Managing Conflicts between Marketing and Sales: Customer Acquisition in Business Markets

Abstract

Conflicts between marketing and sales functions are common in business markets, particularly regarding customer acquisition. Marketers often express frustration over sales teams ignoring their leads, while sales teams question the revenue potential of those leads. This study examines whether firms should integrate these functions to mitigate conflicts or manage them separately by designing incentives that maximize acquisition value. The authors develop a dynamic principal-agent model that captures the sequential nature of acquisition in B2B firms and accounts for information asymmetries regarding efforts and lead quality. The analysis shows that conventional compensation structures—rewarding agents based solely on either “what matters” (revenue) or “what they control” (leads for marketers, revenue for sales)—can misallocate risks and exacerbate conflicts. Hybrid incentives incorporating both leads and revenue reduce conflicts, with optimal weighting tailored to each function’s role. When leads are homogeneous, separation does not necessarily reduce efficiency under the proposed hybrid schemes. In contrast, when leads are heterogeneous, separating the two functions can outperform functional integration despite its a priori benefits. The findings suggest decentralization enhances profitability only when incentives properly allocate risks across the acquisition funnel. This study provides a framework for optimizing marketing-sales interactions, improving efficiency, and mitigating conflicts through incentive design.

Keywords: Business Markets, Marketing-Sales Interface, Conflicts, Agency Theory, Sequential Agency Model.