Digital transformation and disintermediation are having a huge impact on the marketing and sales functions.
Disintermediation and digital transformation are causing CEO’s and CMO’s to rethink their digital marketing plans. Although the fundamentals of marketing and sales have not changed, vehicles of message delivery have transformed.
The internet has had a more significant impact on the way products and services are being sold than anything in the past century. For many years, we have relied on a middleman to find the goods and services we wanted and to negotiate the terms of payment, shipping terms, and delivery.
When I was a purchasing agent many years ago, I recall dealing with multiple manufacturing reps that carried many product lines. Mostly today, those jobs are gone, and you can find anything you want pretty much on the internet.
Today, anyone with a web browser in a bit of resourcefulness can take part in a direct conversation in commerce with the people who make the products. The internet has broken the established processes for conducting transactions. Digital transformation is causing disintermediation in marketing and sales functions.
Disintermediation is not just another long word. It represents a significant shift and how we market, sell, and deliver our products and services. The middleman is disappearing or already gone in many industries and being replaced by electronic media.
Direct sales forces are shrinking, and marketing is forced to become a revenue-producing part of the organization. In this post, I’ll discuss the major trends and share what you must do to be successful in this emerging digital marketing landscape.
Let’s break up the word, disintermediation, into two parts. The meaning becomes clear. Disinter is defined as to unearth, to displace and mediate define as to act as middlemen. But the two definitions together in the meeting becomes to displace the middleman.
And this is happening today. I recall back in the 90s, Amazon was selling only books. Today they have thousands and thousands of products available. The middlemen in today’s economy are being displaced. However, there is a counter-trend called reintermediation; it has significant ramifications.
Reintermediation refers to using the internet to reassemble sellers, buyers, and business partners in new ways. You might know it has the supply chain, workflow, are blockchain. This new class of middleman is the infomediary and portals that I will discuss in this post.
The Impact of Digital Transformation and Disintermediation on Sales and Marketing
With today’s massive amount of data and easy access to this data by anyone with a web browser, sales and marketing teams have to take a new look at how they conduct their operations. In many sales and marketing organizations, field sales will no longer be the king of the hill, and in fact, many field reps will lose their jobs or be moved to other positions– unless they follow some of the suggestions here.
Many companies are requiring their sales reps to use the internet as a channel to move goods and services. And some organizations are requiring everyone in the sales organization to pass an internet knowledge test before being hired. The most routine part of the sales process is being moved online, including repeat orders, product and catalog data, order tracking, management and financial reporting, and sales quotations.
These types of e-commerce models, the customer is interacting with a company over the Internet, which means an inevitable loss of control by the salesperson, over smaller customers. Customers have become the real power brokers in the e-economy. They do not have to depend on sales reps the way they once did. They also have many new ways of trying before buying, and the actual transaction is just likely to be electronic as face-to-face.
In fact, in most situations, the buyer has already gone through the sale cycle by as much as 57% before contacting a vendor. You heard this before, but the folks are researching on the internet. Therefore, it requires you to understand what keywords in key terms your target audience is entering their browsers so you come up on top of the search.
This concept is easy to understand. What are some of the buy terms that your ideal customer would enter the search? Think about it for a minute, write a few key search terms and go over to your browser and enter them. Is your company coming up on the first page? Maybe it’s coming up on the second page? Who is on the first page? Is it your competition?
Why are you not on the first page?
Go back to the sales process and see how disintermediation. The automation of the sales process has also made salespeople much more accountable than in the past. Before they were responsible just for meeting their current quota target, they now have to answer to the entire process.
Many of the decisions formally made by field sales reps will be taken out of their hands as it forces them to practice a greater uniformity in their practices. This combination of loss of control and accountability is leading to a culture shock for sales reps trained in older or traditional methodologies.
With most CRMs, I love Salesforce and use it here as an example. On the Salesforce CRM platform, you can create workflows for your marketing and sales process. So when a web visitor becomes unqualified marketing captured leads (MCLs) where the sales rep doesn’t have to do anything.
These are going through an automated process and being scored. Once that score is met its threshold the sales rep can engage with pertinent information about the prospects and not miss a step.
As sales reps wane in power, marketing will gain some of that power. However, marketing managers should not become complacent because this new power will come at a price of greater accountability.
It will hold you accountable for your marketing funnel and sales pipeline alignment.
The reason for this is twofold. First, the new marketing automation tools, like HubSpot, Pardot, Eloqua, or ActiveCampaign, businesses are implementing marketing automation systems to quantify the results of all marketing activities. Just as with the sales automation tool has exposed to the weaknesses of many sales teams, so has marketing automation systems exposed gaping weaknesses in the marketing teams. There capture loads of great data.
The second reason for marketing’s rise is that it will own its own profit center. I’m referring to the internet and e-commerce channels. At first, this revenue channel was owned by the IT department. But it’s moved to the marketing department. Marketing spends more money than most other departments in an organization. Therefore accountability is essential.
The biggest winner in the new digital world is not marketing but the customer. The sales department no longer controls the flow of information, and customers have 24 access to suppliers anywhere in the world. As information about products and services become more available, these products and services are becoming harder to differentiate in many are becoming commoditized.
If all this information about a product category is a simple mouse click away, customers will use this data to find the low cost in the best value, even if it means choosing a new supplier over an existing vendor. Well, this spells opportunity for new suppliers. It is a source of concern to traditional companies who do business only in traditional ways. For with the rise of blockchain and digital transformation, a small business must engage in digital marketing to survive today.
All of this change causes confusion anxiety for sales managers. Here’s a list to focus on for digital transformation:
- Sale productivity
- Change management
- Channel management
- Strategic planning
- Impact of electronic channels on revenue flow
The roles of marketing managers are also causing confusion anxiety. The marketing teams are asked to do more than they ever have. Understand the numbers and be creative. A tall order for some.
Sales Process Elements are Moving to the Internet
Marketing and sales technology has caused disintermediation and allowed entire parts of the sales process to be moved to electronic or sales channels. Many of these time-consuming processes are now controlled by field or inside salespeople. Often called sales development reps or marketing development reps. This model is beneficial to both the company and the customer.
Let’s look at the process:
- Repeat purchases: customers that buy the same products repeatedly will buy them over the internet.
- Commodity purchases: non-differentiated products can be purchased online. More products will be commodities overtime.
- Order status: customers can now check the order status of their purchases online to get up to minute information.
- Financial reporting: all financial data can be viewed online, including purchase history, customized product specifications, and account payable status.
- Catalog information: companies can help publish full information, including detailed specifications on their products, in one central location.
- Account team information: instead of searching for the right contact to deal with on a particular issue, customers can now find this information online or through online chat.
- First-line customer support: telephone customer support is not only frustrating for the customer but also very expensive for the company. Tremendous savings can be gained by providing online support over the internet through chatbots or live chat.
Even though many parts of the sales and marketing process can be moved to the internet, this does not mean the end of field sales as a career. The web can help but salespeople still need it to supply the motivation to close more sales.
Sales reps are also much more capable of helping customers decide on the most appropriate customized solution — there many ways who’s still prefer buying from a fellow human instead of through an electronic means.
How to Prosper Despite Disintermediation In Your Sales and Marketing Functions
The first advice I have is you have to accept what you cannot change. The disintermediation is caused by digital transformation. Digital transformation is happening so fast that it is catching small businesses, startups, large enterprises, CMOs, and boards by surprise. Just look at what happened to Walmart. These companies must rethink how to remain competitive or risk going out of business.
If you’re in the business that relies on brick and mortar, you need to think about how to integrate your existing business model with an online presence. Not all companies are 100% e-commerce. But you have to have a plan for moving to an e-commerce model if you want to grow, from resellers to distributors. Does an affiliate model fit your business model? Take a hard look at how your marketing and sales resources are being deployed, making changes before the competitive environment forces you to change.
I love the quote, “control your destiny or somebody else will.” Or the Alice in wonderland quote: “if you don’t know where you want to go, any road will take you there.” Where are you headed today? Where do you want to go?
Follow these rules to help you win:
- Dealing with disintermediation, you must ask the right questions. You will miss critical data that will help you deal with the coming changes.
- Dealing with disintermediation, concentrate on digital assets. Most business people understand the classical business models that assign value to physical assets, but not all information assets. This model is no longer valid, and you need to concentrate on your digital assets.
- Dealing with this sooner intermediation, give it away. By giving away, give up protecting your data. It is better to adopt a policy of openness and share everything you can with customers, prospects, suppliers, and employees.
- Empower everyone in your organization to play a role in digital changes. You accept that business, as usual, will cease to be a business. You will need to redeploy some of your assets, both financially and human, to build your e-strategy.
- Automate your marketing functions. Accountability in measurability is critical for e-business success. You must organize your activities for more efficiency and ensure you are doing the right thing for greater effectiveness.
- Choose a career that leverages e-business. Certain jobs are better suited to the digital economy than others, so take a close look at your chosen career path.
The New Sales and Marketing Model
Disintermediation has impacted the sales process. Historically, the field sales reps receive a lead from the marketing department and then conducts a 7-step process typically. In addition to doing all of this, the sales rep spends large amounts of time on non-revenue related activities, including customer service, information delivery, and relationship-building. A typical sales rep may spend as much as 70% of their time on non-revenue-generating activities. Because field sales representatives are so expensive, this is a highly inefficient model.
Modern organizations have learned that much of what sales reps now do can be accomplished by a combination of inside sales reps and digital services. These digital services free up the valuable field sales rep’s time to concentrate on revenue-producing activities. In fact, by adopting this model, the 7-step process can be shortened by eliminating one single step. Three of these processes can be handled by the internet and by less expensive resources.
Don’t get me wrong here. I’m not advocating that we are going to eliminate the sales role. Sales reps will still play a role in most organizations, but it’ll be different. The most important job of field sales will become customer advocacies and their primary.
Modern businesses know that sales compensation plans always drive sales behavior. They will adjust them to ensure that all employees cooperate in their customer’s best interests. In this new model, instead of being sources of channel conflict, the sales development representative and field sales reps will become the right partners.
Compensation models will be adjusted to reward inside and field sales teams who cooperate in selling the same accounts. Bonus plans will reward accounting on customer loyalty and customer satisfaction levels. Sales reps will also be compensated for their customer’s e-commerce purchases and will continue to own the customer relationship on large accounts.
I must state the importance of organizing sales and marketing operations, not on how they prefer to sell, but on how customers prefer to buy. This is your buyer’s journey. It’s all about what the customer values, and it should not be about what you value. Sales and marketing people who organized and practice this will have successful careers even in the era of disintermediation.
Wrap up and Lessons Learned From Disintermediation
We’ve been working with hundreds of clients who are changing their business models. We have noticed several factors that can almost guarantee issues. Here’s a list of the four problems that we see again and again as we talked with prospects and customers.
- The biggest challenge to progress is past success. Businesses are reluctant to change business methods that have gained them success in the past. This tendency can be deadly because it will prevent them from taking steps necessary to prosper.
- The most dangerous time is when everyone is patting you on the back. As they say, you should be careful about reading your press. At the time you think you have the World by the tail, there may be hundreds of small competitors waiting to take market share away from you. These competitors have fresh ideas and new ways of doing business that may be more in tune with the needs of today’s buyers.
- Only the customer counts, but you have to know who the right customer is. It is vital that you understand who the individuals and groups that most control your destiny; the right customer is not always the end-user of your product or service. It may be channel partners or resellers, and if you work in marketing, it may be your sales team.
- For people, processes, and technology; two out of three isn’t good enough. As you begin moving your company towards a new business model, make sure you have the right people committed to change, the new process well-defined, and the marketing technology in place to support the people and processes. If you lack any part of the Golden Triangle, or your efforts will fail. It is better to wait until everything is lined up then to act prematurely in a hopeless cause.
Whether you or someone who is a beneficiary or a potential casualty of disintermediation, the changes that are occurring are not going away. Instead of holding on to the old way of doing things, why not embrace the digital age and thrive?
Have something to say about your thoughts on disintermediation and digital transformation?
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Disintermediation is the elimination of intermediaries in the supply chain also referred to as “cutting out the middlemen.”
What is disintermediation in marketing?
Disinter — to unearth, to displace, and mediate — to act as a middleman. Combined, they mean to displace the middleman. Disintermediation signifies significant shifts in how we market, sell, and deliver products. In many industries, distributors are disappearing and being replaced by electronic media.
What does digital transformation mean?
Digital transformation is the transformation of business activities, processes, competencies, and models to leverage the changes and opportunities of a mix of digital marketing strategies and technologies.
Why is digital transformation important?
Digital transformation provides a valuable opportunity for core business functions, such as sales, marketing, finance, and HR, to move away from manual processes and automate critical areas like email workflows, lead capture, lead scoring, payroll, enabling leaders to focus on broader business opportunities.