Sales_effectiveness_whitepaper

Sales Effectiveness Promises to Double Sales Growth How changes in the way your organisation sells can significantly accelerate sales growth Executiv e Summary 1. With conversion rates under pressure from increased competit ion, lengthening sales cycles and increasingly demanding buyer sales effectiveness is the new mantra for sales managers across the glo be. 2. The focus on sale s effectiveness recognises the need for greater visibilit y, predictabilit y and control in respect of sales. 3. Sales The Effectiveness best results brings the notion by of continuous on the improvement to all aspects of sales and sale s led marketing. are achieved focusing identificatio n of a varie ty of modest im provements across the organisation and throughout the sales cycle. 4. Although the approach is incremental the result s can be ex traordinary. Typically a 3% increase in conversion rates at each stage of the sales cycle can double the rate of sale s growth. 5. Rather than looking at win rates overall, managers are looking for improvements at each stage of the sale s cycle; leads, meetings, cycles, orders and repeat orders. 6. Increasingly managers are viewing sales and marketing as the revenue generating engine of their business. This result s in a more engineering-led approach to sales, w it h greater emphasis on metrics, systems and conversion rates. 7. This approach also enables managers to lo ok behind such general problems as ‘not enough leads’ or ‘low conversion rates’ to identify specific opportunit ies to accelerate sale s growth in their business. 8. The driv e for increased sales effectiveness necessit ates an approach to sale s that is planned, structured and systematic. Table of Contents Ex ecutiv e Summary Why sale s effectiv eness matters What is sales effectiveness? Can sales effectiv eness deliver? How achievable are the results? Identifying opportunitie s to im prove sales effectiveness? Effectiveness – Sale s Leads Effectiveness – Sale s Meetings Effectiveness – Sale s Cycles Effectiveness – Sale s Orders Effectiveness – Repeat Orders Underpinning Sales Effectiv eness The next steps Checklist for Busy Managers 1 2 4 5 6 8 10 13 15 18 20 23 24 080702RC Why Sales Effectiveness Matters Most sale s managers are under pressure from increased competit ion, more complex buying processes and le ngthening sale s cycles. The result is a focus on conversion rates, and the visibility, predictability and control of sales overall. Top 11 Sales Complaints 1. 2. 3. 4. 5. 6. 7. 8. 9. ‘Buy ing Cy cles Are Longer’ ‘Buy ing Decisions Are More Complex ’ ‘More Deals Are St alled or Delay ed’ ‘Conv ersion Rat es Are Falling’ ‘Forecast ing Accurat ely is More Difficult ’ ‘Sales Target s Are More Ambitious’ ‘Sales & Market ing Costs Are Rising’ ‘Compet it ion is int ensify ing’ ‘Lead Qualit y is Falling’ 10. ‘Sales Rep Turnov er is Rising’ 11. ‘Access t o Senior Ex ecut iv es is limited’ These trends serve as a rallying call for sales professionals and the impetus for an increasingly sophisticated approach to sale s. In particular increased pressure on closure rates, has put sale s effectiveness at the top of the agenda. The result is a focus on conversion rates, and the visibility, predictability and control of sales overall. But w hat is sales effectiv eness? What benefits can it deliver? Where are the benefit s to be found and how? accelerating sales growth. This document answers these questio ns, showing the role of increased sale s effectiveness in 1 What is sales effectiveness? Sales effectiveness is the application of ‘work smarter, not just harder’ thinking. Sales effectiveness is everything that has the potential to improve overall w in rates for your sale s team and more specifically conversion rates at different stages of the sales cycle. That means its scope is almost endle ss – ranging from the effectiveness of sale s collateral in generating leads, or enquiries, to the effectiv eness of sales presentatio ns and proposals. Indeed, sales effectiveness brings the notion of continuous improvement to all aspects of sales and sales le d marketing. Faced with real resource limit ations, it is also the applicatio n of ‘work smarter, not just harder thinking’. Sales effectiveness necessitates closer alignment between sale s and marketing – something that is lacking in many organisations. The results are clearer joint goals, greater co-operatio n and fewer demarcations. It also means an accelerated transit ion from tradit ional mass marketing (big events, expensiv e ads, etc.) to oneto-one marketing aimed at specific customers, niches and segments. Sales effectiveness also means responding to marketplace changes. More specifically it means more effectively tailo ring the seller’s proposit ion (product or service) and sales efforts to the prospect’s individual and often idio syncratic needs. 2 Case study: Sales Revenues fall as sales effect iveness slides Sales effectiveness is everything that has the potential to increase win rates. A long established business services company dominated its market for more than 20 years growing sales in a manner that at times seemed alm ost effortless. However, in more recent years sale s had show n a dramatic decline. The sales team pointed to increased competit ion, changing buying patterns and minim al marketing by the company as the causes of the dow nturn. However, further analy sis identifie d that low levels of sales activ it y and effectiveness as the prime factors involved: • On average sale s reps met only one new customer, or potential customer, every month (i.e. 12 per annum). With conversio n rates at 25% and average order values of £40,000, each rep could only ex pect to w in new business of approx. £120,000 per annum. • There were no targets for growing revenue among existing customers, no key account plans and only limited attentio n overall was giv en to account management and service delivery. These factors explained declining le vels of repeat business among ex isting customers. By increasing the level of new customer sales activity by 15% over 6 months and repeat business by 7%, the company reached its yearend target midway during quarter 3. 3 Can Sales Effectiveness deliv er? A 3% increase will at each stage of the sales cycle can double the rate of sales growth in most organisations. Greater sale s effectiv eness increases conversio n rates and therefore boosts not just the rate of sales growth, but also the marginal profitability of sales. Managers are finding that focusing on Sales Effectiv eness has the potential to accele rate sales growth more immediately than most other activit ies, or strategies. Furthermore compared to other strategie s, such as the launch of a new product, it generally does not require a major investment. For most companies a focus on increased Sales Effectiveness has the potential to double the rate of sale s growth. Moreover, as effectiveness generally im plies getting more from ex isting resources, the im pact on margins is often greater. A modest 3% increase in conversio n rates at each stages of the sale s cycle - for ex ample the quality of sales le ads, the effectiv eness of sales presentations, etc. – is likely to double the rate of sales growth in most organisations. 4 How achievable are the results? Modest sales process, systems and skills improvements can have a major impact on sales growth. Sales effectiv eness is less about ‘a magic bullet’ and more about a series of modest sales process, systems and skills improvements. These changes, in isolation, might be considered minor, yet the cumulative effect on sales is surprising. Tom Peters said ex cellence is measured in millimetres not kilometres. This is particularly true in respect of sale s effectiv eness. The focus is on continuous and modest ongoing improvement, as opposed to revolutionary or earth-shattering change, in areas such as: • • • • • • • Pre-qualification of Leads The effectiv eness of sales meetings, or presentations A more structured sale s approach Selling skills (e.g. building relatio nships) Selling higher in target organizations More effective proposals Sales systems to manage le ads, opportunit ies, etc. The combined effect on sale s of small changes in these areas is to significantly im pact on overall conversion rates. Yet, adopting such an incremental approach has the advantage of being easier to implement. 5 Identifying opportunities to improve sales effectiv eness? No sales person, or organisation has a 100% win rate, so effectiveness can be increased. No sales person, or sales organisatio n, has a 100% w in rate. Thus, every organisation presents opportunit ies wit h respect to increasing sales effectiveness. But how to exploit those opportunitie s? We have develo ped a methodology to guide managers in identifying and exploit ing opportunit ies for increased sale s effectiveness and accelerated sale s growth. It encourages managers to view sales and marketing, not as a set of discrete functions (e.g. telemarketing, or customer service), but as the revenue-generating engine of the business. The Sales Engine framework enables managers to lo ok behind such general problems as ‘not enough leads’ or ‘low conversio n rates’ to identify specific opportunities to accelerate sales growth in their business. 6 The sale s engine guides mangers step by step through an ex aminatio n of effectiv eness in terms of 6 key stages of the sale s process, including sales; leads, meeting, cycles, orders and repeat orders. Stage Sales LEADS Sales MEETINGS Objective Typical Complaints ‘The quality of leads generat ed by marketing is poor, t here is limit ed prequalificat ion!’ ’The chances of closing are v ery high once w e get in front of t he cust omer, but gett ing in t he door is t he problem – w e need more meet ings!’ Generating more and better leads. Converting more prequalified le ads into meetings More effective sale s meetings leading to sales cycles Closing deals and increasing w in rates Sales CYCLES ‘W e hav e lots of meet ings w it h cust omers and t hey seem int erest ed, but t hen it just seems t o go now here’ Sales ORDERS ‘The cust omer asks for a proposal fast, but aft er sending it w e don’t hear anyt hing back...’’ ‘W e spend mont hs in a sales cy cle only t o discover at t he last moment t hat w e hav e lost t o a compet it or’. ‘W e are excellent at gett ing t he first sale but keeping t he cust omer long t erm is a problem.’ REPEAT Sales Keeping and growing ex isting accounts The ASG Group (Accelerating Sales Growth) is le ading the way in the application of a scientific, approach to identifying and ex ploit ing opportunit ies for increased sale s effectiv eness. The ASG Sales Engine framework enable s managers to lo ok behind such general proble ms as ‘not enough leads’ or ‘low conversion rates’ to identify specific opportunitie s to accelerate sale s growth in their business. An overview of this process in respect of each stage of the sale s cycle is examined in the remainder of this w hitepaper. 7 Effectiveness: Sales Leads A majority of managers ex press concerns about the effectiv eness of their organisatio ns in terms of generating leads. However, a more detaile d ex amination is required to fully understand the causes and its symptoms: SALES LEADS - Typical problem(s): 1. Not enough le ads overall, or from particular sources (e.g. web) 2. Poor le ad quality (poor prequalification) 3. High, or rising cost of le ads generated 4. Uneven flow , or distribution of leads (by period, rep, market, etc.) 5. Profile of leads does not fit strategic prio ritie s SALES LEADS - Common Symptoms: No target, plan, or budget for lead generation Not enough le ad generatio n activity Too few sources of leads or enquiries – over reliance on particular sources Prequalification criteria not clear Using the wrong methods to generate sales le ads No metrics to measure quality, cost, etc No system to store, track and manage le ads Ineffective collateral for use in generating le ads or responding to enquiries Confusion about who is responsible for lead generation Lead generatio n not discussed at sale s meetings Marketing not focused on generating le ads 8 No list of target customers as a focus for lead generation activit y Insufficient - ineffectiv e direct marketing or tele sale s contact with the list Not all le ads are followed up, or followed up in tim e Leads representing lo nger term opportunit ies are not develo ped or nurtured Little demand generation (educating the market) or profile building (e.g. PR) activ ity to support le ad generatio n activ ity SALES LEADS – Top 5 Sales Effectiveness Priorit ies The Top 5 areas addressed by Managers in order to improve the effectiveness of le ad generatio n are as follows: 1. Adopting greater rigor in terms of screening, scoring and prequalifying le ads 2. Implementing a sales database / CRM system to automate, manage and track sale s leads 3. Systematically nurturing leads to sale s ready stage 4. Adopting a more sales-led approach to marketing in order to generate more and better leads 5. Developing a target, plan & a budget for le ad generation 9 Effectiveness: Sales Meetings Conversio n rates from sale s meetings are falling, w ith statistics show ing that 4 out of 5 sale s meetings ‘go nowhere’. However, to identify opportunit ies to increase the effectiveness of sale s meetings requires a more detaile d examinatio n of the proble m. SALES MEETINGS - Typical problem(s): 1. Not enough sale s activit y – too few meetings 2. Not getting past the first meeting in too many cases 3. Meeting the wrong companies, or the wrong people in those companies (i.e. insufficient pre-qualificatio n) 4. Too much time spent on sale s meetings, or too many meetings required to progress to the next stage 5. Failing to get the message across to customers in sales meetings/presentations 6. Failing to ask questions, specifically needs - pay-off questio ns SALES MEETINGS - Common Symptoms: Leads not been pre-qualified, or nurtured to ensure sale s readiness Not enough preparation for meetings Divergent ex pectatio ns regarding sales meetings between reps and prospects The propositio n, or how it is communicated, is not sufficiently clear or compelling Ineffective sales presentatio n, or sale s aides Failure to elicit the buyer’s needs, or match the company’s solutio n to those needs Inadequate product, industry or customer knowledge on the part of sale speople Not asking the right questio ns, or not asking them in the right way Failure to adequately answer questio ns or handle obje ctions 10 Failure to pre-qualify in terms of budget, authority, timing or need Failure to build rapport Next actio ns not agreed at the close of sale s meetings Meeting is seen as the beginning and the end of the sale, resulting in poor follow -up, or follow -through Divergent approach to sale s meetings across the sale s team SALES MEETINGS – Top 5 Sales Effectiveness Priorities The Top 5 areas addressed by Managers in order to improve the effectiveness of sales meetings are as follows: 1. More systematic approach to needs analy sis, w it h more effective listening and questio ning 2. Greater prequalificatio n and preparatio n for meetings 3. Communicating a more compelling proposit ion, w it h a quantified business return 4. Adopting a mult iple -meeting approach 5. An ex pert led approach to sales, focused on identifying solutio ns as opposed to selling products 11 CASE STUDY More effective management of sales cycles increases win rates ‘M any of our potential customers have reigned in spending’ ‘More and more buying decisions are being stalled or delayed.’ complained the sale s manager of a software company selling to the major financial institutions. ‘It is not that we are losing business to our competit ions, it is that more and more buying decisions are being stalled, or delayed’ he ex plained. It w as clear that turmoil in the financial markets had certainly impacted on IT investment plans among the big banks. However it also emerged that aspects of how the company managed sales cycles also contributed to the number of stalled buying decisions. Working wit h the manager and his team a range of sales effectiveness opportunities were identified: • More thorough pre-qualification – it was clear that the sales team did not have a full understanding of budgetary and timing factors in all cases More extensive coverage of the buying unit – the sale s team was relying on just one or two contacts in the buying organizatio n More systematic needs analysis – in many cases there was insufficient information to complete a business case for the buyer Ensuring more time is spent w it h the prospect - the amount of interactio n with the buyer before submitting a proposal was limited Reducing buyer risk – there was lim it ed use of low risk pilots, or phased projects that would make it easier for clients to commit Identifying and accentuating points of pain – in most cases the sales team had not helped the buyer to create a compelling case for buying now , as opposed to later • • • • • Addressing these issues resulted in a 7% increase in the number of deals closing as forecast. 12 Effectiveness: Sales Cycles For the majorit y of sale s organisations sales cycles are longer, more complex and increasingly difficult to predict. That means they require more careful management than ever before. SALES CYCLES - Typical problem(s): 1. Not enough genuine sales opportunit ies in the pipeline 2. Sales cycles are taking longer and are more costly 3. Customer buying decisions are more complex 4. It is difficult to predict w hat deals will close & w hen 5. The seller often gets shut out of the buying decision, particularly in RFPs, or arriv es on the scene too late to influence buying crit eria SALES CYCLES - Common Symptoms: Failure to match company, product, or service to the buyer’s needs (explicit and im plicit, latent or otherwise) Failure to interact sufficiently with the customer in identifying requirements and solutions Needs analy sis fails to adequately identify points of pain and create a dynamic for change Sales opportunity lists are lo ng, held in ex cel and have not been cleansed recently Failure to establish ROI justificatio n Prospects don’t see us as experts, but as sale speople Failure to build incremental interest and commitment Failure to build relationships, develop an internal advocate, or cover the buying group Difficult to forecast what deals will close and poor sales forecast accuracy Pipeline line has not been validated Poor opportunit y management systems or procedures Ability to demonstrate a clear advantage over competit ors 13 A lot of tim e is spent at sales team meetings reviewing lo ng and often outdated lists of opportunit ies one by one Inadequate pre sale s and technical support to sale s Managing sale s cycles distracts from le ad generatio n and other sales activ itie s Prospects begin the process of searching for a solutio n long before meeting any potential supplie rs Formal buying processes, such as RFPs, mean that the sale s person gets lo cked out of the buying process SALES CYCLES – Top 5 Sales Effect iveness Priorities The Top 5 areas addressed by Managers in order to improve the effectiveness of sales meetings are as follows: 1. Earlier and more rigorous pre-qualification 2. Selling higher w it hin target organizations and more extensive and systematic coverage of the buying unit 3. More ex tensive interactio n with the potential customer to jointly uncover needs and explore solutions 4. Demonstrating commitment and ex pertise throughout the sales cycle 5. Helping the prospect to build a compelling business case and trial ballooning price 14 Effectiveness: Sales Orders Pressure on w in rates is mounting, but competit ors are not the only threat. Managers are increasingly complaining of purchase decisions being stalled, or delayed. SALES ORDERS - Typical problem(s): 1. Revenues falling short of target 2. A ‘sure thing’ deal( s) is lost 3. Win rates are ‘below par’, or under pressure 4. Too many opportunit ies are ‘in the valley’ 5. Order size or profit ability needs to be increased SALES ORDERS - Common Symptoms: Too many proposals being writ ten Proposal qualit y is low Poor proposal turnaround times No clear guidelines on w hen proposals will & won’t be written A formal presentation of our proposals is not alw ays giv en Confidence in closing skills is low Customers are not involv ed in proposal preparatio n Customers are not reading proposals Proposal follow-up is lim it ed It is difficult to get a response to proposals once submit ted Increasing demand for pilots and phasing of projects Increasing use by buyers of competit or face-offs Difficulty accurately forecasting revenues Deals lost to competit ors Deals lost to no decision Deals won but then delayed in starting or being signed off More deals being renegotiated before sign-off 15 Average order value / profitability is low or falling Sales targets are unrealistic, or not challenging enough Contractual documentation is weak, or not alw ays used No formal reviews of lost deals Win rates are not know n SALES ORDERS - Top 5 Sales Effect iveness Priorities 1. Avoiding pre-mature diagnosis through more ex tensive information gathering and more interaction with the prospect before proposing a solution 2. Diminishing the role of the proposal in the sales process and not ex pecting the proposal to sell in the absence of sufficient meaningful interaction with the prospect in advance of submissio n and a formal presentation of the proposal post submissio n 3. Trial ballooning price and gauging in advance prospect reaction of proposals being prepared 4. Reducing the number of proposals submit ted, w ith clear criteria regarding w hen and how they will be prepared 5. Improving the quality and presentation of proposals 16 CASE STUDY: Bid losses draw attention to sales effectiveness opportunities ‘It is precisely in depressed markets that a focus on sales effectiveness can produce greatest results.’ The lo ss of a number of recent bids had heightened competitiv eness concerns among the sale s team of a le ading IT services company. This was compounded by fears regarding a general economic slow dow n. However it is precisely in depressed markets and among downspirited sale s teams that a focus on sale s effectiveness can produce the greatest results. In particular two key opportunit ies to increase sales effectiveness were identified: 1. The sales team was over reliant on proposals to sell. Most proposals were prepared after an init ial short meeting wit h the customer, or following a phone call or email enquiry. As a result proposal success rates were low , w it h lim ited information gathering / needs analysis, or prequalification before submission and no gauging reactio n to price. 2. Hampered by an insufficient flow of sale s le ads – reps were responsible for generating all their own leads, as a result less than 10% of their time was spent meeting new customers, with just one new customer being met each week by each rep. In respect of proposals new criteria regarding when they are to be prepared and a policy of greater interaction w it h buyers before submissio n reduced the number of proposal generated, but dramatically increased win rates. Added to a series of campaigns to generate leads, the rate of growth doubled over a 2 year perio d. 17 Effectiveness: Repeat Orders Accelerating sale s growth in the lo nger term is very difficult w it hout generating a base of repeat business. Yet in the driv e to win new customers, growing ex isting customers can get over-looked. REPEAT ORDERS - Typical problem(s): 1. Initial customers orders do not repeat 2. Customers lo st to competit ors, or other factors 3. Clients have been over-sold, so delivering w hat was promised is difficult 4. Failure to max im ise/grow account revenues 5. Over-dependence on key customers REPEAT ORDERS - Typical symptoms(s): Low average customer value It is difficult to up sell and cross sell The correct balance between lo oking for new customers and growing revenue from the customer base is not clear There is no target for repeat business Those who were involved in selling to the account are not involved once the project is won Customer satisfaction and loyalty is not measured or tracked Account management is reactiv e There are no key account plans There is a failure to sell onwards wit hin client accounts (e.g. to other div isions) Customers see us as a supplie r, as opposed to a partner Customer references and referrals are not widely used Communication wit h clients needs to be im proved Account revenue and profitability is not tracked 18 Customers are continually being courted by competit ors It is easy for customers to sw it ch to another supplie r Few customers are depending on us for an increasing proportion of their needs Management is often taken by surprises in client accounts The company does not alw ays deliv er on promises to the customer Customer ex pectations and perceptio ns of value are not proactive managed Client and proje ct review meets are irregular REPEAT ORDERS – Top 5 Sales Effectiveness Priorities Not only are leading sales organisations more effect iv e at finding and w inning new cust omers, but t hey are also better at keeping and grow ing ex isting cust omers. The follow ing are t he priorit ies of managers in t erms of grow ing repeat business: 1. Setting targets for growing revenue from ex isting customers, including up selling and cross-selling 2. Key account plans, client side reviews and pro-active account management 3. Managing and ex ceeding customer expectatio ns and communicating value throughout 4. Systems for Customer Relationship Management 5. Improved measurement & tracking of account profitability and revenues 19 Underpinning Sales Effectiv eness Increased sale s effectiveness requires a more systematic, planned and structured approach to sale s. If sales is the engine of the business, the plans, systems, process & structure are the gearbox. Old Approach New Approach Planned Sy st emat ic Requirement SALES PLANS SALES SYSTEMS Unplanned Ad-hoc Unstructured Random St ruct ured SALES STRUCTURES Consistent SALES PROCESS Indeed, if sales is the engine of the business, then plans, systems, structures and process represent the gearbox . They enable managers to le verage their ex isting sales resources to max imum effect. Plans, process, systems and structures are key to increasing effectiveness, as well as to greater visibilit y, predictabilit y and control in respect of sales and sale s le d marketing. 20 Plans Plans are fundamental to the effectiv eness of all sales and marketing activ ity. They ensure adequate thought and preparation More can be achieved in 6 months with a plan, than 16 months without one. before the commit ment of resources and max im ise success through a co-ordinated and consistent programme of action. More can be achieved in 6 months w it h a plan, than in 16 months without one. That includes sale s and marketing plans, as well as plans for campaigns, products, territ orie s, reps, etc. Process Having a Sales Process is essential to accurately predicting and managing w hat deals will close and when. That is a set of agreed steps to effectively progress a potential customer through the different stages of the buying process. Systems Putting a System in place to lo g, track and manage leads, prospects and opportunitie s is essential to measuring, validating and managing the pipeline. That is a CRM / SFA system which acts as a central reposit ory for customer and prospect information. It will structure, or automate, the pre-qualification of leads and the nurturing of prospects, as well as the management of opportunitie s and accounts. 21 Structures Sales structures are essential to the management of sales teams and sales people . reviews, etc. That is sale s; reporting, territ orie s, team meetings, These represent the basic ingredients of a well organised sale s team. 22 The Next Steps The ASG Group’s Sales Engine guides Managers step by step through the process of: • • • • • • • Analysing sale s performance and effectiv eness Benchmarking against industry best practice Identifying specific opportunitie s for im provement Forecasting the im pact of these im provements on sales Updating sale s systems, structures, etc. Fine-tuning sale s process Tracking key performance metrics in respect of sale s Increasing sale s effectiveness is one of 8 key sales accelerators targeted by The ASG Group. www.theASGgroup.com. For more informatio n please visit 23 A Checklist for Busy Managers 1. How would you rate your company in terms of: Very Good Good Average Poor Very Poor Don’t K now (a) The le vels of sale s and marketing activity (b) The effectiv eness of its sales and marketing? (c) Overall w in rates in respect of sales (d) The availability of informatio n on key sales metrics, including conversion rates (e) Openness to new and better ways of doing things & learning from mistakes (f) Commitment to continuous improvement in terms of sale s and marketing 2. Does your company’s sales plan specify the le vel of sales activity (e.g. number of sales leads, etc.) and conversio n rates required to meet target? Yes No Don’t know 3. Is sale s & marketing effectiveness regularly discussed at sales & management meetings? Yes No Don’t know 4. How many of the sale s effectiveness opportunit ies identifie d on pages 9 & 10 are relevant to your company? _________________________________________ 24 25