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Sales and marketing executives in B2B companies seem to be working harder every year, yet consider some recent results:
- 62% of companies had difficulty making target revenues in 2014. (Forrester)
- 42% of all sales opportunities end in “No Decision.” (HubSpot)
- B2B companies are delaying contact with salespeople. (Google and the CEB)
- A pass bet at a craps table has better odds than the average sales forecast. (CSO Insights)
Further, for the last five years running, a Sirius Decision’s survey of sales and marketing organizations showed “The inability of our sales reps to sell value” is at the top of the list of B2B company challenges.
To say the typical companies in these studies are trying to improve would be an understatement! They try sales training, CRM systems, lead generation, contests, compensation plan changes, changing out salespeople, and many other things. Revenue is so important, most companies have no choice but to spend on sales and marketing. In fact, the sales portion of SG&A (sales, general and administrative) expenses is one of the largest costs in the typical company, and the most difficult to control.
With so much time, energy, and money at stake, why don’t things actually improve?
Three Reasons Sales and Marketing Productivity Don’t Improve
One reason is that customers today want to look on the Internet to help them solve their problems. They are less likely to talk to salespeople, at least in the beginning. Yet, salespeople often have little to do with their company’s website. Worse, when companies try to improve their marketing and their websites, they often struggle. With divergent opinions around what changes will create improvement, how do you select the best approach? Without a clear payoff, it is difficult to justify investment. So making changes is a difficult proposition.
This points out a second reason why things don’t actually improve: Most companies have difficulty distinguishing value from waste in sales and marketing. Should the company spend money on the website, or on sales training, or on recruiting more channel partners? Is attending trade shows more important than purchasing a new CRM system? With no easy rule or principle for distinguishing value from waste, companies can only muddle through.
So how do you distinguish value from waste in sales?
Value is created when you enable your customer to take the actions you want them to take. Anything else is waste. Salespeople have always known they must get their customer’s attention, time, and trust if they are ever to have a chance of earning any of their customer’s money. Yet as we said earlier, salespeople are hampered when customers are searching to solve their problems on the Internet.
And this points up a third reason sales and marketing productivity isn’t improving. Executives who think in terms of functions instead of value unwittingly make assumptions that limit their awareness. They “swim” in a world where the goals of marketing, selling, and servicing are independent of each other. They see “sales process” as just an issue of detail and discipline – something else to consider alongside other departmental issues such as sales training, CRM, or lead generation. As the saying goes, “The last thing a fish discovers is water.”
Customers see your company as a single entity. Integrating your approach to finding, winning, and keeping them enables you to see the business as a production system that helps customers realize, prioritize, and solve their problems. These stages are called the customer’s journey, and it doesn’t matter whether helping the customer buy requires a marketing tactic or a sales tactic. What matters is implementing the appropriate tactic as efficiently and effectively as possible.
What Does a Sales Production System Look Like?
When sales and marketing becomes a cross-functional production system, companies can achieve big increases in sales productivity and margins. For example, one client achieved a 1% increase in margin without increasing prices, simply by reprioritizing their deal flow. Another doubled their sales productivity by figuring out and walking away from the least likely prospects. These changes actually happened quickly, and without much fanfare.
How does that happen? The first step is to get everyone to define their terms in the same way. For example, it is very common for different individuals in a company to have a different concept of who the customer is. One individual might think the customer is the person at the distributor who signs the check in payment of your company’s invoice. Another might think the customer is the end user who touches or uses the product. And still another might think the customer is the executive who achieves lower costs and higher performance as a result of selecting your products and services. If the people in your company are not aiming at the same thing, how can anything improve?
Getting your team to tie their words to observable reality takes time and energy, but that effort is richly rewarded.
For example, the sales VP at a machine tool company selling six figure capital equipment felt his salespeople were spending too much time on the wrong accounts. Unfortunately, the problem was not solvable in this form. How much is “too much time?” What is the definition of “wrong account?” He realized certain observable characteristics, such as a prospect’s degree of interest in training and maintenance around their machines, were an indication of their willingness to pay for value. He and his sales team developed a list of traits that enabled them to convert these observations of prospect quality into a number. The higher the observed quality of the prospect, the higher the number.
Prioritizing their deal flow in this manner caused the best prospects to rank higher than when salespeople had forecast their deals informally. Like other clients, they were surprised to learn their sales forecasts become far more accurate with this approach. (Some clients have achieved 94% forecast accuracy.) Instead of working on their sales opportunities sequentially as they had in the past, our machine tool company started applying their scarce engineering resources to the highest quality prospects first. In practice this had the effect of increasing their margins. They conservatively estimated this increase to be at least 1%, which amounted to nearly a million dollars annually.
However, the impact went farther. Measuring their deal flow enabled them to detect a decline in the quality and quality of sales opportunities. This is an important market signal, indicating they might be in the early stages of a recession (recessions are especially hard on capital equipment manufacturers).
Instead of attempting to push harder on poor quality prospects, the sales team lent their expertise to help the marketing department develop a compelling ROI model for an exciting new product. The ROI model was published as lead magnet on a web page offering an even more detailed analysis and a budgetary quote, in exchange for qualifying information about the prospect. This was a big process change that would produce data about the quality of the prospect. Within the first three weeks the web page produced two new prospects in different parts of the world.
Far from having to enforce some arbitrary discipline around a “sales process” purchased from an outside sales training or CRM vendor, the management at this company merely encouraged the sales team’s energy to improve their own process!
Traditional approaches to managing sales and marketing cannot produce improvements like these. That’s because instead of solving for desired customer actions, they impose “best-selling practices” out of context, and make assumptions like “deals at stage 3 have a 40% chance of closing, while deals at stage 5 have a 90% chance of closing.” By failing to define and analyze actual data around what is working and not working in the field with salespeople and their customers, they fail to solve actual sales and marketing problems. In fact, that statement is a nice summary of why sales and marketing productivity doesn’t improve.
Process Excellence Makes Sales and Marketing Problems Solvable
No company has much direct control over the demand curve among its customers. However, by defining your terms, gathering data, and aligning the work to real customer value (the fundamentals of process excellence) you can remove the waste and misalignments that hamper conversion and productivity in your business. You can pick up information allowing you to shift your resources to where customers need it, such as emphasizing more efficient new products or service and replacement parts during a recession.
This approach offers an immense opportunity for producing growth that is both more predictable and more sustainable. Process excellence works because it provides a data-driven framework for identifying which kinds of changes will actually make the sales funnel flow faster. Precisely defining the problems you are trying to solve has much greater impact than just applying another version of the usual fixes, such as lead generation, sales training, CRM, or attempting to select even more talented (and expensive) salespeople. Further, the simple, logical reasoning it encourages is respected by salespeople and marketers alike. Ultimately, improvements to the quality of customers that are input to your business increases the productivity, and therefore the profitability of the entire enterprise.
About the Author
More than twelve years ago, with deep experience in field sales, sales management, and sales training, Michael Webb set out to create a data-driven, process-based alternative to the offerings of typical sales training, sales consulting, and CRM companies. Since 2002, he has published numerous articles on ways B2B sales organizations can benefit from process improvement techniques, and consulted with companies like Burr Oak Tool, Danfoss, Wacker, Pentair, Tyco, and Thermo Fisher, as well as many smaller B2B companies.