H EINEKEN A USTRALIA ’ S
S ALES F ORCE A UTOMATION S YSTEM
A road to profitable volume growth
B
YA NDREW A. B ERKHOUT
2004
H EINEKEN A USTRALIA ’ S
S ALES F ORCE A UTOMATION S YSTEM
A road to profitable volume growth
Groningen, The Netherlands 30th of August 2004
Author
Andrew A. Berkhout
Supervisors
•
Heineken Australia: Nikki Buttfield
•
University of Groningen,
Faculty of Management and Organisation: Dr. C. Lutz and Drs. D. Maccow
The author is responsible for the contents of this paper. All rights reserved.
P REFACE
Since my gap-year in Australia from 1997 to 1998, I always wanted to return there and spend another period in Australia professionally. Heineken Australia gave me the opportunity to do so.
From September 2003 to March 2004, I undertook an internship to research potential improvement areas for their newly implemented Automated Sales Force System.
This internship gave me the opportunity to use my theoretical background formed during my studies at the Faculty of Management and Organisation at the University of Groningen and apply it in practice at Heineken Australia in Sydney. The reason for my internship was to enable me to do research that would form the basis of my final thesis and graduation.
As my Master degree is in Small Business and Entrepreneurship, this research has proven to be very interesting as Heineken Australia is a small and relatively new company needing to survive in a competitive Australian beer market. The Sales Force Automation System I was researching covers nearly all areas of (small) business and can be very useful as a tool to reach Heineken’s strategic objectives.
My time in Australia turned out to be wonderful both professionally and socially and Heineken (both the company and the product) made sure of that. In addition to travelling around five states to do research, I was allowed to visit the Australian Open tennis, the Rugby World Cup and take part in many other great activities. Therefore my gratitude goes out to all my colleagues at Heineken Australia who made me feel at home and made my stay unforgettable.
I especially want to thank Nikki Buttfield who supported and supervised me during my research and Hans Erik Tuijt who gave me the opportunity to put my theoretical experience into practice.
Finally, I would like to thank Clemens Lutz and Delano Maccow for their time and guidance during the process of writing this thesis.
Andrew A. Berkhout
Groningen, 30
thAugust 2004
A BSTRACT
Heineken Australia operates in a competitive beer market. They feel they have to stay innovative to create a competitive advantage in order to achieve the strategic objective of profitable volume growth. Therefore they have invested in an Automated Sales Force System (ASFS) that can be used as a tool to facilitate the delivery of value to customers. When properly configured and supported, the ASFS will provide a powerful weapon in the overall competitive strategy by enhancing efficiency and effectiveness while building and managing relationships.
However, the ASFS, as it stands, is far from optimised. The effect the system should have on business processes isn’t as yet noticeable, as the sales force doesn’t consider the system as a tool to boost performance. The sales force is not using it to input and analyse field data and therefore decisions cannot be based on correct and relevant information. These issues resulted in the following research objective:
To achieve this objective, four steps are taken. A theoretical framework is used during these steps to ensure a reliable and scientifically sound outcome.
The first step involves the comparison between the elements of Heineken’s ASFS and an optimal ASFS to identify potential discrepancies. Although some discrepancies are discovered, none are considered a priority for improvements.
The second step involves a characterisation of the current usage of the system by outlining the users’ expectations of the system and information requirements needed to fulfil their functional objectives. This resulted in evidence that the sales force has not yet accepted the technology. This issue has to be dealt with before any other improvements can be addressed by focussing on the usefulness of the system, social influences, sales person’s characteristics and organisational facilitators.
The third step involves the assessment of the ASFS’ supporting role in enhancing effectiveness and efficiency during the sales process. By including the users’ information requirements and additional value-adding software applications, areas for improvement are highlighted.
The fourth step involves sustaining the competitive advantage by clarifying the significance of managing customer relationships and assessing the system’s supportive role during this process.
This assists in retaining profitable customers resulting in profitable volume growth, which is Heineken’s main objective.
These four steps are used to provide recommendations that answer the following research question:
A positive effect on the objective of this research is probable, when Heineken Australia implements the following recommendations listed in order of priority.
The objective of this research is to provide Heineken Australia with insight in the functioning of the Automated Sales Force System and to propose recommendations for improvement of this system.
How can a small company like Heineken Australia use the Automated Sales Force System
effectively in the Australian beer market to build a relationship with retailers in order to create
a competitive advantage and realise profitable volume growth?
1. Ensure the acceptance of the SFA system by the sales force, by:
•
Focussing on the system’s usefulness, stressing the technology’s benefits and usability.
•
Applying follow-up training courses.
•
Improving organisational implementation efforts.
•
Ensuring that technical user support is easily accessible.
•
Focussing on the personal innovativeness of the users.
•
Focussing on enhancement of supervisor’s influence.
2. Enhance Effective Operations by implementing and improving value-adding
applications, such as:
•
Call targeting & Automated Call Cycle Generator
•
Call reports
•
Specific reports & answering questions
•
Call management
•
Local marketing
•
Standardised reports, Customer surveys and Business reviews
3. Implement a Customer Relationship Management strategy and use the SFA system during this process, through:
•
Understanding markets and customers, using the system’s analytical capabilities.
•
Developing offering and targeting customers, using the data collection capabilities of the system.
•
Acquiring customers, using applications that shorten sales cycles and add value by facilitating customer needs.
•
Retaining customers, by collecting customer complaints and ensuring appropriate
customer servicing.
C ONTENT
PREFACE ... 2
ABSTRACT ... 3
INTRODUCTION ... 7
1 RESEARCH DESIGN ... 9
1.1 Problem identification ... 9
1.2 Problem statement ... 12
1.2.1 Research objective ... 12
1.2.2 Research question... 12
1.2.3 Sub-questions ... 13
1.2.4 Limitations ... 13
1.3 Methodology... 14
1.3.1 Research approach... 14
1.3.2 Type of knowledge product... 14
1.3.3 Information sources... 14
1.4 Structure of thesis ... 16
1.5 Summary ... 17
2 THEORETICAL FRAMEWORK ... 18
2.1 Information Technology acceptance by the Sales Force ... 18
2.2 Effective Operations ... 21
2.2.1 Porter’s Value Chain and Value System ... 21
2.2.2 The sales process... 23
2.2.3 Value ... 24
2.3 The Customer Relationship Management philosophy ... 25
2.3.1 Customer Relationship Management ... 25
2.3.2 CRM strategy with its significance to sustaining competitive advantage ... 26
2.3.3 CRM process ... 27
2.4 Conceptual framework... 30
2.5 Conclusion ... 32
3 SALES FORCE AUTOMATION ... 33
3.1 Emergence of the industry ... 33
3.2 The system ... 35
3.2.1 The Network... 36
3.2.2 End-user computer devices ... 38
3.2.3 Applications ... 39
3.3 The synchronisation process ... 42
3.4 Simtac ... 43
3.5 Conclusion ... 43
4 USAGE OF THE SYSTEM... 44
4.1 Users ... 44
4.1.1 Support and maintenance ... 45
4 .1.2 General Managers ... 46
4.1.3 State Managers ... 48
4.1.4 Area Managers ... 50
4.2 Acceptance of the ASFS by the sales force ... 53
4.3 Conclusion ... 57
5 EFFECTIVE OPERATIONS... 58
5.1 The ASFS’ value adding capability... 58
5.1.1 The Sales Process ... 58
5.1.2 ASFS potential support to the sales process... 62
5.2 Conclusion ... 72
6 CUSTOMER RELATIONSHIP MANAGEMENT ... 73
6.1 CRM processes and Heineken’s ASFS’s supportive role... 73
6.2 Conclusion ... 76
7 CONCLUSIONS... 77
8 RECOMMENDATIONS ... 82
9 EVALUATION ... 86
9.1 Theories used... 86
9.2 Research methods ... 87
9.3 Scientific contribution ... 87
9.4 Role of the researcher... 88
9.5 Suggestions for further research ... 88
BIBLIOGRAPHY ... 89 APPENDICES ... ERROR! BOOKMARK NOT DEFINED.
Appendix 1: Heineken Australia’s demographics... Error! Bookmark not defined.
Appendix 2: Heineken’s network... Error! Bookmark not defined.
Appendix 3: Print screen of the Territory Maintenance File.... Error! Bookmark not defined.
Appendix 4: Data behind table 4.2, 4.4 and 4.5 ... Error! Bookmark not defined.
I NTRODUCTION
On December 16, 1864 Gerard Adriaan Heineken bought “The Haystack”, which was Amsterdam’s largest brewery and founded Heineken & Co. By 1893 Heineken & Co. was already selling some 200.000 hectolitres of beer. However, by 1930 the Dutch domestic beer consumption came under pressure and for this reason, the board decided to steer a new course and placed greater emphasis on looking beyond the national borders for expansion. This laid the foundations for the international structure and organisation of today’s Heineken Company.
This expansion strategy brought Heineken to Australia where it started its operations in Sydney on April 1, 1999 as part of the Heineken Export Group (HEG). Originally, Carlton United Breweries (CUB) distributed Heineken beer in Australia, but HEG decided to create an export office for greater control over the sales, distribution and marketing of its products as the direction in which CUB was guiding the brand was considered unsuitable.
Heineken Australia continually assesses the opportunities within the Australian beer market and has substantially increased distribution, awareness and optimised pricing, wanting to become the best team in the premium beer market, with an information-driven attitude. Next to a drive in distribution and price regulation, Heineken Australia sponsors several major sporting initiatives, like the Rugby World Cup and the Australian Open Tennis.
Since its start in 1999, Heineken Australia has grown rapidly, selling 20.000 hectolitres of beer and forecasting its volume for 2003 to be 124.000 hectolitres. Profitable volume growth is again the focus for the coming year.
Australia’s beer market
1, with a total volume of 17,4 million hectolitres, is almost a duopoly, controlled by two major breweries - Carlton United Breweries (CUB) with 54% market share and Lion Nathan Australia (LNA) with 42% market share. The market can be divided into four different segments. The regular mainstream segment is the largest, but is declining by – 3.7%. The Premium segment is the smallest, but is growing the fastest by 13%. This reveals an opportunity for Heineken, which is ranked sixth in this premium segment and operates with a market share of 6%.
Heineken Australia can be characterized as a small business needing to survive in a competitive premium beer market. It’s a young company with fifty-five employees divided across five states of Australia. Its long-term objective is to grow in profitable volume and to become the number one premium beer brand in Australia, which is a difficult but achievable task. Heineken needs to stay innovative to be able to compete with the larger breweries.
It’s easy just to look at the sales figures at the end of the month and see the sales process as a black box, meaning that you don’t see what was sold and to whom. But it is a challenge to base decisions on more detailed information and manage promotions and the sales process more effectively. One method of achieving this is by getting close to customers, by gathering relevant information that can be used to streamline and optimise the sales process.
For Heineken Australia the brand is a given entity and a substantial amount of money is invested in marketing the product through the use of television and market researches. But it is the “feet in the street” that actually sell the product and need to be managed. So far, this hasn’t been the case.
Australia is a big and vast country and the sales force needs to be well organised to get close to the customers. They needed a tool to help them sell more beer to more customers without having to have a bigger sales force.
1 For a more detailed explanation of Heineken Australia’s demographics, see appendix 1
A Sales Force Automation System can support this information-driven approach and competitive urge and for this reason Heineken has invested in such a system.
Heineken Australia has asked me to research the possibilities for improvement of their Sales Force
Automation System and to bring to light those fundamental elements of the system that will lead to
creating a competitive advantage.
1 R ESEARCH DESIGN
Research design structures the research by stating the objective and the concepts used to guide the research objective.
The result of this design will be a clearly defined research objective and research question. These will be anchored in theories through conceptualisation and in the reality of Heineken Australia through operationalisations. Both serve as the input for a framework that guides the research to the achievement of the objective.
The first part of this research design starts with a description of the problem that made Heineken Australia decide that research into the Automated Sales Force System was required. It serves as input for the research objective and the research question that are presented in the second section.
After which the methodology will be described. This indicates how research questions are answered and what information sources have been used. This chapter will be concluded with a presentation of the thesis’ structure.
1.1 Problem identification
As mentioned in the introduction of this thesis, Heineken Australia has been growing rapidly since 1999, but feels it has to stay innovative to create a competitive advantage and extend this growth in the future.
Heineken is competing against major beer brewers in the Australian beer market. These breweries have larger sales forces and have larger product portfolios, next to their own distribution and a centralized ordering system. They also control the pricing. The strengths of these competitors form a challenge for Heineken to compete against. Heineken Australia will need to leverage its trade and retail relationships, as the brand is given and doesn’t leave much room for further exploitation.
Given such, the manner in which the sales and marketing functions do business is critical; here lies the focus for continuity and future growth.
Furthermore, there has never been a time when suppliers, like Heineken, needed to be closer to their customers. With strong competition between the brewers and the intense pressure on margins, survival is going to depend upon having a good bond with customers and understanding their needs and priorities. The most effective mechanisms to remain on top are to provide superior sales presence with an organisation that is truly customer driven.
2A series of tools to assist these mechanics of business and the facilitation of delivery of value to Heinekens customers is the Automated Sales Force System (ASFS).
3Sales force automation can take a primary role in information gathering and process management, including lead qualification, forecasting, team communication, complex opportunity management, and task automation. It can also serve as a portal for customer activities, allowing the Area Managers (Sales Representatives) to better coordinate company resources on behalf of the customer. Sales force automation can also take a secondary role in initiatives like lead management (by communicating the leads to sales and tracking results) and in territory and resource management, by driving management reporting that can help adjust resources and quotas to maximize results. These new capabilities offer the ability to more effectively integrate field process with the company’s internal customer facilitating process.
2 Quoted from Managing Director Heineken Australia, Hans Erik Tuijt
3 Petersen, Glen S., “High impact sales force automation”, Boca Raton, St. Lucie Press, 2000
However, in all of these areas, it's the business strategy supported by the tool - not the tool itself - that delivers the value. A strategic perspective, therefore, is required to examine the issues of competitiveness and change in the marketplace and convert them into a plan that leverages technology as an enabler. Productivity must precede competitive advantage and the delivery of superior value to the customer.
For Heineken, this system contains a number of tools that enable Area Managers enhance their professionalism towards the retailers and make their calls more effective. Secondly it provides management with tools to monitor the activities of the Area Managers. It increases the quality of- and the time the Area Managers spend with the customer and achieves a bi-directional information flow at outlet level. It is expected that Area Managers can be armed with information from managers from all functional areas of the organization, information that will be at the Area Manager’s command at the moment that they need it to respond to customer questions and objections. The result is a far more interactive exchange, in which Area Manager and customer work together to solve the customer’s problems. This scenario requires a much richer level of information on the part of the salesperson, and it is far more complex. For Heineken, this application that assists salespersons in carrying out their expanded duties can be part of the winning formula, creating a competitive advantage and boosting profitable volume growth.
Heineken’s objective for the implementation and use of this system is as follows:
The strategy for achieving the above objective can contain the following tools to assist the users of the system (Area, State and Business Managers):
4Ë
Ë Automate and manage repetitive activities
•
Call cycle planning
•
Point of sale management
•
Evaluation of investments and promotions
Ë Ë Monitor progress, performance and opportunity. Management and evaluation of:
•
Territories
•
Promotions
•
Business initiatives
•
Area Management
Ë Ë Synthesise data and information sources
•
Create reports for ease of use, encouraging action rather than information for the sake of information.
•
Provide template-style information, used to assist in increased sales and efficiency.
Ë Ë Gather information from the field:
•
What does the market really look like? - Competitive activity, Merchandising, Price.
•
Gather information from the retailer.
4 Heineken Australia, Post Audit Report for the implementation of an ASFS, Sydney 2001
ASFS is designed to improve sales force effectiveness and efficiency, by maximising the time and quality the
Area Managers have with customers and collecting outlet information that can be analysed and distributed
across the organization. This will improve the relationship with the customer, which will result in creating a
competitive advantage and growth in profitable volume without necessarily needing to increase sales force
size.
The system as it is being used now, however, is far from optimised. The effects the system should have on business processes aren’t noticeable yet. The users don’t consider the system as a tool that boosts their performance and that saves valuable time in the process of achieving their targets as essential (sales) data is not yet visible on the Area Managers tablet PC. Most importantly, the system hasn’t been properly accepted by the sales force and other users as they find it inconvenient.
This and more reasons that will be discussed further on, create a negative vicious circle. The ASFS is not doing what it is supposed to do, which leads to dissatisfied users, which leads to a dysfunctional system. In other words, Heineken’s expectations haven’t been met.
Figure 1.1: Negative vicious circle with regards to Heinekens ASFS
Heineken Australia has invested in an ASFS since 2000, with little success in streamlining the business process, repetitive tasks, flows of information or automating administration. In 2003, additional investment of almost $200.000AU– the most significant investment in information technology (IT) for the fiscal year – was loaded into the automation of sales force activity, with the objectives of enhancing relationships and performance and efficient delivery of information, product and service.
Heineken Australia needs to include only the fundamental elements of use in order to regain oversight of the overall objective and trust in the system. That is why Heineken wants to gain more knowledge of those elements that lead to a competitive advantage and profitable volume growth.
Heineken requires research to be done in order to assess these fundamental elements.
Quote from the Managing Director:
“You can only get relevant information out of the system if you put the right structure and data into the system, while knowing what you are looking for.”
Summing up, in order to create a competitive advantage and increase profitable volume growth, a research has to be conducted to gain knowledge concerning the improvement of the Automated Sales Force System that can be used as a tool to lead to effective operations and improved customer relationships. As at this stage, it is not working to its expectations. An assessment has to be made how the negative vicious circle can be reversed to create a SFA system that users accept and exploit to enhance their performance and relationships with customers, which leads to Heineken’s strategic objectives.
No performance booster or time
saver No acceptance
of system by users Dysfunctional
ASFS
No field data feedback and
input
1.2 Problem statement
The objective of this section is to present the problem statement that will serve as the framework for the entire research. It has to structure the research internally, but also align the research with Heinekens needs. It is comprised of the objective, the research question, the sub questions and the preconditions.
1.2.1 Research objective
The objective states for whom the research is carried out, what the end result should be and why this thesis result is important.
5So the objective embodies the relevance of the research.
Heineken’s urge to survive and grow in the competitive Australian beer market forced them to choose an innovative path. By focussing on attaining an information-driven attitude and therefore investing in a Sales Force Automation System, Heineken feels it can create a competitive advantage needed to realise their strategic objective. An improved exploitation of information flowing from the retail environment through the sales and marketing department is expected to be a fruitful investment to boost sales. However, as this system is currently not operating to its full potential, the objective of this research can be described as follows:
1.2.2 Research question
The research question links the research objective to the research process; it states what has to be done to achieve the research goal. The answer to the research question should allow the decision- makers of Heineken to make the right decisions in order to improve the Automated Sales Force System. So the methodological question that leads to the research goal is: what should be researched?
Because Heineken Australia wants to use the ASFS as a tool to create a competitive advantage and to boost profitable volume growth, the main question should imply a way to achieve this.
Heineken Australia has a total of fifty-five employees of which twenty-one are situated at the head office in Sydney. It is a young company, which has been operational since 1999 and is therefore considered to be a small company.
The ASFS is an electronic software based system that enable field personnel and companies to keep detailed records of their dealings with customers at all stages of the sales cycle, from initial contacts through to contracts and can be used as a tool to facilitate the delivery of value to these retailers. For Heineken Australia, these customers consist of on-premise and off-premise outlets.
On-premise retailers are pubs, bars and restaurants and off-premise outlets are bottle shops.
The other terms in the research question will be described in the following chapter (theoretical framework) and will therefore not be discussed here.
5Leeuw, A.C.J. de, “Bedrijfskundige Methodologie, Management van onderzoek”, Assen: van Gorcum,1996
The objective of this research is to provide Heineken Australia with insight in the functioning of the Automated Sales Force System and to propose recommendations for improvement of this system.
How can a small company like Heineken Australia use the Automated Sales Force System effectively in the
Australian beer market to build a relationship with retailers in order to create a competitive advantage and
realise profitable volume growth?
1.2.3 Sub-questions
The answers to the sub-questions should be needed (usable) and sufficient (effective) to answer the main research question.
Ë Ë How does Heineken’s ASFS operate compared to other SFA systems?
•
What does the history of the ASFS industry look like?
•
What are an ASFS’s key characteristics and capabilities and how are they formed for Heineken?
Ë Ë How can the current use of the ASFS by Heineken Australia be characterised and how can it be optimised?
•
In what way does Heineken use the system?
•
What are the user’s expectations of the system and what are their information needs?
•
Which aspects influence the acceptance of the SFA system by the sales force?
Ë Ë How can the ASFS assist in effectiveness of operations?
•
What are effective operations?
•
How can Heineken’s sales process be characterised?
•
Which tools/applications need to be input in the system to increase the effectiveness of operations?
Ë Ë How can the ASFS assist in Customer Relationship Management?
•
What is CRM and what is its significance to sustaining competitive advantage?
•
How can the CRM process be characterised?
•
Which applications can be used to support the CRM process?
1.2.4 Limitations
Preconditions of a research show the restrictions of the research result and methods that are chosen to conduct the research.
6The following preconditions are set:
•
The research has to be completed within 9 months.
•
Research should cover all relevant areas of the business, but focuses only on the ASFS and not on other IT-systems.
•
Recommendations must be backed by theory.
6 Leeuw, A.C.J. de, “Bedrijfskundige Methodologie, Management van onderzoek”, Assen: van Gorcum,1996
1.3 Methodology
To indicate how the research questions are answered (with what strategies, using what methods, etc.), research activities are laid down in a method of research. The choices of which methods to use have great influence on the final result of the research.
7The methodology for this research consists of the research approach, type of knowledge product that will be written and the choice of information sources.
1.3.1 Research approach
Exploratory research is used when one is seeking insight into the general nature of a problem. It explores and forms ideas and answers an open question.
8This is the case in this research. The research question, stated in paragraph 1.2, implies that more knowledge of an unknown area of the ASFS has to be gathered. The research methods are highly flexible, structured and qualitative (using questions that begin with “how” and “why”
9) because the researcher begins without a firm presumption of what will be found.
1.3.2 Type of knowledge product
In this case the research result should support management decisions. The choice for this type of research implies that the output of the research has to be the basis for the decision making process of Heineken Australia, by making recommendations based on scientific research. This type of research produces concrete knowledge, which is specified in the research objective, in the specific situation of Heineken Australia and satisfies a certain part of the total necessity of knowledge.
101.3.3 Information sources
To answer the research question both primary and secondary information sources will be utilized.
Whenever possible, secondary information (desk research) is preferred, because the costs are low and it requires minimum input from others. During the research process the weight on the information sources is expected to shift from secondary to primary information (field research).
Both sources will be used to uncover the real nature of Heineken’s issues and their ASFS. When the research problem is defined, primary knowledge becomes increasingly important. Primary information will be gathered by conducting field research. Observing and interviewing are the most common forms of field research.
11The information sources have been chosen on the bases of reliability and accessibility and noting the different information sources serves the quality and effectiveness of the research. These information-gathering methods per sub questions can be viewed in the table on the next page.
Furthermore, certain information sources that support this research have been used throughout this thesis. Like educational literature from the University of Groningen and the expert advice of supervisors.
7 Zwaan, A.H. van der, Organisatieonderzoek, leerboek voor de praktijk: het ontwerp van onderzoek in organisaties, Assen: Van Gorcum, 1990
8 Leeuw, A.C.J. de, “Bedrijfskundige Methodologie, Management van onderzoek”, Assen: van Gorcum,1996
9 Yin, R.K., The Case Study Crisis: Some answers, Cornell University, 1981
10 Leeuw, A.C.J. de, “Bedrijfskundige Methodologie, Management van onderzoek”, Assen: van Gorcum,1996
11 Baarda, D.B. en Goede, M.P.M de., Methoden en Technieken, Groningen: Stenfert Kroese, 1999
Sub Questions Secondary Information Primary Information
1. How does Heineken’s ASFS operate compared to other SFA systems?
• Literature on Automated Sales Force Systems
• Internet
• Interview with the Insights Manager and IT consultant
• Interviews with the software supplier Perenso and with data supplier Simtac
• Observations
2. How can the current use of the ASFS by Heineken Australia be
characterised and how can it be optimised?
• Literature on acceptance of information technology by sales force
• Heinekens archives and database
• Internet
• Interviews with all functional managers
• Interviews with all the State Managers and Area Managers
• Interviews with the Insights Manager and IT consultant
3. How can the ASFS assist in effectiveness of operations?
• Literature on effectiveness of activities
• Literature on sales processes
• Heineken’s database
• Internet
• Interviews with all functional managers
• Interviews with all the State Managers and Area Managers
• Survey retailers
• Observations
4. How can the ASFS assist in
managing customer relationships? • Literature on CRM
• Internet
• Interviews Area Managers
• Survey retailers
• Observations
Table 1.3 Information Sources
Chapter 1, 2 Orientation
Chapters 3,4,5,6 Research
Chapter 7, 8 Analyses
1.4 Structure of thesis
In this model a global view of the research is presented. It reflects the results of the research as a system of relevant concepts derived from the sub questions and provides an overview of what can be expected in each following chapter. It therefore structures this thesis and can be used as a guidance tool. Each chapter in the research segment answers a sub question outlined in paragraph 1.2.3.
Figure 1.8 Structure of thesis model
This research is divided into an orientation segment, research segment and an analyses segment.
The first segment has to do with the reasoning and rationale for the initiation of this research in Heinekens Automated Sales Force System. It gives the reader the necessary information needed to put the remaining chapters into perspective.
The introduction briefly outlines Heineken’s situation and dynamics in the Australian beer market as well as the strategy. Through the problem identification in the research design it becomes clear that research concerning the ASFS is necessary to support Heineken’s management in their decision-making. Therefore a detailed design is set up to support the objective of the research. The theoretical framework addresses the theories used in this research to clarify Heineken’s situation and the concepts that support answering the sub questions.
The research segment starts with a detailed description of the characteristics of an ASFS to identify the discrepancies with Heinekens ASFS. It then becomes clear what aspects of the system need further research to be able to make recommendations for the improvement of the system. As this sub question doesn’t need a specified theory to be answered, it isn’t included in the theoretical framework.
It then becomes necessary to start researching how Heineken Australia can accept and use the ASFS to operate effectively, to manage relationships with retailers and to realise profitable volume growth. It is here where it is important to understand the relations between these elements that lead
Acceptance Sales Force Effective
Operations Customer
Rel. Man.
Conclusions
Recommendations Research
Design Introduction
ASFS Volume
growth
Theoretical Framework
to the strategic objective of creating a competitive advantage and realising profitable volume growth. That is why chapter two will address theories that clarify these issues. Three theories will be described that are used to answer the sub questions.
The main and therefore the first aspect, is the acceptance of the system by the users. If the system isn’t used or not used to its full potential, then the outcome isn’t to its full capacity either (garbage in, garbage out). In Heineken’s case the acceptance of the system by the users is a very relevant issue and needs to be addressed before anything else. The ASFS can be improved, but if the sales force still doesn’t accept it, then the improvements become redundant.
After this, the value adding aspects can be researched. One of the main characteristics of an ASFS is its ability to enhance effective and efficient operations. What this means for Heineken and how this comes to life will be made clear before the aspect of customer relationship management is described. These two elements in the research positively relate to Heineken’s strategic objective of creating a competitive advantage and realising profitable volume growth. They are also very interrelated. Operating in a way that meets customer needs will inevitably build a better relationship. Also, by having a good relationship with a retailer, approaching him in a way that he feels comfortable for him will be easier, hence effective.
After the research segment of this thesis, an analysis can be made to conclude the research, after which recommendations for the further improvement of the ASFS can be made.
1.5 Summary
In this chapter a layout of the research concerning Heineken’s SFA system was presented which will be used to support the facilitation of the research objective.
The objective of this research is to provide Heineken Australia with insight in the functioning of the Automated Sales Force System and to propose recommendations for improvement of this system.
In order to successfully complete this research, the main research question will need to be answered in a scientifically sound manner.
How can a small company like Heineken Australia use the Automated Sales Force effectively in the Australian beer market to build a relationship with retailers in order to create a competitive advantage and realise profitable volume growth?
To answer this research question in a scientifically sound manner, the sub questions will have to
be answered by using relevant theories. Therefore, the next chapter will provide a theoretical
framework to enhance the understanding of Heineken’s practical problem situation.
2 T HEORETICAL F RAMEWORK
As stated before, a research needs to be anchored in the reality and in the world of theory. In this chapter the research is linked to theories in order to better grasp the problem situation, because by using theories the reality becomes more understandable. This is done to ensure that improvements of the Automated Sales Force System are being assessed. Furthermore, the theories have been carefully selected to back all findings and to assist in answering the sub-questions in a scientifically sound manner and to make sure that the outcome is reliable
As the first sub question doesn’t need a specified theory to be answered, paragraph 2.1 will start by describing the theory of IT acceptance that supports answering the second sub-question.
Paragraph 2.2 will address the third sub question and will describe Porter’s concepts of the Value Chain and Value System to clarify how IT can facilitate effectiveness and efficiency. The last sub question can be answered by using a theory concerning Customer Relationship Management. This theory is described in paragraph 2.3.
The final paragraph of this chapter addresses the relations between the concepts and theories. A conceptual model will be presented to illustrate this.
2.1 Information Technology acceptance by the Sales Force
One of the main problem areas for Heineken Australia is that the sales force hasn’t fully accepted the ASFS. Full acceptance of an ASFS is prerequisite for optimal use and further improvement to the system, which is the objective of this research.
This sub-question will be answered in chapter four using Schillewaert and Ahearne’s theory of IT acceptance.
12More scientists have researched acceptance of IT, but Schillewaert and Ahearne have integrated these different theories to obtain a more detailed theory that covers more areas. It is therefore used in this research.
The main model used in Schillewaert and Ahearne’s theory is that of the Technology Acceptance Model. The central theme of the TAM is that individual computer acceptance is determined by two instrumental beliefs: perceived usefulness (the extent to which a person believes that using the system will improve his/her job performance) and perceived ease of use (the extent to which a person considers that using the system will be free of effort).
Despite the extensive study of TAM, the impact of social influences (supervisor influence, peer usage, customer influence and competitive pressure) on acceptance remains one of the poorly understood aspects of technology acceptance and for that reason Schillewaert and Ahearne have researched these aspects too. Furthermore, their study pays attention to the salesperson’s characteristics (personal innovativeness and computer self-efficacy) and their influences on IT acceptance. Last aspects of their study are organisational facilitators (user training, technical user support and organisational implementation).
12 Schilleweart, N. & Ahearne, M.J., The acceptance of information technology in the sales force, Journal of Marketing, December 2000
Figure 2.1 Schillewaert’s research model of IT acceptance
In the research model above, all the aspects from Schillewaert an Ahearne’s theory that were suggested to influence acceptance can be viewed. It is clear that the TAM is integrated with other theories to create a more relevant model that provides a broader and richer understanding of salespeople’s technology acceptance. The arrows, however, show the results of their study and form the revised model that is more practical (and correct) to use for Heineken’s situation.
Because they researched their initial model using 787 sales representatives from 233 different companies (e.g. manufacturing, services, trade, finance and information) and because they also focussed on Sales Automation technology (like this research), it is to be expected that their revised model can be used for Heineken Australia and their sales force. So the arrows in the model show how (even if) the aspects influence acceptance.
Acceptance is the extent to which a sales individual frequently and fully uses his/her company’s SFA system and does so throughout his/her sales process activities for which the SFA system is suited. The results of Schilleweart and Ahearne’s research reinforced the role of perceived usefulness as the fundamental driver for sales technology acceptance. Perceived ease of use, however, is an important, yet secondary driver of acceptance and affects acceptance only indirectly, because technologies that are easy to use can be more useful.
Personal innovativeness in a sales person is a salesperson’s attitude, which reflects his/her tendency to experiment with and adopt new information technologies, independently of the communicated experience of others. The innovativeness of a salesperson should be seen as an individual characteristic, which he “brings along in the job”. It can be expected that sales reps that are highly innovative in the area of IT, will exhibit more positive beliefs towards using SFA technology. These technologically oriented reps will have greater computer-related skills, be better at using them and realise the usefulness of these systems for sales activities. But highly innovative individuals will also use computer applications as a natural reflex and from habit and this influences their acceptance directly.
Technology Acceptance Model Usefulness
Acceptance Social Influences
Peer Usage
Supervisor influence
Customer influence
Competitive pressure
Ease of Use Salesperson
Characteristics
Personal Innovativenes
s
Computer Self-Efficacy
Organisational Facilitators
Computer self-efficacy is an individual’s perceptions of his ability to use computer (software) in the accomplishment of a task. Because a Sales rep uses his sense of his overall computer abilities as an anchor to judge the usability of a computer system (even if a Sales rep has little or no knowledge about the ease of use of a specific system), this aspect is an antecedent of perceived ease of use and does not directly relate to acceptance.
Organisational facilitators such as user training, technical support and implementation effort, are internal marketing and service efforts targeted to end-users of the ASFS. Organisational facilitators will indirectly influence acceptance through a sales rep´s beliefs about the SFA technology. The rationale is that training salespeople on how to apply an SFA-system in their job, providing them with adequate technical support together with an adequate implementation program will enhance their awareness of the system operations and its ease of use. The findings furthermore show that organisational facilitators have a direct influence on acceptance and must be regarded as an important aspect when acceptance of IT is considered. The rationale is that a firm signals commitment to an innovation by means of its investments related to IT, the importance given to the innovation in human resource practices and the status of managers involved in the innovation process.
SFA usage of a sales rep’s communication partners (social environment) can influence both the beliefs about using SFA systems in the selling process and its acceptance over and above the beliefs.
When the improvement of the system’s acceptance has been assessed, it is of interest to examine
how the system can be improved in regards to the actual functioning. This, in turn, will influence
the acceptance of the SFA system and will lead to a better utilisation of its capabilities (change the
negative vicious circle into a positive vicious circle). The following paragraph will describe the
theory used that addresses effectiveness and efficiency of operations and in Heineken’s case, the
sales process.
2.2 Effective Operations
The main capability of an ASFS is the streamlining of the sales process by enhancing efficiencies and effectiveness (chapter three will address the ASFS’ capabilities in greater detail). In this research, these two terms put together will be called Effective operations.
In order to better understand in what way the system actually facilitates effective operations, these terms need to be described in great detail. This research will use Porter’s view
13on effectiveness and efficiency to address Heineken’s specific situation with regards to the ASFS and its supportive role in creating a competitive advantage.
2.2.1 Porter’s Value Chain and Value System
Porter’s concept of the Value Chain highlights the role of information technology in competition by describing the activities an organisation performs. The initial purpose of the value chain model is to analyse the internal operations of a company, in order to increase its efficiency, effectiveness and competitiveness.
14This concept divides Heineken’s activities into the technologically and economically distinct activities it performs, in doing business. Porter calls these activities “value activities”. Heineken is profitable if the value it creates for the customer exceeds the cost of performing the value activities. To gain competitive advantage over the local, larger breweries, Heineken must perform these activities at a lower cost and/or perform them in a way that leads to differentiation and a premium price (more value).
Porter distinguishes between primary activities and support activities. Primary activities are directly concerned with the creation or delivery of a product or service. They can be grouped into five main areas: inbound logistics, operations, outbound logistics, marketing and sales, and service. Each of these primary activities is linked to support activities, which help to improve their effectiveness or efficiency. There are four main areas of support activities: procurement, technology development, human resource management, and infrastructure.
Figure 2.2 The Value Chain
13 Porter, M.E., Competitive advantage: Creating and sustaining superior performance, New York: The free press, 1985
14 Porter M.E., and Millar V.E., How information gives you competitive advantage, Harvard Business Review, July-August 1985 Support
Activities
Primary Activities
Infrastructure
Human Resource Management Technology Development Procurement
Inbound Operations Outbound Marketing Service Logistics Logistics & Sales
Margin
The term “Margin” implies that Heineken realizes a profit margin that depends on their ability to manage the linkages between activities in the value chain. Porter’s Value Chain can be viewed in the figure 2.2.
Heineken’s value chain is a system of interdependent activities, which are connected by linkages.
Linkages exist when the way in which one activity is performed affects the cost and/or effectiveness of other activities. Linkages are flows of information, goods and services, as well as systems and processes for adjusting activities. Careful management of these linkages is a powerful source of competitive advantage because of the difficulty rivals have in perceiving them.
Heineken’s value chain is embedded in a larger stream of activities that Porter calls the “value system”. The value system includes the value chains of suppliers (Heineken Export Group), who provide inputs (beer and information) to Heineken’s value chain and includes the value chains of distributors, customers and the ultimate buyer.
Figure 2.3 The Value System
Linkages not only connect value activities inside a company (as clarified by the value chain), but also create interdependencies between its value chain and the rest of the value system. A company can create competitive advantage by optimising or coordinating these links to the outside and by adding value to its customers. An analysis of a company’s value chain should therefore consider the whole value system; so that it can be assessed how the net value produced by the company is perceived by its customers (downstream value).
So far, effectiveness and efficiency of activities and their relation to gaining competitive advantage have been described using Porters value chain and value system concepts. They demonstrate the opportunities to add value and contribute to the customer’s competitive capability. Due to substantial added value potential, firms can develop competitive advantage by reducing the costs of performing these activities and/or using distribution activities to differentiate their offering.
15Competitive advantage in cost and/or differentiation (value creation) is a function of a company’s value chain and system. A company’s cost position reflects the collective costs of performing all its value activities relative to rivals. Each value activity has cost drivers that determine the potential sources of a cost advantage. Similarly, a company’s ability to differentiate itself reflects the contribution of each value activity toward fulfilment of buyer needs. For a company to be effective, it has to generate value for the customer to fulfil their needs.
Information technology can assist in optimising and coordinating the linkages between value activities in the value chain and between players in the value system. It can therefore assist in the creation of value by fulfilling different needs for customers and by improving the exchange of information. These needs can include quicker delivery, more service and better quality. IT is applicable at every point of the value chain, transforming the way value activities are performed and the nature of the linkages among them. It is generating more data as a company performs its
15 Weitz B. and Sandy D., Relationship Marketing and Distribution Channels, Journal of the Academy of Marketing Science, Vol. 23, 1995
Upstream value Downstream value
HEG HAUS Distributors Customers Final buyer
activities and is permitting it to collect or capture information that was not available before. The result of all this IT usage can be the same; a better competitive position via lower costs and/or more differentiation.
16The terms efficiency and effectiveness have been discussed together with information technology’s supportive role. However, only in a general manner. This still doesn’t explain how Heineken’s ASFS can be used as a tool to create a competitive advantage. It merely enhances the reader’s understanding of the two terms in an organisational situation. Therefore, Porter’s concepts will be built on to assess in which specific areas the SFA system facilitates the delivery of value to Heineken’s customer.
2.2.2 The sales process
As an ASFS is a tool to initially support the Sales and Marketing processes (and Service), Heineken’s system fits in Porter’s primary activity “Marketing & Sales” of the company’s value chain (as can been seen in figure 2.2, indicated by the red lines).
Heineken’s SFA system has, at this stage, not developed to support other primary activities and it is therefore considered to be beyond the scope of this research to include. It should be noted though, that technology offers far too much power to limit the focus to the sales and marketing functions in future research, this is the main reason why chapter six of this thesis focuses on managing customer relationships; it broadens the horizon of the SFA usefulness in more (other than the sales process) situations.
The general perception of maximizing customer benefit (effectiveness) at minimum cost and cycle time (efficiency) stays the same, only the aggregation level changes to a more operational view.
Instead of researching all Heineken’s primary activities, only the sales process will be defined and the way their ASFS can support and contribute to intensifying product and service differentiation, improved customer service, shortening sales process cycles, reducing operating costs and increasing value to facilitate customer needs.
17Sales is defined as the set of antecedents, behaviour and consequences involved in past, current and future discrete sales transactions
18. A basic sales process as viewed in the figure below, provides a clear picture of the role of sales as an interface with the customer and will be used to clarify Heineken’s situation.
19Figure 2.4 The Sales Process
16 Porter, M.E., Competitive advantage: Creating and sustaining superior performance, New York: The free press, 1985
17 Moriaty, R.T. and Swartz, G.S., Automation to boost Sales and Marketing, Harvard Business Review, January-February 1989
18 Selden, P.H., What is Sales Process Engineering?, Sales Automation Association’s Quarterly Journal, December 1994
19 Petersen, Glen S., “High impact sales force automation”, Boca Raton, St. Lucie Press, 2000 Customer
Plan1 Pre-Sale2 Sell3 Post-Sale4 Relationship5 Review6
By performing these phases of the sales process efficiently and effectively by utilising the SFA system’s capabilities, Heineken can compete with the larger breweries and create a competitive advantage, which will eventually lead to profitable volume growth.
2.2.3 Value
The term value has passed the revue quite often. It is, however, necessary to clarify the term value to enhance the reader’s understanding of what value creation means for Heineken and their customers.
Porter’s concepts have been used to indicate that value can be created by performing and linking activities in the value chain more efficiently and effectively. In other words, by maximizing customer benefit at minimum cost and cycle time. For the SFA system to support this idea, the term value has to be clarified.
Traditionally, value has been defined from an organisation’s standpoint as the quality built-in a product or service relative to its price. Total customer value could then be described as a state in which the quality of the total experience, as perceived by the customer, exceeds its costs.
20The term value can therefore be divided in three components:
1. The degree to which a supplier’s product or service contributes to the saleability of the customer’s product or service.
2. The net cost benefit (margin) that a supplier’s product or service has vs. other alternatives available to the customer.
3. The bias of the purchaser relative to personal or institutional needs.
Items one and two in totality can be addressed by the concept of contributing to the customer’s profitability. The profitability concept is also consistent with the idea of partnership where two firms work together to the mutual benefit of both as was described in Porter’s concept of the value system. The third item represents the softer aspect of value that is tied with psychological characteristics (maybe the customer doesn’t want to buy from a big multinational company, but rather from a small dedicated customer). This pertains to any intrinsic characteristic of the supplier that meets the personal need of the buyer.
The amount of value created by Heineken will be described using the following function:
Value Contribution = Revenue improvement potential for customer – Total costs of customer It should be clear that value, in this research, is created by maximizing customer benefit (effectiveness) at minimum cost and cycle time (efficiency). As customer benefit is a perception of the customer himself (different customers have different needs), it is hard to measure. In the end it is the margin created (by minimising cost and maximising customer benefit) and perception of met needs that leads to the value created.
20 Petersen, Glen S., “High impact sales force automation”, Boca Raton, St. Lucie Press, 2000
2.3 The Customer Relationship Management philosophy
The capabilities of the ASFS can be taken a step further. SFA is merely a part of CRM and therefore only one piece of the puzzle of the road to profitable volume growth.
It was explained already that technology offers far too much power to limit the focus to the sales and marketing functions. Also the Managing Director stressed (during interviews) the need for Customer Relationship Management as a means of growing profitable volume (paragraph 1.1). As CRM has significance in sustaining a competitive advantage, Heineken Australia could achieve their objectives by implementing such a philosophy.
Heineken could implement this philosophy simultaneously with the acceptance and enhancement of effective operations. During field research, however, it became apparent that the company would not be ready to implement such a vast and complex philosophy, as the technology (ASFS) necessary to support the CRM strategy is not functioning sufficiently. Therefore, it was chosen to deal with this issue last when the ASFS is fully accepted by the sales force and when the system functions the way it’s expected to. The structure of this thesis (1.4) and the conceptual model (2.4) illustrates this.
2.3.1 Customer Relationship Management
To clarify what CRM exactly means, three definitions will be stated.
21One of the definitions is that of the Metagroup, who defined CRM in 2000 as the automation of horizontally integrated business processes involving front office customer contact points (marketing, sales, service & support) via multiple, interconnected delivery channels.
This definition mainly focuses on the technology aspect of CRM. Another definition states CRM as a process that addresses all aspects of identifying customers, creating customer knowledge, building customer relationships, and shaping their perceptions of the organisations and its products. In this definition, technology isn’t even mentioned. CRM is defined as a process, however not a process where technology is a necessity.
A definition that goes further is that of the Gartner Group. Gartner defines CRM as a business strategy that maximises profitability, revenue and customer satisfaction by organising around customer segments, fostering behaviour that satisfies customers and implementing customer centric processes. To achieve the long-term value of CRM, enterprises must understand that it is a strategy involving the whole business, and thus should be approached at an enterprise level.
22In comparison to the other two definitions, this definition defines CRM as a business strategy and not specifically as a process.
In this research, elements of all three definitions will be used to create a definition relevant for Heineken.
“CRM is a business strategy, which is focused on developing sustained, mutual beneficial, individual customer-supplier relationships and which is based on an IT infrastructure that gives enabled and capable employees an opportunity to function optimally during well-defined and manageable processes.”
23It is important to understand that CRM is both a business approach to improved management of customer operations and a collection of technologies to assist in automating those operations.
Therefore three aspects of CRM are of importance in this research; business strategy, processes
21 Peelen, E., Customer Relationship Management, Amsterdam: Pearson Education Benelux, 2003
22 Nelson Scott D., Management Update: the eight building blocks of CRM, Stamford: Gartner, www2.cio.com, 2003
23 Peelen, E., Customer Relationship Management, Amsterdam: Pearson Education Benelux, 2003
and technology. They all are needed to make customers, keep customers and maximise customer profitability.
24Profitable customers form the “raison d’être” of a company.
Therefore, creating customers who are profitable and trying to retain them is the aim of CRM. The figure below illustrates this. The outer cube refers to customer potential and the inner cube refers to the existing customers.
Figure 2.5 Basic Principles of CRM, Source: Haskett & Schlesinger
2.3.2 CRM strategy with its significance to sustaining competitive advantage
Now that CRM, and its aspects that are of importance, have been defined, its significance in creating a competitive advantage and sustaining it will be described in order to clarify why Heineken should try to implement this philosophy in the long run and why they shouldn’t merely focus on creating a competitive advantage (short term) through the utilisation of their SFA system during the sales process.
First of all, sustainable competitive advantage (SCA) means the prolonged benefit of implementing some unique value creating strategy not simultaneously being implemented by any current or potential competitors along with the inability to duplicate the benefits of this strategy.
25Superior skills and superior resources are involved in creating a competitive advantage. Superior skills are distinctive capabilities of personnel that set them apart from the personnel of competing firms, and superior resources are the more tangible requirements for advantage that enable a firm to exercise its capabilities.
26Barney mentions that not all firm resources hold the potential of Sustainable Competitive Advantage, instead, they must possess four attributes: rareness, value, inability to be imitated, and the inability to be substituted. So, by implementing a CRM strategy these four attributes of resources should be achieved in order to sustain a competitive advantage. By quoting five researchers in the field of strategy and SCA it will become clear how CRM adds to achieving a Sustainable Competitive Advantage.
2724 Drucker, P. F., Tasks, Responsibilities, and Practices. New York: Harper & Row, 1973
25 Barney, J., Firm resources and sustained competitive advantage, Journal of Management 17, 1991
26 Day, G. S. and Wensley, R., Assessing advantage: A framework for diagnosing competitive superiority, Journal of Marketing 52, 1988
27 Hoffmann, N. P., An examination of the “Sustainable Competitive Advantage” concept: Past, Present, and Future, Academy of Marketing Science Review, Vol 4, 2000
Duration Customer relationship (Retention)
Profitability customers (Expansion)
Amount of customers (Acquisition)
