‘Business Development’ and ‘Sales’ are terms which are often used interchangeably. How often have you seen “Business Development Manager” on the business card of a sales rep? Sure, it might sound like a fancy title but it’s not necessarily correct. In this article, we’ll explore the key differences between ‘Sales’ and ‘Business Development’ and why it’s important to make the distinction.
What is Sales?
Sales is the activity of assigning targets relating to the volume or value of products or services sold into a particular market and measuring performance against those targets.
How the actual selling gets done will vary from one business to another. A company which manufactures highly engineered industrial equipment is likely to have a global network of highly specialised sales engineers and trusted distributors. A company selling mobile phone cases, primarily through Amazon, will not. In either case, the above definition holds true.
There are many other activities which may fall within the remit of Sales, dependent on the type of business, but one universally applicable factor which all businesses must consider is margin.
It is the responsibility of Sales to work with Operations to establish acceptable margins for their products and services. Set them too high and customers will look elsewhere. Set them too low and the business becomes unsustainable. This is, of course, a very simplistic view so let’s take a look at a couple examples of margin adjustment in play.
Nespresso famously sells their coffee machines at little or no margin to encourage more customers to buy them. This increases the size of the market for the coffee pods, which they sell at a premium. The machines are well built and highly reliable which ensures the high margin pod business for years to come.
Apple will usually have a huge stock of last year’s iPhones when the new model comes out and, unsurprisingly, the price of the old model will drop. However, it won’t drop by much. The price of last year’s model will typically be around 80% of the new one, driving most customers towards the latest model. Apple are quite happy for hundreds of thousands of old models to go unsold as their priority is selling the new model at a premium. A premium which allows them to absorb the cost of any unsold units.
What is Business Development?
Business Development is the pursuit of sustainable growth through the development of strategic relationships with customers, distributors and other key business partners.
It’s very tempting to define Business Development as “not sales”, in the same way that I might define a dog as “not a cat”, but that won’t get us any closer to understanding the difference.
The difference is that Sales has a very short term view, looking ahead only as far as the end of the month, the quarter or, at most, this year. Business Development is about looking towards the future, building relationships now to ensure success for years to come.
Business Development operates somewhere in between Sales and Marketing, assessing the viability of new products, testing the water in new markets and forging mutually beneficial partnerships.
Let’s look at a couple of hypothetical examples of typical Business Development Activities:
Company X designs and manufactures industrial lasers and are well known in that market. They have seen a recent increase in the use of lasers in medicine and they want to expand into the medical laser market. Since they don’t have any medical expertise and are not well known in that community, they decide to partner with an existing medical equipment manufacturer to jointly develop a new product. Both companies benefit from the expertise of the other and both will enjoy increased revenue from the new product.
Company Y designs and manufactures pumps for oil refineries. Reliability is paramount as the refinery can lose hundreds of thousands of dollars every day that the pumps aren’t running. Company Y has developed some software to monitor the pumps and predict when they are going to fail but it has never been tested in the field. They partner with a well known oil company to pilot the system at one of their refineries for two years. If successful, the oil company will roll the system out across all their refineries.
Neither of these examples involved any direct “Sales” activity and yet both companies can expect increased revenue in three years’ time. That’s Business Development.
So Why the Confusion?
There are three main reasons why the lines between these two distinct activities have been blurred.
1. Smaller companies can’t afford to staff two positions and so combine both roles in to the collective title “Business Development Manager”.
2. Some companies fear that potential clients and customers might be scared off by the word “Sales” on a business card and so opt for the softer sounding title.
3. It just sounds better. People would rather be called a Business Development Manager than a Sales Rep and so companies started changing their job titles.
Whatever the reason, I think it’s important to acknowledge and understand the differences, whatever you put on your business cards.