Playing To Win
Playing to Win & Sales
Clarifying the Place of the Missing Function
Ever since I started my stint as a business school Dean in 1998, I have thought more about the sales function because only then did I come to realize that it was the missing function at business schools. Because I think it is important to understand the critical link between strategy and sales, I have dedicated my 43rd Playing to Win/Practitioner Insights (PTW/PI) piece to Playing to Win & Sales: Clarifying the Place of the Missing Function. (Links for the rest of the PTW/PI series can be found here.)
The Missing Function
When I took my MBA, there was no course in sales in the whole school. But I didn’t give it any thought at the time. I took the required courses and chose my electives from the wide array of available alternatives. But when I started my term as Dean of the Rotman School a couple of decades later, I paid a lot more attention to what we were and were not teaching. There were multiple courses in virtually all the functions that I was used to seeing in every company: finance, marketing, accounting, operations, OB/HR, strategy, and IT. We even had courses for which students could cross-register at the law school related to the legal function and at the engineering school related to the R&D function. But one major corporate function was missing: sales. There wasn’t (and I believe 23 years later still isn’t) a single course on sales.
Given that it is obvious that the sales function is critical to the success of every company — because without revenues a company won’t survive — I thought it odd that we had no course in sales and did some exploration, which confirmed that for sure it was odd logically but not unusual in practice. I couldn’t find a single sales course at any peer business school. Occasionally there are sales courses but mainly in lower-ranking business schools. But it is safe to say that only a tiny fraction of MBA students — probably under 1% — have access to a course on the topic of sales in their program.
It is not as though there isn’t demand for sales education. Sales training is a multi-billion-dollar industry, which by my rough estimate has annual revenues equivalent to around one-third of the revenues of the entire MBA business. Given the major challenge these days for MBA programs to maintain their revenues, it is striking that they have handed over this huge revenue stream to commercial providers.
Why don’t business schools have courses in sales? The explanation I get when I ask business academics is that it isn’t a research field. That is, there are few academic journals and no prestigious ones for scholarship in sales. Therefore, professors can’t make it a field of study in which they would be able to earn tenure. Therefore, there aren’t sales professors. Therefore, there aren’t sales courses.
I think that chicken and egg dynamic is real. But an equally important reason is that business academics think the field is below them. Marketing is lofty and intellectually rich. Sales is déclassé and boring. But it isn’t! While some products/services sell themselves, most don’t. As a consequence, sales is a critically important function that should not be AWOL at business schools — for both their sakes and those of their students.
Sales vs. Marketing
To be able to specify the link between strategy and sales, we need a useful definition of sales, which is often comingled unhelpfully with marketing. And remember, I believe there is no longer a useful distinction between marketing and strategy, but rather than call it strategy/marketing, I will refer it as to marketing for short in this piece.
At the broadest level, I think about marketing as ‘wholesale’ and sales as ‘retail.’ That is, marketing is aimed at customers as a collective. It engages in determining the offering for a given set of customers, the Where-to-Play (WTP), and the method for winning with that set of customers, the How-to-Win (HTW). Meanwhile, sales is aimed at the customer in front of the salesperson, typically one salesperson on one customer, even if the buying unit is made up of multiple people, such as a couple buying a car or a procurement group buying a jet engine. (In a tiny minority of cases, the sales activity can involve selling to a group of distinct customers as with a wealth management salesperson selling to a group of potential investors in a hotel conference room.)
Until relatively recently, sales activities were entirely face-to-face. Then in the late 1960s telemarketing became the new thing in selling. The name is unfortunate because it isn’t telemarketing; it is actually tele-sales — interacting with a single customer. And of course, now much of sales is not even human-to-human with cookie tracking of individuals and chat-bots doing the interaction. For me, the ads served up to you personally by Google or Facebook are sales, not marketing because they are targeted at you alone. It may be an ad designed by marketing to appeal to people like you. But the act of positioning it in front of you as an individual makes it a sales activity by my definition.
So, marketing includes defining the product/service, determining its price, deciding where to sell it, and running ad campaigns for it — the classic 4Ps. Sales involves interacting with an individual customer in service of the marketing. An ever-increasingly critical component of sales in the modern world is to use the opportunities provided by Internet search to find you, the individual, and talk to you as an individual — annoying as that may have become.
The Positive Role of Sales for Marketing/Strategy
There are two important and positive roles that sales can play in support of the intent of marketing/strategy, enhancing mental availability and confidence.
On mental availability, customers won’t buy your offering if they don’t know it exists, or if they have forgotten about you, or even if other competing offerings are more prominent in their minds. There is only so much mental availability that can be achieved with marketing activities such as advertising. The sales function is the outreach that keeps mental availability high. Goldman Sachs will get some of its business from overall brand recognition. But if its partners don’t show up to visit CEOs and CFOs to remind them about what Goldman Sachs can do for them, those executives may choose someone for their transaction who did visit more recently. If that winery salesperson didn’t offer you a taste of a featured wine in the grocery store, chances are you would have walked right by it on the store shelf. Those may be very different contexts, but they are both efforts in enhancing mental availability.
On confidence, the positive role of sales is to provide the confidence that if a customer buys, it will be happy. Of course, there are many ways that sales can accomplish that. A salesperson can customize the offering for the customer as with home insurance, clothing, or conference facilities. A salesperson can provide detailed information that helps the customer feel confident in what it is buying, such as explaining the functionality and features of a smart home system. A salesperson can ally concerns that the customer may have, such as explaining the warranty coverage or return policy. A salesperson can instill confidence by showing that the salesperson cares enough to spend time with the customer.
The Positive Role of Marketing/Strategy for Sales
The road between marketing/strategy and sales runs both ways. Marketing/strategy can equally play a positive role in helping the sales function succeed. The key feature is precision in WTP and HTW. The bane of all sales is an overbroad WTP. In that case, sales has to call on too many customers, for many of which there is no HTW. That wastes salesforce time on customers that are highly unlikely to buy. That is costly in terms of both time and morale. Hit rate is critical to both cost of sales and morale. A low hit rate results in high costs and elevated turnover. Hence, a tightly defined WTP is extremely helpful to sales.
The other challenge is a ‘how to play’ rather than HTW. Salespeople can’t build their own confidence in winning when the way to win is not specified by marketing. Likewise, they can’t build customer confidence that the offering is best for the customer when it just plain isn’t. A ‘how to play’ results in a lower hit rate, longer sales cycles, and sales function turnover.
That is why sales benefits from a tightly defined WTP and a real HTW.
An Unhelpful Role of Sales in Marketing/Strategy
To me this is clear but will be controversial. The most unhelpful role for sales to play is in negotiating price, even though it is commonly done. The problem with allowing sales to engage in price negotiation with the customer is that the vast majority of the sales call will be taken up by the negotiation and it will crowd out the time the salesperson can spend on boosting both mental availability and customer confidence. In fact, it undermines a key attribute of confidence: Am I confident that I am getting the best deal or did some other customer negotiate harder and more successfully?
Whenever I make this argument, people tell me that it is impractical and can’t be done, that customers like to negotiate price with their salesperson. I have yet to see hard evidence that is the case — though I don’t deny that some customer segment may exist in some markets that wants to negotiate with their salesperson. I am told, for example, that negotiating price is absolutely necessary for success in the automotive retailing business. Well tell that to rigidly no-haggle CarMax, now the biggest in the industry, and Carvana, #8 and fastest growing. Both are doing enviably well. Their salespeople know they have no authority to negotiate price and the customers don’t expect it.
Is there any positive role for price negotiation? Sure, but by marketing not sales. If the offering isn’t working at the set price, that feedback is a helpful form of implicit negotiation from customers. But it is for marketing to fix the WTP/HTW, not for sales to start price negotiating. Sales is there to boost mental availability and customer confidence — and those two critical jobs are it!
If you are an MBA student, badger your Dean to get real and provide at least one rigorous course on sales. If you are a business school Dean, recognize (if you don’t already) that the MBA business is in secular decline, but the sales training business continues to grow. It is mistake from a student learning perspective to withhold sales education from them, plus you are giving a huge revenue stream to commercial providers. Providing sales education at your school is a win-win.
For companies, it is important to distinguish between marketing and sales and make sure both do their respective jobs. Marketing (aka strategy) is there to define a WTP/HTW. Sales is there to enhance both mental availability and confidence for the customer in front of it — whether that is in person, on the phone, or online. The more precise WTP and powerful HTW that marketing defines, the more successful sales will be in enhancing the effectiveness of that WTP/HTW combination. And make sure to ban price negotiation on the part of sales. Sales has a suite of offerings with prices in its portfolio and its job is to sell them.