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We love to help sales people fulfil their potential, but the key to success is not always what you might at first think. Getting better performance from your sales team will probably involve helping them individually with skills and techniques but it will usually also require better leadership and management.
So what is the difference between leadership and management? This is one of those things where asking a number of people will typically produce a wide range of often contradictory answers.
Perhaps a good place to start is with a view from the great Peter Drucker who after many years of pondering concluded that
“Management is doing things right and leadership is doing the right things”.
If this definition sits well with you then you can start to see why both leadership and management are necessary disciplines and also how they might interface; the leader decides what is to be done and the manager ensures it is done. Put another way the leader decides the strategy and the manager deploys the tactics to implement the strategy.
For many years Drucker had been uncomfortable that people bestowed the term “leader” upon themselves motivated by pride or ego, believing that “leader” in some way made them superior to managers; it is clear from the above quote that he eventually felt comfortable that both roles had their place.
Why business? Really just to define the scope of what we will cover as these disciplines can be found in the armed forces, police, education, in fact all public services and in professional sport. To further refine the scope I will use sales and selling as the context for this article.
I have been in leadership and management roles in business for the past 40+ years including the last 14 years when I have had the privilege of working in other people’s companies helping them to make their businesses more successful. While the primary focus of what we do is performance improvement in the areas of sales and selling our starting point is invariably the leadership team and their strategy for the business followed by extensive work with the leaders and managers responsible for implementing the strategy across the sales operation.
A key aspect of good leadership is the ability to clearly articulate the strategy in a form that everyone can understand, can feel motivated by, and above all, can see what part they play in delivering the strategy. If a strategy is high level and is expressed in language e.g. “improve the ROCE” that most people cannot relate to they will simply return to work and continue doing what they have always done in the same way they have always done it. Communicating the strategy must make it clear to each employee how doing their job on a day-to-day basis will contribute to achieving the objectives of the business. Cascading the strategy and the KPIs as in a Balanced Scorecard helps in this respect.
For me a key to good leadership is the recognition and acknowledgment that the leader is there to serve the business not the other way around. In smaller companies where the leader, often the owner, is also the manager of some functions such as sales or production, their primary challenge is to recognise which hat they are wearing on each occasion, and to allow for the effects of their privileged position when judging the corresponding performance of their employees fulfilling the equivalent function.
While you can lead people, management is a discipline for creating and maintaining the environment that supports the people succeeding in their work, whilst minimising unnecessary diversions.
When considering a management style, the starting point has to be a definition of the purpose and objectives of the business as a whole as well as the various activities the manager is responsible for. For me a key objective should always be, the creation of staff who can think for themselves, finding new and creative ways to deliver the required results while coping with ‘non standard’ situations.
A poor manager, who doesn’t know how to act through their people as opposed to on their people, will probably resort to ‘micro-managing’; telling them what to do on every occasion and in minute detail. For sales managers this is evidenced when they focus on relatively low level activity, for instance, pushing to make more calls in order to make more appointments, where what is really needed is better quality contacts or conversations to generate meaningful appointments. Invariably the drive for quantity is coupled with a fall in quality and a resultant fall in the very thing the manager was looking for; more customers and more orders.
“work smarter not harder.”
The problem with micro-management is that it amounts to supervision and just one brain doing the thinking; it stifles creativity, adaptability and evolution in the way of doing things. There is rarely only one way to achieve an outcome, so if the framework within which staff are required to operate is too tightly defined they are unlikely to give of their best. Supervision styles such as ‘my way or the highway’ rarely lead to improved performance, and they also eat time, constraining the capacity of the ‘manager’ to focus on their complete role. If, as suggested earlier, your purpose is to help people become independent thinkers resolving most of their issues on their own initiative supervising their every move will not deliver the desired outcome. Supervision may be applicable in support of inexperienced people but even here a coaching style will always deliver a better long lasting outcome.
“… teach a man to fish …”
The risk of becoming a ‘micro-manager’ is at its height for newly promoted managers especially when they take up a post running the team they inhabited. It is common in sales that the best sales person is made the manager but this is often done without a proper process of selection that would look at the suitability of the person for the role of manager; the result is typically diminished sales results and a demotivated team. The other common issue is that newly promoted managers rarely receive adequate training or support for their new role leaving them to find their own way; which may be out of the business and back to doing what they’re good at – selling.
When working with sales managers who struggle with the idea of ‘managing’ their people, the conversation quickly turns to coaching. This is a very powerful tool that sales managers should use to help their people avoid or solve their own problems and issues that impact on their performance.
I mentioned earlier that this article was focused on business as opposed to, amongst other disciplines, sport. However, sport provides an excellent example where coaching is used extensively to enhance and improve performance. Professional sports people who are at the top of their game have to look for small marginal gains to get that edge over a competitor.
The role of the coach is interesting in that the person they coach will invariably be better than they are at the discipline which begs the question “how can the coach help them?” Put simply; it is hard for any of us to see in ourselves small blemishes that are clearly visible to others. Even if we can see those blemishes it may be hard to admit them or perhaps as they have become a part of us we cannot see how to deal with them. The coach is able to stand back and focus on specific points that need to be improved looking both at the practical and emotional aspects of dealing with the issue.
Everyone who is responsible for the performance of others needs to consider coaching as a key weapon in their armoury.
In many of our customers the CEO/MD, who may also be the business owner, also functions as the head of sales; they wear multiple hats and sales can never be their 100% focus. If it is impractical to have a dedicated sales leader it is even more important to be mindful of the need to lead and coach rather than manage and supervise the sales people. Initially it may seem that leading and coaching requires a larger time commitment but quite quickly the approach will require less time from the leader as the sales people will have gained confidence from being trusted and will have learnt to function independently. Ensuring that there is a defined framework in place to specify the aims, essential outputs, quality criteria and control gates will make it easier for the sales leader to monitor performance and decide when proactive intervention might be required; but remember don’t waste time measuring low level activity.
When I say sales managers I mean anyone who manages; account managers, new business sales people or desk based telephone sales people. You may be the owner of a business to whom the sales people report; you are still their sales manager.
So, what can you learn from the Olympics? In a word: COACHING; a steady, constant, cumulative process that progressively builds performance.
Whenever Olympic competitors are interviewed about their success they rarely say “I” but they do always talk about; the coach and/or the coaching team. Perhaps it seems odd; a top athlete who has already won Olympic medals looks to someone else to help them perform at the top, but it is a tried and trusted approach. The same approach can be seen in almost any sport and also other disciplines such as the armed forces that train and practise constantly and the arts where actors, dancers, singers and others also practise and rehearse constantly. All of this practising, rehearsing, training, etc., is done under the watchful eye of someone who will coach as a means of maximising performance.
Sales people need to be considered in the list those who benefit from structured, regular coaching. It is not enough to recruit experienced people and assume they will just get on with it. It is not enough to put people on a training course and assume when they return to the office they will by magic be a different person suddenly able to do things they couldn’t even spell before the course.
The received wisdom from 1,000s of successful sales managers is that their primary role is coaching; working one-on-one and also with the whole team where the sole purpose is to get each individual sales person and the team as a whole to perform better and to be more productive. Time spent in unnecessary management meetings or pouring over a spreadsheet of last month’s figures is a wasted opportunity. You owe it to the sales people you employ and the company as a whole to ensure sales management time is proactively focused on performance and productivity as its top priority.
Some things to consider:
Why not use the remains of the summer preparing a new regime to support your sales people through a programme of structured coaching? Plan a meeting 1st or 2nd September with the whole team to launch the programme so you can really maximise the selling season running up to the end of the year.
First published on LinkedIn Pulse
A good starting point might be a definition of management. My own simplistic view is that there are broadly three disciplines to consider; leadership, management and supervision. While leadership and supervision are disciplines that act upon people and can influence their performance I feel strongly that you cannot manage people and that this discipline should be reserved for processes. Lead your people, manage the processes and if required supervise your people but be aware that reverting to supervision typically means there is a failure in leadership and/or the processes are poorly designed hence they fail to drive the desired behaviours.
Sales management is simply a blend of leadership of the people and management of the processes. The purpose will be to ensure the company achieves whatever goals and objectives it has set for itself. In most cases the purpose will be to gain more revenue and probably at an improved margin, but at different times in a company’s life the sales operation may be required to support the achievement of other goals; accessing new markets (business sectors, geographic locations, company size …), introduction of new products or services, or working with new partners being common examples.
The basic model is; the board defines the strategy and the sales manager creates and delivers a plan to realise that strategy.
I have observed many sales managers, through our work helping companies to improve sales & selling performance, and a common behaviour that I see is attempts to ‘manage’ people descending into supervision. For example, a frequent management tool is to count the number of telephone calls being made hoping it will provide an indicator as to the level of deals that might be done. Unfortunately, measuring low level activity is rarely a good indicator of performance in terms of what really matters to the business; appointments attended, opportunities identified, bids submitted and the biggy – deals done.
I am a huge fan of Peter Drucker and one of his many observations is worth considering here is :
“Most of what we call management consists of making it difficult for people to get their work done.”
There are four things that need to be in place to maximise the chances of a sales operation being successful and the sales manager should ensure they all happen and ideally be fully involved in all of them. Don’t be tempted to leave most of this to HR as this is abdication and dereliction not delegation.
The first three steps should only be required infrequently and will typically be completed over a period of two to four months but step four is at the heart of the role as an on-going process of continual development for the team. Think sports person; to stay at the top of their game all sports people train continually under the watchful eye of a dedicated coach; this is the primary role of sales management -trainer and coach.
leadership and coaching should account for at least 70% of the sales manager’s time
To make sure the new recruits stand the best chance of being successful it is very important to ensure consistency across all four steps. Don’t be tempted to paint an inaccurate rosy picture during recruitment as this can lead to new recruits quickly becoming disillusioned when they eventually join and the reality does not match the hype of the interview. During the interview process ensure the candidates understand what will happen if they join. The key here is; no surprises!
The answer to the question; what should the sales manager be doing, is laid out in the four steps above and of these leadership and coaching should account for at least 70% of the sales manager’s time. Sitting in offices pouring over spread sheets, attending interminable internal meetings will not help the sales people sell more. Time spent crying over last month’s poor results would be better spent in the office or the field helping the sales people to close more deals for this month and further into the future.
I have heard it argued that sales managers have to spend time on their role as part of the senior management team or, if they have been given the title of sales director, in the board room. This won’t make me popular but I feel strongly that sales should be led by managers not directors so there is no need to spend time in the boardroom. As for senior management meetings; I would have thought a couple of hours per month would be perfectly adequate so that shouldn’t distract the sales manager too much either.
The purpose of employing a sales manager should be laser focused on ensuring sales people sell more and if they do not, then it could be argued that the sales manager is just an overhead.
I would summarise the role of the sales manager as follows:
Sales Manager should be a dedicated role but if the team is small it may have to be a part-time role. This is not ideal but if it is necessary then it must be done properly and the key thing is to ensure sales management is the primary not the secondary activity. Also be aware that the prime discipline of the person undertaking the part-time sales manager role will leak into their sales management approach. For example, an accountant will focus on historical numbers and at certain times; month end, year end, vat return time; the accountant role will dominate – they will be of little value in training or coaching the sales people who will also only get sporadic management.
In many ways this is simply a special case of the part-time manager but it comes with additional issues. It is not unusual that the person at the head of the company has previously been the selling resource for the organisation. This is especially true for smaller companies, or where the founder is still active in a larger business. I would be very rich if I had £10 for every time I have been told something along the lines of “I am the greatest sales person and if only they were half as good as me …”. This is well described as Founder Syndrome or even better the more comical version is Founderitis.
The problem is that as the founder or MD you engage in sales activities as the founder or MD not as a bag carrying sales person. You come with all sorts of advantages arising from your position and title that gives you unfair advantage over the sales people. Try getting some visiting cards printed with the title Sales Representative, rather than MD, and walk in the shoes of a sales person for a month – let me know how you get on :-) BTW, when I say walk in their shoes I mean the whole job; cold calling on the phone to make appointments, wrestling with the CRM, suffering lack of resource from the technical team, marketing or pre-sales support, etc.
There are two primary selling roles to consider; hunters and farmers. Typically the hunters , will be professional new business sales people whereas the farmers will be account managers who may have a professional selling background but may also come from a different discipline such as accountant, architect, project management or customer services. It is also quite common these days that a single person could perform both roles; hunter/farmer.
While the overall philosophy of managing people will apply in all scenarios it is important for the manager to appreciate the potential for different needs and motivations of the different people. While hunters will generally be totally focused on finding and winning new business, account managers may have additional responsibilities so managing them will need to take account of their multiple responsibilities and a balance must be struck between different objectives.
If you have such a small team that you cannot sustain the overhead of a full time sales manager and part-time seems to be your only option then consider employing a part-time manager from outside rather than resource sharing internally.
This option means you will get a fully experienced sales manager who comes with all the essential skills and experience outlined above so you get 100% effective sales management during the time they are focused on the role; more than you could expect from the accountant or MD.
I can guess you may be thinking at this point; Shipperlee is a consultant, so this is a case of the butcher saying buy more meat. Think that if you wish but then think about all the other business functions that you outsource either because you don’t have a full time need or because you want to time share a larger pool of skills and knowledge.
Sales targets are expressed in a variety of ways with common examples being; revenue, margin or number of units sold. Targets may be set at the point that an order is taken, when the product has been delivered or the service has commenced or even when the customer pays.
Targets should be set taking account of any factors that could distort actual performance such as seasonality. The setting of targets should also allow for anomalies such as special offers that may be made after the targets have been set. We look at both issues in the accompanying article on compensation schemes.
Simplistically, the sum of the sales targets held by individual sales people should equal the amount of business the company wants to acquire through sales in a particular period and typically a trading year. In a business where customers have an ongoing relationship and pay fees on a regular basis such as for an outsourced service, the target will often be in two main parts; business from continuing contracts and business from new contracts. The role of maintaining existing relationships and finding new customers may be undertaken by separate teams or it may be a shared role and in the latter case the sales person will normally carry two targets for; continuing business and new. Where continuing business is part of the mix targets may be applied to maintaining the level of existing business or it may require the sales person to grow it.
Let’s consider a simple example of a sales team of four people working for a company that wants to grow from current revenue of £3m to £4m over a 12 month period. If the company has no annuity revenue, as it only supplies products, the whole £4m will have to come from new orders won by the sales people in the 12 month period. If on the other hand the company does have annuity revenue and of the £3m revenue, £2m is ongoing maintenance contracts then the task for this year is to find £2m extra revenue. In both cases consideration must be given to whether the sales team have the capacity to find and sell either the £2m or £4m and whether all the support facilities are in place; marketing, lead generation, pre-sales support, technical support, manufacturing & delivery capacity, etc.
I work with a lot of sales teams and a common feeling is that targets are set arbitrarily, by taking the overall target the board has set for the business and dividing that by the number of sales people. In the simple example above, the company has four sales people who achieved revenue of £3m last year and the same four people will now be required to achieve £4m. Unless there has been some significant change e.g. better products, it is difficult to see how the fixed sales capacity can achieve an increase of 33%.
This approach invariably leaves sales people demotivated as they feel they are likely to be blamed for any failure to achieve the new target.
There is no point setting unachievable targets, in fact it is dangerous. The target will usually be the bottom line of the budget so there will be other dependencies within the budget on achievement of the target and in particular expenditure commitments. So, for example, if a business is planning to take on additional space to cope with the additional work the cost of the space will be committed and incurred before the company knows whether the sales team can achieve the target.
A safer and more meaningful approach to target creation is to work it bottom up, so continuing with our example:
So the above suggests the existing sales team plus the new re-seller partner will produce £3.46m of sales in the year, of which £3.21m will be down to the in-house sales team. So logic suggests the budget and targets should be built bottom up from the projected revenue and reflect where emphasis needs to be given, e.g. new product sales to existing customers, contract renewals, … If the individual sales targets are now determined from this logical approach the company is more likely to achieve its goals and the sales people will understand their individual targets so they are more likely to feel committed and motivated to pursue them. Rational target setting also supports the sales manager as they work with the sales people in their efforts to achieve them.
If the example company really wants to grow to £4.0m they need to carefully consider how they can achieve it, e.g. budget for additional sales resource, but if they are only just thinking about this as the year is starting they need to allow for the time required to recruit and get the person up to operational speed. They would also need to consider the fact that the new re-seller is an unknown quantity so may not produce what they have forecast to do.
Having set targets, we now need to consider how to incentivise the sales team to achieve and exceed those targets.
Now you have your targets in place you can build a sales compensation scheme to reflect both the KPIs and the behaviours required to achieve those targets. This will usually be a blend of a fixed amount (salary) and a variable amount (bonus or commission).
In recent years, often driven by economic turmoil, it has become more common that packages are entirely variable so there is no basic salary; if you don’t sell you don’t earn. While a lot of companies see this as a way of reducing their financial exposure it can have the opposite effect as people need enough money to live and if they are not earning it with you they will turn their focus elsewhere. A secondary factor to consider is that if people are entirely dependent upon making sales to live it may distort their judgement and in some recent bad cases this has led to the various mis-selling scandals of recent times.
I believe employees will deliver their best performance when they are rewarded properly and with sales people this involves paying a reasonable basic salary whilst still leaving them hungry enough to put in the extra effort to exceed their target.
I am often asked what the difference is between bonus and commission and strictly there isn’t one in so much as they are both variable amounts which correlate directly with the amount sold by a sales person. Generally, a bonus will be a lump sum such as a fixed amount per unit sold and commission is generally a percentage of revenue or margin. In the latter case, if the sales person gives discount this will reduce their commission whereas a bonus would be unaffected by discount.
Another approach to paying variable compensation is based on a bonus pool created in line with overall company, or perhaps division or branch office, profitability. The pool is then distributed according to pre-determined rules. This approach is valuable if staff other than direct front line sales people, are involved in helping to win deals. This would cover situations where sales is supported by functions such as; technical engineers, pre-sales support, technical & proposal writers, etc.
There are undoubtedly many other approaches but the core philosophy is to have a fixed sum plus a variable amount and the variable elements must be tied directly to the targets that have been agreed with the individual sales person.
While there are no hard and fast rules about the ratio between fixed and variable amount there are often trends or norms for particular industries. Another factor is geographic location where basic salaries and often complete packages include a premium for London and other major cities. Recruitment consultancies are a good source of advice on this but a word of caution, many will want the salary to be as high as possible for their own fee earning purposes. As a rough guide packages will typically range between 1:4 to 1:1; basic to variable.
The primary purpose of a compensation scheme should be incentive and reward but I have seen plenty of situations where the scheme is used by the employer to find ways to reduce the amount paid. I have also seen schemes where the sales person has to make sufficient sales, usually determined in margin terms, to cover their basic salary and employment costs before their sales efforts will go towards calculating commission or bonus. No other class of employee has to cover their costs so why sales people? These approaches are disingenuous and will ultimately lead to a lack of trust which will probably also reduce sales achievement rather than increase it so the approach is in effect counter-productive.
These are just two common examples of how a commission scheme should be tuned to align with the KPIs and overall company objectives.
In summary, compensation schemes should be designed to create the required behaviours and provide sales people with the incentive to do what is required to achieve their targets. If those targets are directly tied to what the company needs and measures, successful sales people => successful company. The final piece in the jigsaw is to ensure the sales manager’s targets, objectives and compensation are directly tied to the success of their sales people. Everyone will be singing from the same song sheet, pulling in a single direction, focused on a common objective.
This is a question often asked as people look for ways to refine and perfect the way they go to market. Answering this question is made more complex by the large range of marketing and sales options that people can draw upon. However, the fundamentals have not really changed; the proliferation of options has just made it harder to see those fundamentals.
While having multiple marketing and sales options is a key factor complicating the answer so is the use of the terms; product and service and also the now common use of the term solution. Before you decide how you should approach selling what you offer, you must first decide whether what your offer is really a product, a service or a solution.
In answering the question will also provide input to both the strategy and the tactics to be deployed in pursuit of new customers and for growth of established customers.
Although there is a lot of debate around these terms understanding the differences is generally quite straight forward.
Take for example where a business needs some contract labour that they bring in and manage, then the provision of the labour is a service and some might argue the people providing the labour are in effect a product as they come with a specification in the form of their skill profiles and capabilities. If however the supplier accepted the responsibility for delivery of the desired outcome, within an agreed timescale and to an agreed budget, then an [outsourced] solution is being provided as not only is the supplier providing the labour they are also managing the project to deliver the required result through the use of that labour.
I characterise this as the customer exporting the problem, thus transferring risk and controlling cost, and re-importing the solution; the authority and responsibility for delivering the desired outcome rests with the supplier. If that responsibility is on the customer side of the relationship then they are buying a service.
Summary example for a customer looking for cost effective business travel for frequent point to point carrying of samples/equipment.
- Buy Product = buy cars – maintenance costs variable
- Buy Service = rent* or lease cars – maintenance costs controlled, admin costs variable
- Buy Solution = use taxis* or outsource fleet management – maintenance and admin costs controlled
* Car rental or taxis would be effective for intermittent usage, lease and fleet for frequent/high utilisation
Presenting these three main categories of proposition is probably more of a challenge for the marketing function than it is for those doing the selling. Once the sales process has commenced there is one-on-one engagement between seller and buyer and hence differences in propositions can be discussed and explained and questions from the buyer can be answered. For the marketing function explaining the proposition in a one way communication is much harder and it requires good anticipation as to what problems the customer might have so a real understanding of the market is essential.
My high level answer to this question is that there are, or should be, no real differences. But, the question deserves an answer:
The key difference in the way people approach selling can be found in the fact that; products are made and then sold whereas services are sold then made.
The product is made in the privacy of the suppliers’ environment whereas the service is ‘made’ in the public gaze of the customers’ environment. A solution on the other hand is more like a Bake-off challenge; the target is defined and the result subsequently appears for judging.
Products have a finite specification and the capabilities and limitations are known and can be demonstrated before a sale is made. A service can in effect have an infinite, or least very flexible, specification limited mainly by the available resources and capabilities which makes their demonstration more difficult. A Service Level Agreement is often created to define the boundaries and expected behaviours for a service.
To sell a product you only have to demonstrate what it is, but with a service you have to demonstrate what might be which is a quite different challenge. All forms of selling require the establishment of trust; the greater the intangibility the more the selling challenge involves the creation of trust without direct proof.
Good effective selling techniques can be characterised by a few key building blocks and all apply whatever you are selling:
If the sales person talks about features before understanding the buyer’s needs they gain no value from you being in the room; they might just as well read a brochure. To illustrate how ineffective this will be, consider a couple of ‘comical’ terms used to describe this behaviour ‘features dump’ and ‘spray and pray’ – both put the onus on the buyer to ‘get it’ and then buy it but there is a very good chance they won’t do either.
In summary, the key to effective selling is to recognise that you are only facilitating the buyer in their understanding of the problem, the potential means of resolution and your ability to deliver it. You must treat all sales situations; product, service or solution, as a process of discovery, building trust and a demonstration of your capability to deliver. Demonstrate your knowledge but don’t show off, and make it clear what it will be like for the customer to work with you if they choose you as their supplier.
One final thought; all product is likely to have an element of service e.g. delivery time, packaging integrity, order completeness, reliability, help-line performance, etc and this enveloping service may be the differentiator between you and the competition – so you need to understand how this may impact on the customer’s choice of supplier. This service may only be required for a short period of time between order placement and commissioning of the product but don’t under-estimate its value in differentiating you from your competition.
In the book “The Discipline of Market Leaders”, written just over 20 years ago by Michael Treacy and Fred Wiersema where they looked at competitive business strategies, the overarching conclusion was that a business needed to;
Choose your Customers, Narrow your focus and then Dominate your market.
A key reason for doing this is to make best use of your sales and marketing resources. This requires a focus around a well-defined market or in most cases a logical subset of the wider market. Deciding how best to do this is a common topic of debate with our customers and the most common dimensions considered are; vertical, horizontal, geographic and e-location.
Vertical refers to a market consisting of businesses in a particular sector where the product or service addresses issues particular to that type of business; insurance brokers, engineers, logistics companies, etc.
Horizontal applies to a market where the product or service satisfies a need that is common across a wide range of businesses regardless of sector. For example; a software product that produces invoices, calculates vat and automatically produces the vat return would be of interest to any business.
Geographic; this model is common with; taxi companies, decorators, service engineers and in fact any business that needs to travel to get to and service its customers. This is also a very common model with bricks and mortar retailers who know they need a physical presence in the locations where their customers will want to shop.
e-location; the arrival of the on-line environment has to some extent removed the need for a geographic dimension but the vertical and horizontal dimensions are in many cases even more important. It is now all too easy for someone to ‘wander by’ your website; just browsing, and in the process they may trigger you to respond but if your on-line presence is too general many enquiries could be a waste of time for you.
These dimensions are important when you are planning how and where to focus your outbound sales and marketing effort but they are also important, as mentioned under “e-location”, to focus the nature and volume of in-bound enquiries that you receive.
Blending various combinations of the four dimensions is also common and this can help to further refine the focus of your efforts and a typical mix will see a geographic component with one of the others. There are also many other parameters that can be used to further refine a target market including; business size, private rather than publicly quoted and demographics such as age, lifestyle and interests.
Defining a business’ marketing strategy as being ‘vertically focused’ has become very popular in recent years. If you do actually have a vertical offering and you adopt a vertical go-to-market strategy then you and your customers will benefit hugely. However, I see various companies that have adopted a vertical go-to-market strategy when their product or service actually provides a horizontal proposition.
I recall an example of a company that provided IT support services that considered itself to have a vertical offering for the utilities sector. It is true that around 40% of revenue did come from contracts with utility companies and this spurred them on to approach other utility companies with the message “we are a supplier to the utility sector”. As a result they gained an appointment with the CIO of a large electricity company and during the meeting he asked the supplier what they knew about smart metering systems. The answer was actually very little.
It is said that perception is truth. The CIO believed that someone claiming to have utilities experience would know about the business issues specific to a utility whereas the supplier only knew about the technical issues of the IT systems.
This example illustrates very well that doing a lot of work in a particular vertical market does not mean you have a vertical offering.
The experience the supplier had with that CIO proved to be invaluable as they re-evaluated their offering and realised they had a horizontal proposition. Their knowledge and expertise was focused on the IT issues around processing very large volumes of batch data; they had developed experience in tuning systems to optimise performance. Their market focus thus became any company needing to process large volumes of data; utilities, insurance companies, membership organisations and many others.
Once you have a clear view of your proposition measured against the two dimensions of vertical and horizontal you can now overlay other parameters such as location or company size to further refine the definition of your preferred target market.
The above will feed into creating appropriate sales and marketing messages specifically aimed at your target market. The messages can be accurately framed to appeal to the needs of your target customers and specific individuals with relevant responsibilities; financial director, production manager, HR manager, quality manager, etc.
Incidentally, not many prospects will actually ask “why you” but naturally they will be thinking it so you need to ensure your sales and marketing messages proactively answer this question.
Before you can consider this part of the job as finished you need to take account of what your potential customers might think. Unless you do this there is a risk you will be telling your prospects what you want them to hear rather than what they need to know.
To ensure you have a complete picture you need to gather external inputs from customers past and present plus a range of external stakeholders such as; your suppliers, relevant trade bodies and publications, government legislation, general media commentary and if justified specific market research.
None of this is especially difficult but it can be time consuming which can be frustrating when all you want to do is get out there and make some more sales. However, you will find this structured approach will pay you back handsomely as the key result is to make your sales, selling and marketing effort more focused which in turn will give better return in terms of conversion ratios leading to more orders won and therefore more revenue to bank.
Formal bidding processes can appear very challenging and are often a source of belief that the incumbent always wins but in fact although complex such bidding process are typically scrupulously fair to all concerned.
So regardless of whether you respond to formal bid requests or create your own opportunities the first thing needed to get you on the radar is a compelling proposition that addresses two common questions a prospect would ask; “why would I buy that“ and “why would I buy it from you”. Even if they don’t ask out loud these questions will be in their minds. As part of the proposition you also need to elucidate the value you deliver and consider the price you would charge.
Next you need to consider how you will identify your ideal market, how you will take your proposition to market and which routes you will use.
The final piece in the jigsaw is the sales engagement process; the stages and steps you need to follow to mirror the buying processes of prospects in your chosen market.
Ensuring these four elements; proposition, market selection, routes to market and engagement process, are contiguous and fully integrated will increase the proportion of well qualified opportunities that you are dealing with.
As a result you will increase your win rate without increasing the bidding effort and gain increased revenue whilst enjoying a better RoI on your sales and marketing investment. What’s not to like?
So, what is a compelling proposition, in fact; what is a proposition? Is it your product or service or something extra? It is something extra. The product or service only defines what you make or do, it may also define the problem the customer will solve by using your product or service. For example you could consider installing a low energy lighting system that would give; better quality light, lower energy bills and reduced maintenance costs. This is what the product does for the customer, but is it attainable for them?
Maybe, the customer cannot afford the capital outlay to buy and install the new lights so is unable to enjoy the benefits. At this point the supplier could introduce the idea of the customer acquiring the new lights by way of finance or operating lease; the supplier’s proposition is now to use a financial instrument enabling customers to enjoy the benefits of the low energy lights without the need to spend or raise capital.
If the only objection the potential customer had was affordability, then the supplier’s ability to provide various financial options makes their proposition compelling by removing the only objection to proceeding with the transaction.
Selling tip; before making a final offer, always ensure you understand all of the prospects objections. If you don’t then the prospect will probably say; yes but – yes I like the different financial approach but I don’t like …
Most readers will have heard the term Unique Selling Point or Proposition (USP) and it is often argued that nothing is truly unique or if it is it doesn’t stay that way for long. While this may be true when it comes to product or service features the factors that contribute to the proposition provide fertile ground for the creation of uniqueness. If the finance option offered by the low energy lighting company is underwritten by the manufacturer of the lights it is likely that the finance rate will be very low enabling the supplier to offer lower financial terms than its competitors.
USPs are typically a combination of relatively small elements which taken together make the proposition compelling and this is what enables the supplier to keep the prospect interested whilst also countering competitive threat.
Arriving at a price that will be competitive and attractive to potential customers is a key part of proposition definition process but pricing policy is so important I felt it deserved a section on its own. There are three main approaches to arriving at a price; cost plus, competitor/market matching and value based pricing. Of these, value based pricing provides the most likely positive outcome for the supplier as the customer will be able to see ‘what is in it for them’.
Briefly the three approaches work like this:
Strictly speaking you will gain most benefit from value based but you will need to review the other approaches as a sanity check. Using the cost plus example you know you need to sell at £15 to break even and if you judge your value based price to be less than £15 you will need to review what you are doing to find ways to reduce your costs or increase the value you can deliver.
Similarly, if you arrive at a price that makes you a profit and delivers value to the customer but it is higher than an apparently equivalent competitor price you will likely fail when the customer asks the “why would I buy it from you” question. You need to ensure you are comparing like for like with the competitor’s offering; if your offer includes ‘added value’ items that are not visible to the customer your offer will look expensive. You will also need to ensure the competitors’ current price is genuine rather than a special offer.
Having sense checked your selling price against cost and competition you make the value you can deliver, for the price you will charge, a key part of the presentation of your proposition.
This activity flows naturally from the process of defining your proposition and why it might be compelling. If, for example, the companies that will really benefit from what you do are in a particular business sector and are above a certain size then simplistically your market is those companies that meet these criteria. Just having two parameters; business sector and size, may produce a very long list of potential customers so you will probably need to add a few more parameters to bring the long list down to a manageable size.
The parameters you use to define and identify your target market should relate directly to your proposition. Returning to the example of the low energy lights, if an important part of your USP is the financing options that you offer then companies who prefer not to use capital are more likely to be interested. While it may not be straightforward to determine a company’s financing preferences from the outside it is something that can be achieved during the first prospecting meeting.
I said it “may not be straightforward to determine a company’s financing preferences from the outside”, not straightforward but not impossible. It is often said that buyers are more empowered than ever by the ready availability of information on the web but so are suppliers. A quick scan of the company accounts of your target prospects will provide clues as to their preference when financing different types of purchase.
Selling tip; having defined the key elements of your USP ensure your sales discovery process explores these elements at the earliest possible opportunity. If those elements are not present for a particular prospect you will have to modify your sales approach or perhaps qualify the opportunity out if you think you stand little chance of winning.
There are now at least 10 routes to market to choose from courtesy of; networking, social media, digital marketing (out/in-bound), all of the traditional marketing mechanisms and direct and indirect sales options. While there are a few business sectors where one dominant option is the obvious one to use, for most businesses the solution will be a blend of several approaches.
The above routes are largely driven by the supplier, but other routes such as; partners, re-sellers, referrals and recommendations may be a better source of leads in some business sectors. In addition, for companies who have large corporate or public sector customers, the route to market will probably involve becoming ‘approved’ under the terms and conditions the customer applies to selecting suppliers.
To get the best RoI for the investment in sales and marketing it is crucial that the mix of marketing and sales options is optimised to match the supplier’s proposition and the needs and demands of their chosen market.
As with any investment, the assumptions that led to your chosen sales and marketing strategy need to be challenged on a regular basis to ensure what you are doing is still providing the results you need while delivering a good RoI.
Marketing tip; don’t assume that everything that is new will be good and everything old will be bad.
Whatever approach is used to generate interest and bring about that first contact with potential customers the crucial part of the process starts when someone from the supplier speaks with someone from the potential customer. This is the beginning of the sales engagement process that will build towards the creation of a customer and the identification of opportunities to bid for work with that customer.
For the sales person to enjoy maximum success, converting as many opportunities as possible, the following needs to be in place:
A final thought; two very important factors in effective sales engagement are sequence and timing. The order in which you undertake the various activities, the timing between individual steps and the overall timing of the bidding cycle will have an impact on your success rate. For example; presenting your proposed solution should be done as close as possible to the point when the customer has said they will be ready to make a decision. If the typical cycle in your business sector is six months involving four or five meetings with the customer then you should not be presenting a proposal after the first meeting.
This is a commonly held belief, especially in B2B sales, and in some cases there may be justification. However, if you view each new potential opportunity from the perspective that the incumbent is going to win you will behave like a loser in waiting and, guess what; you will probably lose. Optimists and pessimists tend to have one thing in common; they are both right most of the time – anticipating failure increases the odds that this will be the outcome.
Far from incumbents getting an easy ride, from my own observations, I think customers may actually be more flighty today but, in many cases, suppliers often fail to recognise the signs. Both incumbent suppliers and hopeful new suppliers may be behaving in such a way that increases their chances of losing as a result of subtle signals they send to the customer.
If suppliers assume, while prospecting for new customers or bidding for new work, that the customer will favour the incumbent it conditions behaviour towards a loser’s frame of mind which in turn increases the chances of actually losing. There is nothing more likely to lead to a lost sale than a lack of self-belief from the supplier’s sales people. This is compounded if management fail to put their full weight behind bidding for an opportunity resulting in the effort put into the proposal lacking commitment; the prospect will spot this very easily. If the opportunity met the qualification criteria management should back it and if it didn’t qualify out. This is a binary decision; either pull it or support it fully!
On the other hand an incumbent that takes the customer for granted is simply moving themselves closer to the exit door. A common engagement model involves customers being moved from the new business team to the account management team once the relationship has been established and the first piece of business has been secured. While it is good to move to managing an account with a ‘customer service’ mentality what is not good is to move from a hunter to a farmer or, worse still, a browser/gatherer mentality. An important fact never to lose sight of is that the incumbent’s farmer will be competing with the hopeful new supplier’s hunter which may not be a fair fight.
The key questions that I address here are; why might a customer consider changing suppliers, why might a customer be reluctant to change suppliers, what can incumbents do to keep their customers and what can hopeful new suppliers do to win the customer over? This assumes the customer still wants to buy that type of product or use that type of service so having a supplier is of strategic or tactical importance to the business.
There will be a variety of reasons but they basically boil down to the customer becoming less satisfied by what the existing supplier is doing. This can be an expression of an absolute position or it may be a relative position compared to what competitors may now be offering. It is also the case that public bodies are driven by procedure to put work out to tender at certain time intervals and some large corporates have similar habits.
For the incumbent it is very important that the relationship management approach never slips into a casual, maintenance frame of mind. Existing customer relationships must be managed proactively including regular formal account reviews that look at the performance of the relationship as well as the products and services being supplied.
It is the responsibility of the supplier to explore and probe to look for areas where the customer’s expectations might have changed and therefore where there are opportunities to do things differently. Failure to do this, enabling small changes to be made along the way, will often result in the customer suddenly declaring that they are no longer satisfied; the feeling that may have been growing over time could by now be entrenched. This is bad for the supplier as the customer will have built up the impression that the supplier did not care enough to find out how the customer was feeling.
Cases where customers like the product but no longer like the supplier are a common trigger for change. If a disaffected customer decides to look for a new supplier the incumbent will have to work hard to keep the customer as overcoming a loss of faith or trust is a tough ask.
There are many reasons but they tend to fall into two main groupings:
There is an interesting engagement philosophy that might be worth considering called ‘partnership sourcing’. During the early 1990s a company called Partnership Sourcing Ltd (PSL) was set up by the joint action of the DTI, CBI and a number of large corporates which if I recall correctly included BA. The basic principle was to foster an environment that would lead to the creation of mutually beneficial trading relationships between customer and supplier. This was a reaction to the ‘master-slave’ approach that was common at the time and especially where the supplier was a minnow compared to the customer whale.
An excellent example of a PSL type approach can be found in Just-in-Time relationships where although the customer and the supplier are separate businesses they function as one unit with a common aim. A key PSL principle is ‘no blame’; if something goes wrong the customer and supplier sit down on the same side of the table to address the problem. Terms such as “the customer is always right” and “it’s my way or the highway” do not exist in PSL thinking.
PSL led to the creation of BS 11000 Collaborative Business Relationships, continuing the principles of customer and supplier working together to a mutually beneficial outcome; just as important now as they were 25 years ago. Customers and suppliers should regularly sit down together in a no blame environment to discuss the relationship openly, sharing issues and concerns.
In trust-based relationships the supplier should be invited to attend part of the customer’s periodic business review to be informed what the customer needs to achieve in the next period enabling the supplier to plan whatever changes are required to continue to meet service levels.
If the supplier can convince the customer to include their budget when putting projects out to tender, effectively saying “we need this and our business case says we can spend £x; can you deliver what we need for the budget and if not how much can you deliver?”, this avoids the supplier guessing what the budget might be, thus offering solutions to match a perceived budget rather than a business specification.
Suppliers should manage customer relationship pro-actively through positive account management. If the only time the supplier contacts the customer is to; renew a contract, sell them something new or ask a favour such as acting as a reference, the customer may justifiably begin to feel taken for granted. Similarly, if the only time a customer contacts the supplier is to chase an order or complain about something the feeling will progressively turn negative.
It is very important that the supplier’s account manager has the responsibility to manage the relationship above and beyond the basic task of supplying products and services. Account review meetings should be held between the parties at regular intervals and whilst part of the agenda will focus on product or service performance the bulk should focus on the performance of the relationship. Mutual discussion of future plans permits development of joint plans thus enabling both parties to prepare. In the spirit of partnership sourcing conversations should be frank and fair.
The account manager should also be equipped to share war stories about other customers and projects; this is commonly done by new business sales people but all too often as soon as the customer becomes established no one from the supplier bothers to update them. I have seen many situations where a customer buys from a competitor because they didn’t know the existing supplier made such a product or provided such a service.
Perhaps the first thing to say is that this is a very common scenario. Established business will have relationships with various suppliers for a wide range of things; accounting services, office cleaning, photocopiers, IT, vending machines, building security and the list goes on. So, in a majority of cases hopeful new suppliers will be working to replace an incumbent. The two main scenarios where this might not be the case are; with start-up or young companies and where the product or service is genuinely new. Recent examples of new might be cloud computing five years ago and more recently big data.
So, the starting point for thinking about this is to recognise that most new business effectively involves the hopeful supplier taking business away from an incumbent. It is also worth recognising that some or all of the following factors will be present:
It is important for potential new suppliers to have a sales engagement process that approaches all potential prospects with an open mind. Don’t assume anything about the current position; use a process of structured questions to explore the current situation, problems they may wish to address, problems they may not have thought of, their desire to solve the problems and willingness to pay for a solution. This process of discovery will of course include exploration of existing suppliers enabling the hopeful supplier to differentiate between situations when an incumbent is truly embedded or when the customer will be open to considering a change. This needs to be achieved early in the sales engagement process otherwise selling effort may be wasted.