Product designers learned years ago that they’d save time and money if they consulted with their colleagues in manufacturing rather than just throwing new designs over the wall. The two functions realized it wasn’t enough to just coexist—not when they could work together to create value for the company and for customers. You’d think that marketing and sales teams, whose work is also deeply interconnected, would have discovered something similar. As a rule, though, they’re separate functions within an organization, and, when they do work together, they don’t always get along. When sales are disappointing, Marketing blames the sales force for its poor execution of an otherwise brilliant rollout plan. The sales team, in turn, claims that Marketing sets prices too high and uses too much of the budget, which instead should go toward hiring more salespeople or paying the sales reps higher commissions. More broadly, sales departments tend to believe that marketers are out of touch with what’s really going on with customers. Marketing believes the sales force is myopic—too focused on individual customer experiences, insufficiently aware of the larger market, and blind to the future. In short, each group often undervalues the other’s contributions. This lack of alignment ends up hurting corporate performance.
The quote is from the HBR paper titled “Ending the war between sales and marketing” by Philip Kotler, Neil Rackham, and Suj Krishnaswamy, that outlines findings based on a survey of a variety of companies. Among their findings, they claim that “Companies can take practical steps to move the two functions into a more productive relationship, once they’ve established where the groups are starting from”.
In this article, we try to analyze the current reality based on our experience with B2B sales teams and their conflicts with their respective marketing departments. Then we use the evaporating cloud methodology invented by Eli Goldratt as part of the Theory of Constraints, and try to resolve the conflict.
Biggest Sales Challenge – Generating high-quality leads
According to a recent report by MarketingSherpa, the biggest challenge for sales people is to generate high-quality leads.
To try and understand why it is such a big challenge, we must first answer the question – what exactly are “high quality” leads?
Universal Lead Definition
Lead generation guru, Brian Carrol says that most companies lack a clear definition of a sales lead – that is, their sales and marketing departments do not agree on a universal lead definition. He responds to the above survey results on his blog and advises sales and marketing teams to work together to create a Universal Lead Definition (ULD). If leads generated by marketing are transferred to sales without qualification, sales persons will assign a very low priority to following them up. By having a common definition, marketing can presumably ensure that leads passed on to sales are qualified as “high quality”, so as to address their concern.
But can sales and marketing really agree on a common definition of a qualified lead? To answer this question, we need to understand how we measure the performance of both these functions, and see if having a common definition is consistent with their individual objectives.
The Marketing Perspective on Leads
From a marketing perspective, the ROI of marketing initiatives – campaigns, events etc. – are measured by the number of leads generated. Hence, they tend to keep minimal qualification criteria so as to get the maximum number of leads possible for the given marketing budget. For example, in case of a direct mailer, every response is considered as a lead. Or in case of a promotional event or exhibition, every person who drops a visiting card is considered as a lead. And rightly so, for however small the chance of success and however long the sales cycle, a lead is still a prospective sale!
Marketing ROI ~ Number of leads generated / Marketing Spend
To maximize the ROI of marketing initiatives, marketing requires lax lead qualification criteria, if any.
The Sales Perspective on Leads
From a sales team’s perspective, sales performance is measured by their ability to meet targets for a pre-defined period, such as a quarter. Follow-up of every lead requires sufficient time – more so when the buying process is complex and involves several decision variables. Available sales time is limited primarily by the size of the sales team. If each lead is to be given the necessary time and attention, there is a limit to how many leads the sales team can follow up.
The primary sales performance indicators are:
Conversion Ratio ~ Orders Won / Leads or opportunities Value Converted ~ Sales Order Value / Sales Targets
Sales persons usually prefer to maintain conversion ratio at a healthy level depending on the market average. A higher than normal conversion ratio could imply inadequate number of leads or opportunities in the pipeline, while a lower conversion ratio could indicate lack of adequate closing skill.
Hence the main determinant of performance is the ability to achieve assigned targets. For this, sales persons will choose to follow-up on those leads or opportunities that:
- have the best chance of closing within the current evaluation period (e.g. current quarter) and
- have a high enough estimated sale value to cover the deficit in their assigned target.
As such, opportunities that are already in the pipeline will serve these objectives better than leads that have dubious value and unknown sales cycle. Hence leads are usually given a lower priority, or postponed indefinitely, unless they have a proven quality.
To maximize sales performance, sales requires strict lead qualification criteria.
The Sales and Marketing Process Disconnect
The Marketing and Sales processes are usually disconnected from each other. Philip Kotler, Neil Rackham and Suj Krishnaswamy write in an HBR article:
Sales departments tend to believe that marketers are out of touch with what’s really going on in the marketplace. Marketing people, in turn, believe the sales force is myopic–too focused on individual customer experiences, insufficiently aware of the larger market, and blind to the future. In short, each group undervalues the other’s contributions. Both stumble (and organizational performance suffers) when they are out of sync. Yet, few firms seem to make serious overtures toward analyzing and enhancing the relationship between these two critical functions.
They conclude that:
The strains between Sales and Marketing fall into two main categories: economic (a single budget is typically divided between Sales and Marketing, and not always evenly) and cultural (the two functions attract very different types of people who achieve success by spending their time in very different ways)
Further, the marketing and sales processes are also disconnected. The marketing funnel works with the target market and attempts to generate leads. The sales funnel starts with opportunities and attempts to generate sales orders.
A forced connection between these two processes will require a resolution of the conflicting definitions of a lead that both departments will have.
In case we try and implement the marketing perspective of a lead and have lax lead qualification criteria, every lead captured by marketing will need to be followed up by the sales team.
This will result in overloading the sales team, resulting in lowering the conversion ratio and the sales value converted. On the other hand, forcing the implementation of the sales perspective of strict lead qualification criteria will result in reduction in the marketing ROI, and very likely lead to lost business.
As we can see, there is a conflict on hand. It seems impossible to arrive at a universal lead definition as suggested by Brian Carrol, and even if we manage to agree on a common definition, implementing it will result in either departments individual objectives to be compromised.
We shall use the Evaporating Cloud methodology to try and break this conflict.
The Sales and Marketing Evaporating Cloud of Conflict
- Both departments are working towards a common objective – of ensuring high sales volume
- The marketing departments tries to achieve this objective by maximizing the number of leads generated from marketing initiatives.
- The prerequisite for this is that the lead qualification criteria should be as lax as possible
- The sales department tries to achieve high sales volume by maintaining their conversion ratio and maximizing the sales value generated
- To prerequisite for this is that they have a strict lead qualification criteria that ensures that the sparse sales resources are utlized well
To evaporate this cloud of conflict, one must examine the underlying assumptions behind each argument that lead us to the conflict.
The following are the two assumptions that lead us to the conflict:
- Leads have to be qualified either by sales or by marketing
- Leads that are not qualified are dropped out of the funnel
Both these assumptions are invalid, for:
- Lead qualification can be done by an independant, low cost resource – such as a tele-marketing team or by using an online self-qualification system.
- Leads that do not qualify can be nurtured in a low cost CRM initiative that helps develop the lead into a qualified lead
An independant, low-cost lead qualification and nurturing process
By having an independant lead qualification team that uses a low-cost telephonic or online qualification process, leads generated by marketing initiatives can be divided into two groups:
- Leads that satisfy the universal lead definition
- Leads that do not satisfy the universal lead definition
The leads that qualify the ULD can be immediately transferred to the sales team to follow-up and close. The leads that do not qualify can be put into a nurturing program that maintains the dialog with the lead till it converts into an opportunity that is worth following up by the sales team.
The objectives of the nurturing process are to:
- Maintain a continuing dialog with the lead by using nurture marketing initiatives, till it satisfies the universal lead definition
- Capture and track all responses and behaviour of the lead
- Develop an intelligent buyer profile that can assist the sales process to close the resulting opportunity
There can be various types of low-cost nurturing initiatives, including email campaigns, online and offline events and webinars, articles and white paperts on the web site, blogs, etc. Each of these initiatives will result in some responses. All such responses can be tracked and recorded in the lead nurturing process. Every response, be it a click on a link in an email campaign, downloading a white paper, comments on a blog, etc. add to a valuable buyer profile that is useful when the lead converts into an opportunity for the sales team to follow up.
It is possible to resolve the conflict between sales and marketing by introducing an independant lead qualification process that utilizes a universal lead definition criteria for evaluating every lead generated by marketing initiatives and categorizes them into qualified and un-qualified leads. This strategy not only breaks the conflict, it can enhance the individual performance metrics of both departments.