By: Dr. Brian Reuben
How is your sales doing? There are three answers I can expect: very well, still pushing, not well. I meet with several senior business executives in several industries every year and I usually get such answers in confidence. No executive talks about how lousy his/her sales is, they only talk about how great it is when it’s doing great (and even when it’s not). But as every executive stands in the shower each morning, one thought that keeps him/her company is, ‘what do we need to do to capture maximum value from our efforts?’ And capturing more value is a function of a well articulated and executed strategy.
That’s the same thought that bothered a dejected man whom Bruce Burton, American advertising legend talked about. The man was a sales manager reputed for writing winning sales letters. But he lost his job and was at the verge of committing suicide. Burton led the man to a window and began, Look out there at those buildings ” Barton said, Offices of people, all filled with people who have goods to sell and most of whom don’t know how to sell them ” You say you can write sales letters. This is your great chance to prove it. Write those people a letter that will sell them the idea that they need you to help them sell their goods. The man accepted the challenge. Six month later his earnings were over $25,000 a year! The question is how did such a great salesman lose his job? Did his company file for bankruptcy? How could that happen with such a great salesman? Well the answer is that great salespeople do not translate to a great sales department. And by the way ‘a great sales department’ on its own is a pretty big term that may need to be broken down.
A great sales department is one, which its policies, culture and behavior are in alignment with the strategic direction of the whole organization. That’s dealing with the sales department that does the right things as against doing things right.
A confusion between efficiency and optimization plagues many sales efforts. But while sales efficiency initiatives — like CRM, training, and KPI dashboards — improve your corporate engine horsepower. Sales optimization decisions — like aligning sales tasks with business strategy, customer selection, and sales force deployment across opportunities — set the route which the company takes. Like the aphorism, “If you don’t know where you’re going, any road will take you there.” But if you’re going in the wrong direction, getting there faster is not the solution.
According to a report by Boston Consulting Group, doing the right things such as targeting high-value customers and deploying sales resources with strategically-appropriate criteria, have more than three times the impact on revenue growth than doing things right.
The implication is that effective allocation of available sales resources can be a strategic asset and leverage for more profitable growth.
At the core of sales effectiveness is an effective sales culture. Having a productive sales culture is the effective way to harness the potentials of your sales people and put their ability to the best use. My research shows that effective sales organisations focus on building four important capabilities as the framework for building a productive sales culture.
Strategy and planning: there are two things most companies do wrong here. The first is a siloed approach to strategic planning irrespective of their go-to-market approach, which often spans the whole organization. Secondly the planning process often takes four to five months. While this is going on, business has to go on, sales people have to keep working based on their individual capacity rather than what the company strategy should direct. This is why a survey of 1,800 executives more than half (53%) of the respondents said their employees do not understand their company’s strategy.
Customer targeting and cost of service: All customers are equal but some are more equal than the others. This principle is what underlies prioritizing customers so as to make real the crucial “scope” component of a coherent strategy — i.e., decisions about the customer segment to target. Geography, frequency of order and order size dramatically determines the cost of serving customers.
Many capital costs are embedded in cost-to-serve differences, which affects your return on investment. Sales efficiency efforts usually do not take capital cost into consideration. If this cost is not measured sales people will simply chase after competing price proposals. When sales people focus on price and volume and are rewarded based on that, sales resources cannot be optimized. This also exposes the business model and ultimately profit to risk.
Performance assessment and reviews: successful organizations take assessment and review very seriously. Consider Toyota, when they reorganized their performance evaluation system. Although Toyota usually develop their system themselves, they had to seek the help of outside consultants who worked with them for three years to develop a new process. That’s how seriously they take review. Yet many sales managers tend to treat reviews as cursory, drive-by conversations that are mainly about compensation, not evaluation and development. Reviews are where strategy is revealed and emphasized. It is where sales behaviours are defined and data applied to customer interaction. Review meetings can consider issues like changing prices to reflect cost to serve, reducing technical support for certain customer segments, changing the locus of relevant support, determining different ordering or delivery options, and perhaps instituting a channel strategy that offloads some cost-to-serve to resellers whose economies of scope allow them to perform these tasks more efficiently.
Sales capacity and resource allocation: sales productivity depends on the capacity of the sales people and how much they can do to reach target customers. Since doing the right thing is the key to high performance, resources should be effectively allocated towards sales optimization efforts like customer selection, and sales force deployment across opportunities.
Evaluating sales with the expense-to-revenue ratio can shed light on the relative cost efficiency of selling activities, but not (by itself) on their cost effectiveness, which is a more complex relationship between selling costs, revenues, profit margins, and customers acquired through one or another means of organizing sales resources.
While big data can be a great way of evaluation, but they, are not an end on their own. High performing companies understand that data are not just numbers; they are a way of viewing reality by the people who should use that data. And sales people will ignore analytics that they can’t apply to where they live: in daily encounters with customers.
Bottom line: performing the right sales activities is the foundation of a great sales unit, which is the only way to capture optimal value. Among other things, performing the right sales activities allows sales leaders to grow the top line using the resources they already have by deliberately focusing selling efforts on what will really make a difference.
Dr Brian Reuben is one of the most sought after thought leaders on the subject of Strategy in Nigeria. He speaks at business events globally. He has advised and mentored senior executives in several organisations including Africa-Reinsurance Corporation, Savile Energy Luxembourg, Department of Petroleum Resources, amongst others.