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Couple competitive analysis to sales force decisions
Couple Competitive Analysis to Sales Force Decisions Daniel C. Smith John E. Prescott Current approaches to competitive analysis typically provide information that is too general to be integrated into sales management decisions. This paper presents an approach to competitive analysis which uses customer evaluations of competing suppliers to generate intelligence that is tailored to the needs of sales managers. The proposed framework was developed throughjeld research which involved nine d#erent companies and selling situations. A case example is used to illustrate concepts central to the implementation of this approach.
INTRODUCTION The periodic assessment of a sales force is at the foundation of many sales management decisions. The outcomes of this process can provide guidance to sales managers in recruiting, training, evaluating, and compensating salespeople; designing sales territories; and deploying the sales force to territories and accounts. To be truly effective, a sales force analysis should be based on information about the sales force characteristics of key competitors. Sales force strengths and weaknesses are Address correspondence to Daniel C. Smith, Graduate School of Business, University of Pittsburgh, 259 Mervis Hall, Pittsburgh, PA 15260.
Industrial Marketing Management 16.55-61 (1987) 0 Elsevier Science Publishing Co., Inc., 1986 52 Vanderbilt Ave., New York, New York 10017
rarely universal; rather, they are interpretable only in terms of the strengths and weaknesses of specific competitors. While most sales managers express an interest in obtaining competitive intelligence, few firms collect such information in a systematic fashion and even fewer advance the analysis beyond a superficial level [5, 7, 81. Moreover, in firms which do engage in competitive analysis, the data are typically gathered to provide input to broad strategic decisions. Consequently, even if competitive intelligence exists within an organization, it is often too general to be readily integrated into sales management decisions. This article presents a customer-based approach to competitive analysis which has been developed through field research that involved nine different organizations and selling contexts. The proposed approach utilizes customer evaluations of competing suppliers to generate intelligence which is tailored to the unique needs of sales managers. While profiles of sales force strengths and weaknesses are the primary output of customer-based competitive analysis, it also provides sales managers with three additional benefits: (1) an “early warning” system that is capable of detecting emerging problems before they are reflected in financial performance, (2) a systematic approach to evaluating the effectiveness of changes 55 0019.8501/87/$3.50
in sales strategy, and (3) a method for assessing the impact changes in a competitor’s strategy had on other firms in the market. A case example will be used to illustrate concepts central to the implementation of customer-based competitive analysis.
explanations for the change in performance, the national sales manager decided to engage in an extensive analysis of customer perceptions of product and sales force performance. The investigation followed the four steps outlined in Figure 1.
A customer-based competitive analysis is conducted in four steps. A FRAMEWORK FOR CUSTOMER-BASED COMPETITIVE ANALYSIS As illustrated in Figure 1, customer-based competitive analysis is conducted in four steps: 1) definition of primary and secondary competitors, 2) identification of criteria used by a particular customer segment to select alternative suppliers, 3) evaluation of criteria importance and competitor performance, and 4) evaluation of sales force strengths and weaknesses. The activities involved at each step are summarized in Figure 1 and will be discussed through the use of a case illustration. The case involves the Industrial Water Treatment Division of a Fortune 500 manufacturer of industrial chemicals and took place over a 4 month period in 1985. To maintain confidentiality, the firm will be referred to as Chemtech. All data have been disguised.
CASEBACKGROUND Following an extended period of steady growth, sales in the Canadian market were beginning to decline. The fact that this condition occurred while industry demand was experiencing considerable growth created great concern among the marketing staff. In an attempt to surface
DANIEL C. SMITH is a doctoral candidate and JOHN E. PRESCOTT is an Assistant Professor in the Graduate School of Business at the University of Pittsburgh.
56
Step One: Identification of Primary and Secondary Competitors The set of competitors faced by a firm can be expected to vary across market segments and geographic regions. As such, multiple data sources such as personal interviews with customers, distributors, and sales people in each territory should be accessed when defining the body of relevant competitors. Once a general group of competitors has been identified, the distinction between primary and secondary competitors can be made based on the answers to the following two questions: (1) which firms will be most affected by changes in our sales strategies? and (2) which firms have the greatest potential for affecting the outcomes of changes in our sales strategies? In the Chemtech case, competitors were identified through semistructured telephone interviews with individuals involved in purchasing water treatment chemicals (WTC) in each of the three market segments served by Chemtech (i.e., steel manufacturers, pulp and paper producers, and electric utilities) and in three broadly defined sales territories. A total of nine such interviews were conducted. Respondents were asked to provide the names and suppliers of WTC in their particular regions. It was found that Chemtech competed with three other firms in all geographic regions and in all three market segments. Additionally, two general types of secondary competitors were identified. The first type was characterized by a national presence but focused on serving a particular market segment. The second type served all three market segments but operated within a limited geographic territory. These findings were confirmed through interviews with sales people in each territory.
Definition of Competitors
step
I
Identlficatlon of Supplier Selection Criteria
step
FIGURE I.
Step Two: Identification Criteria
+
Evaluation of Critena +Importance and Competitor---, Performance
II
step
III
p/
step IV
A Framework For Customer-Based Competitive Analysis
of Supplier Selection
Supplier selection criteria represent the attributes of the total product offering that customers use to evaluate a set of competing suppliers. Selection criteria are not limited to tangible features such as product performance, price, and follow-up service. They also include a wide array of intangible features such as the professionalism, product knowledge, and empathy displayed by the sales force; the availability of product-related information; and the overall reputation of the supplier. The criteria associated with the selection of a supplier of water treatment chemicals were elicited through the telephone interviews described in Step One. Given that Chemtech’s sales manager had no a priori explanations for the decline in sales, criteria related to both the product and the sales force were obtained. It was believed that there were no substantive problems with the physical product. There was a concern, however, that customer perceptions of product benefits were not accurate. The inclusion of product related criteria would allow for the identification of such problems which could, in turn, be dealt with through the modification of the salesperson’s presentation. A content analysis of the interviews resulted in the identification of eight unique selection criteria: 1. Technological progressiveness: the extent to which a firm is recognized as being a leader in introducing new products to the marketplace. 2. Technical support: the extent to which the salesperson is available to answer questions concerning the actual application of the product. 3. Technical competency: the extent to which the salesperson is knowledgeable about the benefits of the product. 4. Need sensitivity: the extent to which the salesperson displays empathy and a customer “problem solving” orientation. 5. Punctuality: the extent to which the sales person is on time for scheduled appointments.
6. Availability: the frequency of routine visits a salesperson makes on a current or potential account and/or the ease with which the sales person can be contacted. 7. Product pegormance: the extent to which the product meets performance expectations. 8. Product-related information: the extent to which the salesperson makes available printed information related to product specifications and applications. These criteria were subsequently confirmed through interviews with salespeople and the national sales manager of Chemtech. Step Three:
Evaluation of Criteria Importance and Competitor Performance
While the types of supplier selection criteria tend to be relatively constant within a product class, the importance of each criterion often varies considerably across types of buyers. Both criterion importance and competitor performance can be readily obtained through survey research. In the case of Chemtech, data on which the analysis of criteria importance and competitor performance are based were gathered through a national mail survey of purchasing agents. The sampling procedure involved drawing every fifth name from a directory of industrial purchasing agents in Canada. The first respondent was selected randomly from the first five names in the directory. The sample was subsequently refined to include only those purchasing agents in Chemtech’s three principal markets. The final sample consisted of 186 purchasing agents. In an attempt to improve the response rate, the purchasing agents selected were contacted by telephone and informed of the study prior to mailing the questionnaire. A total of 132 usable questionnaires were received for a response rate of 71%. The distribution of the sample across the three industry segments closely approximated that of the population.
57
The importance ascribed to each selection criterion was measured by asking respondents to rate each criterion in terms of its importance in determining the selection of a supplier of WTC. Responses were recorded on 7 point ‘ ‘not important/very important” scales. The performance of competitors on each criterion was measured on a 10 point “poor” to “excellent” rating scale.
Step Four: Evaluation of Sales Force Strengths and Weaknesses The strengths and weaknesses of a firm’s sales force are determined by integrating criterion importance with the firm’s relative competitive performance on each criterion. A measure of relative competitive performance is obtained by calculating the difference between a firm’s performance on each criterion and that of each competitor. Given these two measures - importance and relative performance - two primary types of analyses may be considered. ’
Relative measured between criterion
Postscript When presented with the final report, the sales manager of Chemtech explained the findings in terms of the recent growth strategy of the division. Specifically, the volume
competitive performance is by calculating the difference a firm’s performance on each and that of each competitor.
The first type of analysis utilizes the importance and performance measures to construct a matrix of major and minor strengths and weaknesses. Major sales force strengths (weaknesses) consists of those criteria judged to be highly important and on which the referent firm (i.e., the firm conducting the analysis) performed at a level significantly above (below) that of the competitor considered. Minor strengths and weaknesses are defined in a similar fashion based on selection criteria of lesser importance. As illustrated in Figure 2, relative to Competitor A, Chemtech’s primary strengths reside in the general technological progressiveness of the firm and the technical competence of its sales force. However, these strengths are offset somewhat by problems in the areas of sales‘A third type of analysis which provides a measure of overall competitive advantage is presented in the Appendix.
58
person availability and the extent to which members of the sales force express a sincere concern for solving customer problems. The second type of analysis utilizes the procedure described above but is conducted for relevant customer subgroups. For instance, by constructing the importance/performance matrix based only on survey respondents who represented current accounts of key competitors, Chemtech was able to identify specific areas where their three primary competitors were the most vulnerable. Since these findings were available at an individual account level, it was possible for the sales force to tailor their presentations to competitor accounts to take advantage of an area’s customer dissatisfaction.
of WTC purchased per account has tended to be relatively stable; therefore, sales growth had to be generated by increasing the number of accounts served. As such, an incentive system was established to encourage the generation of new accounts. The aggressive pursuit of new accounts not only reduced salesperson availability, but also provided little motivation to engage in problem solving research with existing accounts. Corrective programs are now being implemented. Using the initial findings as benchmarks, the 4 step procedure discussed in the case will be applied to evaluate the effectiveness of these changes.
PITFALLS TO AVOID While the activities involved in implementing customer based competitive analysis are relatively straightforward,
RELATIVE Not
PEKFORMANCE
Favorable
Favorable -2
-I
0
+2
+1
High c* E* A*
F
i-J* Major Weaknesses
Major Strengths IMPORTANCE H
Minor Weaknesses
Minor Strengths B* G LOW
FwRE 2. Competitive Performance/Criterion Importance Matrix, Competitor evaluated: Competitor A; market segment: total sample. Calculated as the difference between Chemtech’s performance and the performance of competitor A on each criterion. *: statistically significant difference (t-test) at p < .05. Key: selection criteria: A = Technological progressiveness B = Technical support C = Need sensitivity D = Technical competence of the sales force E = Sales person availability F = Product performance G= Product-related information H = Punctuality
they are not without their potential pitfalls. Some of the more prevalent ones which have been encountered in the field studies on which this approach is based include the following: 1. Uninformedlmisinformed salespeople. Successful application of competitive analysis mandates that sales managers clearly communicate the objectives and desired outcomes of the investigation to the sales force. Failure to do so often results in the perception that the research is a “headhunt” in disguise. 2. Overconcern with style. Too often individuals in-
volved in the conduct of competitive analysis allow form to dominate substance in the presentation of findings. It is critical to remember that the focus of analysis is on obtaining actionable information. The usefulness of the findings can be enhanced dramatically through ongoing interaction between researchers and end-users of the information at all stages of the process. 3. Omission of key competitors. Competitors should not be defined too narrowly. Indeed, it is often worthwhile to include suppliers of potential substitute products (e.g., steel versus plastic) within the domain of relevant competitors. 4. Diminishing returns to information. Be aware of information costs. The focus of competitive analysis should be on generating information which is relevant to improving sales force performance. The key to avoiding inefficiencies lies in the answer to the question, “What would we do differently if we had a certain piece of information?” If the answers are slow to emerge, the information probably will be of limited value. 5. Unsystematic dissemination of results. Upon completion of the analysis, the findings should be disseminated in a manner which facilitates use. One approach which has proven to be highly effective involves the conduct of regional meetings or retreats in which sales managers present the findings to their salespeople. The presentation is followed by a “brainstorming” session which focuses on surfacing ways in which the information can be integrated into daily practice.
ADDITIONAL MANAGERIAL AND EXTENSIONS
APPLICATIONS
Sales managers are constantly faced with the challenge of finding ways in which to improve sales force performance. Toward this end, the approach to competitive analysis presented in this paper may be extended and modified
Five pitfalls to avoid
in a number of ways. For instance, in addition to comparing sales force performance to that of a particular competitor, performance may be evaluated against specified threshold levels of each criterion. Further, when conducted longitudinally, customer based competitor analysis provides a basis for proactive sales force control. Traditional approaches to control focus on identifying dimensions of economic performance which deviate from established norms [3]. Unfortunately, such discrepancies represent symptoms as opposed to problems. Moreover, a concern strictly with financial performance is inherently reactive. That is, changes in financial performance are preceded by shifts in customer preferences. The periodic conduct of customer based competitive analysis not only highlights specific problem areas which underlie unfavorable financial performance, it also provides an “early warning” system which is capable of identifying emerging problems before they are reflected in financial performance. While the discussion presented in this article focused on customer evaluations of competitor performance, it is critical to recognize that long-term success is influenced by a variety of stakeholder groups (e.g., suppliers, distributors, etc.) [ 1, 21. Each of these groups holds a set of criteria on which they evaluate the performance of relevant players in the marketplace. A more comprehensive extension of the approach discussed in this article would involve the evaluation of a firm’s competitive performance from the perspective of significant stakeholder groups beyond customers. Finally, the basic framework discussed in this article is a specific case of a more general notion of “project based” competitive analysis which may be used in the implementation of marketing strategies [6]. Such an approach replaces supplier selection criteria with implementation success factors. Competitors are then evaluated in terms of their strengths and weaknesses on each success factor.
APPENDIX: DETERMINATION COMPETITIVE ADVANTAGE
Sales Force Relative to
Market Segment Competitor Competitor Competitor Competitor
Total Sample
Steel
Pulp & Paper
Utilities
30.19 30.37” 68.75”
-17.96 -43.38 24.82
4-l. 37” 35.47” 79.69h
23.40 68.64” 66.57”
A B C
“t-test significantly k-test significantly
different from zero at p < 0.05. different from zero at p < 0.01.
where Pi,,, = customer i’s preference for for supplier k relative to supplier I; (Aijk - A,,) = the difference between the performance of the referent supplier k and competing supplier 1 on supplier selection criterion j as judged by customer i; W, = the importance placed on criterion j by customer i. A positive (negative) sum indicates that, in aggregate, the sales force of the referent firm (the firm conducting the analysis) possesses a net competitive advantage (deficit) relative to the particular competitor considered. Since positive differences on some criteria tend to be offset by negative differences on others, this model provides a conservative test of relative performance. The findings in the Chemtech case that were based on this model are illustrated in Table I. As illustrated above, when the data were aggregated across the total sample, Chemtech was found to be significantly stronger than its three primary competitors. However, the fact that this position of strength did not generalize to all market segments (e.g., steel manufacturers) was of particular interest to members of Chemtech’s marketing staff. These findings prompted more specific analyses of differences on individual selection criteria at the market segment and sales territory levels.
OF AGGREGATE
The following linear decision model has been used in a variety of contexts to explain customer choice [4] and represents the conceptual underpinning of the framework presented in the Chemtech case:
60
TABLE 1 Aggregate Performance of the Chemtech Key Competitors by Market Segment
REFERENCES 1. Dowling,
Grahame R., Managing Your Corporate k&n8 Managemenr 1.5, 109-l 15 (May 1986).
2. Freeman, Edward R., Strategic Management: Pittman Publishing, Marshfield, Massachusetts,
Image, Induslriaf
A Stakeholder 1984.
Mar-
Approach,
3. Hulbert, James M., and Toy, Norman E.. A Strategic Marketing Control, Journal of Marketing, 12-20, 1977.
Framework
for
4. Lutz, Richard J., and Bettman, James, Multiattribute Models in Marketing: A Bicentential Review, in Consumer Behavior for Marketing Managers, Ian Fenwick and John A. Quelch eds., Allyn and Bacon, Inc., 1984. 5. Porter, Michael E., Competitive Strategy, The Free Press, New York, 1980.
6. Prescott, John E., and Smith, Daniel C., A Project-Based Approach Competitive Analysis, Strategic Management Journal, Forthcoming.
to
7. Rothschild, William E., Competitive Analysis: The Missing Link in Strategy, Management Review, 22-28, 37, 38 (July 1979). 8. Washington Washington,
Researchers, Company Information: A Model Investigation, D.C., Washington Researchers, Ltd., 1983.
61
INTRODUCTION The periodic assessment of a sales force is at the foundation of many sales management decisions. The outcomes of this process can provide guidance to sales managers in recruiting, training, evaluating, and compensating salespeople; designing sales territories; and deploying the sales force to territories and accounts. To be truly effective, a sales force analysis should be based on information about the sales force characteristics of key competitors. Sales force strengths and weaknesses are Address correspondence to Daniel C. Smith, Graduate School of Business, University of Pittsburgh, 259 Mervis Hall, Pittsburgh, PA 15260.
Industrial Marketing Management 16.55-61 (1987) 0 Elsevier Science Publishing Co., Inc., 1986 52 Vanderbilt Ave., New York, New York 10017
rarely universal; rather, they are interpretable only in terms of the strengths and weaknesses of specific competitors. While most sales managers express an interest in obtaining competitive intelligence, few firms collect such information in a systematic fashion and even fewer advance the analysis beyond a superficial level [5, 7, 81. Moreover, in firms which do engage in competitive analysis, the data are typically gathered to provide input to broad strategic decisions. Consequently, even if competitive intelligence exists within an organization, it is often too general to be readily integrated into sales management decisions. This article presents a customer-based approach to competitive analysis which has been developed through field research that involved nine different organizations and selling contexts. The proposed approach utilizes customer evaluations of competing suppliers to generate intelligence which is tailored to the unique needs of sales managers. While profiles of sales force strengths and weaknesses are the primary output of customer-based competitive analysis, it also provides sales managers with three additional benefits: (1) an “early warning” system that is capable of detecting emerging problems before they are reflected in financial performance, (2) a systematic approach to evaluating the effectiveness of changes 55 0019.8501/87/$3.50
in sales strategy, and (3) a method for assessing the impact changes in a competitor’s strategy had on other firms in the market. A case example will be used to illustrate concepts central to the implementation of customer-based competitive analysis.
explanations for the change in performance, the national sales manager decided to engage in an extensive analysis of customer perceptions of product and sales force performance. The investigation followed the four steps outlined in Figure 1.
A customer-based competitive analysis is conducted in four steps. A FRAMEWORK FOR CUSTOMER-BASED COMPETITIVE ANALYSIS As illustrated in Figure 1, customer-based competitive analysis is conducted in four steps: 1) definition of primary and secondary competitors, 2) identification of criteria used by a particular customer segment to select alternative suppliers, 3) evaluation of criteria importance and competitor performance, and 4) evaluation of sales force strengths and weaknesses. The activities involved at each step are summarized in Figure 1 and will be discussed through the use of a case illustration. The case involves the Industrial Water Treatment Division of a Fortune 500 manufacturer of industrial chemicals and took place over a 4 month period in 1985. To maintain confidentiality, the firm will be referred to as Chemtech. All data have been disguised.
CASEBACKGROUND Following an extended period of steady growth, sales in the Canadian market were beginning to decline. The fact that this condition occurred while industry demand was experiencing considerable growth created great concern among the marketing staff. In an attempt to surface
DANIEL C. SMITH is a doctoral candidate and JOHN E. PRESCOTT is an Assistant Professor in the Graduate School of Business at the University of Pittsburgh.
56
Step One: Identification of Primary and Secondary Competitors The set of competitors faced by a firm can be expected to vary across market segments and geographic regions. As such, multiple data sources such as personal interviews with customers, distributors, and sales people in each territory should be accessed when defining the body of relevant competitors. Once a general group of competitors has been identified, the distinction between primary and secondary competitors can be made based on the answers to the following two questions: (1) which firms will be most affected by changes in our sales strategies? and (2) which firms have the greatest potential for affecting the outcomes of changes in our sales strategies? In the Chemtech case, competitors were identified through semistructured telephone interviews with individuals involved in purchasing water treatment chemicals (WTC) in each of the three market segments served by Chemtech (i.e., steel manufacturers, pulp and paper producers, and electric utilities) and in three broadly defined sales territories. A total of nine such interviews were conducted. Respondents were asked to provide the names and suppliers of WTC in their particular regions. It was found that Chemtech competed with three other firms in all geographic regions and in all three market segments. Additionally, two general types of secondary competitors were identified. The first type was characterized by a national presence but focused on serving a particular market segment. The second type served all three market segments but operated within a limited geographic territory. These findings were confirmed through interviews with sales people in each territory.
Definition of Competitors
step
I
Identlficatlon of Supplier Selection Criteria
step
FIGURE I.
Step Two: Identification Criteria
+
Evaluation of Critena +Importance and Competitor---, Performance
II
step
III
p/
step IV
A Framework For Customer-Based Competitive Analysis
of Supplier Selection
Supplier selection criteria represent the attributes of the total product offering that customers use to evaluate a set of competing suppliers. Selection criteria are not limited to tangible features such as product performance, price, and follow-up service. They also include a wide array of intangible features such as the professionalism, product knowledge, and empathy displayed by the sales force; the availability of product-related information; and the overall reputation of the supplier. The criteria associated with the selection of a supplier of water treatment chemicals were elicited through the telephone interviews described in Step One. Given that Chemtech’s sales manager had no a priori explanations for the decline in sales, criteria related to both the product and the sales force were obtained. It was believed that there were no substantive problems with the physical product. There was a concern, however, that customer perceptions of product benefits were not accurate. The inclusion of product related criteria would allow for the identification of such problems which could, in turn, be dealt with through the modification of the salesperson’s presentation. A content analysis of the interviews resulted in the identification of eight unique selection criteria: 1. Technological progressiveness: the extent to which a firm is recognized as being a leader in introducing new products to the marketplace. 2. Technical support: the extent to which the salesperson is available to answer questions concerning the actual application of the product. 3. Technical competency: the extent to which the salesperson is knowledgeable about the benefits of the product. 4. Need sensitivity: the extent to which the salesperson displays empathy and a customer “problem solving” orientation. 5. Punctuality: the extent to which the sales person is on time for scheduled appointments.
6. Availability: the frequency of routine visits a salesperson makes on a current or potential account and/or the ease with which the sales person can be contacted. 7. Product pegormance: the extent to which the product meets performance expectations. 8. Product-related information: the extent to which the salesperson makes available printed information related to product specifications and applications. These criteria were subsequently confirmed through interviews with salespeople and the national sales manager of Chemtech. Step Three:
Evaluation of Criteria Importance and Competitor Performance
While the types of supplier selection criteria tend to be relatively constant within a product class, the importance of each criterion often varies considerably across types of buyers. Both criterion importance and competitor performance can be readily obtained through survey research. In the case of Chemtech, data on which the analysis of criteria importance and competitor performance are based were gathered through a national mail survey of purchasing agents. The sampling procedure involved drawing every fifth name from a directory of industrial purchasing agents in Canada. The first respondent was selected randomly from the first five names in the directory. The sample was subsequently refined to include only those purchasing agents in Chemtech’s three principal markets. The final sample consisted of 186 purchasing agents. In an attempt to improve the response rate, the purchasing agents selected were contacted by telephone and informed of the study prior to mailing the questionnaire. A total of 132 usable questionnaires were received for a response rate of 71%. The distribution of the sample across the three industry segments closely approximated that of the population.
57
The importance ascribed to each selection criterion was measured by asking respondents to rate each criterion in terms of its importance in determining the selection of a supplier of WTC. Responses were recorded on 7 point ‘ ‘not important/very important” scales. The performance of competitors on each criterion was measured on a 10 point “poor” to “excellent” rating scale.
Step Four: Evaluation of Sales Force Strengths and Weaknesses The strengths and weaknesses of a firm’s sales force are determined by integrating criterion importance with the firm’s relative competitive performance on each criterion. A measure of relative competitive performance is obtained by calculating the difference between a firm’s performance on each criterion and that of each competitor. Given these two measures - importance and relative performance - two primary types of analyses may be considered. ’
Relative measured between criterion
Postscript When presented with the final report, the sales manager of Chemtech explained the findings in terms of the recent growth strategy of the division. Specifically, the volume
competitive performance is by calculating the difference a firm’s performance on each and that of each competitor.
The first type of analysis utilizes the importance and performance measures to construct a matrix of major and minor strengths and weaknesses. Major sales force strengths (weaknesses) consists of those criteria judged to be highly important and on which the referent firm (i.e., the firm conducting the analysis) performed at a level significantly above (below) that of the competitor considered. Minor strengths and weaknesses are defined in a similar fashion based on selection criteria of lesser importance. As illustrated in Figure 2, relative to Competitor A, Chemtech’s primary strengths reside in the general technological progressiveness of the firm and the technical competence of its sales force. However, these strengths are offset somewhat by problems in the areas of sales‘A third type of analysis which provides a measure of overall competitive advantage is presented in the Appendix.
58
person availability and the extent to which members of the sales force express a sincere concern for solving customer problems. The second type of analysis utilizes the procedure described above but is conducted for relevant customer subgroups. For instance, by constructing the importance/performance matrix based only on survey respondents who represented current accounts of key competitors, Chemtech was able to identify specific areas where their three primary competitors were the most vulnerable. Since these findings were available at an individual account level, it was possible for the sales force to tailor their presentations to competitor accounts to take advantage of an area’s customer dissatisfaction.
of WTC purchased per account has tended to be relatively stable; therefore, sales growth had to be generated by increasing the number of accounts served. As such, an incentive system was established to encourage the generation of new accounts. The aggressive pursuit of new accounts not only reduced salesperson availability, but also provided little motivation to engage in problem solving research with existing accounts. Corrective programs are now being implemented. Using the initial findings as benchmarks, the 4 step procedure discussed in the case will be applied to evaluate the effectiveness of these changes.
PITFALLS TO AVOID While the activities involved in implementing customer based competitive analysis are relatively straightforward,
RELATIVE Not
PEKFORMANCE
Favorable
Favorable -2
-I
0
+2
+1
High c* E* A*
F
i-J* Major Weaknesses
Major Strengths IMPORTANCE H
Minor Weaknesses
Minor Strengths B* G LOW
FwRE 2. Competitive Performance/Criterion Importance Matrix, Competitor evaluated: Competitor A; market segment: total sample. Calculated as the difference between Chemtech’s performance and the performance of competitor A on each criterion. *: statistically significant difference (t-test) at p < .05. Key: selection criteria: A = Technological progressiveness B = Technical support C = Need sensitivity D = Technical competence of the sales force E = Sales person availability F = Product performance G= Product-related information H = Punctuality
they are not without their potential pitfalls. Some of the more prevalent ones which have been encountered in the field studies on which this approach is based include the following: 1. Uninformedlmisinformed salespeople. Successful application of competitive analysis mandates that sales managers clearly communicate the objectives and desired outcomes of the investigation to the sales force. Failure to do so often results in the perception that the research is a “headhunt” in disguise. 2. Overconcern with style. Too often individuals in-
volved in the conduct of competitive analysis allow form to dominate substance in the presentation of findings. It is critical to remember that the focus of analysis is on obtaining actionable information. The usefulness of the findings can be enhanced dramatically through ongoing interaction between researchers and end-users of the information at all stages of the process. 3. Omission of key competitors. Competitors should not be defined too narrowly. Indeed, it is often worthwhile to include suppliers of potential substitute products (e.g., steel versus plastic) within the domain of relevant competitors. 4. Diminishing returns to information. Be aware of information costs. The focus of competitive analysis should be on generating information which is relevant to improving sales force performance. The key to avoiding inefficiencies lies in the answer to the question, “What would we do differently if we had a certain piece of information?” If the answers are slow to emerge, the information probably will be of limited value. 5. Unsystematic dissemination of results. Upon completion of the analysis, the findings should be disseminated in a manner which facilitates use. One approach which has proven to be highly effective involves the conduct of regional meetings or retreats in which sales managers present the findings to their salespeople. The presentation is followed by a “brainstorming” session which focuses on surfacing ways in which the information can be integrated into daily practice.
ADDITIONAL MANAGERIAL AND EXTENSIONS
APPLICATIONS
Sales managers are constantly faced with the challenge of finding ways in which to improve sales force performance. Toward this end, the approach to competitive analysis presented in this paper may be extended and modified
Five pitfalls to avoid
in a number of ways. For instance, in addition to comparing sales force performance to that of a particular competitor, performance may be evaluated against specified threshold levels of each criterion. Further, when conducted longitudinally, customer based competitor analysis provides a basis for proactive sales force control. Traditional approaches to control focus on identifying dimensions of economic performance which deviate from established norms [3]. Unfortunately, such discrepancies represent symptoms as opposed to problems. Moreover, a concern strictly with financial performance is inherently reactive. That is, changes in financial performance are preceded by shifts in customer preferences. The periodic conduct of customer based competitive analysis not only highlights specific problem areas which underlie unfavorable financial performance, it also provides an “early warning” system which is capable of identifying emerging problems before they are reflected in financial performance. While the discussion presented in this article focused on customer evaluations of competitor performance, it is critical to recognize that long-term success is influenced by a variety of stakeholder groups (e.g., suppliers, distributors, etc.) [ 1, 21. Each of these groups holds a set of criteria on which they evaluate the performance of relevant players in the marketplace. A more comprehensive extension of the approach discussed in this article would involve the evaluation of a firm’s competitive performance from the perspective of significant stakeholder groups beyond customers. Finally, the basic framework discussed in this article is a specific case of a more general notion of “project based” competitive analysis which may be used in the implementation of marketing strategies [6]. Such an approach replaces supplier selection criteria with implementation success factors. Competitors are then evaluated in terms of their strengths and weaknesses on each success factor.
APPENDIX: DETERMINATION COMPETITIVE ADVANTAGE
Sales Force Relative to
Market Segment Competitor Competitor Competitor Competitor
Total Sample
Steel
Pulp & Paper
Utilities
30.19 30.37” 68.75”
-17.96 -43.38 24.82
4-l. 37” 35.47” 79.69h
23.40 68.64” 66.57”
A B C
“t-test significantly k-test significantly
different from zero at p < 0.05. different from zero at p < 0.01.
where Pi,,, = customer i’s preference for for supplier k relative to supplier I; (Aijk - A,,) = the difference between the performance of the referent supplier k and competing supplier 1 on supplier selection criterion j as judged by customer i; W, = the importance placed on criterion j by customer i. A positive (negative) sum indicates that, in aggregate, the sales force of the referent firm (the firm conducting the analysis) possesses a net competitive advantage (deficit) relative to the particular competitor considered. Since positive differences on some criteria tend to be offset by negative differences on others, this model provides a conservative test of relative performance. The findings in the Chemtech case that were based on this model are illustrated in Table I. As illustrated above, when the data were aggregated across the total sample, Chemtech was found to be significantly stronger than its three primary competitors. However, the fact that this position of strength did not generalize to all market segments (e.g., steel manufacturers) was of particular interest to members of Chemtech’s marketing staff. These findings prompted more specific analyses of differences on individual selection criteria at the market segment and sales territory levels.
OF AGGREGATE
The following linear decision model has been used in a variety of contexts to explain customer choice [4] and represents the conceptual underpinning of the framework presented in the Chemtech case:
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TABLE 1 Aggregate Performance of the Chemtech Key Competitors by Market Segment
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