Sales steering in the case company

Since the concept of sales steering was not acknowledged in the previous studies and there was no clear definition for it, the first questions were in-tended to map what was meant when the interviewed people talked about the sales steering. The interviews revealed that the people who worked closely among sales (70 % of the answers) emphasized that sales steer-ing is about optimizsteer-ing the long-term profitability of sales by steersteer-ing the sales towards the previously set objectives. These people work quite closely together so it was expected that the answers would be fairly

simi-lar. The rest of the answers were a bit more vague; one of the answers considered sales steering as procedures that steer the sales to the right direction, and the rest of the two answers focused on the efficiency of the company’s internal sales processes. However, every answer was on the right course, and it is somewhat impossible to give a fully accurate answer to a subject that has not been officially defined anywhere. Compared to the case company’s own definition of sales steering (management of pric-es, volumes and customer relationships), the pricing and volume aspects were mentioned in the answers but none of the answers considered cus-tomer relationships to be a part of the sales steering process. This can be caused by the fact that currently the case company does not have an op-erating customer relationship management system. (Interviewees: A, B, C, D, E, F, G, H, I, J)

When the interviewees were asked to explain what elements does the sales steering include, the answers offered a variety of aspects. The ma-jority of answers mentioned that pricing is one of the most essential parts in sales steering. Prices are used as a measure on how the markets and company’s market share are developing. When the economic situation is good and the company has a fair share of the markets, the prices tend to go up and vice versa. Prices can also be used in estimating the develop-ment of the markets. For example, the company can monitor the accepted offers over a specific timespan and on what price have they realized. If the accepted prices have been going down, then it is possible that the overall demand is decreasing and the market situation is getting tougher. Fur-thermore, prices will partly determine the profitability of the company, so the correct calculation of prices is essential. Prices and price targets are also used as a steering element for the salespeople. The salespeople are given specific price levels which they cannot undercut when dealing with the customers, and this will ensure that the salespeople will not make un-profitable deals for the company, assuming that the target price is correctly calculated. The salespeople’s target prices act also as a control instrument for the management. The prices are easy to measure and follow, so the

correcting actions can be taken quickly if deviations are noticed. Finally, prices make a good comparison tool for the management to compare how the different business segments are performing. Thus, the products that are sold in different segments are similar but they can be sold with differ-ent prices to differdiffer-ent customers and regions, and this should be closely monitored. (Interviewees: A, B, C, D, E, I, J)

Pricing decisions are made inside the business segments and each one has a different way of doing them. Pricing is mostly done on customer lev-el and it is based on profitability. Some segments have large customers which have long contracts and the prices can be decided for three years onwards but most of the prices are negotiated for each order separately.

The segment directors are guided by the instructions from the BU man-agement which affects the pricing frames used by the segment directors.

As mentioned before, pricing is based on EBITDA-levels which the negoti-ated prices are not allowed to undercut. The segment directors give these frames to the salespeople who then negotiate the prices. However, cur-rently the prices can include different discounts and surcharges which are negotiated by the salespeople with the customers. Therefore, the compa-rability and transparency of prices has suffered because each salesperson has used their own methods, and on the other hand, management has just monitored that the profitability-requirement has been filled. The price leak-age has been a problem, because the company has not been able to mon-itor if the prices have included the necessary surcharges or that the cus-tomer has not been given unjustified discounts. The current sales steering project will present a new pricing tool which will make the monitoring more reliable, and the price leakage can be minimized. When comparing the case company’s pricing to the frameworks presented in the literature (see chapter 2.1.2), the aspects from Smith’s (1995) cost-orientation, and No-ble and Gruca’s (1999) cost-based pricing are quite similar with the com-pany. The case company uses price waterfalls to discover how the varia-ble and fixed costs affect the desired profit margin. (Interviewees: B, C, E, I)

The other important element mentioned was the management of volumes.

Volumes in customer, market and segment level are along with the prices the most important steering methods. Sales plans are based on the esti-mated volumes that the field sales calculate regularly, and then the sales plans are used as targets for the coming months. Furthermore, manage-ment can try to optimize the capacity utilization to avoid the unnecessary fixed costs. Also, regarding the capacity utilization, when the market situa-tion is poor the machines should be kept running full, but when the market situation is better the company should perform “tail cutting” analysis which aims to lose the unprofitable customers that are using the machines’ ca-pacity. Volumes were also seen as easy to measure and a simple enough metric to be used as a salespeople’s personal target. (Interviewees: A, B, C, E, G, I)

The interviewees listed other sales steering elements too: finding the ket and growth opportunities, developing the offering to the targeted mar-ket segments, giving feedback and coaching the salespeople, cost analy-sis, optimizing the internal sales processes, and following up the agree-ments with the customers. Most of the interviewed people mentioned the opportunity spotting but when asked more about it they considered it to be more strategy related issue. They thought that it was part of a longer term planning on where the company wants to be in the future, and these deci-sions are made during the strategy process. (Interviewees: A, B, D, E, F, G, I)

The majority of the interviewed persons were unanimous when they were asked to explain on what level is the sales steering performed. They all agreed that the main responsibility for sales steering is in the hands of the segment directors. They have the first hand contact to the salespeople who ultimately perform the actual sales actions. They also concurred that the segment directors were guided by the business unit management and by the company strategies, but the segment directors still had room for own visions and actions. Thus, the segment directors should have clear

objectives from the top management which they can use as guidelines when steering their salespeople and sales function. This is in line with the findings of Dannenberg and Zupancic (2009) and Ingram et al. (2002) pre-sented in chapter 2.1 that the objective setting and strategy process is a hierarchical process. (Interviewees: A, B, C, E, G, H, I, J)