FEATURE PAPER

The Impact Of Experiential Learning On Sales Career Adversity

This paper was written by Claudia C. Mich, from Purdue University Calumet, Susan E. Conners, from Purdue University Calumet, and Lori Feldman, from Purdue University Calumet. This paper was presented at the 2011 Allied Academics Annual Conference in Orlando, Florida.

Abstract

Personal selling is a part of everyday life, reflected in how we build and maintain relationships, convince others of our ideas, negotiate terms even in friendships (ex: where to go for dinner), portray ourselves to others (ex: in an interview, first date), and may be part of our daily jobs. However, personal selling, and salespeople in particular, has been criticized as being a tool used to convince people to buy what they do not need. Business students, about 60% of whom end up in an entry-level sales position directly out of their undergraduate program, are still fairly averse to a career in sales.

This study explores 1) how students' attitudes toward a career in sales change due to participation in Experiential Learning (ExL) activities and 2) the impact of confidence as a moderator of these effects. Students' attitudes toward sales will be assessed at the beginning and end of the course, and periodic assessments of confidence will be taken several times during the course. It is expected that attitudes toward sales will change positively as a result of participating in a personal selling course with ExL activities and that confidence will be built through the experiences in the course and will moderate the attitude change. The paper reports research in progress. (Page 3) Academy of Marketing Studies.

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TIP OF THE WEEK

The initial funds used to launch a new firm are usually called seed capital. The first round of capital needs may be limited, and funds may be readily available. Moreover, there are many steps that a small firm can take to reduce costs and to improve cash flow, such as obtaining advance payments from customers, delaying payments to others, and sharing employees, assets, or business space with other firms [Winborg and Landstrom, 2000].

Launching a start-up with modest funds from the entrepreneurial team, friends, and family is often called bootstrap financing. The term originated from the saying "they pulled themselves up by their bootstraps." To bootstrap a venture means to start a firm by one's own efforts. For many ventures with modest potential returns to investors, it is best to attract investors who are known to the entrepreneurs. Professional investors can only back a small fraction of the number of firms that start up each year. They seek to invest in large opportunities with high rates of return that have defensible competitive advantages, well-defined business plans, and well-known, proven founders.

An advantage of bootstrap financing is the ability to make some mistakes and yet keep going. Entrepreneurs who are unsure of their markets or who do not have the experience to deal with investor pressure are better off without other people's capital, even if they can somehow get investors to overlook their limited credentials and experience.

Bootstrap entrepreneurs often start with a modest business plan and a focused opportunity and look for a quick route to breakeven and positive cash flow. Many entrepreneurs underestimate the time and the marketing costs entailed in overcoming customer inertia and conservatism, especially with respect to new, unproven products.

Bootstrap companies start small and build their experience and know-how as they go. Eventually, these modest beginnings can turn into large successes as the firms find new opportunities. For example, Princeton Review was launched to compete with local private tutors of uneven quality. Eventually the firm found its place on the national scene and competed with the Kaplan chain. Actual figures are difficult to obtain, but up to 75 percent of start-ups are bootstrap, self-financed firms. Self-financed start-ups concentrate on sales activity to bring cash flow into the business.

Many businesses fit the model of a bootstrap opportunity. They keep costs low, seek out markets that competitors are ignoring, and build the business one step at a time. Entrepreneurs often must fund a significant portion of their new business since investors and lenders are reluctant to provide the required capital [Quadrini, 2002].

Pierre Omidyar launched Auction Web on Labor Day, 1995, while he was still employed full-time at a software firm. As an experience software developer, Omidyar was intrigued by the opportunities to build a business on the Internet, and his vision was to prove a "perfect market" for buyers and seller on the Internet auction site [Cohen, 2002]. He wrote the program for the site over the Labor Day weekend using his personal website provided by his home Internet service provider. The best domain name he could find was eBay.com. Throughout the fall of 1995, Auction Web had hosted thousands of auctions. By February 1996, Omidyar's Internet service provider started charging him a commercial rate for his website, so he started charging a small fee for each sale. Starting in February, Auction web was profitable. By April, Auction Web took in $5,000 in sales. In June, when revenues double to $10,000, Omidyar decided to quit his day job. He quickly attracted a friend, Jeff Skoll, to join him, first as a consultant and then full time by August 1996. By late 1996, they moved out of Omidyar's house to an office building in Campbell, California. By October 1996, Auction Web had a total of four employees when it hosted 28,000 auctions that month. Auction Web was dedicated to thriftiness and controlling costs. By January 1997, the site had hosted 200,000 auctions, and Auction Web was projecting revenues of over $4 million for 1997. Early in 1997, Omidyar and Skoll wrote their first business plan and started looking for investors. By June 1997, Benchmark Capital, a venture capital firm, paid $5 million for 21.5 percent of the company, which then changed its name to eBay.
Bootstrap companies usually follow five rules: (1) start small and probe the market, (2) learn from your customer and adjust the business model, (3) adjust the revenue and profit engine, (4) keep costs to a minimum, and (5) start expanding the company, once the new venture starts growing, while keeping the cost curve below the revenue curve. Often, using bootstrap financing can instill long-term frugality and financial discipline in a new venture.

A useful indicator of the value of the quality of a new venture proposal for funding is the actual proportion of the lead entrepreneurs' wealth that is committed to the new venture [Prasad et al., 2001]. Typically, bootstrap start-ups can take care of the first (seed) round of the company. If the firm starts to grow, it may need investments from professional investors. The advantages and disadvantages of bootstrap financing are listed.

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