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Slideshow transcript
Hi, I'm Dianne Ledingham, a partner with Bain & Company, and I'd like to spend the next few minutes talking to you about the new science of sales force effectiveness. To begin, I think we know this is all about growth, and sustainable growth is hard—it's been achieved by fewer than 12% of companies when you do a broad assessment of them. Consistently increasing sales force productivity is key to that growth, but as an industry matures, as new competitors enter the fray, as you develop a complex sales channel system, getting that sales force productivity right—getting that sales system right—becomes more challenging. We have an approach called TOPSales, which we believe can identify those critical sales elements to drive improved performance. And we've seen our clients get results. Revenue increases of 25% to 40% are not uncommon, and some clients have also lowered costs.
Growth is hard. We looked at more than 2,000 companies and tracked their growth over a 10-year period of time, and what we've found is only a little more than a quarter were able to grow at 5.5%. If you add on top of that a profit growth of 5.5%, the number shrinks to a little less than 20%, but by the time you put on another valuable screen—costs of capital—you're talking about 11% of companies that have earned their costs of capital and grown top and bottom line at 5.5% over a 10-year period of time. That's pretty rare.
So how do companies seek sustainable growth? Companies that take the conventional approach do a few things. They might spread their targets evenly across territories. They are dependent on rainmakers and rely on them to really drive a significant portion of growth, or they may select one or two trendy elements to focus on—things like sales screening techniques for hiring new personnel, or new sales campaign, or a new type of tracking tool. But they do that without a comprehensive approach across all elements of their sales system, and, therefore, they don't get consistent productivity. And what they find is that in order to grow, they have to grow largely by adding new sales resources.
High-performing companies take an alternative approach. These companies know who their most promising customers are, know what products they want to sell to them, and they prioritize those segments accordingly. And everybody understands where they need to go. These companies continue to get the most out of their current sales force and only selectively add new sales capacity.
It's an intuitive concept that improvements in productivity are going to reduce the sales resources required. But when you actually map it, you can see that it is a pretty dramatic impact on one's budget. So, in this example, Company A is operating at about half the productivity increases of Company B, but have had to add three times as much incremental sales force capacity because they weren't able to achieve those same gains.
What enables those companies to consistently drive sales force productivity? They do four things well:
- They start with targeted offerings. They know who to target, with what, and how to prioritize their time accordingly;
- They have optimized automation tools and procedures that start in marketing and go through their selling process, through forecasting, and into their supply chain;
- They have a maniacal focus on performance management that starts with the budgeting process. They use a fact base in order to look at the competitive dynamics as well as what their current experience is in their target segments to see what kind of true demand is out there that they haven't been able to get. And they align their metrics and incentives to go after it;
- And, of course, they follow all of that up with the right sales force deployment system. It's the right channels, it's the right team structure with well understood responsibilities. And it's the right number of sales people spending more than half their time talking with customers.
How do you know you're getting this right? Bain has a diagnostic tool that helps companies evaluate how there doing. It starts with gathering the facts on a series of questions. So, for example, have you identified the most important segments and customers? Where are you the most profitable? Where do you have an advantage over competitors? Can you track marketing spending and understand where you're getting a return on that spend? And do you have other disciplined processes to manage the entire sales process, from start to delivery. Is your rep productivity up? What's the trend on your win rates? And, what's the difference between your best-performing reps and your lowest-performing reps? And, have you mapped out your territories based a really rigorous analysis of demand by segment?
Building the right sales system delivers results. We've done this in hundreds of projects across more than 20 industries, and the results speak for themselves. If you'd like to know more, feel free to give me a call, or follow up with any Bain partner. We'd be delighted to talk with you further about this or answer any questions you might have.
First published in September 2006