by dmitchel | October 14, 2012 | Submit a Comment
It’s one of the stock pieces of advice given to small providers: to grow your business you need to develop an indirect channel. All the arguments about scale and reach get trotted out, as though they were a universal law that all companies are obliged to follow. Based on 200 small and medium software businesses that we’ve studied over the past few months I’ve developed a different view (see Marketing Essentials: Benchmarking Software Sales Performance).
Inside Sales are highly effective in delivering growth
What I found was that using an Inside Sales team was one of the most effective ways to deliver sales growth.Of the different channel choices available (field sales, inside sales and partner sales) Inside Sales were the sales team that was most likely to deliver their sales quota or over-achieve against those targets. Their sales cycles were shorter and they had a better win:loss rate that other sales colleagues.
Partner Sales are more unpredictable
In contrast the Partner Sales teams were the most likely to fail to achieve their sales targets, their sales cycles are longer and their win:loss rates are poorer. However, there were two distinct communities within Partner Sales teams. First, is a group of relatively poorly paid and relatively inexperienced Partner Sales people, and these people have comparatively low levels of performance. On the other hand a second group of Partner Sales people were much more experienced and much better paid, and delivered much better results.
What does it mean?
If you are going to invest in a low-cost sales channel to drive growth then a low-cost Inside Sales channel is likely to out-perform a low-cost Partner Sales channel. If you’ve decided to invest in a Partner Sales team then you should either finance it properly and hire more experienced partner sales people… or you shouldn’t pick this option. For most providers… unless have the maturity and management competency to manage a complex and multi-faceted channel program… the recommendation is that you should grow your Inside Sales capabilities.
Category: Uncategorized Tags: Inside Sales, Partner Sales, quota, sales
by dmitchel | August 19, 2012 | 1 Comment
I tend to keep the old age “people buy from people” in mind when talking to executives who are looking to improve the performance of their sales teams. If the company’s sales team is unpleasant to do business with then customers become reluctant to buy the products and/or services of that company.
On the other hand customers also develop buying preferences that are based on an emotional attachment to the brand of a particular supplier.
As blogger Sara Roberts commented in a recent posting…
Even in today’s price-sensitive economy, the imagery attached to brands goes far beyond product attributes, functional benefits and price. It’s about capturing hearts and minds. It’s moving your customer beyond retention, to commitment, delight and ultimately evangelism. According to Gallup, companies that embrace the customer in this way, not merely as a standalone activity, but in collaboration with brand and business strategy, outperform competitors by 26% in gross margin and 85% in sales growth.
Building attachment to abstract concepts is much harder than building emotional attachment based on the lived experience. I am a firm believer that it is the way that brands treat people, both as customer and employee, that re-enforces the brand. If a member of staff goes the extra mile to help make your shopping experience easier you’ll believe “every little helps” more readily than you will if you’ve only seen the TV advert.
People make and break brands. The most sophisticated branding strategies can be undermined and devalued if the behavior of the staff in the company doesn’t align with the values of that brand. Have you seen any companies recently where the way that you were treated by their staff contradicted the brand description?
Category: Uncategorized Tags: brand, sales
by dmitchel | July 29, 2012 | 2 Comments
In the past week I’ve been dealing with a number of customer inquiries from senior sales management, all of which have a common script. Basically, there is a passive-aggressive sales man (and, yes, it is almost always a man) who does not want to comply with the reporting framework that the management team want to put in place, especially the parts of the frameworks that focus on tracking individual sales activity. They don’t want to log the sales calls that they make, the number of meetings they’ve had, and certainly don’t want to record any of this in a common sales-force management system. They just went to go out an sell and “not to be bothered by all this trivial admin rubbish”.
The argument the mavericks make is that they are too experienced to be subject to that level of monitoring, that they can be trusted to deliver “the goods” and that any executive who wants to measure what they are doing is too inexperienced to be their manager. Being accountable for the “numbers and just the numbers” is what they ask for, none of the intermediate rubbish. The question I’ve been faced with is “should I just let them get on with it” and instead focus measurement on the more junior sales staff. My answer is… absolutely not. No sales person is so good or so experienced that can opt out of the metrics that sales management need to track the business. A sales person who wants to opt out doesn’t understand the reasons why a sales manager needs metrics – as a tool to look at the effectiveness of an entire sales team, rather than to spy on what an individual sales person does. Selling is team sport, not an individual pursuit. Team sports need a framework of rules, to make sure that everyone is playing fairly and that each member of the team is doing their fair share. Asking to opt of those rules is an early sign of someone who doesn’t want to play in a team.
My message to those inquiries… tackle mavericks early, as soon as you start to notice those behavioural tendencies. Don’t leave it for a few weeks or months before you have a conversation with the passive-aggressive sales man. Team members all need to have the same measurement framework and to play by the same rules. Nobody is too good to be accountable for the same metrics as the rest of their team. Set rules about the information that you want each person to provide and be very firm about this not being an option. If you need to get formal and take disciplinary action to make it stick then do it and don’t blink. The maverick sales person will play a game of chicken with you and will wait for you to blink first. Don’t blink.
Category: Uncategorized Tags: sales, sales management
by dmitchel | June 24, 2012 | Submit a Comment
Continuing the series of postings about the future of sales that I started 2-3 weeks ago. This time I start to look at the cost of sales and how that is going to change over time.
The next place for the axe to fall
Cost reduction, or whatever the current euphemism is, has been a fact of business life since the outset of the recession in 2008. First we saw the cuts in spending on staff training and a clamp down on travel and general expenses. Close behind was a reduction in contingent labor, with contractors being let go.
Developments such as the use of shared services centers and the introduction of self-services finance, accounting and human resources software have all been part of a more general back office cost reduction. Consolidation of systems, standardization and simplification of processes has also driven down costs. Property and facilities consolidation is another part of the picture, as is the increased support for homeworking arrangements.
Of course, cost reduction of a more structural nature has been going on for much longer. We’ve been using low-cost offshore development and support resources for decades – all contributing to reducing the cost of product development and the ongoing support for those products. We’ve seen products being delivered electronically, by software download, cutting the cost of that process.
In marketing the use of digital marketing has increased as well. While it doesn’t necessarily mean that you should spend less on marketing, there is general association between cost reduction and the more electronic marketing techniques.
Apart from sales, most elements of business have been through several rounds of tactical cost reduction and at least one round of more structural cost reduction program. Sales, while not totally immune from cost reduction, has been relatively lightly touched – with many executive being simply frightened to touch “the third rail”. That immunity cannot continue…
Inside sales – a lower cost approach
We’ve been predicting for some time that Inside Sales will be a more important part of the sales mix in the future, driven by its lower cost structure but also by the increased coverage that it can deliver. In the research note Predicts 2012: Marketers Must Adapt to a World That Rewards Speed we predicted that we’d see a 50% in the volume of inside sales capability available in the industry.
I’m now beginning to wonder if that prediction was simply too conservative. I see continued growth in inside sales capabilities in sales teams around the world, and no sign that is going to slow down. I’m also seeing more vendors appearing in the market that offer different types of outsourced sales services – with cost reduction and improved effectiveness being at the core of their proposition.
Inside sales have traditionally been paid less than their field sales colleagues, with those colleagues being paid approximately 15% more in total compensation – according to some of still to be published research from a recent study on sales operations. The more cost effective inside sales staff are also predicted to generate a higher proportion of company revenue by 2015, especially in EMEA where 51% thought agreed with this idea – compared to 25% who disagreed.
A move to inside sales, to help reduce the overall cost of sale, is clearly one element of a structural change in the cost of the sales function. The move to eCommerce and online sales is another.
Online commerce for software
In a recent survey (to be published later in the year) it was surprising to see that 49% of software providers (from a sample of nearly 200 software vendors) are generating revenue through eCommerce or online sales channels. Although these channels are generating only 12% of the total software revenue this figure is rising, and it is a high margin channel. I can only see the proportion of revenue deliver by the channel increasing, as a reflection of customer preferences and the desire to use the most cost effective channels possible.
While there may be some doubts about whether online transactions are preferred or wanted by customer they’re still sure to happen. Just like eCommerce grew because of supplier costs structure issues, rather than by an unmet set of needs in the B2C retail industry…. so a move towards more B2B IT transactions being made through eCommerce will be driven by cost structure issues in the suppliers, and not by a change in business buying preferences.
More to come…
Over the next few weeks I’ll continue the analysis about how the sales function in the ICT industry is changing… Clearly there is significant pressure for the sales function to deliver results at a lower cost but that’s not the only structural change…
Category: Uncategorized Tags: cost reduction, sales
by dmitchel | June 4, 2012 | 1 Comment
Over the past 2-3 weeks I’ve been travelling around different parts of Europe, talking to dozens of different companies about sales. What’s becoming more and more clear to me, after the latest conversations, is that sales are at a crossroads and that we are just entering a phase where the future of sales is up for grabs.
This post starts a series of postings that look at pressures that are shaping the evolution of the sales function.
Sales is one of the least respected professions
Sales need to recognize that they have a perception problem with their customers; frequently they are barely tolerated. On the other hand sales people admire other sales people who are successful, and don’t ask too many questions about what their customers think. Instead they want to know the tricks and tips that the successful sales people have used.
That perception disconnect is only going to increase. The market is offering more and more choice, not just in the solutions that are being offered but also choices in the way that solutions can be bought. Customers can compare and buy solutions without involving a single sales person, transacting directly on the web. They can buy online, they can buy through third parties or, if they really want, they can buy direct from the company makes the technology. While the introduction of eCommerce brought in different buying options that customers had not even thought of e.g. buying books online versus at a bookstore, the current B2B market is very open to alternative buying options – in a desire to avoid dealing with elements of the traditional sales model.
Unless sales recognize the perception problem that they have, and the real threat that alternative buying options pose for them, then they are in trouble. The changes will happen with or without them…
Historical sales perceptions
Selling has always been the powerhouse of the technology world, in terms of its ability to drive the growth of a technology vendor. However, sales have also set the tone and culture of many IT companies – frequently in a pretty unpleasant way. It’s been a testosterone driven, macho culture with an aggressive undertone that has focused on “revenue extraction” rather than trying to deliver the most value to their customers. Customer satisfaction is something that someone else needs to care about after the deal has closed and there is vendor versus vendor competition to win the prize for being the “hardest” sales team.
The other image of sales has been of the irritating telesales person. They begin by disturbing your evening meal, then continue with a fake attempt to build rapport, before launching into a heavily scripted dialogue that fails to recognize the “I am not buying” signals that you are sending. When you eventually manage to convey that message the call is unceremoniously terminated, without so much as a “thank you”. The perception is that the sales person at the other end of the line is rude and not interested in delivering value to their potential customer.
Neither of these perceptions afflicts all sales organisations but it is heard often enough to make it a concern for all sales organisations.
Category: Uncategorized Tags: sales
by dmitchel | May 29, 2012 | 2 Comments
Welcome to my new Gartner blog. You’re probably wondering what topics that I’m going to be writing about here. Rather than focusing on a specific type of technology I’ll be writing about how companies across the technology industry go to market and the way that they make money.
Basically that means that I’ll be focusing on the sales, marketing, channels and pricing side of the industry – the commercial side of the technology industry itself, rather than the products or services that the vendor community provides to their customers. Most of this will be aimed at small and medium sized vendors, but there also be articles that the larger vendors should find interesting.
Finally, there will be the occasional foray into the way that companies gain their funding from the venture capital industry, private equity providers and other invest routes. After all, most companies will need to raise capital before they can bring exciting new products and services to market.
I hope you enjoy the content that I’ll be sharing. I’d be delighted to have your feedback as this blog evolves.
Category: Uncategorized Tags: welcome