paper
PNR Paper

When Sales and Marketing Align: Impact on Performance

Robert M. Peterson, Geoffrey Gordon, and Vijaykumar Krishnan Palghat. “When Sales and Marketing Align: Impact on Performance.” Journal of Selling, Volume 15, Number 1

Executive Summary

In this paper, the authors explore the impacts on performance from sales and marketing being aligned. One obvious fact is that without sales and marketing working to produce revenue, the business ceases to exist. Yet, conflicts between the two functions are to be expected given that salespeople wan to make quotas and solve customer problems while marketers want to build long-term customer relationships leading to organizational profitability.

Primary Drivers of Conflict between Sales and Marketing

A classic story is when salespeople rush to make their quota at the end of a quarter. Some salespeople might push products at an heavy discount in order to earn their commission. On the other side, marketers might try to sell bundled products in a manner that salespeople can’t sell it to the customers because customers don’t want it. These stories are not rare in businesses. A couple of drivers can explain the misalignment between sales and marketing:

  1. Sales feel like they are the ones on the line and that marketing often lacks credibility. On the other hand, marketing feels they are ignored because the behind the scenes efforts are important too.
  2. Sales tend to be shorter term and customer focused whereas marketing focus is more on the longer term, looking for incremental profit margins, marketing campaigns, branding and product development.
  3. Salespeople need to achieve sales, which is the only key measure for success for the sales force. This pursuit might sometimes hurt profit margins. Marketing wants to see an increase in sales results but not at the expense of profitability.
  4. Attribution for sales results is often a point of disagreement. Salespeople argue that they are the main function generation revenue whereas marketers think that their implementation of a strategy is the main revenue driver. This is reinforced by a perception from salespeople that believes marketing is out of touch with customers and marketers that believe salespeople have no clue as to what is occurring in the larger markets.
  5. Salespeople complain that they are given too many low quality leads while marketers complain about lousy feedback from the field. One study found that up to 70% of leads generated by marketing are not pursued by sales.
  6. Finally, given that salespeople and marketers don’t have much exposition in each other field, a lack of common vocabulary and a lack of experience can lead to conflict. For example, for salespeople a lead is a prospect expressing interest in a product while marketing may qualify something else as a lead.

The Power of Alignment

In the era of information overload, what matters for the customer is that he gets a standard customer experience across functions. As such, sales and marketing should adopt a market/customer-oriented focus that starts with detailed analysis of customer benefits within end-user segments and then reverse engineer the actions needed. In theory, the information to do the analysis is collected and disseminated by marketing. However, in practice, this information is most likely to be captured by the sales team because of their field presence and link with the customers.

Considering that sales productivity depends upon marketing for qualified prospects we should expect that when marketing and sales teams are not aligned to see a negative effect on overall business performance.

Lead Generation Becoming New Account Acquisition
The authors found that the higher the sales and marketing alignment, the higher the growth in numbers of qualified leads, the higher the lead conversion rate and the higher the growth in new account acquisition.

In a classical organization the marketing team is tasked with maximizing lead generation and the sales team with lead conversion which usually leads the marketing team to inundate the sales team with low quality leads and thus wasting sales force effort.

A properly aligned team should qualify leads, create scoring and categorization criteria, and then nurture leads until passed to the sales team that acknowledges the leads as being opportunities with a high probability of conversion. They can then both work together to increase sales results by engaging in joint sales call which lead to better needs discovery, positioning communication, features to benefits translation, objections handling, and closing techniques.

Sales Forecasting Accuracy
Sales forecasting require timely and accurate market feedback. The authors found that the higher the sales and marketing alignment the higher the sales forecasting accuracy, which is due to the marketing team following up with every lead provided by the sales team and then taking preemptive actions depending on if the information is valid or not.

Customer Retention and Other Key Performance Criteria
The authors found that the higher the sales and marketing alignment, the higher the growth in customer retention rates, the higher the growth in average account billing size, the higher the growth in revenue and the higher the growth in achievement of sales quotas.

Customer retention drivers are relationship quality (commitment, trust, exchange efficiency), contact density (number of connections) and contact authority (influential contact). Thus, salespeople ability to adopt consulting behaviours is important as they serve as an information conduit for the marketing team, which would then nurture the customer relationship by building both contact density and authority resources through targeted marketing programs, webinars, conferences and other marketing activities. This information conduit will help the company to address the customer needs and concerns which should improve close rates, customer retention rates and new customers acquisitions.

Conclusion

In this paper, the authors found that firms can generate a potential high ROI if they decide to put resources on aligning sales and marketing. Indeed the study found positive results for the following metrics: 1) growth in numbers of qualified leads; 2) increases in lead conversion rates; 3) growth in new account acquisition; 4) accuracy in sales forecasting; 5) growth in customer retention rates; 6) growth in average account billing size; 7) revenue growth; 8) growth in achievement of sales quotas.

Given the positive outcomes of this paper and even though balancing priorities between sales and marketing is difficult to achieve and maintain, managers should strive to cultivate better communication, collaboration and mutual understanding between the two groups. As such, a shared destiny needs to be instilled and aligning sales and marketing goals and compensation tends to be a powerful tool or managers can try to implement techniques such as account-based everything.