From Sales Obsession to Marketing

SALES

Effectiveness
by Philip Kotler
From the November 1977 Issue
An enormous number of U.S. companies are sales-minded, but only a few are
marketing-minded. The difference is subtle and usually hard for sales executives to see,
but it spells the difference between unstable short-term success and stable long-term
growth. The first aim of this article is to show executives how to tell whether an
organization understands and practices marketing—and if so, how well. This can be
done by means of a marketing effectiveness audit. The audit is a form for rating
marketing effectiveness in each of five major functions; the resulting score tells where
the organization falls on a scale ranging from no marketing effectiveness to superior
effectiveness. The second aim of the article is to show top management how to respond
to a low or mediocre score by injecting more marketing thinking into the division or

T
company.

he president of a major industrial equipment company with annual sales of

over $1 billion was unhappy with his company’s performance. Overall sales
were at a standstill; market shares were under attack in several key divisions;
profits were low and showing no signs of improvement. Yet the divisions prepared
annual marketing plans and employed marketing executives and marketing services.
Also, the sales force was well-trained and motivated.

The president called in the corporate vice president of marketing and said:

/
“I would like to know how each division rates from a marketing point of view. I don’t
mean current sales performance. I mean whether it exhibits a dynamic marketing
orientation. I want a marketing score for each division. For each deficient division, I
want a plan for improving its marketing effectiveness over the next few years. I want
evidence next year that each division is making progress.”

The corporate vice president left feeling uncomfortable about this assignment.
Marketing effectiveness is a complex subject. What key indicators are involved? How
can they be scaled? How can they be combined into an index? How reliable would this
index be?

The vice president got little help from the marketing literature. Some articles described
“the marketing concept” in philosophical terms. A few articles featured instruments to
rate the “marketing-orientedness” of companies or divisions. However, these
instruments were oversimplified.

The marketing vice president had to create a marketing effectiveness auditing system.
The system had to be based on a sound philosophical concept of the role of marketing in
the modern corporation. It had to have credibility. It had to yield clear directions on
steps that the corporation could take to improve marketing effectiveness where it was
lacking. It had to be available for periodic application to measure progress toward
greater marketing effectiveness.

Sales/Marketing Confusion
Marketing is one of the most misunderstood functions of the modern corporation. Of
the Fortune 500 corporations, it seems to me that only a handful—such as Procter &
Gamble, Eastman Kodak, Avon, McDonald’s, IBM, Xerox, General Electric, and
Caterpillar—really understand and practice sophisticated marketing. Most of the other
companies are only under the illusion they practice sophisticated marketing. A chief
executive in one of the world’s largest automobile companies once said: “I thought we
were doing marketing. We have a corporate vice president of marketing, a top-notch
sales force, a skilled advertising department, and elaborate marketing planning

/
procedures. These fooled us. When the crunch came, I realized that we weren’t
producing the cars that people wanted. We weren’t responding to new needs. Our
marketing operation was nothing more than a glorified sales department.”

In industrial goods companies, too, management often confuses sales and marketing.
Sales and distribution are the major elements of the marketing mix, with advertising
playing a very minor role. Most if not all of the marketing talent in the company comes
from the sales organization. These people are not counterbalanced often enough with
“brand management” personnel, who think in terms of long-run product strategy and
its financial implications.

Contrasts in Thinking
Yet the thinking of sales executives is very different from the thinking of marketing
executives. One marketing executive recently complained: “It takes me about five years
to train sales people to think marketing. And in many cases I never succeed.”

Sales executives tend to think in the following terms:

Sales volume rather than profits. They aim to increase current sales to meet quota
commitments and to achieve good commissions and bonuses. They are usually not
attentive to profit differences among different products or customer classes unless
these are reflected in compensation.

Short-run rather than long-run terms. They are oriented toward today’s products,
markets, customers, and strategies. They don’t tend to think about product/market
expansion strategies over the next five years.

Individual customers rather than market segment classes. They are knowledgeable about
individual accounts and the factors bearing on a specific sales transaction. They are less
interested in developing strategies for market segments.

Field work rather than desk work. They prefer to try to sell to customers instead of
developing plans and strategies and working out methods of implementation.

/
In contrast, marketing executives think in these terms:

Profit planning. They plan sales volume around profits. Their aim is to plan product
mixes, customer mixes, and marketing mixes to achieve profitable volume and market
shares at levels of risk that are acceptable.

Long-run trends, threats, and opportunities. They study how the company can translate
these into new products, markets, and marketing strategies that will assure long-term
growth.

Customer types and segment differences. They hope to figure out ways to offer superior
value to the most profitable segments.

Good systems for market analysis, planning, and control. They are comfortable with
numbers and with working out the financial implications of marketing plans.

A Common Dilemma
Once the management of a company recognizes such differences between sales and
marketing thinking, it may decide to establish a high-level marketing position. Here it
faces a dilemma. No one in the company is a trained marketing manager. The whole
industry may be devoid of trained marketing managers. Yet trained marketers outside
the industry are not knowledgeable about the industry’s products and customers’
buying patterns.

The company typically resolves the problem by promoting a top sales manager to a new
title—vice president of marketing. However, the new marketing executive continues to
think like a sales executive. Instead of taking time to analyze environmental changes,
new consumer needs, competitive challenges, and new strategies for company growth,
he or she worries about the disappointing sales in Kansas City last week or the price cut
initiated by a rival corporation yesterday. The marketing executive probably spends
almost as much time putting out new fires as when he or she was a sales executive.

Moreover, former sales executives heading the marketing operation often lack a
balanced view of the effectiveness of different marketing tools. They continue to favor
the sales force in the marketing mix. They are reluctant to take dollars out of the sales
/
force budget to help increase new-product development, advertising, sales promotion,
or marketing research. They under estimate the cost-effectiveness or non-sales-force
marketing expenditures in increasing customer awareness, interest, conviction, and
purchase.

The sales executive dressed in a marketing vice president’s clothing often fails to
appreciate the negative impact of aggressive sales action on a company’s bottom line. In
one company where the marketing vice president is extremely strong, short-run sales-
oriented promotions are constantly disrupting production planning and cash flow
requirements. One of the company’s plants, for example, operates at 50% capacity
much of the time and at 150% the rest of the time. Sales-oriented marketing managers
are in the saddle and give little heed to the adverse impact of their actions on
manufacturing costs or working capital costs.

Job of the Marketing Executive

What is the proper conception of the job of a high-level marketing executive? The
answer has gone through three stages of thinking.

The earliest and most popular view is that the marketing executive is an expert at
demand stimulation. He or she is someone who knows how to combine the tools of
marketing to create an efficient impact on chosen markets. The marketing executive
understands buyers’ wants, buying influences, channels, and competition, and is able to
use product features, personal selling, advertising, sales promotion, price, and service
to stimulate purchasing behavior.

More recently, a broader conception of the marketing executive has been proposed: he
or she should be an expert in demand management. The marketing executive works with
a varied and changing set of demand problems. Sometimes demand is too low and must
be stimulated; sometimes demand is too irregular and must be evened out, or
“smoothed”; sometimes demand is temporarily too high (as in a shortage period) and
must be reduced with “demarketing.”1

The increasingly volatile state of the economy is one reason that the marketing
executive needs broad skills in demand management rather than abilities only in
demand stimulation. The varying fortunes of different company divisions is another /
reason. Every multidivision company has certain divisions whose low sales growth,
market share, or profitability may call for a strategic objective other than growth. The
strategic objective might be to maintain, “harvest,” or terminate sales. Hence the
marketing executive must be skilled at more tasks than simply stimulating demand.

Even the conception of the marketing executive as an expert in demand management

may be too limited. The newest view is that he or she should be effective at systems
management. The executive who focuses only on attaining a certain demand level may
cause undue costs in engineering, purchasing, manufacturing, servicing, or finance.
The marketing executive should be able to develop marketing strategies and plans that
are profitable. These plans should strike a balance between the needs of the marketing
mix (sales force effort, advertising, product quality, service), business functions
(manufacturing, finance, marketing), and the external system (customers, distributors,
suppliers) from the vantage point of profit.

Where is this person to come from? The ideal marketing manager should have general
management experience, not just sales and marketing experience. To deal effectively
with manufacturing, research and development, finance and control, advertising, the
sales force, and marketing research, the marketing executive should have moved
through these departments on the way up. He or she should understand the problems
of these other departments; and they should know that the marketing executive knows
all about their problems.

Auditing Effectiveness
Many top managers believe that a division’s performance in terms of sales growth,
market share, and profitability reveals the quality of its marketing leadership. The high-
performing divisions have good marketing leadership; the poor-performing divisions
have deficient marketing leadership. Marketing executives in the high-performing
divisions are rewarded; the others are replaced.

Actually, marketing effectiveness is not so simple. Good results may be due to a

division’s being in the right place at the right time rather than the consequence of
effective management. Improvements in market planning might boost results from

/
good to excellent. At the same time, another division might have poor results in spite of
the best strategic marketing planning. Replacing the present marketing leaders might
only make things worse.

In my view, the marketing effectiveness of a company, division, or product line depends

largely on a combination of five activities:

1. Customer philosophy. Does management ac-knowledge the primacy of the

marketplace and of customer needs and wants in shaping company plans and
operations?

2. Integrated marketing organization. Is the organization staffed so that it will be

able to carry out marketing analysis, planning, and implementation and control?

3. Adequate marketing information. Does management receive the kind and quality
of information needed to conduct effective marketing?

4. Strategic orientation. Does marketing management generate innovative strategies

and plans for long-run growth and profitability?

5. Operational efficiency. Are marketing plans implemented in a cost-effective

manner, and are the results monitored for rapid corrective action?

The Exhibit at the end of this reading presents the questions that should be asked in
auditing the marketing effectiveness of business. This audit has been helpful to a
number of companies and divisions. In the next few sections I will elaborate on each
main part of the marketing audit.

Customer Philosophy
The first requirement for effective marketing is that key managers recognize the
primacy of studying the market, distinguishing the many opportunities, selecting the
best parts of the market to serve, and gearing up to offer superior value to the chosen
customers in terms of their needs and wants. This requirement seems elementary, yet
many executives never grasp it.
/
Some managements are product oriented. They think the trick is to make a good
product and go out and sell it. Some are technology oriented. They are fascinated with
the challenge of new technologies and pay little attention to the size and requirements
of the market. Still others are sales oriented. They think anything can be sold with
sufficient sales effort.

If a company starts with the marketplace when it is designing the organization’s

structure, plans, and controls, it is well on the way to effective marketing.

Integrated Organization
The organizational structure of the company or division must reflect a marketing
philosophy. The major marketing functions must be integrated and controlled by a
high-level marketing executive. Various marketing positions must be designed to serve
the needs of important market segments, territories, and product lines. Marketing
management must be effective in working with other departments and earning their
respect and cooperation. Finally, the organization must reflect a well-defined system for
developing, evaluating, testing, and launching new products because they constitute the
heart of the business’s future.

Adequate Information
Effective marketing calls for the executives to have adequate information for planning
and allocating resources properly to different markets, products, territories, and
marketing tools. A telltale sign of the quality of information is whether management
possesses recent studies of customers’ perceptions, preferences, and buying habits.
Many marketing managers operate primarily on what they learned as sales managers in
a particular industry 20 years earlier. They don’t want to spend money for marketing
research because “we already know the market.” They spend little to monitor direct and
indirect competition.

Another sign is the presence of good information regarding the sales potential and
profitability of different market segments, customers, territories, products, channels,
and order sizes. The controller must work closely with marketing and provide a
responsive accounting system that gives profit information by line item. Finally, skillful
marketers need information to evaluate the results of their marketing expenditures.
/
Strategy and Operations
Marketing effectiveness depends also on whether management can design a profitable
strategy out of its philosophy, organization, and information resources. First, this
requires a formal system for annual and long-range marketing planning. Second, the
system should lead to a core strategy that is clear, innovative, and data-based. Third,
management should look ahead toward contingent actions that might be required by
new developments in the marketplace.

And last, marketing plans do not bear fruit unless they are efficiently carried out at
various levels of the organization. The interests of the customers must be of paramount
concern to employees throughout the organization. Marketing management must have
the right amount of resources to do the job. It also must have systems that enable it to
react quickly and intelligently to on-the-spot developments.

Improving Poor Performance

The auditing instrument enables management to identify marketing weaknesses in a
company or division. But diagnosis is not enough. Management should follow up by
forming a marketing committee staffed with top executives of the company or division
and a suitable complement of functional managers. The task of the committee is to
review the results of the audit and prepare a marketing improvement plan. The plan
should deal with these needs:

1. Training of officers, through seminars, for example, to provide a better understanding

of modern marketing.

2. Hiring of consultants to bring in to the company specific marketing improvements

that are needed.

3. Creation of new positions in the marketing organization.

4. Personnel transfers where necessary.

5. Increased investment—or sometimes just more efficient investment—in marketing

research.
/
6. Installment of improved formal planning procedures.

Suppose these steps are not pursued vigorously. This situation is not unlikely in an
organization with poor marketing ability; the managers prefer to think exclusively in
terms of production, sales, or research.

Choosing an Effective Approach

To visualize what top management can do, consider the following case.

One division of a large company was headed by a general manager with the vice
presidents of manufacturing, finance, and sales reporting to her. This division had
enjoyed steady growth of sales and profit during the past decade. However, during the
preceding two years there had been a sales decline. Managers thought the decline
reflected the maturing of the industry and the slowing down of the national economy.
The sales vice president’s answer was to increase the sales force and push harder.

The corporate marketing vice president applied the marketing audit to the division and
found that it scored very poorly. The division’s executives did not have a marketing
philosophy; there was no high-level marketing position; marketing information was
poor; and there was little strategic thinking.

The corporate marketing vice president expressed his concern to the general manager.
Together, they agreed on the need to infuse modern marketing thinking into the
division, but in a way that did not alienate those in power, especially the vice president
of sales.

They considered three different strategies for bringing marketing thinking in to the
division.

The first called for convincing the sales vice president to add a marketing person to her
staff. This person would handle such activities as marketing research, problem solving,
and planning. The hoped-for result was that the sales vice president would gradually
come to develop a better appreciation of marketing thinking.

/
The corporate marketing vice president and the general manager realized, however,
that the first approach might fail. The sales vice president might choose not to hire any
one, or to hire a person but give him or her little responsibility, or to hire an
incompetent person and prove that marketing planning is a waste. Many marketing
staff people who report to sales vice presidents complain that their bosses do not pay
attention to plans and recommendations. Therefore the two executives decided to
consider a possible second approach.

This second approach was to hire a marketing vice president from the outside and place
the incumbent sales vice president (whose title might be changed to general sales
manager) under him or her. In addition, advertising, customer service, and other
marketing functions would be placed under the new marketing vice president. The
message would come across loud and clear that sales was only one, albeit the most
important, of several elements in a coordinated marketing planning system.

The danger of this solution was that the sales vice president and her sales force could
become angry and sabotage the new vice president. Therefore, the corporate
vicepresident and the general manager considered still another approach.

The third approach fell between the two extremes and called for the general manager to
appoint a marketing director to her staff. The marketing director would not have
control or responsibility for field sales. He or she would prepare studies of new
products, markets, and marketing strategies; estimate the profitability and cost-
effectiveness of different marketing activities; conduct studies of customer perceptions,
preferences, and buying habits; and supervise the preparation of marketing plans. The
general manager could then decide to give this person the title of corporate marketing
director, marketing planner, or planning director.

The third approach had the most to recommend it. The new marketing director would
not be under the thumb of the sales vice president; nor would he or she be appointed
over the sales vice president, with all the problems that this move might create. Over
time, the marketing direct or might be promoted to marketing vice president to run all

/
the marketing activities, including sales. But this would be done only after he or she
developed a record of accomplishment and proved able to work harmoniously with the
sales vice president, sales managers, and other key people.

Conclusion
We tend to confuse marketing effectiveness with sales effectiveness. This is our big
mistake—and in the end it hurts sales as well as marketing. A company or division may
have a top-notch sales force that could not perform better. But if the sales people don’t
have the right products to sell, know the best customers, and have the best values to
offer, their energy counts for little.

One way to view the difference between marketing and sales is in terms of the
difference between seeding a field and harvesting the crops. Good marketing work is
tantamount to planting seeds; without planting, there will be no future crops. Good
sales work is equivalent to efficiently harvesting the crops. In the short run, the harvest
may be good and sales will take the credit. But if there is no reseeding by marketing,
heavy sales effort will be for naught.

This is not to say that top marketing executives are supposed to keep their heads in the
clouds and stay out of the daily storms beating the field. They must do both. They are
responsible for this year’s profits as well as long-run profitability. If they spend all their
time slugging it out with competitors to reap today’s profits, they make their job harder
tomorrow. If they only consider tomorrow, they may be lashed for today’s inadequate
profits. They have no choice but to balance their time between both objectives.

Marketing thinking is not easy to introduce in to an organization. It tends to be

misunderstood or, once understood, easily forgotten in the wake of success. Marketing
is characterized by a law of slow learning and rapid forgetting.

The corporation, and particularly the corporate vice president of marketing, has the
responsibility of assessing marketing effectiveness in each division. An audit of the type
described in this article can be a useful tool. Using it, the top executive can work
constructively with general managers of divisions that have a low score, apprising them

/
of the factors that makeup marketing effectiveness. This plan may include attending
marketing seminars, reading the marketing literature, hiring inside experts or outside
consultants, carrying out fresh research, and improving strategy and planning.

In some divisions, as I have pointed out, top management may need to intervene. It
may need to hire a marketing-trained person to work for the sales vice president, a
marketing director to work for the general manager, or a marketing vice president to
head all sales and marketing activity.

The results of trying to improve the division’s marketing effectiveness can be evaluated
each year. The amount of progress can be measured by using the audit (see the Exhibit,
“Outline for Marketing Effectiveness”). If progress has been good, the division will be
encouraged to develop a new plan for further progress. If progress has been poor, top
management will have to consider the need for more drastic steps to protect the
interests of the corporation against the marketing division with poor marketing skills.

/
Exhibit Outline for Marketing Effectiveness (Check one answer for each question.)

/
1. See Philip Kotler and Sidney J. Levy, “Demarketing, Yes, Demarketing,” Harvard
Business Review (November–December 1971).

A version of this article appeared in the November 1977 issue of Harvard Business Review.

Philip Kotler is the S.C. Johnson & Son Distinguished Professor of International Marketing at Northwestern
University’s Kellogg School of Management in Evanston, Illinois. This is his 11th article for HBR.

This article is about SALES

/
 Follow This Topic
Related Topics: Marketing

Comments
Leave a Comment

Post Comment
0 COMMENTS

 Join The Conversation

POSTING GUIDELINES
We hope the conversations that take place on HBR.org will be energetic, constructive, and thought-provoking. To comment, readers
must sign in or register. And to ensure the quality of the discussion, our moderating team will review all comments and may edit them
for clarity, length, and relevance. Comments that are overly promotional, mean-spirited, or off-topic may be deleted per the moderators'
judgment. All postings become the property of Harvard Business Publishing.