Marketing or sales: the executive decision

Article

Hei-wai Lee Crystal J. Scott , (2015),”Marketing or sales: the executive decision“, Journal of Business Strategy, Vol. 36 Iss 5pp. 43–49

Reviewer

Dr. Scott Downey, Associate Director and Professor

Summary

The authors looked at 246 companies to consider financial performance differences between companies with an executive officer in marketing or sales, or a combination of both. They discuss the differences between the roles. Marketing executives focus on longer term issues, planning, communications, performance metrics, and branding. Sales executives focus on staffing, training, motivation, and programs. Combination executives focus on developing sales and marketing strategies, analyzing performance, and building and motivating teams. The determinants for choosing which type of executive a firm should employ depended on branding strategy, innovation, customer base and industry. Companies with an umbrella branding strategy that was recognizable by customers, typically favored the use of marketing executives. Companies who were innovative and needed to explain their innovations to the marketplace favored the use of sales executives. Firms that catered to a business-to-business customer base (a small number of customers) needed relationships and favored sales executives, where business-to-consumer firms (with a large number of customers) favored marketing executives. Specific industries usually have norms that dictate the type of hiring. Consumer packaged goods (such as cereals and soaps) usually have marketing executives. High-tech and younger firms usually had sales executives. Healthcare firms usually have hybrid executives. Returns on advertising (ROAs) for firms with the different types of executives were not significantly different. Cash flows were better with marketing executives, while the market value as compared to book value was higher with sales executives.

What this means for food and agribusinesses

This issue is an interesting one for food and agribusinesses, where we see many of these factors changing.

In many cases, customers have become more business-like over the past 20 years. In the past, small businesses could be approached more like consumers, but those approaches are probably somewhat less effective today. Consolidating markets would favor sales executives because there are fewer relationships to build. But an interesting phenomenon is taking place today in food and agriculture. At the same time as food production has consolidated into large highly efficient production, there has been a rise in local and organic food production. As a result, many food and agribusinesses may see growth in smaller customer markets at the same time as there is concentration in large customers. When polarization occurs (fewer, but larger customers occurring at the same time as more, but smaller customers,) a dual approach may be suggested, with marketing executives leading the effort to communicate with the majority of customers and sales executives leading the effort with key larger customers. Perhaps a hybrid approach could be used more effectively than hiring executives to focus on the two segments separately.

Another constantly changing factor that drives the need for specific types of executives in food and agribusiness is innovation. Agribusinesses are historically bulk commodity businesses. This would usually be considered a low-innovation environment and suggest that a marketing executive would be the best suited for leading the customer function. Innovations in genetics for livestock and seed, advances in nutrition for livestock, chemicals and fertility in crop farms, and the rapid advancement in equipment or information technologies throughout every area of agricultural production would tend to mean that a sales executive is most needed. I think most firms in agriculture see their role as educating farm business customers on the benefits of their solutions and have tended to favor sales executives for that reason. In the food industry, innovations in processed and frozen foods, as well as fresh food options, might suggest that sales executives could lead communication of innovations better than marketers.

For some products, the differences between alternative brands or products are small and brand loyalty is fairly high. This is probably most true for many food products at the consumer level, as well as equipment, some seed, and a few other product categories in agriculture. In these cases, the focus is on branding, which means marketing executives make sense. When differences between options are larger, the purchase decisions become more complex. Ordinarily, that would imply that a sales approach could be used to help customers through these decisions. However, that approach has limitations. When a buying decision becomes too complex, some buyers (consciously or unconsciously) might choose not to engage and instead rely on what they have done in the past. Markets where buying decisions are made based on past performance or because of loyalty might be better served having a marketing executive than a sales executive.

Finally, there could be large differences between manufacturer-level decision making, where product brands are the focus, and front-line-level decision making, where relationships have historically been the focus. In my experience, manufacturers are much more likely to have marketing executives who are responsible for managing various brand components of manufactured brands. On the agriculture side, as retailers consolidate, it is likely that more private label brands will appear, requiring retailers to develop their own marketing functions.

The research showed no statistical advantages to having a hybrid executive. I suspect that the tasks associated with marketing as compared to sales are different enough that having one person to do both roles comes at the price of exceptional performance, but that’s something that would need to be researched further in order to be determined for our industry.

The bottom line as I see it is that we have need in food and agribusiness for both marketing executives and sales executives. Considering the emphasis on brand, the business orientation of markets served and the amount of innovation present will help these firms better decide the leadership talents needed to guide the organization’s relationship with customers.