Thursday, October 11, 2007

Tech Sales and Marketing Execs: Avoid Negative Attention from Your CEO!

By Richard Vancil, Vice President, IDC's Executive Advisory Group

A long-standing rift exists between sales and marketing in the IT vendor community. We all recognize the tired observations: sales is more tactical and marketing is more strategic; sales is all about the short term and marketing is about the long term; sales brings in the money and marketing just spends it. And we all know that the finger-pointing from the "two sides" gets sharper from there!

Just as these misalignments and strained relationships have been long-standing, so has the tolerance of this by the C-Suite executives. The prevailing mindset: as long as the business results have been very good, a little organizational tension never hurt anyone – and some of it is actually helpful! It's a good sign that complacency hasn't set in.

IDC is now observing that C-level tolerance is reaching its limits. More CEOs and COOs are scrutinizing their total cost of creating a customer: the sales plus marketing cost envelope. They are seeing those costs continue to rise relative to the return and are suspecting that the organizational friction and lack of alignment between sales and marketing is a culprit. And they are right!

The costs are just too big a target for senior management to ignore. A typical large tech vendor might spend 3% to 12% of revenue on marketing and an additional 10% to 20% of revenue on sales. For illustration purposes, let's call it 20% in total. Some of those costs are for pure and isolatable marketing activities and some are for pure and isolatable sales activities.
But a good proportion, as much as one-third, or 7% of revenue, are costs that lie at the intersection of sales and marketing. Activities represented in those costs include customer database management (often redundant and disconnected between departments); the lead management process; and the broad category of marketing's support and enablement of field sales. Where this intersection is tangled with miscommunications and broken processes, it is then reasonable to assume that some large part of that 7% might be wasted money.

As a result, more CEOs are now actively inserting themselves in the sales and marketing process to streamline operations and to reduce costs. At many companies, we are seeing a merging of the sales and marketing operations functions. At several companies we are seeing finance teams (and their hired consultants) spending more time examining and rationalizing sales and marketing costs (by order of the CEO). And finally, at a handful of companies, we are observing tech vendor CEOs looking actively at the organizational option of a single sales and marketing executive reporting to the CEO. We expect to see more of this in 2008 and beyond.

Our guidance for the senior sales and marketing executives is this: Start addressing some of these problems on your own or your CEO will start addressing them for you!

If the coming negative attention from the CEO is not enough motivation, it might be helpful to also look at some external catalysts. New IDC research finds buyers increasingly frustrated by the approach and tactics made by the vendor's marketing and sales efforts. They are getting turned-off by messages, material, timing, and sales representation that is out-of-sync with their buying process. Much of this may have roots in the misaligned sales and marketing execution on the part of the vendor.

Sales and marketing executives need to get on the same page. Put yourself in the shoes of your CEO the next time you are preparing for a sales and marketing planning or budget review. He or she is looking for new ways to lower the overall cost to create a customer. Offer a unified solution – not a fractured problem!

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