Sales Versus Marketing: Vive la difference

“More than 30 years after the call to integrate sales and marketing activities ,… we find no firms that had adopted this recommendation” finds Workman, Homburg, and Gruner.  Why?  Or, more importantly, is this a good thing?

Recent research which maps the strengths of sales and marketing into market performance points to an underlying cause of this permanency in the struggle between sales and marketing:  The disagreements can lead to higher performance.

Homburg and Jensen looked at a number of factors regarding competencies and orientations of sales teams versus marketing teams.  They importantly examined the effect of these differences on performance as measured by profits and revenue.

On one hand, differences between sales and marketing can lead to infighting and wasted time on arguments without results.  On the other hand, different viewpoints are valuable to developing the right approach at the right time.  Homburg and Jensen’s research revealed that the value of applying contrasting points of view outweighs the challenges of allowing disharmony when it comes to performance and contrasting thought worlds, or orientations, of sales versus marketing.

Referring to the work of Cespedes, sales and marketing are oriented in two different key dimensions:  product versus market focus and short versus long time horizon focus.

In the product versus market focus, we often find marketing in the product corner and sales in the market corner.  In this paradigm, a product focus refers to maximizing individual product line profitability, balancing the product portfolio, and discontinuing less profitable products while a market focus refers to being more account oriented and maximizing channel or customer relationships.  At issue is the orientation towards building the product versus developing relationships with buyers.    Conflicts can arise when a product orientation argues to discontinue an unprofitable product while a market orientation counters that that product is a key anchor in a customer relationship.

In the short versus long time horizon focus, we often find sales in the short horizon frame and marketing in the long horizon frame.  Sales tends to be more focused on immediate action and immediate results, and are compensated and promoted on achieving immediate goals.  Marketing tends to focus more on long term product plans and market actions and are compensated and promoted on longer term goals.  Conflicts can arise when a short-term thinking argues in favor or taking a pricing action to keep a customer while the long-term thinking argues in favor of maintaining price integrity to achieve strategic positioning and profitability goals.

In many cases, there are also differences in sales and marketing in terms of their competencies meaning skill sets and knowledge.  Interpersonal skills, depth of product knowledge, and depth of market knowledge can vary between the sales and marketing teams.  In the Homburg and Jensen study, interpersonal skills referred to sustaining conflicts, communicating, and convincing.  Market knowledge implied being knowledgeable of customers and competitors while product knowledge implied being knowledgeable about products and internal processes.  Variations in competencies are well known.  What is important to gain from their study is that these differences affect outcomes.

In examining the effect of contrasting orientations and competencies on operating profits and revenues, Homburg and Jensen found that differences in orientation are associated with better performance, while differences in competencies are associated with poorer performance.

Why are contrasting orientations good for performance?  Contrasting orientations enable multiple viewpoints to address a challenge, thus yielding more optimal decisions.  Marketing needs sales and direct customer interaction to strike them with reality when setting unrealistic list prices.  And, in contrast as noted by Schweiger, Sandberg and Ragan:  “Faced with price pressure from customers, sales may be tempted to myopic price cuts (and thus, revenue and profit sacrifices) if marketing did not act as the devil’s advocate.”

Utilizing both orientations within both issues, the short versus long time-horizon and the product versus market focus, yields better decisions and ultimately higher profits.

If contrasting orientations are good, why are varied competencies bad?  When individuals have severely differing funds of knowledge, they cannot easily share ideas, thus damaging a cooperative and collaborative work environment.   Marketing needs to have interpersonal skills like sales.  Marketing should also interact directly with customers in order to firmly ground their fact base.  Likewise, sales needs to be cognizant of the market trends and product pathways in order to guide their competitive actions.

In otherwords, both sales and marketing need to be competent when it comes to interpersonal skills, market knowledge, and product knowledge.  They need to respect each other’s knowledge domains and learn means to integrate the other’s knowledge into their decisions.  But when it comes to their orientation on how they see the world, celebrate the differences if you want to win.

References

1. Christian Homburg & Ove Jensen (2007), “The Thought Worlds of Marketing and Sales:  Which Differences Make a Difference?” Journal of Marketing, 71(July) 124-142.
2. Frank V. Cespedes (1994), “Industrial Marketing:  Managing New Requirements,” Sloan Management Review, 35 (Spring), 45-60.
3. John P. Workman, Jr., Christian Homburg, and Kjell Gruner (1998), “Marketing Organization:  An Integrative Framework of Dimensions and Determinants,” Journal of Marketing, 62 (July), 21-41.
4. David M. Schweiger, William R. Sandberg, James W. Ragan (1986), “Group Approaches for Improving Strategic Decision Making:  A Comparative Analysis of Dialectical Inquiry, Devil’s Advocacy, and Consensus,” Academy of Management Journal, 29 (1), 51-71.

Pricing Domain Rejoinder on Vive la difference

Conflicts arise in the field of pricing.  As research indicates, broad agreement on pricing actions is unlikely to be had anytime soon and, in fact, appears to be undesirable.

Contrasting orientations towards products versus markets and short versus long time horizons both have direct effect on pricing decisions.   Skim versus penetration pricing, product portfolio pipeline, price integrity, and influencing industry trends versus customer requests, quarterly profit calls, and market share fights.  Pricing must weigh in on each of these issues.  In doing so, it has a responsibility to promote a point of view, collegially but firmly, in favor of value differential based pricing, controlled discounting, and price war avoidance.

Sales and others will argue for price discounts, cuts, and commoditization.  That is what the customers are most likely to request and claim, time and time again.  That’s what sales will hear.  Eventually, someone will believe it and then start preaching it internally.  If these customer facing people did not request discounts, cuts, and argue at times that your highly differentiated product wasn’t a commodity, you should be wondering if they actually talk and listen to customers.  Many have argued that it is best to have the salespeople act as advocates for customers within the firm.

Truth will lie somewhere between the two poles.  It is the job of pricing to be bold in capturing margins, maintaining price integrity, and avoiding pricing errors.  If you don’t hold up your side of the argument, there is only one way things can go.

Harmony means that not all points of view are brought to bear on key pricing issues.  A little respectful contention, where the parties periodically hold contrasting points of view yet are able to listen and learn from each other, is fundamental to high performance pricing.  (Just as the two handed economist was a forefather of pricing, it is good for a pricer to hold conflicting ideas concurrently.)

Or, in other words, if you’re a wimp don’t get into pricing because it is likely the most stressful and least supportive position you can find.  Yet that is the job and it is of key importance to the firm that it is done well.  Take the lashes as a badge of honor.  But maintain your ability to be collegial and listen.