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sustainable revenue growth

Science of sales growth in a recession

Thought Leadership Research Series

Introduction
As the global economy tightened, most businesses appreciated they wont get different results by doing things the same way. But much of the science for growing sales in a recessionary market is counterintuitive, and managers whose hands were on the rudder in previous downturns may no longer be in the workplace. Few of todays executives therefore have ever faced this kind of storm in their career.

Its a situation primed for old mistakes to be made all over again.
A recent study of the experiences of former executives of Fortune companies and start-ups who captained the ship through the 70s stockmarket crash to the 90s dot-com bubble, reveals some useful home truths.

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Five dangerous mistakes

They report a range of signs that its time to rethink how your company sells:
Tenders appear to be an exercise to justify decisions that are already made, and not a serious opportunity to win the business. Key customers slash budgets or rationalize their number of suppliers. Deals you thought were hot to trot go off the boil. Your pipeline bloats with opportunities stuck in a holding pattern, with the seller not achieving any forward progress for several months. Decisions become more complex, involving more people and taking longer to get across the line. Price and risk mitigation become main topics for discussion in the negotiation phase. Sales are for amounts far less than forecast. Salespeople spend time on low-yield activities like prospecting because the quality and quantity of leads from Marketing is too low or dries up. Your forecast is murky when you look out further than six months. You win deals, but cant repeat success across the salesforce. You lose deals and dont know why, or when they became irrecoverable. Good salespeople bail out into management roles in other departments or leave the company altogether.

So what happens next?

A downward spiral commences. Managers focus on activity metrics and demand more calls, more leads, more proposals. Salespeople chase anything that moves, filling their funnel with unqualified, low potential deals to meet the activity targets. Forecasts fill with fiction. Managers start weighting the forecast report, which sends the message they dont trust their team. Salespeople invite managers to help close their big deals, knowing that if the manager cant win, the salesperson is off the hook. Customers invite managers to attend the final pitch, knowing they can approve larger discounts. Coaching stops as managers don the cape of SuperRep. Non-standard promises made in the heat of battle are off-menu for what the delivery team actually does, establishing a gap between the customers expectations and what they then experience. Repeat business drops as promises are not met. Margin and market erosion begins. Managers focus on even more activity metrics, more calls, more leads, more proposals. The downward spiral gets deeper and deeper... If any of these danger signs look familiar, youre in good company. Most executives who turned their companies around in former recessions first fell into the same traps because they represent a natural response in times of uncertainty. People focus on risk and get tactical.

But these same executives report the secret to pulling out of the nosedive is to act against the natural impulse, keep your head, and take a contrarian path. Those that did so achieved stability and even growth while their competitors fell by the wayside. They cite five most dangerous mistakes as:

to short-term gain but long-term pain; the loss of sustainability. Conversely in the B2B space, higher prices positioned as necessary to reduce the customers risk, actually plays better to executive perception than getting a cheap deal. Sometimes putting your price up is the best way to build your market with the right customers who can help you grow, not slow.

1. Ignoring the problem

Fear and panic can cause indecision. When they do, business leaders can fail to evaluate options rigorously, and so make inappropriate decisions to maintain the status quo. Poor choicesor safe choices made too latecause a company to go backwards. When the warning signs appear, take swift action.

4. Freezing sales expenses

Putting a hold on sales costs such as travel, entertainment and training are typical areas targeted by nervous CFOs. But a study by Mercer reports:

2. Increasing advertising
For fast moving consumer goods, brand advertising can sway preference and so take market share away from competitors in the short-term. But in complex B2B sales, advertising does not lift short-term revenue because institutional buying decisions require a protracted period of assessment that outlasts most advertising campaigns. So dont advertise and expect an impact on B2B sales this year. Instead, convert advertising budgets into demand creation programs that turn buyers with latent needs into buyers with active interest. Also PIMS Associates1 reports how companies that maintain advertising presence end up growing faster over the long-term than firms that drop off the customers radar, seemingly swallowed by the downturn.

Only 27% of companies that indulged in intensive cost cutting were growing as a result of their pains.2
As Tom Peters observed in his book The Circle of Innovation:

You cant shrink your way to greatness.3 5. Pushing more calls

Pressuring salespeople into making more intrusions on the same number of prospects actually reduces sales. Speaking on studies of leading companies across thousands of salespeople for three decades, Neil Rackham (author of SPIN Selling and Rethinking the Sales Force) concludes:

Asked how their organizations dealt with these challenges, they said the typical gag reflex is to:
Spend more on advertising. Cut back on salespeople. Cut back on training & coaching. Cut back on pricing. Tell salespeople to work harder and smarter.
04 Science of sales growth in a recession : A Research Report

3. Cutting the price

Buyers in a tight market will naturally gravitate to low prices. But this simply reduces your margins, which must be paid for by cutbacks to operating expense elsewhere. It leads

The least successful people are the ones making the most calls. Increasing the call rate results in fewer orders, not more.4

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Five winning ideas

Spotting and dealing with the danger signs is one part of the equation. The other is engaging in new activities that drive success. Past recession-beating executives suggest the following: 1. Create value
A tight market will change the priorities of your target customers. As they face new challenges, they look for answers. So equipping your salesforce to shift from value communicators to value creators becomes a key part of your growth strategy. The talking brochure type of selling no longer works because it adds no value. By thoroughly doing your homework on target accounts, anticipating the issues theyre about to deal with, and approaching them with answers even their own people dont have, you standout in the crowd, and show your organization to be relevant.

2. Chunk your offer

When customers face uncertainty, fewer high-cost projects clear the launch pad. Therefore, helping clients acquire your offerings in smaller modules that can be signed off at lower levels of the organization has been shown to produce more revenue, as well as serving as a foot in the door for expansion and consolidation when the market rebounds. This doesnt mean the product manager needs to invent anything new. It means salespeople need to be selective about what chunks of their offering they emphasize and package to each customer. Consider trimming mention of aspects of your product or service that arent core to the client need (the nice to haves). At the same time, emphasize must have features that add to the client experience, sell their value and even justify a premium. Or seek out partner products to combine with yours in dynamic new ways. Involve your customers when refining your messaging. Enlist their guidance and engender a were all in this together esprit de corps. When doing so avoid any language that smacks of desperation. They must understand your motive is in placing their needs first.

3. Map your funnel

Gain a laser focus on the dynamics of your sales funnel. Enlightened leaders use difficult times to take stock of the mechanics of where sales come from and how to improve the system they pass through. They map their sales process by getting answers to the following: What problem do we solve better than anyone else (differentiation)? Who most has that problem and where do we find them (targeting)? What are the cognitive steps those prospects go through from being unaware of their problem, to being a satisfied customer (buying journey)? What ah-hah moments propel a prospect from one stage in that journey to the next (sub-sales)? How can Marketing and Sales help those sub-sales happen (roles)? What does average, fast and slow look like through each stage (velocity)? How many move forward and how many leak from the funnel, at each stage (planned attrition)? What is the average contract size (revenue)? When you know these metrics, youre able to start with the revenue figure you need to achieve this year, next year and the year after that, and can calculate backwards to know how many opportunities you need stacked at each stage of the sales funnel, each month, for the right number and value of deals to close each quarter. This informs how many new leads are needed monthly, and going back even further, how many new contact names Marketing needs to start connecting with at the very start of the demand creation process. It also informs when hiring is needed to keep reps at the optimum person-to-customer ratio, and can track forward to show when new problems and prospects will be needed to offset peaking in the initial target market.

4. Circle the wagons

In a recession when pickings are lean, you will face increased assaults on your customer base by hungry competitors. So protect your clientsespecially those that provide high margin. Identify the clients you cannot afford to lose, and initiate specific programs to retain their loyalty. Get away from vague solutions and get known for delivering tangible results. This means agreeing outcome metrics for the work you perform, and showing your accountability for achieving these. It infers an agreement with these clients that you will track and communicate the value delivered, and deal with any shortfalls. 2010 data from executive buyers who swapped suppliers indicates that in most cases they didnt churn because of price or any particular dissatisfaction, but because they just didnt know if money spent with existing suppliers was well spent because nobody had bothered to close the loop with them after making the initial sale.

The goal is to make the type of sales calls your customers would want to write a check for because value was exchanged.
When you end sales calls that produce no excitement and lead to no mutual commitments to move forward, its a sales call that fails both companies at the table.

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5. Coach performance
Doing this is difficult if the sales manager does not go into the field to observe their salespeople in front of customers. They cannot divine their team members strengths and improvement needs from behind a desk. Here are suggestions successful managers use to drive growth: Map the activities that help customers move through the funnel. Agree with salespeople what actions they can take to achieve those progressions. Focus them on achieving this, along with the qualification, planning and presentation needed at each stage. Give new hires specific but realistic metrics to achieve that take into account the fact that the average ramp up time is now 7.4 months. Catch them doing things right and reinforce the positive. When improvement is needed, provide context, examples and suggestions. For experienced salespeople, focus performance coaching on the 60% of salespeople in the middle of the bell curve (not the top 20% and not the bottom 20%). The middle of the bell is where the biggest gains will be made. Set clear expectations for an accompaniment day and agree the salesperson will remain in control so customers dont staple themselves to the manager. Managers should never hand out their business card or be seen approving any decisionthey defer everything to the salesperson.

Brief before and debrief after every call. What outcome do we want? Why would they write a check for this call? What went well? What could have gone better? Managers offer motivation and direction as needed. Always gain and give commitments and follow through. After spending whole days with team members, trends will be spotted. Common needs are best dealt with during sales meetings in a peer setting. Every sales meeting should include a training component based on observations in the field. Push the administration and company news to emails. Use face-to-face time with salespeople to hone their skills. Run a quarterly performance appraisal one-on-one and always in person (never via webcam or telephone). Review performance to date. Plan what the salesperson needs to create a sustainable, rhythmic approach to revenue attainment. Direct them. Enable them. As unique needs arise, partner with human capital specialists and training departments as appropriate (but dont abdicate the training role in sales meetings). The argument that sales managers must have first been successful salespeople is less true than saying they need to understand the levers of sales performance, and be trained to identify gaps and coach their salespeople to greatness. This

requires deliberate, systematic process thinking skills; a blend of engineer, analyst and psychologist. There is increasing evidence that the role of sales management favors staff with a left-brain bias where the dominant traits are reasoning, speech, writing and number skills. This is in contrast to the right-brain processes of creativity, imagination, quick wits and visual processing that are more suited to the salesperson. It doesnt mean salespeople should not be promoted to the management role, only that in the absence of properly profiling if a candidate exhibits the right behavioral fit to the role requirements, doing so blindly can be a risky proposition where mistakes are magnified by the number of people under each sales managers stewardship.

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End Word
o avoid reinventing the wheel, learning from executives who weathered past recessions is a sound approach to reducing risk. In your own organization, your alumni, or your online social network, there may reside active or emeritus officers with deep experience to share. Talk to them.

T
1. 2. 3. 4.

Pick their brains.

But one thing is certain when an ailing economy mimics a black hole: piecemeal remedies fail to achieve escape velocity. Cutting back on cost, though logical, is the opposite of what has pulled businesses through recessions in the past. Increased investment in the sales process, governed by greater discipline, is a more reliable approach for achieving sustainable revenue growth, even in difficult times.

End Notes
Roberts, Keith. What Strategic Investments Should You Make During A Recession To Gain Competitive Advantage in the Recovery?, Journal of Strategy & Leadership, Vol. 31, Issue 4.

Wall Street Journal Europe The Circle of Innovation, Random House

Rackham, Neil. Strategies for Hard Times, Huthwaite

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About SalesLabs
SalesLabs is a global leader in revenue growth strategy consulting & training. Across 40 countries and in eight languages, we improve implementations of sales, marketing & management process, by providing pragmatic approaches to sales performance that are research-based and field-tested. www.saleslabs.com

A complete health check diagnostic on your Services marketing ecosystem, to spot best sales & practices and gaps. Realignment of marketing, sales & management to their true roles in the customers buying process. Science-based selection, induction, training and mentoring of your sales & marketing human capital.

Research, briefings, call coaching and opportunity or account management methodologies & skills. Improved demand creation, lead qualification and acquisition of new business. Modeling your financial data against our Blueprint Growth algorithms from Standard & Poors to identify your roadmap to exponential growth.

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This communication provides general information current at the time of production. The information herein does not constitute advice and should not be relied on as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. SalesLabs Inc. disclaims all responsibility and liability (including, without limitation, for any direct or indirect or consequential costs, loss or damage or loss of profits) arising from anything done or omitted by any party in reliance, whether wholly or partially, on any of the information. Any party that relies on the information does so at its own risk. SL100303-1