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SALES FORCE AUTOMATION EXPECTATIONS, PRACTICES AND OUTCOMES IN THE SPECIALTY CHEMICAL INDUSTRY: A SURVEY ANALYSIS by Lyle E. Henson

H. PERRIN GARSOMBKE, Ph.D., Faculty Mentor and Chair PERRY HAAN, Ph.D., Committee Member ANNE AUTEN, Ph.D., Committee Member

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Kurt Linberg, Ph.D., Dean, School of Business & Technology

A Dissertation Presented in Partial Fulfillment Of the Requirements for the Degree Doctor of Philosophy

Capella University February 2008

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UMI Number: 3296776

Copyright 2008 by ProQuest Information and Learning Company. All rights reserved. This microform edition is protected against unauthorized copying under Title 17, United States Code.

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UMI Microform 3296776

ProQuest Information and Learning Company 300 North Zeeb Road P.O. Box 1346 Ann Arbor, MI 48106-1346

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Lyle E. Henson, 2008

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ABSTRACT

The purpose of this study was to replicate and expand the study by Erffmeyer and Johnson (2001) where the expectations, practices and outcomes of companies involved in the process of automating the sales process were investigated. In the current study a national sample consisting of subjects from the specialty chemical industry were surveyed concerning the goals and objectives of implementing sales force automation (SFA) in their organization, the factors which lead to a successful implementation and the outcomes resulting from implementing SFA in their

implementation and pre-project communication between IT and the salesforce or between senior

outcome. Additionally a positive correlation was not found between automating the sales process and improved access to information or that high costs would be perceived as a negative outcome automating the salesforce. The results of this study differ considerably from previous research done in this area and suggest that additional future research in this area needs to be conducted.

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managements involvement in the implementation process and a successful implementation

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organization. The current study failed to find a positive correlation between successful SFA

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TABLE OF CONTENTS

LIST OF TABLES CHAPTER 1: INTRODUCTION Introduction to the Problem Purpose of the Study Definition of Sales Force Automation Goals and Objectives of Implementing SFA

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8 9 10 12 12

Outcomes CHAPTER 2: LITERATURE REVIEW Decision to Utilize SFA

Implementation of SFA and Key Success Factors CHAPTER 3: METHODOLOGY Selection of Subjects

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Factors Resulting in a Successful SFA Implementation

21 21 22 26 30 31 32 32

Measure Development

Data Collection Instrument Data Display Data Potential Problems Associated with Method Chosen CHAPTER 4: RESULTS Descriptive Statistics

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Data Analysis CHAPTER 5: DISCUSSION Descriptive Statistics and Comparison with Erffmeyer and Johnson Hypothesis Testing Results and Future Research Research Limitations REFERENCES APPENDICES Appendix A: Data Collection Instruments

39 46 46 50 54 56

62 66 68 70 84

Appendix C: CITI Completion Report Appendix D: IRB Form

Appendix E: Organization / Agency Permission Letter

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Appendix B: Informed Consent Form / Cover Letter

LIST OF TABLES

Table 1: Contributions from Literature Relating to Factors Influencing the Decision to Implement SFA Table 2: Contributions from Literature Relating to Factors Associated with the Successful Implementation of SFA Table 3: Variables Table 4: Frequency of Responses to Survey Questions 19 25 15

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Table 6: Correlation Coefficients (Spearmans Rho) Between Success with SFA and

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All Other Factors

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Table 5: Descriptive Statistics on Response to Survey Questions

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CHAPTER 1: INTRODUCTION

Introduction to the Problem For years, companies have steadily increased their use of technology to streamline the selling process. The use of technology to enhance the sales process includes systems and technologies such as sales force automation (SFA), communication technology and customer relationship management (CRM). These systems have the potential to streamline the selling process, allowing more individual sales to be accomplished by fewer sales representatives,

there are seven basic sales functions where SFA plays a role. These seven functions include

communicating. The goal of SFA is to enhance, support and improve each of these functions. The decision to automate a sales force can be quite difficult, since most centrally controlled SFA systems can cost millions of dollars and take years to set up, making cost justification very complicated (Slater, 1993). The difference between a successful and an unsuccessful experience with SFA in an organization can have far-reaching consequences depending on how the process is planned and implemented. For instance, cost estimates to add technology to the sales process range from $5,000 to $15,000 per salesperson (McCrea, 1998; Hanaman, 2000) depending on the levels of technology implemented. Clearly, the decision to implement SFA involves certain expectations on behalf of the organization. Little research has been done to address what specific goals and objectives organizations hope to achieve by automating the sales process (Rivers and Dart, 1999; Erffmeyer and Johnson, 2001).

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organizing, presenting, reporting, informing, supporting, processing transactions and

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resulting in increased sales and profitability. According to Widmeir, Jackson & McCabe (2002)

Early reports conflict on the success of SFA once implemented (Erffmeyer and Johnson, 2001) with the verdict still out on the usefulness of such projects. While the potential benefits of SFA have been well documented (Taylor, 1993; Verity, 1993) failure rates ranging from 60% (Schafer, 1997; Engle and Barnes, 2000) to 75% (Blodgett, 1995; Engle and Barnes, 2000) have been reported in the literature. One of the primary reasons for such a high failure rate may relate to issues developing during the implementation stage of the project. Of particular interest regarding the implementation of SFA are the factors that seem to correlate to a successful implementation. Organizations appear willing to spend huge amounts of

and Davis, 2000). However, there is little research assessing which factors are critical to assure

could potentially lead to large cost savings and an improved return on investment.

The purpose of this study is to replicate and expand the study by Erffmeyer and Johnson (2001) where the expectations, practices and outcomes of companies involved in the process of automating the sales process were investigated. In their study the authors addressed the following questions:

1. What were the goals and objectives that led to automating the sales process? 2. What were the critical implementation issues? 3. What were the outcomes of automating the sales process?

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an organization will experience successful implementation of SFA. Determining these factors

Purpose of the Study

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money acquiring SFA despite the considerable risk of failure (Rivers and Dart, 1999; Venkatesh

The major limitations to the original study were the sample size, generalizability and bias as a small number of subjects from a single Midwestern state were used to conduct the study. In the proposed study, these limitations will be addressed by expanding the sample size to include a national sample consisting of subjects from the specialty chemical industry. For the purpose of this study, specialty chemical companies are defined as companies that manufacture and/or distribute chemicals, including basic, intermediate and specialty chemicals; petrochemicals; plastic resins and materials used in synthetic fibers; agrochemicals; and paints and coatings.

investigate which factors correlate to successful implementation of SFA. In the proposed study

Research Question 1: What were the goals and objectives of the specialty chemical companies that led to automating the sales process?

H1: There is a positive correlation between the desire to improve efficiency, customer contact and increase sales and the decision to implement SFA. H2: There is a positive correlation between management, sales representatives and clients desire to implement SFA and the decision to implement SFA.

Research Question 2: What factors during the implementation process correlated to successful implementation for the specialty chemical companies? H3: There is a positive correlation between successful SFA implementation and preproject communication between IT and the sales force.

H4: Successful implementation of SFA positively correlates to senior managements involvement in the i

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the author will address the following questions:

In addition to identifying critical implementation issues, the proposed study will

Research Question 3: What were the outcomes of automating the sales process for the specialty chemical companies? H5: Automation of the sales process is positively correlated to an improved access to information. H6: High costs are perceived as a negative outcome of automating the sales force.

The research method that will be utilized in this study will be the qualitative method of utilizing surveys. This particular method is effective for this type of research, as potential subjects are scattered over a large geographical area and the potential subject pool is quite large.

relatively quick manner.

The use of technology in the sales force, known as sales force automation (SFA), including communication technology, software applications and customer relationship management (CRM), has the potential to streamline the selling process, allowing more to be accomplished by fewer sales representatives (Christian, 1959; Comer, 1981; Sengupta, Krapfel & Pusateri, 1994). Many studies have reported the benefits of technology use, which include decreased costs (Taylor, 1993), enhanced communication (Thetgyi, 2000), reduced cycling times (Thetgyi, 2000) and improved organization and access to information (Lejfer, 1999; Flanagan, 1995). Studies have shown that up to 60% of a sales representatives time is spent doing nonselling activities such as traveling, waiting for appointments, processing paperwork and

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Definition of Sales Force Automation

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This method will allow data to be gathered over a large area from a large pool of samples in a

attending meetings (Wedell and Hempeck, 1987). A national survey of salespeople concluded that SFA has become a required way of life in sales (Keilor, Bradshaw & Pettijohn, 1997). SFA has not only become a necessary tool for salespeople in the United States but also an important part of the sales function in Europe (Engle and Barnes, 2000). Yet, it is estimated that for every two successful implementations of SFA, there are three failures (Engle and Barnes, 2000). Another survey conducted showed that immediately after training, sales people had positive perceptions of the newly implemented technology. However, six months after implementation, the technology had been widely rejected and absenteeism and turnover had

raises the question of what sales force technology is found useful. According to Widmeir,

seven functions are: organizing, presenting, reporting, informing, supporting, processing transactions and communicating.

Managing contacts, scheduling sales calls, developing sales plans and planning sales routes can be time-consuming organizational activities that SFA can streamline. Managing contacts can include information about current customers as well as prospects and network channels (Colombo 1994; Petersen 1997). Scheduling is another task that SFA has addressed. The benefits of utilizing SFA to schedule include better time management, and fewer missed appointments and information sharing with management, other salespeople and administrative personnel (Colombo, 1994; Head, 1960). Sales plans for each customer can be generated with automated sales planning software, helping salespeople manage numerous prospects in different stages of the sales process

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Jackson & McCabe (2002) there are seven basic sales functions where SFA plays a role. These

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significantly increased within the sales force (Spier and Venkatesh, 2002). This discrepancy

(Colombo, 1994). Information from sales planning software can be used by management to create sales forecasts and budgets. Automated sales route planning software can calculate an order amount and the route of sales calls to minimize time in front of customers and prospects (Colombo, 1994). Presentations have also been affected by SFA through the creation of portable multimedia tools and customized proposals. Using SFA salespeople can generate customized proposals and presentations, and add colors, pictures, graphs, movies and sound, all making the presentation have a much greater impact on the customer (Andersen, 1993; Jenkins, Elder & Thomas 1999;

road (Jenkins, Elder, and Thomas 1999; Taylor 1993). Laptops also allow traveling salespeople

and reduced cycling time between sales (Jenkins, Elder & Thomas 1999; Petersen 1997; Thetgyi, 2000)

Sales managers can use information contained in sales call, expense and calendar reports to effectively manage salespeople (Columbo, 1994). SFA allows the introduction of standardized forms that can be easily transmitted to the central office, reducing time spent on paperwork and improving the ability of managers to read and analyze data (Colombo 1994; Parathasarathy and Sohi, 1997; Petersen 1997; Rasmusson, 1999). There can also be a downside as automated reporting may lead to a feeling of being monitored by management. Automation may also lead to managers requesting more reports from salespeople leading to a decrease in available sales time (Colombo 1994; Falvey, 1994; Gondert, 1993; Parathasarathy and Sohi, 1997; Rivers and Dart, 1999).

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to quickly and accurately generate proposals with the customer, allowing for greater accuracy

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Koster, 1999; Taylor, 1993). Computers allow salespeople to make powerful presentations on the

SFA has also had an impact on the ability of salespeople to collect, analyze and distribute information concerning prospecting, product information and product-configuration information (Colombo, 1994; Taylor, 1994; Petersen, 1997; Thetgyi, 2000). This technology is commonly referred to as customer relationship management or CRM. CRM systems allow cross-referencing of customers within divisions of a company for greater sales opportunities. Once prospects are identified, information about them can be stored and organized using contact management software and used to customize many aspects of sales calls and continuing relationships (Colombo, 1994; Petersen, 1997; Thetgyi, 2000).

several books worth of product information. Many SFA systems allow salespeople to network

specialists while in the customers office. SFA also gives salespeople the ability to configure products to customers specifications and check the availability and price of any configuration while with the customer. This, in turn, reduces the number of calls needed to make a sale and reduces backorders (Colombo 1994; Taylor 1994; Thetgyi, 2000). SFA has the ability to handle vast amounts of data. How these data are communicated can have a significant impact on how transactions are completed and processed (Watad and DiSanzo, 2000). For example, SFA allows salespeople to satisfy customer needs quickly by obtaining the status of an order in real time. SFA has had a profound effect on inventory control, inventory inquiries and the qualification of customers. One of SFAs largest and most widespread effects SFA is in the ability of salespeople to quickly communicate accurate information (Taylor 1993; Kendall 1997). Pagers, cellular phones

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into home office computers to obtain up-to-date information or communications with technical

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SFA also allows salespeople to carry and maintain compact disc catalogs containing

and Wi-Fi allow sales people to be reached by customers and the home office almost continually. E-mail has resulted in almost instantaneous transmission of text, pictures, sound and video to any networked computer, pager, cellular phone or organizer (Colombo 1994; Jenkins, Elder and Thomas, 1999). In summary, for this study SFA is defined as the automation of manual sales activities through the use of technology (Rivers and Dart, 1999). Further, the various technologies that can be included in this definition range from cell phones, faxes, personal computer, CRM, various software packages, LANS and personal organizers (Collins, 1988; Chonko, Tanner & Smith,

through numerous combinations of hardware and software, this study will use the broad concept

opposed to utilizing a fixed configuration of hardware and software, as the definition of SFA.

Academic research is limited on the topic of organizational goals and objectives that lead to SFA implementation (Rivers and Dart, 1999; Erffmeyer and Johnson, 2001). Further, there is no known research on what factors lead to SFA implementation in the multi-billion dollar specialty chemical industry. Further, it has been noted that buying decisions are often made by individuals with little or no IT expertise, and the contribution to the organizations profitability is usually not tracked or remains unknown (Rivers and Dart, 1999; Erffmeyer and Johnson, 2001). In their limited study, Erffmeyer and Johnson (2001) identified improved efficiencies, improved customer contact, increased sales, decreased costs and improved accuracy as the key

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of using technology to reduce time and improve efficiency in order to increase selling time, as

Goals and Objectives of Implementing SFA

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1991; Rivers and Dart, 1999; Erffmeyer and Johnson, 2001). Though this goal can be achieved

goals that organizations hope to achieve in automating the sales force. Rivers and Dart (1999) indicated that the complexity of the systems involved likely resulted in far greater benefits than simply automating the sales processes. Additional research by Tapscott (1996) suggests that failure to perform a needs assessment prior to implementation will often lead to a reduced level of investment which may result in negative consequences. The limited research to date all points to the importance of the goals and objectives that led the organization to implement SFA. As noted previously, none of these issues have been researched in the multi-billion dollar specialty chemical industry.

Research Question 1: What were the goals and objectives of the specialty chemical companies

H1: There is a positive correlation between the desire to improve efficiency and customer contact and increase sales and the decision to implement SFA. H2: There is a positive correlation between management, sales representatives and clients desire to implement SFA and the decision to implement SFA.

There is limited research to date that focuses on factors that determine the success of SFA implementation. Several researchers have shown that there is a link between the pre-project communication that exists between IT departments and sales departments (Christenson, 1992; Rivers and Dart, 1999; Erffmeyer and Johnson, 2001). Additionally, some research has shown

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that led to automating the sales process?

Factors Resulting in a Successful SFA Implementation

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there may be a link between the training received by the sales force during the implementation process and the overall success of the project (Christenson, 1992; Erffmeyer and Johnson, 2001). Others have noted that successful implementation is largely a factor of the attitude the sales force has towards SFA (Parthasarathy and Sohi, 1997; Keller, Bashaw & Pettijohn, 1997; Jones, Sundaram and Chin, 2002). Still others point to the level of upper managements support as an indication of the degree of success of implementation (Rivers and Dart, 1999; Erffmeyer and Johnson, 2001; Speier and Venkatesh, 2002). As noted previously, none of these issues have been researched in the multi-billion dollar specialty chemical industry.

Research Question 2: What factors during the implementation process correlated to a successful

H3: There is a positive correlation between successful SFA implementation and preproject communication between IT and the sales force. H4: Successful implementation of SFA is positively correlated to senior managements involvement in the implementation.

Probably the least predictable aspect of implementing SFA is what outcome the organization can expect. Although SFA will presumably result in improved efficiency, communication and access to information, many researchers have noted a high failure rate that causes many organizations to question the implementation cost and efficiency of such systems (Erffmeyer and Johnson, 2001; Rivers and Dart, 1999; Peterson, 1997; Parthasarathy and Sohi,

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implementation for the specialty chemical companies?

Outcomes

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1997; Schafer, 1997). No research exists today that determines the outcomes of SFA within the multi-billion dollar specialty chemical industry.

Research Question 3: What were the outcomes of automating the sales process for the specialty chemical companies? H5: Automation of the sales process is positively correlated to an improved access to information. H6: High costs are perceived as a negative outcome of automating the sales force.

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CHAPTER 2: LITERATURE REVIEW

Decision to Utilize Sales Force Automation The benefits of SFA are becoming increasingly obvious. In 1992 over a billion dollars was spent on such systems in the United States (Parathasarathy and Sohi 1997). Increasing numbers of companies are adopting SFA systems to gain an advantage in a highly competitive global marketplace. This process typically involves two steps. First, the organization decides to adopt SFA. Implementation is the second, lengthier step. Both steps can play a critical role in the

The decision to automate a sales force can be quite a difficult one, since most centrally

Complicating the situation, SFA systems consist of computer-based equipment, which can become rapidly obsolete. There is, therefore, a substantial continuous expense to keep systems up to date over the years. In addition to the difficulty of measuring short-term benefits, factors affecting the decision to automate include the competitive environment, communication patterns within the industry and organizational characteristics (Parathasarathy and Sohi, 1997). Most firms adopting SFA are likely to be comparatively large, resourceful firms operating in an oligopolistic environment (Parathasarathy and Sohi, 1997). This common characteristic may be attributed to the nature of the marketplace and the relative cost of SFA systems. In an oligopolistic market, firms tend to offer similar products at a similar price via similar marketing strategies. In such a market, a firm introducing SFA may realize a competitive advantage over its competitors through reduced costs, increased information processing and

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controlled SFA systems can cost millions of dollars and take years of invested time to set up.

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success of SFA implementation (Parathasarathy and Sohi).

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enhanced customer retention. SFA may also provide an additional barrier to entry of new competitors into the marketplace, making SFA implementation attractive (Parathasarathy and Soli). Research suggests that organizations are more likely to adopt an innovation such as SFA when it is integrated into the external information environments. Thus, organizations with a communication link that looks outward from their own industry to other industries for information are more likely to be innovators within their own industry with respect to the adoption of new technologies (Kimberly, 1978).

about innovations from third parties or by observations. Communication may include

Roberts, 1991). Firms that have communication links with firms in other industries will have quicker access to information about new innovations and would consequently be earlier in adopting innovations such as SFA into their sales force (Midgley, Morrison & Roberts, 1991). Organizational characteristics can facilitate the adoption of certain types of innovation. SFA systems depend on organizational standardization in order to achieve productivity gains, because SFAs value is tied to the standard hardware, the standard software and the standard training that must be associated with such a system if it is to be used by a large sales force. Therefore, large centralized organizations are more likely to adopt technological innovations for their sales forces than small non-centralized ones (Midgley, Morrison & Roberts, 1991). Organizational complexity may also promote the adoption of innovations such as SFA. Complex organizations are more likely to have specialized wings dealing with specific areas of operation.

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information from suppliers, customers, consultants or industry groups (Midgley, Morrison &

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Firms within an industry will try to find ways to outdo other firms and gain information

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These wings are more likely to be aware of and open to new technological innovations, including SFA. An organizations decision to adopt SFA may be enhanced when the firm is part of a well-coordinated vertical marketing system that permits information flow between the various channel members (Robertson and Gatignon, 1986; Kimberly, 1978). This is due to the fact that an integrated SFA system can provide information that can enhance the performance of the entire vertical system and not just one of its members. As a result, some cost advantage may also result if many entities make use of a single SFA system.

that have previously adopted computer technology for other functions in the organization are

large percentage of employees have previous experience with similar innovations, they may be more open to the adoption of the innovation under study. Previous staff experience with SFA may lead to earlier adoption by the organization. However, once the decision has been made by an organization to adopt SFA, the technology still needs to be accepted and utilized by the individual salesman for the investment to pay off. A summary of reasons from the literature supporting the decision to implement SFA can be found in Table 1.

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more open to the adoption of laptop computers and associated systems for their sales force. If a

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Previous experience with innovation may hasten the speed of adoption. Organizations

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Table 1.

Contributions from Literature Relating to Factors Influencing the Decision to Implement SFA

SFA research demonstrates that while some salespeople may be more willing and able to make full use of a newly implemented SFA system, others will reject the new system, leading to under-utilization of SFA capabilities and poor return on investment. Therefore, an important component in successful implementation will be early identification of both employees who will most likely accept and fully utilize the new system and those likely to resist it (Rogers, 1983). Non-monetary costs of adoption; personal, demographic and environmental factors; and interpersonal communication have all been shown to affect utilization of the system by individual salespeople (Midgley, Morrison & Roberts, 1991; Rogers, 1983). Adoption of SFA is a double-edged sword for most salespeople. On the one hand, SFA implementation has demonstrated improved efficiency and productivity that leads to more potential sales. On the other hand, adoption may involve substantial non-monetary costs. These 15

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Implementation of SFA and Key Success Factors

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Authors Parathasarathy and Sohi, 1997 Parathasarathy and Sohi, 1997 Kimberly, 1978; Midgley, 1991 Midgley, 1991 Robertson and Gatigon, 1986; Kimberly, 1978 Erffmeyer and Johnson, 2001

Summary Large firms that operate in an oligopolistic environment are good SFA candidates. SFA can provide an entry barrier to new competitors. SFA is well-suited for companies with communication links seeking information from other industries. SFA works well for large centralized firms. SFA fits well with organizations containing a well-coordinated vertical marketing system with good information flow between channel members. Improve efficiencies, improve customer contact, increase sales, decrease costs