MANAGEMENT PERSPECTIVE INDUSTRY'S NEW EPA OF MARKETING

Gordon G. Andrew Managing Partner The Consultancy New York When it comes to marketing sophistication and sales force management, the oil and gas industry-with a few notable exceptions-has been sleeping with its hands on the wheel for the past 20 years. But for majors and independents alike, the industry's wakeup call is sounding.

Jan. 19, 1993

7 min read

Gordon G. Andrew
Managing Partner
The Consultancy
New York

When it comes to marketing sophistication and sales force management, the oil and gas industry-with a few notable exceptions-has been sleeping with its hands on the wheel for the past 20 years.

But for majors and independents alike, the industry's wakeup call is sounding.

For far too long, marketing and sales strategies in the energy business on both the producer and consumer sides, involving physical products and related services, have been based largely on socializing within the good old boy network. Golf, hunting, fishing, and topless bar dancing have served as bread and butter sales tactics for building client relationships.

At industry trade shows, companies construct elaborate booths, host lavish parties, and shovel baseball hats, belt buckles, umbrellas, vacuum bottles, and other useless items with company logos prominently displayed into the hands of unlikely customers and competitors.

In short, business development in the energy business has meant buying client loyalty.

Until very recently, the energy industry has had little incentive to engage in legitimate sales and marketing activity. Margins were fat, competition was mostly lazy, and customers were all too willing to have their loyalty purchased. But changes in the dynamics of the marketplace are taking the industry on a wild ride that has most participants closing their eyes, hoping for "business as usual" when the dust settles.

The smart players know better.

DRASTIC CHANGES

The energy industry continues to be whipsawed by change.

New technology is creating greater production efficiencies. New financial instruments are spawning sophisticated ways to buy, sell, and invest in energy products. Deregulation is reshaping the competitive playing field.

Advances in communication are making prices transparent. International ventures are jacking up the stakes.

What's all this change likely to mean in terms of sales and marketing?

Very simply, it means unprecedented levels of competition, the catalyst that will force the energy industry to adopt operating disciplines that have been in place for decades in other market-driven industries.

This sea change spells opportunity for companies with the foresight and determination to build strategic new business development programs and tactics. And it spells disaster for companies unwilling or unable to train, equip, monitor, and motivate yesterday's sales force in order to deal with tomorrow's marketplace realities.

MARKETING CHALLENGE

Regardless of size or resources, all energy companies attempting to reorient their sales force are likely to encounter similar challenges, most notably:

Failure of personnel to acknowledge they are salespeople. Many oil and gas 'representatives view themselves as "relationship managers' and equate sales with low status and sleazy methods. By not claiming to be involved in sales, oil and gas reps have little or no implied obligation to generate new business.
Lack of basic sales skills, including prospecting, qualifying, approaching, presenting, and closing. Contrary to popular wisdom, good salespeople are trained, not born. Most of today's oil and gas reps learned their craft from predecessors who relied mostly on wit, personality, and connections-only a small part of effective salesmanship.
Politics involved in attempting to change well-entrenched beliefs, personalities, and organizational cultures. For example, asking reps who have always bought or sold on a spot basis to begin pushing long term contracts will undoubtedly result in significant sales force unrest and can lead to open resistance or even program sabotage.

Those three obstacles and others related to redirecting a company's strategic marketing must be addressed head-on by its senior management.

This is the most difficult challenge for oil and gas companies: making necessary sales tactics and account-abilities mandatory, rather than optional, for people who currently hold the keys to customer relationships.

BLUEPRINT FOR CHANGE

There are proven ways, of course, for companies to minimize the trauma related to changing outdated or ineffective marketing and sales methods. The handful of energy firms that have been most successful in addressing this challenge have used some or all of these methods:

Formalization of a marketing plan. This should be a written document complete with a description of strategic, measurable objectives, specific tactics, assignment of responsibilities, budgetary allocations, and target dates for completion. This document is a starting point for action and should be reviewed and adjusted at least every quarter.
Internal consensus building. Despite their shortcomings, every sales-force has experience and market insights that are necessary ingredients for development of a successful new program. Senior management's task is to communicate to its sales reps the necessity for change and the potential rewards.
Creation of- proper tools. Many energy firms handicap sales reps either by failing to equip them with effective, field tested sales tools or by not teaching them how to use the tools properly. A large natural gas marketing firm recently invested in sophisticated brochures and presentation flip charts, supported by a national advertising campaign. Management was surprised to learn that the program's mediocre results were based on the fact that sales reps found the materials too technical. Fearing that customers would ask them tough follow-up questions they were unprepared to answer, most reps trashed the brochures and used the flip charts as seat cushions at ball games.
Sales skill and product training. Training and development are probably the most critical aspects of sales force effectiveness. Training should encompass general sales skills, knowledge of available products and services (including the competition), and specific sales methods endorsed by the company. Presentations or seminars conducted by outside "experts" to infuse sales reps with knowledge often have little or no lasting benefit. At some energy companies, these quick-fix solutions have led to confusion and resentment. A leading integrated gas marketer has found considerable success in this area by videotaping its reps in simulated sales situations, sometimes using actual customers, then constructively critiquing sessions individually or in small groups.
Development of sales management systems. Regardless of how well reps are trained or how effective the sales materials may be, most oil and gas companies have no assurances that their sales force is singing from the same song sheet. A sales manager of one large independent firm admitted that he was unpleasantly surprised recently when he accompanied one of his seasoned sales reps on a customer visit. He watched in amazement as his rep spent 45 min discussing subjects ranging from baseball to politics and 4 min explaining (poorly) the company's new contracts.
Accountability management. Sales reps, despite what they may say, want precise definitions of performance expectations, potential rewards, and risks.

For example, if things such as cultivating new customers or cross-selling new products are defined as corporate marketing objectives, the sales force needs to know two things: first, quantified standards regarding their day-to-day efforts (how many? how much? how often?), More important, they need to know the rewards and risks involved in making the effort to meet those expectations.

Energy companies historically have provided little or no incentive for long term market development and provided substantial rewards only for bringing home the "big contact." This practice is a major reason the industry's most senior sales reps are content to limit their efforts to relationship maintenance with lucrative customers.

RETURN ON INVESTMENT

So what's the payoff for energy firms willing to risk major upheaval, dissension, frustration, defection of key staff, and even loss of current customers in order to build a sophisticated sales and marketing capability? Is it worth the pain?

Short term, the rewards can include lower cost of sales, increased productivity revenues, and margins, the flexibility to identify and capitalize on shifting market opportunities quickly, and the reputation to attract and keep highly motivated and productive professionals. These tangible rewards generate intangible benefits: a place where people are eager to come to work in the morning and are proud to hand out their business cards.

Longer terms, the most significant reward for making today's difficult sales and marketing decisions involves survival. In the coming decade, oil and gas marketing practices will change dramatically, regardless of whether industry participants are ready or enthusiastic.

Companies that traditionally seek the safety involved in waiting for others to act before taking action will be forced to play catch up. Those firms are unlikely to ever regain the momentum lost to those with the vision to recognize significant market opportunities and the courage to do what's necessary to capture them.