Drivers of Innovation Deployment Affecting the Marketing and Sales Relationship

Abstract

This study investigates the antecedents of information management and its effect on formalization and joint planning as drivers of the marketing-sales functions perceived relationship effectiveness during the formalized process of new product deployment (NPD). We examine the effect of communication as perceived by the marketing and sales functions based on two components: communication amount/frequency (CA) and communication quality (CQ). Finally, we investigate how process formalization and joint planning affect the perceived relationship effectiveness of marketing and sales during the NPD process. The quantitative study uses 152 matched responses from top-level managers, responsible for the innovation deployment of six South American subsidiaries of a global consumer packaged goods company. The qualitative research, via in-depth interviews, confirms the importance of various behaviors of sales and marketing staff during the process of new product launches in the market. While numerous studies have researched the drivers of innovation process, this is the first chapter that studies the NPD implementation process based on the cross-functional relationship between marketing and sales. These drivers can help managers implement effective team processes to enhance innovation deployment results.

1. Introduction

Consumer packaged goods industries deploy innovation in order to open new streams of revenue, to stay ahead of competitors and to enhance brand equity. Companies facing a turbulent and hyper-competitive environment require effective management of cross-functional relationships, to maintain their competitive advantage in the marketplace [1, 2].

Extant research of the effectiveness of cross-functional integration in new product development has focused on goal incongruity among marketing, research and development (R&D) and manufacturing, perceived R&D and marketing conflicts or interpersonal trust [3, 4] inter alia. More recently, Wiebmeier et al. [5] introduced the relevance of sales to unlock synergies during the innovation process and the customer relationship improvement [6].

The importance of marketing and sales interface has been consistently reported as a key cross-functional interface to enhance business performance and to create superior customer value (e.g., see [1, 7, 8, 9]).

In highly innovative consumer packaged goods companies, business performance is embedded with innovation deployment success and measured by relative market share, sales, profitability and objective compliance [10].

The literature highlights key factors that can either contribute to or hamper the coordinated and collaborative sales-marketing interface [1, 11, 12] inter alia. These studies are based on samples from a specific context of developed economies like the United States, Australia, New Zealand and countries from the European Union, while emerging markets remain underexplored [13, 14, 15]. This chapter, instead, studies for the first time the nature of the sales-marketing cross-functional relationship and those factors that contribute to the interface relationship in order to gain in new product deployment (NPD) effectiveness in the six South American countries of a consumer packaged goods global company.

The chapter is organized as follows: after a review of the literature, a theoretical model is developed, followed by the methodology and results’ presentation. Finally, conclusions, management implications and limitations are presented.

2. Literature review and theoretical model

The integration of the customer insights at different stages of the innovation process through sales collaboration is a far more effective source of new ideas than are other innovation sources; however, new methods are required [16]. Over the last decade, a number of studies have offered insights into marketing and sales described by Rouziès and Segalla [17] like configurations, orientation and influence, interface revenue and profit implications. Sales and marketing have different perspectives and compete for resources, facing sometimes conflict between the two functions [7, 18]. Malshe and Biemans [9] studied the activities of the interface sales and marketing during the development of new products in early stages; however, the collaboration required during the final deployment stage has not been studied. The sales-marketing cross-function relationship approach considered in this research is established by Rouziès et al. (in Ref. [12], p. 115) as “a dynamic process in which the two functional areas create more value for their firms by working together than they would create by working in isolation.” That is to say, activities are consistent and coherent with each other (same goal) and are coordinated over time during innovation deployment process.

The model was developed building on the theoretical constructs of the multidimensional model drawn by Homburg et al. [11] and the foundations considered by Massey and Kyriazis [3] for the marketing and R&D interface.

2.1. Perceived effectiveness of the sales-marketing relationship (PRE)

The dependent variable, PRE, is the degree to which sales and marketing managers perceive that the relationship is effective and satisfying in achieving organizational objectives [19]. The construct was adapted from both Ruekert and Walker [20] and Homburg et al.[11]. In spite of being a psychosocial outcome, it can be viewed as a precursor to objective outcomes like product innovation performance, superior value creation or market share growth [7, 21].

2.2. The inter-functional communication role (CA and CQ)

Extant literature proposes that the amount and difficulty of communication are important aspects of cross-functional interaction, associated with an improved relationship commitment and perceived justice [12, 20, 22].

Given the established importance of cross-functional communication to achieve functional coordination during NPD (e.g., see [20, 23]), we explore two communication dimensions: amount of communication and communication quality. Communication amount (CA) is defined as the intensity of information flow among managers via e-mails, telephone, formal or ad-hoc meetings and reports [20]. Communication quality (CQ)—adapted from Fisher et al. (in Ref. [23]) and Homburg et al. (in Ref. [11])—is defined as the extent to which communication between sales and marketing managers is a bidirectional process of credible, relevant, useful and on-time provided information for a flawless NPD. Massey and Kyriazis [3] found a strong effect of communication frequency and bidirectional communication (a key variable of communication quality). Therefore:

H1 Communication amount is positively related to communication quality between sales and marketing managers.

Extant literature confirmed the importance of communication frequency to promote a more effective relationship between marketing and other departments, through informal conversation and efficient meetings [3, 23, 24].

We therefore hypothesize that:

H2 Communication amount is positively related to the perceived relationship effectiveness between sales and marketing managers.

Sales and marketing managers perceive their relationship to be effective if both of them achieve the innovation deployment targets. Fisher et al. (in Ref. [23]) found a positive link between bidirectional communication and the perceived marketing-engineering relationship effectiveness during the innovation process. This effect was confirmed by Massey and Kyriazis ([3] between R&D and marketing managers). We therefore hypothesize that:

H3 Communication quality is positively associated with the perceived relationship effectiveness between sales and marketing managers.

2.3. Formalization (FMZ)

Formalization is defined as the extent to which sales-marketing cooperation is structured by rules and procedures [11]. The process adopted by the studied company in each country is the Stage-Gates innovation process that enables companies to minimize uncertainty by helping them identify the wrong projects before too many resources are invested [25]. A key managerial role is to direct sales-marketing integration toward the common goals of NPD projects through formalized processes that affect cross-functional relationships (e.g., see [26]). We therefore hypothesize that:

H4 Formalization of the innovation process between the sales and marketing managers is positively related to the perceived relationship effectiveness.

However, it is also recognized that strictly adhering to the Stage-Gates philosophy may turn out in rejecting viable projects. Therefore, initial flexible processes that are adaptable through information sharing, experience and learning can improve the dynamics of project execution [27]. Therefore:

H5 Communication amount between the sales and marketing managers is positively related with the formalization of innovation processes.

H6 Communication quality between sales and marketing managers is positively related with the formalization of innovation processes.

2.4. Joint planning (PLAN)

Joint planning, one of the structural linkages, is understood as the degree needed in developing the product strategy where marketing and sales ideally should reach a consensus [11]. The dimension is built on product strategy agreement and teamwork, as well as objectives, budgets and activities alignment [11]. Hence:

H7 Joint planning between the sales and marketing managers is positively related with the perceived relationship effectiveness during innovation deployment.

The significant negative relationship between the quality of cross-functional information and goal incongruity [4] suggests that the joint planning among functions engaged in NPD programs may be improved through cross-functional information sharing. Therefore:

H8 Communication amount is positively related with joint planning between marketing and sales during innovation deployment.

H9 Communication quality is positively related with joint planning between marketing and sales during innovation deployment.

3. Methodology

The methodology is presented in two stages. The first phase of the research was to develop a hypothetical model and test it. This should provide information on the variables in the relationship and their interaction with each other. Then, in order to confirm our findings and provide in-depth and context-rich data [28], in-depth interviews were used to confirm and provide further insights into the behaviors of sales and marketing staff during the deployment of new product launches.

3.1. Quantitative stage: survey context and data collection

This study was conducted in a Global 500 [29] multinational consumer packaged goods company in six of its Southern Cone Latin American branches (Argentina, Chile, Peru, Bolivia, Uruguay and Paraguay). The total cluster accounts for a significant turnover (higher than $ 2 billion US dollars) and an intense innovation deployment strategy.

3.1.1. Measure development

The questionnaire was developed based on the review of the literature and in-depth interviews with a sales manager and a marketing manager. In order to ensure content validity, the questionnaire was pretested in Argentina and Uruguay with six sales and marketing managers. The original questionnaire included 46 questions, taking less than 20 minutes to complete.

3.1.2. Sample characteristics

Sales and marketing managers (who have various titles e.g., directors, category, sales, channel and brand managers) were involved in the innovation projects in each of the six countries; they were drawn from the company’s database and sent a self-administered questionnaire via e-mail in August 2012. The same procedure was followed for all countries and each person contacted received an introduction to the project’s objective as well as a confidentiality clause.

3.1.3. Measurement

Reflective multiple-item measures are used for all the researched constructs. The use of reflective scales allows us to test the constructs for convergence, discriminant validity, reliability and internal consistency [30]. Items and source for constructs measure on a 7-point scale (completely agree–completely disagree).

FMZ [3, 11, 20].

To coordinate the activities during NPD:

1. Formal communication channels are followed

2. Standard operating procedures are established

3. Marketing understands the sales process

4. Sales understands the marketing process

PLAN [11].

In the course of a common goal definition and planning of innovation deployment projects of marketing and sales in our business unit/company:

1. Market goals and sales goals are reconciled

2. Both units commit to the efficacy of common collaboration and coordination

3. Market-related activities are jointly planned

4. Market-related activities are taken jointly

5. Market-related activities are carried out jointly

CA [3, 20].

Generally, in coordinating NPD, the frequency of communication is appropriate through:

1. Impromptu face-to-face conversations

2. Scheduled one-to-one phone conversations

3. Scheduled one-to-one meetings

CQ [3, 11, 23].

Generally, in coordinating NPD, people in the sales (marketing) unit of our business unit/company:

1. Respond promptly and without a reminder to two-way information requests

2. Provide useful two-way information

3. Are very satisfied with the two-way content of the information provided by marketing (sales)

PRE [3, 11, 20, 22].

Generally, in coordinating NPD, people in the sales (marketing) unit of our business unit/company:

1. Overall are satisfied with the working relationship

2. Collaborate frictionless

3. Act in concert

4. Coordinate the market-related activities in a credible way

5. Fully carry out their responsibilities and commitments

6. Respond well to feedback and advice

7. Achieve their common goals

From a performance perspective, the relationship between marketing and sales has been effective.

3.2. Qualitative stage

In-depth interviews with 18 senior sales and marketing staff managers/directors within 5 or 6 subsidiaries were carried out in 2014 and 2015. The participants were recruited using convenience and snowball sampling techniques [31]. The interview guide included 30 topics and was moderated by the researcher itself, based on his experience in qualitative in-depth research.

3.2.1. Measurement

The guide was based on the innovation implementation projects involved within the last 6 months.

Q0: What determines the success of the implementation of the launch of new products in the market?

Regarding the processes used in the innovation projects that are launched in the market:

Q1: How do they relate to communication channels?

Q2: What role do the marketing and sales functions play in the processes?

Q3: What is the degree of knowledge of the marketing processes and the sales processes?

Regarding the communication used in the innovation projects that are launched in the market:

Q4: What are the media frequently used?

Q5: What relevance do they have?

Q6: How is the exchange of information between both areas?

Q7: How relevant is the information exchanged?

Q8: What type of information does marketing exchange?

Q9: What type of information is exchanged by sales?

Q10: What is the response of the other area?

Regarding the relationship between marketing and sales during the implementation of innovation in the market:

Q11: How would you describe the relationship between marketing and sales?

Q12: How do they coordinate the activities required for the correct launch in the market?

Q13: How are sales and marketing objectives determined?

Q14: What is the degree of marketing and sales involvement?

Q15: How do you achieve marketing and sales commitment?

Regarding the planning of the implementation of the launch of new products in the market:

Q16: What role is played by marketing and sales in tracking objectives?

Q17: How are activities related to the market planned?

Q18: How are decisions made between marketing and sales?

Q19: How are marketing and sales activities carried out?

In general:

Q20: How does the formalization of processes affect the communication between marketing and sales?

Q21: How does the formalization of processes influence the planning between marketing and sales?

Q22: How does the communication between marketing and sales affect the relationship between both areas?

Q23: How does the communication between marketing and sales influence the integrated planning between both areas?

4. Analysis and results

After quality control of the data, 152 valid answers (a high 70% response rate) were received from all 6 countries, over a period of less than 30 days. Out of the 152 answers, 55% were from marketing; 45% from sales; 7% from directors; 33% from category or channel managers and 60% from brand or client managers. There are no significant differences between the means of respondents from sales and marketing and from different hierarchical levels. Conversely, the resulting significant differences between means among countries highlight different levels of structural complexity and evolution, in spite of being part of the same multinational company.

4.1. Quantitative descriptive results

As can be seen from Table 1, the results are consistent with the findings of Homburg and colleagues [11] for the brand-focused professional taxonomy.

	No of items	Mean	S.D.	α
FMZ	4	4.68	1.37	0.74
PLAN	5	5.26	1.24	0.88
CA	3	5.30	1.45	0.73
CQ	3	5.07	1.41	0.89
PRE	8	5.26	1.25	0.91

Table 1.

Means, standard deviations and internal consistency of constructs.

The resulting mean score for the sales-marketing perceived relationship effectiveness (X = 5.26, SD = 1.25), communication amount (X = 5.30, SD = 1.45) and joint planning X = 5.26, SD =1.24) is significantly high. On the contrary, the quality of communication (X = 5.07, SD = 1.41) and formalization (X = 4.68, SD = 1.37) shows a lower level.

After using exploratory factor analysis, reliability of each multi-item scale was reassessed through calculation of the α coefficient. The reliability estimate of communication amount and formalization, although acceptable, is the weakest (See Table 1).

4.2. Quantitative measure refinement

Convergent validity is established by calculating the average variance extracted (AVE) for each construct that is higher than 0.50. Discriminant validity is established confirming that the correlation for all pairs of constructs is less than the AVE root square for each individual construct [32].

4.3. Model estimation and testing results

The measures were tested and modeled by using two-stage least squares estimation of observed variables (2SLS) [33]. As shown in Table 2, the resulting indices indicate construct acceptable fit; however, the root mean square error of approximation (RMSEA), higher than 0.05, poses some limitations.

	χ^2(df)	RMSEA	GFI	NNFI	CFI
FMZ	160.6 (6)	0.153	0.971	0.863	0.954
PLAN	406.7 (10)	0.246	0.872	0.769	0.884
CA	100.3 (3)	—	1	—	—
CQ	352.9 (3)	—	1	—	—
PRE	700.7 (28)	0.093	0.926	0.945	0.961

Table 2.

Unidimensionality assessment.

Both communication dimensions—amount and quality—are positively related with the PRE of the marketing and sales relationship (β = 0.362, p < 0.001; β = 0.743, p < 0.001, respectively). Correspondingly, CA is positively related with FMZ (β = 0.488, p < 0.001) and PLAN (β = 0.573, p < 0.001); meanwhile, CQ is positively related with PLAN (β = 0.741, p < 0.001), with a weaker relationship with FMZ (β = 0.160, p < 0.1).

PLAN is strongly and positively related with the sales-marketing PRE (β = 0.610, p < 0.001), in contrast with FMZ that has a negative non-significant relationship with the cross-functional interface PRE. See the resulting measures of fit for the hypothesized relationship among constructs in Table 3.

	χ^2(df)	RMSEA	GFI	NNFI	CFI
CA to FMZ	303.0 (21)	0.093	0.951	0.904	0.940
CQ to FMZ	565.9 (21)	0.121	0.929	0.915	0.947
FMZ to PRE	131.2 (53)	0.099	0.875	0.891	0.912
CA to PLAN	562.4 (28)	0.132	0.893	0.862	0.907
CQ to PLAN	837.5 (28)	0.140	0.891	0.898	0.930
PLAN to PRE	184.7 (64)	0.112	0.846	0.878	0.900
CA to CQ	700.7 (28)	0.115	0.950	0.940	0.968
CA to PRE	131.8 (43)	0.117	0.866	0.871	0.899
CQ to PRE	134.5 (44)	0.117	0.842	0.904	0.923

Table 3.

The marketing-sales relationship’s structural modeling results.

4.4. Qualitative results

Results of the interviews confirmed the measured factors determining the success of the implementation of the launch of new products in the market and their relationship.

CA/CQ: Fluent and honest communication, discipline in fulfilling the agreed activities with commitment, on time and in form.

CQ: Communication of the project spreading energy and conviction, in addition to the information of attributes and objectives. To transmit a contagious enthusiasm of the passion to win is a key factor.

FMZ: Three-level committee meetings are carried out:

Project committee meetings are held monthly, in order to present key drivers (share drivers), market monitoring and progress, required actions and evaluation of results. Participants are directors and stakeholders involved in each area.

Category committee: Marketing and sales, working together in the project, are responsible for presenting the background, integrated action plan, market arrival and budget.

Executive committee or operational weekly meetings of marketing, sales with supply chain and finances are held where the details of the project and the final opening by a single key unit are shared.

PLAN: The proper marketing and sales planning of projects in advance, jointly elaborating each one of the stages that is conducted toward implementation in the market in synergy between both areas.

RE: Coordination in defining the information and actions involved to carry out the project.

This is a high priority for marketing and sales teams and therefore they share the relevance of the project. The focus of marketing and sales is different: for marketing a category is key, but in sales, the organization has many categories.

Alignment is natural if the project is large and where relevancy is high. In a small project, it is more difficult.

5. Discussion

5.1. Research implications

Despite growing interest in understanding the drivers of the innovation process [3, 4, 26] and more recently by Wiebmeier et al.(in Ref. [5]) introducing the relevance of sales, the deployment of innovation based on the cross-functional marketing-sales relationship has not been previously studied.

Second, extant research consistently reported sales and marketing as a key cross-functional interface to enhance business performance and to create superior customer value (e.g., see [1, 2, 7, 8]). However, empirical research has been conducted in emergent geographies like South America.

Results show that both—amount and quality communication—influence the perceived effectiveness of marketing-sales relationships during innovation deployment. The amount of shared communication and its quality also enhance the positive effect of joint planning on this variable, but only the frequency of communication affects the formalization of the process. The findings also suggest that joint planning strongly influences the perceived effectiveness of sales-marketing interface, unlike the Stage-Gates formalization non-significant (negative) effect on this dimension.

These results are consistent with the findings of Lovejoy and Sinha [24], stating that efficiently innovative organizations do not look like standard formal organizations with strict and unchanging lines of communication. The strong and positive relationship of communication with sales-marketing effectiveness is consistent with past literature [19, 20]. Nevertheless, according to the interaction point of view [20] and contrary to previous research [3], the amount of communication has a positive effect on the relationship effectiveness between sales and marketing.

5.2. Managerial implications

These findings are relevant for firms deploying innovation through marketing and sales cross-functional teams, providing insights into how to improve sales and marketing teams’ perceived relationship effectiveness to positively affect product innovation and performance [21].

Results indicate that value creation is not just a result of the formalized Stage-Gates process; it needs to be nurtured over time to promote joint planning in a collaborative mindset and behavior. Further, it is shown that both, formalization and joint planning, can be effectively enhanced by encouraging the amount of marketing-sales communication strategies, improving new product success rates, market share and sales growth [22]. Managers should implement systems to stimulate information sharing (both quantity and quality) to set and reward sales and marketing based on shared goals [8].

Finally, the evidence provided by this research could help multinational companies expanding into emergent markets like Latin America to implement effective cross-functional relationship in the host countries.

6. Limitations and directions for future research

Despite providing a complete picture of South American emerging markets, since this study was performed in a consumer goods packaged company in different countries, the applicability of our findings to other industries needs to be tested.

A more detailed examination of a bigger number of firms, on other taxonomical industries [11], would give us more insightful information of the innovation process. Additionally, cross-functional relationships are affected by a wide range of factors; thus, future research could draw on other frameworks such as the impact of different “linkage devices” on trust and how social network mechanisms help firms internalize resources and transform them into product and process innovation.

From the methodological point of view, despite being recently studied [3, 22], future work could add objective measures to the subjective construct of “perceived relationship effectiveness”, such as new product turnover, market share and mix participation inter alia.

7. Conclusions

This study focuses on the organizational team’s innovation process between marketing and sales of a successful global company in six different countries of South America.

In contrast to recent studies, this research builds on the interaction and roles of sales and marketing, operating as distinct functions but deploying new product launches jointly.

The research contributes to the understanding of factors that can enhance the team’s innovation process between marketing and sales managers, specifically in Latin American emerging markets who are capitalizing post-crisis growth by delivering products of value to consumers and clients.