Sales effectiveness dilemma
By Nils Randrup
Many companies we have worked with are caught in a sales effectiveness dilemma: Sales results are under budget despite reasonably good products, competitive prices and motivated sales people. This is a major management headache. The way out is often impossible to find if you do not have the right key or flashlight. And the right key is typically a more structured approach to sales improvement through a Sales Excellence approach.
Two years ago we started working for a larger Scandinavian company on an IT oriented project that brought us in contact with the sales management within the company. During one of the breaks in the meeting, we had an informal talk over a cup of coffee, where the VP of Sales introduced his biggest job challenge. He was brought in to improve the effectiveness of the sales department and was tasked with increasing sales by increasing the productivity by 10% (10% higher sales with the same headcount). As he was an experienced Sales Manager this should be pretty easy. However, after working in his new position for 6 month, he found himself in a dilemma which he had lost some sleep over. The company seemed to have reasonably good competitive products and prices. The sales force also seemed very motivated and committed, but despite this, all the sales figures we lagging including sales vs. last year, sales vs. budget and sales vs. the market development (market share).
As we have worked with companies in more or less the same situation, we took on the challenge and within 6 month the sales department was all of a sudden getting the “ketchup out of the bottle”. The Sales was now ahead in sales of both their budget, last year and the market share was increasing.
So what did they actually do which changed the situation for them? 3 things happened.
First, we had to realize what the root causes of the problem were. To do this, an analysis was done where we bench-marked their sales setup and efforts against best practice sales setups and effort. The most important problems were then unveiled. There were 12 major problems identified.
Secondly, we prioritized. Of these 12 problems, 3 were huge – prototype lead-time, quote handling, order handling - which could explain lost sales potential of approx. 30%. First of all, the company had a low hit rate on larger customer projects, because when developing a prototype or sample of a new product, this took almost 2 month, and in most cases the customers were not willing or able to wait that long, so instead they chose another supplier. The second and third problems were both ineffective working processes. The quote and order handling processes took place in such a way, that 10-12 people from different departments were typically part of making an offer or handling a customer order, even when the offers/orders were small and concerned low priority customers. This increased the lead time on offer/order handling, which in terms resulted in a waste of internal resources, as also lead to some existing customers buying products from other suppliers, when the customers needed a quick quote and fast delivery time.
Thirdly, we made things happen. Once the problems were spotted, the company then developed and implemented key actions to rectify the problems. A new fast prototyping process with a dedicated older machine and personnel was put in place in the main factory, they changed their standard operating procedures for smaller less complex orders and for how to handle smaller customers, they implemented a more structured follow-up on offers sent out. To make these changes stick, we also worked with formally changing the problematic processes and employee behavior.
The company caught up with their budget after 3 month and after 6 month they have reached 20% higher sales than the same month last year. Everyone was happy, the CEO, VP of Sales, the sales department employees (and the consultants :-).
The key insight from this and similar problematic sales situations is to solve it by doing 3 things. First, do a root cause analysis by bench-marking the current sales setup and behavior against Sales Excellence best practices. This unveils the important but hidden performance problems. Second, select the vital few specific problems instead of going after all potential problems. Third, implement a few concrete changes quickly, in this case 3 changes in the sales processes.
When we help companies solve sales problems, we use Performance Excellent tools like our Sales Excellence Wheel to find and solve the practical problems. If you want to know more about our Sales improvement methods and techniques, or Sales Excellence principles, don’t hesitate to contact us.