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• Hard since they have to frequently deal with new people, namely customers, who are tough and demanding. And they only start selling when customers say “No”.
SALES FORCE MOTIVATION IN THE CONSUMER GOODS MARKET IN VIETNAM: A CASE STUDY OF THE TOILETRIES AND BEVERAGES INDUSTRIES. by Luong Vu Quang A research study submitted in partial fulfillment of the requirements for the degree of Master of Business Administration Examination Committee Dr. Mark W. Speece (Chairman) Dr. Lalit M. Johri Dr. Clemens Bechter Nationality Vietnamese Previous Degree(s) Bachelor of Economics Hanoi National Economics University Hanoi, Vietnam Scholarship Donor Government of Switzerland Asian Institute of Technology School of Management Bangkok, Thailand April 1999 Abstract There is no doubt that motivation to the sales force is very important in sales management, especially in Vietnamese today’s conditions, where selling as a career is in its infancy stage. The conditions impose difficulties for sales management to determine what motivates salespeople and how to motivate them effectively. Thus, this paper aims to make clear these issues in two sectors: joint ventures (JVs) and state owned enterprises (SOEs). With in-depth interviews with nine representative companies of the two sectors, the research finds that, though in the same macro-economic conditions, salespeople in JVs place more value on high order rewards such as training, recognition, promotion. Meanwhile their SOEs counterparts show more interest in low order rewards such as salary/commissions, fringe benefits, job security and stability. This is mainly because sales and sales force management in JVs are more professional, systematic than in SOEs. To improve, JVs need to fine tune current practices while SOEs need fundamental changes. Specifically, the research suggests that, JVs should employ a multi-ladder sales system and SOEs should replace their centrally-planned minded sales managers by market-oriented ones. ii Acknowledgement For the completion of this research, I would like to express my deepest gratitude to Dr. Mark Speece – Chairman of the Examination Committee – for his continuous guidance and encouragement throughout the research period. I also would like to express my profound gratitude to Dr. Lalit Johri and Dr. Clemens Bechter – Committee Members of the Examination Committee – for their continuous comments and advice during the conduct of this research. Great thanks to my friends, the sales people and the companies that have helped to collect valuable information which is essential for the completion of this research. I also wish to express my thanks to the Switzerland Government for providing the scholarship in AIT. Sincere thanks to all of my friends at SAV and AIT, who have been sharing with me the studying and living during the program. I am extremely grateful to my beloved brothers and sister for their understanding, supporting and inspiration through my life. And, no word could possibly express my gratitude to my parents. Their loving encouragement and many sacrifices could never be forgotten. iii Table of Content Chapter Title Page Abstract .ii Acknowledgement .iii Table of Content .iv List of Tables vi List of Figures .vii CHAPTER 1 1 INTRODUCTION .1 2.1RATIONALE OF THE RESEARCH .1 2.0 Role of motivation to the sales force .1 2.1 Selling as a new career in Vietnam 1 2.1PROBLEM STATEMENT .1 2.1RESEARCH OBJECTIVES .2 2.1INFORMATION NEEDS 2 2.0 From the sales reps 2 2.1 From sales managers 3 CHAPTER 2 4 LITERATURE REVIEW 4 2.1MODEL OF SALESPERSON MOTIVATION .4 2.1PREVIOUS FINDINGS ON MOTIVATION OF THE SALES FORCE .5 2.0 Expectancy estimates .5 2.1 Instrumentality estimates .6 2.2 Valence estimates 6 2.3 Fairness .7 CHAPTER 3 8 RESEARCH METHODOLOGY 8 2.1DATA COLLECTION 8 2.0 Companies investigated .8 2.1 In-depth interviews .9 2.2 Interviewing and data processing .10 2.1SCOPE OF THE RESEARCH 10 2.1RESEARCH FRAMEWORK .12 CHAPTER 4 13 FINDINGS 13 4.1INTRODUCTIONS TO THE TWO SECTORS: JVS AND SOES .13 4.1.1 State owned enterprises (SOEs) .13 4.1.2 Joint ventures (JVs) 13 4.2 BACKGROUND FINDINGS 14 iv 4.2.1 Channels .14 4.2.2 Recruiting .15 4.2.2.1 Recruiting at JVs .15 4.2.2.2 Recruiting at SOEs .16 4.2.3 Orientation .17 4.2.3.1 At JVs 17 4.2.3.2 At SOEs .18 4.2.4 A typical sales rep’s profile 18 4.3MOTIVATIONAL PERCEPTIONS .20 4.3.1 Effort – Performance Relationship 20 4.3.1.1 At JVs .20 4.3.1.2 At SOEs 21 4.3.2 Performance – Rewards relationship and Fairness 22 4.3.2.1 At JVs .22 4.3.2.2 At SOEs 22 4.3.3 Valence of rewards .22 4.3.3.1 Basic financial compensation: Salaries, Commissions, Fringe benefits .22 4.3.3.2 Work supports .24 4.3.3.3 Prizes . 24 4.3.3.4 Training . 25 4.3.3.5 Job achievement .26 4.3.3.6 Recognition of management 27 4.3.3.7 Advancement opportunities .27 4.3.3.8 Job responsibility .28 4.3.3.9 Job security and stability .29 4.3.3.10 Freedom and supervision .29 4.4MOTIVATIONAL PRACTICES .31 4.4.1 Setting up motivational policies, incentive packages, or/and campaigns, programs 31 4.4.2 Communicating these program to sales reps .32 4.4.2.1 At JVs .32 4.4.2.2 At SOEs 32 4.4.3 Monitoring and facilitating implementation 32 4.4.4 Evaluating, reinforcing and improving the programs .33 4.5LIMITATIONS AND DIRECTIONS FOR FUTURE STUDIES 33 CHAPTER 5 34 RECOMMENDATIONS 34 5.TO JOINT VENTURES: CREATING A PARALLEL MULTI-LADDER SALES SYSTEM 34 REFERENCE 40 APPENDIX 1: GUIDELINE QUESTIONS FOR INTERVIEWS 42 APPENDIX 2: RANKING OF THE IMPORTANCE OF REWARDS .43 v List of Tables Table Title Page TABLE 1: SAMPLE OF COMPANIES INVESTIGATED .8 TABLE 2: SAMPLE OF INTERVIEWEES 9 TABLE 3: A TYPICAL SALES REP’S PROFILE 20 TABLE 4: PERCEPTIONS ON MOTIVATIONAL FACTORS 30 vi List of Figures Figure Title Page FIGURE 1: A MODEL OF SALESPERSON MOTIVATION .5 FIGURE 2: TYPICAL STRUCTURE AT JVS AND SOES 10 FIGURE 3: THE RESEARCH FRAMEWORK .12 FIGURE 4: SALES FORCE AND DISTRIBUTION ARRANGEMENTS .15 FIGURE 5: AN EXAMPLE OF A PARALLEL MULTI-LADDER SALES SYSTEM 35 FIGURE 6: VICIOUS CIRCLES AT SOES .37 vii Chapter 1 Introduction 2.1 Rationale of the Research 2.0 Role of motivation to the sales force According to Douglas and William (1998), by nature, salespeople handle such type of a job that is • Hard since they have to frequently deal with new people, namely customers, who are tough and demanding. And they only start selling when customers say “No”. • Flexible and self-controlled because salespeople spend majority of their time out of office. • Ambiguous in terms of roles perception since they have little supervision and under pressure from dual masters: their customers and their companies. Thus, managing sales force requires more motivational methods rather than controlling ones. Quite many researches, studies have been working on the issue of how to motivate salespeople to achieve their most productivity. However, almost all of these studies were carried out in developed countries, far fewer studies were carried in developing countries. So the first issue this paper aims to address is whether motivational techniques that work in developed countries can also applied developing countries like Vietnam? 2.1 Selling as a new career in Vietnam Vietnam has recently emerged as a new developing country. Vietnam was a closed and highly centrally planed economy until 1986. Under this economy, there was no real selling since selling to whom, at what price, at what quantity, etc. are determined from the government. As a result, there are no real salespeople. To shift to a market economy, Vietnamese government has been undertaking “doi moi” program (meaning economic renovation program) to open the economy since 1986. The move forces companies to do real selling tasks, and some employees become salespeople. The “doi moi” program has also brought in several foreign firms, who are helping to build a professional sales career in Vietnam. However, selling as a career in Vietnam is characterised with no systematic education, very fragmented (because each company develops its sales force differently), and no clear way to develop. In this situation, at the infant of selling as a career, the question of how to motivate salespeople becomes more blurred to sales managers in Vietnam. Thus, this paper would like to contribute to make clear motivational issues of the sales forces in Vietnam. 2.1 Problem statement Thus, this research aims to address these issues of what motivates salespeople in specific conditions of Vietnamese economy at the time being? And how can management utilize these factors to increase their sales forces’ productivity. 1 2.1 Research objectives Specifically, the research’s objectives are as follows: • To find out what factors field salespeople in Vietnam perceive as motivators to them and what factors sales managers perceive as motivators to their subordinates? ⇒ Money: salary, bonus, fringe benefits, commissions. ⇒ Management’s recognition: medals, certificates, titles. ⇒ Prizes: physical valuables like mobile phones, motorbikes, watches, etc. ⇒ Work supports: tools that facilitate doing a job. ⇒ Training ⇒ Advancement opportunities ⇒ Job achievement ⇒ Job security and stability ⇒ Freedom and supervision • To compare Joint Ventures’ (JVs) motivational practices to salespeople and that of Vietnamese State Owned Enterprises (SOEs) in: ⇒ Setting up a motivational policies, incentives packages or programs, ⇒ Selling (communicating) these programs to salespeople, ⇒ Monitoring and facilitating implementation of such programs, and ⇒ Evaluating, reinforcing and improving the programs. • To try to recommend applicable models for sales management in Vietnam to motivate their subordinates. ⇒ To joint ventures ⇒ To state owned enterprises 2.1 Information needs To achieve the above objectives, following information is needed. 2.0 From the sales reps • What factors do they value most in term of motivating them: salaries, fringe benefits, prises, recognition, work supports, advancement opportunities, training, responsibility, job security and stability, autonomy, and supervision. • What are salespeople’s opinions about effort and performance relationship? • What are salespeople’s opinions about performance and rewards relationship? 2 • How do salespeople value the rewards? Are rewards worth their effort? 2.1 From sales managers • Do sales managers understand their salespeople’s motivational factors? • How are quotas set? • What are criteria to evaluate salespeople’s performance? • How are rewards given? What are the most frequently used rewards? • How do sales managers design, implement an incentive program, and evaluate its effectiveness? • What are compensation and promotion policies? • What is a typical sales rep’s profile? 3 [...]... are not any more reps at the agent at all to exclusively sell the company’s products Occasionally, the rep comes to take orders and collect money from the agents; otherwise the rep just telephones to get orders Then it is up to the distributors to sell the products whatever way they like Thus, SOEs sales network is more like a wholesale network rather than a distributor network That is essentially... and sell.” Thus new reps have to learn by themselves by watching and imitating their seniors To them, their tasks are just to sell as much volume as possible So they try to force products onto customers Since they are not trained how to sell, their most common practice is to give customers deep discount Worse, there is generally no feedback on performance to reps This makes SOEs reps become even more... salespeople in other JVs or SOEs Moreover, they know well about the company and the job, and they know what type of person to recommend Therefore, JVs often find good reps with less cost in comparison with other sources • Internal employees: JVs seldom recruit sales reps from its internal staff of other departments The reason is that they believe salespeople need distinct traits and knowledge that other departments’... and half-hours Two General Managers (GMs) and one Vice General Manager (VGM) could be interviewed, all from SOEs thanks to the author’s close relationship with them GMs and VGMs at JVs were also sought to be interviewed However, they all declined quoting time limitation and the topic of the research is not directly in their concerned areas Thus, JVs GMs and VGMs just referred the author to sales managers... beer If they buy, I’ll conduct the deal If not, I go to another customer And that’s all.” Moreover, SOEs reps’ performance is just based on volume However, they say they have little influence on volume They claim much of their sales to “luck” due to the way they sell their products described before Obviously, reps have no influence or control on how much their distributors can sell By experience, they... hierarchy of needs theory and Herzberg’s (1987) hygiene-motivation theory fall in this area The common assumption is that people seek things to satisfy their needs, and the things they seek are motivators to them In sales settings, Futrell (1991, p 373) classifies these factors into seven categories as a motivation mix as follows: (1) Sales climate: ceremonies and rites, stories, symbols, and language (2)... recruiting and providing new reps to SOEs However, no HRM in SOEs was interviewed since difficult access to them Fortunately, the two SOEs GMs and one VGM, in those SOEs that the author could get access to, had provided some important insights that could replace the role of human resource managers since these GMs and VGM are in charge of all sales issues relating to Sales Department It is important to examine... so is the winner Therefore, even though a TV is quite valuable to reps in SOEs, they don’t see it as an evidence of their achievement, but a windfall Therefore, it does not induce the reps try harder These differences reflex the poor knowledge of SOEs sales managers They themselves do not understand clearly how to organise, implement, and take advantages of such events with prizes to build their sales... gives them satisfaction.” (Porter 1997, p 249) This seems true with JVs reps in Vietnam only, not with other groups Because JVs reps have to accomplish quite difficult tasks in a tough and demanding environment, they feel happy when they can achieve these tasks Job achievement also builds into them self-confidence To some reps, this is really what motivates them the most since they are realising themselves... 1 They are mostly in their first stage of career, so quite a lot of them actively seek changing their job They are more risk-taking than SOEs reps And do not value job security and stability much 2 Some get to understand that real job security and stability depends on themselves If they could improve their capability, enrich their experiences, learn new skills, there are enormous chances for them to . salespeople and how to motivate them effectively. Thus, this paper aims to make clear these issues in two sectors: joint ventures (JVs) and state owned. FINDINGS 13 4. 1INTRODUCTIONS TO THE TWO SECTORS: JVS AND SOES .........................................13 4.1.1 State owned enterprises (SOEs) ...................................................................13