Managing Conflicts between Marketing and Sales: Customer Acquisition in Business Markets

55 Pages Posted: 12 Dec 2019 Last revised: 4 Jun 2023

See all articles by Olivier Rubel

Olivier Rubel

University of California, Davis - Graduate School of Management

Chen Zhou

University of South Carolina

Rajdeep Grewal

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School

Jagmohan S. Raju

University of Pennsylvania - Marketing Department

Date Written: March 7, 2022

Abstract

In business markets, marketing and sales functions often conflict over customer acquisition. Marketers are seen to complain that sales representatives disregard the leads they generate, while sales representatives question the revenue potential of these leads. How should firms resolve such conflicts? Should they integrate the two functions into one to avoid conflicts; or can Marketing and Sales be separated and yet managed effectively? If so, how should firms incentivize the two functions to maximize the value created by the acquisition funnel? We investigate these questions using relatively novel sequential principal-agent models with risk averse agents where asymmetry of information exists regarding leads’ revenue potentials. The proposed framework captures relevant managerial features of acquisition funnels in business markets, i.e., marketing and sales efforts are often exerted by different agents, marketing efforts produce leads with different revenue potentials, and only the agent responsible for conversion efforts discovers which leads have a high versus low revenue potential. In this setting, the characterization of optimal incentives allows us to establish three key results. First, we find that the intuitive managerial recommendations such as compensating agents on “what matters” or “what they control,” may misallocate risks between the two functions resulting in conflicts. Second, we discover conditions under which the separation of the marketing and sales functions can be achieved without any loss of efficiency when leads are homogeneous. Third, in the case where leads are heterogeneous, we identify conditions under which functional integration is suboptimal despite the a priori benefits that could come with centralization.

Keywords: Business Markets, Marketing-Sales Interface, Conflicts, Agency Theory, Sequential Agency Model.

Suggested Citation

Rubel, Olivier and Zhou, Chen and Grewal, Rajdeep and Raju, Jagmohan S., Managing Conflicts between Marketing and Sales: Customer Acquisition in Business Markets (March 7, 2022). Available at SSRN: https://ssrn.com/abstract=3493361 or http://dx.doi.org/10.2139/ssrn.3493361

Olivier Rubel (Contact Author)

University of California, Davis - Graduate School of Management ( email )

One Shields Avenue
Davis, CA 95616
United States

Chen Zhou

University of South Carolina ( email )

701 Main Street
Columbia, SC 29208
United States

Rajdeep Grewal

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

Jagmohan S. Raju

University of Pennsylvania - Marketing Department ( email )

700 Jon M. Huntsman Hall
3730 Walnut Street
Philadelphia, PA 19104-6340
United States
215-898-1114 (Phone)
215-898-2534 (Fax)

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