Sales Department Analysis (B2B)
One of the first things for turnaround a sales department is to know what the people profile is. So I would suggest the following classification: Farmers, Hunters, and Soldiers.
Sales department staff classification: Farmers, Hunters, and Soldiers.
A few common mistakes in sales departments regarding staff profile
- Not having Farmers: So not having customer loyalty strategy or not properly implemented.
- Having Farmers but manage everybody as Hunters or Soldiers: In this case probably we are not taking advantage of the specific Body of Knowledge (BOK) for Account Management.
- Not having Soldiers: This is deciding to “not pilot our sales”. I mean leave leads generation just on marketing actions could be a risky decision. Because we do not decide specifically the customers in which we are interested, we just wait passively to receive customers’ requests that could come from an interesting customer for the firm, or not. Likely, many customers searching for bargains will approach us. Moreover, some customers could not be approach our company because there is a misunderstanding about our market positioning. For instance, customers that could think that our company is too big to be interested in their business while those customers have enough size for us. Be aware that without Soldiers the company cannot create a Territory Plan, and companies without a Territory Plan manage the present rather than the present and future of sales.
- Having more than one sales type, but managing all of them just according to one type: People profile and even salary must be different for each sales type mentioned, so we are managing wrongly all of them in the same way (“coffee for everybody strategy”).
Analyzing B2B Sales Profiles: Who Are You?
Nowadays closing large and complex deals in B2B is getting harder and harder for sales staff. Large firms in order to guarantee the best deal in important purchases are creating robust procurement teams, hiring well prepared professionals from specialized industries (e.g. from logistics service providers), and using consulting firms support. Today large companies are well-prepared and define their own solutions. Thus the time in which the relationship building approach used to fit much better than other tactics to close sales deals looks to be ending.
CEB Consultancy (Matthew Dixon and Brent Adamson’s) study has performed a massive study in order to understand much better the key success factors of high performance sales staff. They have found that we have five main sales profiles, although some salespeople could have characteristics of more than one style:
- Relationship Builders are focused on building rapport and nurturing long term relationships.
- Problem Solvers used to be well prepared to manage post sales issues. They are detailed and reliable people who solve problems. We are likely in front of the right profile for Key Account Managers.
- Hard Workers enjoy with their job. So they are self-motivated and are able to work hard for closing sales. They are constantly interested in comments regarding the sale.
- Lone Wolf is self-confident salespeople who follow their own instincts rather than the rules.
- Challengers have a deep knowledge of the customer business, their industry and products/services. They love to debate and approach customers challenging their assumptions and trying to move from their comfort zone bringing up new ideas that generate massive value for customers. Being at ease to discuss money.
This study concludes that after analyzing the five styles (core performers) sample the higher performers are: Challenger (39% of high performers relative to core performers) and Lone Wolf (25%). Under performers used to be the styles: Relationship Builder (7%), Problem Solver (12%) and Hard Worker (17%).
From the turnaround point of view is essential to mention that many companies spent massive amounts of money on training and other initiatives in Relationship Builders. However, many of those companies do not underperform maintaining accounts, or having loyal customers. The big issue use to be getting new deals and especially new customers. So sales turnaround in those firms should likely move resources from Relationship Builders to Challengers.
Sales Rep Pofiles from CEB Consultancy
The Best B2B Sales Transformation Methodologies and
Books
Unfortunately, market competition is intensifying day by day. Sales organizations need to be updated and even continuously transformed to maintain the firm competitiveness and accomplish with the high demanding expectations of shareholders. Leading sales organizations use sales transformation methodologies to reinvent themselves and revamp sales.
What is a B2B sales transformation methodology?
It is a proven sales methodology that comes with a new insight to increase the number and the size of the winning deals at the same time that reduce the long selling cycle time of large complex sales.
What are the key B2B sales transformation methodologies?
We have summarized in a timeline infographic the sales methodologies that have transformed sales organizations. Although some of them like Dale Carnigie Relationship Selling Principles were created many decades ago, all those selling techniques are still to be valid nowadays. Most of the newest sales methodologies are adding new contributions to the sales knowledge rather than offering a new complete sales methodology. For this reason, it is advisable to know all these selling approaches.
Is your sales organization using the full potential of the available sales approaches?
In our experience many companies are using the potential of 20th century approaches as Solution Selling. Nevertheless, there are still many organizations that they have no updated their sales methodologies in order to incorporate new selling concepts as The Challenger Sale (see our post Analyzing B2B Sales Profiles: Who Are You?) or Inbound Sales.
What is the best B2B sales transformation methodology?
In our experience success sales reps at least must master one of this methodology. As many of them that are mastered in an integrated way will likely increase the selling success rate. However, it is important to simplify the selling approach in order to be able to training and implementing an easy and replicable selling process around the whole sales organization. Thus, our suggestion is taking one of those methodologies as a core sales process and complement that one with a few addons from the other methodologies.
We suggest using Inbound Sales methodology as a core sales process.
Why should we use inbound sales methodology as a core sales process?
- This is probably the newest sales transformation methodology. So, it is integrating most of the previous sales approaches (product benefits, spin selling, solution selling, quantify value, building rapport and so on).
- This methodology realizes that Internet as increase the amount of information flow and power of buyers. Therefore, the sales strategy is based on the buyer rather than the seller. Failing to understand how the buying behaviors have changed is one of the most important barriers to growth for many firms.
- Inbound sales personalizes the sales experience to the buyer’s context rather than using standardized emails or presentations. That will support the differentiation process and the chance to win deals.
- This approach is taking advantage of the pure interaction selling processes AND the sales support technology processes (CRM tools, etc.) in order to increase the sales team productivity and success rate.
- It is based on smarketing (sales and marketing processes integration) to achieve around 20% higher revenue.
Although identifying Inbound Sales as a new powerful sales transformation methodology is a great step, that methodology must be adapted. That methodology mentions the integration with other sales approaches as building report but it does not develop how to do. So, we suggest to request support from specialized companies on Inbound Sales to overcome some of the handicaps of successfully implementing the new Inbound Sales methodology to materialize the full growth revenue potential of the organization. Moreover, we are showing the Key books but there are other books that we do not tag as transformational but they are important to be considered.
Quick and Inexpensive B2B Guerrilla Marketing Transformation to Revamp Revenue
As Jay Conrad Levinson said in his book Guerrilla Marketing “failure to upgrade your marketing effort is a symptom of corporate demise.” Many firms need to revitalize or even turnaround their growth strategy. Nevertheless, without a marketing transformation or deep review, we have the risk of having a false start in our growth initiative. I think that Guerrilla Marketing with 200 marketing “weapons” is a very good starting point to revitalize the marketing strategy.
Why is marketing so important for growth transformation?
Two of the most common causes of growth failure are related with marketing:
1. The wrong company positioning and target market definition: Strategic marketing is the starting point for a success growth strategy, and there are some SMB (Small and Medium Business) that have not thought deeply about the positioning of their firms. Organization need to think about:
- What is your firm competitive advantage?
- What are the real benefits that your company is offering?
- What are the key differentiators?
That positioning exercise will take the company to the next strategic issue, I mean the definition of the target market. For most SMB, a success target definition will require a niche focus because that would be probably the only way to differentiate from huge global organizations that used to be focus on all the large market segments. Moreover, that niche specialization will “likely protect” the company from the commoditization threat and price competition.
Once that we have successfully performed the key strategic marketing activities, our sales organization would have a much higher success when it will continue the strategic growth process defining the strategic account targeting.
2. The unsuccessful attempts to attract customers: Different surveys to sales reps show that one of the most difficult selling tasks is to get leads. Strong marketing organizations are not just focused on brand building rather than on lead generation. So, how many leads is your marketing team generating? If the answer is just a few, it means that we need a marketing transformation.
Why is not our operational marketing generating enough leads?
First, many of us we have learnt many of the best marketing practices from the most successful players which means from large well-known companies. Those large well-known marketing oriented organizations used to have two main characteristics that determine the operational marketing: they used to be B2C firms, and they used to have huge marketing budgets. So, for those firm a success operational marketing used to be based on building brand awareness using traditional media ads. However, if we replicate large B2C operational marketing in a SMB B2B organization will likely realize that our budget is not enough to be effective.
Second, misunderstand the concept of marketing. We must not confuse advertising with marketing. Guerrilla marketing transformation offers us 200 marketing weapons. Ads are just a small portion of the marketing weapons, and used to be one of the most expensive weapons. In the same way, we must not confuse social media with facebook. Facebook is the largest and most famous social network but if we are in the B2B business, should we think about LinkedIn as our main focus social network? Finally, it is well-known that a picture worth a thousand words. But in complex B2B, sales messaging is the key for a success selling process. Photos is not marketing. Photos just will demonstrate what we say with our message.
Third, overlook that one of the competitive advantages of SMB is that they can focus on tiny details to approach and build close and personal relationships with customers and prospects. Nonetheless, old marketing practitioners overlook this advantage and continue using unethical marketing tactics as massive email spam that damage the company brand and even achieve less leads than could be with laser focus emails.
Fourth, one of the sales reps activities is generating leads. So, some companies decide to leave 100% lead generation responsibility on the sales organization. This is happening because there is probably a misunderstanding of the potential amount of leads that could be generated with the right marketing, and it is also misunderstood the complementarity of marketing and sales leads generation approaches.
Fifth, your marketing ROI is determined by your marketing investment. Small and medium enterprises used to have important budget limitations. Although guerrilla marketing transformation does not need a lot of money, it is forgotten that an adequate formal budget is need it. Thus, it is quite common to find organizations that just have one person to take care of marketing, and with very low experience. You will likely know what the consequences will be. Yes! a false start of the marketing initiative. In those situations, I would suggest to compare the total marketing investment with the total sales investment. Then, I would recommend to analyze if we transferred some budget from sales to marketing, would it be worthy? For instance, moving the investment from one underperforming sales reps (if there is any) to marketing would likely bring more leads to be closed for less sales reps. That should reach the sales organization productivity, and hopefully the revenue and profitability of the company.
Implementing B2B Guerrilla Marketing transformation
In 1983 Jay Conrad Levinson published the first version of Guerrilla Marketing. At the moment of writing this post the last version was the fourth one from 2007. Guerrilla Marketing shows 200 marketing weapons which many of them are easy and inexpensive to implement (download our template: 200 Guerrilla Marketing Weapons: Plan & Budget). Thus, I strongly recommend for turnaround and transformational projects using this marketing approach that must bring quick and dramatic results in the marketing and revenue areas of the organization.
Those 200 marketing weapons are classified on 8 main categories: mini-media, maxi-media, e-media, info-media, human-media, non-media, company attributes, and company attitudes. I generally suggest avoiding maxi-media that used to be more suitable for large B2C organizations and analyze properly the mini-media options because it show many of the traditional media tactics that are reducing their effectiveness nowadays. On the other hand, I highly recommend to explore and focus on the potential of e-media and info-media weapons because with a small budget, a stream of important leads could be generated focusing on Internet marketing.
In order to maintain marketing budget under control, you need a professional marketing team (the team could be just one person, this depend on the size of the company) with experience, imagination, flexibility, energy and technology prepared. So, in the same way that you cannot expect to improve the sales organization without at least one sales A-player in your team, do not expect relevant improvements from your marketing without at least one marketing A-player in the team.
I must highlight that guerrilla marketing transformation is about speed, flexibility and inexpensive initiatives. In order to achieve those goals, I suggest thinking about the trade off between the expensive highly personalized marketing material provide for traditional marketing and publicity agencies versus using very low cost customizable templates sold by Internet. If you are lucky to manage a large budget for marketing, there is no doubt that you must use the specialized services of marketing and publicity agencies. However, I have seen medium enterprises with very limited budget trying to replicate large firms hiring those professional services, and the result was a high quality marketing material that could not be quickly updated, being inflexible and expensive. Therefore, rather than having control over the key marketing material by performing monthly and even weekly updates, Those firms just could update the essential marketing material once every 3 years or even more. That un-flexibility killed the marketing freshness that in the Internet age is even more essential than ever.
As I mentioned before, Internet is likely the great opportunity to transform your marketing. In order to materialize that opportunity, the marketing guerrilla staff must be comfortable working with customizable electronic marketing material templates, WordPress content management, CRMs, and so on.
Is Your B2B Firm Struggling to Grow Sales? Sales Transformation
If your firm is struggle to grow sales, you already know that you are facing an important issue which needs to be fixed quickly. We cannot “pilot” our organization, if we are not able to manage the top line of the company (sales). We could try to protect the profitability of the firm with cost-cutting programs, but those initiatives have a short-term limit effect. Healthy companies need a reliable revenue growth “engine” (sales organization) or perhaps they need a sales transformation…
Sales Diagnostic
The first thing we need is to make a diagnostic of the severity of the sales issue. So we would suggest checking quickly, if your firm was facing any or most of the following symptoms:
- Commoditization of your products/services
- Lack of sales leads
- Low sales success rate
- Revenue does not take off
- Margins are getting eroded
- Weak company pipeline
- Low sales forecast accuracy
Unfortunately, all those symptoms used to be interrelated and companies underperforming in sales used to face most of them. In those situations, the firm need a sales transformation to fix the root cause of those symptoms. Although before analyzing the sales transformation, let me tell you the story of one of the company in which I have worked that showed clearly in two different times of that company life cycle how used to be a high-performance sales firm, and how used to be a low-performance one.
How it is a sales high-performance and low-performance organization
At the beginning of 1990s this firm developed a very good strategic vision in which the transportation industry will grow and transform into the logistics industry. In order to materialize that vision the company understood that every business start by sales. So a strong sales function had to be built to sell the future logistics projects that large firms would demand according to the new coming logistics outsourcing strategies. So the best salesperson that I have never ever met (my best sales coach) was in charge part-time like company sales director and part-time acting as a large accounts sales executive.
After a few years the company was importantly growing in number of large accounts, revenue and margin. It is true that at that time the company was in a new and fast growing industry. So competition was lower, and buyers used to be less experienced. However, enter a new industry and sell “new” services are not anything trivial that just a real A-player could do it.
At that time, the sales department was the most relevant one in that organization. A strong customer-driven and sales culture were building up. Everybody in the firm respected and supported the sales function. The CEO used to participate in the sales meeting, and he used to have his complicated agenda “almost” opened for new customers’ meetings. All the staff got a customer-driven and sales training which set a clear message for the whole organization. Salespeople had quarterly meetings with some time allocated for sales skills training (AIDA selling technique, purchase motivations, company presentation role play, sales objections management, etc.) Additionally, salespeople used to have regular review meetings with the sales manager, and the sales manager used to visit customers with salespeople in order to be able to offer a better feedback and support to them. Etc.
Suddenly, the company decided to try to find new ways of fast growing and it started to focus on “new sales toys searching for the magic bullet” (NLP, selling quantified value, hiring a high-performance industry veteran, etc.) Unfortunately, the company made a chain of big mistakes that are quite common in many sales organizations underperforming:
- Believe that there is just a “magic sales bullet”
- Forget to motivate its “golden goose” (A-player)
- Ignore the fundamentals of sales management
The new direction and consequences were terrible. The part-time sales manager function was assumed by a 100% operational general manager with a lack of customer orientation and no sales managing experience. All the sales management fundamentals were substitute for a few meetings to review the sales quota progress (no training, no sales team support, etc.) So the sales team got unmotivated, without direction and immersed in the chaos (“as goes the leader, so goes the organization”). Then, after a while the unmotivated “A-player” and real “hunter” was fired, and the company tried unsuccessfully with a few “farmers” to fulfill the real “A-player” performance. The sales situation was deteriorating. The company was really struggling to get new sales, and contract renovations became an issue too…
Sales Force Transformation Approach
The most important key success factor in sales used to be following the sales management fundamentals. However, for whatever reason nowadays you can find an important amount of companies that are not following those fundamentals and get struggle to create a healthy sales organization.
For those firms with important issues on sales, we would like to suggest the following sales transformation roadmap to improve results:
- REFRAME Sales
- Leadership: Coaching the sales manager about how to lead the sales team. Tools: monthly sales meetings, monthly one to one review meetings, working in the field, etc.
- Strategic focus: Reframing the sales strategy. Tools: market segmentation, strategic account targeting, messaging, etc.
- Organizational change: Reviewing the team, roles, and responsibilities. Tools: people performance review, talent management, hunters vs. farmers, etc.
- RENEW Sales
- Diagnostic: Reviewing main causes of failure, best practices, processes, and the team. Tools: one to one interviews, questionnaires, visits to customers with salespeople, etc.
- Culture management: Renewing the sales culture fostering a high-performance and result-driven sales culture. Tools: communication plan, compensation plan, etc.
- Change management: Making things happen. Tools: conditions for success framework, etc.
- REVITALIZE Sales
- Critical processes improvement: Improving the high value sales process. Tools: sales territory plan, sales pipeline, value proposition, etc.
I would like to highlight that other sales “toys” like NLP or CRM are good sales support tools that should be incorporated inside the last part of the framework as process improvements. Nevertheless, in order to be success in sales we suggest that the main focus must remain in the sales management fundamentals rather than in the sales “toys.”
Right now, someone could think “well, most of this is anything new, it is just to train and enforce the traditional sales management fundamentals.” Indeed, it is not as simple because it is getting quite uncommon to get people in house with strong experience on performing the “sales management fundamentals.” The training option is needed it but it is not enough because unfortunately just a couple of days of training will not materialize a sales transformation. How many people does it get trained and after a few weeks you realize that they are not using almost any of the training?
The sales management fundamentals are mainly based on sales leadership and cultural management factors and those “soft factors” used to require some coaching to materialize the nontrivial sales transformation. Moreover, the rest of the transformation framework proposed is not part of the sales management fundamentals rather than a necessary complement for success transformation of the sales organization. For instance, strategic focus reviews the sales and market strategy and connects it with the firm strategy. Change management makes sure that we correctly implement the transformation at the salespeople level. The critical improvement processes get advantage of a few chosen sales tools to maintain the sales process as simple as possible in order to improve the effectiveness of the sales process execution .
Benefits of the Sales Force Transformation
The correct sales transformation approach will create a high-performance, well-motivated and properly trained sales team. This team will be able to match customer expectations, differentiate the firm, and being perceived for customers as high value advisors. So the sales success rate, revenue and margins will start taking off again. Then, the pipeline will show the healthy of the company sales. This is a virtuous circle because salespeople will become energized by the success, and they will work better and with a higher success probability.
It looks simple and logical, but all of us we know that making a success sales transformation is one of the most difficult tasks. A experience person on sales and a clear sales transformational roadmap are the foundations for the transformation.
Additionally, we must say that this sales management transformation approach should be leveraged with other transformational approaches like: growth transformation that takes advantage of a better synchronization between sales and marketing, or customer experience transformation to leverage the sales mainly from current accounts. Many times areas as sales are view as silo, and honestly speaking high-performance sales required of the properly coordination with other areas as marketing, or customer service to improve the number of leads, referrals, cross-selling and so on.
Right now, it is your decision if you transform and accelerate sales…
How to Grow Your Business. Why Do B2B Firms Fail to Grow? Sales and Marketing Turnaround
Nowadays, one of the main business issues is how to grow business and “obviously” profitably grow. Therefore, the first task is to identify what is limiting our growth, I mean why we are failing to grow. Thus, we are analyzing the most common mistakes that B2B firms used to make defining and/or executing their growth strategies. Once that we will be able to identify why our firm is not growing healthy, we will be able to know how to turnaround the situation to recover the route to growth.
Being sales minded rather than balancing sales and marketing minded
As Philip Kotler pointed out long time ago there are some industries in which is difficult to find marketers with specific knowledge about those industries and customers’ buying patterns (e.g. service logistics providers). In those cases many CEOs are still taking the decision to put the marketing responsibility under the Sales Director. Those people without enough marketing knowledge and experience continue acting like Sales Managers. Therefore, we will not able to get the benefits of a stable long-term growth that offers us marketing, compare with the less predictable short-term growth that used to produce a sales strategy without a robust marketing strategy. Sales mainly focus on closing deals and marketing on demand generation, so both functions are necessary and complementary to achieve a sustainable growth. Furthermore, the lack of a powerful strategic marketing function used to reduce the firm profitability importantly, because sales used to focus on volume and marketing on profits. Thus, firms facing profitability issues should review urgently their marketing strategy rather than just look for a solution in the sales area.
Sales minded vs Marketing minded
- Is your company sales-minded?
- Do you have the right person managing of marketing function?
Being unable to uncover the full marketing potential
Marketing is a powerful tool and as we have mention before is a necessary discipline to growth profitable and sustainable. Unfortunately, there are still many firms that limit marketing to communication or promotion of their selling products and services. It is easy to identify the organizations that have not realized the marketing potential because they used to have very few people on marketing (even just one person) that used to be the most inexperienced person in the Sales & Marketing department. Global firms used to invest in marketing, but some of them mainly invest in a global marketing team. Unluckily, those people used to be too far away from the local and customer reality. Thus, they should invest in local marketing teams in the same way that they are investing in local direct sales force. That investment in local marketing not necessary means increasing the expenditure in Sales and Marketing, it means to reallocate the budget of Sales and Marketing in a more efficient way.
Marketing Phases
- In which marketing stage is your company?
“Just” a good Sales Rep in the position of Sales Director
Sometimes firms assume that functional competence of a sales rep is enough to lead a sales department. The leading competence is assumed too because some people think that if they are able to lead customers, they should be able to lead a team. Indeed, being a good sales rep is a necessary condition for leading a sales department but not sufficient. “Weak” Sales Directors used to underperform in the important task of coaching and motivating the sales team. It is impossible to growth with a not well trained and motivated sales force. I would suggest asking the sales reps:
- When was the last time that the Sales Director visit a customer with them?
- When was the last time that they learnt something from the Sales Director?
- Does the Sales Director show how to achieve the results or just set objectives?
Do we have a really compelling value proposition? How to grow business?
It is very difficult to find good compelling value propositions. For instance, the global market players trying to escalated positions to the top market positions used to adopt a similar value proposition than market leaders (we are global, customized solutions, etc.) It is very difficult to reach the market leaders using the same weapons that they used. Moreover, many of the value propositions are not based on what the company can offer today rather than on what they would like to offer in the future. That approach used to rest credibility to the value proposition. If we analyze the value propositions of market leaders used to be very similar, it looks that all of them copy to each other.
- Why should customers buy our products/services compared to the market leaders?
- Have you asked any customers about how compelling they believe is our value proposition?
Used a market-segmentation rather than a customer-segmentation
Segmentation is a strategic pillar for growing. Segmentation is going to define where and how to grow. Nevertheless, many organizations are still segmenting based on market segmentation like size of the companies or industries what offers a poor direction to the sales force compared with customer segmentation (attitudes and the willingness to do business with them, how important is the supplier in the buying decision, service needs, different degrees of value added and so on.)
- What is your segmentation strategy?
Sales obsession for large accounts
A few global large accounts with a good margin can make growing a company a lot. However, this is just the “nice” part of the story. Indeed, large companies used to delay buying decisions (bureaucracy of large firms), take advantages of their buying power, and “ignores” our solutions because they have consultants and their own well-trained staff. Moreover, the cost to attract those accounts are usually prohibitive unless a competitor makes an important mistake. Competitors are going to fight very hard to retain those huge accounts.
- Have you thought about focusing in mid-market companies?
Failing to decide when to approach customers
There are “sweet times” to approach customers successfully. For instance: a few months before the current contract is expiring, or when there are changes in the buyer management team, or when the buyer firm is underperforming, etc. In order to take advantage of those “sweet times,” we need a process in place to manage sales notifications.
- Do you have a customer database with contract expired date?
- Do you search in daily basis on business newspapers or/and Internet for relevant news?
Ignore the channel management competitive advantage
Leading companies has built the channel advantage using the full potential of the direct sales force and other channels like business partners, tele-channels and even Internet. I mean they have been able to cut the selling cost, increase market coverage, customized customer approaches, and growth faster using their channel advantage. On the other hand, we have companies which growth strategy is based just only in one channel, the direct sales force which is the most expensive channel. Those organizations argue that they are selling complex customized solutions mainly for large accounts, so the correct selling channel is direct sales force. Nevertheless, I would like to point out that using a channel management strategy does not necessary mean that closing deals are performed for example for a tele-channel. A well-trained tele-channel could perform prospecting tasks perhaps more efficient that direct sales force. Moreover, many customers are demanding easy and inexpensive solutions that could be sold from several channels rather than complex customized solutions delivered by direct sales force. For instance, Dell selling customize solutions using call centers or Internet, or Verti.com selling insurance using call centers or Internet. In the past, selling computers or insurance was defined as complex and critical sales that had to be performed by sales reps, but nowadays that assumption has changed.
- Could any of your products be sold for other selling channels?
- Have you explored the possibility of accelerating revenue generation creating a network of business partners?
- Do you have any activity like leads generation that could be performed more efficiently for other channel like tele-channel?
Managing distributors as competitors rather than partners
There are organizations that just move complex and low margin activities to distributors. That situation could create financial viability problems in the distributor side, and indirectly create service problems in the end customers (the distributor could not have resources to invest in stock and/or services). We should be aware that customer service is one of the building blocks to achieve customer loyalty and profits from referrals. There are firms that rather than support distributors compete for the same business. We should be aware that most times killing our distributors is killing “the goose that lays the golden eggs.”
- What is your margin and your distributors’ margin?
- Do you perform distributor satisfaction surveys?
- Who is managing distributors’ complaints and suggestions?
- Do you have clear and fair rules to differentiate opportunities to be managed for your company or for your distributors?
Chaotic and desperate growth strategy
There are Sales Directors even at global level they are still thinking that sales initiatives have an additive effect. I mean as many initiatives and in many fields, faster growth is generated. Indeed, trying to be all things to all customers all of the time used to produce chaos, confusion and very poor results. For example, a company growth strategy based on new customers, AND new products, AND new markets, AND more Sales Reps, AND increasing prices all of the time. I am not suggesting that those growth initiatives are not good, although I suggest that those initiatives need time and excellent execution in order to deliver the expected results. The point is that the faster and most profitable way to growth used to be based on growing with the current customer base and the current product portfolio. Thus, the suggestion is not losing the main focus on the very fast growing opportunities, and “limit” the resources for other much slower and riskier initiatives. Be aware that most times trying to implement at the same time many complex initiatives could create some important chaos into the direct sales force (approaching new and existing customers, small and large accounts, selling new and well-stablished products, selling in several industries, and so on). Let’s go to review the issues with the main growth initiatives that look for “new landscape” rather than growth mainly with the well-known customers and products base.
New customers
The cost to acquire new customers is between three and six times the cost to retain. We must be aware that new customers are increasing revenue, but in the short-term will probably be unprofitable due to acquisition and implementation costs. Without any doubt companies have to invest in acquire new customers, but we have to decide wisely what portion of time and budget is for developing new customers and what for existing ones.
New products
Those are harder to sell than actual products and sales cycle will be longer which means that we are not increasing our sales in the short-term. Furthermore, those products would be likely unprofitable in the introduction stage due to sales force training, customer education and other introduction costs. Again investing in new products is something desirable, but we have to decide wisely what portion of the budget is for developing new products and what is for existing ones.
New markets
Imagine a logistics service provider which main experience is in the automotive and high-tech industries trying to entry in the pharma market. That company is probably building its pharma capabilities and the direct sales force does not have the selling expertise for that market. Thus, in the short term we should not expect fast growth and even profit generation. Be aware that entry in new markets has the risk to fail. How much should we invest in new markets?
More sales reps
We could think that hiring more sales reps, we are increasing our revenue and profits proportionally. In that case, we would be underestimating some key factors affecting sales reps performance. First at all, new sales reps likely need some training at least in our specific company and products what is going to delay the delivery of results. Second, it is well known that usually sales force spent just around 37% of their time selling because the rest of the time is spent on meetings, admin tasks, aftersales service, etc. Third, direct sales force is the most expensive selling channel. Fourth, I would say that the ROI of the direct sales force is heavily conditioned as we have reviewed for: the marketing strategy and implementation, segmentation, compelling value proposition, having the right Sales Director, and so on.
Increasing sales prices above normal prices’ adjustments
This initiative is one shoot initiative because we cannot perform special sales price increments in regular basis. Furthermore, customers are well informed and it is difficult that they accept price increases above the market. But even if we get the approval of some customers, it is likely that those customers are going to be the small accounts with low buying power because large accounts would face an important impact what they are unlikely going to accept. Thus, this financial initiative used to fail to improve company profits because the success relies on applying for price increases in the key largest accounts. At the same time, that unexpected and unusual price increases used to annoy customers and deteriorated relationships. It is essential to mention that some companies’ face problems of profitability because sales department manages prices rather than discounts. Modern management to avoid compliance issues in the sales area and increase profit focus suggests removing the sales price activity from sales.
While some managers blame to market and commoditization forces for the low growth rate and sales margins. In this post, we have tried to show the principal pitfalls to growth and some suggestions to overcome those issues proactively.
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