Reputation Management As a Motivation for Sales Structure
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Allen M. Weiss, Erin Anderson. & Deborah J. Maclnnis Reputation Management as a Motivation for Sales Structure Decisions The authors examine whether reputation concerns affect how manufacturers structure their sales organization. Us- ing reputation theory, they examine whether reputation-related perceptions and beliefs affect whether a manufac- turer that currently uses an outside selling organization {i.e., a "rep") intends to vertically integrate the selling func- tion or switch to a new rep. In particular, they propose that a manufacturer's intentions to replace its current manufacturers' rep with a company sales force or a different rep is a function of its perceptions of the reputation of itself and the rep and its beliefs about how high-reputation manufacturers in the industry typically organize their sell- ing function. Survey data support the plausibility of these reputation-based arguments as factors that influence sales organization structure decisions. These results provide some important extensions to reputation theory. The authors discuss the study's implications for both managerial behavior and the literature on channels and organiza- tional governance. n important topic in marketing involves how manu- they appear consistent with their preconceived intentions to facturers choose the structure of their sales organiza- change. Thus, the decision to vertically integrate the selling Ation (e.g., Anderson 1985; Anderson and Coughlan function or change reps appears to be psychologically moti- 1987; Klein, Frazier, and Roth 1990). Manufacturing firms vated, with "economic" rationales assembled as postdeci- often create their sales organization by outsourcing the per- sion justifications. sonal selling function to an independent organization (i.e., a Moreover, observations of such decisions in practice manufacturers' "rep"). Over time, manufacturers may de- suggest the existence of specific psychological motiva- cide to change their sales organization structure by vertical- tions—those grounded in the decision's impact on the firm's ly Integrating the selling function or maintain the structure reputation. Research in management, sociology, and psy- but switch to a different rep (Corey, Cespedes, and Rangan chology is consistent with the idea that managerial decisions 1989; Weiss and Kurland 1997). Currently, research ad- are affected by consideration of tbe firm's reputation dressing the motivations underlying these decisions is limit- (Bromely 1993; Fombrun and Shanley 1990). However, the ed in at least two ways. effect of reputation on sales organization decisions has been A first limitation is that, though several theories have neither theoretically proposed nor empirically tested. been proposed to explain manufacturers" motivations for us- A second limitation of current research on a firm's deci- ing either a rep or a vertically integrated sales organization sion to outsource or integrate its selling function is the as- structure, most are tied to economic-based efficiency or ef- sumption that there was no structure in place and that firms fectiveness motivations (Heide 1994) with an emphasis on select the most appropriate structure for going forward. the role of transaction-specific assets (e.g., Anderson 1985, However, the presence of a preexisting system appears to af- 1988; Heide and John 1988). Although economic motiva- fect the system going forward (Anderson 1985; Anderson tions undoubtedly affect sales structure decisions (Powers and Couglan 1987). Furthermore, changing from one system 1987), findings by Weiss and Anderson (1992) suggest otb- to another is not costless. As Weiss and Anderson (1992) er motivations. Their results indicate that manufacturers ma- demonstrate, perceived switching costs indeed do deter nipulate the perceived costs of changing their current rep so manufacturers from switching from a manufacturers' rep to an employee sales force. Thus, it is useful to consider how firms make sales organization structure decisions, assuming Allen M. Weiss is Associate Professor of Marketing, University of Southern a structure is already in place. California. Enn Anderson is Professor of Marketing, INSEAD, Deborah J. The current research builds on these ideas by examining Maclnnis is Associate Professor of Marketing, University of Southern Cal- ifornia.This research was supported by the Marketing Science Institute. whetber reputation concerns influence how manufacturers Tfie authors thank Bruce Hardie and Vijay Mehrotra for their capable re- intend to structure their sales organization. Our study focus- search assistance. The first author is a David and Jeanne Tappen Fellow es on manufacturers that currently use an independent sales of Marketing. The second author was a visiting professor at the European force. We ask whether their intentions to integrate vertically Institute for Advanced Studies in Management (Brussels) and Ihe Catholic or switch to a different rep are driven by reputational con- University of Mons (Mons, Belgium) while working on this project and is cerns. Reputation theory (Bromley 1993; Dranove and currently the John Loudon Chaired Professor of International Manage- Shanley 1995; Emier 1990; Fombrun and Shanley 1990) ment. guides our empirical predictions. In the following sections Journal of Marketing 74 / Journal of Marketing, October 1999 Vol. 63 (October 1999), 74-89 we review literature relating to reputation constructs and de- nis 1986), Thus, United Airlines cultivates an image of velop explicit hypotheses. We present the results of the em- friendliness, Apple an image of ease of use, Rolex an image pirical study and end with a discussion of its limitations, im- of luxury, and Campbell's an image of bome cooking. Rep- plications, and directions for further research. utation, in contrast, reflects an overall judgment regarding Our study makes several contributions. First, we offer the extent to which a firm is held in high esteem or regard, theoretical grounding and empirical support for the idea that not the specific identity it has. Thus, whereas image reflects sales organization structure decisions are influenced by rep- what a firm stands for, reputation reflects how well it has utation concerns. Second, we demonstrate tbe unique in- done in the eyes of the marketplace, image and reputation sights gained by examining a manufacturer's perceptions of are distinct concepts as each can vary independent of the its own reputation, its rep's reputation, and the reputation other. A firm can change its image through repositioning, gap between the two. Third, we identify managerial impli- though its reputation remains intact. Thus, the "softer side of cations that stem from our findings. Sears" campaign has altered customers' perceptions of what Sears' stands for (its Image), though it has not affected the esteem or regard with which customers view Sears. (Sears Conceptual Background has been and still is regarded as a highly reputable firm.) Conversely, a firm's reputation may be affected negatively, What Is Reputation? even though its image remains intact. For example, a restau- Reputation is defmed as "an impression of public esteem or rant with an image of "great fast food" may be regarded as high regard judged by others" {Merriam Webster's Colle- nonreputable if it is discovered tbat its owner is engaged in giate Dictionary 1996, p. lOOI). Several aspects of the def- illicit activities. Notably, tbougb, this negative reputation inition warrant attention. First, it is Important to clarify the need not alter customers' image of the restaurant as a place meaning of "public esteem" and "high regard." Prior work that serves great fast food. suggests an organization is held in public esteem or high re- Second, the extent to which customers view a specific gard when it is viewed as botb visible and credible (e.g., es- image as desirable is likely to be specific to a market seg- tablisbed, professional, and a stable player in tbe market- ment. As such, a firm's image may not necessarily be desir- place) (Fombrun 1996; Fombrum and Sbanley 1990). able to customers even tbough they may agree that its visi- Altbough individual persons may have perceptions of an or- bility and credibility render its reputation highly positive. ganization's reputation for specific things (e.g., its reputa- Thus, Rolex may have an image of luxury and a highly fa- tion for fairness, quality, and good hiring practices), re- vorable reputation as a company, even though the image of search suggests that persons tend to make global evaluations luxury may not be desirable to all customers. In contrast, of an organization's reputation. Hence, reputation tends to customers are likely to regard a favorable reputation as de- be regarded as a unidimensional, not multidimensional, con- sirable no matter wbat segment they belong to. struct (Thcus 1993; Yoon, Guffey, and Kijewski 1993). In accord with these ideas, we view reputation as a global per- Basic Elements of Reputation Theory and Its Link ception of the extent to which an organization is held in high to Marketing esteem or regard. Reputation theory (Bromley 1993; Emler 1990) suggests Second, it is useful to consider the entities whose repu- that a social entity (e.g., a person, an organization) engages tations may be evaluated (Bromley 1993). In a sales organi- in several reputation-related processes. It actively monitors zational structure context, a manufacturer may consider the reputations—both its own and otbers'. Evidence suggests reputation of at least