What is the Cost of Misalignment in Sales and Marketing?

Posted on June 14, 2009. Filed under: aligning marketing and sales, interim management, Revenue funnel, Sales funnel | Tags: , , , |

There’s a lot of talk about aligning sales and marketing. I’ve given speeches on the topic and have written numerous posts.  Company executives know it’s an issue, but what are the costs associated with misalignment?

If our car is out of alignment we know that the tires are going to wear out faster; we are more in danger of the car wandering out of our lane into on-coming traffic; the ride isn’t as smooth; and the car is harder to steer. We know the cost of replacing tires and in our mind we can calculate the risk of an accident. That’s pretty easy.

But, what is the cost if  a company’s  revenue engine is out of alignment? Believe me, it’s costing you more than a set of new tires.

I want to open this discussion up and let the ideas flow.  I have a thesis. I think most companies have been driving in a misaligned state for so long they are settling for sub-par results and resigned to trying to solve the problem. Misalignment is the default situation in most B2B companies.

Here is an excellent reason why an outside executive serving in an interim manager capacity at your firm, or as a consultant is best able to get you out of the rut.  They bring objectivity and the knowledge that there is indeed gold at the end of the rainbow.

What is the cost of misalignment? If, as business managers, we can’t put a number to the cost we’ll hesitate to invest in a solution, and that is the way it should be.

Here are a few areas in which misalignment is costing your company.

  1. Low conversion rates – your proposal to close ratio is static or falling. Research has shown that misaligned companies have a lower conversion rate. What would be the impact if you reduced your cost of customer acquisition by 10% , 20% or more?
  2. Missed revenue forecasts – unpleasant budget surprises at quarter end when actual sales are significantly below budget.
  3. Lost customers – research has shown that misaligned companies are not as good at keeping and growing profitable customers. What is the lifetime value of a customer? If you lost 10% or 20% fewer customers each year what would than mean to the top line and bottom line?
  4. Slow reaction to market dynamics – when marketing and sales have difficulty agreeing on direction and tactics there are delays in action; opportunities are missed. What is the value to you in beating the competition to a market opportunity?
  5. Internal strife – It’s not fun or productive to work in a company in which marketing and sales are at odds (or at war).  Soon egos and politics rule the decision making rather than a focus on progressing buyers through the sales funnel.  The cost here, besides low productivity, is employee turnover. What are your recruitment and training costs in sales and marketing?
  6. Do-overs – programs are often created and never implemented  because there is disagreement about what should be done and how. What is the cost of programs that never see the light of day, or what is the cost of do-overs?
  7. Loss of momentum – the most effective revenue generation plans are those that have coordinated strategies and tactics where sales and marketing are pulling forward together. A dog-sled team is a good metaphor. When the dogs are running out of step or in different directions the sled is not going to progress at optimum speed.

Those areas will give you a start. I’m sure I’ve overlooked a few.  Once you’ve identified the cost areas you’re ready to get out your calculator and compute what the chaos is costing you.

Give it a shot. Bring out the calculator, look at your current financial statements and budget. Don’t be shocked if the total cost is 5% or more of your total sales and marketing budget.

Think small if you like. What would a 5% improvement in any area look like? Think big. What would a 20% improvement in any area look like? What would a 5% improvement in all areas look like?

I look forward to reading your comments and  sharing more on this topic soon.

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    A Discussion of Interim Management for Marketing and Sales Functions by Charles Besondy

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    This blog is devoted to the topic of interim management for marketing functions within large and small corporations. Interim management as a staffing concept is well-understood and widely utilized in Europe. However, here in the colonies we are just beginning to open our eyes to the business benefits of being flexible and nimble when it comes to staffing senior-level marketers. (c) 2006 - 2012 Charles Besondy
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