What is the purpose of sales and marketing in a company? Its job is to find, win and keep customers, right?
Well, that’s an incomplete answer to the question. We need to define the role of sales and marketing more broadly since successful companies don’t just accumulate a lot of customers, they also achieve a certain amount of economic power. Why frame it in terms of power? Because after successful firms acquire a lot of customers they find ways to keep their customers and to prevent competitors from stealing them. That’s power.
How do you rise to this position of economic power? Let’s start with a well-known observation from Peter Drucker. Drucker identified marketing (by which he meant both sales and marketing) as one of the two basic functions of a business:
“Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.
From Drucker’s observation we can identify three principles at work in a business:
- People and companies have problems. These problems increase costs, lower productivity, and prevent companies from succeeding at their goals.
- Your company’s innovation solves one of these problems. Your company exists to bring your innovation into the world to solve that problem.
- Marketing is how you get there, how you bring your innovation to the people that can use it to solve a problem. If you have economic power you have the ability to change people’s behavior even if they don’t want to.
Success Requires Economic Power
So now we see that companies need power not only to win customers, but also to counter competitive forces. Michael Porter described multiple barriers to entry that prevent new companies from entering a competitive market:
- Economies of scale
- Product differentiation
- Cost advantages
- Access to distribution channels
- Favorable government policy
- Demand-side benefits like “winner take all” technology and network effects
- Customer switching costs
- Expected retaliation
Persuasion Changes Behavior without the Use of Power
Someday you will possess these sources of economic power. But until then you will have to find other ways counter these barriers to entry and bring your innovation come into wider use.
How can you change people’s behavior if you don’t have power? You’ll have to use your ability to persuade, because that’s what persuasion is, the ability to get people to want to change their behavior.
Persuasion Leads to Power
You can bootstrap your way to economic power with persuasion. You begin with rational arguments that persuade one customer at a time to participate in your innovation. You educate your buyers on the problem and the industry trends that make it important to solve. You explain how the features of your innovation benefit the customer because they solve this imporant problem. You show how easy you have made it to solve the problem in a new way.
You build trust with your reputation for putting the customer first and for the quality of your work. Your buyers begin to feel a sense of identity with you and with your other customers. They become a part of the community that you are creating.
As you build a community of customers, you create economic power through increased switching costs and barriers to new entrants. Your growth makes your company a more attractive investment. You can expand into additional sales channels. If you are in a winner-take-all market, you have a chance to become that winner.