Most companies tend to work in a fashion where the Sales force and the Marketing department have an invisible ‘fence’ between them. This causes miscommunication (or no communication at all) between these two wings, which often leads to a significant dip in the company’s profits.
We will first take a look at the responsibilities of these two departments (what they are supposed to do). Then we will discuss the root cause of differences between them and at last, discuss a viable solution.
The marketing department that comprises large volumes of well researched market reports by skillful researchers and data analysts, experienced cost accountants, and lead by the principle for gaining higher share price for the company; prices the product keeping such parameters in consideration. On the other hand, it is the sales force that communicates with the customers (face-to-face, phone, e-mail etc.) and hence, knows more about how people compare price with the benefits of the product, on ground.
The main functions of the Marketing team are to research, produce and price a product. Once this is done, the onus for selling the product falls on the shoulders of the sales force. This is where the issues arise. The sales force often holds the marketing team captive of pricing the product ‘too high’. Whereas the Marketing team blames the sales force of not having the required sensibility to target the right customer pool and possessing the necessary set of skills to sell the product to them. This kind of trade-off leads to a ‘tug-of-war’ between these two departments.
The Marketing department brings its expertise in pricing the product by carrying out rigorous market study such as comparing prices of similar products by competitors, analyzing what customers want in their products and the maximum value that they would agree to pay for the product, expenditure on promotional activities and to strengthen public relationship, and planning an incentive strategy to get customers to continuously think about the product. But all of this will be worthless unless you have a capable sales team, who uses its power of persuasion, to make an actual sale and fill the company’s coffers.
Keeping in mind the above arguments, we can conclude that both departments should be mutually responsible for pricing the product. Companies should work towards removing the invisible ‘fence’ that exists between these two important departments and encourage them to work together. This will help them come up with better strategies for pricing the product, make their work easy, and most importantly, increase the company’s profits.
There is a small loophole that needs to be taken care of. The sales force, often compelled to meet a pre-decided goal sheet (weekly, monthly or quarterly) and often steered by the greed to earn high commissions, is always looking out to price the product as low as possible. This can lead to high sales but low profits. Thus, companies should try to maintain a balance of power, between the two departments, while pricing the product.