Customers today use an average of six channels during the buying process, and the number of channels available to them is only increasing. Competition for those customers has also increased as margins have tightened. Digital channels have upended the well-trod ruts of sales and marketing organizations — already, nearly a third of all B2B purchases are done digitally. All of this increased complexity means sales leaders must rethink how they source leads, manage pipelines, and sell more effectively.
Rather than being overwhelmed, the best sales leaders have figured out how to overcome this complexity to drive above-market growth. Our analysis of 73 B2B technology companies shows that across sectors, the top 25% of companies achieve more than twice as much return on sales investment compared to the bottom 25%.
What do they do right? Based on our experience and analysis, they maintain a clear focus on four things:
1. They measure sales ROI differently. The key to smart investing is having good data that highlights where the greatest sales ROI is. That starts by knowing what to measure. Many companies, however, measure sales efficiency in terms of sales cost versus revenue. That metric is misleading because it does not sufficiently reflect the margin differences between sales channels. A more meaningful sales ROI is to measure sales cost against gross margin or profit (EBIT), which helps leaders more effectively align the number of accounts per sales employee with actual and potential revenues. By analyzing the sales ROI potential of various segments, for example, sales leaders uncover different channel approaches for each. In one company, analysis revealed that sales ROI in indirect channels was 50% greater than in direct channels.
The best leaders also achieve such high sales ROI by reducing overall sales costs without giving away too much margin. Approaches include a strong “quality instead of quantity” focus on their highest-performing partners. They also tend to de-emphasize direct discounts, such as rebates and product offerings.
2. They keep sales costs low. While the old adage “it takes money to make money” is popular, it’s not true when it comes to the best sales leaders. The best of them keep their costs lower than their peers do. Some 72% of companies in the top quartile of sales ROI also have the lowest sales costs. Effectively controlling costs requires a clear and objective view of profitability and cost-to-sell by channel, product, and customer.
With this foundation, sales leaders can make better decisions, such as scaling back sales efforts for lower value orders. They also invest in processes and training that cut costs, such as installing technologies that reduce the number of order exceptions and cross-training people to have multiple skills. This level of efficiency not only reduces costs but also allows sales leaders to profitably pursue lower-margin business.
3. They free up their salespeople for selling. Top performing sales organizations have the same percentage of sales staff in sales management roles — around 8% — as lower-performing companies. However, they have about 30% more sales staff in support roles. While this may seem counterintuitive, this approach frees up sales reps from more administrative tasks, such as order management and developing sales collateral, to devote more of their time to customers. The result is that front lines sales reps are three times more productive than their peers.
One leading high-tech equipment business, for example, found that 28% of sales rep time was spent on low value activities like complaint handling. They then shifted about half of these transactional activities into a sales factory and freed up 13% of sales rep time for them to sell.
Sales executives also need to take a hard look at their sales support systems. Some activities can be automated or streamlined, some can be delegated and pooled into back-office sales factories, and others can be cut entirely. Implementing such operational and structural changes requires a clear understanding of just what constitutes low- versus high-value-add activities and what resources are currently devoted to each.
4. They use as many channels as they can. Companies that effectively sell across multiple channels (inside sales, outsourced agents, value-added resellers, third-party retail stores, distributors, or wholesalers) achieve more than 40% higher sales ROI than companies wedded to a single channel model (only key account management and/or field sales). Managing multiple channels calls for effectively addressing selling opportunities based on value versus on volume, and recognizing that not every channel is optimal for every product. For instance, inside sales reps can handle key accounts with low-complexity products, whereas more costly in-person support should be assigned exclusively to key accounts with high-complexity products.
Many companies are understandably afraid to “tinker with” sales, the only part of the organization that actually brings in the revenue. We believe, however, that more aggressive action to match sales resources with sales ROI opportunities is critical if companies are looking to beat the market.
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