Sales is a $900 Billion spend
The amount invested in sales forces (including salaries, benefits, and other components of SG&A—selling, general and administrative expenses) is about $900 billion annually. That is more than five times the $170 billion spent on all media advertising in 2012 and more than twenty times the $40 billion spent on online advertising and marketing in 2013.
Hiding behind social media
“Do you do anything in sales?” is a question we get regularly. We do, particularly if you combine it with marketing and social media. Sometimes we have the impression that selling is nearly a lost art, and that companies (particularly the small ones) are hiding behind “likes” and “friends”.
Life is a pitch
Selling is a noble art, and in a world of multi channel engagement, it becomes even more important. “Life is a pitch” was one of the first to bring it back from a formulaic approach to a philosophical discussion on why sales are important. In business and in life. He doesn’t understand why it is not taught in universities.
Strategy and sales
Frank V. Cespedes also does not understand why sales are not part of universities. He brings it one step further and is a lot tougher in his views on selling and in particular on the alignment of sales with strategy.
Strategy is what we do a lot with clients. And he is spot on. Sales are never really mentioned or covered. Only as an abstract concept, and definitely not translated into sales action.
Strategy does not work in 90% of cases
In his view, that is why strategy does not work in 90% of cases. Strategy and sales are not connected. A $100 billion is spent per year on consultants doing “strategy”. 50% of staff do not understand the strategy of the company. The same for customers.
Research into strategy
He quotes some interesting research. Two thousand executives were asked for words that they associate with strategy. Only 2 mentioned people (!!!!!!) on none mentioned sales.
- Unlike advertising, salespeople cannot be turned on and off. Unlike a website, they cannot be expanded and upgraded overnight.”
- “Selling isn’t for sissies.”
- “I’ve come to see making a sales call as one of the most challenging intellectual activities there is.”
- “In this job, if you don’t survive the short term, you don’t need to worry about the long term.
- First salesman: “I made some very valuable contacts today.” Second salesman: “I didn’t get any orders, either”
- “People don’t buy two-inch drill bits; they buy two-inch holes
What happens to strategy when you are in front of potential customers?
Frank V. Cespedes has a dim view of consultants, managers and theory. The question he asks is “What happens to strategy when you are in front of potential customers”? Strategy is about value creation. That is not created in the market place with customers, not in conference rooms or planning meetings
Value creation! Making money. Strategy is not the same as mission or purpose. Strategy is not the same as values. Business strategy is not the same as war or a battle plan. As Peter Drucker put it over a half-century ago, “The purpose of a business is to create a customer.” That’s also the purpose of purpose and any business strategy. Make customers, not war.
Studies indicate that “loss of focus” is the most common reason that companies stall and strategies fail.
To quote Steve Jobs: “Focus … means saying no to the 100 other good ideas that there are. You have to pick carefully. I am actually as proud of the things we haven’t done as the things we have done.”
So we are not letting a 1000 flowers bloom. There is no point studying military strategy.
That is half of our recommended books (“33 strategies of war” for example) dismissed. That is our strategic box discredited. The perfect anti book (we use anti books as part of creating contrast).
What is a strategy?
So, what is a strategy in his view? It’s fundamentally the movement of an organisation from its present position to a desirable but inherently uncertain future position. Strategy involves “no” as well as “yes.”
A strategy must answer the question “Where and how are we going to win?” A customer value proposition is always at the core of any successful strategy.
You must serve customers in ways that produce good economic returns for your firm: a strategy also requires choices about how you extract financial value.
A strategy means continually asking, “Where are we spending too little and too much time, people, or capital?”
Companies with coherent strategies do not treat all functions equally. Some are more important, and get more resources, than others.
Coherent strategy versus a slogan
Put differently, what makes a company great—and what makes for a coherent strategy versus a slogan—is not the fact that the firm may have a great value proposition or has a terrific blue-ocean opportunity or is very good at R&D, engineering, marketing, sales, or social media. What makes a company great and a strategy something more than a wish list is how these things fit together.
Communicating the strategy
It’s important to translate the choices in a strategy into statements that people in sales and other functions can understand and use.
Studies indicate that communication of priorities to the front line is highly correlated with business performance. Conversely, this “middle ground” is often where strategy execution breaks down in companies.
Other studies find that employees need information to understand the strategic and bottom-line impact of their daily choices, that communicating strategic identity is the first step, and that “strategy maps” or other visual devices can play important roles.
Ideal customer profile
But what is our objective? Articulating strategy to the field begins with a clear-eyed answer to that question.
But choose you must: every firm is always making it easier or harder for certain types of customers to do business with it, and customer selection is a core strategic and selling decision. He calls it the ideal customer profile (ICP).
Not every customer is a good customer. Order size, product mix, profitability, opportunity cost, maintenance cost, type of sales, complexity, multiplier, lifetime value, etc.
A really effective approach was to only pay commission to sales to ICP.
If you are new, you need to outweigh loss
The author gives an interesting insight on how new and innovative is evaluated:
First, we evaluate on the basis of perceived value, not just “objective” value. Second, we evaluate new products relative to a reference point, usually the products we already own or consume. Third, people view improvements (or value added) relative to the reference point as gains and treat any shortcomings as losses. Fourth, and most important for sales management, perceived losses have a much greater impact on buying behavior than similarly sized gains, Gains must outweigh potential losses by two or three times before most people find the bet attractive.
The technical stuff
It gets technical. Recruitment, talent, training, culture, incentives, performance management. Some lessons:
- Grow your own and invest in training
- Be scientific. Gut feeling does not scale
- Product knowledge is important
- Observe before you recruit. Studies across job categories indicate there is only about a 14% correlation between interview predictions and job success (straight from “The rare find”)
- Focus on market right organisation principles
- Some salespeople work harder and/or smarter than others.
- Train regularly on use learn by doing
The customer has escaped
A lot of people may “like” a Facebook entry and tweet on Twitter. But 140 million people actually buy stuff at Wal-Mart weekly.
In fact, if you peek behind the server farms of online firms themselves, you will find big and traditional face-to-face sales organizations as the engine of revenue acquisition and firm value: at Groupon in 2012, over 45 percent of employees were in sales; at Google, it’s over 50 percent; and at Facebook, the sales force’s ability to translate “likes” into advertisers will make or break that company’s valuation and fortunes going forward.
Sales are more important than ever
The technological options available to customers put more pressure on the sales people to add value to the experience. Salespeople have to be better at closing the sale on the spot—they usually have only one shot, and there’s not really a warming-up period anymore
Marketing, CRM and sales not working
Studies indicate that less than 40 percent of firms believe their sales and marketing units are aligned with what their customers want.
That most marketing collateral is considered useless by salespeople and customers.
And that, despite investments in CRM and now big data, simple lead generation from marketing to sales remains a constant source of complaints in both functions.
Over the last decade, over 15 billion was spent on CRM systems. How much do you think customer satisfaction has increased as a result? Nil, nada, zip, zero. Why? CRM captures date that is relevant to the company, not the data that is relevant to the customer. And therein lies the problem.
The divide between sales and marketing
In most firms, marketing managers operate across geographies and accounts but with a specific product or market responsibilities. Their time horizons tend to be driven by internal R&D, and product introduction, planning or budgeting cycles. Because they manage markets, not accounts, marketing managers often have an incentive to amortize R&D costs and stretch a product’s applicability across customer groups.
In contrast, sales managers and reps tend to operate within geographical or account assignments. Their time horizons are driven by selling cycles at specific accounts, which are indifferent to the seller’s budgeting or planning cycles.
Marketing career paths often emphasize frequent rotation among products, brands, or markets, but with P&L or return-on-assets criteria as key metrics.
In sales, career paths place more emphasis on account continuity, relationships and getting access to the appropriate decision makers, but usually with sales volume as the key metric.
In any firm, what in theory is “everybody’s business” tends in practice to be nobody’s business, because of the lack of accountability.
Reverse hassle mapping?
His solution is identifying those with whom you are dependent to get your job done and jointly clarifying the rules of engagement that should apply to these groups.
Then, construct a balance sheet to clarify what you must get from the other group to perform your activities effectively, and what your group must give to the other for that group to provide it most efficiently.
Reciprocity is at the heart of these interactions. Everyone as one happy family……..
New strategic box
I have learned a lot from this book. If I look at the strategic box again, I would now add “Sales actions” to the box.
Not sure if that is part of the frame, the tactics or the targets. We think his point is that is should be part of all three to achieve true alignment between sales and strategy. We agree.