Anchored down by a stale sales plan? Learn to navigate these five biggest sales challenges, and get back on course.
For Diane Hessan, selling is a lot different than it was just afew years ago. Sales cycles are longer as prospects convene15-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 salesenvironment," says Hessan, CEO of Communispace, a40-employee software company in Watertown, Massachusetts, thathelps blue-chip companies get customer feedback and insight overthe Web.
Hessan and the company's four in-house salespeople areputting more emphasis on solid relationships with existingcustomers, and the company's implementation people are muchmore involved in the sales process. A referral program pullspromising leads from customers, and each resulting sales call iscustomized 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 collectingROI stories and using them in our sales process."
Hessan, 49, isn't the only entrepreneur navigating a salesclimate that's gotten a little better but still leaves much tobe desired. When sales and marketing research firm CSO Insightssurveyed more than 1,300 sales professionals for its report onsales effectiveness in the fourth quarter of 2003, only 49 percentof sales reps met or exceeded their quotas for the past year-thelowest percentage since 1994. Even more startling, 70 percent ofthe study's participants were small businesses with fewer than50 employees. "For the under 50 [employee] group, it'seven worse. For them, quota attainment was 46.6 percent," says, a partner at CSO Insights and co-author of thefirm's sales-effectiveness study, released in February 2004."It's fair to say that virtually everything is going inthe wrong direction for salespeople."
It takes more forethought and way more strategizing to meettoday's biggest sales challenges. "How you sell isbecoming as important, maybe more important, than what yousell," Trailer says. Here's how successful entrepreneursare overcoming their sales challenges.
Sales Challenge No. 1:
Increasing Sales Effectiveness
Making effective sales calls is one area where salespeople arefalling short. A sales-effectiveness study of nearly 2,300 salesleaders conducted late last year by Reno, Nevada, sales trainingand consulting firm Miller Heiman found 67 percent of salesprofessionals believe their sales teams aren't making enoughcalls to add good leads to the sales funnel. In addition, 6 out of10 say their sales departments aren't qualifying leads as wellas they should.
For Mike Robson, building greater structure around the salesprocess has been key to increasing effectiveness. Robson, 39, isfounder and CEO of ATA Services, a 48-employee company in Salt Lake Citythat maintains, refurbishes and brands existing ATM machines atbanks and credit unions around the country. He's tightened thesales team's reporting procedures, monitoring the progress ofthe company's four-person sales team through daily callreports. Those call reports keep Robson posted on sales proposalsand the salesperson's strategy going into a selling situation.More structure is generating more sales: ATA Services' sales intwo of the four sales territories topped $1 million for the firsttime last year, and the company projects sales of $6.5 million in2004. "We've had to become better at selling. We used togo by our gut, but we've moved to a more structuredsystem," says Robson. "That's helped us."
Successful sales teams are establishing multiple contacts withincompanies that put them on the CEO's radar from a variety ofdifferent 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 upinformational meetings with prospects is hot; overscriptedtelemarketing calls are not. Direct marketing is out; creating"safe venues"-webinars, breakfast meetings,research-report release events-to meet prospects and buildcredibility is in. "The space is so crowded that the way toget me to understand you is to give me some value," says SamReese, CEO and president of Miller Heiman. "The sales callcomes afterward."
Steve Johnson is founder and president of G2 Safety, anAnaheim, California, distributor of gear designed to protectagainst workplace hazards. A few years ago, Johnson, 35, reliedsolely on inside sales and direct marketing to drive traffic to thecompany's Web site. But now, G2 Safety is putting more boots onthe ground, having recently hired four territorial sales reps, withsix more to be hired by year-end. And the company is also joiningtrade organizations to identify quality leads. G2 Safety'ssales hit $1.5 million last year, and Johnson forecasts sales ofmore than $3 million in 2004. "We originally thought we coulddo direct marketing only," Johnson says. "[Now] I thinkyou 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 ofsales leaders in the Miller Heiman study believe their companieswill grow this year by increasing share in existing markets, butmore than half admitted that selling new products and servicesremains a significant challenge.
Blame it on complexity and competition. Roughly 70 percent offirms in the CSO Insights study say competitive activity isincreasing, and nearly two-thirds say products are getting morecomplex and harder to sell.
To spur market-share growth, companies are reinvesting in salesand product training. They're increasing salespeople'saccess to product experts. And there's new emphasis onunderstanding the core of a product or a service's valueproposition to retain current customers and lure business away fromthe competition. "Don't debug your product," Trailersays. "Debug your sales process."
ATA Services aims for 3 to 5 percent of a bank's annual ATMbudget. "We think we've hit a home run if we getthat," Robson says. "Most [banks] have a slush fund, andour job is to get that slush fund." At press time, ATAServices 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 insteadof hawking a product, and that means finding out what's notworking for prospects. "Look for areas of pain, and try tosell against those," says Robson. It also requires stayingfocused on a specific market segment. "We do ATM-related[work]," Robson says. "We don't do windows, and wedon't change their oil. This specialization has allowed us toget deeper into our customers' budgets than some of ourcompetitors."
Communispace is spending more time trying to build relationshipswith existing accounts than trying to sell new business, Hessansays. The company's salespeople point to very specific examplesof how the company's software has helped clients acceleratetheir product development process. "We've invested more inunderstanding prospects before we make the call, and we'rereally getting educated," says Hessan.
Companies are putting more emphasis on upselling, cross-sellingand building strong referral programs; and they're giving goodsalespeople more discretion to determine which clients andprospects are best suited to such opportunities. "There'sa place for the cross-sell and the upsell, and I think it'ssmart to do it. But you have to know when to do it," saysDenis Pombriant, CRM industry analyst and founder and managingprincipal of Stoughton, Massachusetts-based research and consultingfirm Beagle Research Group, which specializes in the CRMand Internet infrastructure markets. "Companies simply need toget into the mind-set of the customer."
Sales Challenge No. 3:
Increasing Customer Loyalty
Product life cycles are getting shorter, making it tougher todifferentiate one product or service from another. Customer loyaltyis harder to come by as a result: Sixty-four percent of salesleaders in the Miller Heiman study believe buyers treat theirspecific industry as a commodity-driven market.
Salespeople find they have to create a layer of value aroundtheir offering through added service, best practices and superiorindustry knowledge. This is what keeps products and services frombecoming just another commodity in the eyes of the prospect, saysDave Stein, founder of Mahopac, New York, sales consulting firm TheStein Advantage and author of How Winners Sell: 21 ProvenStrategies to Outsell Your Competition and Win the Big Sale."Customers aren't playing golf these days; they'replaying hardball," he says. "A product or service is justa medium to deliver value to the customer."
To maintain loyalty, G2 Safety's sales team is selling aprogram where customers accumulate points toward new purchases foreach dollar they spend. "We want to reward companies forbuying from us," says Johnson.
Reese believes entrepreneurial firms should break their businessinto three "loyalty buckets": the business they'regetting from existing customers, the business they're gettingfrom 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 totheir company."
"Going vertical"-separating sales territories byindustry rather than geography so each salesperson trulyunderstands the threats, challenges, risks and opportunities facinga particular market segment-is another way smart companies aregenerating loyalty. "Initially, it seems to be morecost-effective if you have a geographical orientation," Steinsays. "But if [salespeople] are taught to leverage industryknowledge, the net result is a much higher increase in profit percustomer, a high level of credibility, and less reliance ondiscounts and special deals."
What does it take to make a sale right now? We asked theseexperts and entrepreneurs.
- Diane Hessan, CEO of Communispace, a software company inWatertown, Massachusetts: "Selling is all about earningthe right to do business with someone. Put yourself in their shoes,and understand what their issues are. In today's businessenvironment, 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 tellingme.'"
- Denis Pombriant, CRM industry analyst and founder andmanaging principal of Stoughton, Massachusetts-based research andconsulting firm Beagle Research Group, which specializes in the CRMand Internet infrastructure markets: "I don't thinkthings are [any] different than they've ever been. Selling ishard work. It requires preparation and diligence. It's simplygetting to know the customer and understanding the customer'sneeds. You can't pin it down to saying three HailMarys."
- Steve Johnson, founder and president of G2 Safety, adistributor of gear designed to protect against workplace hazards,in Anaheim, California: "I want our people to feelcomfortable discussing price. You don't want to ignore it; youwant to be confident about it. I'm training our guys to have adiscussion [about price] right upfront."
- Sam Reese, CEO and president of sales consulting firm MillerHeiman in Reno, Nevada: "To close a deal today, itultimately takes a clear understanding of how your solution clearlyimpacts what the customer is trying to fix, accomplish or avoid.It's all about the customer's concept. If you can satisfytheir concept of what they're trying to fix, accomplish oravoid, then you can close business."
- Joe Galvin, vice president and research director of CRMStrategies for technology and consulting firm Gartner Inc. inStamford, Connecticut: "It's being knowledgeable aboutyour product, knowledgeable about the industries and markets intowhich you're selling. It's being aware of your competitiveproducts and how to position yourself."
- Mike Robson, founder and CEO of ATA Services, a Salt LakeCity-based firm that services and refurbishes existing ATMmachines: "It's back to the basics. It's having agood value proposition, being in the right place at the right time,and not looking like a putz. The follow-up is very important. Youhave 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 increaserevenue; today it's about showing them how a product or servicewill save them money. The Miller Heiman study found that 66 percentof respondents believe buyers want discounts before they'llmake a purchase. "Buyers are tending to keep their eye onpricing more than once or twice per year," Johnson says.
Successful sales teams are breaking the discount habit throughbetter service that allows them to offer premium pricing.They're bypassing prospects that demand huge price breaks andgoing for those more likely to appreciate quality service at aslightly higher price. "You'll have fatter margins thatfeed your business and allow you to get better customers who aremore loyal," Trailer says.
ATA Services has increased its margins by incorporatingvalue-added services into its bidding process, such as cleaning andpolishing ATM machines for clients. "In our early salesprocess, the only thing we were selling is what we could cut theprice [of]," Robson says. "Now we try not to cut theprice, [but to] add more value." The result: ATA's profitmargin is predicted to grow by almost 40 percent this year.
A profitability breakdown of each customer-which includes ananalysis of time spent per customer, system changes made toaccommodate the client, and the salesperson's salary-canidentify where margin growth is being lost. "You'll findyour most difficult customers [that take] up the most resources arealso the ones causing the most problems-and where you have thelowest margins," Reese says. "Those are the customers youwant to fire." Or at least figure out how to allocate fewerresources in servicing them.
Hessan tells clients a price break might mean putting alower-level person on the account or cutting the number of reportsthe client receives. "I'm up for getting very aggressiveabout how we can cut our costs to serve clients and come up withways for them to pay less," Hessan says. "But usually, ifI'm coming up with a way for them to pay less, it's becausethey're going to get less." Communispace is growing 83percent 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. Infact, 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 regularlyputting off final decisions. "If you have a six-month salescycle, it typically takes nine calls to close the deal," saysTrailer.
To reduce the sales cycle, Robson is working with his sales teamto 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'vesurvived." He's also revamped the company's salesreporting and compensation structures so salespeople work towardmonthly and quarterly goals instead of an annual quota. Thesechanges have cut the 12-to-18-month sales cycle down to three tosix months.
Savvy sales managers are spending more time examining closingrates-how many sales aren't closing-and they're instituting"loss reviews," calling prospects who didn't buy tofind out why. Nothing is sold during the interaction; it's anopportunity to find out why the deal fell through. "You mayfind you lost the deal for other reasons than you thought,"Reese says. Managers use this information to alter sales tactics inways that sell the next customer more effectively and quickly.
Trailer says companies need to pay greater attention topsychographics, not just demographics. Psychographic questionsdelve into a prospect's thought process, such as how much aprospect values premium services or seems risk-taking vs. beingindecisive. By looking at common characteristics of their bestcustomers, sales teams can better target messages and reduce theoverall sales cycle. "Most [salespeople] aren't clear ontheir psychographics," Trailer says. "Look at thecharacteristics common among and unique to the best customers vs.the worst customers." With a few changes in strategy, salesteams may find their biggest challenge will be turning downbusiness 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 yourbusiness needs, here are three CRM applications that aim to helpyou and your sales force close more sales and manage thoseall-important relationships. All three offer a free online trial,so you can try before you buy.
CRMOnDemand, From Siebel
Price: $70 per user, per month
With Siebel's CRM OnDemand, you can choose either the generalversion or from one of the 23 industry-specific solutions in theareas of consumer goods, high-tech, manufacturing and more. Anindustry-specific solution provides interface templates featuringspecial key data fields as well as industry-specific businessprocess support, analytics and reports. This CRM solution alsocovers 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 customerretention-marketing, sales, service and support, and management.These cycles include lead distribution through the Web; contactmanagement through a single, centralized database; automatedadministrative tasks like sending customized e-mails; identifyinghigh-margin leads and more. You can also import existing data fromACT! and Microsoft Excel or Outlook.
NetCRM, From NetSuite
Price: $75 per user, per month
NetCRM includes built-in customizable dashboards that givesnapshots of the most important performance indicators, such ascustomer and product rankings, and lead-generation statistics.NetCRM also includes commissions management, automated e-mailcampaign statistics, customer support management, customizableonline lead forms, customer privileges and more.
Chris Penttila is Entrepreneur's "StaffSmarts" columnist.