Mint

Turbocharge your sales, margins

When business conditions are harsh, you need every rupee of revenue you can find. Unfortunately, so do your competitors.

Par Vivek Gambhir, Dianne Ledingham and Vikas Saggi

First published on mars 19, 2009
min


When business conditions are harsh, you need every rupee of revenue you can find. Unfortunately, so do your competitors-who seem willing to do almost anything. You don't want to win business indiscriminately. But you also aren't willing to sacrifice market share to aggressive competitors. So, how is it possible to gain share without giving away the store One powerful way to shore up sales and margins is to make your sales force more effective. A few years ago, GE Commercial Finance added $300 million (Rs1,524 crore today) of profitable new business in 12 months by restructuring and refocusing its sales organization. Those improvements have helped GE Commercial Finance weather the current storm better than many in the financial services sector. What are the right moves? The key is a numbers-driven approach to boost sales effectiveness. We call the approach TOPSales: Targeted offerings, Optimized tools and procedures, Performance management, and Sales resource deployment. It provides executives with practical levers they can apply to increase sales and margins. Targeted offerings: create a "heat map" and focus on the hot spots Every company has its best customers. These customers are the most profitable and typically the most loyal. Sales from such customers produce "good revenue", that's predictable and profitable, and can expand. Bad revenue, in contrast, comes from customers that don't value your core proposition, requiring excessive customization, complexity or discounting, and cause you to lose focus. Companies typically identify their best customers by analysing win rates, revenue, relative market share, and profitability among customer segments. Downturns demand additional measures. Which customers will still be strong and continue to buy in the downturn? Which companies should be your best customers, even if they haven't been buying from you? Major Indian IT firms such as HCL Technologies and Infosys are particularly adept at identifying and managing their best customers. These winning firms have a robust account prioritization process and well-defined account plans. They also have a clear-cut process for managing customer satisfaction and benchmarking against competition. Finally, they have a process for proactively investing in relationships, offering free projects in priority areas with an eye to getting more work. High-potential customers are the hot spots in an otherwise cooling economy. Once you have a sense of who they are, you can draw a "heat map" of the market to guide your efforts. Managers can identify and sell specific combinations of products or services best suited to these customers. Everyone who interacts with customers can concentrate his or her efforts on the hot spots. Recently, a broadcasting company refocused its advertising sales team on a few key segments that appeared less affected by the downturn. After just two months, sales in the broadcaster's two test regions were up 90% and 450%. Optimized tools and procedures: put muscle into pipeline management In a downturn, sales cycles lengthen. Close, disciplined pipeline management attuned to the heat map can help improve win rates. Use the heat map to dissect the existing pipeline and screen out opportunities that don't fit. Ensure high-priority projects get the marketing, sales and executive support they need. Create the management processes and disciplines to put your sales tracking technology to work. Every company tracks prospective sales and closed deals. But few push sales tracking deep into the rhythm of the organization. Companies such as GE, IBM, and Cisco have customized "digital cockpits" that enable quick, regular pipeline X-rays and analyses. Performance management: scope territories and quotas Traditionally, sales managers have defined territories and set quotas based on history, gut instinct, and mandates from headquarters. That no longer works well. Forward-looking companies are adopting more scientific techniques, especially in a slowdown when the need for accurate data is more acute. At Aggreko, North America, a division of the UK-based equipment rental company, executives gather regional data on the critical business factors that influence the company's markets—oil refining, home construction, and so on—and then calculate the firm's share of each market to set goals for growth. With this data, area sales managers develop a view of territories, accounts and quotas for individual reps by multiplying potential market size by target shares for each market. The new numbers-driven approach helped Aggreko boost sales force productivity by 90% in one year. Sales resource deployment: get the mix of resources right When customers are wary of buying in turbulent times, sales managers face two critical challenges. One is to maximize the time reps can spend in front of customers. The other is to keep overall sales costs under tight control. Effective deployment of sales resources can help with both. To maximize face time, check the heat map: the hot spots show the customers most likely to buy. That's where you need your best reps; not doing paperwork. Measure the time that reps spend with customers compared with total time. If it's less than what you think it should be, or less than industry benchmarks, consider channelling some reps' administrative functions to support staff or rearranging territories to reduce transit time. Preparing for recovery: no downturn lasts forever When the recovery comes, your sales organization should be positioned to capitalize on pent-up demand. Companies that win during and after turbulence often recruit top sales talent from competitors or may even pursue acquisitions. In either case, the TOPSales approach helps position the sales force for high performance. It focuses on robust data gathering operations and then uses that data to set goals and quotas and manage territories and pipelines. And it prepares your reps to sell products and services tailored to what companies need in a downturn. Every business confronting economic turbulence needs to sustain revenue and margins, and astute management of your salesforce will improve your performance in both areas. TOPSales approach Create a "heat map" of your high-potential customers to guide your sales efforts Get more disciplined about managing your pipeline to improve win rates Be more scientific about territory and quota management Ensure your best reps spend maximum time with the best customers, not doing paperwork Cherry-pick top talent from the competitors even during uncertain times Vivek Gambhir is a partner with Bain & Co., based in New Delhi and leads the consumer products practice in India. Dianne Ledingham is a director with Bain, based in Boston and is a leader in Bain's technology and telecom practice. Vikas Saggi is a principal with Bain, based in New Delhi. Adapted from the forthcoming book Winning in Turbulence by Bain & Co., published by Harvard Business Press. This is the second in a Bain series on managing turbulence that is being published by Mint. Bain Book Winning in Turbulence Learn more about how companies can navigate through turbulent times and succeed as the economy improves.

When business conditions are harsh, you need every rupee of revenue you can find. Unfortunately, so do your competitors-who seem willing to do almost anything. You don't want to win business indiscriminately. But you also aren't willing to sacrifice market share to aggressive competitors.

So, how is it possible to gain share without giving away the store

One powerful way to shore up sales and margins is to make your sales force more effective. A few years ago, GE Commercial Finance added $300 million (Rs1,524 crore today) of profitable new business in 12 months by restructuring and refocusing its sales organization. Those improvements have helped GE Commercial Finance weather the current storm better than many in the financial services sector.

What are the right moves? The key is a numbers-driven approach to boost sales effectiveness. We call the approach TOPSales: Targeted offerings, Optimized tools and procedures, Performance management, and Sales resource deployment. It provides executives with practical levers they can apply to increase sales and margins.

Targeted offerings: create a "heat map" and focus on the hot spots
Every company has its best customers. These customers are the most profitable and typically the most loyal. Sales from such customers produce "good revenue", that's predictable and profitable, and can expand. Bad revenue, in contrast, comes from customers that don't value your core proposition, requiring excessive customization, complexity or discounting, and cause you to lose focus.

Companies typically identify their best customers by analysing win rates, revenue, relative market share, and profitability among customer segments. Downturns demand additional measures. Which customers will still be strong and continue to buy in the downturn? Which companies should be your best customers, even if they haven't been buying from you? Major Indian IT firms such as HCL Technologies and Infosys are particularly adept at identifying and managing their best customers. These winning firms have a robust account prioritization process and well-defined account plans. They also have a clear-cut process for managing customer satisfaction and benchmarking against competition. Finally, they have a process for proactively investing in relationships, offering free projects in priority areas with an eye to getting more work.

High-potential customers are the hot spots in an otherwise cooling economy. Once you have a sense of who they are, you can draw a "heat map" of the market to guide your efforts. Managers can identify and sell specific combinations of products or services best suited to these customers. Everyone who interacts with customers can concentrate his or her efforts on the hot spots. Recently, a broadcasting company refocused its advertising sales team on a few key segments that appeared less affected by the downturn. After just two months, sales in the broadcaster's two test regions were up 90% and 450%.

Optimized tools and procedures: put muscle into pipeline management
In a downturn, sales cycles lengthen. Close, disciplined pipeline management attuned to the heat map can help improve win rates. Use the heat map to dissect the existing pipeline and screen out opportunities that don't fit. Ensure high-priority projects get the marketing, sales and executive support they need. Create the management processes and disciplines to put your sales tracking technology to work. Every company tracks prospective sales and closed deals. But few push sales tracking deep into the rhythm of the organization. Companies such as GE, IBM, and Cisco have customized "digital cockpits" that enable quick, regular pipeline X-rays and analyses.

Performance management: scope territories and quotas
Traditionally, sales managers have defined territories and set quotas based on history, gut instinct, and mandates from headquarters. That no longer works well. Forward-looking companies are adopting more scientific techniques, especially in a slowdown when the need for accurate data is more acute. At Aggreko, North America, a division of the UK-based equipment rental company, executives gather regional data on the critical business factors that influence the company's markets—oil refining, home construction, and so on—and then calculate the firm's share of each market to set goals for growth. With this data, area sales managers develop a view of territories, accounts and quotas for individual reps by multiplying potential market size by target shares for each market. The new numbers-driven approach helped Aggreko boost sales force productivity by 90% in one year.

Sales resource deployment: get the mix of resources right
When customers are wary of buying in turbulent times, sales managers face two critical challenges. One is to maximize the time reps can spend in front of customers. The other is to keep overall sales costs under tight control. Effective deployment of sales resources can help with both. To maximize face time, check the heat map: the hot spots show the customers most likely to buy. That's where you need your best reps; not doing paperwork. Measure the time that reps spend with customers compared with total time. If it's less than what you think it should be, or less than industry benchmarks, consider channelling some reps' administrative functions to support staff or rearranging territories to reduce transit time.

Preparing for recovery: no downturn lasts forever
When the recovery comes, your sales organization should be positioned to capitalize on pent-up demand. Companies that win during and after turbulence often recruit top sales talent from competitors or may even pursue acquisitions.

In either case, the TOPSales approach helps position the sales force for high performance. It focuses on robust data gathering operations and then uses that data to set goals and quotas and manage territories and pipelines. And it prepares your reps to sell products and services tailored to what companies need in a downturn.

Every business confronting economic turbulence needs to sustain revenue and margins, and astute management of your salesforce will improve your performance in both areas.

TOPSales approach
Create a "heat map" of your high-potential customers to guide your sales efforts
Get more disciplined about managing your pipeline to improve win rates
Be more scientific about territory and quota management
Ensure your best reps spend maximum time with the best customers, not doing paperwork
Cherry-pick top talent from the competitors even during uncertain times

Vivek Gambhir is a partner with Bain & Co., based in New Delhi and leads the consumer products practice in India. Dianne Ledingham is a director with Bain, based in Boston and is a leader in Bain's technology and telecom practice. Vikas Saggi is a principal with Bain, based in New Delhi.

Adapted from the forthcoming book Winning in Turbulence by Bain & Co., published by Harvard Business Press. This is the second in a Bain series on managing turbulence that is being published by Mint.