Examining the Marketing - Sales Relationships and its Implications for Business Performance

Page 1 of 8 ANZMAC 2009 Examining the Marketing - Sales Relationships and its Implications for Business Performance Ken Grant*, Monash University, Ken.Grant@buseco.monash.edu.au Hanny Nasution, Monash University, Hanny.Nasution@buseco.monash.edu.au Abstract The marketing and sales interface was considered as one of the most important issues facing marketing and sales managers. This study investigates antecedents of the marketing-sales interface and its implications to business performance. This study further examines differences in the business performance levels between different degrees of marketing-sales relationships. The sample was collected from 155 marketing and salespeople within Australian firms. The results indicate that organisational characteristics and market orientation are significantly related to marketing and sales relationships. The marketing and sales relationships are significantly related to business performance. The results further suggest that there are significant differences in the level of business performance between different degrees of marketing and sales linkages. Keywords: Marketing and sales relationships, market orientation, organisational characteristics, business performance 0

ANZMAC 2009 Page 2 of 8 Examining the Marketing - Sales Relationships and its Implications for Business Performance Introduction The marketing-sales relationships have been receiving increasing attention in the marketing literature (Geunzi and Troilo, 2007; Homburg, Jensen, and Krohmer, 2008; Rouziès, Anderson, Kohli, et al., 2005), as it is considered as one of the components of market-driven organisations (Rouzies et al., 2005). The marketing concept subsumes both marketing and sales under the marketing organisation (Homburg et al., 2008); marketing and sales have been perceived as marketing (Dewsnap and Jobber, 2002; LeMeunier-FitzHugh and Piercy, 2007) in which customers do not differentiate between marketing and sales departments and consider them to perform a single purpose (LeMeunier-FitzHugh and Piercy, 2007). However, in managerial practice, marketing and sales have been treated as separate functions (Homburg et al., 2008). Marketing has been considered as product focused and long-term focused; whereas sales function is considered as customer focused and short-term focused (Cespedes, 1993; Homburg et al., 2008; Rouzies et al., 2005). In addition, marketing could be structured based on major customers and markets, and integrates all sales, products, and other marketing activities including marketing strategy, distribution, and marketing communication; whereas the function of sales is to stimulate demand for products (LeMeunier-FitzHugh and Piercy, 2007). Dewsnap and Jobber (2002) argue that the marketing-sales relationships were characterised by poor co-ordination, conflict, non-cooperation, distrust, and dissatisfaction. Despite, marketing and sales needing to be treated as separate functions (Homburg et al., 2008); both should be closely coordinated and integrated in order to improve business performance (Biemans et al., 2009; Rouzies et al., 2005). The marketing and sales integration was considered as one of the organisational changes that would do the most to improve sales performance and as one of the most important issues facing marketing and sales managers (Rouzies et al., 2005). In addition, Rouzies et al., (2005) suggest that coordinating the marketing and sales functions can improve the effectiveness of activities undertaken by the functional areas. Previous studies examined the relationships between marketing and other functions within organisation in order to successfully develop and launch new products (e.g. Fisher et al., 1997; Tatikonda and Montoya-Weiss, 2001). However, research on the marketing-sales interface is still limited (Biemans, et al., 2009; Rouzies et al., 2005). Therefore, this study aims to bridge the gap found in literature by investigating antecedents and consequences of marketing-sales relationships. The study will also seek to examine whether different degrees of the marketing-sales relationships contribute to differences in the levels of business performance. Marketing-Sales Relationships Theoretical Background Marketing-sales relationship is defined as the extent to which activities carried out by the two functions are supportive of each other (Rouzies et al., 2005). According to Song et al., (2000) integration among functions within an organisation is identified as involvement, information quality, and harmony. Specifically, Ruekert and Walker (1987) suggest that marketing interactions with other functions can be identified in terms of exchanges of resources, work, 1

Page 3 of 8 ANZMAC 2009 and technical assistance and the amount of difficulty of communication. The integrated activities of marketing and sales can be performed effectively only through a coordinated effort between marketing and sales (Rouzies et al., 2005). In this sense, salespeople could collect valuable customer-related information and pass it to their marketing colleagues (Biemans et al., 2005; Dewsnap and Jobber, 2000). Rouzies et al., (2005) propose a conceptual model that illustrates the need for interaction between marketing and sales. In their model, integrating mechanisms (i.e. structure, process/system, culture, and people) are the main antecedents of marketing and sales integration. Similarly, LeMeunier-FitzHugh and Piercy s (2007) work on marketing and sales include integrators, management attitude towards coordination, and facilitator as antecedents of the marketing and sales collaboration. Further, Homburg et al., (2008) introduces a conceptual model of marketing and sales interfaces, which include five domains: information sharing, structural linkages, power, orientations, and knowledge. In this study, marketing-sales relationships include four dimensions: extent of relationship, trust, importance of relationship, and cooperation. Organisational Characteristics Organisational characteristics in this study include leadership style, organisational structure, and organisational culture. Leadership is defined as the ability to influence a group toward the achievement of goals (Perry, 1996). The relationship between the leader and follower can be described from two different perspectives. It can be described as a framework of exchange relations (Popper and Zakai, 1994). The exchange perspective of leadership is expressed in the leader s ability to make followers aware of the relationship between effort and reward. Organisational structure is defined as a system of roles (structure) and stream of activities (processes), which are designed to accomplish a shared purpose (Robey and Sales, 1994) or the formal presentation of a system of positions and relationships within the firm (Staniforth, 1994). Organic structure is characterised as low in complexity and formalisation, and possesses a comprehensive information network, involves high participation in decisionmaking (Robey and Sales, 1994), and encourages open channels of communication, authority based on the individual, emphasise on getting things done, and frequent use of participation to achieve group consensus (Thibodeaux and Faden, 1994). Schein (1993) defines organisational culture as the set of beliefs and norms shared by members of an organisation or subunit within the organisation. It refers to the pattern of shared beliefs, values, and assumptions that help individuals understand how an organization function (Deshpande and Webster, 1989). Market Orientation Market orientation is defined as the organization-culture that most effectively and efficiently creates the necessary behaviour for the creation of superior value for buyers and, thus continuous superior performance for the business (Narver and Slater, 1990, p.21). Specifically, Narver and Slater (1990) and Slater and Narver (1994) have conceptualised market orientation as consisting of three components: customer orientation, competitor orientation, and interfunctional coordination. Hypotheses Development The conceptual model as presented in Figure 1, suggests that organisational characteristics (i.e. leadership, organisational structure, organisational culture) and market orientation are considered as antecedents to improve the marketing-sales relationships and subsequent 2

ANZMAC 2009 Page 4 of 8 business performance. This view is in-line with the work of Dewsnap and Jobber (2002) which underline the importance of deploying organisational structures that enable marketing and salespeople to work together to perceive and develop mutual understanding, mutual respect, and a sense of esprit de corps and joint commercial objectives. In terms of organisational culture, Rouzies et al., (2005) put forward that marketing and sales integration requires the two functions to share information and adjust their activities to accommodate each other s concerns and perspectives. In addition, the adoption of customer oriented selling on the part of the selling firm s salespeople fully mediates the positive impact of market orientation on performance (Langerak 2001; Guenzi and Troilo, 2007). With regards to business performance, previous studies indicate that there is significant impact of collaboration between sales and marketing on business performance (e.g. Dewsnap and Jobber, 2002; Guenzi and Troilo, 2007; LeMeunier-FitzHugh, 2007; Song, Xie, and Dyer, 2000). Rouzies et al., (2005) further propose that the greater the level of marketing-sales integration, the higher the business performance. Based on these, the following hypotheses are advanced H1: Organisational characteristics are positively related to market orientation H 2: Organisational characteristics are positively related the marketing-sales relationships H3: Market orientation is positively related the marketing-sales relationships H4: Marketing-sales relationships are positive related to business performance. H5: There are significant differences in the level of organisational characteristics (a), market orientation (b), and business performance (c) between different levels of marketing-sales relationships. Figure 1: Conceptual Model Organisational Characteristics H1 Market Orientation H2 H3 Marketing-Sales Relationships Extent Trust Importance Co-operation H4 Business Performance Research Methodology Data was collected using a self-completed questionnaire to marketing and sales people within Australian firms. A total of 155 respondents participated in this study. Most of the construct were adopted from existing literature. Calculations of Cronbach alpha, exploratory and confirmatory factor analysis were used to assess the psychometric properties of the measures. All constructs produced Cronbach alpha values above 0.85 suggesting adequate reliability for the measures (Nunnally, 1978). As shown in Table 1, a CFA of the measurement model produced a fit to the data. The model was built on the basis of second-order factors. 3

Page 5 of 8 ANZMAC 2009 Table 1: Measurement Model N = 155 α IC 1 2 3 4 1. Organisational characteristics.85.70.70 2. Market orientation.89.83.34**.83 3. Marketing-sales relationships.93.70.34**.25**.70 4. Business performance.90.84.34**.22**.27*.84 Model fit: Cmin/df= 1.89; GFI=.93;AGFI=.87;NFI=.91;TLI=.94;CFI=.96; RMSEA=.07 ** = p < 0.01. The diagonal (in italics) shows the average variance extracted for each construct. IC=Internal Consistency Results and Discussion The hypotheses were tested simultaneously using AMOS and SPSS version 17.0. As presented in Table 2, the structural model fit indexes indicate that the model fit was acceptable. The results of hypotheses testing indicate that organisational characteristics are associated with market orientation (β=.40, p<.001), leading to the acceptance of H1. The results further find a significant positive impact of organisational characteristics (β=.45, p<.001), and market orientation (β=.15, p<.05) on the marketing-sales relationships. Thus, H2 and H3 are supported. These results can be explained in that leadership, organic structure, and organisational culture facilitate the marketing and sales coordination. For example, having an organic structure in organisations enables them to improve relationships and coordination between the marketing and sales functions through the hierarchical authority (Rouzies et al., 2005). In addition, the process of sharing information about customers and competitors has underpinned the marketing and sales relationships (LeMeunier-FitzHugh and Piercy, 2007). Table 2: Model Parameters and Fit Statistics Hypothesized Relationships H Std. Est t-value Market orientation <--- Organisational characteristics H1.40 3.67*** Marketing-sales relationships <--- Organisational characteristics H2.45 4.84*** Marketing-sales relationships <--- Market orientation H3.15 1.65* Business performance <--- Marketing-sales relationships H4.36 3.64*** Model fit: Cmin/df= 1.88; GFI=.91; AGFI=.86;NFI=.89; TLI=.93;CFI=.94;RMSEA=.07 * = p < 0.05, ** = p < 0.01, *** = p < 0.001 The results further indicate that there is a positive impact of the marketing-sales relationships on business performance (β=.36, p<.001) leading to the acceptance of H4. This result supports previous studies which indicate a positive link between internal collaboration and improved business performance (e.g. Krohmer, Homburg, and Workman, 2002; LeMeunier- FitzHugh and Piercy, 2007; Morgan and Turnell, 2003). In this sense, the positive impact of marketing-sales linkage on business performance is not just based on close working relationships, but also need to be supported by aligned goals and integrative and synergistic processes (LeMeunier-FitzHugh and Piercy, 2007). 4

ANZMAC 2009 Page 6 of 8 Moreover, the results as shown in Table 3 further indicate that there are significant differences in organisational characteristics (p<.001), market orientation (p<.001), and business performance (p<.001) between the marketing-sales relationships levels. These results imply that the stronger the degree of marketing-sales linkages, the higher the levels of organisational characteristics, market orientation, and subsequently business performance. In this sense, an effective relationship between marketing and sales might facilitate the alignment of these two departments with regards to organisational characteristics and market orientation. The aim being is to improve business performance through creating superior customer value for a competitive advantage (Guenzi and Troilo, 2007). Table 3: Differences in Marketing-Sales Relationship and Business Performance Variable Marketing-Sales Relationships H Strong (N=83) Weak (N=72) F Ratio Organisational characteristics H5a 4.19 3.69 14.32*** Market orientation H5b 4.00 3.60 5.53*** Business performance H5c 3.58 3.29 6.06*** * = p < 0.05, ** = p < 0.01, *** = p < 0.001 Conclusion and Implications This study sought to investigate antecedents of marketing-sales relationships and its implications for business performance. The study further examines differences in the business performance levels between the strong and weak marketing-sales relationships. The results indicate that organisational characteristics and market orientation are antecedents of the marketing-sales relationships. In addition, marketing-sales relationships have a positive impact on business performance. The results further indicate that there are significant differences in the levels of organisational characteristics, market orientation, and business performance between different degrees of marketing-sales relationships. This study contributes to the marketing literature by providing empirical evidence on the importance of marketing-sales relationships to business performance. From a managerial perspective, the results suggest that managers need to facilitate favourable organisational characteristics and implement market orientation in order to underpin the marketing and sales relationships. Specifically, managers who are in charge in both functions need to encourage their people to coordinate and integrate closely between marketing and sales, as the stronger relationships between marketing and sales have significant impact on improving business performance. Further research is recommended to replicate the model in different contexts and elements of the model. 5

Page 7 of 8 ANZMAC 2009 References Biemans, W. G., Brencic, M. M., Malshe, A., 2009. Marketing-sales interface configurations in B2B firms. Industrial Marketing Management (in press) Cespedes, F. V., 1993. Coordinating sales and marketing in consumer good firms. Journal of Consumer Marketing 10(2), 37-55. Deshpande, R., Webster, F. E. J., 1989. Organizational culture and marketing: Defining the research agenda. Journal of Marketing 53(1), 3-15. Dewsnap, B., Jobber, D., 2000. The sales-marketing interface in consumer packaged-goods companies: A conceptual framework. Journal of Personal Selling and Sales Management 20(2), 109-119. Dewsnap, B., Jobber, D., 2002. A social psychological model of relations between marketing and sales. European Journal of Marketing 36(7/8), 874-894. Fisher, R. J., Maltz, E., Jaworski, B. J., 1997. Enhancing communication between marketing and engineering: The moderating role of relative functional identification. Journal of Marketing 61(July), 54-70. Guenzi, P., Troilo, G., 2007. The joint contribution of marketing and sales to the creation of superior customer value. Journal of Business Research 60, 98-107. Homburg, C., Jensen, O., Krohmer, H., 2008. Configurations of marketing and sales: taxonomy. Journal of Marketing 72(March), 133-154. Krohmer, H., Homburg, C., Workman, J. P. J., 2002. Should Marketing be Cross-Functional? Journal of Business Research 55(6), 451-465. Langerak, F., 2001. Effect of market orientation on the behaviour of salesperson and purchasers, channel relationships, and performance of manufacturers. International Journal of Research in Marketing 18, 221-234. LeMeunier-FitzHugh, K., Piercy, N. F., 2007. Exploring collaboration between sales and marketing. European Journal of Marketing 41(7/8), 939-955. Narver, J. C., Slater, S. F., 1990. The effect of a market orientation on business profitability. Journal of Marketing 54(4), 20-35. Nunnally, J. C., 1978. Psychometric Theory (Second Edition Ed), McGraw-Hill Book Company, New York. Perry, K., 1996. Leading People in Transformational Leadership: Developing an Enterprise Management Culture (pp. 39-59), Pittman. Melbourne. 6

ANZMAC 2009 Page 8 of 8 Popper, M., Zakkai, E., 1994. Transactional, charismatic and transformational leadership: conditions conducive to their predominance. Leadership & Organizational Development Journal 15(6), 3-7. Robey, D., Sales, C. A., 1994. Designing Organizations (Fourth Edition Ed.), Irwin, Inc., Illinois Rouziès, D., Anderson, E., Kohli, A. K., Michaels, R. E., Weitz, B. A., Zoltners, A. A., 2005. Sales and marketing integration: A proposed framework Journal of Personal Selling and Sales Management 25(2), 113-122. Ruekert, R., W., Walker, O., C., 1987. Marketing's interaction with other functional units: A conceptual framework and empirical evidence. Journal of Marketing 51(January), 1-19. Schein, E. H., 1993. How can organizations learn faster? The challenge of entering the green room. Sloan Management Review (Winter) 85-118. Slater, S. F., Narver, J. C., 1994. Market orientation, customer value, and superior performance. Business Horizons March-April, 22-28. Song, M., X., Xie, J., Dyer, B., 2000. Antecedents and consequences of marketing managers' conflict-handling behaviours. Journal of Marketing 64(January), 50-66. Staniforth, D., 1994. To restructure or not? That is the managerial question. The TQM Magazine 6(5), 28-31. Tatikonda, M., V., Montoya-Weiss, M. M., 2001. Integrating operations and marketing perspectives of product innovation: The influence of organizational process factors and capabilities on development performance. Management Science 47(1), 151-172. Thibodeaux, M. S., Faden, S. K., 1994. Organizational design for self-managed teams. Industrial Management & Data Systems 94(10), 20-25. 7