Sabnis Et Al 2013 JM Sales Lead Black Hole
Sabnis Et Al 2013 JM Sales Lead Black Hole
Sabnis Et Al 2013 JM Sales Lead Black Hole
Lilien
Keywords: sales leads, lead qualification, sales force, sales-marketing alignment, sales foliow-up
In too many companies. Sales and Marketing feud like one of the most contentious issues between sales and mar-
Capulets and Montagues. keting functions is the lack of follow-up of leads that mar-
—Kotier, Rackham, and Krishnaswamy (2006, p. 68) keting generates (see also Churchill, Ford, and Walker 2003;
Zoltners, Sinha, and Lorimer 2009). Sales reps complain
O
n average, business-to-business (B2B) firms spend about the poor quality of the leads; marketing complains
65% of their marketing budgets on activities such as about sales reps' poor follow-up (Biemans, Brencic, and
trade shows, product seminars, cold-calling, data- Malshe 2010; Homburg and Jensen 2007; Homburg,
base purchases, and telemarketing—all activities designed to Jensen, and Krohmer 2008). According to the executive
yield information about prospective new customers (Sirius- director of the Sales Lead Management Association, poor
Decisions Inc. 2006). Yet studies show that sales represen- follow-up "is not a small problem, it is a big problem, a 10
tatives (reps) never contact approximately 70% of the leads percent to 30 percent problem ."2 Despite widespread recog-
generated by their marketing departments (Marcus 2002; nition (Smith, Gopalakrishna, and Chatterjee 2006; Watkins
Michiels 2009); instead, the leads disappear into a prover- 2003), researchers have devoted little attention to either the
bial "sales lead black hole" (e.g., Hasselwander 2006).' causes or possible cures of this phenomenon (Chatterjee
Kotier, Rackham, and Krishnaswamy (2006) suggest that 1994; Jolson 1988).3
Sales reps often argue that many marketing-generated
'The number of marketing leads provided to sales reps can be
leads (or marketing leads) lack the potential to result in
so large that it is not possible for the sales reps to pursue all of
them, even if they desired to do so; thus, the 70% figure reflects actual sales, so they focus only on what they perceive to be
inadequacies of marketing as well as the sales function. "good leads" (Oliva 2006). However, Hasselwander (2006)
asserts that firms often lose "ready-to-buy" customers that
Allocation of Time
the proportion of the time allocated to self-generated leads attractive may not meet the immediate needs of the sales
decreases (increases) and (2) independence between the rep.
proportion of the time allocated to marketing leads and self- Monitoring by sales managers could motivate sales reps
generated leads. Because we could find no research litera- to pursue those marketing leads. Sales managers might
ture on self-generated leads and our focus is on marketing believe that a greater volume of marketing leads provides
leads, our analysis of self-generated leads is exploratory. sales reps with a greater opportunity to achieve their goals.
However, the degree of pursuit also depends on sales reps'
MOA Framework and Sales Rep Time Ailocation individual circumstances (i.e., how did Sally get so many
Ideally, marketing generates high-quality leads, and sales self-generated leads, which Jason lacked?). In other contexts,
reps follow up on most of them; however, the reality is dif- the MOA framework has proved useful in determining how
ferent for several reasons, including differences in goals such differences in circumstances might affect actions, such
and time horizons. For example, marketing, with its longer- as customer information processing of advertisements
term perspective, likely considers leads that demand careful (Maclnnis, Moorman, and Jaworski 1991), knowledge shar-
nurturing to be more attractive than sales does, because ing among employees (Siemsen, Roth, and Balasubramanian
sales reps must focus on short-term quota attainment (Hom- 2007), managerial assessments of marketing performance
burg and Jensen 2007). In addition, marketing may have a (Clark, Abela, and Ambler 2005), and new product introduc-
cost-effective way to generate a large number of leads; a tions (Wu, Balasubramanian, and Mahajan 2004). In Figure
sales rep may simply want a few leads to help meet his or 2, we identify the context-specific constructs we use to
her quota. Thus, the leads that marketing views as most operationalize an MOA framework.
•Experience
ABILITY
•Past Performance
••Experience and past performance measure different aspects of ^Empirical research indicates that "sales reps are quota achiev-
sales rep ability. Experience indicates years spent in the job, ers rather than dollar maximizers" (Churchill, Ford, and Walker
resulting in detailed knowledge of the market, the selling process, 2003, p. 232), and their prior quota achievements influence their
and contacts with customers and vendors (Park and Holloway lead follow-up behaviors (e.g., Gaba and Kalra 1999; Ross 1991).
2003). Past performance indicates an ability to achieve (and Sales reps with better previous sales performance are more likely
exceed) quotas through selling skills (Weitz 1978). Although both to follow up on leads that offer a lower likelihood of closure but
aspects of ability should benefit sales reps, their effect on time higher revenue potential, rather than the reverse (e.g., Mittal,
allocations need not be the same. Thus, we propose separate Ross, and Tsiros 2002).
hypotheses for the effects of experience and past performance. ^Although sales reps may not allocate a fixed amount of time to
^Although we expect sales rep experience to correlate with the lead follow-up, there are limits on the amount of time, and trade-
sales rep's ability to build relationships with customers, there may offs must be made; thus, pursing one lead can make the next lead
be diminishing returns to increased ability. Thus, we estimated a less attractive (see also Kotier, Rackham, and Krishnaswamy
model with a squared term for experience as an additional 2006).
explanatory variable, but the coefficient for this squared term was 'The interactions of ability with motivation and opportunity are
not statistically significant. most appropriate here: Ability is an individual-specific variable,
^Although experience may not be the strongest indicator of whereas motivation and opportunity are firm-specific variables,
sales reps' ability, it significantly affects their knowledge of the consistent with the classical person-situation framework (Dickson
marketplace and ability to manage customer relationships, both of 1982). We estimated a model with interactions between motivation
which infiuence lead follow-up activities (Coughlan and and opportunity variables in a post hoc robustness assessment but
Narasimhan 1992; Szymanski and Churchill 1990). found no empirical support for such relations.
Ability
•Sales Reps' Experience
•Sales Reps' Past Experience
-b
Motivation a-b
•Prequalification Process
•Manageriai Tracking Lead FoMow-Up
•Marketing Leads
•Self-Generated Leads
Opportunity
•Marketing Lead Volume
tion process (motivation) should have a positive relation- Prequalification process and sales rep past performance.
ship with time allocated to marketing leads (Hi^). As sales Leong, Busch, and John (1989) show that sales reps' past
reps' experience increases, their knowledge of the market- performance (quota achievement in previous year) is posi-
place and the quality of their relationships with customers tively related to reps' ability to identify customer needs and
increases as well (e.g., Coughlan and Narasimhan 1992). communicate the value of sales offerings. In a meta-analysis,
Furthermore, an increase in sales reps' knowledge and rela- Verbeke, Dietz, and Verwaal (2011) demonstrate that sales
tionship quality should enhance (1) the efficiency with rep performance is positively related to selling-related
which sales reps manage their existing clientele and (2) the knowledge, degree of adaptiveness, cognitive aptitude, and
ability of these sales reps to follow up on and close leads. work engagement but negatively related to role ambiguity.
Greater efficiency in managing existing relationships, then, Dubinsky and Hartley (1986) note that past performance is
should provide more time to pursue other activities, includ- positively related to the likelihood that sales reps respond to
ing existing customer management and potential new cus- motivational cues, including information about the quality
tomer acquisition.10 Furthermore, a greater ability to close of the organizational processes. Thus, an effective lead pre-
leads should motivate sales reps to pursue more leads. qualification process should equip sales reps with reliable
Because the prequalification process legitimizes leads, sales information that enables them to pursue the goal of acquir-
reps with greater experience should spend more time pursu- ing new customers.
ing marketing leads that come from a more reliable lead As sales reps' past performance improves, their ability
generation process. We expect experience and the perceived to achieve their goal efficiently also improves. Thus, as past
quality of the prequalification to have a positive interaction performance improves, sales reps should have more time to
effect on the proportion of time sales reps spend on market- pursue selling-related activities, including the pursuit of
ing leads. new customers. Furthermore, as Mittal, Ross, and Tsiros
H4a: The positive effect of the perceived quality of the market- (2002) find, an increase in past performance can enhance
ing lead prequalification process on the proportion of confidence about taking on the challenge of acquiring new
time spent on the follow-up of marketing leads increases customers. As past performance increases, sales reps can
as sales rep experience increases. better discern organizational cues (Leong, Busch, and John
1989) and gain the ability to act on these cues (Verbeke,
can only speculate about what sales reps might do with Dietz, and Verwaal 2011). As the quality of the lead pre-
time that becomes available due to their greater efficiency, but as qualification process improves, sales reps also are more
the quality of the prequalification process increases, the option to likely to recognize that lead follow-up is important from an
pursue new customers seemingly should be more attractive and, in organizational perspective, as well as possess the ability to
the aggregate, pursued to at least some extent. exploit this recognition. Thus:
TABLE 1
Descriptive Statistics
A: Firm-Specific Descriptive Statistics
Total Firm1 Firm 2 Firm 3 Firm 4
Variable N 461 51 30 100 280
Managerial tracking M 2.81 3.62 2.39 3.20 2.55
SD 1.33 1.16 1.16 1.33 1.28
Quality of prequalification M 2.87 4.60 3.23 3.14 2.43
SD 1.25 1.10 1.25 .98 1.04
Marketing lead volume M 48.61 109.30 199.48 18.42 32.14
SD 141.52 111.1 428.5 21.68 88.57
Past performance M 111.64 97.37 99.53 104.31 118.17
SD 50.37 22.32 15.53 52.73 54.47
Experience M 11.92 18.45 10.77 8.83 11.96
SD 7.53 9.69 7.56 7.22 6.40
B: Bivariate Correlation Coefficients
Variable SD MLT SLT MT QP iWLV NAQT PP
Marketing lead follow-up time proportion (MLT) .057 .091
Self-generated lead follow-up time proportion (SLT)) .156 .167 .108"
Managerial tracking (MT) 2.81 1.33 .189* -.041
Quality of prequalification (QP) 2.87 1.25 .246" -.011* .38**
Marketing lead volume (MLV) 48.61 141.52 -.084 -.001 .05 .06
Non-acquisition time proportion (NAQT) .788 .196 -.548** -.891** -.07 -.05 -.07*
Past performance (PP) 111.64 50.37 -.038 -.129* -.06 -.13** -.05 .05
Experience (EXP) 11.92 7.53 -.077* -.066 .07 .13** .08** .05 -.06
*Correlation significant at the .10 level.
**Correlation significant at the .05 level.
Notes: Managerial tracking and quality of prequalification reflect the mean scores of four items (measured on a seven-point scale). Past per-
formance is the percentage quota achieved in the previous year. Experience is tfie number of years the respondent has viiorked as a
sales rep. The sample size is 461. The means (M) and standard deviations (SD) for the independent variables apply across all four
firms.
(2) Results
Our estimation reveals firm-level coefficients for the inter-
cept term and all explanatory variables. Because the signifi-
(3) cant firm-level coefficients are consistent with the aggregate-
level coefficients (in the hierarchical Bayesian specification),
where we report only the aggregate-level coefficients in Table 2.
Among the main effects, we find support for Hi^ (b =
^firm[i] and <l>firm[i] are firm-specific intercepts, .64,;? < .05), which suggests that as the perceived quality of
ßfirm[i] and Yfjrni[i] are firm-specific vectors of coeffi- prequalification increases, the proportion of time spent on
cients, and marketing leads increases. We also find that as the per-
Xj is the vector of explanatory variables for sales rep i. ceived quality of prequalification increases, the proportion
of time spent on self-generated leads decreases (b = -.38,
Because Y¡n = 1 - Yj^, - Yj^, the Dirichlet parameter corre- p < .05).
sponding to nonacquisition for each sales rep Aj^ is defined We had argued that managerial tracking of sales reps'
as a sales rep-specific unknown constant (accounting for follow-up of marketing leads would signal the importance
heterogeneity) for identification purposes, drawn from a that the managers place on lead follow-up and thus increase
vague prior uniform distribution U(0, 100). We specify that follow-up of marketing leads; however, our results show an
the firm-specific intercepts Qfirm[i] and <I>f,rm[i] each come opposite effect (Un,: b = -.89, p < .05; note that the effect
from aggregate-level normal distributions, whereas the firm- of managerial tracking on self-generated leads is statisti-
specific coefficients in the vectors ßfirm[i] and Yf,nn[i] are cally nonsignificant: b = .28, n.s.). As we discussed previ-
drawn from aggregate-level, multivariate normal distribu- ously, as a behavioral control mechanism, managerial track-
tions. With the ßfirn,[i] coefficients, we can test our hypothe- ing may not be welcomed by "an excellent salesperson who
ses related to marketing lead follow-up; with the Yfinn[i] refuses to accept behavior control" (Oliver and Anderson
coefficients, we test hypotheses related to self-generated 1994, p. 63) and thus prompt reactance (Joshi 2010) from
lead follow-up. sales reps and a reduction in follow-up of marketing leads.
Anderson and Oliver (1987) theorize that firms should
Modei Estimation benefit from behavior-based controls, but they find in prac-
We estimate the model using standard Markov chain Monte tice (Oliver and Anderson 1994) that outcome-based con-
Carlo procedures; we provide details about the prior trols are more effective for driving performance (confirmed
specification, posterior distribution, and our sampling pro- by Heide 1994). Because of the result-driven nature of their
cedure in Appendix B. For the estimation, we used three jobs and achievement-based compensation schemes, sales
concurrent chains (Bolstad 2007), such that for each chain, reps likely are even more focused on outcomes than other
the first 5000 iterations are the bum-in sample and the next employees. Thus, managerial tracking is not just ineffective
50,000 iterations provide the sample for parameter estima- but could even lead to negative consequences relative to the
tion. To assess model convergence, we used the Gelman- intended objective of increasing marketing lead follow-up.
Rubin statistics. To test for the statistical significance of the We argued that as marketing lead volume increases,
coefficients, we checked whether the 95% Bayesian poste- sales reps' opportunities to pursue marketing leads increases.
TABLE 2
Results for the Dirichlet Component Regression Model
Marketing Lead Self-Generated
Time Proportior1 Lead Time Proportion
Variable Parameter 2.5% 97.5% Parameter 2.5% 97.5%
Prequalification .64* .39 .85 -.38* -.59 -.18
Managerial tracking (H.ib, +) -.89* -.96 -.68 .28 -.05 .58
Marketing leads volume (H2, +) .44 -.28 .73 .41 -.36 .92
Experience (H3a, -) -.19 -.34 .16 .24* .12 .37
Past performance (H3t,, -) -.31* -.46 -.12 .29* .16 .38
Experience x prequalification (H^^, +) .71* .48 .96 -.36* -.51 -.24
Past performance x prequalification (H4b, +) .04 -.21 .23 .09 -.11 .23
Experience x managerial tracking (Hsg, -) -.55* -.74 -.39 -.44* -.49 -.28
Past performance x managerial tracking {H^t, -.21* -.31 -.14 .29* .17 .41
Experience x marketing lead volume (Hga, -) -.11* -.16 -.11 .21* .11 .34
Past performance x marketing lead volume .15* .09 .24 -.19* -.30 -.08
*p< .05.
TABLE 3
Elasticity of Marketing Lead Time Proportion
Controllable Factor Aggregate Firm1 Firm 2 Firm 3 Firm 4
Quality of prequalification 1.12 1.24 .58 1.64 1.43
Managerial tracking -.14 -.08 -.27 .33 .02
Marketing lead volume -.07 .05 -.14 -.16 .21
Notes: Elasticities refer to the effect of controllable factors on marketing lead follow-up time, at the aggregate level and for each of the four
firms.
Conclusion
For too long, sales and marketing have blamed each other Appendix B
for the sales lead black hole. There is more than enough Priors arid Full Conditional
blame to go around. We hope our results demonstrate that Distributions
the solution requires not just more general cooperation but In this Appendix, we provide details on the priors and full
rather forms of cooperation that are attuned to individual conditional densities used in the Bayesian estimation of our
sales reps' abilities and the firm's specific marketing and Dirichlet regression model. Our dependent variables are the
sales processes. proportions of total time allocated to marketing leads and
nIN
,-1
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