Psychology (67): 422-436.
Equity theory thus makes two important observations. First, salesforce motivation largely
depends on perception of fairness in the exchange process between what the salesperson
contributes and what the salesperson receives. Second, salespeople are constantly
comparing themselves to others, and the way they see their input-outcome exchange
relative to others will affect their sales behaviour.
2.10 Goal – Setting Theory
Goal-Setting Theory focuses on motivating salespeople to contribute their inputs to their
sales jobs and organizations; in this way it is similar to expectancy theory and equity
theory. But goal-setting theory takes this focus a step further by considering as well how
sales managers can ensure that salespeople focus their inputs in the direction of high sales
performance and the achievement of the organizational goals. Locke and Latham
inputsoutcomes
inputsoutcomes
inputsoutcomes
inputsoutcomes
inputsoutcomes
inputsoutcomes
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(1990:66-69), the leading researchers on goal-setting theory suggest that the goals that
salespeople strive to attain are prime determinants of their motivation and subsequent
performance. A goal is what a salesperson is trying to accomplish through his or her
efforts and behaviour. For example, salespeople strive to meet sales goals while top
managers pursue market share and profitability goals. Goal-setting theory suggests that to
stimulate high salesforce motivation and performance, goals must be specific and
difficult (Locke, Shaw, Saari and Latham, 1981: 125-152). Specific goals are often
quantitative. In contrast to specific goals, vague goals such as “doing your best” or
“selling as much as you can” do not have much motivational impact. Difficult goals are
hard but not impossible to attain. In contrast to difficult goals, easy goals are these that
practically everyone can attain, and moderate goals are goals that about one-half of the
salespeople can attain. Both easy and moderate goals have less motivational power than
difficult goals (Locke and Lathan, 1990:92-98).
Hundreds of studies have demonstrated that salespeople are more highly motivated when
they have concrete objectives or targets to achieve. These studies suggest that three
important aspects of goal energize salespeople to try harder (Zoltners and Lorimer,
2000:139-150; Zimmerman, 2001:59-63). First, salespeople need to believe that the goals
are good, that is, they should “buy into” the goals. One effective way to increase goal
acceptability is to have salespeople and sales managers jointly set the goals in a
participative fashion. Second, the targets set should challenge salespeople to “stretch”
their abilities, but they should also be realistic. Unattainable goals frustrate and
demoralize salespeople. Third, goals should be specific, quantifiable and measurable to
give salespeople clear direction on how to focus their efforts so they can concentrate on
meeting or exceeding the established targets. Dixon, Spiro and Jamil (2000:353-362),
suggests that goal setting should be carefully done. They argued that in most sales jobs,
successful performance depends on the accomplishment of intangible tasks or duties that
cannot be easily quantified or translated into a neat set of targets or objectives. The
evaluation and reward system needs to be flexible enough to prevent salespeople from
single-mindedly focusing on the achievement of measurable performance objectives at
the expense of other key elements of sales job success.
Locke and Latham (1990:119-126), further suggest that one well-know approach to
implementing goal theory is by Management By Objectives (MBO). In an MBO system,
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salespeople and sales managers agree on a set of measurable goals to be accomplished
within a certain amount of time. MBO allows the firm to implement overall company
sales objectives by breaking these down into specific objectives assigned to different
units and sales persons in the firm. Management by objectives has several advantages.
First, it results in a hierarchy of marketing objectives that links specific sales objectives
with each succeeding organizational level. Second, each salesperson knows exactly what
is expected of him or her. This makes it easier to evaluate and reward salesperson
contributions by comparing them to agreed-on goals. Third, because salespeople and
sales managers jointly participate in goal setting, MBO facilitates the flow of sales-
related information from the bottom up as well as the top down. One drawback of MBO
has already been discussed: in many sales jobs, the most important tasks cannot be easily
quantified. By emphasizing what can be measured, an MBO system may cause
salespeople to lose sight of crucial salesforce behaviours that have no clear metrics, such
as being patient and friendly with customers. Another draw back is that MBO system
may encourage salespeople to play it safe by choosing less challenging goals that are
more easily attainable. This risk-reduction strategy makes sense from the salespeoples’
perspective if job security and organizational reward are contingent on the achievement
of agreed-on goals (Locke, Shaw, Saari and Latham, 1981: 125-152).
2.11 Learning Theories
The basic premise of learning theories as applied to organizations is that sales managers
can increase salesforce motivation and performance by the ways they link the outcomes
that salespeople receive to the performance of desired behaviours in an organization and
the attainment of goals. Thus, learning theory focuses on the linkage between
performance and outcomes in the motivation equation. Learning can be defined as a
relatively permanent change in a salesperson’s knowledge or behaviour that result from
practice or experience (Weiss, 1990:171-221). Learning takes place in organizations
when salespeople learn to perform certain behaviours to receive certain outcomes. For
example, a salesperson learn to perform at a higher level than in the past because he or
she is motivated to obtain the outcomes that result from these behaviours, such as a pay
raise or praise from a sales manager. Of the different learning theories, operant
conditioning theory and social learning theory provide the most guidance to sales
managers in their efforts to have a highly motivated salesforce.
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Operant Conditioning Theory: According to operant conditioning theory, developed by
psychologist Skinner (1969:47-69), salespeople learn to perform behaviours that lead to
desired consequences and learn not to perform behaviours that lead to undesired
consequences. Translated into motivation terms, skinner’s theory means that salespeople
will be motivated to perform at a high level and attain their sales goals to the extent that
high performance and goal attainment allow them to obtain outcomes they desire.
Similarly, salespeople avoid performing behaviours that lead to outcomes they do not
desire. By linking the performance of specific behaviours to the attainment of specific
outcomes, sales managers can motivate the salespeople to perform in ways that help an
organization to achieve its goals. Operant conditioning theory provides four tools that
sales managers can use to motivate high performance and prevent salespeople from
engaging in inefficiency and other behaviours that detract from organizational
effectiveness. According to Hamner (1974:117-119), these tools are positive
reinforcement, negative reinforcement, punishment, and extinction, as illustrated in figure
2.25.
Figure 2.25: The Consequences of Behaviour
Source: Skinner, B.F. (1969) Contingencies of Reinforcement, New York:
Appleton-Century-Crofts
Positive Reinforcement gives salespeople outcomes they desire when they perform
organizational functional behaviours. These desired outcomes, called positive reinforcers,
include any outcomes that a salesperson desires such as pay, praise, or a promotion.
Organizational functional behaviours are behaviours that contribute to organizational
effectiveness; they can include providing high-quality customer services, and meeting
sales targets and deadlines. By linking positive reinforcers to the performance of
functional behaviours, sales managers motivate salespeople to perform the desired
behaviours. Negative Reinforcement also can encourage salespeople of an organization to
perform desired or organizationally functional behaviours. Sales managers using negative
Positive Reinforcement Or
Negative Reinforcement
Same Behaviour likely to be repeated
Punishment Or
Extinction
Same Behaviour less likely to be repeated
Behaviour
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reinforcement actually eliminate or remove undesired outcomes once the functional
behaviour is performed. These undesired outcomes, called negative reinforcers, can range
from a sales manager’s constant nagging or criticism, to unpleasant assigned territory or
quota, to the ever-present threat of losing one’s job. When negative reinforcement is
used, salespeople are motivated to perform behaviours because they want to stop
receiving or avoid undesired outcomes. Sales managers who try to encourage salespeople
to sell more by threatening them with being fired are using negative reinforcement. In
this case, the negative reinforcer is the threat of job loss, which is removed once the
functional behaviours are performed. According to Byrenes (2003:53-54), whenever
possible, sales managers should try to use positive reinforcement. Negative reinforcement
can make for a very unpleasant work environment and even a negative culture in an
organization. No ones like to be nagged, threatened, or exposed to other kinds of negative
outcomes. The use of negative reinforcement sometimes causes salespeople to resent
sales managers and try to get back at them.
Weiss (1990:171-221) noted that sales managers who use positive reinforcement (and
refrain from using negative reinforcement) can get into trouble if they are not careful to
identify the right behaviours to reinforce-behaviour that are truly functional for the
organization. Doing this is not always as straightforward as it might seem. First, it is
crucial for sales managers to choose behaviours over which the salespeople have control;
in other words, salespeople must have the freedom and opportunity to perform the
behaviours that are being reinforced. Second, it is crucial that those behaviours contribute
to organizational effectiveness. Sometimes salespeople of an organization are motivated
to perform behaviours that actually detract from organizational effectiveness. According
to operant conditioning theory (Skinner, 1960:46-49), all behaviour is controlled or
determined by its consequences; one way for sales managers to curtail the performance of
dysfunctional behaviours is to eliminate whatever is reinforcing the behaviours. This
process is called extinction. Withdrawing or failing to provide a reinforcing consequence
leads to extinction. When this occurs, salesforce motivation is reduced and the behaviour
is extinguished, or eliminated. Examples include not giving a compliment for a sales job
well done forgetting to say thanks for a favour, or setting impossible performance goals
so that the salesperson never experience success.
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But sometimes, sales managers cannot rely on extinction to eliminate dysfunctional
beahviours because they do not have all the control over whatever is reinforcing the
behaviour or because they cannot afford the time needed for extinction to work. When
salespeople are performing dangerous behaviours or behaviours illegal or unethical, the
behaviour needs to be eliminated immediately. Sexual harassment, for example, is an
organizationally dysfunctional behaviour that cannot be tolerated. In such cases, sales
managers often rely on punishment, administering an undesired or negative consequence
to subordinates when they perform the dysfunctional behaviour. Punishments used by
organizations range from verbal reprimands to pay cuts, temporary suspensions,
demotions, and firings. Punishment, however, can have some unintended side effects-
resentments, loss of self-respect, a desire of retaliation-and should be used only when
necessary. According to Hamner (1974:114-128), to avoid the unintended side effects of
punishment, sales manages should keep in mind the following guidelines: (i)
Downplaying the emotional element involved in punishment. Sales managers should
make it clear that they are punishing a salesperson’s performance of a dysfunctional
behaviour, and not the salesperson himself or herself; (ii) sales managers should try to
punish dysfunctional behaviours as soon after they occur as possible, and make sure the
negative consequences is a source of punishment for the individuals involved. They
should be certain that salespeople know exactly why they are being punished; and (iii)
sales managers should try to avoid punishing a salesperson in front of others, for this can
hurt a person’s self-respect and lower esteem in the eyes of other salespeople, as well as
make colleagues feel uncomfortable. Even so, making salespeople aware of the fact that a
salesperson who has committed a serious infraction has been punished can sometimes be
effective in preventing future infractions and teaching all salespeople of the organization
that certain behaviours are unacceptable. For example, when the salespeople are informed
that a sales supervisor who has sexually harassed subordinates has been punished, they
learn or are reminded of the fact that sexual harassment is not tolerated in the
organization. Thus, effectively administering rewards and careful, judicious use of
punishment are key strategies for sales managers to motivate their saleforce (Skinner,
1969:113-117; Weiss, 1990:171-221).
When sales managers systematically apply operant conditioning techniques to promote
the performance of organizationally functional behaviours and discourage the
performance of dysfunctional behaviours, they are engaging in organizational behaviour
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modification (OB MOD). OB MOD has been successfully used to improve saleforce
productivity, efficiency, attendance, punctuality, compliance with safety procedures, and
other important behaviours in an organization. According to Moingeon and Soenen
(2002:144-168), OB MOD works best for behaviours that are specific, objective, and
accountable, such as sales calls, sales targets, or sales expenses, all of which lend
themselves to careful scruting and control. OB MOD provides sales managers with a
technique to motivate the performance of the organizationally functional behaviours.
Figure 2.26: Five steps in OB MOD Source: Hamner, W.C. (1974) “Reinforcement Theory and Contingency
Management in Organizational Setting” in Tosi, H. and Hamner, W.C, Organizational Behaviour and Management: A Contingency Approach, Chicago: St Clair press.
Social Learning Theory: Social Learning Theory proposes that salesforce motivation
results not only from direct experience of rewards and punishments but also from a
salesperson’s thoughts and beliefs. Social learning theory extends operant conditioning’s
Sales managers identify an important behaviour.
Sales managers measure the frequency with which the behaviour is occuring.
Sales managers determine if salespeople know whether they should be performing the behaviour and what consequences they receive when they do
perform it.
Sales managers develop and apply a strategy entailing the use of positive reinforcement, negative reinforcement, punishment, or extinction.
Sales managers measure the frequency of the behaviour
No Yes
Sales manages maintain the behaviour by continuing to use the strategy.
Managers determine if the problem is solved
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contribution to sales managers’ understanding of salesforce motivation by explaining (i)
how salespeople can be motivated by observing other salespeople perform a behaviour
and be reinforced for doing so (Vicarious learning), (ii) how salespeople can be
motivated to control their behaviour themselves (self-reinforcement), and (iii) how
salespeople’s beliefs about their ability to successfully perform a behaviour affect
motivation (self-efficacy). Vicarious Learning, often called observational learning,
occurs when a salesperson (the learner) becomes motivated to perform behaviour by
watching another salesperson (the model) perform the bahviour and be positively
reinforced for doing so. Vicarious learning is a powerful source of salesforce motivation
in which salespeople learn to perform functional behaviours by watching others.
Salespeople learn how to work harder by observing experienced ones in the same
organizatn perform these behaviours properly and being reinforced for them. In general,
salespeople are more likely to be motivated to imitate the behaviour, have high status,
receive attractive reinforcers, and are friendly or approachable (Goldstein and Sorcher,
1974:114-126).
And to promote vicarious learning, Bandura (1976:135-155) suggested that sales
managers should strive to have the learner meet the following conditions: (i) the learner
observes the model performing the behaviour, (ii) the learner accurately perceives the
model’s behaviour; (iii) the learner remembers the behaviour; (iv) the learner has the
skills and abilities needed to perform the behaviour, and (v) the learner sees or knows that
the model is positively reinforced for the behaviour. Although sales managers are often
the provider of reinforcement in organiatons, sometimes salespeople motivate themselves
through self-reinforcement. Salespeople can control their own behaviour by setting goals
for themselves and then reinforcing themselves when they achieve the goals. Self-
reinforcers are any desired or attractive outcomes or rewards that salespeople can give to
themselves for good performance, such as a feeling of accomplishment, having a dinner
out, or taking time out for a holiday with his family. When sales people of an
organization control their own behaviour through self-reinforcement, sales managers do
not need to spend as much time as they ordinarily would, trying to motivate and control
behaviour through administration of consequences because salespeople are controlling
and motivating themselves. In fact, this self-control is often referred to as the self-
management of behaviour (Gist and Mitchell, 1992: 183-211; Carlson and Pearo, 2004:
48-59; Chanko, Dubinsky, Jones and Robert, 2003:935-946).
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Self-efficacy is a salesperon’s belief about his or her ability to perform behaviour
successfully. Even with all the most attractive consequences or reinforcers hinging on
high performance, salespeople are not going to be motivated if they do not think that they
can actually perform at a high level. Similarly, when salespeople control their own
behaviour, they are likely to set for themselves difficult goals that will lead to outstanding
accomplishments only if they think that they have the capability to reach those goals.
Thus, self-efficacy influences salesforce motivation both when sales managers provide
reinforcement and when salespeople themselves provide it. The greater the self-efficiacy,
the greater is the salesforce motivation and performance (Bandura, 1982:122-127; Gist
and Mitchel, 1992:183-211).
2.12 Human Relations Theories
The central concern of the human relations perspective on saleforce motivation is how
salespeople respond to supervisory treatment and, more specifically, how supervisors
influence motivation by the way they deal with salespeople. A classical human relations
approach to understanding salesforce motivation is that of Dougla McGregor. According
to McGregor (1960:126-142), a sales manager’s assumptions about human nature
determine how the sales manager will view salespeople, interpret their behaviour, and
relate to them. McGregor postulated two distinct and opposite perspectives, a negative
view he called Theory X and a positive view he called Theory Y. Sales managers who rely
on Theory X hold the following set of assumptions: (i) salespeople dislike work and will
try to avoid it if they can; (ii) since work is unpleasant, salespeople need to be coerced,
threatened with punishment, and closely supervised to perform effectively; (iii)
salespeople prefer to be directed or told what to do, thus avoiding responsibility; (iv)
most salespeople have little ambition and desire security more than anything else (Locke,
1968:157-189).
At the opposite extreme, sales managers who hold theory Y assumptions believe that: (i)
work can be pleasurable and may be enjoyed as much as rest or play; (ii) salespeople are
capable of exercising self-control and acting independently if they are committed to
achieving organizational goals; (iii) giving the opportunity, the average salesperson will
eagerly accept and seek responsibility; (iv) the ability to innovate and be creative is
widely distributed in the population, and it is not limited to the sales managers (Locke
and Latham, 1990:126-132). Theory Y sales manages rely on participative decision
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making, offer salespeople responsible and challenging assignments, and treat salespeople
with respect, all of which tend to maximize a salesperson’s job satisfaction. McGregor
(1960:86-122), believed that sales managers who hold theory Y assumptions are more
likely to motivate salespeople than sales managers with theory X views. While the theory
is intuitively appealing, it is difficult to test empirically because it is essentially
prescriptive and a statement of philosophy.
2.13 Pay and Motivation
Pay can be used to motivate salespeople to perform at a high level and attain their work
goals. Pay is used to motivate entry-level salespeople, first line and middle sales
managers, and even top sales managers, such as sales Directors and CEOs. Pay can be
used to motivate salespeople to perform behavours that help an organization achieve its
goals, and it can be used to motivate salespeople to join and remain with an organization
(Locke, 1968:114-117). Each of the theories reviewed in this study alludes to the
importance of pay and suggest that pay should be based on performance of the
salespeople: (i) expectancy theory instrumentality, the association between performance
and outcomes such as pay, must be high for salesforce motivation to be high, and in
addition, pay is an outcome that has high valence for many salespeople; (ii) need
theories: salespeople should be able to satisfy their needs by performing at a high level;
pay can be used to satisfy several different kinds of needs; (iii) equity theory: outcomes
such as pay should be distributed in proportion to inputs, including performance levels;
(iv) goal-setting theory: outcomes such as pay should be linked to the attainment of
goals; and (v) learning theories: the distribution of outcomes such as pay should be
contingent on the performance of the salespeople.
As these theories suggest, promoting high salesforce motivation, sales managers should
base the distribution of pay to sales people on performance levels so that high performers
receive more pay than low performers (other things being equal). According to Sandis
(2000:35-42), a compensation plan basing pay on performance is often called a merit pay
plan. Once sales managers have decided to use a merit pay plan, they face two important
choices: whether to base pay on individual, group, or organizational performance or to
use salary increases or bonuses. Sales managers can base merit pay on individual, group,
or organizational performance. When individual performance can be accurately
determined, salesperson motivation is likely to be highest, especially when pay is based
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on individual performance. But when the attainment of organizational goals hinges on
saleforce working together and cooperating with each other, group or organizational
plans may be more appropriate than individual-based plans (Galea, 2004:29-30). It is also
possible to combine elements of an individual-based plan with a group or organization-
based plan to motivate each individual to perform highly while at the same time
motivating all salespersons to work well together, cooperate with each other, and help
each other as needed.
Salary Increase or Bonus: Sales managers can distribute merit pay to salespeople in the
form of a salary increase or a bonus on top of regular salaries. Although the naira amount
of a salary increase or bonus might be identical, bonus tend to have more motivational
impact for at least three reasons. First, salary levels are typically based on performance
levels, cost-of-living increases, and so forth from the day salespeople start working in an
organization, which means that the absolute level of the salary is based largely on factors
unrelated to current sales performance. A 5 percent merit increase in salary, for example,
may seem relatively small in comparison to one’s total salary. Second, a current salary
increase may be affected by other factors in addition to sales performance, such as cost-
of-living increases or across-the-board market adjustments. Third, because organizations
rarely reduce salaries, salary levels tend to vary less than performance levels do. Related
to this point is the fact that bonuses give sales managers more flexibility in distributing
outcomes. If an organization is doing well, bonus can be relatively high to reward
salespeople for their contributions. However, unlike salary increases, bonus levels can be
reduced when an organization’s performance lags. All in all, bonus plans have more
motivational impact than salary increases because the amount of the bonus can be
directly and exclusively based on performance (Holmes and Srivastava, 2002:421-428).
2.14 Theoretical Framework
In analyzing the reality and phenomenon under this study, the researcher would be
drawing heavily from Vroom’s Expectancy Theory (Vroom, 1964:114-136; Vroom and
Deci, 1970:96-126). The theory states that performance can be thought of as a
multiplicative function of motivation and ability, ie. P=F(MXA). Salesforce motivation in
turn varies with valences (v) or attractiveness of outcomes upon the performance of that
task, and the instrumentality (1) of performance for attaining the outcome. The major
outcomes he identifies are money (salary), fringe benefits, promotion, supportiveness
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behaviour (the leadership style of the sales manager fairness, honesty, involvement,
conscientiousness etc), group acceptance (the attitude other people and discipline towards
team approach) and the joy derived in doing the sales job itself (internalized motivation).
His model is as follows:
V = Ve + Vmlpm + Vflpf + Vplpp+ Vslps+ Vglpg
VglP8
Where :
V = Valence
Ve = Valence due to ego involvement
Vm = Valence of money (salary)
Vf = Valence of fringe benefits
Vp = Valence of promotion
Vs = Valence of supportiveness behaviour
Vg = Valence of group acceptance
And lp, m, f, p, s, g are respectively perceived instrumentality (Ip) of money, fringe
benefits, promotion, supportiveness behaviour and group acceptance.
The equation looks formidable. Henced, the researcher considers it very informative, for
in such equation, the answer to salesforce motivation will emerge. Vroom is simply
saying in precise mathematical language that salesforce motivation depends not just on
the outcome desired by the salesperson, but also on the instrumentality of effort, ie, the
relationship perceived by the salesperson between his and others’ previous effort (hard
work, honesty, loyalty, putting one’s self last), and the desired outcomes (promotion,
praise, medals, salary increments, and recognition in the industry). Therefore, this is a
good and pertinent theory that would place this study at an advantage, by providing a
rationale basis for explaining and interpreting the results this survey.
2.15 Summary and Synthesis of the Review
Research done in both psychology and business literature over the past four decades has
recorded that salesforce motivation varies as a function of different factors in the work
environment, including evaluation expectation, actual performance feedback, reward,
autonomy, and the nature of the sales job itself. Moreover, both theory and empirical
research reviewed in this study have suggested that salesforce motivation can be
categorized into two types: intrinsic motivation, which comes from the intrinsic value of
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the sales job for the salesperson, and extrinsic motivation, which comes from the desire to
obtain some outcomes that are separate from the sales job itself. When salespeople have
high autonomy, receive feedback about their performance, and have an important,
identifiable sales job to do which requires skill variety, they may experience feelings of
happiness and therefore intrinsic motivation to keep performing well.
According to expectancy theory, sales managers can promote high levels of salesforce
motivation in their companies by taking steps to ensure that expectancy is high
(salespeople think that if they try, they can perform at a high level), instrumentality is
high (salespeople think that if they perform at a high level, they will receive certain
outcomes), and valence is high (salespeople desire these outcomes). Need theories
suggest that to motivate their salesforce, sales managers should determine what needs
salespeople are trying to satisfy in companies and then ensure that salespeople receive
outcomes that satisfy these needs when they perform at a high level and contribute to the
firm’s effectiveness. According to equity theory, sales managers can promote high level
of salesforce motivation by ensuring that salespeople perceive that there is equity in the
firm or that outcomes are distributed in proportion to inputs. Equity exists when a
salesperson perceives that his or her own outcomes/input ratio equals the outcome/input
ratio of a referent. Inequity motivates salespeople to try to restore equity.
In its own, goal-setting theory suggests that sales managers can promote high salesforce
motivation and performance by ensuring that salespeople are striving to achieve specific,
difficult goals. It is also is important for salespeople to accept the goals, be committed to
them, and receive feedback on how they are doing. While operant conditioning theory
suggests that sales managers can motivate salespeople to perform highly by using
positive reinforcement or negative reinforcement (positive reinforcement being the
preferred strategy). Sales managers can motivate salespeople to avoid performing
dysfunctional behaviours by using extinction or punishment. Social learning theory
suggests that salespeople can also be motivated by observing how others perform
behaviours and receive rewards, by engaging in self-reinforcement, and by having high
levels of self-efficacy. But a classical human relations approach to understanding
salesforce motivation came from Douglas McGregor. According to him, a sales
manager’s assumptions about human nature determine how the sales manager will view
salespeople, interpret their behaviour, and relate to them. Hence, he postulated two
145
distinct and opposite perspectives, a negative view he called theory X and a positive view
he called theory Y. McGregor believed that sales managers who hold theory Y
assumptions are more likely to motivate salespeople than sales managers with Theory X
views. While the theory is instinctively appealing, it is difficult to test empirically
because it is essentially prescriptive and a statement of philosophy.
Each of the salesforce motivation theories reviewed in this study alludes to the
importance of pay and suggests that pay should be based on salespersons’ performance.
Merit pay plans can be individual, group, or organization-based, and can entail the use of
salary increases or bonuses. Indeed, a multitude of studies have been done on salesforce
motivation, but no one has ever done any study on a specific group of salespeople and
sales managers to test what their motives are and to test to see which incentive program
will suit the majority of salespeople in that group. Therefore, from the literature reviewed
so far, one can see that a need for further research is necessary. This will help sales
managers to find out what the salespeople really want from employers to perform at their
best.
146
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163
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Introduction
This chapter presents the scope of the study and the technical process that was involved
in designing of research instruments, collection of field data and the statistical analysis
required in the investigation of the impact of a salesperson’s satisfaction on CRM in the
pharmaceutical and health care industry in Nigeria.
3.2 Scope of the Study
The study covered the top ten pharmaceutical and health care companies in Nigeria. They
are included in table 3.1.
Table 3.1 Top Ten Pharmaceutical and Health care companies in Nigeria. Rank Company Sales
(Nm)
Growth
(%)
Market share
(%)
Salesforce
size
1. Neimeth International Pharmaceuticals Plc. Ikeja, Lagos. 450,983 2.1 7.3 106
2. Glaxo-Smithkline Plc. Apapa, Lagos. 370,034 9.7 5.9 98
3. May and Baker Plc, Ikeja Lagos. 350.638 5.0 5.7 74
4. Evans Medical Plc. Agbara, Ogun. 280,880 18.0 4.6 66
5. Roche Nig. Ltd. Dopemu, Lagos. 260,596 21.8 4.2 60
6. SKG-Pharma Ltd. Ikeja, Lagos. 250,741 10.5 4.1 50
7. Novartis Nig. Ltd. Mushin, Lagos. 230,267 4.2 3.7 48
8. Emzor Pharmaceutical Industries Ltd. Isolo, Lagos. 220,636 2.8 3.6 43
9. Ranbaxy Nig. Ltd, Isolo, Lagos 215,683 2.4 2.5 41
10. Fidson Health care Plc Oregun, Lagos 214,814 7.5 2.4 38
Source: Nierenberg, A. (2009) “Ten Largest Pharmaceutical and Biotech Companies in
Nigeria” Time Magazine, February (2): 51-53.
The choice of these pharmaceutical and biotech companies (often referred to as the Big
Pharmas) was based on the fact that they are the market leaders in terms of sales in
Nigeria. Their products are staple products in the Nigerian market. These companies
often boast of their philosophy of business that puts the customer at the center of strategic
decision making. They generally employ salespeople (often called drug reps or an older
term Medical reps) to market directly and personally to physicians and other health care
providers.
164
3.3 Research Design
Since the study is concerned with specific predictions, narrations of facts and
characteristics, a descriptive/diagnostic design was adopted. The research design ensured
enough provision for protection against bias and maximized reliability, with due concern
for the economical completion of the research study.
3.4 Method of Data Collection
Both secondary and primary sources were employed to gather information for the study.
Secondary data were sourced from both published and unpublished data. The published
data were collected through: (i) various publications of the federal, state and local
governments; (ii) various publications of foreign governments and of international bodies
and their subsidiary organizations; (iii) technical and trade journals; (iv) books,
magazines and newspapers; (v) reports and publications of various associations
connected with business and industry, banks, stock exchanges etc., (vi) reports prepared
by research scholars, universities, economists, etc. in different fields; and (vii) public
records and statistics, historical documents, and other sources of published information.
Questionnaire was the principal source of the primary data; however, interview served as
complementary. In designing the data-collection procedure, adequate safeguards against
bias and unreliability was ensured. Questions were well examined against ambiguity;
interviewers were instructed not to express their own opinion. They were trained so that
they will uniformly record a given item of response. The data collection instruments were
pre-tested before they were finally used for the study. To ensure that the data obtained
were free from errors, the researcher closely supervised the research assistants as they
collect and record information. Also, checks were set up to ensure that the data collecting
assistants perform their duty honesty and without prejudice. A miniature trial survey of
the study was carried out in Lagos metropolis to test the validity, reliability and
practicality of the research instruments and operations. Twenty drug reps and ten senior-
level executives of the available Big Pharmas were used for the test-run. The pre-test
provided the researcher the good ground to train the research assistants for the main
inquiry. It also provided the researcher with the opportunity to come out with the final
version of the research instruments. The pilot survey enabled the investigator to estimate
the cost component of the main study.
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3.5 Sampling Procedure
The target population of the study included the grand total (624), of the salesforce size of
the top ten pharmaceutical and health care companies in Nigeria. These domestic drug
makers constitute the population of the study. They formed the Big Parmas table below.
Table 3.2 The Big Pharmas in Nigeria Rank Company Senior sales
Executives (Managers &
above)
Sales Executives (Drug Reps & others)
Total salesforce
size
1. Neimeth International Pharmaceuticals Plc. (Former Pfizer
Product Plc.) Ikeja Industrial Estate, Lagos
15
91
106
2. Glaxo-Smithkline Plc. (Merger of Glaxo-Welcome and
Smithkline Beecham Plc) Creek Road, Apapa, Lagos.
11
87
98
3. May and Baker Plc, Ikeja Industrial Estate, Lagos. 9 65 74
4. Evans Medical Plc. Agbara, Avenue. Ikeja Industrial Estate 5 43 48
5. Roche Nig. Ltd, Dopemu, Agege, Lagos. 6 54 60
6. SKG-Pharma Ltd, Oba Akran Avenue. Ikeja Industrial
Estate.
5 45 50
7. Novartis Nig. Ltd. (Former Swiss Nigeria Chemical
Company Ltd) Agege Motor Rd, Mushin, Lagos.
5
43
48
8. Emzor Pharmaceutical Industries Ltd. Aswani Market Road,
Isolo, Lagos.
5 38 43
9. Ranbaxy Nig. Ltd, (Former Ranbaxy Laboratories Nig.
Ltd.) Isolo Industrial Estate, Lagos
4
37
41
10. Fidson Health Care Plc Oregun, Industrial Estate, Lagos. 4 34 38
Source: Nierenberg, A. (2009) “Ten Largest Pharmaceutical and Biotech Companies in
Nigeria” Time Magazine, February (2): 51-53.
These drug Companies that constitute the population of the study, spend Millions of naira
annually sending representatives to physician offices to stimulate sales. They spend
millions of naira also on the service of specialized health care marketing research
companies to perform marketing research among physicians and other health care
professionals. The sample sizes were determined, using the Yamani (1964:280) formula:
n = )(1 2Ne
N+
Where n = Sample Size
N = Population Size
e = Erro limit
I = Constant value
166
Therefore: N = 624
e = (.0025)
n = )0025.624(1
624x+
= 244
The stratified sampling technique was used to ensure a fair representation of the ranked
top ten pharmaceutical and health care companies in the ratio of 10: 9: 8: 7: 6: 5: 4: 3: 2:
1, using proportionality formula.
Q = NA
x 1n
Where Q = the number of questionnaires to be allocated to each
segment
A = the population of each segment
N = the total population of all the segments
n = the estimated sample size of the study.
Therefore:
(1) Neimeth Pharmaceutical Plc. = 624
106 x
1244
= 41
(2) Glaxo – Smith Kline Plc = 62498
x 1
244 = 38
(3) May and Baker Plc. = 62474
x 1
244 = 29
(4) Evans Medical Plc. = 62466
x 1
244 = 26
(5) Roche Nig. Ltd = 62460
x 1
244 = 23
(6) SkG-Pharma Ltd = 62450
x 1
244 = 20
(7) Novartis Nig. Ltd. = 62448
x 1
244 = 19
167
(8) Emzor Pharmaceutical Ltd. = 62443
x 1
244 = 17
(9) Ranbaxy Nig. Ltd. = 62441
x 1
244 = 16
(10) Fidson Health Care Plc = 62438
x 1
244 = 15
The items were selected in the ratio of one senior sales executive to three sales executives
from each company. This offered a good representation of all the segments in the
population of the study. Each respondent from the stratum was selected in order of their
years of experience in the sales job.
3.6 Questionnaire Administration
The researcher employed both open-ended and close-ended techniques to pose questions
which the respondents are familiar with, so as to enable them express attitude relevant to
the study. The respondents included the senior sales executives (product managers, brand
managers, field managers and above) and other sales executives (Drug reps, Detail men,
merchandisers and below). The questionnaires were administered to them through direct
contact approach. The researcher and his four research assistants were in Agbara, Ikeja,
Apapa, Isolo, Oregun, Mushin, Dopemu headquarters of these Big Pharmas in Nigeria, to
personally present the questionnaires to the respondents in accordance with the samples
allocated to each company that make up the population of the study in table 3.2.
The purpose of choosing this expensive and tedious direct contact approach was to
reduce the incidents of bias responses and unwillingness on the part of the respondents to
handle the questionnaire as they would observe that the exercise was purely for academic
purpose. This was enough to generate the confidence to these pharmaceutical companies
that the information/data obtained from them would not be misused. This was also
intended to create some interactions between the university academics and the Big
Pharmas in Nigeria, in order to explore the primary data of non-confidential nature that
have remain untouched/untreated by the researchers for want of proper contacts. Thus,
the respondents were encouraged to answer questions honestly and completely. The
approach would encourage development of a university – industry interaction so that
academics could easily get ideas from practitioners on what needs to be researched, and
practitioners can apply the research done of the academics.
168
3.7 Method of Data Presentation and Analysis
Data from the study were analysed using descriptive and inferential approaches. Simple
tables, charts and table of means were employed as descriptive tools. For hypothesis
testing, anova, t-test and correlation analysis were used to judge the significance of the
result obtained. In formulating necessary mathematical model that would depict the
relationship among the research variables for the purpose of predicting the values of
dependent variables, regression analysis was used. SPSS for windows (SPSSWIN
Version 15) was used to process and analyse the generated data. Principle Component
(PC) extraction model was employed in the multiple-factor analysis to predict inter-
dependency and interaction outcome among variables.
3.8 Analytical Framework
Principle Component (PC) extraction model was employed in the multiple-factor analysis
to predict inter-dependency and interaction outcome among variables. Factor analysis is a
statistical technique whose common objective is to represent a set of variables in terms of
a smaller number of hypothetical variables. That is, it assumes the existence of a system
of underlying factors and a system of observed variables, which is linearly dependent on
the underlying factors. It assumes that there is a certain correspondence between these
two systems and exploits this correspondence to arrive at conclusions about the level of
influence of the respective underlying variables to the observed variables. The model has
the advantage of determining interaction outcome through the use of pattern matrix and
structural matrix, to arrive at the characteristics or variables that are most important in
classifying, qualifying or capturing dimensions of change like woodland conversion.
When the liner weights associated with common factors according to Jeon and Charles
(1978) are arranged in a rectangular form, they are jointly referred to as factor path
matrix or factor structure matrix or matrix of factor loadings e.g.:
X1 = b11F1 + b12F2 + d1U1
X2 = b21F1 + b22F2 + d2U2
X3 = b31F1 + b32F2 + d3U3
X4 = b41F1 + b42F2 + d4U4
Xn = bnF1 + bnF2 + dnUn
169
Where: b2i = b2
i1 + d2i2. Path matrix differs from structure in that path matrix consist of
standardized linear weights (path coefficients) only, while structure matrix contains
respective correlation coefficients between the factors and observed variables. If factors
are uncorrelated, that is, one common factor model, a path Matrix is equivalent to a
structure matrix: The general form of determining the level or proportion of variance of
respective observed variables Xs as determined by the common factor (underplaying
factor) is expressed thus: Var X1 = b21 + d2
1 or Var X2 = b22 + d2
2. The weight (b2i and
d2i ) represents the square of the correlations or square of factorloadings and explains the
proportion of the Xs that is determined by the common factor and unique factor
receptively. This proportion (i.e. the square of the factor loading) is called communality
(h2) in factor analysis. The uniqueness component is 1 - h2, while the covariance of the
underlying factors and the observed variable (cov F, X) is their correlation or their
standard regression coefficient. The covariance of X1 and X2 is b1b2 when one common
factor or orthogonal multiple common factors are involved. Factorial determination of
variance refers to the degree to which the observed variables are determined by the
common factor: ∑h21/m where m stands for number of variables. This index is the
average of proportion of variance of observed variables explained by the single common
factor. Significant loadings are those ≥ + 0.30 (absolute value) for sample size of ≥ 50.
Also the result of the structural/path matrix expressed in % gives the overall factorial
determination (D2), which represents a percentage of the variance among the observed
variable that is determined by the common factors (Ugwuonah, 2005; Ugwuonah and
Uduji, 2008; Jeon and Charles, 1978; Thurstone and Mueller, 1979).
170
REFERENCES
Nierenberg, A. (2009) “Ten Largest Pharmaceutical and Biotech Companies in Nigeria” Time Magazine, February (2): 51-53.
Yamani, Y. (1964) Statistics: An Introductory Analysis, New York: Harper and Row
Publishers. Jeon, N and Charles, W.M. (1978), Introduction to Factor Analysis: What it is and How
to do it, London: Sage Publications. Ugwuonah, G.E. (2005), Data Analysis and Interpretation: A Computer-Based
Approach, Enugu: Cheston Limited. Ugwuonah, G.E. and Uduji J.I. (2008), “Analyzing Continuous and Discrete Variables: A
Computer-Based Approach” Nigerian Journal of Research and Production, 13 (2): 35-43.
Thurstone, L.L and Mueller, C. (1979), Multiple Factor Analysis, Chicago; University of
Chicago Press.
171
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND INTERPRETATION
4.1 Introduction In this chapter, attempt is made to present, analyze and interpret the data collected in accordance with the study objectives, questions and hypotheses. A total of 244 copies of questionnaires were printed and distributed, and 178 copies were properly filled and returned. Problems found in the rejected 43 copies include incomplete answers, non-responses to specific questions, yes-to-no saying patterns, middle-of-the road patterns, and unreliable responses. However, a complementary of 75 respondents were interviewed as it was observed that many salespeople preferred to talk than to write.
4.2 Classification of Data The demographic characteristics of respondents help to classify the salespeople in this study into groups on the bases of the following variables: gender, job status, marital status, age bracket, educational qualifications, sales experience, employment status, and union activities. The popularity of these variables is essential, as the needs, wants and reward preference of the salespeople are often associated with demographic segmentation. The stream of commonalities that indicated the linear associations between the principal components and individuals observed variables of this study was completed with the demographic characteristics of the respondents.
Table 4.1: Demographic Characteristics of Respondents. Question Number
Feature Respondents Frequency Percentage Total
Male 136 76.4 1. Gender Female 42 23.6
178(100%)
Manager 31 17.4 2. Job Status Below Manager 147 82.6
178(100%)
Married 150 84.3 3. Marital Status Single 28 15.7
178(100%)
25 yrs and below 37 20.8 26 – 35 yrs 7 3.9 36 – 45 yrs 101 56.7
4. Age Bracket
46 yrs and above. 33 18.5
178(100%)
HND/Degree/Equivalent 62 34.8 5. Educational Qualifications Post Graduate
Studies/Degree 116 65.2
178(100%)
< 1yr 21 11.2 1 – 3 yrs 3 1.7 4 – 6 yrs 25 14.0 7 – 10 yrs 2. 1.1
6. Sales Job Experience
11 – 20 yrs 123 69.1
178(100%)
> 20 yrs 4. 2.2
7. Employment Status Full-time Employment 170 95.5
Part-Time Employment 8 4.5 178(100%)
Non-Union Worker 176 98.9 8. Union Activist Union Worker 2 1.1
178(100%)
Source: Analysis of Field Data, 2010.
172
Table 4.1 shows the gender distribution of respondents as follows: male (76.4%), and
female (23.6%). Men and women often tend to have different attitudinal and behavioural
orientations based partly on generic make up and socialization. The implementation of
gender differentiation in opinion analysis is relevant as women tend to be more
communal-minded and men more self-expressive and goal directed in their immediate
environment. Therefore, this representation guaranteed a satisfactory gender opinion for
the study. Also with 17.4% (Managers) and 82.6% (non-managers) in the study, it shows
an even distribution of respondents among the job status. This implies that the survey
covered every category of sales personnel in the pharmaceutical and health care industry
in Nigeria. Again, the participation of 84.3% (married) and 15.7% (single) in the study
indicates a satisfactory distribution of martial status among the respondents. As
salespeople’s wants and abilities change with age, it is a good indication that 81.5% of
the respondents were under the 46 years age bracket that can do sales job. This is
especially true of field selling: Salespeople usually work alone, their hours are irregular,
and they are often away from home. They spend a large amount of time by themselves
calling on customers and traveling between accounts. Most of the time, salespeople are
away from any kind of support from their peers or leaders, and they often feel isolated
and detached from their companies. Consequently, the sales job requires younger men
and women to reach the performance level management has desired.
Table 4.1 also shows that the pharmaceutical and health care industry in Nigeria is a high
literacy group with 65.2% (post graduate degree holders) and 34.8% (first degree or
equivalent holders) of the salespeople. The high literacy of salespeople in this industry
implies that this social class can have a strong influence on motivational variable
preferences even when they have different psychographic make ups. Also, the survey
covered a good range of experienced salespeople in the industry with 71.3% (more than
10 years of sales job experience) and 28.7% (less than 10 years in the sales profession).
In this study, it might be positulated that older salespeople in the sales job is perceived as
relatively more experienced and knowledgeable with more credible source of information
for this survey than the younger salespeople. The survey also covered the salespeople that
have full stake in the organization with 95.5% and, part-time employed salespeople with
4.5%. The 1.1% union activists that participated in the study represented the opinion of
the agitators and critics among the salespeople. The inclusion of all these segments in the
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study ensured that the result of the survey reflects the perception of the salesforce in the
pharmaceutical and health care industry in Nigeria.
Demographic Characteristics – Demographic characteristics, such as age, gender,
marital status, job status and education, as contained, in table 4.1, can affect a
salesperson’s valence for rewards. At least, part of the reason for this is that people with
different demographic characteristics are likely to have different levels of satisfaction
with current rewards. Although there is only limited empirical evidence with respect to
salespeople in this regard, some lessons have been drawn from studies in other
occupations. It is generally true that older, more experienced salespeople obtain higher
levels of lower-order rewards (e.g. higher pay, a better territory) than newer members of
the salesforce. Thus, it could be expected that more experienced salespeople are more
satisfied with their lower-order rewards. Consequently, they also should have lower
valences for lower-order rewards and higher valences for higher-order rewards than
younger and less experienced salespeople (Nwosu and Uduji, 2009: 33-48, Uduji, 2006:
99-179).
A salesperson’s satisfaction with the current level of lower-order rewards may also be
influenced by demands and responsibilities he or she must satisfy with those rewards.
The salesperson with a large family to support, for instance, is less likely to be satisfied
with a given level of financial compensation than the single salesperson. Consequently,
the more family members a salesperson must support, the higher the valence for more
lower-order reward and the lower the valence for higher-order rewards. Finally,
individuals with more formal education are more likely to desire opportunities for
personal growth, career advancement, and self- fulfillment than those with less education.
Consequently, highly educated salespeople as shown in table 4.1 are likely to have higher
valances for higher-order rewards.
Job Experience – As a salesperson gains experience on a job, he or she is likely to gain a
clearer idea of how expending effort on particular tasks affects performance. The
experienced salesperson is also likely to understand better how his or her superiors
evaluate performance and how particular types of performance are rewarded in the
company. Consequently, as suggested by table 4.1, there is likely to be a positive
relationship between the years a salesperson has spent on the job and the accuracy of his
or her expectancy and instrumentality perceptions. In addition, the magnitude of a
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salesperson’s expectancy perceptions may be affected by experience. As they gain
experience, salespeople have opportunities to sharpen their selling skills; and they gain
confidence in their ability to perform successfully. As a result, experienced salespeople
are likely to have larger expectancy estimates than inexperienced ones.
Psychological Traits – An individual’s motivation also seems to be affected by
psychological traits. People with achievement needs are likely to have higher valences for
such higher-order rewards as recognition, personal growth, and feeling or
accomplishment. This is particularly true when they see their jobs as being relatively
difficult to perform successfully. The degree to which individuals believed they have
internal control over the events in their lives or whether those events are determined by
external forces beyond their control also affects their motivation. Specifically, the greater
the degree to which salespeople believes they have internal control over events, the more
likely they are to feel that they can improve their performance by expending more effort.
They also feel that improved performance will be appropriately rewards. Therefore,
salespeople with high “internal locus of control” are likely to have relatively high
expectancy and instrumentality estimates.
There is some evidence that intelligence is positively related to feelings of internal
control (Taylor, 1911: 72-79). Therefore, more intelligent salespeople may have higher
expectancy and instrumentality perceptions than those less intelligent. Those with
relatively high levels of intelligence – particularly verbal intelligence – are especially
likely to understand their jobs and their companies’ reward policies more quickly and
accurately. Thus, their instrumentality and expectancy estimates are likely to be more
accurate. Finally, a salesperson’s general feeling of self-esteem and perceived
competence and ability to perform job activities (task-specific self-esteem) are both
positively related to the magnitude of expectancy estimates. Since such people believe
they have the talents and abilities to be successful, they are likely to see a strong
relationship between effort expended and good performance. Also, salespeople with
higher levels of self-esteem are likely to attach greater importance to, and receive more
satisfaction from, good performance. Consequently, such people probably have higher
valences for higher-order, intrinsic rewards attained from successful job performance.
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Management Implications – The relationships between salespeople’s personal
characteristics and motivation levels have two broad implications for sales managers.
First, they suggest that people with certain characteristics are likely to understand their
jobs and their companies’ policies better. They also should perceive higher expectancy
and instrumentality links. Such people should be easier to train and be motivated to
expend greater effort and achieve effective implementation of a CRM strategy.
Therefore, as researchers and managers gain better understanding of these relationships,
it may be possible to develop improved selection criteria for hiring salespeople easy to
train and motivate. More important, some personal characteristics are related to the kinds
of rewards salespeople are likely to value and find motivating. This suggests that sales
managers should examine the characteristics of their salespeople and attempt to
determine their relative valences for various rewards when designing compensation and
incentive programs for effective implementation of a CRM strategy. Also, as the
demographic characteristics of a salesforce change over time, the manager should be
aware that salespeople’s satisfaction with rewards and their valances for future rewards
may also change.
4.3 Evidence of CRM Process in the Pharmaceutical and Health Care Industry
in Nigeria
The first objective of this study was to find out if CRM strategy exists in the
pharmaceutical and health care industry in Nigeria. And in order to get this information,
the respondents were asked to indicate the elements of the CRM process prevalent in
their organizations as contained in table 4.2. It was hypothesized that elements of the
CRM process were not evident in these organizations. Hence, the respondents were asked
to rate the following factors of CRM strategy in table 4.2, based on the extent to which
they are performed by their organizations, in a scale of answers from 5 – very high to 1 =
Not at all. The results were judged based on the means of 3 as observed in table 4.2.
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Table 4.2: Elements of the CRM Process Evident in the Organizations. Question Number
Feature Respondents Frequency Percentage Total
Not at all 29 16.3 Very low 123 69.1 Low 18 10.1 High 8 4.5
1. Acquires and captures customer data based on interaction
Very High - -
178(100%)
Not at all 29 16.3 Very low 88 49.4 Low 41 23.0 High 20 11.2
2. Uses technology to store and integrate customer data
Very High - -
178(100%)
Not at all 56 31.5 Very low 70 39.3 Low 44 24.7 High 8 4.5
3. Analyzes data for profitable/unprofitable segments
very High - -
178(100%)
Not at all 29 16.5 very low 61 34.3 Low 88 49.4 High - -
4. Leverages and disseminates customer information through the organization.
very High - -
178(100%)
Not at all 29 16.3 very low 94 52.8
Low 55 30.9 High - -
5. Customizes its product and service offering based on data generated through interactions between the customer and the organization
very High - -
178(100%)
Not at all 45 25.3
very low 60 33.7 Low 73 41.0 High -
6. Centralizes and shares learned information from customers in order to enhance the relationship between customers and the organization.
very High -
178(100%)
Not at all 43 24.2 very low 77 43.3
Low 56 31.5 High 2 1.1
7. Delegates authority to solve customers’ problem quickly-usually by the first person that the customer notifies regarding the problem
very High - -
178(100%)
Not at all 63 35.4 very low 74 41.6 Low 41 23.0 High - -
8. Operates a logistic system that reacts to, monitors, and controls the interaction between the customer and the organization.
very High - -
178(100%)
Not at all 71 39.9
very low 57 32.0 Low 46 25.8 High 4 2.2
9. Uses web vehicles for communications between customers and the organization.
very High - -
178(100%)
177
Not at all 61 34.3 very low 38 21.3
Low 71 39.9 High 8 4.5
178(100%)
10. Operates a Central repository for data from various functional areas of the organization that are stored and inventoried on a centralized computer system so that the information can be shared across all functional departments of the organization.
very High - -
Not at all 29 16.3 very low 73 41.0
Low 68 38.2 High 8 4.5
11. Develops product or service offerings customized for appropriate customer segment and then pricing and communicating these offerings for the purpose of enhancing customer relationships very High - -
178(100%)
Not at all 29 16.3
very low 40 22.5 Low 99 55.6 High 10 5.6
12. Designs its program to optimize profitability, revenue, and customer satisfaction by focusing on highly defined and precise customer groups.
very High - -
178(100%)
Source: Analysis of Field Data, 2010. The information in table 4.2 shows that many of the concepts underlying CRM are not all
new in the pharmaceutical and health care industry in Nigeria. This suggests that many of
the tenets of what we refer to as CRM are prevalent in these organizations; albelt might
not have particularly been integrated or cross-functional in scope. CRM is a company-
wide business strategy designed to optimize revenue, profitability, and customer
satisfaction by focusing on highly defined and precise customer groups. This is
accomplished by organizing the company around customer segments, encouraging and
tracking customer interaction with the company, fostering customer-satisfying
behaviours, and linking all processes of a company from customers through suppliers.
Acquiring and capturing all relevant information about the customer and the use of the
appropriate technology to store and integrate customer data are some of the critical
components of a CRM system. This process also includes measure of satisfaction,
response to targeted promotions, changes in account activity, and even movement of
assets. The value of customer data depends on the system that stores the data and the
consistency and accuracy of the data captured. Companies like Neimeth, Novartis,
Glaxo-Smithkline, and May and Baker, have taken great strides to improve their data-
collection processes by using “data cleansing” and accuracy software such as “Validity
Integrity Software”. Data cleansing software checks for inconsistencies and extracts
them. It then organizes and streamlines the data. Obtaining high-quality, actionable data
from various but complementary sources is a key element in a CRM system. Therefore,
judging from the information in table 4.2, it is evident that elements of a CRM process
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are traceable in the top ten pharmaceutical and health care companies in Nigeria. This
finding will lead us into discussing the extent of CRM implementation in this industry.
4.4 Extent of CRM Implementation in the Pharmaceutical and Health Care
Industry in Nigeria
The second objective of this study was to examine if CRM strategy is effectively
implemented in the pharmaceutical and health care industry in Nigeria. In order to get
this information, the respondents were asked to rate the following factors of a CRM
strategy as contained in table 4.2 based on the extent in which it is practiced by their
organizations, in a scale of answers from 5 = very high to 1 = Not at all. The results
obtained were judged based on the table of means of 3 as shown in table 4.3. It was
hypothesized that CRM strategy is not effectively implemented in the pharmaceutical and
health care industry in Nigeria.
Table 4.3: Descriptive Statistics Showing Means Responses of Respondents on the Extent of CRM Practices in the Organizations. S/N Elements Total Minimum Maximum Mean Std.
Deviation Remark
1. Acquires and captures customer data based on Interaction
178 1 4 2.03 .667 Low
2. Uses of technology to store and integrate customer data
178 1 4 2.29 .873 Low
3. Analyzes data for profitable/Unprofitable Segments
178 1 4 2.02 .863 Low
4. Leverages and disseminates customer information through the organization.
178 1 3 2.33 .742 Low
5. Customizes its product and service offering based on data generated through interactions between the customer and the organization.
178 1 3 2.15 .673 Low
6. Centralizes and shares learned information from customers in order to enhance the relationship between customers and the organization.
178 1 3 2.16 .801 Low
7. Delegates authority to solve customers’ problem quickly- usually by the first person that the customer notifies regarding the problem.
178 1 5 2.11 .806 Low
8. Operates a logistic system that reacts to, monitors, and controls the interaction between the customer and the organization.
178 1 3 1.88 .756 Very Low
9. Uses web vehicles for communications between customers and the organization
178 1 4 1.90 .862 Very Low
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10. Operates a central repository for data
from various functional areas of the organization that are stored and inventoried on a centralized computer system so that the information can be
shared across all functional departments of the organization.
178 1 4 2.15 .951 Low
11. Develops Product or service offerings customized for appropriate customer
segment and then pricing and communicating these offerings for the purpose of enhancing customer relationships.
178 1 4 2.31 .795 Low
12. Designs its program to optimize
profitability, revenue, and customer satisfaction by focusing on highly defined and precise customer group.
178 1 4 2.51 .832 Low
13. Mseca 178 1.00 3.25 2.1522 .56065 Low
Source: Analysis of Field Data, 2010 Table 4.3 shows the descriptive statistics indicating the mean responses of respondents on
the extent of CRM practices in the pharmaceutical and health care industry in Nigeria.
The results were obtained by judgment based on the means of 3 as observed in table 4.3.
This implies that even though that many of the components underlying CRM system are
evident in these organizations, yet they are not particularly effectively implemented,
integrated and cross-functional. This suggests that what has changed in the environment
to allow for the more integrated approach to customers represented by gadgets and
equipments is technology. More sophisticated approaches to data management are key
components and enablers a CRM strategy, yet it is a serious mistake to consider CRM as
mere software. Consequently, many firms are struggling with their CRM initiatives
precisely because they have bought the sophisticated software, but do not have the
culture, structure, leadership, or internal technical expertise to make the initiative
successful. Software solutions are just one component of a successful CRM initiative.
Companies should approach customer relationship management as a complete business
strategy, in which people, processes and technology should be organized around
delivering superior value to customer.
Nnabuko and Uduji (2008: 113-124) suggested some implementation qualities that
successful CRM system should share: (i) CRM should be results driven. It is important
that the firm decide on specific goals and benefits before attempting to implement a CRM
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strategy; (ii) CRM should be implemented from the top down. The CEO and senior-level
executives must be committed to changing the firm to a new focus on customer; (iii)
CRM requires investment in training. Firms do not nurture customer relationships, but
their people do. Training must be company-wide so that everyone knows that the firm is
transforming itself. Training must also upgrade the skill sets of employees so that they
are able to handle new tools; (iv) they communicate effectively across functions.
Effective CRM depends on cross-disciplinary teams that work together to solve customer
problems. It shouldn’t make any difference whether the customer interacts with the
company directly through the salesforce, over the web, or indirectly through a reseller (or
is accessing these entire channels simultaneously); (v) they are streamlined. A
concentrated focus on the customers allows firms to weed out wasteful business
practices. If any function or process does not help the firm better serve its customers, it
probably is not necessary. Streamlining also eliminates the need for costly customization
when it comes to creating software solutions; (vi) CRM implementation requires
involvement of the end users in creation of software solutions. Input from employees,
suppliers, distributors, and any other partner who will use the system is essential. It will
not only ensure that the systems meet the needs of all those who will implement them,
but will encourage everyone to support the transition to customer relationship
managements; and (vii) they constantly seek improvement. By tracking and measuring
results, firms are able to continuously improve relationships with customers. And once
this groundwork has been laid, technology solutions drive the firms toward a clear
understanding of each customer and his or her needs.
4.5 Evidence of Salesforce Motivation in the Pharmaceutical and Health Care
Industry in Nigeria
The third objective of this study was to find out if the salesforce is motivated in the
pharmaceutical and health care industry in Nigeria. And in order to get this information,
the respondents were asked to rate the following motivational tools as contained in table
4.4 based on the extent which it is used by their organizations to motivate its salesforce,
in a scale of answers from 5 = very high to 1 = Not at all. It was hypothesized that the
salesforce is not motivated in the pharmaceutical and health care industry in Nigeria. The
results obtained were judged based on the table of means of 3 as shown in table 4.5.
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Table 4.4 Elements of Salesforce Motivation Evident in the Organizations Question Number
Feature Responses Frequency Percentage Total
Not at all 27 15.2 Very low 47 26.4 Low 102 57.3 High 2 1.1
1. Salary Compensation
Very High - -
178(100%)
Not at all 35 19.7 very low 75 42.1 Low 58 32.6 High 10 5.6
2. Commission incentives
Very High - -
178(100%)
Not at all 35 19.7 Very low 64 36.0 Low 77 43.3 High 2 1.1
3. Bonus Payments
Very High - -
178(100%)
Not at all 31 17.4 Very low 90 50.6 Low 55 30.9 High 2 1.1
4. Fringe Benefits
Very High - -
178(100%)
Not at all 57 32.0 Very low 104 58.4
Low 15 8.4 High 2 1.1
5. Recognition awards such as pins, trophies, certificates
Very High - -
178(100%)
Not at all 53 29.8 Very low 59 33.1 Low 56 31.5 High 8 4.5
6. Opportunity for promotion and advancement
Very High 2 1.1
178(100%)
Not at all 35 19.7 Very low 46 25.8
Low 87 48.9 High 8 4.5
7. Participative Goal setting, including MBO
Very High 2 1.1
178(100%)
Not at all 27 15.2 Very low 64 36.0 Low 85 47.8 High 2 1.1
8. Praise and Encouragement from Management
Very High - -
178(100%)
Not at all 29 16.3
Very low 95 53.4 Low 52 29.2 High 2 1.1
9. Job Enrichment, such as greater responsibility, authority, and control
Very High - -
178(100%)
Not at all 27 15.2 Very low 111 62.4 Low 38 21.3 High 2 1.1
178(100%)
10. Sales Training Programs, including ICT.
Very High - -
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Not at all 27 15.2 Very low 46 25.8 Low 67 37.6 High 36 20.2
11. Sales Planning Elements, including forecasts, budgets, quotas and territories
Very High 2 1.1
178(100%)
Not at all 27 15.2
Very low 24 13.5 Low 36 20.2 High 89 50
12. Sales Contest Programs that use prizes and awards for short-term incentive.
Very High 2 1.1
178(100%)
Not at all 27 15.2
Very low 20 11.2 Low 51 28.7 High 80 44.9
13. Evaluation of Salesperson’s Performance using output factors, such as sales volume, Gross Margin, and customer Relations.
Very High - -
178(100%)
Not at all 27 15.2
Very low 28 15.7
Low 55 30.9 High 60 33.7
14. Management leadership Style, such as organizational structure and communication channel
Very High 8 4.5
178(100%)
Source: Analysis of Field Data, 2010. Table 4.4 shows that the salesforce in the pharmaceutical and health care industry in
Nigeria is not motivated. Today’s increasingly competitive business would mean that a
highly motivated workforce is vital for any organization seeking good results. Therefore,
learning how to motivate the salesforce should become an essential skill for sales
managers in the pharmaceutical and health care industry. Because most salespersons’
value more than one reward and people with different characteristics place different
values on the same reward, firms should not rely on a single reward to motivate their
salesforce. Instead, they should offer a mix of rewards, including both financial and non
financial incentives. The ideal motivation program should perhaps offer rewards that are
tailor-made to the unique needs and characteristics of each member of the salesforce.
Such an approach might not be practical in Nigerian industries, however, because of the
administrative complexities it would involve. Pharmaceutical and health care firms
should develop compensation and incentive programs that aim to achieve - at least in part
- this personalized ideal. They should offer a variety of rewards so that each member of
the salesforce has at least something he or she considers worth working for. The primary
sales management objective should be to encourage the salesforce to expend a large
amount of effect on implementing the CM strategy. Companies should not rely
exclusively on one reward, money, to motivate its salesforce, as more money is not the
only reward salespeople seek from their jobs.
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Several motivation theories work on the assumption that given the chance and the right
stimuli, people work well and positively. Therefore, sales managers should be aware of
what these stimuli or “motivational forces” are. Maslow (1970: 116-123), grouped them
into five areas. The first is physiological needs, and these are followed by further needs,
classed as safety social, esteem, and self-actualization. These needs are tackled in order:
as you draw near to satisfy one, the priority of the next one becomes higher. Also, once a
need has been satisfied, it is no longer a stimulus. This is particularly relevant in the sales
job because salespeople do to need just money and rewards, but also respect and
interaction. Therefore, when designing sales jobs, working conditions, and organizational
structures, sales managers should bear in mind the full range of needs in the Maslow
hierarchy. Implementing this will not cost more, but it will undoubtedly generate higher
psychological and economic rewards all round. It is also important to measure salesforce
morale on a regular basis to discover if and why salespeople are experiencing problems
with the CRM implementations. Salesforce demotivation for many salespeople tends to
be caused by poor systems or work overload. Very clear signs of demotivation can
include ineffective implementation of CRM strategy, high levels of absenteeism and
quick turnover of sales people. Recognizing demotivation is pointless except the causes
are intended to be eradicated.
4.6 Extent of Motivational Tool Usage in the Pharmaceutical and Health Care
Industry in Nigeria
The fourth objective of this study was to examine if the elements of the salesforce
motivation mix are effectively implemented in the pharmaceutical and health care
industry in Nigeria. It was hypothesized that elements of salesfore motivation are not
effectively implemented in the pharmaceutical and health care industry in Nigeria. And
in order to get this information, the respondents were asked to rate the following
motivational tools as contained in table 4.4 based on the extent in which it is used by their
organizations to motivate its salesforce, in a scale of answers from 5 = very high to 1 =
Not at all. The results obtained were judged base on the table of means of 3
as shown in table 4.5.
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Table 4.5: Descriptive Statistics Showing Means Reponses of Respondents on the Extent of Motivational Tool Usage in the Organizations. S/N Elements Total Minimum Maximum Mean Std.
Deviation Remark
1. Salary compensation 178 1 5 3.03 1.223 High 2. Commission incentives 178 1 4 2.24 .832 Low 3. Bonus Payments 178 1 4 2.26 .782 Low 4. Fringe Benefits 178 1 4 2.16 .711 Low 5. Recognition Awards, such as
pins, trophies, certificates 178 1 5 1.80 .684 very Low
6. opportunities for promotion and Advancement
178 1 5 2.14 .937 Low
7. Participative Goal setting, including MBO
178 1 5 2.42 .893 Low
8. Praise and Encouragement from Management
178 1 5 2.36 .777 Low
9. Job Enrichment, such as greater responsibility, authority, and control
178 1 5 2.16 .730 Low
10. Sales Training programs, including ICT.
178 1 4 2.08 .637 Low
11. Sales Planning Elements, including forecasts, budgets, quotas and territories
178 1 5 2.66 1.002 Low
12. Sales Contests Programs that use prizes and awards for short-term incentives
178 1 5 3.08 1.134 High
13. Evaluation of Sales person’s Performance using output factors, such as sales volume, Gross Margin, and Customer Relation’s.
178 1 4 3.08 1.084 High
14 Management Leadership Style, such as organizational structure and communication channel
178
1
5 2.97 1.134 Low
15 Adequate Salary gives a Salesperson degree of effectiveness
178 1
5 4.13 1.511 very High
16 Msecb 178 1.00 4.43 2.4567 .68949
Source: Analysis of Field Data, 2010. Table 4.5 shows the descriptive statistics indicating the means responses of respondents
on the extent in which the motivational tool in table 4.4 is used by the organizations to
motivate its salesforce. The results were judged by means of 3 as contained in table 4.5.
The findings suggest that the extent of motivational tool Usage in the industry is low.
This implies that the salesforce in the industry are not adequately motivated. The
information in table 4.5 suggests that management policies and programs concerning
higher-order rewards, such as recognition and promotion, can influence the desirability of
such rewards in the salesperson’s mind. For these rewards, there is likely to be a
curvilinear relationship between the perceived likelihood of receiving them and the
salesperson’s valence for them. For example, if a large proportion of the salesforce
receives small formal recognition each year, salespeople may feel that such recognition is
185
too common, too easy to obtain, and not worth much. If very few members receive
formal recognition, however, salespeople may feel that it is not a very attractive or
motivating reward simply because the odds of attaining it are so low. The same
curvilinear relationship is likely to exist between the proportion of salespeople promoted
into management each year (the opportunity rate) and salespeople’s valence for
promotion.
A company’s policies on the kinds and amounts of financial compensation paid to its
salespeople are likely to affect their motivation. As seen, when a person’s lower-order
needs are satisfied, they become less important and the individual’s valence for rewards
that satisfy such needs - such as pay and job security – is reduced. This suggests that in
firms where the current financial compensation (compensation rate) is relatively high,
salespeople will be satisfied with their attainment of lower-order rewards. They will have
lower valances for more of those rewards than people in firms where compensation is
lower. The range of financial rewards currently received by members of a salesforce also
might affect their valences for more financial rewards. If some salespeople receive much
money than the average, many others may feel underpaid and have high valances for
more money. The ratio of the total financial compensation of the highest paid salesperson
to that of the average in a salesforce is the earning opportunity ratio. The higher this ratio
is within a company, the higher the average salesperson’s valence for pay is likely to be.
Finally, the kind of reward mix offered by the firm is a factor. Reward mix is the relative
emphasis placed on salary versus commissions or other incentive pay and non-financial
rewards. It is likely to influence the salesperson’s instrumentality estimates and help
determine which job activities and types of performance will receive the greatest effort
from that salesperson. The amount of effort the salesperson desire to expend on each
activity or task associated with the job – the individual’s motivation – can strongly
influence his or her job performance. The question from a sales manager’s viewpoint is
how to design an effective reward mix for directing the salesforce’s efforts toward the
activities felt to be most important to the overall success of the firm’s sales program, such
as CRM.
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4.7 Relationship Between Salesforce Motivation and Effective Implementation of a CRM Strategy in the Pharmaceutical and Health Care Industry in Nigeria
The fifth objective of this study was to determine if there is any relationship between the
salesforce motivation and the effectiveness of CRM strategy implementation in the
pharmaceutical and health care industry in Nigeria. It was hypothesized that there is no
significant relationship between salesforce motivation and effective implementation of a
CRM strategy in the pharmaceutical and health care industry in Nigeria. And in order to
get this information, the respondents were asked to rate the following statement as
contained in table 4.6, that best expresses the extent to which they agree or disagree with
the opinion in a scale of answers from 5 = definitely agree to 1 = definitely disagree. The
results obtained were judged by means of 3 as shown in table 4.6.
Table 4.6: Motivational tools Usage and Implementation of a CRM Strategy in the Organizations
Question Number
Feature Responses Frequency Percentage Total
Definitely Disagree - - Generally Disagree - -
Somewhat Agree 27 15.2 Generally Agree 32 18.0
1. Adequate salary gives a salesperson a considerable degree of effectiveness in achieving marketing objectives
Definitely Agree 119 66.9
178(100%)
Definitely Disagree - - Generally Disagree 2 1.1 Somewhat Agree 32 18.0 Generally Agree 66 37.1
2. Commission incentive is a strong motivating factor to get the salespeople to work hard in acquiring and capturing customer data based on interactions.
Definitely Agree 78 43.8
178(100%)
Definitely Disagree - - Generally Disagree 2 1.1 Somewhat Agree 32 18.0 Generally Agree 75 42.1
3. Tying bonus Payments to the accomplishment of sales goal help the salesforce focus on long-term customer satisfaction. Definitely Agree 69 38.8
178(100%)
Definitely Disagree - - Generally Disagree - - Somewhat Agree 32 18.0
Generally Agree 21 11.8
4. Providing fringe benefits work to increase the effectiveness of the salespeople to integrate customer focus across the organization. Definitely Agree 125 70.2
178(100%)
Definitely Disagree - - Generally Disagree - -
Somewhat Agree 32 18.0 Generally Agree 44 24.7
5. Special recognition awards encourage salespeople to achieve such specific goals as getting new accounts, selling specific products or relieving certain overstocked inventory positions.
Definitely Agree 102 57.3
178(100%)
Definitely Disagree - - Generally Disagree - - Somewhat Agree 32 18.0 Generally Agree 81 45.5
6.
Opportunity for promotion and advancement move salespeople to closely monitor and controls the interaction between customers and the organization Definitely Agree 65 36.5
178(100%)
187
Definitely Disagree - - Generally Disagree 2 1.1 Somewhat Agree 33 18.5 Generally Agree 49 27.5
7. Involvement of the salespeople in the CRM planning process from the beginning ensures their full interest and commitment integration in the system.
Definitely Agree 94 52.8
178(100%)
Definitely Disagree - - Generally Disagree 2 1.1 Somewhat Agree 33 18.5
Generally Agree 38 21.3
8.
Praise and Encouragement from the management make salespeople work more hours in changing the firm to a new focus on customers.
Definitely Agree 105 59.0
178(100%)
Definitely Disagree - -
Generally Disagree - - Somewhat Agree 29 16.3 Generally Agree 33 18.5
9. Increasing the level of responsibility, authority and control over jobs, help salespeople to solve customer’s problem promptly.
Definitely Agree 116 65.2
178(100%)
Definitely Disagree - - Generally Disagree - - Somewhat Agree 33 18.5 Generally Agree 37 20.8
178(100%)
10. ICT training programs for salespeople enhance the use of technology to store, leverage and disseminate customer information through the organization.
Definitely Agree 108 60.7
Definitely Disagree - - Generally Disagree - - Somewhat Agree 33 18.5
Generally Agree 48 27.0
11. Forecasts, budgets, quotas and territories ensures that salespeople focus on highly defined and precise customer groups.
Definitely Agree 97 54.5
178(100%)
Definitely Disagree - - Generally Disagree - - Somewhat Agree 9 5.1 Generally Agree 33 18.5
Definitely Agree 136 76.4
12. Salespeople tend to be motivated if they believe that their effort to implement a CRM strategy will bring results, results will be rewarded and the rewards are valued.
178(100%)
Source: Analysis of Field Data, 2010. The information in table 4.6 indicates there is a relationship between the salesforce
motivation and the effectiveness of a CRM strategy implementation in the
pharmaceutical and health care industry in Nigeria. This suggests that when attempting to
motivate salespeople, sales managers should be concerned with two aspects of their
subordinates’ expectancy perceptions: magnitude and accuracy. The magnitude of a
salesperson’s expectancy perception indicates the degree to which that person believes
expending effort on job activities will influence him or her ultimate job performance.
Other things being equal, the larger a salesperson’s expectancy perceptions, the more
willing he or she is to devote effort to the job in hopes of bettering performance.
Accuracy of a salesperson’s expectancy perceptions refers to how clearly he or she
understands the relationship between effort expended on a task and the resulting
188
achievement on some dimension. When salespeople’s expectancies are inaccurate, they
are likely to misallocate job efforts. They spend too much time and energy on activities
that have little impact on performance and not enough on activities with a great impact.
Therefore, since personal and organizational characteristics affect the magnitude and
accuracy of salespeople’s expectancy perceptions, managers must take these factors into
account when deciding on supervisory policies, compensation, and incentive plans so that
their subordinates’ expectancies will be as large and as accurate as possible.
Like expectancies, instrumentalities are probability estimates made by the salesperson.
They are the individual’s perceptions of the link between job performance and various
rewards. Specifically, an instrumentality is a salesperson’s estimate of the probability that
an improvement in performance on some dimension will lead to a specific increase in the
amount of a particular reward. The reward may be more pay, winning a sales contest, or
promotion to a better territory. As with expectancies, sales managers should be concerned
with both the magnitude and the accuracy of their subordinates’ instrumentalities. When
the magnitude of a salesperson’s instrumentality estimates is relatively large, he or she
believes there is a high probability that improved performance will lead to more rewards.
Consequently, he or she will be more willing to expend the effort necessary to achieve
better performance.
The true link between performance and rewards in a firm are determined by management
policies about how sales performance is evaluated and what rewards are conferred for
various levels of performance. These policies may be inaccurately perceived by the
salespeople. As a result, salespeople may concentrate on improving their performance in
areas that are relatively unimportant to management; and they ultimately may become
disillusioned with their ability to attain desired rewards. Besides the firm’s compensation
policies, other organizational factors and the personal characteristics of salespeople
themselves can influence both the magnitude and the accuracy of their instrumentality
estimates. These factors and their managerial implications should be explored for
effective implementation of a CRM strategy in the pharmaceutical and health care
industry in Nigeria.
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Valances are the salesperson’s perceptions of the desirability of receiving increased
amounts of rewards he or she might attain as a result of improved performance. One
question about valences that has always interested sales managers is whether there are
consistent preferences among salespeople for specific kinds of rewards. Are some
rewards consistently valued more highly than others? Historically, many sales managers
and most authors of books and articles on motivating salespeople have assumed that
monetary rewards are the most highly valued and motivating rewards. They feel that
recognition and other psychological rewards are less valued and serve only to spur
additional sales effort under certain circumstances. However, few empirical studies have
been conducted to test whether salespeople typically have higher valances for more pay
than for other rewards. Rather the assumption has been based largely on the perceptions
of sales managers rather than on any evidence obtained from salespeople themselves
(Vroom, 1964: 81-86; Vroom and Deci, 1974: 66-69; Kotler, Bowen and Makens,
2006:211-233; Zeithaml, Bitner and Gremler, 2009: 34-38; Stevens, 2006: 379; Kotler
and Armstrong, 2010: 316-324, Gupta and Lehman, 2005: 18).
Survey conducted among employees in other occupation often finds that increased pay is
not always the most highly desired reward. For example, a recent review of 43 surveys of
non-sales workers (Uduji, 2006:126-132), suggested the importance of more pay was
rated relative to other rewards. Pay was ranked most important in only 25 percent of these
studies, and its average importance across all studies was third. In view of this evidence,
it shows that salespeople do not desire money more than other rewards, as they are not
different from workers in other jobs. An additional study (Nnabuko and Uduji, 2008:146-
184), sheds more light on this finding when a group of 481 salespeople in two large
manufacturing organizations ranked seven different rewards according to their relative
attractiveness and rated than on a 100-point scale. The result showed that more pay was
not universally seen as the most desirable reward by all the salespeople in the study.
Although more pay was by far the most attractive reward for salespeople in one
company, it ranked only third behind opportunities for personal growth and sense of
accomplishment for those in the other company. Why did the salespeople in one company
value a pay increase more than those in the other? It is possible that the salespeople in
one company had a higher valence for more pay than the other, because they were less
satisfied with the financial compensation they were currently receiving. In other words,
there are no universal statements to be made about what kinds of rewards are most
desired by salespeople and most effective for motivating them. Salespeople’s valences for
190
rewards are likely to be influenced by their satisfaction with the rewards they are
currently receiving. Their satisfaction with current rewards, in turn, is influenced by their
personal characteristics and by the compensation policies and management practices of
their firm (Winer, 2007: 269-278, Berman and Evans, 2007: 420-436; Weiner and
Kumar, 2002: 86-94; Rust, Lemon and Narayandas, 2005: 112-117).
4.8 Extent of the Relationship Between Motivational Tool Usage and Effective
Implementation of a CRM Strategy in the Pharmaceutical and Health Care
Industry in Nigeria
It was necessary to determine the level of relationship that exists between the salesforce
motivation and effective implementation of a CRM strategy in the pharmaceutical and
health care industry in Nigeria. And in order to accomplish this purpose, the respondents
were asked to rate the following statements as observed in table 4.6, that best expresses
the extent to which they agree or disagree with the opinion in a scale of answers for 5 =
definitely agree to 1 = definitely disagree. The results were judged by means of 3 as
shown in table 4.7.
Table 4.7: Description Statistic’s showing Means Responses of Respondents on the Extent of Motivational Tool Usage Influence on Effective Implementation of a CRM Strategy in the Organizations. S/N Elements Total Minimum Maximum Mean Std.
Deviation Remark
1. Adequate salary gives a salesperson a considerable degree of effectiveness in achieving marketing objectives.
178 1 5 4.13 1.511 Very high
2. Commission incentives is a strong motivating factor to get the salespeople to work hard in acquiring and capturing customer data based on interactions.
178 1 5 3.89 1.437 High
3. Tying bonus payments to the accomplishment of sales goals help the salesforce focus on long-term customer satisfaction.
178 1 5 3.84 1.415 High
4. Prividing fringe benefits work to increase the effectiveness of the salespeople to integrate customer focus across the organization.
178 1 5 4.16 1.519 Very high
5. Special recognition awards encourage salespeople to achieve such specific goals as getting new accounts, selling specific products or relieving certain over stocked inventory positions.
178 1 5 4.03 1.484 Very Low
191
6. Opportunities for promotion and Advancement move salespeople to closely monitor and control the interaction between customers and the organization.
178 1 5 3.83 1.401 High
7. Involvement of the salespeople in the CRM planning process from the beginning ensures their full interest and commitment integration in the system.
178 1 5 3.96 1.490 High
8. Praise and Encouragement from Management make salespeople work more hours in changing the firm to a new focus on customers.
178 1 5 4.02 1.511 Very high
9. Increasing the level of responsibility, authority and control over jobs, help salespeople to solve customer’s problem promptly.
178 1 5 4.10 1.525 Very high
10. ICT training programs for salespeople enhance the use of technology to store, leverage and disseminate customer information through the organization.
178 1 5 4.05 1.512 Very high
11. Forecasts, budgets, quotas and territories ensure that salespeople focus on highly defined and precise customer groups.
178 1 5 3.99 1.492 High
12. Salespeople tend to be motivated if they believe that their effort to implement a CRM strategy will bring results, results will be rewarded, and the rewards are valued.
178 1 5 4.21 1.550 Very high
13. Msecb 178 1.00 5.00 4.0169 1.43373
Source: Analysis of Field Data, 2010. The information in table 4.7 indicates a significant relationship between the motivational
tool usage and the effective implementation of a CRM strategy in the industry. The
findings show a close relationship that exists between a company’s strategic CRM
implementation and its salesforce motivational plan. The motivational tool has a direct
bearing on the successful implementation of the CRM strategy. As an example of this
relationship, assume that a pharmaceutical firm is planning to enter a new market
segment to increase the firm’s market share. Consequently, the company conducts data
mining to determine the profitability of that market segment, by compiling personal,
pertinent, actionable data about the potential customers. A straight salary compensation
plan probably would help to implement this strategy. But on the other hand, a stronger
192
incentive-perhaps a large commission – might be necessary when the strategy calls for
aggressive selling to liquidate excess inventories of the firm. To get its salespeople to aid
in successfully implementing its CRM strategy in the marketing plan, management needs
to coordinate its motivational tools with the company’s goals. But it is surprising how
often a firm has a sales compensation system that is at odds with management’s stated
goals. Many firms, for example, typically say that they want a salesforce motivation plan
that “emphasizes profitability”. Yet these plans often have a commission component
based on sales volume, rather than on gross margin or some other measure of profit.
Other firms say that they want their salespeople to meet customer needs, but compensate
them only on meeting sales quotas. This is a discouragement to effective implementation
of a CRM strategy in the pharmaceutical and health care industry in Nigeria.
To implement an effective CRM strategy, management also should recognize that
companies and their market positions change over time. Consequently, a salesforce
motivation plan also should change to reflect the company’s evolution in its business
environment. One type of motivational tools is needed when a firm is just getting started
and it wants to reach and maintain a certain level of sales volume. Another type of plan
will be required later when this company is realigning territories, introducing new
products, and adding new channels of distribution or new types of middlemen for
effective CRM strategy. Companies are changing the way they implement the CRM
strategy. Successful companies in this 21st Century are focusing on developing long-term
relationship with their customers. Sales efforts must shift to reflect these changes; and
because sales effort must shift to these changes; and because sales effort must change,
salesforce motivational plans must be revised as well to reflect the current happening in
the industry. Instead of being rewarded for selling as much as possible and winning
market share, salespeople should be rewarded for building penetration of each customer,
keeping customers longer, and increasing the value of each customer, in order to achieve
a successful CRM strategy implementation.
Table 4.7 further shows that the objective of a salesforce motivation plan from the
salesperson’s perspective may differ from the company’s perspective. These objectives
may not mutually be exclusive, as in some situations, one goal may conflict with another.
To a salesperson, every plan should provide a regular income, at least at a minimum
level. The principle behind this point is that salespeople should not have to worry about
193
how to meet living expenses. If they have a bad month, if they are in seasonal doldrums,
or if they are sick and cannot work for a period, they should have some income.
However, this steady income should not be so high that it lessens the desire for incentive
pay. In addition to a regular income, a good salesforce motivation plan should furnish an
incentive to elicit above-minimum performance. Most salespeople do better when offered
a reward for some specific action than when no incentive is involved. It should be noted
that it is not possible to design a workable system that offers the greatest degree of both
security and incentive. The concepts are mutually incompatible. In practice, the company
must develop a compromise structure in order to achieve a successful implementation of
a CRM strategy (Johnson and Selnes, 2004: 1-17).
The information is table 4.7 shows that simplicity is a hallmark of a good salesforce
motivation plan. However, sometimes simplicity and flexibility are conflicting goals, that
is, a plan that is simple may not be sufficiently flexible, and a plan with adequate
flexibility may achieve that goal at the expense of simplicity. A salesforce motivation
plan should be simple enough for salespeople to understand readily; they should be able
to figure out what their incomes will be. In general, there should be no more than three
measures combined to calculate the salespersons’ compensation. Also, a good salesforce
compensation plan should treat the salespeople in an equitable manner. Nothing will
destroy salespeople’s morale faster than felling that their reward is inequitable. One way
to ensure fairness in any salesforce motivation plan is to strive to base it as much as
possible on measurable factors that are controllable by the salesforce. Every salesforce
motivational programme should be integrated with the entire sales management program.
A good motivational policy should be a part of a well-planned and executed sales
management program.
Satisfaction – When placed in the same job with the same compensation and incentive
programs, different salespeople are likely to be motivated to expend widely differing
amounts of efforts. This is because people with different personal characteristics have
divergent perceptions of the links between effort and performance (expectances) and
between performance and rewards (instrumentalities). They are also likely to have
different valences for rewards they might obtain through improved job performance. The
personal characteristics that affect motivation majorly include: (i) the individual’s
194
satisfaction with current rewards; (ii) demographic variables; (iii) job experience; and (iv)
psychological traits.
It possible to pay a salesperson too much? After a salesperson reaches a certain
satisfactory level of compensation, does he or she lose interest in working to obtain still
more money? Does the attainment of non-financial rewards similarly affect the
salesperson’s desire to earn more of those rewards? The basic issue underlying this
question is whether a salesperson’s satisfaction with current rewards has any impact on
the valence for more of those rewards or on the desire for different kinds of rewards. The
relationship between satisfaction and the valence for rewards is different for rewards that
satisfy low-order needs (e.g. pay and job security) than for those that satisfy higher-order
needs (e.g promotions, recognition, opportunities for personal growth, self-fulfillments).
Theories of motivation suggest that low-order rewards are valued most highly by workers
currently dissatisfied with their attainment of those rewards. In other words, the more
dissatisfied a salesperson is with current pay, job security, recognition, and other rewards
related low-order needs, the higher the valence he or she attaches to increases in those
rewards. In contrast, as salespeople become more satisfied with their attainment of low-
order rewards, the value of further increases in those reward declines (Maslow, 1970:
116-123; Herzberg, 1966: 102-114; Mcgregor, 1960: 46-75).
Other theories of motivation further suggest that high-order rewards are not valued highly
by salespeople until they are relatively satisfied with low-order rewards. The greater the
salesperson’s satisfaction with low-order rewards, the higher the valence of increased
attainment of high-order rewards. Perhaps the most controversial aspect of these theories
is the proposition that high-order rewards have increasingly marginal utility. The more
satisfied a salesperson is with the high-order rewards he or she is receiving from the job,
the higher the value he or she places on further increases in those rewards. Previous
studies have provided at least partial support for these suggested relationships between
satisfaction and the valence of low-order and higher-order rewards. Some evidence is
equivocal, though, and some propositions – particularly the idea that higher-order
rewards have increasingly marginal utility – have not been tested adequately. The only
study of valence for rewards conducted among salespeople provides support for some,
but not all, of the preceding hypotheses. This survey of salespeople in two manufacturing
firms found that salespeople relatively satisfied with current pay (a lower-order reward)
had significantly lower valences for attaining more pay than those dissatisfied with
195
current pay. Also, salespeople satisfied with their overall attainment of higher-order
rewards had significantly higher valences for more of those rewards than those
dissatisfied with their higher-order rewards. Salespeople satisfied with their lower-order
rewards, lower, did not have significantly higher valences for higher-order rewards, as
the theories would predict (Nnabuko, and Uduji, 2008:75-86; Nwosu and Uduji, 2007:
165-179; Uduji, 2007: 52-59; Uduji, 2008: 19-28).
4.9 Principal Components (PC) Extraction and Sufficiency
Principal components (PC) extraction on the determinant was used to analyse the
proportion of variations in the observed variables that are associated with the common
factors. It produced the six principal components (PCs) also called common factors or
underlying factors as shown in table 4.8.
Table 4.8 Component Extraction and Total Variance Expected
Initial Eigenvalues Extraction Sums of Squared
Loadings Rotation Sums of Squared
Loadings
Component Total % of
Variance Cumulative
% Total % of
Variance Cumulative
% Total % of
Variance Cumulative
%
1 17.814 52.393 52.393 17.814 52.393 52.393 12.214 35.924 35.924 2 4.304 12.658 65.052 4.304 12.658 65.052 6.415 18.869 54.793 3 2.195 6.456 71.507 2.195 6.456 71.507 3.584 10.541 65.333 4 1.946 5.724 77.232 1.946 5.724 77.232 3.283 9.656 74.989 5 1.492 4.388 81.620 1.492 4.388 81.620 1.911 5.619 80.609 6 1.397 4.109 85.729 1.397 4.109 85.729 1.741 5.121 85.729 7 .957 2.814 88.544 8 .891 2.621 91.164 9 .692 2.035 93.199 10 .632 1.859 95.058 11 .475 1.396 96.454 12 .252 .742 97.196 13 .218 .642 97.838 14 .169 .498 98.336 15 .138 .404 98.741 16 .112 .328 99.069 17 .075 .221 99.290 18 .054 .160 99.450 19 .045 .134 99.583 20 .037 .110 99.694 21 .026 .075 99.769 22 .019 .055 99.824 23 .017 .049 99.873 24 .010 .029 99.902 25 .009 .025 99.927 26 .007 .020 99.947 27 .006 .018 99.965 28 .004 .011 99.977
196
29 .003 .010 99.986 30 .003 .008 99.994 31 .002 .005 99.999 32 .000 .001 100.000 33 7.003E-
5 .000 100.000
34 1.512E-5
4.446E-5 100.000
Source: Analysis of Field Data, 2010
Extraction Method: Principal Component Analysis.
Table 4.8 shows that out of the twenty-nine (29) components analysed, only six principal
components extracted accounted for 85.75% of the variation. This suggests that salary
compensation, commission incentive, bonus payment, fringe benefits, recognition of
awards for outstanding performance, opportunity for promotion and advancement were
the major factors that account for salespersons motivation. These components were
further used as independent variables to regress customer relationship management index.
The result showed statistical significant effect of the independent variables of the CRM at
P � 0.05 level of significant, and a corresponding value of F = 129.925.
Table 4.9 Component Loading on Variables Component 1 2 3 4 5 6
salary .757 .148 .258 -.145 .054 -.020 commission .598 .563 .021 -.007 -.113 -.259 bonus payments .728 .412 .048 -.109 .082 -.149 fringe benefits .720 .395 .132 -.233 .194 .133 recognition of awards for outstanding performance
.501 .527 -.103 .384 .190 -.178
opportunity for promotion and advancement
.512 .391 -.068 .526 -.053 -.324
participative goal setting .701 .527 .081 .135 -.163 -.259 praise and encouragement from management
.787 .080 .107 .140 .481 -.137
job enrichment, such as greater responsibility
.655 .001 .424 .055 -.303 -.238
sales training programs, such as ICT
.725 -.123 -.212 .347 .274 -.405
sales planning elements such as forecasts
.754 .214 .364 -.260 .155 -.154
sales contests .729 .016 .440 -.237 .076 -.007 evaluation of salespersons performance
.764 -.067 .429 -.226 .050 -.004
management leadership style .706 .279 .302 -.140 -.220 -.010 adequate salary gives a salesperson degree of effectiveness
.944 -.160 -.201 -.062 .070 .099
197
commission incentive is a strong motivation factor
.927 -.014 -.246 -.014 .068 .168
tying bonus payments to the accomplishment of sales goals
.907 -.307 -.053 .031 -.158 .146
provinding fringe benefits work to increase the effectiveness
.964 -.081 -.105 .018 -.115 .084
special recognition awards encourage salespeople
.926 .021 -.301 .022 .040 .162
opportunity for promotion and advancement moves salespeople
.898 -.336 -.066 .082 -.070 .087
involvement of the salespeople in the CRM planning
.889 -.314 -.174 .135 -.084 .146
praise and encouragement from the management
.925 -.206 -.127 .019 .077 .139
increasing the level of responsibility
.936 -.071 -.188 -.083 -.132 .083
ICT training programs for salespeople enhance
.943 -.042 -.167 .067 .004 .182
forecast, budgets, quotas and territories
.949 -.096 -.080 -.018 -.017 .134
salespeople tend to be motivated if they believe that their effort
.946 -.094 -.238 -.025 -.069 .065
indicate ur gender .345 .514 -.010 -.535 .158 .291 indicate ur current job status -.181 -.420 .174 -.034 .826 -.011 indicate ur current marital status .215 -.655 .483 -.144 -.221 -.176 which of d categories does ur age fall
-.604 .618 .099 .075 .164 .241
which is ur highest education qualification
-.320 .774 -.141 -.293 -.117 .073
how long have u been in d sales job
-.120 .723 .026 .343 -.017 .366
indicate ur current employment status
.132 -.059 .642 .543 -.033 .325
do u consider urself a non-union or union worker
.058 -.012 .400 .472 .008 .449
Source: Analysis of Field Data, 2010 Extraction Method: Principal Component Analysis. a. 6 components extracted.
Table 4.9 shows the component loading that described the relationship that exists
between the study variables and the components. Some of the components in the table
load higher on some variables than the other. While some load evenly on all variables.
The table indicates covariances of the original variables with the components. The sum of
squares of each of the loadings for each component above, gave the variance accounted
for by each component.
198
Table 4.10: Rotated Component Matrix Component 1 2 3 4 5 6
salary .439 .669 .193 -.052 .071 .008
commission .223 .531 .540 .186 -.119 .288
bonus payments .385 .619 .414 .157 -.109 .064
fringe benefits .432 .706 .167 .293 .004 -.051
recognition of awards for outstanding performance
.244 .225 .737 .309 .077 -.012
opportunity for promotion and advancement
.244 .123 .823 .058 .129 .180
participative goal setting .299 .532 .629 .111 .013 .326
praise and encouragement from management
.508 .482 .487 -.026 .083 -.414
job enrichment, such as greater
responsibility
.281 .551 .289 -.410 .199 .293
sales training programs, such as ICT
.578 .089 .679 -.255 -.097 -.260
sales planning elements such as forecasts
.322 .832 .230 -.081 -.016 -.075
sales contests .379 .763 .051 -.193 .129 -.060
evaluation of salespersons performance
.438 .738 .031 -.260 .137 -.057
management leadership style .354 .687 .187 -.023 .110 .302
adequate salary gives a salesperson degree of effectiveness
.909 .332 .156 -.082 -.067 -.062
commission incentive is a strong motivation factor
.897 .318 .202 .077 -.034 -.018
tying bonus payments to the accomplishment of sales goals
.887 .277 .069 -.269 .117 .105
provinding fringe benefits work to increase the effectiveness
.867 .371 .217 -.112 .038 .132
special recognition awards encourage salespeople
.909 .276 .244 .111 -.047 .021
opportunity for promotion and advancement moves salespeople
.875 .242 .133 -.298 .108 .012
involvement of the salespeople in the CRM planning
.929 .149 .146 -.218 .107 .037
praise and encouragement from the management
.894 .307 .150 -.120 .049 -.088
increasing the level of responsibility
.871 .358 .158 -.073 -.075 .156
199
ICT training programs for salespeople enhance
.896 .316 .220 .017 .075 .031
forecast, budgets, quotas and territories
.861 .396 .165 -.081 .052 .032
salespeople tend to be motivated if they believe that their effort
.902 .305 .212 -.072 -.079 .091
indicate ur gender .194 .604 -.165 .555 -.203 .012
indicate ur current job status -.123 -.039 -.149 -.164 .045 -.925
indicate ur current marital status .104 .231 -.260 -.810 .145 .012
which of d categories does ur age fall
-.624 -.070 -.023 .648 .175 -.013
which is ur highest education qualification
-.409 .153 -.008 .678 -.263 .326
how long have u been in d sales job
-.180 .009 .239 .712 .387 .210
indicate ur current employment status
-.009 .133 .080 -.138 .890 -.017
do u consider urself a non-union
or union worker
.054 -.006 -.009 .064 .761 -.033
Source: Analysis of Field Data, 2010 Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization.
a. Rotation converged in 7 iterations.
Table 4.10 shows the matrix of factor leading from the six principal components with
their appropriate statistics. Each component accounted for a maximum proportion of
variance embedded in the data. The factors are isolated by the rotated component matrix.
Table 4.8, 4.9 and 4.10 show that six significant principal components were extracted
from the Matrix 29 observed variables of sales force motivational factors. The new
average value criterion as seen in table 4.10 was used. The rule is to include all the
factors or components whose value is greater or equal to 1. The analysis extracted 6 out
of the 29 observed – variable matrix, a situation that meets the statistical requirements
(Thurstone and Mueller, 1979). Also, the 6 PCs extracted, satisfied the definition of
factor analysis as a satisfied technique whose common objective is to represent a set of
variables in terms of smaller number of hypothetical variables. Further extraction could
be achieved with varimax matrix rotations criterion, or with the application of more
complex statistical package than SPSSWIN. The trend of the principal components or
common factors obtained in the analysis is in-line with the restrictions or rules typically
imposed on factor analysis.
200
4.10 Regression Factor Scores
The six principal components that account for the 85.75% of the data for sales force
motivation were further used as independent variables at this stage, to regress customer
relationship management index as shown in table 4.11, 4.12, 4.13 and table 4.14. The
result shows satisfied significance effect of the independent variables on the CRM at P –
0.05 level of significant, and a corresponding value of F = 129.925. The study is
concerned with finding out how the variation in its dependent variable is explained by
variation in one or more variables.
Table 4.11: Anova Showing Correspondence value of F
Model Sum of Squares df Mean Square F Sig.
Regression 45.627 6 7.605 129.925 .000a
Residual 10.009 171 .059
1
Total 55.636 177
Source: Analysis of Field Data, 2010
a. Predictors: (Constant), REGR factor score 6 for analysis 1, REGR factor score 5 for analysis 1, REGR factor score
4 for analysis 1, REGR factor score 3 for analysis 1, REGR factor score 2 for analysis 1, REGR factor score 1 for
analysis 1
b. Dependent Variable: mseca
The research finding in table 4.11 above suggests that a close relationship exists between
a company’s strategic CRM implementation and its salesforce motivation plan. This
meant that salesforce motivation has a direct bearing on the successful implementation of
the CRM strategy in the pharmaceutical and health care industry in Nigeria. Therefore, to
get its salespeople to aid in successful implementation of its strategic marketing plan,
management needs to coordinate its salesforce motivation plans with the company’s
CRM strategy. Successful organizations today place the customer at the center of firm
strategies and processes. Such customer-centric business models place the salesforce in a
crucial role, as salespeople are the first line of customer contact in most firms. Thus,
salespeople and the selling function are key success factors in modern organizations.
CRM is an important comprehensive customer-centric business model. CRM cannot
work effectively unless there is centralized relationship management.
201
Table 4.12: Coefficients Showing Significance Level
Unstandardized Coefficients Standardized Coefficients
Model B Std. Error Beta t Sig.
(Constant) 2.152 .018 118.684 .000
REGR factor score 1 for analysis 1
.334 .018 .596 18.363 .000
REGR factor score 2 for analysis 1
.258 .018 .460 14.189 .000
REGR factor score 3 for analysis 1
.269 .018 .480 14.805 .000
REGR factor score 4 for analysis 1
.077 .018 .137 4.220 .000
REGR factor score 5 for
analysis 1
.008 .018 .015 .458 .648
1
REGR factor score 6 for analysis 1
.036 .018 .063 1.957 .052
Source: Analysis of Field Data, 2010
a. Dependent Variable: mseca
Table 4.12 suggests a close relationship between a salesforce motivation and the
development of long-term relationships with customers. A CRM strategy provides
internal organizational formalization to support this goal and promote customer loyalty.
Often, the end result may be a strategic partnering between the seller and buyer firms.
Then, what is the role of the salesperson in this era of CRM and customer-centric firms?
Previous research studies have tried to suggest that, given advanced technology,
electronic channels, and increased tendency for categories of goods and services to be
viewed as commodities by customers, the role of the salesforce in this 21st century will be
greatly diminished (Reinar and Kumar, 2003:77-99). However, the findings of this study
are quite the opposite. Certainly, the sales role has changed in the pharmaceutical and
health care industry in Nigeria. But rather than being diminished this study discovered
that salespeople have stronger role than ever before in the success of a firm’s customer-
centric strategy. The key question here is, what specially should salespeople do to
maximize the success of long-term relationship-driven organizations? Salespeople have a
key role to play in fostering successful relationships. The finding of this study reveals
that relationships between pharmaceutical companies that result in strategic partnerships
generally go through four stages: awareness, exploration, expansion, and commitment.
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Table 4.13: Rating of T-test showing Implementation of CRM Factors by Respondents with the Average Value of 3 code N Mean Std. Deviation Std. Error Mean
1.00 38 2.29 .732 .119 acquires and captures customers
data based on interaction 2.00 149 3.00 .000 .000
1.00 38 2.55 .860 .140 uses technology to store and
integrate customer data 2.00 149 3.00 .000 .000
1.00 38 2.37 .883 .143 analyzes data for
profitable/unprofitable segments 2.00 149 3.00 .000 .000
1.00 38 2.50 .647 .105 pass on information about the
customer 2.00 149 3.00 .000 .000
1.00 38 2.32 .620 .101 customize is product and service
offering based on data generated 2.00 149 3.00 .000 .000
1.00 38 2.32 .662 .107 centralized and shares learned
information from customer 2.00 149 3.00 .000 .000
1.00 38 2.29 .768 .125 delegates authority to solve
customer 2.00 149 3.00 .000 .000
1.00 38 2.03 .788 .128 operetes a logistic system that react
to monitors and controls 2.00 149 3.00 .000 .000
1.00 38 2.11 .924 .150 uses web vehicles for
communication between customers 2.00 149 3.00 .000 .000
1.00 38 2.34 .966 .157 operates a central repository for
data from various functional areas 2.00 149 3.00 .000 .000
1.00 38 2.66 .745 .121 develops product or service
offerings customized 2.00 149 3.00 .000 .000
1.00 38 2.79 .741 .120 designs its program to optimize
profitability 2.00 149 3.00 .000 .000
1.00 38 2.3794 .41900 .06797 mseca
2.00 149 3.0000 .00000 .00000
Source: Analysis of Field Data, 2010 Table 4.13 shows that salesperson has a role to play at this stage of relationship
exploration, as each side tries to determine the potential value of the relationship. As time
goes on, the relationship becomes defined through the development of expectations for
each party and the results of individual transactions or interactions. For example, the drug
203
customer begins by evaluating the timeliness of follow-ups to requests for information or
makes a purchase and tests the seller’s product and service. At the same time, trust and
personal relationships develop. Building trust is a very important part of developing long-
term relationships and represents confidence that a salesperson’s word or promise can be
believed and that the salesperson has the long-term interests of the customer at the core of
his/her approach to doing business. A strong exploration stage is important for the
relationship to flourish over time. When the drug buyer tries the product for the first time,
that customer is excited about receiving the benefits of the product as promised by the
salesperson. A poor initial experience is extremely difficult to overcome. Begining the
relationship well requires the motivated salesperson to set the proper expectations,
monitor order processing and delivery, ensure proper use of the product, and assist in
servicing the customer.
Many business people try “to under promise and over deliver”, a catchphrase to
encourage salespeople not to promise more than they can deliver, but also to remind
salespeople to try to deliver more than was promised in order to pleasantly surprise the
buyer. Customer delight, or exceeding customer expectations to a surprising degree, is a
powerful way to gain customer loyalty. Over promising can get the initial sale, but a
dissatisfied customer not only will not buy again, but also will tell many others to avoid
that salesperson and his/her company. The first expectation the drug buyer has is that the
product will be delivered on time and ready to use. A common temptation is to quote a
short delivery time in order to win the sale, even when the rep knows that delivery time
can’t be met. Giving in to such temptation causes trouble with the customer and with
those responsible for the delivery function. Neither will be happy with the salesperson
that makes such promises. On the other hand, the motivated salesperson should monitor
the order processing and delivery processes to make sure that nothing goes wrong.
Some drug buyers may know how to operate the basic features of a product, but if the
product is not operating at maximum efficiency, the customer is loosing value. Many
firms have staffed a customer service department or tasked their technical support group
with training customers, but it is still the salesperson’s responsibility to make sure that
the customer is getting full value of use. Not all quiet customers are happy. Recent
research indicates that users may be dissatisfied long before decision markers are aware
of it (Reinart and Kumar, 2000:17-35). Motivated salespeople can learn of such problems
of working closely with their company’s technical or customer support personnel. Then
204
they can address similar situations in other accounts before the problems grow into
complaints. Complaints may arise at any stage of the relationship, but when complaints
arise during the exploration stage, the motivated salesperson has the opportunity to prove
commitment to the account. When customers sense that commitment, either through the
handling of a complaint or through other forms of special attention, they may be ready to
move into the expansion stage of the relationship.
Table 4.14: T-Test Showing Independent Sample Test. Levene's Test
for Equality of Variances t-test for Equality of Means
95% Confidence
Interval of the Difference
F Sig. t df
Sig. (2-
tailed) Mean
Difference Std. Error Difference Lower Upper
Equal variances assumed
174.759 .000 -11.946
185 .000 -.711 .059 -.828 -.593 acquires and captures customers data based on interaction
Equal variances not assumed
-5.985 37.000 .000 -.711 .119 -.951 -.470
Equal variances assumed
363.095 .000 -6.397 185 .000 -.447 .070 -.585 -.309 uses technology to store and integrate customer data
Equal variances not assumed
-3.205 37.000 .003 -.447 .140 -.730 -.165
Equal variances assumed
326.096 .000 -8.802 185 .000 -.632 .072 -.773 -.490
Equal variances not assumed
analyzes data for profitable/unprofitable segments
-4.410 37.000 .000 -.632 .143 -.922 -.341
Equal variances assumed
439.231 .000 -9.505 185 .000 -.500 .053 -.604 -.396 pass on information about the customer
Equal variances not assumed
-4.762 37.000 .000 -.500 .105 -.713 -.287
Equal variances assumed
312.772 .000 -13.584
185 .000 -.684 .050 -.784 -.585 customize is product and service offering based on data generated
Equal variances not assumed
-6.806 37.000 .000 -.684 .101 -.888 -.481
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Equal variances assumed
517.226 .000 -12.719
185 .000 -.684 .054 -.790 -.578 centralized and shares learned information from customer
Equal variances not assumed
-6.372 37.000 .000 -.684 .107 -.902 -.467
Equal variances assumed
350.564 .000 -11.385
185 .000 -.711 .062 -.834 -.587 delegates authority to solve customer
Equal variances not assumed
-5.704 37.000 .000 -.711 .125 -.963 -.458
Equal variances assumed
163.325 .000 -15.204
185 .000 -.974 .064 -1.100 -.847 operetes a logistic system that react to monitors and controls
Equal variances not assumed
-7.617 37.000 .000 -.974 .128 -1.233 -.715
Equal variances assumed
239.893 .000 -11.916
185 .000 -.895 .075 -1.043 -.747 uses web vehicles for communication between customers
Equal variances not assumed
-5.970 37.000 .000 -.895 .150 -1.198 -.591
Equal variances assumed
402.436 .000 -8.377 185 .000 -.658 .079 -.813 -.503 operates a central repository for data from various functional areas
Equal variances not assumed
-4.197 37.000 .000 -.658 .157 -.976 -.340
Equal variances assumed
266.269 .000 -5.648 185 .000 -.342 .061 -.462 -.223 develops product or service offerings customized
Equal variances not assumed
-2.830 37.000 .007 -.342 .121 -.587 -.097
Equal variances assumed
151.765 .000 -3.496 185 .001 -.211 .060 -.329 -.092 designs its program to optimize profitability
Equal variances not assumed
-1.751 37.000 .088 -.211 .120 -.454 .033
Equal variances assumed
127.397 .000 -18.224
185 .000 -.62061 .03405 -.68780
-.55343
mseca
Equal variances not assumed
-9.131 37.000 .000 -.62061 .06797 -
.75834 -
.48289
Source: Analysis of Field Data, 2010
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Table 4.14 shows that salesperson has a role to play in the stage of relationship
expansion, which is marked by the opportunity to sell new products or increase the share
of the account’s business. Trust is developing, allowing the motivated salesperson to
focus on identifying additional needs and recommending solutions. Several strategies,
including generating repeat sales, cross-selling, and full-line selling, may be used to
expand business with current accounts and move them toward loyalty and long-term
commitment to the relationship. In some situations, the most appropriate strategy is to
generate repeat orders, particularly for supply items and other operating needs.
Generating repeat sales requires recognizing buying cycles and being present at buying
time. Upgrading is convincing the buyer to use a higher-quality product or newer product
and is similar to generating repeat sales. The buyer selects the upgrade because it meets
needs better or more efficiently than did old product.
Selling the entire line of associated products is called full-line selling. Many
pharmaceutical companies will try to get that foot in the door with any sale in order to
prove their company’s worth as a supplier. The hope is that the drug buyer will want to
purchase the full line after trying the company out. Full-line selling is not the same as
full-line forcing, a practice used when a company has one top-selling product that it sells
through distributors. Full-line forcing occurs when the pharmaceutical company forces
distributors to carry the full line in order to be able to sell the top seller. Full-line selling
is a sales strategy that involves leveraging the relationship in order to sell the entire line
of products. Full-line forcing is a questionable sales tactic, one that got Neimeth
Pharmaceutical a great deal of negative publicity when they tried to force their
distributors into carrying all their products lines. In contrast, full-line selling is a
legitimate method of strengthening the relationship. Cross-selling is similar to full-line
selling but reflects selling products that may not be related. Cross-selling works best
when the motivated salesperson can leverage the existing relationship with the drug
buyer. Trust in the salesperson and the selling organization already exists, therefore the
sale should not be as difficult if the proper needs exist. If the drug buying centre for the
second product line changes greatly, cross-selling becomes more like the initial sale.
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4.11 Linear Association of Observation variables and PCs.
Table 4.15 indicates the stream of communalities or community per indicant,
which is an outcome of the Linear Association with their common factors. Table 4.15: Stream of Communalities Indicating Linear Association Between the Principal Components and an Individual Observed Variables. Initial Extraction
salary 1.000 .686 commission 1.000 .755 bonus payments 1.000 .744 fringe benefits 1.000 .801 recognition of awards for outstanding performance
1.000 .754
opportunity for promotion and advancement
1.000 .804
participative goal setting 1.000 .887 praise and encouragement from management
1.000 .907
job enrichment, such as greater responsibility
1.000 .760
sales training programs, such as ICT 1.000 .946 sales planning elements such as forecasts
1.000 .862
sales contests 1.000 .786 evaluation of salespersons performance
1.000 .826
management leadership style 1.000 .736 adequate salary gives a salesperson degree of effectiveness
1.000 .975
commission incentive is a strong motivation factor
1.000 .954
tying bonus payments to the accomplishment of sales goals
1.000 .966
providing fringe benefits work to increase the effectiveness
1.000 .967
special recognition awards encourage salespeople
1.000 .976
opportunity for promotion and advancement moves salespeople
1.000 .942
involvement of the salespeople in the CRM planning
1.000 .966
praise and encouragement from the management
1.000 .940
increasing the level of responsibility 1.000 .948 ICT training programs for salespeople enhance
1.000 .957
forecast, budgets, quotas and territories
1.000 .935
salespeople tend to be motivated if they believe that their effort
1.000 .970
indicate your gender 1.000 .779
indicate your current job status 1.000 .923 indicate your current marital status 1.000 .809
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which of d categories does your age fall
1.000 .846
which is your highest education qualification
1.000 .826
how long have u been in d sales job 1.000 .790 indicate your current employment status
1.000 .835
do u consider your self a non-union or union worker
1.000 .588
Source: Analysis of Field Data, 2010 Extraction Method: Principal Component Analysis.
Table 4.15 shows that the basis of expanding a relationship is a solid foundation of
customer loyalty. Loyal customers not only exhibit repeat purchase behaviour, but also
are very reluctant to switch suppliers because of their high level of trust and satisfaction
with the motivated salesperson, the selling firm, and its products. As such, customers
who are truly loyal are committed to the relationship. When the buyer-seller relationship
has reached the commitment stage, a stated or implied pledge to continue the relationship
is in place. Formally, this pledge may begin with the seller being designated a preferred
supplier. While preferred supplier status may mean different things in different
companies, in general it means that the supplier is assured a large percentage of the
buyer’s business and will get the first opportunity to earn any new business.
In firms with total quality management (TQM) initiatives in place, all members of the
organization are focused on continually working to eliminate errors and defects in all
aspects of their products and processes. Sophisticated quality measurement systems and
empowerment of employees to take action to fix quality problems, suppliers are typically
required to meet rigorous standards in order to be on a preferred supplier list. These
standards typically center on making sure the supplier consistently meets the same quality
standards as the selling firms for example Neimeth, Glaxo-Smithline, Roche and
Novantis are all long-time TQM proponents (Beckham, 2009:3). Each of these firms
closely monitors the quality standards of their raw material suppliers and will quickly
take a supplier of the preferred list if a pattern of quality problem develops. They
aggressively require that their suppliers adhere to rigorous quality and product safety
standards, and have active in-house and product testing programs to ensure compliance. Commitment in a relationship should permit both organizations, supported by a
marketing oriented and customer-centric culture. Commitment comes from both
organizations, and the salesperson must secure commitment not only from the customer,
209
but also from the rest of his or her own pharmaceutical company. Senior management
must be convinced of the benefits of developing a long-term relationship with the account
so that the appropriate investments will be made. Additionally, the motivated salesperson
has to see that others in the organization are empowered to serve the needs of this
customer. For example, if a major customer has a problem with Neimeth or May and
Barker billing process, the corporate billing department should work directly with that
customer’s account payable group to resolve the issue and design a more appropriate
process. Alignment of billing and other key system is a hallmark of a strong business
partnership in the pharmaceutical and healthcare industry in Nigeria.
4.12 Summary and Synthesis of Analysis and interpretation
Factor analysis was employed in analyzing the data, in order to isolate principal
components that account for motivation of a salesperson. Out of twenty-nine (29)
components analyzed, the result revealed that six Principal components account for
85.75% of the data. This suggests that salary compensation, commission incentive, bonus
payment, fringe benefits, recognition of awards for outstanding performance, opportunity
for promotion and advancement were the major factors that accounts for salespersons
motivation. These components were further used as independent variables to regress
customer relationship management (CRM) index. The result showed statistical significant
effects of the independent variables on the CRM at P = 0.05 level of significant and a
corresponding value of F = 129.925. This finding suggests that a close relationship exist
between a company’s strategic CRM implementation and its salesforce motivation plan.
This meant that salesforce motivation plan has a direct bearing on the successful
implementation of a firm’s CRM strategy. Therefore, to get its salespeople to aid in
successful implementation of its strategic CRM plan, management needs to coordinate its
salesforce motivation plan with the company’s goal.
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CHAPTER FIVE
DISCUSSION OF RESEARCH FINDINGS AND MODEL
5.1 Introduction
This chapter sought to present a model by which the performance of salespeople can be
understood. Sales managers require to understand why people in the salesforce behave
the way they do, especially in the implementation of CRM strategy, so that policies and
procedures can be devised to direct that behaviour toward desired objectives. The model
would highlight the links between a salesperson’s performance and the determinants of
that performance.
5.2 Model for Effective CRM Implementation
According to Malnyk and Denzler (1996: 174) the basic process of building a model
involves addressing four questions: (i) what problem to be addressed? (ii) what elements
of real life situation are important and how are they related? (iii) What data does the
model acquire? And (iv) what major assumptions (implicit and explicit) does the model
make? Guided by these factors and the findings of the study so far, the researcher
proposed a model that is shown in figure 5.1 suggesting that for sales managers to
implement a CRM strategy, they must motivate and direct the behaviour of the
salespeople. This requires that sales managers understand why people in the salesforce
behave the way they do so that policies and procedures can be devised to direct that
behaviour toward desired objectives. Figure 5.1 offers a model by which salesforce
behaviour can be understood. The model highlights the links between a salesperson’s
performance in the implementation of a CRM strategy and the determinants of that
performance in the industry.
213
Figure 5.1: Model of an Effective Implementation of a CRM
Source: Field Data, 2010.
Figure 5.1 is the developed model that emerged out of this study. It is a salesforce
motivation model for effective implementation of a CRM strategy in the Pharmaceutical
and Health Care Industry in Nigeria. It is a Salesforce Motivation Model that integrated
the work of the motivational theorists, in particular Vroom, Herzberg, Maslow,
McGregor, Taylor and human Relations Movement. This model suggests that there is a
cycle of salesforce motivation. The higher the salesperson’s motivation, the greater the
effort resulting in higher performance on implementation of a CRM strategy. Effective
implementation of a CRM strategy leads to better reward and job satisfaction of a
Salesforce Motivation
• Salary Compensation
• Commission Incentive
• Bonus payment
• Fringe benefits
• Recognition of awards for outstanding performance
• Opportunity for promotion and advancement
Salesforce Satisfaction
• Physiological Satisfaction
• Safety Satisfaction
• Social Satisfaction
• Esteem Satisfaction
• Self-fulfillment
CRM Systems
• Result driven • Implemented from the top down • Investment in ICT training • Communicate across functions • Streamlined • Involvement of endusers in
creation of software solution • Tracking and Meaning results.
Salesforce Effort
• Learning who the customers are and where they locate
• Manage interactions with the current customer base
• Acquire and Capture all relevant information about the customer
• Use appropriate technology to store and integrate customer data
• Analyze data for profitable/unprofitable segments.
• Leverage and disseminate customer information through the enterprise.
Salesforce Reward
• Financially based rewards • Non financial rewards • Intrinsic rewards • Extrinsic rewards
Organizational Goals
• Optimize customer satisfaction • Optimize revenue • Optimize profitability • Optimize market share
Salesforce Performance
• Sales Volume • Profitability of Sales • New accounts generated • Customer Relations • Product Knowledge
214
salesperson. The cycle is completed through higher satisfaction causing still more
salesforce motivation.
The implications for sales managers are that they should: (i) convince salespeople that
they will achieve more by worker harder and smarter; and (ii) convince salespeople that
rewards for better performance are worth the extra effort. This implies that the sales
manager should give rewards that are valued, and attempt to sell the worth of those
rewards to the salesforce.
5.3 Organizational Goals for a CRM Strategy
Figure 5.2: Organizational Goals for a CRM Strategy
Figure 5.2 suggests that organizational goal for implementing a CRM strategy in the
Pharmaceutical and Health Care Industry in Nigeria should be for increasing revenues
and profits by focusing on customers. This indicates that any application or initiative
designed to help Pharmaceutical Company optimize interactions with customers,
suppliers, or prospects via one or more touch points – such as a call center, salesperson,
distributor, store, branch office, web, or e-mail – for the purpose of acquiring, retaining,
or cross-selling customers should be referred to as a CRM. This suggests that a CRM
strategy should be a journey of strategic process, organizational, and technical change
whereby a pharmaceutical company would seek to manage its enterprise around customer
behaviours. This entails acquiring knowledge about customers and deploying this
information at each touch point to attain increased revenue, profitability, market share
and operational efficiency. Successful organizations today place the customer at the
center of the firm strategies and processes. Such customer-centric business models place
the salesforce in a crucial role, as salespeople are the first line of customer contact in
most firms. Thus, salespeople and the selling function are key success factors in modern
organizations. Hence, CRM is an important comprehensive customer-centric business
model in the pharmaceutical and health care industry in Nigeria. The figure 5.1 model
provides an overview of CRM and then proceeds to illustrate how the salesforce and
selling function interface with the strategies and processes in market-oriented, customer-
Organizational Goals and Objectives
• Optimize Customer Satisfaction • Optimize Revenue • Optimize Profitability • Optimize Market Share
215
centric firms. The process of strategy development and implementation is outlined and
specific guidance is provided on how personal selling can contribute to marketing
strategy and what salespeople can do to maximize the success of long-term customer
relationships. The figure 5.2 provides a foundation for understanding the concept and
effective implementation of a CRM strategy. It also expanded the discussion of the role
of personal selling and the salesforce in market-oriented pharmaceutical and health care
firms in developing and executing marketing strategies when properly motivated.
5.4 Groundwork for a CRM Strategy
Figure 5.3: Essential Qualities for a successful CRM System
Figure 5.3 suggests that for effective implementation of a CRM strategy in the
pharmaceutical and health care industry in Nigeria, the CRM system should first acquire
the following qualities in the organizations:
(i) The organization should be result driven. It is important that the firm decide on
specific goals and benefits before attempting to implement a CRM Strategy.
(ii) The CRM strategy in any organization should be implemented from the top down.
The CEO and other Senior-level executives of the firm must be committed to
changing the firm to a new focus on customers.
(iii) The CRM strategy requires investment in training of the Company’s employees. It
should be noted that firms do not nurture customer relationships – their people do.
Training must be companywide so that everyone knows that the firm is
transforming itself. Training must also upgrade the skill set of employees so that
they are able to handle new tools.
(iv) The organization should communicate effectively across functions. Effective
customer relationship management depends on cross-disciplinary teams that work
together to solve customer problems. It shouldn’t make any different whether the
customer interacts with the company directly through the salesforce, over the
Successful CRM System Qualities
• Result driven
• Implemented from the top down
• Investment in ICT training
• Communicate across functions
• Streamlined
• Involvement of end users in creation of software solution.
• Tracking and measuring results
216
web, or indirectly through a reseller (or is accessing all of these channels
simultaneously).
(v) The organization should be streamlined in order to achieve a successful
implementation of a strategy. A concentrated focus on the customers allows firms
to weed out wasteful business practices. If any function or process does not help
the firm better its customer, it probably is not necessary. Streamlining also
eliminates the need for costly customization when it comes to creating software
solutions.
(vi) The organization implementing a CRM strategy should involve end users in
creation of software solutions. Input from employees, suppliers, distributors, and
any other partners who will use the systems is essential. It not only ensures that
the systems meet the needs of all those who will implement them, but it
encourages everyone to support the transition to customer relationship
management.
(vii) The organization attempting to implement a CRM strategy must constantly seek
improvement. By tracking and measuring results, the firm would be able to
continuously improve relationship with customers.
Once the groundwork has been laid, technology solutions would then drive firms toward
a clearer understanding of each customer and his or her needs. However, this research
revealed that because of the many complex products and the extensive support these
products require, many pharmaceutical companies in Nigeria are finding it very difficult
to create a unified customer relationship management. Nevertheless, they recognized that
developing an integrated, enterprise-wide, CRM strategy is crucial to improve customer
service, productivity, and cross-selling (selling to a customer product that are outside
his/her currently purchased set). For these pharmaceutical firms, that meant a sensitive
blend of vision, customer-centric business process redesign, and intensified dialogue with
customers. It also involves an enterprise side integration that is both functional and
geographical. One of the critical success factors in some companies is to designate the
sales manager as “relationship manager” for CRM. In the pharmaceutical and health care
industry in Nigeria, many firms are beginning to ensure that the sales function owns the
“relationship” with all customers. Therefore, it will be natural for them to own CRM.
217
According to Urban (2004:77-82) the relationship manager in the sales organization is
essentially a quarterback: it calls the plays and positions all the players. A central leader
is needed, other wise the left hand will not know what the right hand is doing. The
relationship manager function is to know the customer’s business, understand its industry
and needs – and then call the plays across all the other functions. A central customer
information system then becomes a safety net to ensure that all players know what they
are doing in terms of customer care and cross-selling. Reinart and Kumar (2003:77-99)
added that CRM cannot work effectively unless there is centralized relationship
management. Ideally, a central relationship organization should own part of the budget
from all functions involved across the enterprise so that CRM re-engineering efforts and
adjustments can be implemented faster. However, a cross-function CRM team involved
in deciding on new directions can be as efficient, especially with a strong product
management function as an unfevencer. The goals of the relationship management
function in the pharmaceutical and health care industry in Nigeria should be to ensure
that customers get the same branding experience every time and across all sales channels.
This industry is relative newcomer to utilizing personal selling as a key element of the
marketing communication mix, and some of the firms are on the cutting edge of the
trend. This study revealed that early results measured in terms of market share gains
cross-selling, and customer satisfaction and loyalty of these firms appear quite promising.
5.5 Salesforce Motivation for a CRM Strategy
Figure 5.4: Six Principal Components for a Salesforce Motivation
Factor analysis was employed in analyzing the data of this study, in order to isolate
principal components that account for motivation of a salesperson. Out of twenty-nine
(29) components analyzed, the result revealed that six principal components account for
85.75% of the data. This suggested that salary compensation, commission incentive,
Principal Components of Salesforce Motivation
• Salary Compensation
• Commission Incentive
• Bonus payment
• Fringe benefits
• Recognition of awards for outstanding
performance
• Opportunity for promotion and advancement
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bonus payment, fringe benefits, recognition of awards for outstanding performance,
opportunity for promotion and advancement were the major factors that accounts for
salesforce motivation plan. This meant that salesforce motivation has a direct bearing on
the successful implementation of a firm’s CRM strategy. Therefore, to get its salespeople
to aid in successful implementation of its strategic CRM plan, management needs to
coordinate its salesforce motivation plan with the company’s goal.
The sales manager’s responsibility for motivating the salesforce for effective
implementation of a CRM strategy cannot be taken lightly. Because the CRM process
involves problem solving, it often leads to considerable mental pressures and frustrations.
Successful CRM strategy implementation often result only after repeated contacts with
customers and may involve a long completion period, especially with new relationships
and complex products. Efforts to motivate salespeople usually take the firm of
debriefings, information sharing, and both psychological and financial encouragement.
Appeal to emotional needs, such as ego needs, recognition, and peer acceptance, are
examples of psychological encouragement. Monetary rewards and special benefits, such
as salary, commission and bonus payments are types of financial incentives. Well-
managed incentive programs can motivate salespeople and improve customer source.
Figure 5.4 shows the principal components positioned as rewards to motivate
salespeople. However, not all incentive programe are effective in motivating salespeople.
Poorly planned programs – for example, those that have targets set too high, are poorly
publicized, allow only the top performances to participate – can actually have adverse
effect. Hence, companies should not expect these programs to solve all their CRM
problems (Reinart and Kumar, 2000:17-35).
Sales managers can improve the implementation of a CRM strategy by understanding
what motivates individual salespeople. They can gain insight into the subject of
motivation by studying the various theories of motivation developed over the years. One
theory that has been applied effectively to salesforce motivation is expectancy theory
(Vroom, 1964:86-94), which states that motivation depends on the expectations an
individual has of his or her ability to perform the job and on how performance relates to
attaining rewards that the individual values. This study suggests that sales managers can
apply the expectancy theory of motivation to achieve an effective implementation of a
CRM strategy by following a five-step process:
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(i) Let each sales person know in detail what is expected in terms of establishing
customer relationships within the organization; determining the level of interaction each
customer has with the company; acquiring and capturing all relevant information about
the customer; use of the appropriate technology to store and integrate customer data;
determining profitable and unprofitable customer segments; and leveraging and
disseminating customer information throughout the enterprise. Rather than setting goals
just once a year, firms can do so on a semi-annually, quarterly, or even monthly and
weekly basis.
(ii) Make the work valuable by assessing the needs, values, and abilities of each
salesperson and then assigning appropriate tasks, such as web-based interaction, point-of-
sale interactions, data mining, data warehousing, campaign management, touch points
and knowledge management.
(iii) Make the work achievement. As leaders, sales managers must inspire self-
confidence in their salespeople and offer training and coaching to reassure them.
Effective implementation of a CRM strategy requires investment in training. Training
must upgrade the skill sets of salespeople so that they are able to handle new tools.
(iv) Provide immediate and specific feedback guiding those who need improvement
and giving positive feedback to those doing well. Periodic measurement of salesperson’s
performance is important. Although evaluation includes both revision and correction, the
sales manager must focus attention on correction. This priority translates into a drive to
adjust actual performance to confirm with predetermined standards.
(v) Offer rewards that each salesperson values. Because most salespersons’ value
more than one reward and people with different characteristics place different values on
the same rewards, firms should not rely on a single reward to motivate their salespeople.
This study suggests instead, that they offer a mix of rewards including both financial and
non financial incentives. The ideal motivation program would perhaps offer rewards that
are tailor-made to the unique needs and characteristics as shown in figure 5.4.
Because monetary rewards are shown in table 4.8 of the principal component extraction
and sufficiency as an important factor in motivating subordinates, compensating sales
personnel should be a critical matter fork sales manager. Sales compensation should be
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based on a commission plan, a straight salary plan, or some combination of these options.
Bonuses based on end-of-year results are another popular form of compensation. The
increasing popularity of team selling has also impelled companies to set up reward
programs to recognize performance of business units and teams. Today, only few
pharmaceutical companies in Nigeria reward business-unit performance. A commission is
a payment tied directly to the CRM efforts that a salesperson achieves. For example, a
salesperson might receive a 5 percent commission on all CRM activities up to a specified
quota and a 7 percent commission on CRM success beyond that point. This approach to
non-sales activity compensation should be increasingly promoted in the pharmaceutical
industries in Nigeria. But if commissions reinforce only selling incentives, they would
cause some salesforce members to short change non selling activities such as Data
mining, web-based interactions, point-of-sale interactions, knowledge management,
leveraging and disseminating of information in the organization. Commission programs
can also then, backfire. Pharmaceutical firms should modify their compensation system
to enable salespeople become more aggressive in the implementation of a CRM strategy.
A salary is a fixed payment made periodically to an employee. A pharmaceutical firm
that bases compensation on salaries rather than commission might pay a salesperson a set
amount every month. A company must balance benefits and disadvantages in paying
predetermined salaries to compensate managers and sales personnel. A straight salary
plan gives management more control over how sales personnel allocate their efforts, but
it reduces the incentive to expand sales. As a result, many firms should develop
compensation programs that combine features of salary, commission and bonus
payments. Because good salespeople are both hard to find and expensive to train, sales
mangers should know what to do that can encourage productive salespeople to stay with
the firms. Incentive plans that favour experienced sales representative tend to provide
fewer benefits for new representatives who are not yet fully experienced in the
implementation of a CRM strategy. Therefore, firms should develop interim
compensation plans for new recruits, such as a straight salary for a given period of time
or a commitment that the salesperson will not earn less than a certain but can earn more
during his or her training period.
Some of the research findings on these salesforce motivations are summarized as follows:
(i) Once a need is satisfied, it no longer motivates a salesperson. (ii) Different salespeople
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have different needs and values. (iii) Increasing the level of responsibility/job
enrichment, giving recognition of achievement and providing monetary incentives work
to increase motivation of salespeople. (iv) Salespeople tend to be motivated if they
believe that effort on CRM implementation will bring results, results will be rewarded
and the rewards are valued. (v) Elimination of disincentives (such as injustices or unfair
treatment) raises salesforce motivational levels. (vi) There is a relationship between the
performance goals of sales managers and those of the salespeople they lead in the
pharmaceutical and health care industry in Nigeria.
The implication of these findings is that sales managers should: (a) Get to know what
each salesperson values and what each one is striving for (unrealized needs). (b) Be
willing to increase the responsibility given to salespeople in the execution of a CRM
strategy. (c) Realise that training can improve salesforce motivation as well as
capabilities to handle new tools by strengthening the link between effort and
performance. (d) Provide CRM targets that are believed to be attainable, and yet provide
a good challenge to salespeople. (e) Link salesperson rewards to the CRM performance
they want to see improved in the organization. (f) Recognize that salesperson rewards can
be both financial and non-financial. (g) Convince salespeople that they will achieve more
CRM targets of the organization by working harder or by being trained to work smarter
(e.g. more efficient data mining, customer interactions, campaign management, and
knowledge management). (h) Convince salaespeople that the rewards for better
performance of a CRM execution are worth the extra effort, which implies that rewards
are valued and would be appreciated.
As figure 5.4 model suggests that sales managers consider opportunities for promotion
and advancement second only to special recognition as an effective salesforce motivator.
This is particularly true for young, well-educated salespeople who tend to view their jobs
as stepping-stones to top management. Unfortunately, salespeople’s valences for
promotion tend to decline in many pharmaceutical companies as they get older,
particularly when they have been with the firm for ten years or more. One reason is that
many firms do not provide many promotion opportunities for their salespeople. The
common career path is from salesperson to area sales manager, to top sales management.
Thus, if a person has been with a firm for several years without making it into sales
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management, he or she may start to believe that such a promotion will never happen.
Consequently, older salespeople may concentrate solely on financial rewards, or they
may lose motivation and not work as hard at their jobs. To overcome this problem,
pharmaceutical firms should institute two different career paths for their salespeople. One
leading to management positions for promising candidates, while the other leads to more
advanced positions within the salesforce. The latter usually involve responsibility for
dealing with key accounts or leading sales teams. In this system, even though a
salesperson may not make it into management, he or she can still work toward a more
prestigious and lucrative position within the salesforce. To make advanced sales positions
more attractive as positions, pharmaceutical firms in Nigeria should provide people in
those positions with additional perquisite, including higher compensation, a better
automobile, and better office facilities.
Contest awards and promotions provide recognition for good performance, but many
firms also have separate recognition programs to provide no monetary rewards. As with
contest, effective recognition programs should offer a reasonable chance of winning for
everyone in the salesforce. On the other hand, if a very large proportion of the salesforce
achieves recognition, the program is likely to lose some of its appeal because the winners
feel no special sense of accomplishment. Consequently, better recognition programs often
recognize only the best performers but do so for several different performance
dimensions. For example, winners might include persons with the highest interactive or
customer relationship skill for the year, the biggest percentage increase in sales, the
biggest revenue increase, the highest penetration of territory potential, and the largest
CRM per account. One thing that makes recognition attractive as a reward – besides the
feeling of accomplishment – is that a person’s peers and superiors are made aware of his
or her outstanding performance. Therefore, communication of the winner’s achievements,
through recognition at a sales meeting, publicity in the local press, announcements in the
company’s internal newsletter, or other ways, is an essential part of a good program. Also
pharmaceutical firms should typically give special awards as part of their recognition
program, as shown in table 4.8.
Sales contexts should form part of the short-term incentive programs designed to
motivate sales personnel to accomplish very specific CRM objectives. Although contests
should not be considered part of the firm’s ongoing compensation plan, they do offer
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salespeople the opportunity to gain financial, as well as non financial, rewards. Contest
winners should receive prizes in cash or merchandise or travel, which have monetary
value. Winners also should receive non financial rewards in the form of recognition and a
sense of accomplishment. Successful contests for effective salesforce motivation should
require the following qualities: clearly defined, specific objectives; an exciting theme;
reasonable probability of rewards for all salespeople; attractive rewards; and promotion
and follow-through. To generate interest and enthusiasm, contests should be launched
with fanfare. For this reason, pharmaceutical firms should announce their contests at
national or regional sales meetings. Follow-up promotion is also necessary to maintain
interest throughout the contest period. As the contest proceeds, salespeople should be
given frequent feedback concerning their progress so they know how much more they
must do to win an award. Finally, winners should be recognized and publicized within the
company and prizes should be awarded promptly.
5.6 Salesforce Effort for a CRM Strategy
Figure 5.5: Input factors of Salesforce Effort for a successful CRM. When salespeople are motivated, they have a key role to play in fostering successful
relationships between organizations that can result in strategic partnership. On the
surface, CRM may appear to be rather simplistic customer service strategy. But while
customer service is part of the CRM process, it is only a small part of a totally integrated,
holistic approach to building customer relationships. Figure 5.5 shows a closed-looped
system that a salesperson must be actively involved to build a relationship with
customers.
Input Factors of Salesforce Effort
• Learning who the customers are and where they located
• Manage interactions with the current customer base
• Acquire and capture all relevant information about the
customer
• Use appropriate technology to Store and Integrate
Customer data
• Analyze data for Profitable/Unprofitable Segments
• Leverage and disseminate Customer Information
through the enterprise
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Initiating a customer relationship within the organization: This may simply entail
that the salesperson who is the touch point will initiate the process of learning who the
customers are, and where they are located. This will require more complex information
on the product the customer is buying. Companies that implement a CRM system adhere
to a customer-centric focus or model. Under this philosophy, the pharmaceutical
company will customize its product and service offering based on data generated through
interactions between the customer and the company. This philosophy should transcends
all the functional areas of the pharmaceutical firm (production, operations, accounting,
etc) producing an internal system where all decisions and actions of the company are a
direct result of customer information. A customer-centric pharmaceutical firm should
build its system on what satisfies and retain valuable customers, while learning those
factors that build long-lasting relationships with those customers. For example, before
launching any of its products, pharmaceutical firms should explore the efforts of the
motivated salesperson to amass a strong database of interested customers. In addition to
potential customer contact information, the database should contain information on those
features, options, and styling characteristics that consumers would want built into the
product.
Not only will this information be necessary for the success of the pharmaceutical firms,
but the direct interaction between the customers and the motivated salespeople is equally
required in shaping the products. The efforts of the salespeople are important to
understand their customers’ needs and expectations, in order to negotiate with them for a
mutually satisfying commitment for product and service delivery. Salespeople know they
can make feceible commitments to customers because they alone, are mostly accountable
for fulfilling their end of the bargain. This, in turn, will allow the salespeople to develop
lasting relationships with customers’, learn more about them, and generate repeat
business. CRM should be a company – wide process that focuses on learning, managing
customer knowledge, and empowerment.
A customer-centric pharmaceutical form should encourage the efforts of its salespeople
to continually learn from customers about ways to enhance its product and service
offerings. Learning in a CRM environment is normally an informal process of collecting
customer information through customer comments and feedback on product or service
performance. For example, May and Baker, learned from its customers that they were
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experiencing difficulties with their product packs. They responded with a simpler and
more efficient packaging design that allowed customers to disassemble the packaging
material in an easy procedure. Each functional unit of a business usually has its own way
of recording what it learns and perhaps even its own customer information system. The
disparate interests of departments make it difficult to pull together, learned customer
information into one place, using a common format. To overcome this disparity,
pharmaceutical companies operating in a CRM mode should use knowledge
management. Knowledge management should be a process by which learned information
from customers is centralized and shared in order to enhance the relationship between
customers and the pharmaceutical organization. Table 4.2 suggests that the information to
be collect should include experimental observations, comments, learned lessons,
conclusions, and qualitative facts about the customer. All these should be formatted so
that the information can be disseminated and shared throughout the entire organization.
Each salesperson should record customer comments about relevant issues in a central
system. This information should be reviewed by marketing, dealer relations, customer
service, and perhaps most important, manufacturing and new-product development
managers. The salespeople should be used to identify customers’ problems and
complaints in the field that can be addressed with product changes or modification.
Table 4.3 suggests the need to delegate relevant authority to salespeople to solve
customers’ problems in the field. According to Dhar and Glazer (2003:86-92), such
empowerment refers to the latitude organizations bestow on their salespeople to negotiate
mutually satisfying commitments with customers (via phone, fax, e-mail, or web
communication, or face-to-face). This study identified interaction as a point at which a
customer and a company’s salesperson exchange information and develop learning
relationships. In a CRM system, where the pharmaceutical company adheres to a
customer-centric focus, the customer, and not the organization, should define the terms of
the interaction. The organizational response should be to design products and services
around the customer’s desired experience. The salesperson should encourage the
customers to define the terms at the time of the interactions. For example, the Kano
customer may want a product just as the Lagos customer may want the same product in a
special colour. The Onitsha customer may want the same product in a special colour and
delivered the next day. The Aba customer may want a price discount from the company
because he or she is buying a large quantity and would also be paying cash on delivery.
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With a CRM system, the company’s salesperson becomes a knowledge worker and has
latitude to make on-the-spot decisions that affect the outcomes of the interaction. In the
above example, the salesperson may determine that the Kano, Lagos and Aba customers
can be accommodated, but that Onitsha customer cannot be helped because the special
colour is out of stock and cannot be delivered the next day. Thus during the interaction,
the company’s salesperson will focus on each individual customer and his or her
requests; the salesperson is also concerned with achieving negotiations that will result in
a mutually satisfying commitment and with learning from each interaction to create
profitable, lasting relationships. Figure 5.5 clearly suggests that the success of CRM –
building lasting and profitable relationships – can be directly measured by the
effectiveness of the interaction between the customer and the organization’s salespeople.
In fact, what further differentiates CRM from other strategic initiatives, such as one-to-
one marketing and market development, is the organization’s salespersons’ ability to
initiate and management interactions with its current customer base. The more latitude
(empowerment) a company gives its salespeople, the more likely the interaction will
conclude in a way that satisfies the customer.
Determining the level of interaction with the current customer base: Once the
pharmaceutical company identifies its customers and its popular products and services, it
then determines the level of interaction each customer has with the company. The firm,
for example should determine how frequently each customer interacts with the company,
and the channel used for the interaction (e.g. sales office, telephone call center, web, etc).
The model of figure 5.5 suggests that the interaction between the customer and the
salesperson is the foundation on which CRM system is built. Only through effective
interactions can organizations learn about the expectations of their customers, generate
and manage knowledge about them, negotiate mutually satisfying commitments, and
build long-term relationships (Mohan, 2000:5-28). Following a consumer-centric
approach, an interaction can occur through a formal communication channel, such as a
phone or salesperson; through a prenous relationship a customer has had with the
organization, such as a past purchase or a response to a marketing research request; or
through some current transaction by the customer, such as an actual product purchase. In
short, any activity a customer has with an organization, either directly or indirectly
constitutes an interaction.
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Pharmaceutical companies that can effectively manage customer interactions should
recognize that customers should provide data to the organization that can affect a wide
variety of internal and external company. In a CRM system, touch point should be those
areas of a business where customer data are gathered and used to guide and direct the
decision making within that business unit. Touch point should be both internal and
eternal to the company. External touch points should include a customer talking with
salespeople. Data gathered at these external touch points, once interpreted, provide
information that can affect internal touch points. This information can be used to
complete product modification. In addition, customer information of this type can be
directed to multiple internal touch points – marketing research, for developing profiles of
purchasers; production, for analyzing recurrent problems; and accounting, for
establishing cost-control models for sales calls. A single salesperson – customer
interaction can generate multiple indirect interactions across multiple internal touch
points within a given pharmaceutical company. For an effective implementation of a
CRM strategy, this study suggests for an extremely common and almost standard touch
point called the knowledge center. According to Melnyk and Danzler (1996:119-124), a
knowledge center or call center is an organization’s internal operational component that
manages and fulfils customer requests. It is the logistical system that reacts to, monitors,
and controls the interaction between the customer and the organization. Salespeople that
organize the knowledge center should be responsible for obtaining customer information,
evaluating the information, and directing the information to the appropriate department
(touch point) within the pharmaceutical company.
A knowledge centre should be used as a passive means of managing customer
interactions because the customer will call to initiate an interaction. Companies should
use the salespeople to generate customer interactions, even when doing so is becoming
increasingly difficult. Bombarding consumers with unsolicited mailers and surveys that
are sometimes viewed as intrusive should be discouraged, as consumers are more likely
to refuse an opportunity for interaction than to accept. In a CRM system, the objectives
should be to obtain this information in a non intrusive manner and to allow customers
freely to relay information when they want to communicate it, not when the
pharmaceutical firms want it. For effective implementation of a CRM strategy, customer-
centric organizations should implement new and unique interactions specifically for this
purpose, such as web-based interactions, point-of-sale interactions, and transaction-based
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interactions. E-mail addresses and web sites are allowing customers to communicate with
the pharmaceutical companies on their own terms. Instead of wasting time with phone
numbers and mail surveys, pharmaceutical firms should begin to publicize their web sites
as the first touch point for customer interactions. Web users should be encouraged to
purchase their products, input preferential data, and comment on the company’s products.
The salespeople should be encouraged to capture the required data from these web-based
interactions at the knowledge center, compiled, and used to segment customers, refine
marketing efforts, develop new products, and deliver a degree of individual
customization to improve customer relationships.
Figure 5.5 suggests that another method of generating customer interactions should be
through the point-of-sale interaction in retail or wholesale stores. Many point-of-sale
software packages are now encouraging the customers to willingly reveal information
about themselves without feeling violated. This information should be used in two ways:
for marketing and merchandising activities, and for accurately identifying the best
customers and the type of products to keep regularly in stock. The data collected at the
point-of-sales interactions should also be used to increase customer satisfaction through
the development of in-store services and customer recognition promotions. It should
noted that transaction-based interaction differ from other interactions in that they focus
on the exchange of information at the point of the actual transaction. Through the use of
optical scanning technology and product bar codes, in conjunction with the payment
method used by the customer, pharmaceutical firms should be able to create parallel
streams of information on each individual customer, which include their purchases and
profiles.
Acquiring and Capturing customer data based on Interactions: Based on its
knowledge of the customer through the salespeople, and his or her interaction with the
company, the pharmaceutical firm can then acquire and capture all relevant information
about the customer. This exercise should also include measures of customer satisfaction,
response to targeted promotions, changes in account activity, and even movement of
assets. The pharmaceutical firms in Nigeria should try to be one of industry that are
successful in acquiring and capturing relevant data about their customers. Figure 5.5
suggests that vast amounts of data can be obtained from the interactions between the
pharmaceutical firms and its customers. But, in a CRM system, the issue is not how much
data can be obtained, instead it is what types of data should be acquire and how they can
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be effectively used for relationship enhancement in the industry. Thus, before discussing
the types of data to be collected, it is more relevant to understand how the data should be
used in the CRM system. For effective implementation of a CRM strategy in the
pharmaceutical and health care industry in Nigeria, the following guidelines and ground
rules regarding customer data are recommended: (a) the customer, as represented by the
information obtained via the interaction, should take the center stage in the
pharmaceutical firm; (b) customer information should be centralized so that a single
definitive source is established, typically within the knowledge center; (c) information
should be retained beyond the initial contact with the customer and accumulated over the
customer’s entire life span with the organization; and (e) information should define the
product and services the customer desires, and the customer’s preferences for future
products and services, as well as contact methods for future interactions.
These CRM guidelines suggest that specific data about customers should be collected via
interactions and then, once collected, should be used in a capacity that will foster further
relationships through out the entire organization. Figure 5.1 illustrates how these
guidelines operate regarding the collection of customer data. The channel, the transaction,
and the product or service purchased all constitutes external touch points between a
customer and an organization that provide the opportunity for acquiring data from the
customer. Once customer data is collected, the question of which owns that data collected
becomes extremely salient. In its privacy statement, Glaxo-Smithkline Plc declared that it
would never sell information registered at the site, including customer’s names and
addresses, to the third party. For example, when any company file for bankruptcy
protection, the information collected should constitute its asset that would be needed to
be sold to pay creditors. The traditional approach for acquiring data from customers is
through channels. A channel should be a medium of communication through which the
customer interacts with a business at an external touch point. Channels for
pharmaceutical firms should include store visits, conversations with salespeople,
interactions via the web, traditional phone conversations, and wireless communications,
such as cell phone conservations and satellite communications. What is important is the
method of communication used by the customer, and not the data that can be collected
from the channel. In a CRM system, channel interactions should be viewed as prime
information sources based on the channel selected to initiate the interaction, rather than
on the data acquired.
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In the pharmaceutical and health care industry in Nigeria, a transaction when viewed as
an interaction between the company and the customer, presents the opportunity to collect
vast amounts of data about the customer. The company can obtain not only simple
contact information (name, address, phone number), but also data pertaining to the
customer’s current relationship with the organization – past purchase history, quantity
and frequency of purchases, average amount spent on purchases, sensitivity to
promotional activities etc. From the transaction, product usage information can also be
obtained, along with the customer’s preferred channel of contact with the company and
preferred transaction pattern – payment by cheque, cash, and credit or quantity discount.
Pharmaceutical firms utilizing a CRM system should view the transaction as an
opportunity to collect behavioural data on customers. They should request information
pertaining to lifestyles (activities, interests, opinions etc), cultural factors (ethnicity,
religion, etc), and customer life stage (family composition, number and age of children,
children living at home, etc) for the purpose of pricing and customizing its product
packages for its customers. These data should also be used for planning new product
offerings to enhance Brand equity (brand awareness, brand image, brand responses and
brand relationships).
By examining patterns or historical data relating to a customer’s transaction, the
pharmaceutical company can also obtain information about the customer’s profitability,
risk, desirability, and loyalty. Profitability is the actual amount of Naira a particular
customer spends on a company’s product over a specific time period. Risk refers to the
amount of investment required to retain a customer. The higher investment required to
retain a customer, the higher the risk. For example, customers who buy Emzors products
only if Emzor is offering cash incentives would be considered high risk. Without cash
incentive, the probability of these customers buying Emzor products is reduced. These
customers are high risk for Emzor because the company must offer incentives (high
investment) to win their business. In contrast, low-risk customers will periodically buy an
Emzor product regardless of the incentive. Customers who, based on a pattern of current
and past transactions, exhibit low risk and high profitability to the organization are highly
desirable, as are customers who demonstrate high levels of loyalty by purchasing the
same brand consistently over time. The pharmaceutical company should seek to retain
these customers but should choose not to make an effort to retain less desirable customers
who exhibit high risk and low profitability.
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In the pharmaceutical and health care industry in Nigeria, the physical, as the
psychological, consumption of a firm’s product or service should constitute an additional
external touch point for customer interaction. As an interaction point, it should also
represent an opportunity to acquire and capture customer data related to the consumption
experience. The unique dimension of the product or service interaction is that it allows
for the collection of customer data during the actual use of the product. Figure 4.6
indicates that the key customer data can be captured by a motivated salesperson at this
interaction include the various brands and types (variety, quality, design, features, brand
name, packaging and services) the customer consumers. The average length of time it
takes to consume the product along with the volume consumed, the price paid, and the
preferred transaction method can also be obtained. Even more important are data related
to the performance of the pharmaceutical product and the method customers use to report
performance – related issues. Because the interaction is typically initiated by the
customer, these data are extremely valuable for the organization.
Knowledge of what customers need, want, and expect is a central concern of companies
focused on building long-term relationships. Customers may call in to a pharmaceutical
company’s knowledge center requesting information on product warranties, optional
features, guarantees and usage requirements. Once these data are gathered and stored by
the knowledge center, they can be translated into critical information and disseminated
across all areas of the company. It should be obvious at this point that a voluminous
amount of information can be captured from one individual customer across several
external touch points. Multiply this by the thousands of customers across all of the touch
points (both internal and external) within the organization, and the volume of data can
rapidly become unmanageable for company personnel. The large volume of data resulting
from a CRM initiative can be managed very effectively only by a motivated salesforce
and through the use of technology. Therefore, training must be used to upgrade the skill
sets of the salespeople so that they can be able to handle new tools.
Using appropriate technology to store and integrate customer data: Technology
plays a major role in any CRM system implementation. It should be used not only to
enhance the collection of customer data, but also to store and integrate customer data
throughout the pharmaceutical company. Customer data are the actual firsthand responses
that are obtained from customers through investigation or asking direct questions. These
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initial data, which might include individual responses on questionnaire, responses on
warranty cards, or lists of purchases can be analyzed and interpreted for a good decision
making. The value of customer data depends on the use of this critical component of
technology to store the data and the consistency and accuracy of the data captured.
Pharmaceutical companies in Nigeria should take further steps to improve their data-
collection process by using data cleansing and accuracy software such as validity
integrity software. Data cleansing software should be used to check for inconsistencies
and to extract them. It should also be used to organize and streamline the data. Obtaining
high-quality, actionable data from various but complement source should be a focused
key element in effective implementation of a CRM strategy in the pharmaceutical and
health care industry in Nigeria.
Customer data are only as valuable as the system in which the data are strode and the
consistency and accuracy of the data captured. In most cases, customer data gathering can
be further complicated by the fact that the data needed by one unit of the organization,
such as sales and marketing, often are generated by another area of the business or even a
third-party supplier, such as independent marketing research firm. This lack of a standard
structure and interface is pushing many pharmaceutical firms in Nigeria, to rely mostly
on technology to capture, store, and integrate strategically important customer
information. This necessary process of centralizing data in any pharmaceutical firm can
be referred to as data warehousing. Figure 5.5 recommend this informational warehouse
to firms in the pharmaceutical and health care industry in Nigeria, as a central repository
of customer data collection by the organization. The data warehouse should contain data
from various functional areas of the organization that are stored and inventoried on a
centralized computer system so that the resulting information can be shared across all
functional departments of the business firm. The end result of the data warehouse should
be to provide the pharmaceutical company with a system driven toward shared
information.
For an effective implementation of a CRM strategy, all customer data collected through
customer interactions should be stored in the data warehouse. Data pertaining to the
channel, the transaction, and the product or service consumed by the customer should be
structured and categorized in the warehouse and made available to all internal touch
points in the organization. To accomplish these tasks, the data warehouse should contain
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three operational components: an information-access component, a system-management
component, and a customer-initiated component. It is suggested that the information-
access component should provide for the classification of customer data and should
enable every department of the firm to access the data for any specific CRM purpose. The
system-management component should define and interpret the data in a longitudinal
manner, allowing for the storage and structure of all data beginning with the initial
contact made by the customer. The customer-initiated component should be used to store
and categorize data initiated by the customer through various channel contacts. Ranbaxy
is a pharmaceutical firm in Nigeria that can provide an example of how data warehousing
can be used in the pharmaceutical and health care industry in Nigeria. Ranbaxy extracts
customer information from multiple customer touch points, including sources of data on
competition. Its data warehouse maintains a complete historical information base about
its customers, including inforamiton on demographics, where customers live and work,
and complete history of building information. The data warehouse enabled Ranbax to
move from a traditional service-based pharmaceutical company to a customer-centric,
relationship management firm. This enables the firm to examine its offerings on
customer-by-customer basis.
The key to any pharmaceutical firm’s data warehouse should be its ability to respond to
customer-initiated interactions. When a customer accesses its web site, the firm should be
able to provide a customize offering that is based on information previously gathered
about that customer’s need. No matter what channel the customer prefers to sue to
communication with the firm (phone, e-mail, or web) the customer should receive the
same offer. And any additional information obtains through the interaction should be
automatically stored in the data warehouse, and if relevant, the offer presented to the
customer should be able to change to reflect the new information. Figure 5.1 suggests that
data warehouse should be developed by pharmaceutical firms to customize their products
and services according to their customers’ needs and wants. Such attention customer
preferences will help to forge long-term relationships that would benefit both customer
and the company. By combining the wealth of data collected through customer
interactions, pharmaceutical firms in Nigeria can target highly specific customer groups
and offer them finely-tuned products or services. More importantly, pharmaceutical
companies in Nigeria should use their data warehouses to monitor important financial
aspect of the relationship, such as the current and potential value the customer represents
to the organization. Through various predictive modeling techniques, data warehouses
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should be able to generate customer profiles that can categorize customers as either
profitable or unprofitable to the business firm. The pharmaceutical and health care
organizations can then use its information to determine the amount of time and fund
required to build relationships with certain customers and to assess whether this
investment will produce profitable relationships for the company. However, to remain
competitive, pharmaceutical firms should consider adding privacy relationship
management to their business practice.
Analyzing data for profitable and unprofitable segments: Every customer wants to be
a company’s main priority, yet not all customers are equally important in the eyes of a
business pharmaceutical firm. Some customers occupy segments that are simply more
profitable for the pharmaceutical company than others consequently; the company
conducts data mining to determine its profitable and unprofitable customer segments.
Data mining is an analytical process that complies personal, pertinent, actionable data
about the purchase habits of a firm’s current and potential customer. Essential, data
mining should transform customer data into customer information, which consists of data
that have been interpreted and to which narrative meaning has been attached. The data
should be subjected to a pattern-building procedure that profiles customers on variables
such as profitability and risk. Table 4.2 suggests that customers should be categorized as
highly profitable, unprofitable, high risk, or low risk, and these categories should depend
on the customer’s affiliation with the pharmaceutical business firm. As a process strategy,
CRM should attempt to manage the interactions between the pharmaceutical company
and its customers. For effective implementation of this strategy, these organizations
should identify customers who yield high profits or potential profits. To accomplish this
full implementation, significant amounts of data should be gathered from customers,
stored and integrated in the data warehouse and then analyszed and interpreted for
commonalities that can produce distinct homogeneous segments that are different from
other customer segments. Because all customers are not the same, pharmaceutical
companies should develop interactions that target individual customer needs and wants.
Likewise, all customers do not contribute the same or generate the same revenue for the
company. In a CRM framework, data mining is required to identify customers that are in
profitable segment of analysis.
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Pharmaceutical firms in Nigeria should use data mining process to find hidden patterns
and relationships in the customer data that are stored in the data warehouse. It is
necessary to use data mining as a data analysis procedure that would identify significant
patterns of variables and characteristics that pattern to particular customers or customer
groups. Although many pharmaceutical firms in Nigeria have been conducting such
analyses for many years now, but the procedures were normally performed on small data
sets containing few customer respondent records. Today, with the giving development of
sophisticated data warehouses in the pharmaceutical and health care industry in Nigeria,
many respondent records can be analyzed. Special data mining tools have been developed
for the specific purposes of analyzing customer patterns and characteristic relationships
found in these extremely large data sets. Fidson health care has implemented a software
program designed to help the company to deliver the same level of service across all
channels and to tailor promotional messages to customers according to their value to the
company. The program would help the firm to increase the profitability of each customer
by identifying appropriate new products based on a life event. The firm planned to use
the software to develop targeted product pricing and discounts for its most profitable
customers.
Figure 5.5 suggests that data-mining tools should be used to analyze significant
relationships simultaneously among several customer dimensions within vast data
warehouses. The study model recommended that this procedure should be conducted
when the decision maker has limited knowledge of a particular subject. For example, the
management of a pharmaceutical company may wish to identify the attributes of
customers who had the largest business account in the transaction in the previous year.
Data-mining techniques would search the data warehouse, capture the relevant data,
categorize the significant attributes, and form a profile of the high-business account
customer. Two major capabilities associated with data mining are the automated
prediction of trends and behaviours, and the automated discovery of previously unknown
patterns. Data mining should be used to automate the process of finding predictive
customer information in large data warehouses. Questions that traditionally required
extensive hands-on analysis should be answered directly from the data. A good example
of a predictive problem in the pharmaceutical and health care industry in Nigeria is
targeting certain customer groups. Data mining uses information on past customer
behaviours to identify those customers most likely to maximize the return on investment
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from future marketing campaigns. Data-mining tools can be used to sweep through data
warehouses to identify previously hidden patterns of behaviour that normally would not
be recognized. For example, through the analysis of retail pharmaceutical sales data, a
store might identify a pattern of seemingly un-related products that are often purchased
together. Using these techniques, a pharmaceutical company can then strategically
position its products through the retail outlets.
The study model of figure 5.1 strongly suggests that pharmaceutical companies in
Nigeria, operating in a CRM environment should turn to data-mining techniques to build
and enhance relationships with highly profitable customer groups in the industry. They
should use data mining to profile on-line customers and offer them customized packages
on drugs packages. They should offer their products to customers via its websites when
they have known who their customers are and what they want. Pharmaceutical companies
in Nigeria should try to initiate programs to raise awareness of their web outlets and
convert internet traffic to sales. Using a combination of on-line sales data, data obtained
from customer registrations for a sweepstakes, and demographic data provided by a third-
party research firms, these firms should be able to initiate a data-mining program to
identify customers who are also high users of on-line shopping. The procedure should
match customers’ profiles to zip codes, so that when customers visit their websites and
type in their zip code, it can match to their profiles. Automatically, a pop-up widow
would be displayed, offering customize products to specific customer groups. These
techniques would enable the pharmaceutical firms in Nigeria to turn more web visitors
into buyers, thereby increasing per-visit revenue of the firms. Data mining works
effectively through a process known as modeling. Modeling is simply the act of building
a model in a situation where the answer is known and then applying the model to another
situation where the answer is unknown.
In the pharmaceutical and health care industry in Nigeria where an environment of CRM
exists, it is suggested in this study that if the necessary information exists in the data
warehouse, the data-mining process can model virtually any customer activity. In this
sense, they key should be to find relevant patterns. Data mining should be used to build
models that will answer questions using existing information from a data warehouse to
predict future consumer behaviour. The data-mining model should assign each prediction
a score. The score, a numerical value that is assigned to each record in the data
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warehouse, should be able to indicate the likelihood that the customer whose record has
been scored will exhibit the behaviour in question. For example, if a model predicts
customer attribution, a high score indicates that a customer is likely to leave, whereas a
low score indicates the opposite. After a set of customers is scored, the numerical values
are used to selectively target individual customers for a new marketing campaign. A wide
range of pharmaceutical companies in Nigeria are beginning to try the application of
data-mining techniques. SKG-Pharma uses data mining to answer a number of questions
to achieve their marketing objectives. Data-mining technology can be applicable to most
pharmaceutical firms looking to leverage a large data warehouse to better manage their
customer relationship. The findings of this study suggest that the two critical factors for
successful implementation of a CRM strategy with a data-mining are: a large, well-
integrated data warehouse, and a well-defined understanding of how the end result of the
mining activities will be used and leveraged throughout the organization. Customer
information has to be shared across the organization.
Leveraging and disseminating of customer information throughout the
organization: Once the customer data are analyzed, they are assigned interpretative
meaning (i.e. transformed into information) and disseminated throughout the entire
organization. The primary objective of the CRM system should be to spread customer
information across all functional areas of the pharmaceutical firm. This is because the
customer does not interact with only one function of the pharmaceutical company (e.g.
the sales or marketing), but rather with all functions (e.g. operations, production,
accounting, etc). A pharmaceutical firm implementing a CRM strategy should view its
customers comprehensively, understanding that they interact, either directly or indirectly,
with all components of the internal business system from suppliers and manufacturers to
wholesalers and retailers. Data mining identifies the most important (profitable)
customers and prospects. Managers can then design tailored marketing strategies to best
penetrate the identified segments. In the pharmaceutical and health care industry in
Nigeria, this is commonly refered to as leveraging and disseminating customer
information throughout the organization to facilitate the development of a CRM strategy
by enhancing relationship among customers. For example, Neimeth pharmaceuticals
analyzed its recent salesforce activities to improve its targeting of high-value physicians
and to determine which marketing activities would be most effective. Data in this
analysis included competitor marketing activity and information about community
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health-care system. Results of the analysis were distributed to the salesforce via a wide
area network that enabled the sales people to learn the key attributes used by physicians
in selecting pharmaceutical vendors. On-going analysis of the data warehouse enabled the
best practices from throughout the organization to be applied in specific sales situation.
Another good example of leveraging customer information that was discovered in this
study comes from Glaxo-Smithkline that leveraged its vast warehouse of customer
transaction data to identify customers most likely to be interested in a credit or cash
reward program. Using a small test making, the company identified attributes of
customers with an affinity for the new offering program. And when the full campaign
was rolled out, Glaxo-Smithkline had such a high response rate that the costs associated
with the highly targeted mailing campaign decreased by twenty fold. In an attempt to
increase the activity of its direct salesforce, Novartis Pharmaceuticals applied data-
mining techniques to identify the best prospects for its new product introduced in Nigeria.
Using data mining to analyze its current customer base, Novartis pharmaceutical
discovered a unique segment of high-value business prospects. Information associated
with this segment was then applied to a business database provided by an independent
marketing research firm, yielded a prioritized list of business customers across several
states in Nigeria. Roche pharmaceuticals, a large ethical drug producer in Nigeria,
applied data mining to improve the efficiency of its sales process to key distributors in
Nigeria. Using data from information on competitor activities, Roche pharmaceuticals
developed a model identifying the reasons for brand switching behaviour among
consumers. From this analysis, Roche managers developed several unique promotional
strategies to most effectively reach several distinct targeted segments.
These examples have a clear common denominator. In each case, the organization
applied various data-mining techniques to leverage knowledge about its customers
contained in a data warehouse. The information was then disseminated throughout the
appropriate channels of the organizational structure. Indeed, one of the benefits of a CRM
system is this capacity to share information through the organization. Through campaign
management, all functional areas of programs target to its customers. Campaign
management involves concentrating on outbound communications to customers design to
sell a company’s product or service. The design of the campaign is based directly on data
obtained from customers through various interactions. Campaign management includes
monitoring the success of the communication based on customer reactions through sales,
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orders, call-backs to the company, and the like. If a campaign appears unsuccessful, it
should be evaluated and possibly changed in order to achieve the company’s desired
objective. Consider Evans Medicals, for example, who developed three ongoing
campaigns targeted to the highly defined segment of its product consumers. Focusing on
the past experiences, expectations, and requirements as expressed by consumer through
key touch points, Evans medical has designed the three campaigns, which ran
simultaneously in Nigeria. Each campaign was being monitored and evaluated relative to
its success at penetrating the consumer market. The campaign that was most successful
would be continued, while the other campaigns would be modified to achieve more
positive results. The key to successful implementation is how well the campaign
conforms to the expectations of the individual consumer while enhancing the opportunity
for future relationships between the pharmaceutical company and the customer. In a
CRM context, this is known as personalization. Personalization is an attempt to develop
and manage campaigns that meet the individual needs of a company’s most profitable
customer group.
In the pharmaceutical and health care industry in Nigeria, campaign management should
attempt to achieve personalization by developing customized product and service
offerings for the appropriate customer segment, pricing these offerings attractively, and
communicating these offering in a manner that enhances customer relationships.
Customizing pharmaceutical product and service offerings requires managing multiple
interactions with consumers, as well as giving priority to those products and services that
are viewed as most desirable for a specifically designated customer group. Even within a
highly defined market segment, individual customer difference will emerge. Therefore,
interactions among customers must focus on individual experiences, expectations, and
desires. Pricing, distributing, and communicating must be done on a continuous basis and
modified according to the most recent information obtained from customer interactions.
Using information stored in the data warehouse, highly customized, even personalized,
products and services can be developed for customers. Ranbaxy pharmaceuticals
developed technology to customize health-care products for customers. When a customer
visits this website and interacts with the company, he or she is prompted to fill out a
questionnaire that will help the company create a product specifically for that group. The
information is then transmitted to the product development center, which determines
which ingredients should be included in the product, given the customer’s information.
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And once the product is developed, the information from the customer is stored for use in
future interactions.
Shared information from customer interactions can also be used to develop an
individualized pricing plan for each customer group. Fidson health care and other
organizations in Nigeria, with many products ranging from bandages and syringes to test
tubes and Petri dishes to diagnostic imaging equipment and X-ray technology often use
shared information from customer interactions to develop their pricing plan for customer
groups. After physicians have registered with these organizations, they can choose to see
only products that are relevant to their practice. Once they begin to place orders, these
organizations would maintain a real-time listing of all the products each physician or
institution ordered during the previous months, ranked in descending order by quantity
and frequency of purchase. In this process, items purchased most frequently by these
institutions are given a priority pricing policy, allowing deep price discounts if the
institution or physician continues to purchase the item frequently. In a CRM
environment, communication means interacting in a manner that is most effective and
non-intrusive for the customer. For example, in SKG-Pharma, survival is based on
customers repeat purchase. To encourage this behaviour, pharmaceutical companies
should use website to personalize their offerings. For instance, if the system finds that a
member hasn’t logged on to the website for several weeks, it will automatically send that
individual an e-mail encouraging him or her to stay on the plan. A company has to take
time nurturing its customers to develop relationships with them. Pharmaceutical
companies in Nigeria should not be slow to adapt campaign management and other CRM
techniques. Adapting CRM should be a way to better understand and serve customers.
Knowledge center and salesforce automation should form the foundations of a CRM
strategy in the pharmaceutical and health industry in Nigeria. The companies should
structure their sales organization and customer interaction processes so that it can be
tracking customers’ buying patterns and the marketing resources devoted to the customer.
Information collected should be share throughout the marketing and sales divisions to
enable the firms have visibility into their customers’ data. This will enable sales
managers to predict customers’ reaction and respond appropriately to them. The CRM
strategy in the pharmaceutical firms in Nigeria will enable the mangers to classify all
customers in terms of importance to the company. High-value customers would get
weekly calls and visits from a dedicated salesperson, while lower-value customers would
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be contacted by direct methods through the knowledge center. As this is developed, it is
important to emphasize on face-to-face contact and building friendships with the
company customers.
5.7 Salesforce Performance for a CRM Strategy
Figure 5.6: Output Factors of Salesforce CRM Performance
Figure 5.6 suggests that there is a cycle of salesforce motivation for effective
implementation of a CRM strategy in the pharmaceutical and health care industry in
Nigeria. The higher the salesperson’s motivation, the greater the effort resulting in higher
performance. Better performance leads to greater rewards and job satisfaction. The cycle
is completed through higher satisfaction causing still more salesforce motivation. The
model suggest that the effort expended by a salesperson on each task associated with his
or her job will lead to some level of achievement on one or more dimensions of job
performance. These dimensions include total sales volume, profitability of sales, new
accounts generated, customer relations, and product knowledge. It is assumed that the
salesperson’s performance on some of these dimensions will be evaluated by supervisors
and rewarded with one or more rewards. These might be externally mediated rewards like
a promotion or internally mediated rewards such as feelings of accomplishment or
personal growth. A salesperson’s motivation to expend effort on a given tasks, then, is
determined by three sets of perceptions: expectancies, instrumentalities, and valence for
rewards. Expectancies are the salesperson’s perceptions of the link between job effort and
performance. Specifically, expectancy is the person’s estimate of the probability that
expending effort on some task will lead to improved performance on a dimension. The
following statement illustrates an expectancy perception: If I increase my calls on
potential new accounts by 10 percent (effort), then there is a 50 percent chance
(expectancy) that my volume of new account sales will increase by 10 percent during the
exist six months (performance level).
Output Factors of Salesforce Performance
• Sales volume
• Profitability of sales
• New accounts generated
• Customer relations
• Product knowledge
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Therefore, the model shown in figure 5.1 suggests that when attempting to motivate
salespeople, sales managers should be concerned with two aspects of their subordinates’
expectancy perceptions: magnitude and accuracy. The magnitude of a salesperson’s
expectancy perceptions indicates the degree to which that person believes expending
effort on job activities will influence his or her ultimate job performance. Other things
being equal, the larger a salesperson’s expectancy perceptions, the more willing her or
she is to devote effort to the job in hopes of bettering performance. The accuracy of a
salesperson’s expectancy perceptions refers to how clearly he or she understands the
relationship between effort expended on a task and the resulting achievement on some
performance dimension. When salespeople’s expectancies are inaccurate, they are likely
to misallocate job efforts. They spend too much time and energy on activities that have
little impact on performance and not enough on activities with a greater impact. As figure
5.1 indicates, personal and organizational characteristics affect the magnitude and
accuracy of sales people’s expectancy perceptions. Mangers must take these factors into
account when deciding on supervisory policies, compensation, and incentive plans so that
their subordinates’ expectancies will be as large and as accurate as possible.
Like expectancies, instrumentalities are probability estimates made by the salesperson.
They are the individuals’ perceptions of the link between job performance and various
rewards. Specifically, an instrumentality is a salesperson’s estimate of the probability that
an improvement in performance on some dimension will lead to a specific increase in the
amount of a particular reward. The reward may be more pay, winning a sales contest, a
promotion to a better territory, or a commission on sales. As with expectancies, sales
managers in the pharmaceutical and health care industry should be concerned with both
the magnitude and the accuracy of their subordinates’ instrumentalities. When the
magnitude of a salesperson’s instrumentality estimates is relatively large, he or she
believes there is a high probability that improved performance will lead to more rewards.
Consequently, he or she will be more willing to expend the effort necessary to achieve
better performance. The true link between performance and rewards in a pharmaceutical
firm determined by management policies about how sales performance is evaluated and
what rewards are conferred for various levels of performance. These policies may be
inaccurately perceived by the salespeople. As a result, salespeople may concentrate on
improving their performance in areas that are relatively unimportant to management; and
they ultimately may become disillusioned with their ability to attain desired rewards.
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Besides the firms compensation policies, other organizational factors and the personal
characteristics of the salespeople themselves can influence both the magnitude and the
accuracy of their instrumentality estimate.
Valances are the salesperson’s perception of the desirability of receiving increased
amounts of the rewards he or she might attain as a result of improved performance. One
question about valances that has always interested sales managers in the pharmaceutical
companies is whether they are consistent preferences among salespeople in specific kinds
of rewards. Are some rewards consistently valued more highly than others? Historically,
many sales managers and most authors of books and articles on motivating sales people
have assumed that monetary rewards are the most highly valued and motivating rewards
(Vroom, 1964: 119-126). They feel that recognition and other psychological rewards are
less valued and served only to spur additional sales effort under certain circumstances. As
one sales executive remarked in study money isn’t everything, but it’s so far ahead of
what’s in second place that it’s simply no contest as a reward. However, this empirical
study has been conducted also to test whether salespeople typically have higher valences
for more pay than for other rewards. Rather the assumption has been based largely on the
perceptions of sales managers rather than on any evidence obtained from salespeople
themselves.
Surveys conducted among employees in other occupations often find that increased pay is
not always the most highly desired reward but given a salesperson’s expectancy and
instrumentality perceptions and valences for rewards, the salesforce motivation model in
figure 5.1 suggests that one can predict the level of that person’s motivation to expend
effort on specific CRM strategy implementation in the pharmaceutical and health care
industry in Nigeria. To do this, one multiplies the person’s expectancies that the activity
will lead to a given performance on various dimensions by his or her valence for this
performance and then sums across all performance dimensions. The salesperson’s
valence for a particular performance outcome, in turn, is predicted by multiplying his or
her perception of the instrumentality of improved performance on dimension for attaining
rewards by the valence of those rewards for the individual and then summing across all
relevant rewards. Several studies have tested the ability of motivation models such as this
to predict the amount of effort workers will expend on various job activities. The
findings provide positive support for the validity of such expectancy models of
motivation as much as 25 percent of the variation in effort among workers (Melnyk and
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Denzler, 1996: 162-174). However, not much of such studies have been conducted with
salespeople especially in the pharmaceutical and health care industry in Nigeria.
This study model in figure 5.1 suggests that motivation is a good determinant of an
effective implementation of a CRM strategy in the pharmaceutical and health care
industry in Nigeria. Thus it seems very appropriate to use effective salesforce motivation
to predict differences in job performance among salespeople. It is also nice to know that
there is enough evidence in this study model for a valid description of the psychological
process that determine a salesperson’s motivation. However, there is a question of even
greater relevance to sales managers as they struggle to design effective compensation and
incentive programs. The question is how the six principal components of salesforce
motivation – salary compensation, commission incentive, bonus payments, fringe
benefits, recognition of awards for outstanding performance, opportunity for promotion
and advancement – are affected by differences in personal characteristics of individual
salesperson, environmental conditions, and the organization’s policies and procedures.
When placed in the same job with the same compensation and incentive programs,
different salespeople are likely to be motivated to expand widely differing amounts of
effort. This is because people with different personal characteristics have divergent
perceptions of the links between effort and performance (expectancies) and between
performance and rewards (instrumentalities). They are also likely to have different
valences for the rewards they might obtain through improved job performance. The
personal characteristics that affect salesforce motivation include: the salesperson’s
satisfaction with current rewards; demographic variables, job experience, and
psychological traits.
5.8 Salesforce Reward for a CRM Strategy
Figure 5.7: Salesforce compensation for Effective CRM Performance Figure 5.7 indicates that the salesperson’s commitment in the effective implementation of
a CRM strategy in the pharmaceutical and health care industry in Nigeria affects the
rewards the salesperson receives. The relationship between performance and rewards is
Salesforce Compensation for CRM Performance
• Financially based rewards
• Non financial rewards
• Intrinsic rewards
• Extrinsic rewards
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very complex, however. For one thing, there are different dimensions of sales
performance that a firm may choose to evaluate and reward. A pharmaceutical company
might evaluate its salespeople on customer relations, total sales volume, quota attainment,
selling expenses, profitability of sales, new accounts generated, services provided to
customers, performance of administrative duties, or some combination of these. Different
firms are likely to use different dimensions. Even among pharmaceutical firms that use
the same performance criteria, they are likely to be different emphasis. In addition to the
multidimensional character of sales performance, there are a variety of rewards that a
company might bestow for any given level of performance. The figure 5.1 model
distinguishes between two broad types of rewards – extrinsic and intrinsic. Extrinsic
rewards are those controlled and bestowed by people other than the salesperson, such as
managers or customers. These include the six principal component of this study, as show
in table 4.8: salary compensation, commission incentives, bonus payments, fringe
benefits, recognition, and promotion rewards that are generally related to lower-order
human needs. Intrinsic rewards are those that salespeople primarily attain for themselves.
They include such thing as feelings of accomplishment, personal growth, and self-worth,
all of which relate to higher-order human needs. As the model suggests, salespeople’s
perceptions of the rewards they will receive in return for various types of job
performance, together with the value they place on those rewards, strongly influence their
motivation to perform.
A company’s compensation and incentive programmes, along with its selection policies,
training programs, and supervision, can be used by managers to influence and direct a
salesperson’s behaviour in the implementation of a CRM strategy. A major purpose of
any sales compensation program is to influence the salesforce to do what management
wants, how they want it done, and within the desired time. Before a firm’s managers can
design a compensation and incentive page to accomplish this, however, they should have
a clear idea of what they want the salesperson to do. To determine what aspects of job
behaviour and performance, a new or improved sales motivation program should be
designed to encourage; managers should examine three issues. First, they should
determine how their salespeople spend their time on the CRM job. On what functions do
they spend their time? How do they devote to each CRM activities? How well do they
perform on various dimensions, such as total sales volume, sales to new accounts, sales
certain items in line, campaign management, data mining, information dissemination or
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interactive web base with customers? Much of this information can be obtained from job
analyses the pharmaceutical company conducts as part of its salesforce selection
procedures, as well as firm performance evaluation and records. Secondly, managers
should carefully assess the firms marketing and sales objectives, as outlined in the
company’s marketing plan, strategic sales program, account management policies, and
CRM strategy. Some thought should also be given to the order of importance of the
firm’s objectives.
Finally, in view of priorities in the company’s marketing and sales objectives, managers
should determine which selling functions and aspects of sales performance should be
receiving greater attention from the salesforce. The new compensation and incentive
program can then be designed to reward desired activities more strongly, thus motivating
members of the salesforce to redirect their efforts. In terms of the figure 5.1 model, sales
managers must decide which aspects of CRM performance will be given the highest
instrumentalities in the firm’s compensation and incentives program. In the Novartis
pharmaceuticals, for example, management’s primary objectives are to encourage sales of
its new-higher priced line and mix, and to improve customer satisfaction and to improve
customer satisfaction and the profitability of sales. Therefore, the firm’s compensation
system was designed to catter bigger commissions for sales of the new more profitable
drugs than for sales of lower-priced items. Some specific CRM activities and
performance outcomes that a sales motivation program might be designed to encourage
are listed in table 4.5. One common mistake in designing sales compensation and
incentive plans, however, is to rely solely on such plans to motivate salespeople to
perform all the desired functions. Plans that try to motivate salespeople to do too much
things at once tend to be in effective. Which rewards are tied to many different aspect of
CRM performance? The salesperson’s motivation should be used to improve CRM
implementation drastically in any single area, and not to be “watered down”.
Also, when rewards are based on many different aspects of a CRM implementation, the
salesperson is more likely to be uncertain about how total performance will be evaluated
and about what rewards can be obtained as a result of that performance. In other words,
complex compensation and incentive programs may lead to inaccurate instrumentality
perceptions by salespeople. Consequently, most authorities recommend that
compensation and incentive plans link rewards to only two or three aspects of CRM
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performance. They should be linked to those aspects consistent with the firm’s highest
priority sales and marketing objectives. Other aspects of the salesforce’s behaviour and
performance should be directed and controlled through effective ICT training programs
and supervision by field sales managers. As mentioned, all salespeople do not find the
same rewards equally attractive. Sales people may be more or less satisfied with their
current attainment of a given reward, and this causes them to have different valences for
more of that reward. Similarly, people’s needs for a particular reward vary depending on
their personalities, demographic characteristics, and life styles. Consequently, no single
reward–including money–is likely to be effective for motivating all of a firm’s
salespeople. Similarly, a mix of rewards that is effective for motivating a salesforce at
one time may lose its appeal as the members’ personal circumstances and needs change
and as new salespeople are lived.
In view of this, a wise preliminary step in designing a sales compensation and incentive
package is for a firm to determine its salespeople’s current valences for the various
rewards, as is contained in table 4.9 of the principal component extraction that might be
incorporated in such a package. This could be done with a simple survey in which each
salesperson is asked to rate the attractiveness of specific increases of various rewards on a
numerical scale, say from 0 to 100. Also, one of the techniques specifically armed at
assessing a person’s preferences could use, such as conjoint analysis. Today, few
managers actually carry out such surveys when designing motivation programs because
they believe they know their salespeople’s needs and desires well enough. Yet, when
salespeople’s actual valences for rewards have been compared with their managers’
perceptions of those valences, the manager’s perceptions of those valences, the
managers’ perceptions sometimes turn out to be very inaccurate. For example, the
findings of this study shows that top sales executives of the pharmaceutical firms in
Nigeria believed that their recognition program is an important reward in the eyes of their
salespeoples. While those salespeople’s actual valences was discovered when they rated
recognition as the fifth attractive of seven alternative rewards. The findings suggests that
rather than offering rewards that sales managers think their subordinates would find
attractive, it may well worth the time and trouble to conduct a study of salespeople’s
actual valences for rewards before designing a motivation program. These valences could
be seen in the six components loading on variables as show in table 4.9 that accounted for
85.75% of the variation.
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The figure 5.1 model of the study suggests that the total amount of compensation a
salesperson receives affects his or her satisfaction with pay and with the company, as
well as his or her valence for more pay in the future. Thus, the decision about how much
total compensation (base pay plus any commission or bonus) a salesperson may earn is
crucial in designing an effective salesforce motivation program. The starting point for
making this decision is to determine the gross amount of compensation that is necessary
to attract, retain, and motivate the right type of salespeople for effective implementation
of a CRM strategy in the pharmaceutical and health care industry in Nigeria. This, in
turn, depends on the type of sales job in question, the size of both the firm and the
salesforce, and the sales management policies of the company. Average compensation
varies substantially in different types of sales jobs for effective implementation of any
CRM strategy. In general, more complex and demanding CRM strategy implementation
which require salespeople with special qualifications and ICT skill, offer higher pay than
more routine sales jobs. To compete for the best talent, a pharmaceutical from should
determine how much total compensation other firms in its industry or related ones pay
people in similar jobs. Then the firm can consciously decide whether to pay its
salespeople an amount average in relation to what others are paying or to pay above
average. Few pharmaceutical companies consciously pay below average (although some
do so without realizing it) because below – average compensation generally cannot attract
the right level of customer relations talent.
The decision about whether to offer average total pay or a premium level of
compensation depends on the size of the firm and its salesforce. Large firms with good
reputations in the pharmaceutical industry and large salesforces (more than 75 or 100
salespeople) generally offer only average or slightly below average compensation. Such
pharmaceutical firms can attract sales talent because of their reputation in the market
place and because they are big enough to offer advancement into management. Also,
such pharmaceutical firms can hire younger people (often just out of university) as sales
trainees and put them through an extensive training for CRM environment program. This
allows them to pay relatively to gross compensation levels since they do not have to pay a
market place premium to attract older, experienced salespeople. On the other hand,
smaller pharmaceutical firms with salesforces of fewer than 25 people often cannot afford
extensive sales training for CRM programs. Consequently, they must often pay above-
average levels of compensation to attract experienced salespeople from other companies.
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The survey found that pharmaceutical firms with fewer than 25 salespeople paid total
compensation that was about 5 percent higher than the average for other firms in the
pharmaceutical and health care industry in Nigeria.
Some pharmaceutical firms, regardless of their size or position in the industry, follow a
deliberate policy of offering their salespeople opportunities to make very large amount of
financial compensation. The rationale for this policy is that opportunities for high pay
will attract the best talent and motivate members of the salesforce to continue working for
higher and higher sales volumes. This survey revealed that some of these firms would not
care how much they pay their salespeople, as their compensation is tied to their sales
performance and customer relations. Over paying salespeople relative to what other firms
pay for similar jobs and relative to what other employees in the same firm are paid for
non sales jobs can cause major problems, however. For one thing, compensation is
usually the largest element of a firm’s selling costs. Therefore, overpaying salespeople
unnecessarily increases setting costs and reduces the firm’s profits. Also, it can cause
resentment and low morale among the firm’s other employees and executives when
salespeople earn more money than oven top management. It then becomes virtually
impossible to promote good salespeople into managerial positions because of the
financial sacrifice they would have to make. Finally, it is not clear that offering unlimited
opportunities to earn higher pay is always an effective way to motivate continually
increasing selling effort. Need theory, for example, suggests that when salespeople reach
a compensation level that they consider satisfactory, their valences for still more money
are likely to be reduced. Indeed, figure 5.1 suggests that most salespeople tend to work
toward a satisfactory level of compensation rather than to maximize their pay (Maslow,
1970: 119-126; Mc Clelland, 1985: 112-114).
Whereas over paying salespeople can cause problems, it is equally important not to
underpay them. Holding down sales compensation may appear to be a convenient way to
hold down selling costs and enhance profits, but this is usually not true in the long-run
when buying talent in the labour market. For an effective implementation of a CRM
strategy, a company tends to get what it pays for. If poor salespeople are hired at low pay,
the firm is likely to have high rate of turnover in the sales force, with higher costs for
recruiting and training replacements and lost sales and customer services. The three
major methods of compensating salespeople are: straight salary, straight commission, and
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a contribution of base salary plus incentive pay in the form of commission, bonus, or
both. Over the past years in the pharmaceutical and health care industry in Nigeria, there
has been a steady trend away from using both straight salary and straight commission
plans toward combination plans. Today, combination plans are the recommended form of
compensation, for salesforce motivation as indicated in table 4.6. All the three plans have
unique advantages for motivating specific kind of CRM performance under particular
circumstances. Therefore, the advantages and limitations of each type of compensation
plan and the conditions under which each is most appropriate is necessary to be examined
before implementation.
Table 4.8 of Component Extraction and total variance expected shows that salary is a
prime factor for salesforce motivation. A salary is a fixed sum of money paid at regular
intervals. The amount paid to the salesperson is a function of the amount of time worked
rather than any specific performance. Two sets of conditions favour the use of a straight
salary compensation plan. These are when the management wishes to motivate
salespeople to achieve specific CRM objectives other than short-run sales volume, and
when the individual salesperson’s impact on a CRM implementation is difficult to
measure in a reasonable time. The primary advantage of a straight salary is that
management can require salespeople to spend their time on activities that may not result
in immediate sales. Therefore, a salary plan or a plan offering a large proportion of fixed
salary is appropriate when the salesperson is expected to perform many account servicing
or other CRM implementation activities. These may include market research, data
mining, data campaign, customer problem analysis, stocking, or sales promotion. Straight
salary plans are also common in pharmaceutical and health industry where a great deal of
acquiring and capturing customer data based on interaction is acquired as part of the
selling function in Nigeria.
Straight salary compensation plans are also desirable when it is difficult for management
to measure the individual salesperson’s actual impact on leveraging and disseminating
customer information through the organization as it is not directly related to sales volume
and other aspects of performance. Thus, firms tend to pay salaries to their salesforce
when: their salespeople are engaged in CRM activities; other parts of the CRM programs,
such as website interactions and sharing learned information from customers in order to
enhance the relationship between customers and the organization; or in the case of other
parts of the marketing program, such as advertising, or dealer promotions, that are
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primary determinants of sales success, or involving a team multilevel selling efforts.
Straight salary plans have the advantage of providing salespeople with a steady,
guaranteed income. Thus, salary compensation plans are often used when the
salesperson’s ability to generate immediate sales is uncertain, as in the case of new
recruits in a field training program or when a firm is introducing a new product line or
opening new territories.
Finally, salary plans are easy for management to compute and administer. They also give
management more flexibility. It is easy to reassign salespeople to new territories or
product lines because they do not have to worry about how much changes will affect their
sales volumes. Also, since salaries are fixed costs, the compensation cost per unit sold is
lower at relatively high levels of sales volume. But the major limitation of straight salary
compensation is that financial rewards are not tied directly to any specific aspect of CRM
activities. Management should attempt to give bigger salary increases each year to the
good performers than to the poor ones. However, the amount of those increases and the
way CRM performance is evaluated are subject to the whims of the manager who makes
the decision. Consequently, the salesperson is likely to have lower and less accurate
instrumentality perceptions about how much more money he or she is likely to receive as
the result of a given increase in CRM performance, sales volume, profitability, or the
like. In other words, salary does not provide any direct financial incentive for improving
CRM – related aspect of performance. Consequently, salary plans appeal more to security
– oriented rather than achievement-oriented salespeople in the pharmaceutical and health
care industry in Nigeria.
A commission is payment for achieving a given level of performance. Salespeople are
paid for results. Usually commission payments are based on the salesperson’s
performance. However, it is becoming more popular for firms to base commissions on
the profitability of sales to motivate the salesforce to expend effort on the most profitable
products, customers and CRM activities. The most common way of accomplishing this is
to offer salespeople variable commissions, where relatively high commissions are paid
for sales of the most profitable products, accounts and CRM special activities. Likewise,
low rates are paid for sales of less profitable products or to less profitable customers. This
is the kind of commission plan used by Ranbaxy pharmaceuticals. Direct motivation is
the key advantage of a commission compensation plan. Figure 5.1 model suggests there
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is a direct link between sales performance and the financial compensation the salesperson
earns. Consequently, salespeople are strongly motivated to improve their sales
productivity to increase their compensation, at least until they reach such high pay that
further increases become less attractive. Commission plans also have a built-in element
of fairness (if sale territories are properly defined with about equal potential) because
good performers are automatically rewarded, whereas poor performers are discouraged
from continuing the low productivity in the CRM implementation.
Commission plans have some advantages from an administrative viewpoint.
Commissions are usually easy to compute and administer. Also, compensation costs vary
directly with the sales volume. This is an advantage for firms that are short on working
capital because they do not need to worry about paying high wages to the salesforce
unless it generates high sales revenues. On the other hands, straight commission
compensation plans have some important limitations that have caused many
pharmaceutical firms to abandon them. Perhaps the most critical weakness is that
management has very little control over the salesforce. When all their financial rewards
are tied directly to sales volume, it is difficulty to motivate salespeople to engage in CRM
activities that do not lead directly to short-term sales. Consequently, salespeople on
commission are likely to ‘milk’ existing customers rather than work to develop CRM
strategies. They may overstock their customers and neglect customer relations, and
service after the sale. Finally, they have little motivation to engage in market analysis and
other administrative duties that take time away from actual selling activities.
Straight commission plans also have a disadvantage for many salespeople. Such plans
make a salesperson’s earning unstable and hard to predict. When business conditions are
poor, turnover rates in the salesforce are likely to be high because salespeople find it hard
to live on the low earnings produced by poor sales. To combat the inherent instability of
commission plans, figure 5.1 suggests that pharmaceutical firms in Nigeria should
provide their salespeople with a drawing account. Money should be advanced to
salespeople in months when commissions are low to ensure that they will always take
home a specified minimum amount of pay each month. The amount of the salesperson’s
draw in poor months should be subsequently deducted from his or her earned
commissions when sales improve. This will give salespeople some secure salary, and it
will also allow management to have more control over their activities. A problem will
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arise when a salesperson fails to earn enough commissions to repay his or her draw. Then
the person may quit or be fired, and the pharmaceutical company must absorb the loss.
As indicated by the survey results in table 4.6, compensation plans that offer a base salary
plus some proportion of incentive pay are by far the most popular. They have many of the
advantages but avoid most of the limitations of both straight salary and straight
commission plans. The base salary provides the salesperson with a stable income and
gives management some capability to reward salespeople for performing customer
relation services and administrative tasks that are not directly related to short-term sales.
At the same time, the incentive portion of such compensation plans provides direct
rewards to motivate the salesperson to expend effort to improve his or her sales volume,
profitability and customer relations servicing.
Combination plans combine a base salary with commissions, bonuses, or both. When
salary plus commission is used, the commissions are tied to sales volume, customer
relations, or profitability, just as with a straight commission plan. The only difference is
that the commissions are smaller in a combination plan than when the salesperson is
compensated solely by commission. A bonus is a payment made at the discretion of
management for achieving or surpassing some set level of performance. Whereas
commissions are typically paid for each task that is achieved, a bonus is typically not paid
until the salesperson surpasses some level of total sales or other aspect of CRM
performance. When the salesperson reaches the minimum level of performance required
to earn a bonus, however, the size of the bonus might be determined by the degree to
which her or she exceeds that minimum. Thus, bonuses are usually additional incentives
to motivate salespeople to reach high levels of performance, rather than as part of the
basic compensation plan. Attaining quota is often the minimum requirement for a
salesperson to earn a bonus. As indicated in figure 5.1 model, quota can be based on sales
volume, profitability of sales, customer relations, or other account-servicing activities.
Therefore, bonuses can be offered as a reward for attaining or surpassing a predetermined
level of performance on any CRM performance dimensions for which quotes are set.
Indeed, some complex bonus plans use a point system to tie the bonus to the
accomplishment of two or more CRM performance objectives.
Whether base salary is combined with commission payments or bonuses, managers in
pharmaceutical firms must answer several other questions in designing effective
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combination compensation plans. These include: the appropriate size of the incentive
relative to the base salary; whether there should be a ceiling on incentive earnings; when
the salesperson should be credited with a CRM performance and sale; and how often the
salesperson should receive incentive payments. What proportion of total compensation
should be incentive pay? According to McClelland (1998:116), one of the most common
reasons that combination plans are not very effective at motivating salespeople is that the
incentive portion is too small to generate much interest. After study the reasons for the
success or failure of 180 compensation plans, he concluded that if the average successful
salesperson working under a sales incentive plan cannot make at least 25 percent of his
gross earnings as incentive pay in the form of bonus or commissions, the plan will never
be truly successful. The 25 percent figure may be a good rule of thumb, but the actual
ratio of incentive pay to total compensation varies substantially by industry. A manager’s
decision concerning what proportion of the overall compensation package is represented
by incentive pay should be based on the company’s objective and the nature of the CRM
activities. When the firm’s primary objectives are directly related to short-term sales,
such as increasing sales volume, profitability, customer relations, or new customers, large
incentive compensation should be offered. On the other hand, when customer service and
other non sales objectives are deemed more important, the major emphasis should be
placed on the base salary component of the plan. This gives management more control
over the salesforce’s CRM activities.
Similarly, when the salesperson’s interactive skill is the key to successful CRM
implementation, the incentive portion of compensation should be large. However, when
the product has been presold through advertising and the salesperson is largely an order
taker, or when the salesperson’s job involves a large proportion of missionary work, the
incentive component should be relatively small. Some compensation plans impose ceiling
on incentive earnings. This ensures that the top salespeople will not make such high
earnings that it causes low morale among other employees. It also protects against
windfalls – such as at the introduction of successful new products – where a salesperson’s
earning might become very large without corresponding effort. A strong argument can be
made, however, that such ceilings have a bad effect on motivation and dampen the
salesforce’s enthusiasm. Also some salespeople may reach their earning maximum early
in the year and be inclined to take it easy for the rest of the year. As a compromise, one
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authority suggests that it might be acceptable to limit incentive earnings to 100 percent of
base salary. This should give the pharmaceutical firm adequate protection yet offer an
attractive enough opportunity to motivate salespeople. Another way that some functions
of ceilings can be accomplished without arbitrarily limiting the motivation of the
salesforce is for management to protest any new or revised compensation plan before it is
implemented. One way to do this is to apply the plan to the historical CRM performance
of selected salespeople. Particular attention should be given to the amount of
compensation that would have been earned by the best and poorest performers to ensure
that the compensation provided by the plan is both fair and reasonable. Salespeople need
to know what to do to secure rewards. When incentives are based on CRM performance
or other sales-related aspect of performance, the precise meaning of a CRM performance
should be defined to avoid confusion and irritation. Most plans credit a salesperson with a
CRM performance when it resulted to sales. Occasionally, though, crediting the
salesperson with a CRM performance only after it had resulted to sales makes some
sense. Salespeople in the pharmaceutical and health care industry in Nigeria need to have
a clear understanding of its overall reward structure of the organization and what they
specifically have to do to secure the elements in the total package that they find desirable.
5.9 Salesforce Satisfaction for a CRM Strategy
Figure 5.8: Components of Salesforce Satisfaction.
Is it possible to pay a salesperson too much? After a salesperson reaches a certain
satisfactory level of compensation, does he or she lose interest in working to obtain still
more money? Does the attainment of non financial rewards similarly affect the
salesperson’s desire to earn more of those rewards? The basic issue underlying these
questions is whether a salesperson’s satisfaction with current rewards has any impact on
the valence for more of those rewards or on the desire for different kinds of rewards. The
relationship between satisfaction and the valence for rewards is different for rewards that
Components of Salesforce Satisfaction
• Physiological Satisfaction
• Safety Satisfaction
• Social Satisfaction
• Esteem Satisfaction
• Self-fulfilment
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satisfy lower-order needs (e.g. pay and job security) than for those that satisfy higher-
order needs (e.g. promotions, recognition, opportunities for personal growth, self-
fulfilment). Maslow’s theory of a need hierarchy, Herzberg’s theory of motivation and
Alderfer’s “existence, relatedness, and growth theory” all suggest that lower-order
rewards are valued most highly by workers currently dissatisfied with their attainment of
those rewards. In other words, the more dissatisfied a salesperson is with current pay, job
security, recognition, and other rewards related to lower-order needs, the higher the
valence he or she attaches to increases in those rewards. In contrast, as salespeople
become more satisfied with their attainment of low-order rewards, the value of further
increases in those reward declines (Maslow, 1970:119-126; Herzberg, 1966:120-124;
Alderfer, 1972: 136-138).
The theories of Maslow, Herzberg, and Alderfer further suggest that higher-order rewards
are not valued highly by salespeople until they are relatively satisfied with their lower-
order rewards. The greater the salesperson’s satisfaction with lower-order rewards, the
higher the valence of increased attainment of high-order rewards. Perhaps the most
controversial aspect of Maslow’s and Alderfer’s theories is the proposition that high-
order rewards have increasing marginal utility. The more satisfied a salesperson is with
the high-order rewards he or she is receiving from the job, the higher the value he or she
places on further increases in those rewards. The findings of this study have provided at
least partial support for these suggested relationships between satisfaction and the
valence of lower-order and higher-order rewards. Some evidence is equivocal, though,
and some propositions – particularly the idea that higher-order rewards have increasingly
marginal utility–have not been tested adequately. This survey of salesforce motivation for
effective implementation of a CRM strategy shows that salespeople relatively satisfied
with current pay (a lower-order reward) had significantly lower valences for attaining
more pay than those dissatisfied with current pay. Also, salespeople satisfied with their
overall attainment of higher-order rewards had significantly higher valences for more of
those rewards than those dissatisfied with their higher-order rewards. Salespeople
satisfied with their lower-order rewards, however, did not have significantly higher
valences for higher-order rewards, as the theories would predict (Vroom, 1964:62-66;
Herzberg, 1966:120-124; Maslow, 1970: 119-126; McGregor, 1960:102-113;
McClelland, 1985:142-148; Alderfer, 1972:136-138).
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The job satisfaction of salespeople refers to all the characteristics of the job itself that
salespeople find rewarding, fulfilling, and satisfying, or frustrating and unsatisfying.
There seem to be seven different dimensions to sales job satisfaction: the job itself;
fellow workers; supervision; company policies and support; pay; promotion and
advancement opportunities; and customers. Salespeople’s total satisfaction with their job
is a composite of their satisfaction with each of these elements. As figure 5.1 suggests,
the rewards received by a salesperson have a major impact on the individual’s
satisfaction with the job and the total work environment. The seven dimensions of
satisfaction can be grouped, like rewards, into two major components – intrinsic and
extrinsic. Intrinsic Satisfaction in related to the intrinsic rewards the salesperson obtains
from the job, such as satisfaction with the work itself and with the opportunities for
personal growth and accomplishment which the job provides. Extrinsic Satisfaction is
associated with the extrinsic rewards bestowed on the salesperson, such as satisfaction
with pay, company policies and support, supervision, fellow workers, chances for
promotion, and customers. The amount of satisfaction salespeople obtain from their jobs
is also influenced by their role perceptions. Salespeople who perceive large amounts of
conflict in the demands, placed on them tend to be less satisfied than those who do not.
So are those who experience great uncertainty in what is expected from them on the job.
Finally, a salesperson’s job satisfaction is likely to have an impact on the individuals’
motivation to effectively implement a CRM strategy, as suggested by the feedback loop
in figure 5.1. The relationship between satisfaction and motivation is neither simple nor
well understood, though. It is more explored in the discussion of the six principal
companies’ extracted form the loading on variables that accounted for the 85.75 of the
variation in table 4.8.
5.10 Summary and Synthesis of Discussion
The model that is shown in figure 5.1 emerged from this study. It is a salesforce
motivation model on effective implementation of a CRM strategy in the pharmaceutical
and health care industry in Nigeria. The model integrated the work of the motivational
theorists, in particular Vroom, Herzberg, Maslow, McGregor, McClelland and Alderfer.
This model suggests that there is a cycle of motivation required for effective
implementation of a CRM strategy. The higher the salesperson’s motivation, the greater
the effort resulting in higher performance. Better performance leads to greater rewards
and job satisfaction. The cycle is completed through higher satisfaction causing still
more motivation. The implications for sales managers for effective implementation of a
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CRM strategy in the pharmaceutical and health care industry in Nigeria are that they
should: (i) convince the salespeople that they can effectively implement the CRM
strategy by working harder and by being trained to work smarter (e.g. managing
interactions with current customer base; acquiring and capturing customer data based on
interactions; using technology to store and integrate customer data; analyzing data for
profitable and unprofitable segments; leveraging and disseminating customer information
throughout the enterprise. (ii) Convince salespeople that the rewards for better
performance are worth the extra effort. This implies that the sales manager should give
rewards that are valued, and attempt to sell the worth of those rewards to the salesforce.
For example firm should focus on the six principal components that accounted for the
85.75% of the data analysed to motivate their salespeople. They include salary
compensation, commission incentive, bonus payment, fringe benefits, recognition of
awards for outstanding performance, opportunity for promotion and advancement in
career path.
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REFERENCES
Alderfer, C. P. (1972) Existence, Relatedness, and Growth: Human Needs in
Organizational Settings, New York: Free Press. Beckham, J.D. (2009) “Expect the Unexpected in Health Care Marketing Future” The
Academy Bulletin, July: 3. Dhar, R. and Glazer, R. (2003) “Hedging Customers” Harvard Business Review, May:
86-92. Herzberg, F. (1966) Work and Nature of Man, Cleveland: World Press. Maslow, A.H. (1970) Motivation and Personality, New York: Harper and Row. McClelland, D.C. 91985) Human Motivation, Glenview, IL: Scott Foresman. McGregor, D. (1960) The Human Side of Enterprise, New York: McGraw-Hill. Melnyk, S. A. and Denzler, D.R. (1996) Operations Management: A Value – Driven
Approach, New York: McGraw-Hill. Mohan S. (2000) “Beyond CRM: Managing Relational Equity” Marketing Theory (2)
1:5-28. Reinart, W. J, and Kumar V. (2000) “On the Profitability of Long-life Customers in a
Non Contractual Setting: An Empirical Investigation and Implications for Marketing” Journal of Marketing, October, 64: 17-35.
Reinart, W. J, and Kumar V. (2003) “The Impact of Customer Relationship
Characteristics on Profitable Lifetime Duration” Journal of Marketing, July, 6: 77-99.
Urban, G.L (2004) “The Emerging Era of Customer Advocacy” Sloan Management
Review, Winter: 77-82. Vroom, V.H. (1964) Work and Motivation, New York: Wiley.
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CHAPTER SIX
SUMMARY, CONCLUSION AND RECOMMENDATIONS
6.1 Introduction
In this chapter, the summary of findings, conclusion of the study, recommendations as
well as further research needs are presented.
6.2 Summary of Findings
The major findings of the study include the following:
1. Elements of the CRM process are evident in the pharmaceutical and health care
organizations in Nigeria (Table 4.2).
2. Many of the concepts underlying CRM system are not at all implemented in the
pharmaceutical and health care organizations in Nigeria (Table 4.3).
3. Sales people are not involved in the CRM planning process and their interests are
not fully integrated into the system as an alignment of internal organizational
performance management (Table 4.4).
4. Salary compensation, Commission incentive, bonus payment, fringe benefits,
recognition of awards for outstanding performance, opportunity for promotion
and advancement are the major factors that account for salesperson motivation
(Table 4.8).
5. There is a significant relationship between the sales force motivation and CRM
implementation in the pharmaceutical and health care organisation in Nigeria.
(Table 4.11).
The subsidiary findings of the study include the following:
i. The firms do not customize most of their products and service offerings based on
data generated through interactions between the customers and the companies
(Table 4.3).
ii. The firms do not use informal process for collecting consumer data, such as
customer comments and feed back on product or service performance (Table 4.3).
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iii. Most of the learned information from customers are not centralized and shared in
the organisations to enhance their relationship with the customers (Table 4.3).
iv. Authorities are not delegated to sales-people to solve some customers’ problem
quickly-usually by the first person that the customer notifies regarding the
problem. (Table 4.3).
v. There are few points at which a customer and the company’s sales people
exchange information to develop learning relationships.
vi. There are limited areas of business available for the sales people to gather
customers’ data that can be used to guide and direct the decision making within
the pharmaceutical and health care organizations in Nigeria.
vii. The firms do not have internal operational components that can manage and fulfill
customers’ requests; react to, monitor, and control the interaction between the
customers and the organisations (Table 4.3).
viii. Communications between customers and organizations using web vehicles are not
encouraged in the pharmaceutical and health care organisation in Nigeria.
ix. There is no central repository for data from various functional areas of the
organisations for storing and inventorying to enhance the sharing of information
across all functional departments of the firms (Table 4.3).
x. The firms lack data analysis procedures that can identify significant patterns of
variables and characteristics that pertain to particular customers or customer
groups (Table 4.3).
xi. There is no numerical value assigned to each record in the data warehouse of the
firms that indicate the likelihood that the customers whose records have been
scored would exhibit the behaviour in questions. (Table 4.3).
xii. The firms do not develop products or service offerings that are customized for the
appropriate customer segment and pricing and communicating these offerings for
the purpose of enhancing customer relationships (Table 4.3).
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xiii. Most of the firms are not results driven, and have not decided on specific goals
and benefits before attempting to implement the CRM strategy.
xiv. The CEO and senior-level executives of these firms are not committed to
changing the firms to a new focus on customers as the CRM are not
implementation from the top down.
xv. Training to upgrade the skill sets of employees are not company wide, as
everyone do not know that the firms are transforming themselves.
xvi. The organisations do not communicate effectively across functions to solve
customers’ problems, as most of the firms don’t depend on cross-disciplinary
teams that work together.
xvii. Most of the pharmaceutical firms are not streamlined, as they do not have a
calculated focus on the customers that will allow the firms to weed out wasteful
business practices that do not help them better save their customers.
xviii. Some of the firms do not involve end users in creation of their software solutions,
as input from employees, suppliers, distributions, and other partners that would
use the system are not encouraged (Table 4.3).
xix. The firms do not constantly seek improved relationships with customers, as they
don’t often track and measure the result of their CRM strategy (Table 4.2).
xx. The sales force motivation plan has a direct bearing on the effective
implementation of a CRM strategy in the pharmaceutical and health care industry
in Nigeria (Table 4.11).
xxi. Salary compensation, commission incentive bonus payment, fringe benefits and
other non-financial rewards can be used to stimulate the sales force commitment
to a successful implementation of a CRM strategy. (Table 4.8).
xxii. Effective sales force motivation is a critical factor that can be used to direct a
sales force performance in the pharmaceutical and health care industry in Nigeria.
(Figure 5.1).
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6.3 Conclusion
Based on the findings of this research, the following major conclusions are made:
1. Many pharmaceutical and health care organisations are now adopting CRM as a
mission-critical business strategy. The companies are redesigning internal and
external business processes and associated information systems to make it easier
for customers to do business with them. Elements of the CRM process are
becoming more evident in this industry.
2. Many of the concepts underlying CRM systems are not at all implemented in
these organisations, as more sophisticated approaches to data management are yet
to be adopted. They have bought the sophisticated software, but do not have the
culture, structure, leadership, and internal technical expertise to make the
initiative successful. The challenges facing the firms in this industry lied in the
implementation of CRM system.
3. Sales people that have a key role to play in fostering successful relationships are
not motivated in the pharmaceutical and health care organisations. They are
fiercely independent and balk at changing their customer approach substantively.
Sales people are not involved in the CRM planning process and their interests are
not fully integrated into system. They are not fully committed to the successfully
implementation of the CRM strategy in this industry.
4. In alignment of internal organizational performance management issues, salary
compensation, commission incentive, bonus payment, fringe benefits, recognition
of awards for outstanding performance, opportunity for promotion and
advancement are the major factors that accounts for sales person motivation. The
motivational programs are to be integrated with the entire CRM program. A good
motivational program will not compensate for poor recruiting, selection, and
training. Motivational policies are to be a part of a well-planned and executed
customer relationship management program.
5. A close relationship exists between a company’s customer relationship
management planning and its salesforce compensation plan. The compensation
plan has a direct bearing on the successful implementations of the customer
relationship management strategy plan. A straight salary compensation plan
264
would help to implement customer relations, while a stronger incentive perhaps a
large commission incentive- would be necessary for exploring and expanding the
relationships.
Other conclusions drawn from the study include:
i. To get its sales people to aid in successful implementing its CRM strategic plan,
management needs to coordinate its salesforce compensation plans with the
company’s customer relationship management goals. To implement its strategic
CRM plans, management needs to recognise that companies and their market
positions change over time. Consequently, a salesforce motivation plan also
should change to reflect the company’s evolution in its CRM environment. One
type of plan is needed when a firm is just introducing a CRM and wants to reach
and maintain a certain relationship level. Another type of plan will be required
later when this company is realigning territories, introducing new products, and
adding new channels of distribution or new types of middlemen.
ii. Companies are changing the way they do business in the pharmaceutical and
health care industry in Nigeria. Successful firms are focusing on developing long-
term relationships with the customers. Sales efforts are shifting to reflect these
changes; and because sales efforts are changing, compensation plans must be
revised as well. Instead of being rewarded for selling as much as possible and
winning market share, sales people are to be rewarded for building penetration of
each customer, keeping customers longer and increasing the value of each
customer.
iii. A significant factor in salespeople’s evaluation of rewards is whether or not they
feel the rewards are equitable. Salespeople compare their performance and
rewards with those of their fellow salespeople and ask themselves whether they
are being treated fairly. If a salesperson feels that salespeople whose efforts and
performance are not as good as his are receiving greater rewards, he may decrease
his efforts. Rewards perceived to be inequitable are unlikely to be a motivating
force. And there is a strong possibility that where significant inequities are
perceived to exist, salespeople will leave rather than continue to be treated
unfairly.
265
iv. Management polices and programs concerning higher-order rewards such as
recognition and promotion can influence the desirability of such rewards in the
salesperson’s mind. For these rewards, there is likely to be a curvilinear
relationship between the perceived likelihood of receiving them and the sales
person valence for them. If a large proportion of the sales force receives some
formal recognition for achieving a CRM implementation each year, sales force
may feel that such recognition is too common, too easy to obtain, and not worth
much. If very few members receive formal recognition, however salespeople may
feel that it is not a very attractive or motivating reward simply because the odds of
attaining it are so low. The same curvilinear relationship is likely to exist between
the proportion of salespeople promoted into management each year (opportunity
rate) and salespeople’s valence for promotion.
v. Money is a powerful motivator. Many sales people prefer pay raises and cash
incentives over any other type of motivational program. The total amount of
compensation a salesperson receives affects his or her satisfaction with pay and
with the company, as well his valence for more pay in the future. Thus, this
decision about how much total compensation (base pay plus any commission or
bonus) a salesperson may earn is crucial in designing an affective motivation
program for effective implementation of a CRM strategy. A company’s polices on
the kinds and amounts of financial compensation paid to its salespeople are likely
to affect their motivation. When a person’s lower-order needs are satisfied, they
become less important and the individual’s valence for rewards that satisfy such
needs-such as pay and job security-is reduced.
vi. Salespeople thrive on challenge. One way managers can challenge salespeople for
effective implementation of a CRM strategy is by giving them greater
responsibility, authority, and control over their job-related CRM tasks. Doing the
same things over and over again quickly becomes boring to a sales person who is
seeking challenge. If managers vary some aspects of the CRM job, this can
provide a stimulus for increased levels of motivation. Salespeople want to fell that
they are performing a meaningful task that will make a significant contribution to
their companies and to those around them. Managers must make sure that each
266
salesperson understands the importance of his or her contribution to the
company’s performance.
6.4 Recommendation
Based on the findings of this research and the conclusion made, the following
recommendations are made:
1. It is important that pharmaceutical and health care firms decide on specific goals
and benefits before attempting to implement a CRM strategy. They should be
results driven. 2. The implementation of a CRM strategy should be from the top down. The CEO
and senior-level executives of the firm must be committed to changing the firm to
a new focus on customers. 3. Effective implementation of a CRM strategy requires investment in training.
Pharmaceutical firms should nurture customer relationship through their people.
Training must be company wide so that everybody knows that the firm is
transforming itself. Training must also upgrade the skill sets of employees so that
they are able to handle new tools. 4. Effective implementation of a CRM strategy requires cross-disciplinary teams
that work together to solve customer problems. The firms must communicate
effectively across functions. It shouldn’t make any difference whether the
customer interacts with the company directly through the sales force, over the
web, or indirectly through a reseller (or is accessing all of these channels
simultaneously).
5. The firms implementing a CRM strategy should be streamlined. A concentrated
focus on the customers allows firms to weed out wasteful business practices. If
any function or process does not help the firm better serve its customers, it
probably is not necessary. Streamlining should be used to eliminate the need for
costly customization when it comes to creating software solutions.
6. It is important that firms implementing a CRM strategy should involve end users
in creation of software solutions. Inputs firm employees, suppliers, distributors
and any other partner who will use the system is essential. It not only ensures that
267
the system meet the needs of all those who will implement them, but it
encourages everyone to support the transition to customer relationship
management.
7. Periodic measurement of customer satisfaction is important, because a dissatisfied
customer is unlikely to remain loyal to a company over time. By tracking and
measuring results, firms are able to continuously improve relationships with
customers and seek improvement. Satisfaction measures need to be supplemented
with examinations of customers’ behaviour, such as measures of the annual
retention rate, frequency of purchases, and the percentage of a customer’s total
purchases captured by the firm. Most important, defecting customers should be
studied in detail to discover why the pharmaceutical firm failed to produce
sufficient value to retain their loyalty. Such failures should provide more valuable
information than satisfaction measures because they stand out as clear,
understandable message telling the organisation exactly where improvements are
needed. 8. Pharmaceutical firms should institutionalize an organizations internal operational
component that manages and fulfils customer requests, the logistical system that
reacts to, monitors and controls the interaction between the customers and the
organisations, as a standard touch point. They should encourage communications
between customers and organisations using web vehicles, and point-of-sale
interactions. The firms should customize their products and service offerings
based on data generated through interactions between the customers and the
companies. An informal process of collecting customer comments and feed back
on product of service performance should also be encouraged. 9. A central repository for data from various functional areas of the organisation that
are stored and inventoried on a centralized computer system so that the
information can be shared across all functional departments of the firm is
recommended. Also, it is important to have a data analysis procedure that can
identify significant patterns of variables and characteristics that pertain to
particular customer or customers groups in the pharmaceutical organisations. The
firms should develop product or service offerings customized for the appropriate
268
customer segement and then pricing and communicating these offerings for the
purpose of enhancing customer relationships. 10. A numerical value should be assigned to each record in the data warehouse of the
firms that would be indicating the likelihood that a customer whose record has
been scored will exhibit he behaviour in question is required for a successful
CRM implementation. Also needed in the act of building a model in a situation
where the answer is known and then applying the model to another situation
where the answer is known and then applying the model to another situation
where the answer is unknown in the industry. If the necessary information exists
in the data warehouse, the data-mining process should be able to model virtually
any customer activity for the firm. 11. Sales managers should first design a reward structure in which greater rewards are
tied to better implementation of a CRM performance. The evaluation process
should linked to the reward system, and sales managers should make every effort
to keep the process as objective as possible. The goals of a CRM strategy should
be clear concise, and measurable. Every salesperson should be made aware of the
criteria and process that will be used to evaluate them on the CRM
implementation. Sales managers should work with each salesperson on an
individual basis to make sure that he or she has accurate understanding about
what is expected and what the rewards are. 12. Sales managers should convince salespeople that the rewards for better
performance are worth the extra effort. This implies that management should give
rewards that are valued and attempt to sale the worth of these rewards to the
salesforce. In order to be motivated, sales force must believe that the improved
CRM performance will lead to greater sales force rewards in the firm. 13. Sales managers should convince salespeople that they will achieve greater
performance by working harder and smarter in the implementation of a CRM
strategy of the firm. Salespeople must believe that if they expend greater effort, it
will lead to improved performance. If they believed this, they will be motivated to
put forth greater effort. Otherwise, salespeople will not expend that effort
regardless of the potential for reward. In other words, if sales people don’t believe
their additional efforts will make a difference, they won’t try. The accuracy of the
269
sales person’s perceptions concerning effort and performance determines whether
motivation can lead to improved CRM implementation performance. Sales people
must have accurate perceptions of which activities will lead to improved CRM
implementation. Similarly, they must correctly understand the reasons for their
success and failures. Otherwise, it is likely that they will also have inaccurate
perception of the CRM effort/performance link. 14. Sales managers should help their sales people recognise which activities lead to
effective implementation of a CRM strategy. They should help them make correct
attributions for success and failure through training, counseling and day-to-day
coaching. It is also important that attainable CRM goals are set. Management
should get to know what each sales person values and what each one is striving
for. They should be willing to increase the responsibility given to sales people in
the CRM activities. Management should realize that training can improve
motivation as well as capabilities by strengthening the link between effort and
performance. They should provide targets that are believed to be attainable yet
provide a challenge to sales people. They should link the rewards to the CRM
performance they want improved. Management should recognise that rewards can
be both financial and non-financial. More important, sales managers themselves
must understand that encouraging their sales people to work harder is not the only
component to achieve effective better results. 15. Purchasing one CRM software package after another, usually through upgrading,
under the auspices of finding a system that fits to companies need should be
discouraged and the process reversed. Management should involve everyone in
determining is advance what the key desired deliverables are, then purchase the
system that meets these goals. Heavy-duty discussions and formal plans for
organizational change must be in place before the CRM switch is thrown. This
includes change in culture, structure and process. Technology is an enabler of
sales success, not a change agent for a pharmaceutical firm. Cross-disciplinary
teams should be established from the initiation of planning stages for CRM that
require IT and sales managers to work together, as well as other functional players
like marketing, accounting and other sales support. Management should make
initial and ongoing training priority one in implementing a CRM strategy. They
should formalize a system for employee feedback to management on system
270
successes and failures, and especially foster a climate for employees input on
ideas for system improvements. It is recommended that pharmaceutical firms
should institutionalize this through reward systems with payoffs to employees
who help increase the effectiveness of the CRM program.
16. Sales people should be involved in the CRM planning process from day one to
ensure their interests are fully integrated into the system. Sales managers must
make sure that each sales person understands what is expected in a CRM strategy
implementation. Writing clear and detailed job descriptions and letting the sales
force fully participate in setting their own goals are ways of decreasing role
ambiguity and conflict. Sales people who participate in their own target program
are more likely to know what is expected of them and to feel that their goals are
attainable and equitable than those who do not take part in such a program. They
are not likely to be fiercely independent to balk at changing their customer
approach substantively. The importance of having the sales force know what is
expected of them and how to handle various situations goes beyond improved
performance. Figure 5.1 model has demonstrated that when sales people have
clear understanding of their performance higher; their job satisfaction is higher
and their propensity to leave the company is lower.
6.5 Further Research Needs
Some of the principal areas of sales force management in which research is needed are:
1. Assessing company objectives and determining what dimensions of sales
performance to encourage.
2. Linking strategies and sales force role in the era one-to-one marketing.
3. The strategic role of information in sales management for Internet marketing.
4. Sales person performance: behaviour, role perceptions and satisfaction.
271
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Appendix I
Department of Marketing University of Nigeria Enugu Campus March 1, 2010
Researcher’s Interview Guide Hello, my name is Joseph I. Uduji. I am a Ph.D student of the Department of Marketing,
University of Nigeria, Enugu Campus. We are conducting a study concerned with the
impact of a salesforce motivation on effective implementation of a CRM strategy in the
pharmaceutical and health care industry in Nigeria. Would you please take a few minute
to answer some questions? I assure you that your answer will be kept completely
confidential.
1a) Have you ever heard about the term – CRM?___________________________
b) What do you know about the concept of CRM? ________________________
_______________________________________________________________
c) Have your organization considered CRM as its business strategy?
______________________________________________________________
d) What elements of the CRM process are evident in your organization?
_______________________________________________________________
2a) How effective is the implementation of CRM strategy in your organization?
_______________________________________________________________
b) How is customer relationships establish within your
organization?____________________________________________________
c) How does your organization establish and manage interactions with your current
customer base?____________________________________________
d) How do you acquire and capture customer data in your organization?
_______________________________________________________________
e) How do you use technology to store and integrate customer data in your
organization? ___________________________________________________
f) How do you analyse data for profitable and unprofitable segments in your
organization? ___________________________________________________
290
g) How does your organization leverage and disseminate customer information
within itself? ____________________________________________________
3a) Do you consider yourself a motivated salesperson?______________________
b) In your self-assessment, how motivated is your organization salesforce?
_______________________________________________________________
c) What elements of the salesforce motivation mix are evident in your
organization?____________________________________________________
4a) How comfortable are you with your organization’s financially based
rewards?________________________________________________________
b) Would you be more comfortable with your organization’s non financially
rewards?________________________________________________________
c) What conclusion can you draw from your experience of other elements in your
organization’s motivation mix?______________________________________
5a) How effective would you be in the implementation of a CRM strategy if you are
comfortable with the organization’s rewards?_______________________
_______________________________________________________________
b) How ineffective would you be in the implementation of a CRM strategy if you are
uncomfortable with the organization’s rewards?_____________________
______________________________________________________________
c) How do you then explain the relationship between your efforts and rewards in the
organization?_________________________________________________
__________________________________________________________________
____________________________________________________________
Thank you very much for participating in this study. You time and opinions are greatly
and deeply appreciated.
291
Appendix II
Cover letter used with the Questionnaire
Department of Marketing University of Nigeria Enugu Campus March 1, 2010
Dear Sir/Madam,
Research Questionnaire May I request you to complete the attached questionnaire for me. I am a Ph.D student of
the above address, studying the impact of a salesforce motivation on effective
implementation of a CRM strategy in the pharmaceutical and health care industry in
Nigeria, and would like to include your opinions. Since the success of the survey depends
upon the cooperation of all the salespeople who are selected, we would especially
appreciate your willingness to help us in this study.
The information obtained from the study will in no way reflect the identities of the
salespeople participating. Your cooperation, attitudes, and opinions are very important to
the success of the study and will be kept strictly confidential. Your response will only be
used when grouped with those of other salespeople taking part in the study. Your honest
responses are what we are looking for in the study.
Again, let me give you my personal guarantee that we are not trying to sell you
something. If you have any doubt, concern, or question about this survey, please give the
secretary of the marketing department a call on 08033860105.
Thank you in advance, we deeply appreciate your cooperation in taking part in our study.
Sincerely
Uduji Joseph Ikechukwu (PG/Ph.D/08/47289)
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Appendix III
Department of Marketing University of Nigeria
Enugu Campus
Research Questionnaire
Thank you for your participation in this interesting study. Your attitudes, preferences, and
opinions are important to this study; they will be kept strictly confidential.
I. Do you have any customer relationship management (CRM) strategy in place in
your organization? _____________________________________________
II. If yes, how does your organization accomplish its CRM strategy?__________
_______________________________________________________________
III. Please rate the following factors of CRM strategy based on the extent in which it
is performed by your organization, in a scale of answers from 5 = Very High to 1
= Not at all.
Table A: Factors of a CRM Strategy
S/N Elements of the CRM Process in an Organization
5 Very high
4 High
3 Very low
2 Low
1 Not at
all 1. Acquires and captures customer data based
on interaction.
2. Uses technology to store and integrate
customer data.
3. Analyzes data for profitable/unprofitable
segments
4. Pass on information about the customer to
those who need them.
5. Customizes its product and service offering
based on data generated through interactions
between the customer and the organization
6. Centralizes and shares learned information
from customers in order to enhance the
relationship between customers and the
organization.
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7. Delegates authority to solve customers’
problem quickly-usually by the first person
that the customer notifies regarding the
problem
8. Operates a logistic system that reacts to,
monitors, and controls the interaction
between the customer and the organization.
9. Uses web vehicles for communications
between customers and the organization.
10. Operates a central repository for data from
various functional areas of the organization
that are stored and inventoried on a
centralized computer system so that the
information can be shared across all
functional departments of the organization.
11. Develops products or service offerings
customized for appropriate customer
segment and then pricing and
communicating these offerings for the
purpose of enhancing customer
relationships.
12. Designs its program to optimize
profitability, revenue, and customer
satisfaction by focusing on highly defined
and precise customer groups.
IV. Do you consider yourself a motivated salesperson in your organization?
_______________________________________________________________
V. In your self-assessment, how motivated is your organization salesforce?
_______________________________________________________________
VI. Please rate the following motivational tools based on the extent in which it is used
by your organization to motivate its salesforce, in a scale of answers from 5 =
Very High to 1 = Not at all
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Table B: Salesforce Motivators
S/N Elements of Effective Motivation Mix in
an Organization
5
Very
high
4
High
3
Very
low
2
Low
1
Not at
all
1. Salary
2. Commission Incentives
3. Bonus Payments
4. Fringe benefits
5. Recognition of awards for outstanding
performance
6. Opportunity for promotion and
advancement
7. Participative goal setting
8. Praise and encouragement from
management
9. Job enrichment, such as greater
responsibility, authority, and control.
10. Sales training programs, such as ICT,
conferences, seminars and workshops
11. Sales planning elements such as forecasts,
budgets, quotas and territories
12. Sales contests
13. Evaluation of salesperson’s performance
14. Management leadership style such as
organizational structure and
communication
VII. Do you consider yourself effective in the implementation of the CRM strategy in
your organization?______________________________________________
VIII. If no, why?______________________________________________________
IX. Please rate the following statement that best expresses the extent to which you
agree or disagree with the opinion, in a scale of answers from 5 = Definitely
Agree to 1 = Definitely Disagree.
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Table C: Implementation of a CRM Strategy
S/N Statements 5 Definitely
Agree
4 Generally
Agree
3 Somewhat
Agree
2 Generally Disagree
1 Definitely Disagree
1. Adequate salary gives a
salesperson a considerable
degree of effectiveness in
achieving marketing
objectives.
2. Commission incentive is a
strong motivating factor to get
the salespeople to work hard
in acquiring and capturing
customer data based on
interactions.
3. Tying bonus payments to the
accomplishment of sales goals
help the salesforce focus on
long-term customer
satisfaction.
4. Providing fringe benefits
work to increase the
effectiveness of the
salespeople to integrate
customer focus across the
organization.
5. Special recognition awards
encourage salespeople to
achieve such specific goals as
getting new accounts, selling
specific products or relieving
certain over-stocked inventory
positions.
6. Opportunity for promotion
and advancement moves
salespeople to closely monitor
and controls the interaction
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between customers and the
organization.
7. Involvement of the
salespeople in the CRM
planning process from the
beginning ensures their full
interest and commitment
integration in the system.
8. Praise and encouragement
from the management make
salespeople work more hours
in changing the firm to a new
focus on customers.
9. Increasing the level of
responsibility, authority and
control over jobs, help
salespeople to solve
customer’s problem promptly
10. ICT training programs for
salespeople enhance the use of
technology to store, leverage
and disseminate customer
information through the
organization.
11. forecasts, budgets, quotas and
territories ensures that
salespeople focus on highly
defined and precise customer
groups.
12. Salespeople tend to be
motivated if they believe that
their effort to implement a
CRM strategy will bring
results, results will be
rewarded and the rewards are
valued.
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X. Classification Data Section
Now just a few more questions so that we can combine your responses with those of the
other salespeople taking part in this study.
1. Please indicate your gender. Female Male
2. Please indicate your current job status.
Manager and above Below manager
3. Please indicate your current marital status.
Married Single (never married)
Single (widow, divorced, or Separated)
4. In which one of the following categories does your current age fall?
Under 18 18 to 25
26 – 35 36 – 45
46 – 55 56 – 65
66 – 70 Over 70
5. Which one of the following categories best corresponds with your highest
educational qualification?
GCE/WASC/NECO OND/NCE/Equivalent
HND/Degree/Equivalent Post-graduate studies or degree
6. Approximately, how long have you been in the sales job?
Less than 1 year 4 to 6 years 11 to 20 years
1 to 3 years 7 to 10 years Over 20 years
7. Please indicate your current employment status.
Employed full-time Employed part-time
Temporal employment Retired
8. Do you consider yourself a non-union or union worker?
Non-union worker Union worker
9. What is your company?___________________________________________
Thank you very much for participating in this classification data section. Your time and
opinions are greatly and deeply appreciated.