In 2006, Philip Kotler, Neil Rackham, and Suj Krishnaswamy published the classic “Ending the War Between Sales and Marketing” in Harvard Business Review. Have things changed? Christian Sarkar caught up with Kotler and Rackham to get an update.
How have things changed since the 2006 article? Is there still a war between sales and marketing?
I don’t think there’s much war today, rather it’s a massive realignment of the boundaries. There have been more changes in 10 years since our article than in the 50 years leading up to it, and these changes have been profound. The biggest of these changes, from the sales perspective, is the migration of transactional business from sales to marketing. A transactional sale is one where buyers already know the solution they want and the selling process is mostly about fulfillment, generally driven by the criteria of price and ease of doing business. In contrast, a consultative sale is one where buyers don’t know the solution and need help and advice.
When we wrote the article, most salesforces were generally accountable for both types of sales. Today most companies have found that the tools for success with transactional sales are things like advertising, branding, web site design and social media. Marketing, in other words, owns the tools for transactional success and should logically take accountability for it. As a result, many marketing departments today have sales targets and quotas. That’s a profound change.
The biggest [change], from the sales perspective, is the migration of transactional business from sales to marketing. — Neil Rackham
Marketing has undergone many changes as well. Marketers are getting more scientific in mapping customer journeys. A marketer can spot the most sensitive touchpoints on these journeys and know when the sales force can play its most important role. Marketers have more data than ever on individual customers and can choose the right content to send to the right customer at the right time. Marketers are attaching more importance to the role played by the company’s values, not just buy the product’s value. Salespeople need to be the dynamic carriers and expressors of the company’s values.
We see a sharp rise in brand activism where a company adopts a social cause that concerns many of its customers. The future of your company may well depend not only on your storytelling but also on your story-making. Make sure that your company itself has done good deeds. Talk is not enough.
On the whole, I think the old war between marketing and sales has softened. Salespeople have more voice in the quota setting process and in what makes good messages and advertising. Marketers see salespeople increasingly as partners in producing the best marketing mix for accomplishing the company’s objectives.
On the whole, I think the old war between marketing and sales has softened. — Philip Kotler
How has the advent of the digital revolution changed the landscape and complexity of the marketing-sales interface?
From the sales perspective, the digital revolution has changed the power balance between sellers and buyers. Armed with information freely available at the touch of a button, buyers know all about you, your products, your competition, your strengths, and your weaknesses. That changes the purpose of sales. Before the digital revolution, salespeople could make a decent living by saying, “Let me tell you why our product is better than theirs.” Today that’s a sure recipe for failure. Customers already know all the strengths and weaknesses of your offerings and the competitions’. They find it more convenient and more objective to do their own research online.
The successful salesperson today must be a creative problem solver, not a persuader. The other side of that coin is that sales and marketing can digitally research both individual and corporate customers in a detail that some find sinister.
The successful salesperson today must be a creative problem solver, not a persuader. — Neil Rackham
We are operating in a New Marketing world. Customers know so much today about vendors, products and brands. In buying insurance, customers can look up comparisons about insurance companies prices, services, and reputations. Each competitor is aware of the other competitor’s offers and capabilities and must fashion, if possible, a unique and standout brand reputation. All companies need to go digital not only to increase their customer knowledge but also to reduce their costs of doing business. With the proliferation of individual customer data, customer personas and analytics, marketers will gain customer insights. These customer insights will lead to better content development, messaging, and delivery.
All companies need to go digital … — Philip Kotler
There are more Chief Revenue Officers in the picture now, as you predicted. What’s next for them?
One thing I hadn’t anticipated when we wrote the original article was the increasing importance of big data and the ability to analyze and manipulate it. We were worried about dysfunctional interfaces between sales and marketing. Today I’d give much more attention to the interface between the Chief Revenue Officer and the CIO. Tomorrow’s CRO will have to be more statistically sophisticated and have a state-of-the-art understanding of AI and data modeling.
Today I’d give much more attention to the interface between the Chief Revenue Officer and the CIO. — Neil Rackham
I am worried about companies that are driven to maximize revenue. Companies must always strike a balance between revenue and cost. A CRO’s plan is likely to be driven by an accounting mindset, a financial mindset. Where is the concern with meeting customer current needs and higher needs? Boeing had a wonderful history as an engineering company aiming to make fine airplanes and air travel. It was overtaken by a financial culture that led to some compromises in cost and the quality of the aircraft.
Companies need CMOs who constantly think about how to improve and enhance the lives of their customers. Marketers need to be driven by a higher purpose and make data-driven decisions benefitting both customers and the company. I favor keeping marketing under a CMO and letting finance worry about the relationship between revenue and cost.
I favor keeping marketing under a CMO … — Philip Kotler
The funnel has changed – what must marketers and salespeople do to integrate their work and be more effective?
As sales forces give increasing attention to large consultative sales opportunities, there’s something of a cost crisis in selling. The cost of bidding on a large sale is often in the millions and there’s no prize for coming in second. In the past, the decision about whether to chase a particular opportunity was largely left to salespeople and their managers. The salesperson comes back to the office and says “This is a huge opportunity.” The manager then asks the dumbest question in the history of sales, “Can we win it?” What do you think the salesperson says? There’s no penalty for saying “Yes” and the possibility of winning, however remote, means being a hero and a large commission. Before you know what’s happened, the company has spent hundreds of thousands in an unsuccessful sales effort.
More and more companies are thinking about how to choose the opportunities with the best chances of success and to over-resource these opportunities at the expense of less attractive prospects. Opportunity management is becoming a data-driven science, based on ever more sophisticated computer models. Marketing generally is better equipped to generate these models.
Opportunity management is becoming a data-driven science … — Neil Rackham
Too many companies are so eager for leads that they go after accounts for which they are not qualified. The smartest companies are niche leaders. They are companies that have carefully defined their customer target industries and they have built the best reputation as the best supplier of service and value in that target industry. Thus, if you are a construction company, you should have already announced what you are good at building, whether it is high schools, new museums, or prisons. By making that clear from the beginning, your salespeople will become well versed in the customer’s industry and able to make the strongest case for creating the best value for that customer type based on the company’s experience in that industry.
The smartest companies are niche leaders. — Philip Kotler
Do relationships still matter? How does AI impact the selling process?
Relationships still matter, of course, but their nature has changed. In the good old days when we were writing Ending the War, the prevailing theory was “build the relationship first and the relationship will lead to business.” Today it’s create value first and afterwards you are rewarded with the relationship — once you’ve earned it. This is another way of saying that the purchasing decision has increasingly become uncoupled from the relationship.
AI has entered selling as it has everywhere else. I have a post-doc research team, based at Sheffield University, who is using AI to analyze team conversations. An obvious application of their work is an AI app that analyzes sales calls and gives salespeople feedback on opportunities they missed, customer needs they might have explored further or the type of questions they could have asked. Of course, it may not be too many years away before the AI app will talk directly to potential customers and do the selling. I’ve seen prototypes being used in telephone sales that are so good that 50% of customers don’t even realize that they are talking to an app.
… the purchasing decision has increasingly become uncoupled from the relationship. — Neil Rackham
Salespeople need to be good at building relationships. Relationship skills remain a major factor in choosing which salespeople to hire. Salespeople must be trustworthy, affable, interesting people. But they must also be able to present the best solution to the customer’s problem. A strong relationship won’t overcome an inferior offer. In the end, the ability of the company and its salespeople to create the most value for the customer is what wins the business.
Companies are eager to turn more of their work into AI and algorithms. Much routine marketing work can be automated. Sending out emails, scheduling ads, selecting specific messages for specific customers — all become the work of sales and marketing automation. AI will bring down the cost of marketing and sales. Any company that is slow in turning to the New Marketing will be at risk.
AI will bring down the cost of marketing and sales. — Philip Kotler
Have you seen examples of more collaborative sales, of sales and marketing sharing commissions, etc.?
Team selling is on the increase and, as a consequence, so is team remuneration. We live in a cross-functional era. It’s not just a sales team, or even a sales and marketing team. There are integrated support roles, sales contributions from IT, from HR that, increasingly, are not just affecting sales and marketing at a managerial level but now work at the level of individual salespeople and their customers. So, collaboration across functions is becoming the norm and, in that environment, it’s more and more anachronistic to keep the old commission and reward models with their emphasis on individual salespeople.
Compensation is changing for another reason. If I could over-simplify it a bit, too many compensation models are based on the assumption that if you could motivate salespeople to sell harder by using commissions, they would make more sales. Although there’s some evidence that this may be true in simple transactional sales, there’s overwhelming evidence that this approach fails as sales get more sophisticated. Success today comes from selling smarter, not harder. Paying me to sell harder, by making more calls, for example, works: but doubling my compensation won’t make me any smarter. Because of this, there’s an accelerating move away from the simplistic compensation models of the past.
… it’s more and more anachronistic to keep the old commission and reward models with their emphasis on individual salespeople. — Neil Rackham
In the area of Big Sales, I think nimble, collaborative companies will beat competitors who depend only on gifted salespeople. Marketing must partner with the sales force in providing the best current information about the composition of the customer’s purchase team. The sales team brings in reps from R&D, product management, finance, HR, and whoever else will tilt the sale toward this company. It would be hard to evaluate the individual contributions that won the sale. And if the company lost the sale, it would be hard to evaluate who failed to do the job. For these reasons, the company should favor salary instead of commission. If the company wins the sale, bonuses should be used and fairly allocated to the participating sales team members.
… the company should favor salary instead of commission. — Philip Kotler
The marketing function is getting much more complex, with many large companies splitting up the CMO function between several people with specialized backgrounds. Is that happening in sales as well? What does the future hold?
There are contrary forces at work here. On the one hand, complexity drives specialization. A CMO, or a Head of Sales, can’t be expected to master the range of skills that the job demands today, which argues that these jobs need to be split. On the other hand, the increasing move to teams is creating pressure to integrate and combine. I can see arguments both ways.
I would be uncomfortable consulting with a company who does not have a CMO. I would have to deal with several persons with specialized backgrounds and wonder if the company has a unified vision, culture and set of goals. It’s easier to start with the CMO. If the CMO has disappointing answers to several of my questions, I will pass this on to his boss, the CEO. If the CMO, in my opinion, is doing an excellent job, I will also pass this on to his boss.
A talented CMO will build a great team of specialists in digital, customer psychology, communications, distribution channels, pricing, and product development. The CMO wants people who know more than he or she knows. The CMO’s job is to help the company quickly spot the changing opportunities and challenges and have the resources and plans to meet them.
Peter Drucker made it clear that marketing’s job is to create plans to find, keep and satisfy customers. The job is even bigger today. The company must get all of its employees, not just the sales force, to live the company’s values and to market the company’s values. The aim must be to get our target customers to be so pleased that they, too, become the company’s advocates and sales force. I have seen this in action in my work with FujiFilm. Where Kodak had to expire when the photo film industry was disrupted by filmless cameras, FujiFilm took what it knew about chemistry and moved into new markets including healthcare and cosmetic products. Its gifted CEO, Shigetaka Komori, put his central attention on honoring the humanity of the company’s customers and employees, leading all of them to believe that they could help create a better world. His company is thriving on a vision founded on creating unique value, innovation, sustainability, and social responsibility.
INTERVIEW by Christian Sarkar