The Effect of Solution Transition on Steering the Sales Force: For New Marketing and Sales Metrics

Table of Content

1. Introduction
1.1. Problem Definition
1.2. Objectives of This Work
1.3. Scope of Work

2. Role of Marketing in a Firm
2.1. Theory of the Firm and the Traditional Role of Marketing
2.2. Value Creation in a Firm
2.3. How Marketing Influences the Firm Value
2.4. Conclusions about the Role of Marketing

3. The Emergence of Solutions
3.1. Product Orientation
3.2. Service Level Definition
3.3. Shift from Product to Service Orientation
3.4. Solution Definition and Demarcation
3.5. Drivers for Solution Orientation
3.6. Conclusions about the Evolution from Product to Solution Orientation

4. Dominant Metrics used to Determine Marketing and Sales Performance
4.1. Performance Assessment in Product Centric Firms
4.2. Proposal for Joint Marketing Sales Metrics
4.3. Key Influencers of Market Success in Service Dominant Markets
4.4. Sales Force Control Systems and BCCS
4.5. Conclusion about Existing Metric Readiness for Solution Orientation

5. Potential Sales Metric Evolution in the Context of Solution Orientation
5.1. Definition of a Customer Solution
5.2. Metrics that Determine Customer Solution Effectiveness
5.3. Selection of an Appropriate Solution Selling Process
5.4. Determinants for Relationship Value
5.5. Impacting Factors on Interrelationship Performance
5.6. Implementation of Consultancy Mind Set in Sales
5.7. Sales and Effort Forecast as a Challenge in Solution Business
5.8. Growing Importance of Professional Maturity
5.9. Independent Measurements that Help to Predict Sales Performance
5.10. Marketing Sales Interface

6. Scorecard Metrics to Measure Solution Orientation
6.1. Discussion
6.2. Managerial Implications
6.3. Limitations and Future Research Directions
6.4. Solution Readiness Metric

Bibliography

Internet Sources

Index of Illustrations

Figure 1 Linking Market Based Assets to Shareholder Value

Figure 2 The Chain of Marketing Productivity

Figure 3 Attractiveness of After Sales and Service Propositions

Figure 4 Pseudo Solutions

Figure 5 Complexity of Solution Performance

Figure 6 Marketing Sales Interface Overview

Figure 7 Determinants of Salespeople’s Performance

Figure 8 Proposed View of a Customer Solution

Figure 9 Supplier and Customer Variables Affecting Solution Effectiveness

Figure 10 Solution Selling Process and Functional Units Coordinating Stakeholders and Activities

Figure 11 The Salesperson as a General Manager

Figure 12 Importance of Several Competences of Solution Selling in Comparison to Selling Standalone Products

Figure 13 Relationship Benefits and Relationship Cost Impact on Relationship Value

Figure 14 The Customer-Level Consequences of Interaction Orientation

Index of Tables

Table 1 Attributes of Balance-Sheet and Off-Balance Sheet Assets

Table 2 Comparison of Goods and Service Centered Views

Table 3 Proposed Scale Refinement for the BCCS Scale

Table 4 Marketing Sales Interface Setups – Verbal Cluster Description

Table 5 Solution Readiness Metric for Sales Forces

Index of Abbreviations

Abbildung in dieser Leseprobe nicht enthalten

1. Introduction

1.1. Problem Definition

In recent years many firms in the business to business (B2B) environment were trying to increase their market position by better product portfolios. After these products became more and more complex product oriented firms started to offer services first as a reaction on customer requirements but soon also to create additional revenue on top of the core business. This transformation included that service departments were not longer considered as a cost center but a business unit. With increasing demand for higher customer satisfaction, the recognition that customer requirements must be better understood, but also external drivers e.g. shareholders who pushed firms to focus on core competencies, the term solution was defined as a combination of products and services that are required to gain competitive advantage.^[1]

After so called solutions are now known for many years still many companies did not succeed in transforming their businesses. Even worse besides failing in the transformation they sometimes even lost core markets.^[2] Scholars work has proven that although well defined in many framework constructs the practical implications for a successful solution transition especially in the sales domain are often not implemented or even unknown. This becomes especially obvious in the metrics that are used by sales organizations today. These do typically not indicate the necessary transformation that is expected due to the solution orientation.^[3] ; ;

1.2. Objectives of This Work

The overall objective of this thesis is to provide a metric that helps to assess the solution readiness status of a firm’s sales force. Sales is often considered to be a part of marketing.^[4] It will be analyzed to what extent this perspective is justified and how this is influenced by the emergence of solutions. As part of that an overview about the sales marketing interface will be given to create awareness for this topic. This study will furthermore increase the understanding of the reader about applied metric concepts in marketing departments that can be found in existing firms today. It will be demonstrated how shareholder value influenced their design and why these metrics are not aligned with latest research about firm value.

1.3. Scope of Work

This work will outline metric elements that shall be applied for sales forces when moving towards solution orientation.

The structure of this thesis is split into 6 chapters and organized as follows. To begin with the history of marketing metrics will be portrayed in dependence on the theory of the firm and its implications on the marketing functions. An explanation will be given in what ways marketing can influence the firm value and how this shall be measured. Chapter 3 is describing why solutions are emerging and what consequences can be expected. To achieve a better understanding the author will depict the product centered logic and how it has been redeemed by the service centered logic over time. This chapter provides a meaningful insight into product dominated market challenges since the recognition of these is fundamental to understand the requirements for companies that shift their business from there towards service or solution oriented markets. Chapter 4 will provide an overview about metrics that are applied in sales and marketing organizations today and the development of Sales Force Control systems. After the overview about the historical progress was provided, considerations about requirements in regards to the sales forces in solution business environments are started with chapter 5. First a description of how customers perceive a solution is given. From there main influencing variables are derived that are likely to impact the success of sales persons. Major valuable measurement suggestions that are fundamental to test solution readiness are justified and outlined throughout chapter 5. The thesis is finalized with a detailed metric proposal for firms that want to benchmark their sales force against solution readiness in chapter 6.

2. Role of Marketing in a Firm

This chapter describes the history of metrics in firms and their evolution in marketing departments. Hereafter the influence of marketing on the firm value is portrayed. Objective of this section is to create awareness why metrics are required and how the idea of firm value influences its design. At the end of this chapter latest research results about firm value creation are compared to the currently dominating metrics to identify their suitability. ;

2.1. Theory of the Firm and the Traditional Role of Marketing

The term “Theory of the firm” is describing which factors are influencing the emergence of firms, the behavior of firms and what objectives a firm follows. In doing so the theory of the firm is also trying to explain future activities of companies that are acting in an economical environment. An outcome of the theory development is how the value of a firm can be measured.^[5]

According to Anderson the way of value assessment has evolved from the neoclassical model that focused on single period profit maximization to the market value model in which a more comprehensive approach is considered. The market value model takes into account several accounting periods, correlating profit expectations and other variables that are finally expressed in the firm value or stock price. In stock listed firms the owner is different from the management and may have dissimilar objectives. Thus the question rose in what way the relationship can be effectively managed to keep control costs low while ensuring maximization of the firm value. As a result the principal agent theory was formulated to overcome emerging conflicts related to value maximization on the one hand and more personal objectives on the other.^[6]

According to the principal agent theory the firm agents (managers) are supposed to fulfill tasks in favor of the principal (shareholders). Since agents act mostly under limited observation of their principals it is required to identify measures that indicate the level of performance of managers to the owners or shareholders.^[7]

Another aspect that has been reflected by Anderson is that each department is challenged for its individual contribution to the value maximization and here the role of marketing probably changed most significantly. Over time the marketing task has developed from being responsible for positive product market results to a role in that it is mainly responsible for the relation to the external environment. In between marketing was forced into a position being accountable for financial outcomes which still remains in many firms. This was caused out of a conflict with finance departments who argued that marketing also shall be responsible for financial performance indicators. Marketing struggled to develop its own transparent measurements to indicate its contribution.^[8] Therefore marketing got used to take the suggested financial figures into account to assess its performance and to justify its existence. These financial outcomes are named in various ways like return on investment, contribution margin, cash flow or cumulative compounded profits etc. Basically all of them describe profit maximization which is considered to be the predominant firm objective although it is recognized that firms follow multiple objectives.^[9] These figures however are most often short sighted and neglect the long term development needs. As a consequence many companies suffer from missing survival strategies and face tremendous challenges after a period of success. It is assumed that the short term financial figures orientation foils the essential role of marketing^[10] which is supposed to align a firm continuously with the market.^[11]

As mentioned by Srivastava et al. stock prices were considered to be the most transparent identifier of firm value.^[12] There has been a strong belief that a positive stock price trend results mainly from superior financial achievements. It was observed that applied rules for stock selection are often based on the short term financial performance which is caused by the dynamic characteristics of investors who often do not consider the long term survival needs of a firm.^[13] Instead they shift their shares if they sense a better profit maximization opportunity.^[14] Knowing that value creation in a firm is the fundamental objective of a company several attempts were made to explain how this can be achieved after doubts raised those financial figures and outcomes are the only explanation.^[15]

2.2. Value Creation in a Firm

Principal Agent Theory describes the monitoring need due to information asymmetry between two parties. It can be considered to be the explanation for performance metric emergence. In addition behavioral theories were developed that describe the firm as coalitions of individuals who follow their own objectives rather than following objectives of their company.^[16] The term coalition is used by Cyert and March to reflect the different departments within a firm and external stakeholders like customers, investors and suppliers.^[17] Resource dependence model as one example of the behavioral theories, explains that each coalition is mainly interested in its own survival and the chances to achieve that are dependant on the ability of a coalition to demonstrate its value to other coalitions. The larger the perceived value of a coalition the more likely it is that this coalition will play a dominant role in the structure of coalitions.^[18] As a consequence of missing measurements in marketing it has been supposed that its influence suffered and its importance diminished.^[19] An early attempt to counteract this development has been the shareholder value methodology in which Day et al. tried to explain their influence beyond short term financial figures recognizing that ultimately the increase of shareholder value is desired by investors. The need for shareholder value enrichment results from the market value model. The theory describes how the marketing activities and market strategy selection influence financial outcomes as the shareholder value. Its objective is to increase or maximize monetary returns for investors of a firm based on the firm’s marketing activities and especially its strategy.^[20] In the literature about marketing and finance this methodology has not been very popular. This probably resulted from the difficulties to link long term oriented marketing activities directly with respectively financial figures and shareholder value since effects do not occur in the same accounting period or even worse for finance over several periods.^[21]

Nevertheless marketing scholars continued to search for a framework to be accepted being aware that short term orientation does usually not result in superior long term development.

With an increasing understanding of the marketplace firms began to acknowledge that the internal and external marketplace is influenced by several goods and conditions.^[22] Marketing departments were originally assigned to be mainly responsible to manage the external product market place while most other firm coalitions are dealing with internal market places. Product development, market research, channel selection but also advertisements etc. are tasks that mainly target to support external coalition needs like customers satisfaction and investor pleasure and hence represent fundamental tasks of marketing.^[23]

The ability of a firm to address the external product market place can be influenced by many variables. These were summarized in the marketing mix, the 4Ps, in the past but after acknowledging that it does not explain all the influence a firm has and that can be impacted by marketing in particular a more comprehensive approach was introduced by Srivastava et al. In this augmented view scholars attempted to illustrate how marketing activities that are not directly linked with a financial result influence the long term well being of a firm. Since assets are well understood by finance and shareholders marketing used a similar terminology when they developed assets that can not be produced by a firm’s internal marketplace. Instead they need to be created with external coalitions and thus result from market interaction. Market based assets are defined as capabilities a firm possesses that leverages its position in the market but do not occur on the balance sheet and are mostly intangible. They can be separated into intellectual and relational and are highly dependant on skills and knowledge. They are different to production facilities or sourcing capabilities. Table 1 shows a comparison of tangible and intangible assets. It also outlines measurement points that shall help to increase acceptance by correlating positive market results to corresponding property considerations.^[24]

Abbildung in dieser Leseprobe nicht enthalten

Taken from: Srivastava, Shervani, Fahey; Market-Based Assets and Shareholder Value: A Framework for Analysis (The Journal of Marketing, 01/1998); 2-18.

Table 1 Attributes of Balance-Sheet and Off-Balance Sheet Assets

Its influence on shareholder value is illustrated in figure 1 on page 8. It depicts the connection between market based assets that are largely intangible on market performance that leads to improved cash flows that finally leverage the firm value. As a conclusion it can be said that intangible assets contribute heavily to a firm’s performance and shareholder value. Considering that most of the intangible assets result from the linkage between a firm and its market it is suggested that marketing leads related actions and may apply measurements on the correlating outcomes.^[25]

Abbildung in dieser Leseprobe nicht enthalten

Taken from: Srivastava, Shervani, Fahey; Market-Based Assets and Shareholder Value: A Framework for Analysis (The Journal of Marketing, 01/1998); 2-18.

Figure 1 Linking Market Based Assets to Shareholder Value

2.3. How Marketing Influences the Firm Value

Being aware that market based assets are fundamental to a firm’s value and understanding how these assets can be created it is possible to derive the influence of marketing on firm value. Since market based assets mainly result from external interactions and therefore functions that have an external relation market orientation will make a difference. Intangible assets gain importance and so marketing also would need to gain influence in firms. Market oriented firms achieve better results and so it is recommended that marketing shall take leadership in aligning the firm with the market.^[26]

A continuous focus on core competences lead to a situation in which it is not very likely that one firm can offer all required products or services.^[27] Therefore the intangible off balance-sheet assets of a firm will be fundamentally influenced by its capability to find its position in market networks^[28] and deal with market alliances.^[29]

According to Simon et al. amongst other scholars Tobin’s q is considered to be the value that mostly explains the impact of marketing on firm value. It reflects the amount of tangible assets compared to the market value. Positive difference which means higher market value than tangible asset value requires intangible assets and is to a large degree a result of external activities.^[30] It shall be beard in mind that accounting systems can manipulate what is an asset.

The stock market is the benchmarks for most firms and market capitalization or Tobin’s q are its key performance indicators.^[31] Here investors do typically invest if they feel that they can realize returns while avoiding uncertainties at the same time. The selection of an investment out of numerous opportunities is mainly based on the expected return and risk considerations. The desires of stockholders do to a large degree concur with firm owners. An interesting difference though is the ability of stockholders to move investments more dynamically if another opportunity promises higher returns. As a consequence stock analysts did often focus on financial key performance indicators when they tried to identify opportunities with high return potential. Research in this field has now proven that the likelihood of high returns apparently is not dependant on previous financial results but correlates well with customer satisfaction.^[32] This finding is enforced with the recognition that stock return risks are highly mitigated when the customer satisfaction is high. Hence the market does not response immediately to changes in customer satisfaction results which is different to financial performance announcements.^[33]

A radical shift is expected since marketing has to transform from being an agent of goods and services in which it is held accountable for short term financial figures to a customer consultant role in which marketing’s focus are market based assets that enable sustainable success in the marketplace.^[34] Since this largely impacts the satisfaction felt on consumer side it will impact the firm value too.^[35] The chain of marketing productivity is illustrated in figure 2 that associates a wide range of marketing activities with financial outcomes and the value of the firm. It suggests a flow top down from strategy development, execution and indicates the visibility in the market place which is at the end Tobin’s q.^[36]

Abbildung in dieser Leseprobe nicht enthalten

Taken from: Rust, Ambler, Carpenter, Kumar, Srivastava; Measuring Marketing Productivity: Current Knowledge and Future Directions (Journal of Marketing, 10/2004) 76-89.

Figure 2 The Chain of Marketing Productivity

2.4.Conclusions about the Role of Marketing

From this chapter following conclusions can be derived. Metrics are an essential element for firms in which the owner is different from executives who run the business. Their purpose is to allow a performance monitoring. Since firm owners seek continuously for firm value progression financial outcomes had been set as ultimate objectives. Marketing not being able to demonstrate its influence by other means had to accept financial results as determining performance metric elements although not believing in them. As reflected by Vargo and Lusch latest research on firm value demonstrated the influence of customer satisfaction imposingly. Marketing is in the best position to take ownership on this as it manages the external marketplace which ultimately creates market based assets. Metric systems shall be adapted to these findings and reflect a clear customer satisfaction orientation instead of being navigated by financial measures.^[37] One can ask whether the importance of customer satisfaction has emerged or was neglected over long time. As described in the problem definition it became fundamental for firms to create high customer satisfaction which thanks to the increasing complexity resulted in a combination of products and services. To gain transparency on that the next chapter is investigating into the evolution of a product oriented market to a solution dominated market. ; ; ; ; ;

3.The Emergence of Solutions

This paragraph describes how solutions emerged from previously product and later service oriented markets. The chapter begins with product orientation which represents the situation from which most firms that are longer present in the market start a potential transformation and therefore provides good insight into existing mind sets. A definition of different service levels is given before the shift towards service orientation is described. A description about solutions in which drivers from selling and buying companies but also economical environment pressures are highlighted finalizes this chapter. ; ;

3.1. Product Orientation

Product orientation refers to classical business models in which activities of a company are centered on goods that are manufactured and finally sold to particular markets or segments. Most marketing activities do still follow the product approach in which differentiation by either price or quality and cost management are essential. On the long run however most products are commoditized and compete on price rather than functionalities.^[38]

With increasing usage and importance of software and also the trend towards customization the term product became obsolete in many cases.^[39]

Products are at the present time often part of a system which is defined as a bundle of software, service and hardware components. A system typically shows scalability for involved components and interaction takes place between the elements.^[40] A system orientation typically requires obligatory secondary services since installation and maintenance must be delivered with the product components.^[41] The service definitions are explained in the next paragraph.

3.2.Service Level Definition

Services in general can be differentiated into retail or consumer and industrial services.^[42]

Industrial services belong to the so called investive services that are found in B2B conditions. These are different from pure investive services that are offered by service companies. Investive services are offered by production oriented firms. From this separation a further split is possible to distinguish between primary and secondary services. Primary services can be offered independently like education. Secondary services are offered on top of a product to increase efficiencies using the product. These secondary services can be differentiated into obligatory secondary services that have to be offered by a company due to market expectations and facultative secondary services that are considered as added value by buying firms.^[43] Firms acting in the service domain are represented by a mixture of companies that either run a pure service business or others that have developed from products to services over time.

Different strategic service levels according to Homburg et al. are illustrated in figure 3 on page 14 with a wording that is more common in management reality. Service for products and service for profit represent obligatory secondary services and service excellence correlates with facultative secondary services. In figure 3 it is also shown how appealing different service levels are for customers and offering firms. Clearly it can be seen that high service levels require advanced knowledge and skills since processes and tasks are performed on behalf of and in co-creation with customers.^[44] Major differences to the traditional 4Ps that characterize a marketing mix in product markets (Price, Place, Product, and Promotion) - service perspective adds 3Ps (People, Process, Physical Evidence) in which people who are in a way neglected in product markets are probably most important.^[45]

This transition from product orientation towards services is explained in more details in the next chapter.

Abbildung in dieser Leseprobe nicht enthalten

According to: (Accenture 2004, VDMA Impuls ) 40

Figure 3 Attractiveness of After Sales and Service Propositions

3.3. Shift from Product to Service Orientation

According to scholars firms have to shift their focus from tangible goods to intangible assets. Service centricity gains popularity considering that the leading economic nations nowadays create an output of 70% with service offers while it grew from 30% over the past decades.^[46] Reason for that is mainly a fundamental shift in the understanding why and what customers actually purchase.^[47]

Vargo and Lusch concluded that with the rise of economic theories goods were considered the unit of exchange probably because it was possible to assess them more objectively. While scholars who created the theory of economic exchange were already aware that goods are only a part of the exchange process they had difficulties to make the surrounding influence factors computable. They also did not fit well into economies of scale theory that is based on the assumption that a unit of exchange which is characterized by specifications can be increased and decreased by adapting its production in dependence of the demand. Over time it became obvious that customers seek for value derived from a purchase and so firms had to adapt the way they are offering to the market. If at the end customers are only interested in the added value of a purchase one can ask whether it is more promising to sell only value at the end. Considering the increased capabilities in manufacturing and sourcing the only piece for differentiation left are human skills. Knowledge and especially its application in exchange with the customer will so become the only unit of exchange and firms that create core competences in this field will be superior against the market.^[48] An overview about the changing conditions is illustrated in table 2 that uses operand resources for goods and products and operant resources for assets that only exist due to applied skills and knowledge as defined by Vargo and Lusch. In addition it says clearly that value can only be created as a result of interaction with customers. Hence an important factor outlined in table 2 is the acknowledgment that customers do also represent an operant resource for a firm.^[49]

Abbildung in dieser Leseprobe nicht enthalten

Taken from: Vargo, Lusch “Evolving to a New Dominant Logic for Marketing” (Journal of Marketing, 01/2004) 1-17.

Table 2 Comparison of Goods and Service Centered Views

Table 2 on page 21 expresses the importance of customers in the value creation process. The ability to interact with customers during the creation process is essential in the service dominant logic. To enable that the selling firm has to ensure that it provides appealing skills and knowledge to the market.^[50]

3.4. Solution Definition and Demarcation

Solutions were originally defined as a bundle of products and services. This has been redefined and today it is typically understood as the integrated combination of goods and services attempting to overcome customer business problems.^[51] So solutions actually describe the extent in which a firm is able to demonstrate to the customer its relevance in solving distinctive business issues or competitive challenges.^[52] As an example: the shipment of a product already belongs to the service domain but this product is now not accepted as a solution. The general term service is covering too many aspects to be used without clear comments.^[53] For example in the B2B domain many sales are based on tenders that require certain service commitments and customization efforts. If a product, service or system is customized based on tender requirements, this probably does not reflect the idea of a solution which is supposed to emerge out of the interaction between customer and suppliers.

Taking into account service levels it can be said that a solution is a bundle of products and service excellence components that belong to the domain of facultative secondary services. Integration of partners to overcome gaps in the own offering is another very critical capability that solution providers shall consider. Looking at solution offerings today it becomes obvious that the term is often misused and does not reflect solution as originally described. The term pseudo solutions depict their positioning compared to solutions.^[54] This relation is illustrated in figure 4. A similar term has been defined by Gebauer et al. who describe such a situation as service paradox.^[55]

Abbildung in dieser Leseprobe nicht enthalten

According to: Sales Performance International “From Commodity Products to Solutions – “Pseudo solutions” still dominate the landscape” (www.solutionselling.com, White Paper).

Figure 4 Pseudo Solutions

Figure 4 expresses the idea of solutions pretty well. A more complex metric shows the individual parameters that change their importance with increasing solution orientation. This is reflected in figure 5 on page 18. From this overview one can see that the complexity increases tremendously and challenges sales personnel in particular. While complexity could be managed within product lines before now most of the tasks need a deep understanding of and alignment with customers to identify the most appropriate offer.^[56]

Solution business changes the importance of product criteria. It has been observed that neither price nor features are anymore the predominant differentiators for solution suppliers. This means a tremendous shift in the focus areas of marketers since two out of the traditional 4Ps, namely price and product, are losing significance as reflected by Dhar.^[57]

Abbildung in dieser Leseprobe nicht enthalten

According to: Buriánek, F./Ihl, C./Bonnemeier, S./Reichwald, R. “Typologisierung hybrider Produkte - Ein Ansatz basierend auf der Komplexität der Leistungserbringung“ (Arbeitsbericht Nr. 01/2007 des Lehrstuhls für Betriebswirtschaftslehre - Information, Organisation und Management der TU München, #01/2007). http://www.hyprico.de/publikationen/AP%20Typologisierung%20hybrider%20Produkte.pdf, Captured 08.06.2007

Figure 5 Complexity of Solution Performance

3.5. Drivers for Solution Orientation

Reason for the development towards solution orientation is not a single root cause but various circumstances of which the most obvious ones are illustrated in the following. Certainly three major groups shall be considered which are the market environment, selling organizations and buying firms.^[58]

Market environments changed tremendously over the recent years. While a few companies operated mostly in local markets the situation today is that much more of them exist and local boundaries are diminishing which leads to more competition on local and global basis and also more firms to focus on their core competences. This finally implies that in most cases it is not possible anymore for one company to provide a real solution that mostly is bundling several core competences. As a consequence many firms started to search for strategic but also on demand alliances that leverage their market position by combining several core competences on demand rather than growing all of them organically. Thus the capability to ally with partners is considered critical and is an additional differentiator for solution providers.^[59] As shown in 2.3 on page 10 this capability is part of the market based assets.

Thanks to this development it becomes also crucial for a firm to recognize its own position in the economy. A firm would have to decide whether it really has the core competences required to sell directly to customers. Alternatively it may be more appropriate to sell to a main supplier^[60] or backup supplier as a backend supplier.^[61] Dependant on this the author assumes that the service and solution orientation may differ since a backend supplier may need a different strategy.

This leads to the question what drives sellers in general to move towards solutions orientation. Science has perhaps not yet identified all drivers for the emergence of solutions from a selling firm perspective. The mindset of sales organizations is reflected on several blogs and also suggested by scholars like Hildenbrand et al. can be summarized as follows. A big shift from a demand rich to a demand poor environment results in survival of the fittest which means that if competition offers solutions or names its offers solutions, firms in the same market are required to do the same. An amplifying effect is the economic landscape that changed from local to global competition.^[62] A further important factor is the continuous race for revenue growth and due to very promising outlooks from a return and margin perspective more and more companies are trying to participate in the race for solution providers.^[63]

From a buying firm perspective the situation is interestingly similar but not equal as Gruhler analyzed. Customer focus on their core competences more which creates resistance to pure product offers that require assembly or integration by the customer. Another fact is that solutions can be easily used to split important functionalities inside a company and even allows complete outsourcing if required.^[64] The outsourcing capability itself provides rather low switching costs although many managers confess that this often is more an expectation rather than a waterproof condition.^[65] Nevertheless this flexibility is highly regarded by managers who face uncertainty or made bad experiences with a vendor of choice who could not meet the expectations over the expected product lifecycle time. If solutions are selected they often can be accounted to the operational expenditures rather than capital expenditures that are in a way disliked by investors especially in industries with high suspicions.^[66] Reducing number of suppliers is appealing to firms since it reduces costs and complexity and also explains why buying firms seek the all in one offering.^[67]

[...]

^[1] cp. Galbraith, Jay R. “Organizing to Deliver Solutions” (Organizational Dynamics, #31/2002) 194-207.

^[2] cp. Johansson, Juliet E./Krishnamurthy, Chandru/Schlissberg, Hank E. “Solving the Solutions Problem” (McKinsey Quarterly #3/2003) 116-125.

^[3] cp. Brown, S.P./Evans, K.R./Mantrala, M./Challagalla, G. “Adapting Motivation, Control, and Compensation Research to a New Environment” (Journal of Personal Selling & Sales Management, #25/2005) 156-167.

^[4] cp. Workman, John P./Homburg, Christian/Gruner, Kjell “Marketing Organization: An Integrative Framework of Dimensions and Determinants” (Journal of Marketing, 07/1998) 21-41.

^[5] cp. Anderson, P. “Marketing, Strategic Planning and the Theory of the Firm” (Journal of Marketing, #46/1982) 15-26.

^[6] cp. Anderson, P. “Marketing, Strategic Planning and the Theory of the Firm” (Journal of Marketing, #46/1982) 15-26.

^[7] cp. Jensen, Michael/Meckling, William "Theory of the firm. Managerial behavior, agency costs, and ownership structure" (Journal of Financial Economics. #4/1976) 305–360.

^[8] cp. Srivastava, Rajendra/Shervani, Tasadduq A./Fahey, Liam “Market-Based Assets and Shareholder Value: A Framework for Analysis” (The Journal of Marketing, 01/1998) 2-18.

^[9] cp Anderson, P. “Marketing, Strategic Planning and the Theory of the Firm” (Journal of Marketing, #46/1982) 15-26.

^[10] cp Anderson, P. “Marketing, Strategic Planning and the Theory of the Firm” (Journal of Marketing, #46/1982) 15-26.

^[11] Day, G.S. “Aligning the Organization with the Market” (MIT Sloan Management Review, #48/2006) 41-49.

^[12] cp. Srivastava, Rajendra/Shervani, Tasadduq A./Fahey, Liam “Market-Based Assets and Shareholder Value: A Framework for Analysis” (The Journal of Marketing, 01/1998) 2-18.

^[13] cp. Fornell, Claes/Mithas, Sunil/Morgeson III, Forrest/Krishnan, Mayuram "Customer Satisfaction and Stock Prices: High Returns, Low Risk" (Journal of Marketing, 1/2006) 3-14.

^[14] cp. Levitt, Theodore "Marketing Myopia" (Harvard Business Review, 08/1960) 24-47.

^[15] cp. Srivastava, Rajendra/Shervani, Tasadduq A./Fahey, Liam “Market-Based Assets and Shareholder Value: A Framework for Analysis” (The Journal of Marketing, 01/1998) 2-18.

^[16] cp. Simon, Herbert A. “On the Concept of Organizational Goal” (Administrative Science Quarterly, 06/1964) 1-22.

^[17] cp. Cyert, M./March, J.G. “A Behavioral Theory of the Firm” (Englewood Cliffs, 1963) 27.

^[18] cp. Pfeffer, Jeffrey/Salancik, Gerald “The External Control of Organizations” (Harper and Row, 1978) 27.

^[19] cp. Srivastava, Rajendra/Shervani, Tasadduq A./Fahey, Liam “Market-Based Assets and Shareholder Value: A Framework for Analysis” (The Journal of Marketing, 01/1998) 2-18.

^[20] cp. Day, G.S./Fahey, L. “Valuing Market Strategies” (Journal of Marketing, 07/1988) 45-57.

^[21] cp. Srivastava, Rajendra/Shervani, Tasadduq A./Fahey, Liam “Market-Based Assets and Shareholder Value: A Framework for Analysis” (The Journal of Marketing, 01/1998) 2-18.

^[22] cp. Constantin, Lusch “Understanding Resource Management” (Oxford The Planning Form, 1994).

^[23] cp Anderson, P. “Marketing, Strategic Planning and the Theory of the Firm” (Journal of Marketing, #46/1982) 15-26.

^[24] cp. Srivastava, Rajendra/Shervani, Tasadduq A./Fahey, Liam “Market-Based Assets and Shareholder Value: A Framework for Analysis” (The Journal of Marketing, 01/1998) 2-18.

^[25] cp. Srivastava, Rajendra/Shervani, Tasadduq A./Fahey, Liam “Market-Based Assets and Shareholder Value: A Framework for Analysis” (The Journal of Marketing, 01/1998) 2-18

^[26] cp. Verhoef, Peter/Leeflang, Peter “Understanding Marketing Department’s Influence within a Firm” (Journal of Marketing, 03/2009); 14-37.

^[27] cp. Gouthier, Matthias "Entwicklungspfade und Erfolgsausichten des industriellen Servicegeschäfts. Eine Bestandsaufnahme" (in Diller, Hermann "Vom Produkt- zum Dienstleistungsgeschäft - Marketingstrategien für reife Märkte", Nürnberg: Gesellschaft für Innovatives Marketing, 06/2008) 1-20

^[28] cp. Rust, Ambler, Carpenter, Kumar, Srivastava; Measuring Marketing Productivity: Current Knowledge and Future Directions (Journal of Marketing, 10/2004) 76-89.

^[29] cp. Swaminathan, Moorman; Marketing Alliances, Firm Networks, and Firm Value Creation (Journal of Marketing, 09/2009) 52-69.

^[30] cp. Simon, Carol J./Sullivan, Mary W. “The Measurement and Determinants of Brand Equity: Financial Approach” (Marketing Science, #12/1993) 28–52.

^[31] cp. Fang, Eric/Palmatier, Robert M./Steenkamp, Jan-Benedict “Effect of Service Transition on Firm Value” (Journal of Marketing, 09/2008) 1-14.

^[32] cp. Fornell, Claes/Mithas, Sunil/Morgeson III, Forrest/Krishnan, Mayuram "Customer Satisfaction and Stock Prices: High Returns, Low Risk" (Journal of Marketing, 1/2006) 3-14.

^[33] cp. Tuli, Kapil R./Bharadwai, Sundar “Customer Satisfaction and Stock Return Risks” (Journal of Marketing, 11/2009) 184-197.

^[34] cp. Achrol, Kotler; Marketing in the Network Economy (Journal of Marketing, 1999) 146-163.

^[35] cp. Rust, Ambler, Carpenter, Kumar, Srivastava; Measuring Marketing Productivity: Current Knowledge and Future Directions (Journal of Marketing, 10/2004) 76-89.

^[36] cp. Rust, Ambler, Carpenter, Kumar, Srivastava; Measuring Marketing Productivity: Current Knowledge and Future Directions (Journal of Marketing, 10/2004) 76-89.

^[37] cp. Vargo, Stephen L./Lusch, Robert F. “Evolving to a New Dominant Logic for Marketing” (Journal of Marketing, 01/2004) 1-17.

^[38] cp. Chase, R.B./Garvin, D.A. “The Service Factory” (Harvard Business Review #67/1989) 61-69.

^[39] cp. Franke, Nikolaus/Keinz, Peter/Steger, Christoph J. “Testing the Value of Customization: When Do Customers Really Prefer Products Tailored to Their Preferences?” (Journal of Marketing, 09/2009) 103-121.

^[40] cp. Salonen, Anna/Gabrielsson, Mika/Al-Obaidi, Zuhair “System Sales As a Competitive Response to the Asian Challenge: Case of a Global Ship Power Supplier” (Industrial Marketing Management, #35/2006) 740-750.

^[41] cp. Stremersch, Tellis “Strategic bundling of products and prices: a new synthesis for marketing” (The Journal of Marketing, 01/2002) 55-72.

^[42] cp. Grönroos, C. “Service Management and Marketing: A Customer Relationship Approach” (John Wiley & Sons, Chichester 2000).

^[43] cp. Homburg, Christian/Garbe, Bernd “Industrielle Dienstleistungen – Bestandsaufnahme und Entwicklungsrichtungen“ (Zeitschrift für Betriebswirtschaft, 66. Jg. #3/1996) 253-282.

^[44] cp. Kaerner, H./Gräßler, M “Vom Produzenten zum Dienstleistungspartner – Marktorientierte Servicemodelle für die Produktionsgüterindustrie“ (in Kaerner, H./Kasper, M/Mattmüller, R. ”After Sales“ (Frankfurter Allgemeine Buch, Frankfurt am Main 2004) 35-49.

^[45] cp. Rafiq, Mohammed/Ahmed, Pervaiz “Using the 7Ps as a generic marketing mix: an exploratory survey of UK and European marketing academics” (Marketing Intelligence & Planning #9, 1995) 4-15.

^[46] cp. Rust, R./Ambler, T./Carpenter, G./Kumar, V./Srivastava R. “Measuring Marketing Productivity: Current Knowledge and Future Directions” (Journal of Marketing, 10/2004) 76-89.

^[47] cp. Gummesson, Evert “Relationship Marketing: Its Role in the Service Economy” (in Glynn, Barnes “Understanding Services Management” ; Wiley and Sons New York, 1995) 244-268.

^[48] cp. Vargo, Stephen L./Lusch, Robert F. “Evolving to a New Dominant Logic for Marketing” (Journal of Marketing, 01/2004) 1-17.

^[49] cp. Constantin, Lusch “Understanding Resource Management” (Oxford The Planning Form, 1994).

^[50] cp. Vargo, Stephen L./Lusch, Robert F. “Evolving to a New Dominant Logic for Marketing” (Journal of Marketing, 01/2004) 1-17.

^[51] cp. Scheer, August Wilhelm/Grieble, Oliver/Klein, Ralf “Modellbasiertes Dienstleistungsmanagement“ (in Bullinger, Scheer “Service Engineering. Entwicklung und Gestaltung innovativer Dienstleistungen“ Berlin, Heidelberg, Springer-Verlag, 2006) 19-51.

^[52] cp. Dhar, Ravi/Menon, Anil/Maach, Bryan “Toward Extending the Compromise Effect to Complex Buying Contexts” (Journal of Marketing Research, 08/2004) 258-261.

^[53] cp. Engelhardt, Werner/Kleinaltenkamp, Michael/Reckenfelderbäumer, Martin “Leistungsbündel als Absatzobjekte. Ein Ansatz zur Überwindung der Dichotomie von Sach- und Dienstleistungen“ (in: Zeitschrift für betriebswirtschaftliche Forschung, #5/1993) 395-426.

^[54] cp. Sales Performance International “From Commodity Products to Solutions – “Pseudo solutions” still dominate the landscape” (www.solutionselling.com, White Paper).

^[55] cp. Gebauer, H./Fleisch, E./Friedli, T. "Overcoming the Service Paradox in Manufacturing Companies" (European Management Journal, #1/2005) 14-26.

^[56] cp. Nippa, Michael/Wienhold, Doreen/Piezonka, Sascha “Vom klassischen Produktgeschäft zum Lösungsgeschäft – Implikationen für eine Neugestaltung des Vergütungssystems im Vertrieb” (Freiberg Working Papers, #2/2007).

^[57] cp. Dhar, Ravi/Menon, Anil/Maach, Bryan “Toward Extending the Compromise Effect to Complex Buying Contexts” (Journal of Marketing Research, 08/2004) 258-261.

^[58] cp. Gouthier, Matthias "Entwicklungspfade und Erfolgsausichten des industriellen Servicegeschäfts. Eine Bestandsaufnahme" (in Diller, Hermann "Vom Produkt- zum Dienstleistungsgeschäft - Marketingstrategien für reife Märkte", Nürnberg: Gesellschaft für Innovatives Marketing, 06/2008) 1-20.

^[59] cp. Achrol, R./Kotler, P. “Marketing in the Network Economy” (Journal of Marketing, 1999) 146-163.

^[60] cp. Swaminathan, Vanitha/Moorman, Christine “Marketing Alliances, Firm Networks, and Firm Value Creation” (Journal of Marketing, 09/2009) 52-69.

^[61] cp. Ulaga, Wolfgang/Eggert, Andreas “Value Based Differentiation in Business Relationships: Gaining and Sustaining Key Supplier Status” (Journal of Marketing, 01/2006) 119-136.

^[62] cp. Hildenbrand, K./Gebauer, H./Fleisch, E. "Strategische Ausrichtung des Servicegeschäfts in produzierenden Unternehmen" (in Barkawi, K./Baader, A./Montanus, S. "Erfolgreich mit After Sales Services", Berlin, 2006) 73-94.

^[63] cp. Sales Performance International “From Commodity Products to Solutions – “Pseudo solutions” still dominate the landscape” (www.solutionselling.com, White Paper).

^[64] cp. Gruhler, W. "Outsourcing von Dienstleistungen zu Dienstleistungsunternehmen" (in Corsten, H. "Dienstleistungsproduktion", Wiesbaden, 1994) 153-175.

^[65] cp. Prahalad, C.K./Hamel, Gary “The core competence of the corporation” (Harvard Business Review 05/1990) 79−91.

^[66] cp. Hennes, M./Metzger, S./Sommer, U. “Daimler Bilanz - Gefangen in der Kostenfalle” (Handelsblatt 14.04.2010).

^[67] cp. Ulaga, Wolfgang/Eggert, Andreas “Value Based Differentiation in Business Relationships: Gaining and Sustaining Key Supplier Status” (Journal of Marketing, 01/2006) 119-136.