Last week, a ran a seminar on Building Revenue Models for the community members at 1871, the Chicagoland Entrepreneurial Center’s (CEC) project that supports entrepreneurs on their path to building high-growth, sustainable businesses that serve as platforms for economic development and civic leadership in Chicago. My partner, Steve Baumgartner, and I have been struck by some 1871 entrepreneurs’ inability to clearly state what problem they solve and, more particularly, how they solve it differently. Instead of being able to clearly articulate the problem they solve, some of these entrepreneurs remain fixated on talking about the features and benefits of their solution and, on a few occasions, the needs that their solutions address.
In both circumstances, these entrepreneurs are off target and wasting the sales opportunities they are generating. Whether it’s true or not, few potential customers want to hear them talk about how elegant their product is, or how it provides features and benefits, that they likely do not even think they need. Instead of being sold a solution, or features and benefits, prospects want help solving a problem, and the bigger the problem the better.
If you find yourself in this situation, It’s time for them to take a step back and develop some hypotheses about what problems your products/solutions solve for customers. Dig deeper past the symptoms of customer’s performance problems into how their businesses operate and how your products/services impact their ability to operate more efficiently or effectively. Confirm what problems your products/solutions address better, faster, and cheaper. Then take a close look at the next best alternatives available for your target customers and compare and contrast them to your products/solutions. Push hard to define how your product/service and business model are truly different. It’s no longer sufficient to just be better, faster, or cheaper, customers want to buy solutions that are different and uniquely create value for them or their businesses. Through iterative conversations with customers you can hone and simplify your message and define what truly makes you different.
You will know you’ve got your fly wheel spinning when the sales cycle speeds up and prospects and customers start noting and referencing what makes your solution different with each other.
If you are working on defining what problems you solve and how you solve problems differently, please comment here, or contact us, we would like to hear from you.
At Evergreen, we help companies grow more, predictably. To enable greater and more predictable growth, our work with senior leaders, sales mangers, and sales reps focuses on:
- Making informed strategic choices about which growth opportunities to pursue,
- Organizing resources effectively, and
- Equipping sales managers and teams with the right processes and tools to sustain success
Over the next six weeks – commencing November 1st – we will focus on our top the top 10 growth drivers we believe senior leaders, sales managers, and sales reps should focus on to drive growth in 2013. We have selected these 10 issues because they are actionable at all levels – the rep, team, and the organization. Moreover, they are proven, based on our experience with over 60 clients, to accelerate growth in a wide variety of industries.
Please follow us via email or RSS feed over the next six weeks. And, if you have recently deployed, or plan to deploy, one of our 10 Drivers, please add a comment on the blog or Twitter at @EvergreenGrowth.
Update: Links to the 10 drivers we posted are listed below:
- Growth Driver #1 – Confirm Your Revenue Model
- Growth Driver #2 – Increase Your Value
- Growth Driver #3 – Sell the Way Customers Buy
- Growth Driver #4 – Pursue a Mix of Revenue Gains and Drains
- Growth Driver #5 – Identify Growth Themes
- Growth Driver #6 – Create a Road Map to Success
- Growth Driver #7 – Tighten Your Focus on Sales Management
- Growth Driver #8 – Assess Your Turnover Risk
- Growth Driver #9 – Focus on Opportunity Creation
- Growth Driver #10 – Define Decisions at Customer Touchpoints Before Investing in BI Tools
Your markets are maturing, even declining. Do you know how to evolve your Sales Model?
Lately, the topics of market maturity and decline have been coming up a lot in our discussions with CEO and business owners. There’s a growing sense, as the anemic economic recovery rocks along, that growth for many markets has peaked or is in a steeping decline.
You know the warning signs of maturity and decline:
- Profits are being harvested and paid to investors and management vs. re-invested in product innovation or market expansion.
- Consolidation of competitors is occurring at an increasing rate, and new entrants are innovating from the bottom.
- Price pressure is increasing significantly.
- Customer’s control over the buying process has increased markedly, it’s harder than ever to gain early access to stakeholders.
- Competitors are competing on brand, ancillary services that complement products, and process improvements instead of the products themselves.
Examples of industries in maturity or decline are abundant. One of the most prominent is the plumbing industry which is very mature in the developed world. And, immature in the developing world; it’s products are not well suited because the lack of public infrastructure, water, and energy. A short list of competitors: Sloan Valve, Kohler, Zurn, Toto, and American Standard have dominant market share and market share has been relatively static for long periods of time. Competition is somewhat oriented to products that conserve water, but is substantially oriented around price, and distribution channel control. So what must the plumbing industry, or others facing similar circumstances do to adapt their sales models?
Implications for Sales Models
Maturing and declining markets pose a number of implications of one’s sales model. In maturity, sales efficiency, or the cost of customer acquisition becomes critically important. Where as in decline, one’s ability to capture specific pools of profit becomes paramount. Here are strategies you should pursue:
Sales Process, Sales Process, Sales Process. The first and most underutilized driver of sales efficiency is a sales process that is designed based on the customer’s buying process. Once you have a sales process that fits the customer’s buying process, it is critical to enable this process with a CRM system to measure and track sales cycle times and customer interactions, as well as tools to support quality conversations and information sharing with each customer stakeholder in the sales process.
Focus on Sales Management Processes. Having a sales management process that enables frequent inspection of sales opportunities and coaching of sales personnel around the efficient and effective execution of the sales processes is a critical, and often under-leveraged driver of customer acquisition cost.
Re-align Compensation. In the wake of maturity, it is important to ensure that compensation spending is aligned with the right revenue, profit, and/or product and market outcomes while appropriately rewards levels of performance. Quota setting accuracy, allocation of compensation dollars by product/market, and the shape of payout curves become critical drivers of cost of sales.
Customer Selection. Once decline begins, the identification and selection of profitable customers becomes critical. To do this, sales leaders, with the help of finance, must develop a detailed understanding of individual and customer segment behavior and the drivers of profitability within the customer’s business and their own. These insights form the foundation of where and how to manage decline while sustaining value at the bottom line.
Channel Selection. Within decline, channel selection and, ultimately, consolidation become critically important drivers of sustained profitability. Before demand shrinks precipitously, sales leaders must begin reducing the number of channel partners while improving their ability, through informed selection and strong partnering programs (invested in and created by the channel partner and manufacturer) , to maintain customer access and ensure quality customer experience.
Sales Coverage. Similar to channel selection, the number and types of sales people deployed across markets must be adjusted as markets decline. Not surprisingly, many sales leaders face maturity without having developed much skill at coverage re-design. This is due primarily to the perceived risk of altering customer relationships by changing account assignments and team configurations. However, this risk is mitigated by maintaining a clear understanding of how, and from whom, customers want to buy – which informs the type and number of sellers required – and creates a basis for making regular incremental adjustments.
It’s not only critical to spot the warning signs of maturity and decline, but also develop the ability to adjust one’s sales model dynamically across the market life cycle, ideally in advance of each stage!
Is your market maturing or declining? If it is, how are you adapting your sales model? Comment here or on Twitter. Or contact me at email@example.com.
What’s required to grow on a sustained basis?
We hear this question a lot, so we decided to share a few qualitative and quantitative insights on growth. Before we jump to insights, some context setting is useful.
Sustained Growth is Hard, but Not Impossible
Our research of S&P 500 company performance from 1996 to 2006 shows that just 6% were able to sustain growth for 10 years running, where as 31% sustained it for five years straight during the 10 year period. A closer look at sustained growers vs. non-growers reveals some interesting differences:
- Companies that sustain growth for 5 and 10 years achieve compound annual growth rates of 12.7 and 13.3%, respectively vs. 4% for companies that don’t grow consecutively.
- Sustained growers across 5 and 10 years also grow their sales forces as higher rates, with compound annual growth rates of their sales forces of 1.91 and 3.1%, respectively, compared to a -2.2% compound annual growth in sales by companies that could not grow consecutively.
- As sustained growers across 5 and 10 years grow they decrease the proportion of sellers as a percentage of the overall workforce by- 2 and -3% per year, respectively, where as companies that do not grow consecutively see an average increase of 3% in the proportion of people in sales.
In summary, serial growth companies: realize a flywheel effect where consecutive years of growth begets higher growth overall growth, they grow their sales forces faster than companies that do not grow consecutively and they grow their sales forces at a slower rate than their overall work force.
So What Drives Sustained Growth Companies’ Ability to Achieve High Sales [Capital] Efficiency?
Our experience suggests that sustained growth companies draw on six levers to drive growth:
- Focus narrowly on growing sub-segments within markets. Sustained growers are exceptional at reviewing their growth history and analyzing segments to identify pockets of growth that they can serve efficiently. Become a master at thin slicing your markets to identify pockets of growth, the benefits are significant; 2-4x growth over average is possible in many sub-segments.
- Segment the sales force into specialized groups targeting segments with similar needs and buying processes. Specialization creates efficiency across the sales process and heightens focus on customer experience. Organizations that fail to specialize do so at their own peril. Too often, Sales leaders develop sales investment cases at the margin which contain flawed assumptions driven by historical experience in different markets under different sales processes. For more, visit my previous post on marginal cost justifications for sales force expansion.
- Regularly assess sales force coverage. Having the right number and types of resources covering your target segments is essential to maximizing revenue capture and sales efficiency. Yes, adjusting coverage is unpopular with the field, however, it’s essential to managing productivity and cost of sales, particularly as markets mature. If you are facing maturity or are already there, bite the bullet and create a coverage realignment process.
- Invest in defining, updating, and consistently following a sales process. Surprisingly few sales forces consistently follow a defined sales process, and fewer still regularly revise the process with customer input. This lack of discipline breeds waste, inefficiency, and customer discontent.
- Tightly align sales and marketing. Creating tighter alignment between sales and marketing, particularly in targeting, awareness building, and lead creation reduces inefficiency by preventing the expenditure of sales resources on unqualified opportunities or early, less valuable steps in the sales process. Serial growers know that maximizing quality lead volume is critical to sales efficiency and impossible, with the prominence of the web, for sales to do one its own.
- Invest in a sales management system. Serial growers consistently have strong sales management systems that clearly focus on managing activities to achieve interim goals which lead to business outcomes. Creating this linkage enables managers to utilize predictive metrics and have coaching conversations with reps that lead to skill development and behavioral change. See my previous post for more on this topic.
Now get out there and start working on these levers, you need not approach them in order. There is incremental value in each one, and perfect alignment across all six requires constant tuning.
If you are pursuing serial growth or have achieved it, we’d love to hear from you. Please comment here or @Evergreengrowth on Twitter.
Last weekend I facilitated a session with Balanced Team in Chicago. Our discussion focused on increasing collaboration between Product Design and Sales across the sales and design processes. I was encouraged to observe that most of the ~40 attendees’ companies uses a sales process.
Unfortunately, only about 25% of the group agreed that they consistently follow the process and that it is well enabled with the necessary information, presentations, and tools, to ensure effective execution. As our discussion unfolded, things got more interesting.
When I probed a bit deeper on whether the attendees knew exactly how customers want to buy and whether their processes substantially match their customer’s needs, most attendees were not confident their processes were optimal.
If you find yourself in this situation, it’s time to pull in your best sales people, who think and work in a disciplined way, and ask a number of questions:
- What are the preferred steps in our customers’ buying process?
- Which steps are of greatest importance to each stakeholder in the customer buying center?
- What does each stakeholder want to learn at each step?
- From whom, in our organization, and how, does each stakeholder want to learn?
- What are the indicators of successful completion of each step with each stakeholder?
- Where does the customer want us to simplify the sales process?
Once you have these questions answered, take your show on the rode and test your perspective with samples of your customers. Then integrate the insights you gather and tune up your process and support systems.
You’ll know you’ve got it right when sales cycle times (with similar types of customers) start to decrease and stakeholders in the customer organization actively do things to help you sharpen your process and move the sales process forward. Over the long-term, you will recognize the value of your efforts in increased quota attainment.
Tomorrow, I will be facilitating a discussion between Product Designers and Sales leaders about how to collaborate more effectively to develop customers.
Stay tuned for follow up posts on insights from the conference. To learn more about Balanced Team, visit: http://www.balancedteam.org/
If you have thoughts or comments from either a Product Design or Sales perspective on how to collaborate more effectively in customer development, please share your comments here.