Development of the sales organization of PayPal Benelux

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Development of the sales organization

of PayPal Benelux

S. Werkman

Student number: 1669524

Faculty of Economics and Business

Specialization Business Development

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Development of the sales organization of PayPal Benelux

Master thesis

By

Sander Werkman

S1669524

University of Groningen

Faculty of Economics and Business

Master of Science in Business Administration

Specialization Business Development

April 2011

Supervisor: Dr. C. Reezigt

Co-assessor: Dr. J.F.J. Vos

Supervisor PayPal Benelux: Drs. E. van Wijk

Lagestukken 13

9761 KS Eelde-Paterswolde

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Preface

This thesis is a result of a research conducted at PayPal Benelux. I performed an internship of seven months at the Benelux business unit which was two folded, performing several assignments on the merchant services department and conducting my thesis research. With my strong interest in e-business, my internship at PayPal was a great experience; it gave me the opportunity to work at one of the most well-known e-business company in the world and I was given a lot of responsibilities at the assignments. Besides, my working experience at PayPal, it resulted in my first job as account manager at Paylogic.

The workload of writing this thesis in combination with a fulltime job was not easy at times. It

required a tight planning and discipline, this was not always an ideal match form me. For that reason, I am pleased to present my final report to you.

I would like to thank everyone who supported me during my research and writing this thesis. In particular I would like to thank Eelco van Wijk, head of Merchant Services, for guiding me during my internship. Secondly, I would like to thank Cees Reezigt, my supervisor, for his support, guidance and patience through the whole process. My third word of gratitude goes to Harry Ammerlaan, who supported me with his experience, helped me handle difficulties and struggles during the process of writing this thesis.

Last but not least, I would like to thank my mother, Myriam Bruggeling, for her commitment and financial support during my studies.

Sander Werkman

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Table of content

1.2 Dutch online payment market 7

1.3 Dutch Business Unit 8

1.4 Merchant Services Department 9

1.4.1 Self internet on-boarding 9

1.4.2 Merchant development 9

1.4.3 Sales and account management 9

1.5 Sales organization effectiveness 11

Chapter 2. Research Problem 17

2.1 Situation 17

2.2 Problem Definition 18

2.2.1 Merchant development acquisition process 21

2.2.2 Information technology 21

2.2.3 Resource allocation 22

2.3 Objective of the research 22

2.4 Conceptual model 23

Chapter 3. Theoretical framework 24

3.1 Sales organization effectiveness 24

3.2 Sales process 25

3.3 Sales process redesign 25

3.4 Information Technology 29

3.5 Sales organization resource allocation 31

Chapter 4. Methodology 34

4.1 Classification of the research 34

4.2 Data collection 34 4.2.1 Documentation review 34 4.2.2 Interviewing 34 4.2.3 Observation 35 4.3 Data analysis 36 4.4 Validity 36 4.4.1 Construct validity 37 4.4.2 Internal validity 37 4.4.3 External validity 37 4.5 Controllability 37 4.6 Reliability 38

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Chapter 5. Results 39

5.1 Merchant acquisition process 39

5.2 Information technology 40

5.3 Aligning sales resource and service 42

Chapter 6. Design 45

6.1 Merchant acquisition process 45

6.2 Information technology 48

6.2 Measuring redesign 49

Chapter 7. Reflection and evaluation 50

7.1 Consequences for science and practise 51

7.2 Personal evaluation and reflection 54

References 54

Appendix

Appendix 1 Questionnaire

Appendix 2 Background Information merchant development Appendix 3 Background information research problem

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Abstract

This report presents a research conducted at the sales organization of PayPal Benelux. The sales organization of PayPal currently lacks proper resource allocation in relation to customer inflow and has difficulties with the current use of information technology systems in the organization. Both problems result in an overall ineffectiveness of the merchant acquisition process.

The aim of this report is to improve the effectiveness of the merchant acquisition process and to present an extensive insight in the importance of aligning sales resources with the proper customer segments.

While customers are becoming more and more demanding in service level, they require sales organizations to design their organizational processes accordingly. Sales organizations now face the dual tasks of not only making their “numbers”, but also meeting the required service level in order to contribute to customer satisfaction. This situation requires sales organizations to transform from a sales oriented selling approach to a customer oriented selling approach. This means that companies anticipate on the wants and needs of their customers and provide a service to fulfil those wants and needs.

By taking a customer oriented selling approach into account, this research contributes to the existing literature by stating the consequences of the misalignment of sales resources. Not only does it result in ineffectiveness of the sales organization but also causes in the failure in delivering the required service to the customer segments they target.

For this qualitative research the most important sources of data-collection were; eight

semi-structured interviews with directly involved sales organization employees, a questionnaire, scientific literature and internal documents of PayPal.

In the last part of this report several practical measures are presented which enable the organization to improve the relationship between resource allocation and customer inflow which in turn should have a significant positive effect on the effectiveness of the merchant acquisition process. These practical measures are described in chapter 6.

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Chapter 1. Introduction

As the title of this report suggests, the aim of this research is to redesign the sales organization effectiveness of PayPal Benelux. This chapter describes the organization of PayPal Benelux and the department where this research has been conducted, Merchant Services. After this introduction, a description of sales organization effectiveness is discussed in general.

1.1 PayPal

This research has been executed at PayPal Benelux. PayPal Benelux is a subsidiary of eBay inc. and is located together with eBay in Amsterdam, the Netherlands. Also Marktplaats.nl, a Dutch eBay website, is located in the same office. PayPal is an online payment solution that allows consumers from all over the world to pay their purchases online 24 hours a day, 7 days a week. PayPal is global leader in online payment solutions with more than 180 million accounts worldwide. The workforce consists of approximately 10.000 employees worldwide. In the fourth quarter of 2010, revenues were Euro 680 million. PayPal is headquartered in San Jose, California and founded in 1998 in Silicon Valley, California.

1.2 Dutch online payment market

In the Dutch online payment market, PayPal is the second online payment solution company. The main competitor is iDeal, which has been developed by the company “Currence” and is the leader on the Dutch market. iDeal has approximately nine million users and is supported by nearly all large banking corporations in The Netherlands. PayPal is not aiming for the first position in the online payment market, but strives to consolidate the second position by providing customers an alternative payment method next to iDeal. This can be compared to brick and mortar stores were customers are offered several ways to pay for their purchases (i.e. cash, credit card, pin). Although there is high competition in the online payment market, there are still opportunities for growth in The Netherlands. Further integration with Marktplaats.nl is a major opportunity for PayPal and the relative strong marketing tools that PayPal posses are an important advantage as well.

The worldwide market is relatively dynamic due to a variety in competitors, like credit card

companies and online payment solutions such as BidPay (Western Union) and Bill Me Later (Recently acquired by eBay). One of the main reasons for the dynamic market is the relative newness of online payment. A major threat for PayPal is the increasing cooperation of large banks with the iDeal

8 payment system. However, PayPal in comparison with iDeal and their associated banks are perceived safer and faster which are two strong advantages for PayPal.

1.3 Dutch Business Unit

The Dutch business unit is responsible for the Benelux region. The main tasks of the Dutch business unit are to market and sell PayPal to the local market and adjusting product features for the Benelux users. The marketing activities are divided in two areas, increasing usage of PayPal and acquisition of companies to integrate the PayPal online payment platform on their website. The organization chart of PayPal Benelux is structured as follows:

9 1.4 Merchant Services Department

The merchant services department is internally also known as the sales organization of PayPal Benelux. Every business unit of PayPal has its own merchant services department with its own direct and indirect sales channels. The sales organization of PayPal divides customer into three segments, these segments are Small Proprietors (SP’s), Small to Medium Businesses (SMB’s) and Large

Merchants (LM’s). Currently, PayPal Benelux has over 9000 Small Proprietors, 800 Small to medium businesses and 200 large merchants in its client base. PayPal uses different sales channels to acquire new merchants in the three different segments, these different channels are in- and outbound telesales (merchant development), direct internet on-boarding and sales and account management. These various sales channels are widely used to get merchants ‘live to site’, a term used internally for the acquisition of new merchants.

1.4.1 Self internet on-boarding

The self on boarding channel of the sales organization of PayPal is responsible for the SP segment, merchants in this segment mainly exploit a simple webshop which are owned and exploited by a single person and are expected to have an online turnover of less than one million a year. Self

internet on-boarding works through the business website of PayPal, after opening a business account merchants can integrate the PayPal product themselves with their webshop. In general, merchants in this customer segment are expected to integrate PayPal themselves without any help of sales

department or integration resources. 1.4.2 Merchant Development

The merchant developer is a sales function which is part of the merchant development organization in Dublin. Agents working in this sales channel are called merchant developers, the Dutch team exists out of eight Merchant developers. Merchant developers are primarily responsible for the SMB segment. A merchant developer is working like the LM sales manager in the business unit: qualifies accounts, uses negotiation levers to close deals and teams up with an integration specialist to activate the merchants. The two main differences are; the merchant developer works on the SMB segment whose online turnover ranges from one million Euros to five million Euro. Next to this, the merchant developer works from Dublin over the phone and through email, so the sales person does not meet the prospect in person.

10 1.4.3 Sales and account management

The sales and account management channel is responsible for the LM segment. Merchants in this segment have an online turnover of at least five million a year. The Dutch business unit has two sales managers and three account managers. In general, merchants from the LM segment are acquired by actively approaching them and promoting the PayPal product. In case LM’s come to PayPal on own initiative, they should be directly guided to the LM sales manager in the business unit.

11 1.5 Sales organization effectiveness

The main subject of this thesis is to assess sales organization effectiveness. The existing sales organization manages a variety of customers that are requiring tailor-made answer to be served by standardized routines, however this variety of customers are not always served accordingly. According to Piercy (2006) the sales organization is responsible for managing a complex strategic customer portfolio and works across functions to deliver value to customers. Improving the sales organization effectiveness is a challenge for almost every company, often triggered by external factors and by stakeholders. Fast changing customer demands, lack of loyalty towards the seller, upcoming competition from newcomers, aggressive sales campaigns, changing laws and public opinion resulted in dynamic markets and require fast response that was considered unthinkable ten years ago.

In order to adapt the organization to manage these changing external drivers, internal factors may cause ineffectiveness, inertia or inability to cope with the changing environment. From the

misalignment of processes and control instruments to fast changing external conditions, combined with unsuitable early warning systems, mismanagement or wrong interpretation of the key performance indicators (KPI’s) may cause management to take the wrong decisions in time, or the right decisions too late. According to Zoltner et al. (2004) it is advised that in a changing

environment, an objective assessment of the effectiveness of the sales organization may be the first trigger to initiate further investigation of the primary process of the organization.

The main goal for the investigating of the sales processes was driven by the desire to improve the effectiveness of the sales organization. The sales executives felt that the sales organization is ‘doing the wrong things rights or doing the right things wrong’. Management was looking for an objective assessment of the sales organization and its effectiveness in order to decide if changes were appropriate or the sales organization was having the wrong perspective. Chapter 3 covers the assessment of the effectiveness of an organization in more detail.

This thesis aims to present insight knowledge on the importance of a service oriented sales organization. This thesis describes what a company should do to take into account the design of processes and the control instruments to align its service level.

12 Today’s literature reveals various models and theories about organizational issues in relation to

effectiveness and efficiency and their drivers. Examples of such drivers include the sales force size, the sales force recruiting process, the performance management system (responding on the basis of key performance indicators “KPI”), and the implementation of a sales force incentive program (Piercy, 2007). Organizational issues, concerns, challenges, and opportunities may be addressed by leveraging one or more sales force effectiveness drivers.

Another approach is mapping the sequence of existing processes by means of identifying chains in the process flow within the sales organization, each chain delivering a function or task making it possible for the next chain to further process the activity towards a predefined result. The amount of time or resources to process the individual task may be considered as a measure to assess the effectiveness of a process. By comparing the old and the new situation and by mapping the

throughput in relation to the resources allocated, this an objective indication of the effectiveness of the company handling its customer portfolio. According to Piercy (2007) the organization is

considered as a ‘black box’ handling input and producing output using minimal resources or at the fastest throughput time.

For the company of this thesis, the sales process appears to be less dependent upon the individual skills or expertise of the employees. Most sales tasks were designed in routines or blue prints, enabling the employees to analyse the specific situation and handle accordingly without designing tailor-made solutions. For this situation, the decision was taken to conduct this research as much as possible on an input-output model focussing only on the relation between resource allocation and process effectiveness with the end goal to improve effectiveness with presenting practical measures. Bitner and Brown (2008) state that customers are demanding more and more tailor-made solutions and that their preferences are changing faster and more unpredictable than in the last decades. In their view, companies can no longer compete by segmenting customers and provide standard processes for each market segment if they aim for business continuity.

Companies are challenged not only to monitor continuously the behaviour of its customer segments, they also need to look one level deeper trying to anticipate future demands in order to stay ahead of competition. In terms of effectiveness they need to monitor the customer segments that they serve and they should consider if these segments will stay in line with the resources committed to them. Such continuous monitoring processes underline the need to assess regularly the effectiveness of the

13 sales processes. This attitude of constant monitoring implies that management is willing to adapt the resources on short term within the framework of a longer horizon. They balance between a short-term focus on transactional selling and longer-short-term business development issues in line with the general business strategy (Piercy, 2006).

Apart from contributing to management awareness of continuous monitoring the sales processes and its environment, this thesis may give an in-depth illustration of a practical situation showing how customers ‘knock on a company’s door’ and accordingly if they ‘knock on the right door’. In this sense, the thesis may contribute to further development of ‘early warning systems’ as a first step to anticipate changing business processes and resources in time. The goal is to assess’ methods to signal changing developments in the larger environment of the company in a premature stage, enabling companies to be prepared for such a change before they are confronted with the change. On the level of an individual organization, the contribution of this thesis is aimed to provide an

understanding of these upcoming changes.

While a sales organization must be designed in the most effective and most profitable manner, the sales organization often plays an important role as a service facilitator. The sales organization is an important facilitator for delivering service to the customer as several tasks of sales employees are service oriented (Frei, 2006). In general, a service organization has various goals compared to a sales organization. Frei (2006) argues that when assessing a sales organization, the straightforward method is to scrutinize the effectiveness and the profitability of the organization. In contrast, a service organization may be assessed on its capability to service its customers in a way that these customers demand when the service has been delivered according to their expectations and satisfaction. In other words, organizations are no longer entities driven by the most effective processes, but driven and motivated by those who remunerate the organization by best performance: its customers.

According to a study by Tax (1998), the service orientation of a sales organization is often eligible for improvement since many sales organization mainly focusing their decisions on internal, operational criteria aimed at effectiveness improvements. Bitner and Brown (2006) argue that an underlying feature of the most successful service businesses is an unrelenting focus on the customer, in sales organizations however this focus is often disrupted by the need of achieving targets of sales employees and high management pressure. Schwepker (2003) states that today’s fast evolving

14 business environment has conditioned customers to become more demanding in the level of service they require from their suppliers and sales representatives. Average or “good enough” levels of service are no longer satisfactory for customers to ensure long-term relationships or customer loyalty (Schwepker, 2003). These new developments now drive sales organization to face the dual tasks of not only making their numbers but also providing customer service to protect their market share. Schwepker (2003) states that since the marketing concept seeks to establish long-term relationships with customers, fostering a customer-oriented selling approach among salespeople may be critical for developing long-term buyer-seller relationships.

When an organization serves several customer segments, this implies that the organization also should adjust its services and relating service level to these segments since these segments all have different needs and requirements (Craig and Bush, 2000). According to Fei (2008) organizations must always effectively meet the needs and desires of an attractive group of customers and provide superior tailor made service to this particular groups. Thorough thinking about the design of a service may require managers to undergo an important shift in perspective: whereas sales organization designers focus on effectiveness and efficiency, service organization designers focus merely on the service experiences customers want to have and which attributes to target for excellence (Fei, 2008). This can be considered as an important trade off when designing the organization.

Where sales organizations fail in indentifying proper customer segments and consequently align the organization to the targeted segments, a coherent phenomenon is that these organizations also fail in shaping its service resources to these segments (Frei, 2007). When an organization fails in identifying customer service needs and does not succeed in properly structuring the services organization to different customers segments according to Schwepker (2003) this can have a negative internal and external outcome. Internally service resources are not aligned to the proper segments what might result to ineffective service resources. Externally this condition implies that existing customers can get dissatisfied when they have the feeling they are underserved, this in the end can lead to customers ‘leaving’ the company.

When companies fail to aligning customer segments to the proper resources, ineffective sales performance will follow. Moreover, when sales organizations fail to delivering best service to its customers, customer loyalty will vanish. This thesis aims to contribute to the existing literature by focusing on the “snow ball effect” of not properly aligning sales resources. By taking a customer

15 oriented selling approach into account, this research contributes to the existing literature by stating

the consequences of the misalignment of sales resources. Not only does it result in ineffectiveness of the sales organization but it also leads to failure in delivering the required service to the customer segments they target.

More specifically, this research identifies practical measures for redesigning the sales organization according to a customer oriented selling approach. Furthermore, the thesis will contribute to gain insight how other companies must create awareness on the importance of being service focused as a sales organization.

Bitner and Brown (2008) argue that companies can compete by offering services through technology, which allows the expansion of service into global markets, ease of access for customers and

increased productivity for companies. In addition to the fast changing demands from customers, the rapid development of information technology is fuelling the need to adapt to this kind of systems in a much faster pace than ten years ago. Not only has the processing capacity of information systems developed faster than ever seen before (Moore, 1995), the information density has increased to such a level that customers and employees have no choice than to constantly adapt and condense the flow of information that surrounds their work environment. Furthermore the Internet has become a dominant sales channel for attracting prospects. The increased ‘exposure’ of the company to attract attention and generate a new flow of prospects on one hand and the drive to increase the prospect-to-order ratio is becoming a real challenge for executives in the near future. The toolkit to handle this complexity of demand with minimal resources comprises business process redesigns, resource allocation programming, continuously monitoring of individual tasks, standardising-what-can-be-standardised, and outsourcing non-core activities (Piercy, 2006). For this reason a constant critically review of the system (which companies often did major expenditures) performance as they were intended and designed, are of imminent importance for survival.

Since information technology facilitates sales organization effectiveness and is directly associated with increasing productivity of sales employees (Loudon, 2006) this thesis creates awareness on information technology and in particular focuses on the importance of looking critical to the current deployment and performance of IT systems. Furthermore, practical measures are presented for assessing and improving current performance.

16 This chapter’s aim was to introduce the research environment and context. The next chapter will

describe the problem situation within the sales organization of PayPal Benelux. The problem situation results in a problem definition which finally results in the main research question.

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Chapter 2. Research problem

This chapter provides the basics for the research. The environment, the problem owner and the scope of the problem context shall be described in detail. The input for the problem definitions was obtained through various interviews with the project sponsor. After reviewing the goals of the research as desired by the project sponsor and setting up an approach to master the research, the problem definitions and its context are described.

2.1 Situation

Today, PayPal Benelux sales force faces many problems in handling its acquisition and order handling processes. The growth of PayPal Benelux in the Dutch online payment market has put intensified pressure on the sales organization which currently results in ineffectiveness.

The sales organizational design of PayPal has been based upon three market segments, each of which requires a different approach in terms of profitability. The LM segment is most important for PayPal. The number of transactions per year is the highest and as a result the turnover/ annum exceed Euro 5 million. The marketing approach for LM customers consists of tailor-made proposals that have been designed by a dedicated sales team after intensive market research. The acquisition is labour intensive and the throughput takes 5-6 months whereas the scoring rate is above 50%.

Opposite to the LM segment is the SP segment. PayPal offers her services to by means of an internet site that should enable customers to fill in their applications and integrate the PayPal system without human interference. The sales approach is highly automated and human interference should only be needed in exceptional situations. In these unlikely events, SP customers are requested to call

customers service for further assistance.

Whereas the sales approach of the SP segment has been designed as an automated process and the LM segment requires a labour intensive tailor made approach, the SMB segment is being handled by merchant developers through telephonic acquisitions. Apart from achieving their sales targets in the SMB segment, merchant developers have the obligation to serve those SP customers that come to them via customer service and require special assistance. As for identifying new prospects, each sales team has its own business development resources, for the SMB segment these are mainly campaigns developed by the business unit which should be performed by the merchant developers .The target of business development is to identify new prospects and to instruct the merchant development

18 team which priorities to follow in order to have the highest possible scoring rate. Prospects are leads and inquiries that the business unit has qualified as having significant sales and profit potential. 2.2 Problem definition

Today’s practise is causing problems for the merchant developer’s team. The general manager is not satisfied with the small number of new customers contracted. Furthermore, the profitability of the SMB segment is below target as a result of non billable hours spend on customers that should not require assistance from a back-office. Now that the workload for the SMB segment has increased, and organizational sales goals cannot be reached, PayPal is considering how to increase its sales organization effectiveness that does not affect the existing workforce. In identifying the ways of enhancing effectiveness, PayPal Benelux may consider to identify the activities that distract the organization from achieving its primary goals. As an example, if the primary goal for the SMB segment is to increase sales, then all activities should be focussed upon achieving this goal. Any distractions, such as giving back-office support to the SP segment should be eliminated or organized in another manner. To this end, the current processes should be evaluated only from a point of effectiveness. Anything that does not add value to increasing sales should be isolated.

The SP segment was originally designed to be managed in an almost automatic system that required little interference from the back-office staff (merchant development). The SMB segment and the LM segment are requiring human support since the nature of the work is more specialised, more dedicated. Though the ultimate tailor-made solutions from the LM segments can still be provided year-to-date, the SMB segment suffers many disruptions caused by SP segment customers that seek back-office support. This results in a situation of stress within the SMB sales force and delays of quotations, outstanding requests and regular commercial tasks. With the current mixing of work between the sales force teams, the management of resources need to be evaluated.

As mentioned earlier, the acquisition of SP prospects is designed as a reactive response. Future customers are ‘invited’ by the website and after filling in a routine of question and following

integration practices, they may be joining the PayPal community without human interference. At the start of PayPal Benelux, it was assumed that out of every 100 prospects, 95 could enable to follow the internet routine without support from the back-office (merchant development staff). As a basic, the website should be designed in such a manner that only 5 of the SP prospects would require help from merchant development for going ‘live’ with PayPal (see figure 1 below).

19 Figure 1: Flow chart SP, SMB process as designed

The flow chart above illustrates the acquisition process via the internet channel as designed. It was assumed that only 5% of the prospects would require the assistance from the merchant developers. The resources for the merchant developers were of such quality and magnitude that they could easily combine handling their own segment whiles incidentally helping SP customers.

In order to manage the workflow for each of the SMB and LM teams, the following key performance indicators (“KPI”) were introduced: 1) 95% of merchants live per merchant developer have a yearly turnover of €>50.000. 2) Acquire 75% of prospects from campaigns directed to Merchant developers from the BU.

However, as a result of the current situation these KPI’s cannot be reached. During the start-up period of PayPal, the organization was able and capable to manage the growth (turnover, number of contracts, and support from back office). In recent years, it seemed that the organization was becoming less successful as the number of new customers in the SMB segment was below target. After investigation of the root cause, it appeared that the attention needed from SP was much higher than anticipated. Instead of an average of 5 customers per hundred, 15 required assistance from the merchant development team thus distracting the latter from their original goals (i.e. handling current customers/ accounts and attracting new customers). The process flow below clearly indicates that the process-as-designed differs much from the process-as-practised in reality.

20 Figure 2: Flow chart SP, SMB process as practised

In the figure above the current situation is stated. 80% of prospects that are handled by the merchant developers have an online turnover of more than €50.000. This implies that 15% of the merchant acquired by the merchant developers have an online turnover of less than €50.000 a year. So 15% from the SP segment comes to the merchant developers, this means that 15% of work of the SMB segment cannot be done and accumulates. This means that currently 15% of work done by the merchant developers is work not be done by the merchant developer. To conclude and as described earlier this results in the following effects;

1; Merchant developers have difficulties in accomplishing their sales targets because they work on the wrong (SP) segment.

2; Merchant developers have an accumulation of prospects (new business campaigns), which primarily are formed by campaigns that focuses on web shops in new or underdeveloped verticals which are directed to them by the business unit.

Besides failing to achieve to attract new customers, there is a chance that both existing SP and SMB customers are receiving insufficient service and support which might lead to decreasing loyalty. The erosion of the customer base in the SP and SMB segment is endangering the sustainability of PayPal services and has become a strategic, priority issue for the general manager. A quick scan of the root causes resulted in the following assessment:

1. The website for SP is not user friendly enough and should be adapted in such a way that only 5% of new applicants need assistance from Merchant Development staff.

21 2. The current KPI for the sales process are not identifying the ‘spill-over’ of SP customers

requiring the support from Merchant developer. As a result, resource management of SMB staff is insufficient and workload management is impossible.

3. The nature of the business may be such that the assumption of self fulfilling forms is not possible; it may be that these services always require specialist support, PayPal could decide to provide extra resources dedicated to the SP segment.

4. The effectiveness of the merchant development staff is below standards and the sales process of the SMB team should be reviewed thoroughly. Number of FTE’s could be increased but so can quality of work done by the merchant developers.

5. Information technology systems are not used properly. IT systems could play an important role in making tasks for merchant developer more efficient.

This quick scan has led to the identification of the following problem areas in the organization where this research focuses on.

2.2.1 Merchant development acquisition process

The organization faces problems in the merchant developer’s acquisition process. Improving this process means that added value has to be optimized and every activity that is not adding value to the acquisition process has to be eliminated. In the current situation merchant developers are forced to spend time on activities that does not add value because of the ineffective acquisition process. Improving this process will be done by mapping the process and conduct an activity survey to explore were activities can be eliminated so that merchant developers get more selling time.

2.2.2 Information technology

Current information technology systems are not used properly or integrated to take care of the flow of customers segments. While the current design should be able doing this, the systems that are used does not function properly. In particular, the systems now ensuring that the right merchant developers get the right 'calls' have to be improved. An effective use of IT systems is needed to increase the effectiveness of sales organization. In particular a literature review will serve as a source for how IT systems should be used to increase sales organization effectiveness. Furthermore this research has to show if there is a demand for more IT in the organization and what kind of systems might be useful to improve effectiveness.

22 2.2.3 Resource allocation

The merchant development organization currently has problems in allocating the right resources to the right customers segments. A limited amount of internal personnel resources is available for the SMB segment, which leads to a lack of work and progress on campaigns directed to them by the business unit. Furthermore sales resources are not aligned properly with the revenue potential of the customers that are assigned to them. Research has to be conducted on how resource allocation can improve effectiveness and for example how resources should be divided based on the several customer segments and relating service requirements so that customers get the appropriate service level.

2.3 Objective of the research

The objective of this research is to give advice on how to redesign the sales organization of PayPal Benelux, so that effectiveness of sales acquisition process and in the end effectiveness of work done by merchant developers will increase. This should result in a situation in which Merchant developers work on the proper segment, have more selling time to work on this segment and can also work on new business directed to them by the business unit.

Research question

How can sales organization’s effectiveness of PayPal Benelux be improved by redesigning the merchant acquisition process, based on sales resources and information technology?

Sub questions

1. How could the merchant development acquisition process be improved?

2. Which proceedings of the merchant development acquisition process could be eliminated to increase effectiveness?

3. How could PayPal allocate sales resources more effective in case of merchant developers? 4. Which information technology systems enable a more effective sales organization? 5. How could PayPal use current information technology systems more effective?

23 2.4 Conceptual model

A high level conceptual model will now be proposed to get an overview of the problems the sales organization of PayPal Benelux currently deals with. The three factors that influence the overall problem are depicted in the figure below.

Figure 3: Conceptual model sales organization effectiveness

The next chapter will describe the concepts from the theoretical framework, this framework consists out of theories and concept that are useful for this research.

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Chapter 3.

Theoretical framework

This chapter introduces theories and concepts useful for this research, in order to answer the sub questions a theoretical framework is developed. First there will be an introduction on sales organization effectiveness followed by a review that will be presented on process redesign,

information technology and sales resource allocation. The literature presents theoretical background on the variables that influences sales organization effectiveness. The academic literature forms the foundation of this research which supports the advice that will be presented on how to redesign the sales organization and increase effectiveness.

3.1 Sales organization effectiveness

To understand the main goal of this research, increasing sales organization effectiveness, a brief literature review will be presented. Organizational effectiveness is the concept of how effective an organization is in achieving the outcomes the organization intends to produce. Since the sales organization is currently not on track in achieving goals set, related to the SMB segment, there is lack in effectiveness.

According to Harrington (1991) effectiveness is a useful characteristic for assessing business processes, effectiveness reflects the way an organization is successful in delivering the customer what he wants (Schaap, 2001). Daft (2001) describes organizational effectiveness as the degree to which an organization realizes its goals, the degree to which objectives are achieved and the extent to which targeted problems are resolved. Schaap (2001) states that in contrast to efficiency, effectiveness is determined without reference to costs and, whereas efficiency means "doing the thing right," effectiveness means "doing the right thing. In this research context the organization strives to reach effectiveness of the sales organization processes. The goals that are pursued are to organize the sales processes in such a way that the organization achieves a maximum result and sales resources are deployed so that targets can be met.

The sales structure and processes, sales employees, sales activities, sales force recruiting process and information technology systems are by Piercy (2006) defined as the sales organization effectiveness drivers. The sales organization has primary responsibility for these drivers (Piercy, 2006). In general organizations take a key interest in maximizing the effectiveness of these drivers in their sales organizations for achieving their goals. Corporate initiatives which intend to increase sales force

25 effectiveness, with labels such as “sales force effectiveness review“, “global sales force effectiveness benchmarking,” and “sales effectiveness and growth initiative,” are common (Zoltner et. al., 2008).

According to Piercy and Lane (2005) the process of innovating and reinventing the sales organization to increase overall effectiveness and meet the challenges of new markets and new strategies is likely to require attention to several critical issues;

 “Focus on long-term customer relationships, although also assessing customer value and prioritizing the most attractive prospects”.

 “Creating sales organization structures that are nimble and adaptable to the needs of different customer segments”.

 “Applying new information technologies appropriately”.

 “Allocate sales resources effectively so that the organization can effective handle large flows of customers”.

Research by Trailer and Dicky (2006) has shown that overall sales effectiveness of organizations is declining. This leads to a higher cost price of sales, which results in lower margins and declining turnover. Moreover organizations do not succeed to reach the set sales KPI’s. Furthermore the same research pointed out that sales professional have a growing accumulation of leads what results in the loss of potential revenue

3.2 Sales process

According to Loudon (2006) it appears to be that the average sales professional spends just a small part of its scarce time on tasks that are really sales related. Research by Proudfoot (2006) indicated that sales professionals spend only 11% of its work time on active selling products or services to customers. Proudfoot (2006) also stated that sales professionals worldwide, in small and large organizations, spend a large amount of time on activities that are not adding value to the sales process, which in turn leads to ineffectiveness.

It appears to be that the underlying and supporting processes is the cause of the fact that sales professionals spend so little time on really selling products or services. However sales professionals are not really responsible for this, as the sales professional is not the one who designed this process. The traditional approach for improving sales effectiveness is focused on the individual sales

professional. However this approach is not very much of use if the underlying process is ineffective (Loudon, 2006). More and more organizations are improving sales effectiveness by viewing the sales process as a production process, the sales activities that are a part of the sales process should add

26 value to the process. As a result of this, many organizations accomplished to reduce the cost of sales and took care of having sales professionals spent more time on activities that add value to the process. An important effect of this is that productivity and effectiveness are improved; in other words; they generate more turnovers with the same amount of people (Loudon, 2006).

3.3 Sales process redesign

By looking at sales processes as production processes, quality can be improved by using business process redesign techniques (Loudon, 2006). These techniques should improve the quality by optimizing the added value of the activities in the process and by eliminating activities that do not add value, in other words; they should increase sales process effectiveness.

Business process redesign (BPR) has been identified as a key change initiative for achieving business improvements for organizations (Kettinger, 1999). Concerns such as providing value for money, increasing customer focus and improving efficiency and effectiveness are seen as important areas for organizations to focus on (Braganza, 2000). According to Mohsen (2003) the motivation for

redesigning an organization or a part of an organization is the need to speed up the process, reduce needed resources, improve productivity and effectiveness and improve competitiveness.

Furthermore Hammer and Champy (1993) define business process redesign as “the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary measures of performance such as costs, quality and speed”. These business processes are described by Harrington (1991) as “an activity or group of activities that takes an input, adds value to it, and provides an output to external or internal customer”. Moreover Mohsen (2003) states that an important reason why organizations may begin to redesign processes is that it is a useful way for an organization to realize its strategy and ultimately gain a competitive advantage. It is a management approach for accomplishing long term business development, since the organization is trying to do something completely different then its competition.

Organizations can make sales process improvements by using several techniques that have its routes in the BPR literature. An important technique of improving processes is the process improvement framework (Davenport, 1990). Loudon (2006) adapted this framework and translated it to sales processes (see figure 4 below).

27 Figure 4: sales process improvement framework (Loudon 2006)

The steps of the process improvement framework designed by Loudon will now briefly be described.

Step 1. Map the process

To improve the sales process of an organization, processes should be made visible first. The sales process flow chart is a technique for improving business processes. A flowchart is a common type of diagram that represents an algorithm or process showing the steps as boxes of various kinds, and their order by connecting these with arrows. This diagrammatic representation can give a step-by-step solution to a given problem (Mohsen, 2003). The goal of a flowchart is to reduce activities that do not add value to the process. Working with flowcharts increases understanding of the business and also enhances the awareness of new opportunities for improving business (Loudon, 2006).

Step 2. Analyse the process

A flow chart is very informative, however the challenge is to filter the information gained from the chart and locate the useful information. According to Loudon (2006) there are eight problem situations in sales processes, these areas help to determine what needs improvement in the sales process. These areas are; costs, flexibility, relativity, time, impact, quality, values and roles. When turning these areas into questions based on the specific sales process, one is able to identify which area(s) require improvement.

28 Step 3. Redesign the process

When the process analysis is completed the areas for improvement are identified. The next step is to make decisions on which area(s) have priority for improvement with the available resources. A priority matrix is a convenient way to select the opportunities for process improvement, the matrix combines two factors. One factor is the relative amount of impact of an improvement on sales effectiveness and the other one is the relative easiness of implementation. There are several techniques for redesign, according to Loudon (2006) most important techniques for sales process improvement are;

Simplifying activities

Automate, standardize or eliminate parts of an activity can simplify activities of the sales process. Examples of these techniques are;

- Simplify by using standardized marketing templates - Simplify by implementing sales technology systems - Simplify by standardizing tasks

Relocation of activities

Relocating activities relates to outsourcing sales activities to third parties. Outsourcing has several advantages; a company can benefit from state of the art systems and processes without large investments required. Moreover if a company needs more resources it is possible to get this without having to invest and without having risk on this investment. Disadvantages are that the activities of the outsourcing partner are difficult to control and when activities are outsourced for a long period of time, the organization can lose expertise in these areas. Often shifted activities in sales processes are; entering data into sales technology systems, generating and qualifying leads, scheduling appointments, bidding and entering orders (Loudon, 2006).

Step 4. Implement sales process improvements

When the process is mapped and the areas for improvements are clear the last step is to implement the improvements. Most important in this stage is to manage change in the sales organization. Proudfoot (2006) stated that there are several conditions for the implementation of process improvements, these critical success factors are;

 Internal capacity available for large change projects to implement and manage

29

 Sufficient and appropriate resources allocation

 Planning and monitoring results

Techniques for meeting this conditions are the creation of a communication plan, make use of sales coaching and set up teams for implementing improvements (Loudon, 2006).

3.4 Information technology

An important element that involves redesigning sales processes to make them more effective is the focus on information technology (IT). IT becomes more and more important for sales organizations, especially in an environment where IT already is a part of the process. According to Mohsen (2003) the key stimulus of redesigning an organization has been the continuing development and

deployment of sophisticated information systems and networks. Leading organizations are becoming bolder in using technology support innovative business processes, rather than refining current ways of doing work (Davenport, 1990). According to Davenport (1993) thinking about IT should be in terms of how it supports new or redesigned business processes, rather than business functions or other organizational entities. And business processes and process improvements should be considered in terms of the capabilities IT can provide.

Customer Relation Management (CRM) and Sales Force management systems (SFA) are both sales IT systems from which marketing and sales professional can capture commercial information, this kind of systems makes it possible that needed commercial information is available in one click (Loudon, 2006). Achieving increased administrative performance is an important objective, however sales technology can also enable sales professionals to perform new tasks that result in better and more profitable relationships with and for customers (Hunter, 2007). Sales IT systems makes life easier for many sales professionals and sales managers, an important reason for this is that sales pipeline can be managed more effective (Loudon, 2006). Sales technology tools are specifically designed to help the sales organization to meet its objectives in managing customer relationships. Mohsen (2003) stated that sales technology systems also create competitive advantage, and as mentioned above, productivity will increase. Sales professionals will use their time more efficiently and more

effectively. This increased productivity can create a competitive advantage in three ways: it can reduce costs, it can increase sales revenue, and it can increase market share (Hunter and Perreault, 2007).

30 While many organizations currently have introduced sales technology systems, many sales

professionals have negative judgments in using them and see this systems rather as an enemy than as a way to increase effectiveness. The systems make visible what sales professional exactly do with their time and ‘steal’ knowledge of their existing expertise (Loudon, 2006). That is why these systems are often not used on the way they should be and how it was planned to use them. Research (Tas Group, 2006) shows that in 50% of the investigated organizations systems are insufficiently used. The quality of output is determined by the input of sales professionals in the systems. Most important reasons for not using systems correctly are; difficult to work with, require additional work inputting data, dehumanize a process that should be personal, require continuous maintenance, information updating, and system upgrading and systems are too costly (Loudon, 2006). One of the main reasons that these systems do not meet expectations is that they are technology driven, the introduction of a system is often focused on the implementation of the technology rather than changing and

improving the way sales professionals work. However more and more organizations are aware that a proper working system should be designed based on existing sales processes. Doing this,

organizations start with the removal of existing systems and design systems specifically for the process of the organization. This is done in order to increase the added value as to get rid of parts that only cost time. According to Loudon (2006) there are five conditions for having a successful implementation of sales IT system. These are:

Conditions for CRM / SFA effectiveness (Loudon, 2006)

 Understand the worries and complaints of the sales professionals

 Make the switch simple through supporting sales professional in using the new system

 Make the system a part of the organization culture

 Focus on value for the sales professional before focusing on value for the organization

 Let use of the new system be required for the sales professional

When an organization chooses not to invest in a complete new IT system, it can also choose to use existing systems more effective. To decide if the systems that are used add value to the sales process an organization should screen their current systems (Loudon, 2006). Organizations can do this by asking themselves the questions stated in the table 1. When one or more questions are answered negatively, there is space for improving effectiveness.

31 Assessing current effectiveness of sales technology systems (Loudon, 2006)

Does the existing CRM or SFA system help the organization to increase sales? Does the sales professional use the systems in all performed sales activities?

Is all useful sales information completed in the system and is the information accurate and up to date?

Is the sales process model of the vendor competent for the organization? Does the system add value to the sales process?

Table 1: Assessing effectiveness of sales technology systems (Loudon, 2006)

3.5 Aligning sales resources and service

Sales resource allocation refers to the problem of allocating scarce sales employees time to the aligned sales coverage segments. Sales resource allocation or planning involves several basic components. In the simplest case, a single sales resource such as a sales budget, sales professional, sales calls, sales time, or sales effort must be allocated among several sources of sales revenue called sales entities (Drexl, 1990). There is a growing responsibility for making decisions about resource allocation in a portfolio of customers with different characteristics and prospects (Piercy, 2006). As the costs of dealing with customers continue to increase, companies face major challenges whether they should invest in resources enhancing customer relationship, or they should not invest. Figure 4 shows an approach to mapping customer accounts by their sales level and potential, and their service and relationship requirements from the supplier. This mapping process is according to Piercy (2006) a screening device for identifying the most appropriate relationship to offer a specific account and the choices to be made in allocating scarce sales resources, account management, and other company resources.

32 Figure 5: The customer Portfolio, Piercy 2006

In this research the accounts; key accounts, middle market and direct channel are involved. To key accounts mutual and joint problem-solving approaches are appropriate to win strategic supplier status (McDonald, Rogers and Woodburn, 2000). In the situation of PayPal key accounts are involved in the LM segment. According to Homburg et. al. (2002) key account management strategies and structures have developed in many companies as a way of developing close, long-term and collaborative relationships with the most important customers and meeting their needs in ways which the traditional sales organization did not.

According to (Piercy, 2006) the middle market contains customers with varying prospects, but generally moderate relationship/service requirements. This group of customers corresponds to the SMB segment op PayPal Benelux. Those accounts which shows potential may be moved into the major account area over time, on the other hand those with relationship/service requirements which are excessive compared to their potential, may be moved towards the direct channel (Piercy, 2006).

The direct channel, in case of PayPal the internet channel, is the route to market for smaller accounts with low relationship/service requirements. Customer development strategy may involve moving middle market accounts towards the direct channel, because they are consuming more service resources than they value. Based on changing prospects and the costs of serving the account,

33 accounts may be moved from the direct channel to the middle market. Such considerations illustrate the potential importance of shifting some sales force resources from a short-term transactional selling focus, to longer-term business development issues in line with business strategy (Piercy, 2006).

The theories, concepts and practices that are introduced in this chapter are useful for the sequel of this research. The next chapter will describe the research methodology.

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Chapter 4.

Methodology

Introduction

In this chapter the methodological choices of this research are described. Fist a classification of the research is stated, furthermore the choices of methodology are explained.

Documentation research, interviewing and observation are chosen as the primary methods of data collection during this research. The use of multiple methods leads to a more comprehensive and objective insight into the sales organization effectiveness problem.

4.1 Classification of the research

This research can be classified as an action research, which according to Gill and Johnson (2006) refers to research programs within organizations whose progress is guided by the needs of the organization. The main feature of action research is its focus on studying problems by changing them and then, after the research has been conducted, seeing the effects of those changes (Gill and Johnson, 2006). In this research the focus is on studying problems within the organization of PayPal Benelux and aims to present recommendations on overcoming these problems. This research can also be classified as a design oriented research. Design oriented research is research that yields design knowledge, which is knowledge that is used to design and improve social/ technical systems and is aimed at solving problems in practice (Van Aken, 2007).

4.2 Data collection 4.2.1 Documentation review

The sales management team of PayPal drawn up several documents related to the problems within the sales organization and related channels and processes. These documents included description of the process flow, role and task descriptions and data on segments ROI. These documents were consulted in the course of this research. Selections of these documents are included in appendix 2. 4.2.2 Interviewing

As the research population encompasses only 8 persons, direct face-to-face semi structured interviews where preferred as the primary research tool. Interview is the primary data collection technique for gathering data in qualitative research (Cooper, Schindler, 2006). Working directly for the Benelux business unit sales director, Eelco van Wijk, gave the support needed to conduct semi-structured interviews with all the people involved into the problem context of the sales organization of PayPal Benelux. The interviews covered a Likert-scale questionnaire and a small set of open

35 questions from which extensive deeper knowledge on the current SMB acquisitions process could be obtained. The insight knowledge of merchant developers on ideas and experiences with the current SMB acquisition process gave a deeper understanding of the problem situation. The questionnaire can be found in appendix 1. Direct interviewing appeared to have the following benefits:

- Respondents could give immediate feedback on the questions presented. Questions that were perceived as unclear or missing the core of relevance could be clarified by the interviewer.

- Instead of focussing only on the answers given, the interviewer was able to witness the speed of answering as well as the expressions of the respondents. This could give an indication whether or not the topics addressed were easy to answer and whether the questions were effectively addressing the topics to be researched.

Interviewing techniques have the potential disadvantage that the research form might not be considered objective in the sense that each respondent have been various, differing forms of attention and (as a consequence) the results might not be comparable or representative for the population (Lee, 1999). To overcome the danger of subjectivity, it was decided to design a fixed questionnaire with equal questions for each respondent. The interviews allowed for open questions in order to give maximum flexibility for each respondent (no bias for topics favoured by the

researcher, absence of presumptions and lack of creating priority lanes for the solutions).

From the extensive research material gained through interviews the most important points are condenses and the essences of the problems were found. The main results of the questionnaire can be found in appendix 1.

4.2.3 Observation

Since this research was done during an cooperating internship, the researcher was a part of the sales team of PayPal Benelux, hereby the researcher gained access to the field of the existing processes and from this point was able to point out were the problems were. This served as an important data source of drawing measures for redesign. The researcher in this research according to Lee (1999) is a participant observer. Participant observation can be defined as a field strategy that simultaneously combines document analysis, interviewing of respondents, direct participation and observation and introspection (Denzin, 1989).

36 The following observation techniques were used;

- Participating in the merchant services team - Participating in meetings

- Participating in the merchant development team - Visiting the operational office in Dublin

- Participating in the social processes of the Benelux sales teams (LM sales manager and Merchant developers)

4.3 Data analysis

From the Likert-scale questionnaire that was distributed, a standardized overview could be obtained on the opinions of the merchant developers on the merchant acquisition process. Analyzing these results gave a clear view on the main factors that influence merchant developers in not achieving their targets. The questions of the Likert-scale questionnaire were based on the theory found in chapter four. In chapter five and six they are used to substantiate these findings.

Furthermore during the interviews a flowchart of the merchant acquisition process was drawn so that the respondent could indicate were in the SMB acquisition process problems occur and were, according to the respondent, non value added processes could be eliminated. According to Loudon (2006) a flowchart is an easy method to collect and directly analyze this data so that it can be used for improving business processes. Data from observation and the set of open questions were used to collect deeper information regarding the use of information technology systems and resource allocation. Information from open questions were noted, analysed and summarized and were send to the respondents for rechecking the collected information.

4.4 Validity

Data is valid when it gives a proper view of the entire situation a researcher is researching. It refers to the relationship between a research result or conclusion and the way that it has been generated (Van Aken, 2007). Conducting multiple means of data-gathering increases the validity of a research, this is named triangulation (Baarda, e.a., 1996). Besides interviews, internal data on sales processes and scientific literature are used for this research. Below the construct, internal and external validity are discussed.

37 4.4.1 Construct validity

Construct validity is the extent to which a measuring instrument measures what it is intended to measure. Main characteristics of construct validity are the measurement should have no components that do not fit the meaning of the concept and the concept should be covered completely (Van Aken, 2007). This research tried to secure the construct validity through the use of interviews questions drawn from research to the developed concepts in this research, specifically process effectiveness and information technology. Furthermore at the beginning of this research it was made clear to the respondents that this research would be aimed at improving sales organization effectiveness.

4.4.1 Internal validity

An important aspect for internal validity in conducting research is the investigated group (Baarda, e.a., 1996). The results of a research are internally valid when conclusions relating to the measured concepts are justified and completed. In this research the employees from the investigated group are all directly associated with the problem situation; all employees are directly affected by the current lack of ineffectiveness of the SMB processes. By this means the investigated group can be called valid, as all the employees that are interviewed are used as straight input for this research.

4.4.2 External validity

External validity means to what extend the results of a study can be generalized beyond the current research External validity is often less important in business problem solving project since these project focus on one specific problem (Van Aken e.a., 2007).

Since this research is an action research and intended at giving measures for redesigning the

organization, the results and design of this research are only applicable to the situation within PayPal Benelux.

4.5 Controllability

The methodological section of a research should be described in such a way that somebody else is able to reproduce it (Van Aken e.a., 2007). To meet these terms, notes and comments were written during the research process. Moreover controllability means formulating the research findings as precisely as possible. These were obtained by reviewing research findings and receive feedback on the information collected through interviews. During the interviews notes were written and then send back to the interviewee for feedback.

38 4.6 Reliability

According to van Aken (2007) the data of an interview is reliable when the facts are not dependent on concurrence. The interviewer and the respondents can all lower the reliability of the research. To enlarge the reliability of this research a standardized questionnaire is used to recheck the answers from the open-interviews in a systematic way.

The next chapter of this thesis presents the research results which were collected with the research methods discussed in this chapter. All outcomes of the present situation are described and the focus areas of this research are clarified more precisely.

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Chapter 5.

Results

Introduction

In the previous chapters, the focus areas for this study have been identified. Within each of the problem area, research has been conducted. From the literature review, questionnaire results and observations, results were condensed and main topics were identified that will form the basis of corrective measures/ improvements (chapter 6).

5.1 Merchant acquisition process

After interviewing all involved merchant developers, a number of problem issues could be identified. Moreover after drawing a flowchart and analysing this chart with the merchant developers, the problem issues in the merchant acquisition process became clear. A flowchart is a compilation of all activities conducted by the merchant developers. All these charts formed the basis for the chart presented in figure 6. In this flowchart the main activities are shown that are purely related to acquiring customers from the SMB segment.

Figure 6: Flow chart merchant acquisition process

Based on this flowchart merchant acquisition process activities could condensed. Bases on these findings the Likert-scale questions were prepared, and therefore involved all merchant acquisition process activities. With this questions merchant developers were asked to indicate which activities they thought were consuming too much time and as a consequence playing a role in the

ineffectiveness of the process and not having enough time for gaining new business.

The result in table 2 shows that there is a common agreement that the activity ‘Qualification’ is too time consuming and plays an important role for the merchant developers in not achieving their targets relating to gaining new business. This activity specifically raises a lot of administrative and search time.