business marketing

Received wisdom can influence generations of managers, even when it's wrong. Two time-hallowed marketing principles are not only erroneous, but positively damaging: the separation of marketing from sales, and the priority given to higher sales volume.

The two erroneous principles are intimately connected. It's the salespeople who push the volume with might and main, because their jobs (and commissions) hang on the numbers. And it's the marketers who sometimes try, usually with scant success, to break with tradition.

But they too will revel in (or groan about) market share measures based on volume, while busily devising promotions and campaigns that are geared solely to pushing more and more through the trade. You can see the harmful effects with particular clarity in the drinks business. The fixation with moving cases leads manufacturers to push as many as possible into the supply chain.

The more they succeed, the more liquor tax they must pay up front. Their finances suffer, as do those of the over-stocked wholesalers and retailers. Moreover, the suppliers have locked themselves in. Suppose they did decide to move to just-in-time delivery geared to actual retail movements: they would suffer a huge hit to sales and profits until the excess stock was cleared.

That would replay in real life the catastrophic results of 'the beer game', as conducted at MIT's Sloan School of Management. Classes, divided into 'retailers', 'wholesalers' and 'warehouse factory managers', have to adjust to one retailer's sudden doubling of his weekly order. Told to optimise their performance, the parties invariably build up surplus, unsaleable inventories. Nobody has ever won the game.

Working only for themselves, they work against each other: nobody looks at the market as a whole. Inside companies, that's supposedly the job of marketing directors and their minions. But sales and marketing are often as separate as the parties in the beer game. Yet they are supposedly playing on the same side with the same objective - to optimise the market stature and the profits of the company. That demands ending the volume fixation, which would happen more readily if, as a first step, marketing and sales came under the same directorate. Why not?