For Diane Hessan, selling is a lot different than it was just a few years ago. Sales cycles are longer as prospects convene 15-person committees to debate even the smallest sales decisions. Customers demand to see a definitive ROI before they'll buy, and they ask for more price breaks when they do.
"It's just a much more challenging sales environment," says Hessan, CEO of Communispace, a 40-employee software company in Watertown, Massachusetts, that helps blue-chip companies get customer feedback and insight over the Web.
Hessan and the company's four in-house salespeople are putting more emphasis on solid relationships with existing customers, and the company's implementation people are much more involved in the sales process. A referral program pulls promising leads from customers, and each resulting sales call is customized to the prospect much more than in the past. "We're trying to reduce our ice-cold [sales] calls," Hessan says, "and we're spending a lot of time collecting ROI stories and using them in our sales process."
Hessan, 49, isn't the only entrepreneur navigating a sales climate that's gotten a little better but still leaves much to be desired. When sales and marketing research firm CSO Insights surveyed more than 1,300 sales professionals for its report on sales effectiveness in the fourth quarter of 2003, only 49 percent of sales reps met or exceeded their quotas for the past year-the lowest percentage since 1994. Even more startling, 70 percent of the study's participants were small businesses with fewer than 50 employees. "For the under 50 [employee] group, it's even worse. For them, quota attainment was 46.6 percent," says , a partner at CSO Insights and co-author of the firm's sales-effectiveness study, released in February 2004. "It's fair to say that virtually everything is going in the wrong direction for salespeople."
It takes more forethought and way more strategizing to meet today's biggest sales challenges. "How you sell is becoming as important, maybe more important, than what you sell," Trailer says. Here's how successful entrepreneurs are overcoming their sales challenges.
Sales Challenge No. 1:
Increasing Sales Effectiveness
Making effective sales calls is one area where salespeople are falling short. A sales-effectiveness study of nearly 2,300 sales leaders conducted late last year by Reno, Nevada, sales training and consulting firm Miller Heiman found 67 percent of sales professionals believe their sales teams aren't making enough calls to add good leads to the sales funnel. In addition, 6 out of 10 say their sales departments aren't qualifying leads as well as they should.
For Mike Robson, building greater structure around the sales process has been key to increasing effectiveness. Robson, 39, is founder and CEO of ATA Services, a 48-employee company in Salt Lake City that maintains, refurbishes and brands existing ATM machines at banks and credit unions around the country. He's tightened the sales team's reporting procedures, monitoring the progress of the company's four-person sales team through daily call reports. Those call reports keep Robson posted on sales proposals and the salesperson's strategy going into a selling situation. More structure is generating more sales: ATA Services' sales in two of the four sales territories topped $1 million for the first time last year, and the company projects sales of $6.5 million in 2004. "We've had to become better at selling. We used to go by our gut, but we've moved to a more structured system," says Robson. "That's helped us."
Successful sales teams are establishing multiple contacts within companies that put them on the CEO's radar from a variety of different directions-marketing, IT and accounting, to name a few. They're also changing the way they approach prospects. Today, research combined with highly qualified calls to set up informational meetings with prospects is hot; overscripted telemarketing calls are not. Direct marketing is out; creating "safe venues"-webinars, breakfast meetings, research-report release events-to meet prospects and build credibility is in. "The space is so crowded that the way to get me to understand you is to give me some value," says Sam Reese, CEO and president of Miller Heiman. "The sales call comes afterward."
Steve Johnson is founder and president of G2 Safety, an Anaheim, California, distributor of gear designed to protect against workplace hazards. A few years ago, Johnson, 35, relied solely on inside sales and direct marketing to drive traffic to the company's Web site. But now, G2 Safety is putting more boots on the ground, having recently hired four territorial sales reps, with six more to be hired by year-end. And the company is also joining trade organizations to identify quality leads. G2 Safety's sales hit $1.5 million last year, and Johnson forecasts sales of more than $3 million in 2004. "We originally thought we could do direct marketing only," Johnson says. "[Now] I think you need to do everything."
Increasing Market Share & Customer Loyalty
Sales Challenge No. 2:
Increasing Market Share
Expanding a customer base is getting harder: Fifty-three percent of sales leaders in the Miller Heiman study believe their companies will grow this year by increasing share in existing markets, but more than half admitted that selling new products and services remains a significant challenge.
Blame it on complexity and competition. Roughly 70 percent of firms in the CSO Insights study say competitive activity is increasing, and nearly two-thirds say products are getting more complex and harder to sell.
To spur market-share growth, companies are reinvesting in sales and product training. They're increasing salespeople's access to product experts. And there's new emphasis on understanding the core of a product or a service's value proposition to retain current customers and lure business away from the competition. "Don't debug your product," Trailer says. "Debug your sales process."
ATA Services aims for 3 to 5 percent of a bank's annual ATM budget. "We think we've hit a home run if we get that," Robson says. "Most [banks] have a slush fund, and our job is to get that slush fund." At press time, ATA Services was closing in on a $5 million contract with a large bank, and it hopes to break into the Canadian bank market.
Increasing market share comes down to solving a problem instead of hawking a product, and that means finding out what's not working for prospects. "Look for areas of pain, and try to sell against those," says Robson. It also requires staying focused on a specific market segment. "We do ATM-related [work]," Robson says. "We don't do windows, and we don't change their oil. This specialization has allowed us to get deeper into our customers' budgets than some of our competitors."
Communispace is spending more time trying to build relationships with existing accounts than trying to sell new business, Hessan says. The company's salespeople point to very specific examples of how the company's software has helped clients accelerate their product development process. "We've invested more in understanding prospects before we make the call, and we're really getting educated," says Hessan.
Companies are putting more emphasis on upselling, cross-selling and building strong referral programs; and they're giving good salespeople more discretion to determine which clients and prospects are best suited to such opportunities. "There's a place for the cross-sell and the upsell, and I think it's smart to do it. But you have to know when to do it," says Denis Pombriant, CRM industry analyst and founder and managing principal of Stoughton, Massachusetts-based research and consulting firm Beagle Research Group, which specializes in the CRM and Internet infrastructure markets. "Companies simply need to get into the mind-set of the customer."
Sales Challenge No. 3:
Increasing Customer Loyalty
Product life cycles are getting shorter, making it tougher to differentiate one product or service from another. Customer loyalty is harder to come by as a result: Sixty-four percent of sales leaders in the Miller Heiman study believe buyers treat their specific industry as a commodity-driven market.
Salespeople find they have to create a layer of value around their offering through added service, best practices and superior industry knowledge. This is what keeps products and services from becoming just another commodity in the eyes of the prospect, says Dave Stein, founder of Mahopac, New York, sales consulting firm The Stein Advantage and author of How Winners Sell: 21 Proven Strategies to Outsell Your Competition and Win the Big Sale. "Customers aren't playing golf these days; they're playing hardball," he says. "A product or service is just a medium to deliver value to the customer."
To maintain loyalty, G2 Safety's sales team is selling a program where customers accumulate points toward new purchases for each dollar they spend. "We want to reward companies for buying from us," says Johnson.
Reese believes entrepreneurial firms should break their business into three "loyalty buckets": the business they're getting from existing customers, the business they're getting from new customers, and the customers that are defecting. Understanding what drives each group is key to selling. "Always have a road map of their issues," Reese says. "Clearly communicate [how] you'll improve your offering to their company."
"Going vertical"-separating sales territories by industry rather than geography so each salesperson truly understands the threats, challenges, risks and opportunities facing a particular market segment-is another way smart companies are generating loyalty. "Initially, it seems to be more cost-effective if you have a geographical orientation," Stein says. "But if [salespeople] are taught to leverage industry knowledge, the net result is a much higher increase in profit per customer, a high level of credibility, and less reliance on discounts and special deals."
What does it take to make a sale right now? We asked these experts and entrepreneurs.
- Diane Hessan, CEO of Communispace, a software company in Watertown, Massachusetts: "Selling is all about earning the right to do business with someone. Put yourself in their shoes, and understand what their issues are. In today's business environment, the most critical element of any sale is trust. Ultimately, when someone says yes to you, they're saying 'I'm betting on what this person is telling me.'"
- Denis Pombriant, CRM industry analyst and founder and managing principal of Stoughton, Massachusetts-based research and consulting firm Beagle Research Group, which specializes in the CRM and Internet infrastructure markets: "I don't think things are [any] different than they've ever been. Selling is hard work. It requires preparation and diligence. It's simply getting to know the customer and understanding the customer's needs. You can't pin it down to saying three Hail Marys."
- Steve Johnson, founder and president of G2 Safety, a distributor of gear designed to protect against workplace hazards, in Anaheim, California: "I want our people to feel comfortable discussing price. You don't want to ignore it; you want to be confident about it. I'm training our guys to have a discussion [about price] right upfront."
- Sam Reese, CEO and president of sales consulting firm Miller Heiman in Reno, Nevada: "To close a deal today, it ultimately takes a clear understanding of how your solution clearly impacts what the customer is trying to fix, accomplish or avoid. It's all about the customer's concept. If you can satisfy their concept of what they're trying to fix, accomplish or avoid, then you can close business."
- Joe Galvin, vice president and research director of CRM Strategies for technology and consulting firm Gartner Inc. in Stamford, Connecticut: "It's being knowledgeable about your product, knowledgeable about the industries and markets into which you're selling. It's being aware of your competitive products and how to position yourself."
- Mike Robson, founder and CEO of ATA Services, a Salt Lake City-based firm that services and refurbishes existing ATM machines: "It's back to the basics. It's having a good value proposition, being in the right place at the right time, and not looking like a putz. The follow-up is very important. You have to chase the sale now. They're not asking me for business; I'm asking them for business."
Increasing Margins & Reducing the Cycle
Sales Challenge No. 4:
Selling used to be about telling prospects how they'll increase revenue; today it's about showing them how a product or service will save them money. The Miller Heiman study found that 66 percent of respondents believe buyers want discounts before they'll make a purchase. "Buyers are tending to keep their eye on pricing more than once or twice per year," Johnson says.
Successful sales teams are breaking the discount habit through better service that allows them to offer premium pricing. They're bypassing prospects that demand huge price breaks and going for those more likely to appreciate quality service at a slightly higher price. "You'll have fatter margins that feed your business and allow you to get better customers who are more loyal," Trailer says.
ATA Services has increased its margins by incorporating value-added services into its bidding process, such as cleaning and polishing ATM machines for clients. "In our early sales process, the only thing we were selling is what we could cut the price [of]," Robson says. "Now we try not to cut the price, [but to] add more value." The result: ATA's profit margin is predicted to grow by almost 40 percent this year.
A profitability breakdown of each customer-which includes an analysis of time spent per customer, system changes made to accommodate the client, and the salesperson's salary-can identify where margin growth is being lost. "You'll find your most difficult customers [that take] up the most resources are also the ones causing the most problems-and where you have the lowest margins," Reese says. "Those are the customers you want to fire." Or at least figure out how to allocate fewer resources in servicing them.
Hessan tells clients a price break might mean putting a lower-level person on the account or cutting the number of reports the client receives. "I'm up for getting very aggressive about how we can cut our costs to serve clients and come up with ways for them to pay less," Hessan says. "But usually, if I'm coming up with a way for them to pay less, it's because they're going to get less." Communispace is growing 83 percent annually, and sales should exceed $5 million in 2004.
Sales Challenge No. 5:
Reducing the Sales Cycle
Pushing clients to closure is a real problem for sales teams. In fact, 90 percent of sales deals do not close as forecasted, according to the CSO Insights study. In the Miller Heiman study, meanwhile, 69 percent of sales leaders said prospects are regularly putting off final decisions. "If you have a six-month sales cycle, it typically takes nine calls to close the deal," says Trailer.
To reduce the sales cycle, Robson is working with his sales team to separate the real leads from ones that are a big waste of time. "We've had to determine who we can't sell to," Robson says. "I think it's one of the reasons we've survived." He's also revamped the company's sales reporting and compensation structures so salespeople work toward monthly and quarterly goals instead of an annual quota. These changes have cut the 12-to-18-month sales cycle down to three to six months.
Savvy sales managers are spending more time examining closing rates-how many sales aren't closing-and they're instituting "loss reviews," calling prospects who didn't buy to find out why. Nothing is sold during the interaction; it's an opportunity to find out why the deal fell through. "You may find you lost the deal for other reasons than you thought," Reese says. Managers use this information to alter sales tactics in ways that sell the next customer more effectively and quickly.
Trailer says companies need to pay greater attention to psychographics, not just demographics. Psychographic questions delve into a prospect's thought process, such as how much a prospect values premium services or seems risk-taking vs. being indecisive. By looking at common characteristics of their best customers, sales teams can better target messages and reduce the overall sales cycle. "Most [salespeople] aren't clear on their psychographics," Trailer says. "Look at the characteristics common among and unique to the best customers vs. the worst customers." With a few changes in strategy, sales teams may find their biggest challenge will be turning down business instead of creating it.
Can You Relate?
CRM technologies help growing businesses sell more efficiently. And while no single application is the solution for all your business needs, here are three CRM applications that aim to help you and your sales force close more sales and manage those all-important relationships. All three offer a free online trial, so you can try before you buy.
OnDemand, From Siebel
Price: $70 per user, per month
With Siebel's CRM OnDemand, you can choose either the general version or from one of the 23 industry-specific solutions in the areas of consumer goods, high-tech, manufacturing and more. An industry-specific solution provides interface templates featuring special key data fields as well as industry-specific business process support, analytics and reports. This CRM solution also covers the standard marketing, sales and customer support fields, and then some.
GoldMine 6.5, From FrontRange Solutions
Goldmine 6.5 focuses on the four cycles of customer retention-marketing, sales, service and support, and management. These cycles include lead distribution through the Web; contact management through a single, centralized database; automated administrative tasks like sending customized e-mails; identifying high-margin leads and more. You can also import existing data from ACT! and Microsoft Excel or Outlook.
NetCRM, From NetSuite
Price: $75 per user, per month
NetCRM includes built-in customizable dashboards that give snapshots of the most important performance indicators, such as customer and product rankings, and lead-generation statistics. NetCRM also includes commissions management, automated e-mail campaign statistics, customer support management, customizable online lead forms, customer privileges and more.
Chris Penttila is Entrepreneur's "Staff Smarts" columnist.