The Death of the Sales Force
ECR model may place emphasis on service and technical support.
The traditional institutional sales representative is becoming a casualty to the move to electronic E2B supply chain management.
In Death of a Salesman, Willy Loman has to face the fact that he no longer has his sales job — and therefore no longer has his basic identity. He can’t handle it. Miller lets us know, however, that the problem lies primarily with Willy himself. Thousands of pages have been written by scholars, critics, and innumerable college students trying to explain Willy’s situation or behavior, but no one blames the job market. Today, however, it is Willy’s job itself – or more specifically, some well-paying institutional sales jobs – that are in danger of disappearing. And other than those whose jobs they are, no one really seems to be noticing.
It is not that there is no attention being given to the overall phenomenon that is responsible for this radical shift. Indeed, there is a great deal being written about it, but the focus is very different. The analyses are birth notices about the advent of business-to-business electronic commerce, not obituaries for the death of the sales job. They celebrate the way Efficient Customer Response (ECR) and related strategies have helped to increase productivity and keep inflation in check rather than mourn the fact that some good-paying jobs, and even a way of life, may be passing away.
To understand what is happening to the sales function in businesses impacted by ECR strategies today, it is necessary to understand what has changed the supplier-customer relationship so dramatically — to understand Efficient Customer Response and the way it has changed several industries.
Efficient Customer Response
The impetus for ECR came from a study commissioned by the grocery industry to help them determine how to react to the entry of mass market discounters, such as Wal-Mart, into the grocery industry. The study concluded that $30 billion in waste could be cut from the distribution chain and still leave a potential cut in prices to the consumer of as much as twelve per cent. The industry sat up and took notice.
ECR consists of four main components: store assortment, product replenishment, promotion, and product introductions. Store assortment is simply what is on the shelf. Traditionally shelf management meant knowing what had sold in the past or was selling at the moment and replacing it. Today, using data available from technological advances such as EDI (Electronic Data Interchange) and scanner data, along with the more traditional sources of information, the firm can focus more on the optimization of future sales.
Product replenishment or CRP (continuous replenishment) involves developing an integrated network between the manufacturers and the retailers. Under the ideal arrangement, they will work together in forecasting consumer demand and determining shelf space allotments. Then an EDI system will be set up that monitors the actual sales in light of the forecasted sales, and the system adjusts the pre-booked shipments accordingly. Ultimately the system develops to the point that the retailer gives the manufacturer carte blanche to decide what to stock under the provision that the retailer does not own the merchandise until it is sold. Advantages of the system include a significant decrease in excess inventory and the elimination of the need for warehouse and distribution centers, saving both the manufacturer and the chain stores a significant portion of their storage costs as well as the costs of double shipping. For the manufacturer, it allows for more efficient production schedules, better category management, and lower warehousing costs as well. For both, it minimizes ordering, billing, and pricing errors; deductions; credits, and the general processing of documents. In essence, it cleans up the system so as to provide maximum efficiency for both parties.
The third component of ECR is more efficient promotion. The traditional manufacturer-retailer relationship is fraught with inefficiencies that are derived from forward buying, diverting, special deals, and multiple deals that vary from store to store, depending upon the sales representative-buyer relationship. ECR eliminates most of this by negotiating set low prices that will maximize profit and efficiency for both. However, this does not mean the complete eradication of promotions. It simply means that by using the EDI technology, the manufacturer and retailer can monitor results on a daily basis and develop promotional activities that move the maximum product at the optimal profit on a store-by-store basis if desired.
The fourth component of ECR is that of new product introduction. This is the area viewed as the most difficult into which to integrate ECR. In a truly integrated system the theory would call for a partnership to jointly develop new products that meet the wants, needs, and desires of the consumer. This is more of a challenge.
While ECR offers many potential advantages to the consumer, including fresher merchandise and lower prices, — it remains to be seen if a significant amount of the savings will be passed on, other than that required by competition. That, after all, was what gave rise to the ECR strategy in the first place.
What Does a Salesperson Do?
To return to our theme of the sales person and how he or she is affected by this new model, it is important to review exactly what a sales person does. A sales person does many things of course. By the 1960’s, social scientists were beginning to dissect the position in order to understand it better. One distinction made early on was between creative and maintenance types of selling. Building on that work, different authors expanded the typologies to include categories such as order takers, missionary salesperson, trade salesperson, technical salesperson, current sales, and new sales. In the 1980’s, Moncrief tried to empirically validate the different types. He ended up with ten groups of activities that, combined, seem to include all of the functions of the salesperson described in the other taxonomies. These are:
- The selling function itself, e.g., making the presentation and overcoming objections.
- Working with orders.
- Servicing the product – primarily relevant in the case of a complex technical product which might require installation, maintenance, and customer training for its use.
- Information management, including receiving feedback from customers and relaying it to management.
- Servicing the account, including inventory control, stocking shelves, handling local advertising, and setting up point-of-purchase displays.
- Attending conferences and meetings, including trade shows.
- Training and recruiting new salespeople.
- Out of town travel.
- Working with distributors.
The introduction of ECR strategies changes most of these.
The Effects of ECR on the Sales Position
The most fundamental key to the success of ECR is a change from the traditional adversarial relationship between the manufacturer and retailer to a partnership. The first step is a commitment to the process by top management and a change in attitude and behavior that is both mandated and modeled by the top management of both sides. There must also be a realistic understanding of the resources necessary to be successful. Next, there must be the creation of a team that includes members on at least the vice presidential level from both partners. In fact, one ECR survey found that, in 21% of the companies surveyed, the CEO was deeply involved in the process.
This shift from a bottom-up to a top-down process affects many of the traditional sales person’s responsibilities. For purposes of discussion, we will assume an ECR situation which is actually working as it should. If we look at the first factor in Moncrief’s schema, the selling function, that now becomes a part of the team’s negotiation. It is the team that decides which products will be carried, at what price, and with what terms, including decisions about new product introductions. These decisions are based on full sharing of data. As for the second factor, working with orders, most of this becomes automated under the ECR strategy. Prospecting, or identification of new and potential partners, is a simpler task because there will be a specific set of criteria for selecting new partners that is developed by the team. Delivery of new products is done automatically by the manufacturer, as is re-ordering.
Even information flow is affected by ECR. Instead of each store manager communicating with the salesperson to work out problems and provide feedback, there will be an immediate upward flow of information to the ECR team either verbally or electronically. Since team members from both sides are in regular contact, there is little need for a salesperson as an intermediary.
The function of servicing the account consists of activities performed at the customer location. With the ECR strategy, the handling of inventory at the store level will be simplified by special pallet designs and the use of cross docking. The stocking of shelves will be handled by existing store employees. Inventory control will be done by EDI and CRP technologies. Even the promotional and advertising activities traditionally done at the store-salesperson level will be largely a responsibility of the team.
Entertainment, traditionally considered one of the staples — and perks — of the job is greatly diminished. The decisions it was designed to facilitate are negotiated by the joint ECR team. Likewise, out-of-town travel and recruiting and training new salespeople are largely eliminated. Of the original set of factors, only the technical aspects involved in servicing an account and some missionary selling (promotions and public relations aimed at the final end-user) remain. The other activities are inefficiencies under the new system.
Sales Force to Re-tool for Service & Technical Support
The logical question is, “What does the future hold for the sales force in large companies that implement an ECR strategy?” Clearly, the role and responsibilities of the sales force will change. With the majority of the traditional activities moving into upper management, it will be necessary for the sales force to retool in the direction of service and technical support. With the introduction of EDI and CRP to both partners in the ECR partnership, not only will there be the need for the technical salesperson but also the internal technician. As the related technologies continue to develop, there will be a need for those who can develop strategies as they relate to inter-organizational goals. In addition, there will be a greater need for those who can interpret the endless stream of data into understandable and manageable terms. These are, however, different skills than are stressed in the traditional sales job.
Finally, for those who are unable or unwilling to retool, all is not lost. ECR strategy will not be adopted by everyone, and it will be possible to attain a sales job with these larger companies that do not get on board with ECR. However, the competition for these positions will be fierce and competing against ECR companies will be difficult at best. The best niche for the traditional salesperson will be in small, localized markets serviced by small to medium sized companies where the lack of economies of scale prevents the adoption of ECR.
Willy Loman could not adapt, and in fact, could not face reality. For those currently in the sales profession, at least those in industries impacted by ECR, the reality is that their world is changing. Moreover, these changes are unlikely to be reversed. There is the possibility of a happier ending than Willy’s however. These changes also have opened up new opportunities and positions for those willing to adapt. The skills involved in selling – being able to communicate, persuade, overcome objections – are skills with many applications. But the new jobs may not include fancy dinners and a box at the stadium.
For Further Reading…
Moncrief, William C. (1986) Selling Activity and Sales Position Taxonomies for Industrial Salesforces in Journal of Marketing Research (August), pp. 261-270.
About the Author(s)
David McMahon, PhD, is an associate professor of marketing in the Graziadio School at Pepperdine University. Dr. McMahon's research interests are in the areas of services, logistics, and ethics. He is co-author of one book and his research has been published in several academic journals including the Journal of Marketing Theory and Practice and The Journal of Business and Economics Research as well as a number of conference proceedings.