SalesExcellenceStudy

Sales Excellence What are the performance drivers in sales? Commentary on the results of a survey among sales managers of 747 companies from 14 countries Mercuri International and The University of St. Gallen, Institute of Marketing and Retailing Reproduction of this material in any form is prohibited without prior permission from Mercuri International Oy. Contents Page Structure of the survey 2 Management summary 4 Top performance drivers in sales 5 Results by subject fields • Strategy • Market and customer segmentation • Organisational structures • Sales management • Sales situations • Sales reps‘ competencies • Companies internal conditions 21 Overall conlcusion 42 1 Structure of the survey (I) Hardly anyone can doubt that sales is one of the most important (and expensive) corporate functions. Nevertheless, there is still not much transparency about the way in which selling must be tackled in order to make a significant contribution to the success of a company. Against this background Mercuri International together with the University of St. Gallen, Institute of Marketing and Retailing, interviewed sales managers of 747 companies from 14 countries on their approach to sales and on their sales success. The following aspects of sales work were analysed: • Strategy • Market and customer segmentation • Organisational structures • Sales management • Sales situations • Employee competencies • Internal basic conditions Approval of statements and of the presence and use of instruments/methods was secured. In order to ascertain the factors leading to success in sales, subsequently the 10% most successful companies (Top 10%) were compared with the least successful 10% (Bottom 10%) and with the average of all respondents. On this basis it was possible to identify numerous, clearly defined success factors or better said performance drivers. 2 Structure of the survey (II) Involved countries: Finland, Sweden, Great Britain, Netherlands, Belgium, Germany, France, Czech Republic, Switzerland, Spain, Italy, Brazil, India, China, At least 50 interviews per country > 10 sales reps Manufacturing, machinery Food products, agriculture Metal Chemical and pharmaceutical products Finance, insurance, real estate Construction Transport and logistics IT and communication Media, printing, publishing Electricity, oil and gas Services Non food Automotive Textile Wholesale Other 19% 9% 9% 7% 6% 5% 5% 5% 5% 5% 5% 5% 4% 4% 4% 10% 100% Number of interviews: Size of sales force: Industries: 3 Management Summary The results of the survey are quite clear. Successful companies cultivate their markets in a different way from less successful ones. The following have emerged as the essential success factors for Sales Excellence.: • A clearly defined sales strategy which is communicated to those involved and discussed with them.. • Market segmentation in which above all the requirements of customers and not so much regional aspects are paramount. • A process-oriented approach to sales, in which the individual phases are defined and implementation is supported by qualifying modules, instruments and check data. • The concentration of all the company‘s resources on the customer, whereby different sales functions and company departments are integrated in individual phases of the process. • A successfully implemented Customer Relationship Management-System, which is also actively used for account management. • The definition of turnover margin, product sales, and customer satisfaction objectives for salespeople. • Constant monitoring and analysis of the implementation and efficiency of the individual sales activities such as the number of visits, success rates and volume of offers. • Focussing more strongly on sophisticated sales situations in which demand has to be built up or in which the company can achieve a higher profile as a partner for solutions. • The qualification of salesmen. Depending on the situation they have mastered the conflicting demands of social competence, personal charisma and competence in the customer‘s business. • Sales-centred orientation of the whole company. Sales is a „boardroom“ topic, an interdepartmental task and every member of staff also sees himself as a salesperson. 4 Top performance drivers in sales The 10 statements with the biggest differences between the top 10%, the average and the bottom 10% 5 10 most important performance drivers The image of sales within your company is excellent For each step of the sales process you have defined training modules You have clearly defined sales and processes/ workflows Your corporate structure fully supports cross-functional approaches Each of your sales reps has to realise a systematic documented account planning 75 Top 10 versus Bottom 10 = 47% TOP 10 versus average = 28% 71 43 28 40 29 69 40 29 68 42 25 62 67 Your sales reps have a high social competence Your sales reps are experts in their customers‘ business You use e-learning to develop the sales competence of your sales staff Your sales reps have a strong projection/charisma You have implemented a customer relationship management tool 0 10 41 22 36 24 60 59 32 26 36 21 57 37 20 30 40 20 50 56 60 70 80 Illustration 1:To which extend do you agree the following statements (top 2 boxes out of seven), n= 747, more than one answer possible 6 Commentary on the top performance drivers 7 „The image of sales within your company is excellent“ This is the point where the top 10% differ most clearly from all the other respondents. Apparently in highly successful companies sales personnel and selling are perceived and recognised as key functions. By contrast, in many other companies sales personnel tend to have a poor image, they are seen merely as a factor in distribution or are still dogged by the negative image of the door-to-door salesman. Only when sales have an excellent image, when the profession of the salesman is valued will there be success in focussing the entire company on the customer and development of the market. If, however, a company is preoccupied with internal matters and if the the focus is on the product and operation and not on the customer, sustainable success in the market will not be achieved. How can the image of sales be improved, how can companies utilize this success factor in a targeted way? - „Sales“ must be experienced by every employee. Anyone who is not confronted with sales results, with acquiring and losing customers, will generally not work in a customer-centred way. For this reason information on sales results should be made available in the form of newsletters, reports or department updates to all employees including those not involved in sales. - Sales should not fall into the trap of arrogance and regard itself as a star performer. On the contrary. Just because the sales function is important, the salesman does not automatically become the most important person in the company. This kind of attitude leads to the creation of a negative image. Instead, the sales department should initiate contact with other departments, should show them that they play an important role in account management. Salespeople should also make contact with production personnel and explain to them what customers value about the products and their quality. In this way, salespeople become ambassadors, who create the necessary link to the „outside world“ and who ensure that every employee recognises his importance for the success of the company. - In addition, company executives must within the framework of their function as a model identify with sales. They should integrate themselves in market development, support sales and demonstrate again and again to their staff that the customers and success in the market are the sole benchmark. 8 „For each step of the sales process you have defined training modules, instruments or checklists“ Successful companies define not only processes but also concentrate on optimising every single phase of these processes. Only in this way can the potential of a process-oriented approach for increasing efficiency be fully exploited. Each phase of a work process makes special demands on the competencies of the sales staff. The more precisely these requirements are made familiar to the salesforce and the better they can be learnt and trained in the form of training modules, the more successfully the process will function. Training modules such as Selling 1 and 2 which are still frequently used and the continuation courses often fail to come up to these requirements. They are more suited to the basic training of sales staff, but not to achieving optimisation of processes involved in selling in sophisticated markets. The same is true of the use of checklists. It is good to be familiar with the rules for handling objections, but it is better to have a checklist with objections and reactions specially designed for the process of acquiring new customers and another specially designed for the process of developing existing accounts. Experience shows that very few salesmen have mastered the transfer of sales techniques to specific sales situations, and a clearly defined blueprint is lacking. That has incidentally nothing to do with the suppression of individuality. On the contrary, such standards are one of the prerequisites for salespeople to be able to concentrate on the sales situation and the personality of their business partner. The instruments remain to be dealt with. Certainly, CRM instruments and other customer databases head the list. Most companies are unanimous in complaining that such instruments are not actively used and are therefore not serviced. As a rule the reason is not ignorance on the part of salespeople but a failure to link the instruments to everyday sales work. However, if it is shown clearly at what stage of the selling process what information from a system can be used and in what way, the degree of acceptance of such instruments will be improved. Unfortunately, training courses dealing only with servicing these instruments and which do nothing more than explain where to enter the data are in a majority. Training courses, which show a salesman how to enhance his personal work-efficiency by appropriate use of the data are much more important. 9 „For each step of the sales process you have defined training modules, instruments or checklists“ Example of the assignment of training modules, checklists and instruments to individual phases in the process of winning new customers. Tool: Requirement profiles Tool: Telephone script Tool: Studies, salesfolder, questionchecklists Tool: Catalogue of arguments, references objections checklist Tool: Offer configurator Selection of target customers Qualifification Mailing Making appointment by telephone- Initial meeting Follow-upmeeting Offer Acquisition of a new customer Turnover per customer Salesresults Training modules • New information about target customer • Arranging appointment by telephone • Preparation of meeting Training modules • Building friendly relationship, • directing the dialogue • Analysis of requirements • creating demand Training modules • Techniques of arguing • handling objections with new customers Training modules • Developing an offer for new customers • Negotiating price and concluding deal • Follow-up Illustration 2: Assignment of training modules, instruments and checklists to a sales process 10 „You have clearly defined sales and processes/workflows“ You cannot simply go out and „sell“. Either it is a question of retaining or developing an existing account or acquiring a new customer. These are all very different sales processes which are carried out in different phases/work steps for which in part different „laws“ apply. Whereas a process-oriented approach has long been standard practice in other corporate departments, sales teams still frequently work in a far less structured manner. This is not to say that they do not have good personal sales skills. But it is more than doubtful whether they utilize their skills in an optimum way. Starting points for an (improved) process-oriented approach in sales: In the first instance the most important sales processes and their performance contribution to achieving targets (relationship input-output) should be described and evaluated. Frequently there is a marked discrepancy between capacity used and the contribution to results. Potential for optimisation frequently lies in the fact that the expensive resource sales rep is not always deployed efficiently. It is only when the sales processes are divided into individual work steps and procedures have been clearly described, that a meaningful decision can be taken whether individual steps cannot be processed more rationally by other sales functions. Communication interfaces between those involved in the sales process can also be more easily and precisely defined (Illustration 3, page 12). What makes working with sales processes additionally difficult is the fact that sales processes differ fundamentally from other corporate processes. In a sales process not files, operations or products are processed but customers who are also processed by the competition between the individual processing steps. This leads to the fact that in almost all sales processes there is a declining probability of success. At the end of the day you end up with fewer customers than the number of potential customers originally targeted. This is a production function of sales (Illustration 4, page 13). If it is not taken into account, meaningful planning of capacity and targeted activity is not possible. And without the planning of activities it will probably be difficult to recognise and counteract unwanted developments in good time. 11 „You have clearly defined sales processes/workflows“ Process optimisation by workflow structure Selection target customers Themerelated Mailing Making appointment by telephone 1. Visit Follow-up contact Offer Closing Sales reps Capacity required S External Call Center Capacity required S S S sales result Office Capacity required S S S =interface Illustration 3: Processes optimisation by workflow structure 12 „You have clearly defined sales processes/workflows“ Example of the structure and elements of sales processes Performance Indicators 20:10 Selection of target customers and qualification Making appointment by telephone Contacts: Contacts: Initial Appoint- contact Appointments ments 10:7 Initial Initial FollowContact: Contact: up Follow-up Follow-up contact contact contact 7:5 Follow-up Follow-up contact :: contact Offer Offer 5:2 Offer Offer :: Closing Closing New Customer 50 TEuro 0 Results per new customer Mailing Offer Sales results 20 Target customers identified 10 Target customer with initial contact 7 Target customer with first contact 5 Offers 2 New customers 100 TEuro Implementation Analysis/Planning Illustration 4: Sales process structure 13 „Your corporate structure fully supports cross-functional approaches“ This performance factor, like „The image of sales within your company is excellent“ factor, refers to the overall salesoriented approach of a company. As many other studies show, the salesman is being more and more transformed from a lone fighter into the manager of the “project customer”. Consultative selling and strategic partnerships are the new challenges for salespeople. More must be done than simply supplying products. Salesmen must optimize customer processes and enhance customers‘ success in creating performance. As a rule, the knowledge of the individual salesman is no longer adequate for this purpose. He needs to integrate specialists from his own company in the management of customer relations. Thus, tailor-made concepts for working with customers almost always include special ITconnections/accessibility, logistics concepts or product modifications. These requirements are reflected in the first instance in the task profile of the salesforce. This cannot always be taken for granted as salespeople stand to lose their -often carefully protected – monopoly in the relationship to the customer with cross-functional account management. On a subjective level they often experience this as a loss of power and influence. What is more, they often lack skills in the field of product management. In most companies, therefore, considerable hurdles have to be surmounted in sales in order to establish forward-looking forms of market cultivation. But even if sales are successfully coaxed in this direction, it is of no use if other structures are not adjusted accordingly. First, the other corporate functions must understand what role they play in the management of customer relations. They will frequently have direct contact to customers and must acquire the appropriate competencies for dealing with them. A further step is the creation of appropriate internal communication and work structures, whether it be the definition of cross-functional customer teams or the installation of a project-oriented organisational structure. All this only works if the control systems are adjusted accordingly. As long as, for example, product managers are only paid or assessed according to the productivity of their department, they will have no interest in producing products adapted to the needs of individual customers. Only when all those involved benefit from the improved turnover margin of such solutions and when they are measured by the market success achieved by a customer team, will the way be clear for market success. 14 „Each of your sales reps has to realise a systematic document account planning“ This factor also reflects the changing market conditions and the higher demands made on sales staff. Customers are becoming more complex and purchasing processes more professional. It is becoming more difficult for salespeople to influence customers‘ decisions. There are more and more decisions made by committees where the interests of many different committee members have to be taken into account. In addition, the salesperson often no longer has any direct contact to the committee members or decision-takers. Some companies even intentionally separate the people who have contact to salespeople from others who take the decisions. Moreover, there is now almost complete market transparency and competitive pressure increases from one year to the next. Successful companies therefore plan not only their management of the market but split their planning down to individual customers. The decisive factor in the sales success with an individual customer is above all to have the right information at the right time. It is necessary to analyse the way in which buying processes take place, what the criteria (rational and emotional) for decisions of individual influencers and decision-takers are, what their attitude to us is and what our relationship to them is like. Subsequently, it is necessary to define what decisions should be influenced, and when and how to influence them. Who can do this best and by taking what measures? This will not work on a purely rational level or informally, especially if the salesperson wishes to involve various corporate functions.. However, not only contacts, levels of contact and relationship management need to be planned. The company‘s own products and services require positioning, forecasting and producing. This is likewise not possible without planning. Who analyses when and how value added processes of the customer and the customer markets. How is this information processed, who produces a customer-specific SWOT-analysis and when does he do so? When are new offers (and which offers?) to be made to the customer (because we plan to do so and not simply because the customer requests them)? Unfortunately salespeople do not like planning and certainly not in written form. Traditionally, they prefer to rely on their spontaneous reactions in contact with customers. They feel that planning is a restriction of their personal freedom. Often they do not know what to plan and how they should go about it. When customer planning is introduced, it is therefore decisive not only to design forms, but to train salespeople and above all show them how they can manage accounts in a more differentiated and sophisticated way. Planning then becomes necessary quite automatically. Or to put it in the form of a slogan - : persuasion not pressure. 15 „Your sales reps have a high social competence“ Selling is an interactive game between people. This despite CRM systems and e-auctions. People still prefer to buy from people they like. Sadly, many salespeople often confuse social competence with flattery, exaggerated friendliness and generous concessions with regard to discounts. Instead, social competence is a reflection of the fact that a salesperson understands the social structures in a company. What relationships exist between different functions and what effect do they have on the relationship to him? What are the concerns and problems of his business partners and how can he help them? Salespeople with a high degree of social competence can integrate themselves into customer organisations, become a living part of this organisation. They succeed in taking part in internal customer meetings achieve the status of a consultant/advisor. They develop behaviour which is the very opposite of the cliché of a salesperson described above. Salespersons with a high degree of social competence are not chameleons, who say what they think their customers want to hear and avoid any conflict. They have their own opinion and may contradict the customer. They position themselves on the same level as their business partner and negotiate as equals. However, they do not do this from egoism. They are free of arrogance and always respect their customer. They put aside their own interests for a time at least, but without becoming their customer‘s advocate. Precisely at a time when there is a lot of talk of strategic partnerships, salespeople are needed who are trustworthy and possess integrity. Yesmen are to be found in less sophisticated sales situations, in which the salesperson is more of a distribution factor. It is true that he presents offers but does not focus on the enhancement of the personal success of his customer. Salespeople with a high degree of social competence do not put on false behaviour. They are nice to their customers because they like them. They have the gift of discovering an interesting aspect in almost any person, even though that is at first sight not always easy. They are not playing a role. They are not naive but they approach others without reservations. They do not attempt to manipulate them; they have objectives and know that their objectives can only be achieved jointly with others. They enjoy contact with others, without slipping into a back-slapping style of behaviour. The more technology plays a part in the relationship between customers and sellers, the fewer salespeople are required. But they need a much higher degree of social competence than used to be the case. 16 „Your sales reps are experts in their customers‘ business“ This performance factor follows as a logical consequence from the most important buying and selling trends of the last few years. Adequate productivity growth can only be achieved nowadays by the intensive integration of suppliers – or better, partners. Without their know how, development processes would take too long and it would not be possible to concentrate on core competencies. Whether as a system supplier in the automotive industry, as a category captain with the large retail chains, as a development partner in industrial manufacturing or as an outsourcing partner for services outside core competences, suppliers are always needed who have not only competence for the product but also for the customer‘s business, his markets and their requirements. However, it is not only the customers who are driving this trend. Suppliers have reason enough to offer more than perfect products. As soon as they concentrate on the enhancement of their customers‘ success, as a rule they have to offer bundled services or individual configurations, which are not so directly comparable to competitors‘ offers. Market transparency mentioned earlier is thus successfully circumvented and direct comparisons with competitors‘ offers are made more difficult or even impossible. Moreover, other value added steps are covered, opening up additional yield potential. . All this is certainly not simply the task of the salesperson but of the entire approach of the offer portfolio of a company. However, the salesperson is here too the decisive interface to the customer. He needs to retain an overview and concentrate all the resources of the company on the customer as effectively as possible. He will not manage to achieve that as a product specialist. He should be familiar with the main trends in the sales markets of his customers. What do they expect of the supplier, how will the markets change in the future. What factors will influence purchasing decisions in these markets? What does the positioning of his customers and that of their competitors look like? What are his customers good at, and what are they not so good at? It is only on this basis that a salesperson can utilize his know how and the competencies of his company to increase the performance of his customer and thus achieve a competitive edge necessary to avoid being dragged into ruinous price competition. 17 „You use e-learning to develop the sales competence of your staff“ It has already become clear that successful companies are making greater and greater demands on their sales personnel. Thus, it is not surprising that new ways of qualifying salespeople must be introduced. Those practised up to now, socalled classroom training seminars are a relatively expensive way to develop the competence of salespeople. It is not only the costs of the trainer, who can only work with a limited number of participants. Usually the costs that are not visible at first sight are much more prohibitive. Participants lose several days of valuable selling time and travel costs are usually high. It is however not only a question of optimising costs. The implementing of the course content is difficult because seminars of this kind cannot take place frequently and little time is left for practice. In addition, the hectic daily work of a salesperson often undermines all the good intentions of the participants and management is usually in no position to continue to give new impulses to extend and revise their knowledge. The actual qualification effect – or effective change - compared with the effort and expenditure – is usually depressingly slight. In contrast to product training, e-learning cannot generally be a 100% substitute for traditional seminars in behaviour training. The function of the trainer as a model, the direct experience of a personal aura cannot be really replaced by online media. However, a skilful combination of e-learning, classroom training and support in the implementation of what has been learnt may greatly facilitate the development of competence in salespeople. In this „Blended Learning approach“ factual information to be acquired is taught by e-learning modules, which are designed according to the principles of educational psychology and which build up the knowledge base in 30-minute sequences. Subsequently, the application of this knowledge in the concrete market and customer situations is discussed in classroom training and practised by means of role play. Support for the implementation of what has been learnt is given in accompanying online-supported knowledge tests, additional information, case studies and individual coaching in direct contact with the customer. Salespeople have to learn more and more in an ever shorter time. Without the use of new forms and methods of learning companies will scarcely be able to fullfil these requirements. 18 „You have implemented a customer relationship management tool “ As customers and customer relationships are becoming more sophisticated and complex far more market and customer data must be recorded, evaluated and communicated. Sales intuition must be combined with analytical approaches. Electronic systems for the processing of this kind of data are not absolutely necessary but they are often very helpful. A mistake that many companies still make is to believe in the self-regulating effect of CRM systems. Even the best CRM software cannot guarantee that data are entered or recorded and that these data are used in an appropriate manner to improve the organisation of customer relations. That only happens if salespeople also learn how working together with customers and the management of market potential can change when data are evaluated intelligently. The most important action fields are: • Status analysis: practically at the flick of a switch all the data available in the company can be concentrated in any number of reports for a customer or group of customers. The tedious and time-consuming search in different databases is no longer necessary. • Analysis of potential: Where is there unexploited potential, which customers/target customers are worth trying? Where is the probability of success greatest? In this connection potential data (e.g. sales volume) are combined with other customer data (e.g. sales structure, customers‘ requirement criteria). In addition, these data can then be compared with the data sets of other customers where the potential has already been fully exploited. • Transparency of processes: At what point are we in the selling process, what activities have been carried out, what are the next steps? What are the current success quotas like, how likely is the achievement of our objective? This is practically an outline of the production process of sales. This results in completely new possibilities of managing sales. • Customer information: Especially when several persons or functions are involved in account management, a CRM system can guarantee a uniform view of the customer. All the people involved have the same information at the same time. 19 „Your sales reps have a strong projection/charisma“ This point also refers to the personal behaviour of the salesperson. Alongside social competence and competence in the business line of his customer individual charisma and persuasiveness are among the most important prerequisites for successful selling. Despite all the complex partnership systems, the integration of other departments in account management, the structured analysis of value added chains etc, purchasing is not a purely rational and analytic process for the customer. Numerous uncertainties and risks remain. Often only the charisma and persuasiveness of a salesperson can inspire the trust and confidence necessary for a decision to be made. Whether in the development of a relationship to the customer or when concluding negotiations, even customers who decide on a relatively rational basis need to sense that sellers are convinced of what they say. In the final analysis, it is always the human factor that makes all the difference. But what is charisma and how does it arise? First of all, it is the way you look at the person you are talking to, how you handle eye contact. A salesperson‘s look and his eyes may underline and strengthen interest, concern, involvement. Ideally a salesperson succeeds in certain situations to hold a person with his eyes without staring at him. But that in itself is not enough for the projection of charisma. The second factor is the voice. It should radiate strength and energy without being unpleasant. It may make moods audible and thus experienceable for listeners. Timbre and speech tempo additionally underline what is being said and create an acoustic vibrancy. However, the third factor is even more decisive. A salesperson must develop a sense of mission, he must believe in what he says. He needs a message for his customers. When this is the case, he almost automatically develops the appropriate posture and gestures. Body language signals and the content of what is said become a unity. This results in charisma. Numerous studies show that these factors (abbreviated to EVA, Eyes, Voice, Attitude) are often more important for conveying a message than the purely factual content. This point also makes quite clear that the „traditional“ strengths of salespeople are not superfluous. 20 Results by subject fields 21 Strategy (I) The formulation of a sales strategy is the basis of successful sales. That sounds obvious but in practice it is not. Here too, there is a big gap between the Top 10% and the Bottom 10%. No matter whether the problem is that there is no clearly defined strategy, or whether the strategy is really conveyed to sales staff, the less successful companies are worse in all aspects. 85% Your sales strategy is clearly defined. 54% 72% Your sales strategy is documented in written form. 49% 72% 61% You regularly communicate and discuss your strategy with the people involved in sales. 0% 10% 20% 30% 40% 50% 87% 70% 54% 60% 70% 80% 90% 100% Illustration 5:To which extend do you agree the following statements (top 2 boxes out of seven), n= 747, more than one answer possible 22 Strategy (II) However, the existence of a strategy is not everything. If it is to have an effect it must include the appropriate statements and measures. It is not always easy to differentiate this from a marketing strategy. The following aspects should always be included: • • • • • • Targets for product and customer or market segments (often the interface to marketing strategy) Targets for existing and new customers and for the most important selling processes Definition of planned success quotas or Key Performance Indicators Definition of the necessary number of sales activities to achieve targets (contacts, offers, demonstrations etc) Use of supporting measures (customer events, competitions, participation at trade fairs, sales promotion campaigns) Organisational allocation of targets and activities (Who is responsible, and who is responsible and for what? Who is to do what when? Team structures) and definition of the communication structures in sales and in relation to other departments Control instruments and processes Meetings, processes of finding agreement, etc. Qualification measures in sales personnel development • • • Conclusion: only with a clear sales strategy which is communicated, explained and discussed can Sales Excellence be achieved 23 Market and customer segmentation Most companies nowadays segment their markets (87%) and their customers (75%). While the average of respondents and the Bottom 10% most often segment markets according to regions (69% and 71%, the Top 10% concentrate by contrast more strongly on customer requirements. In segmentation according to regions the optimisation of the amount of travelling is uppermost. In the case of segmentation according to customer requirements qualitative aspects are paramount Here it is obviously important for salespeople to be experts for certain requirement situations. „Do you segment your market according to …?“ Top 10% … regions Average Bottom 10% 56% 69% 71% 67% … customer requirements 56% 40% 57% … products 53% 54% 29% …industries 41% 43% 0% 10% 20% 30% 40% 50% 60% 70% 80% Illustration 6:To which extend do you agree the following statements (top 2 boxes out of seven), n= 747, more than one answer possible 24 Market and customer segmentation Approaches to segmentation usually reflect certain selling approaches. Thus many of the Top 10% pursue a fundamentally different selling approach from the other respondents. The more strongly a company focuses on the enhancement of its customers‘ success, the more important partnerships are in which customised bundles of services are offered, the more markets must be segmented according to customer requirements. The frequently practised segmentation by industry is not necessarily identical with segmentation by customer requirements. There are industries within which there are very different customer requirements. On the other hand different industries do not automatically have different customer requirements. Here the individual case has to be examined to see what form of segmentation really offers advantages and goes best with the selling approach. In the case of customer segmentation (Illustration 7, page 26), which is intended to help guarantee efficient deployment of capacity in accordance with the account value, the criteria do not, however, differ so greatly. In all cases the present and potential sales and the turnover margin are in the forefront. Only the purchasing strategy, the strategic fit and the reputation of the customer on the market is taken more strongly into account by the Top 10% in the assessment of the customer. Conclusion: The fact that companies segment their markets and customers, does not in itself ensure Sales Excellence. This is already standard practice. Differences lie above all in the selection of criteria for market segmentation and orientation according to the given sales strategy.. 25 Market and customer segmentation „How do you assess the value/importance of your customers?“ By turnover margin Top 10% average Bottom 10% 54 61 58 46 40 31 76 73 73 By potential turnover/margin By supply strategy By strategic fit to your own company 37 By reputation in the industry 23 By willingness to cooperate intensively 0 10 20 30 42 40 32 30 31 33 31 40 50 60 70 80 90 Illustration 7:To which extend do you agree the following statements (top 2 boxes out of seven), n= 747, more than one answer possible 26 Organisation structure and tools Here the differences between the TOP 10% and the others are even more strongly pronounced than in the previous aspects. Structured approaches are used far more strongly in working the market by the successful companies than by the others (Illustration 8/9 page 28/29). No wonder that half the top performance factors come from this category. The highlights - (see also commentaries on the Top Performance factors): • Successful sales teams structure their approach for the development of the market in the form of selling processes and plan their selling activities down to the last customer. Planning is done in written form. It can therefore be understood by a third party and makes possible a comparison between actual and intended results.. • Selling processes are not merely defined. They are flanked by coaching modules and supporting tools. • Successfully implemented CRM systems ensure that customer potential and the sequence of selling processes is transparent.. In this way selling activities can be planned more efficiently.. • Various selling functions and company departments are integrated in market development and account management to ensure optimal deployment of corporate resources.. A team selling approach is consciously cultivated both within and outside sales. The joint work processes and interfaces are defined so that the smooth transfer of information is guaranteed,. • A corporate culture exists in which all members of staff see themselves as salespersons. Conclusion: As already shown, structured approaches are not in themselves sufficient to ensure sales success. However, they are the critical factors which less successful companies practise much more rarely. In today‘s competitive markets it is becoming more and more difficult to survive on the basis of a salesman‘s intuition and gut-level feeling.. 27 Organisation, structure and tools (I) You have clearly defined sales processes/ workflows (e.g. for sales tasks like acquisition or for customer groups like Key Accounts). You have someone responsible for sales in your Management Board. For each step of the sales process/workflow you have defined training modules, checklists /instruments. Each of your sales reps has to realize a systematic written account planning process for his/her customers. You have a CRM Tool (Customer Relationship Management /Customer Data Base) implemented. You have clearly defined processes in place how sales should interact with other functions in the company (e.g. research, production, logistics). You have clearly defined processes in place how the different sales functions (internal / external service) should interact with each other? TOP 10% Average Bottom 10% 88 59 47 74 70 53 68 40 25 68 43 26 68 49 32 67 49 41 66 47 38 0 10 20 30 40 50 60 70 80 90 Illustration 8:To which extend do you agree the following statements (top 2 boxes out of seven), n= 747, more than one answer possible 28 Organisation, structure and tools (II) Team selling together with other functions is an important aspect TOP 10% Average Bottom 10% 62 45 38 62 48 45 A detailed description of the steps of the processes is documented Team selling within sales is an important aspect of your sales practise 60 47 34 57 44 26 56 40 25 43 38 33 0 10 20 30 40 50 60 70 Your customer relationship management tool fully supports the sales activities You have a sales culture in which every employee of the whole company regards themselves as a sales person You invest a lot more resources in key accounts than on other customer groups Illustration 9:To which extend do you agree the following statements (top 2 boxes out of seven), n= 747, more than one answer possible 29 Sales management Practically all companies (94%) have formulated concrete objectives for their salesforce. It is, however striking that the Top 10% often have more objectives which are also often more ambitious. Customer satisfaction objectives, objectives for the sales or profit contribution of individual products are to be found more frequently among them than among the average or Bottom 10% (Illustration 10, page 31). As a result, successful companies control their market development in a more detailed way. They can recognise and correct unwanted developments sooner and thus increase the possibility that they will, in fact, achieve their planned market positions. Control via general sales objectives for individual salespeople/teams or customers will probably no longer be enough in most markets. A product portfolio must nowadays be actively marketed. The composition of sales should not be neglected. Otherwise there is a danger that only those products will be sold which the customer demands anyway. New and innovative products must often, by contrast, be first marketed actively, sometimes initially in the face of resistance. It is only in this way that important market positions can be occupied at an early stage and good turnover margins achieved. Apart from new products the turnover margin of a product can also be used as a control instrument. For a long time product turnover margins remained a secret of the accounts department and were not used as an instrument for controlling sales. The Top 10% use them almost twice as often as the Bottom 10%, but even then only in every other case. Customer turnover margins were often not even calculated.. But more and more companies understand that sales is not only one of the decisive success factors but often also the biggest cost factor in a company. Sales costs amount to 15% of turnover. Here, the issue is not cutting costs. On the contrary – in the case of the Top 10% sales costs amount to even 30%. (Bottom 10% by contrast only 10%). Investments in sales pay off if they are properly managed. Just as an experienced investor invests his money on the capital markets where it earns most interest, a successful company must direct sales capacities where they bring the greatest return (not necessarily most turnover). Although the Top 10% already rely more strongly on control by customer turnover margin, this criterion is used by only one in three companies as a target quantity.. Conclusion: Top performance in sales can only be achieved with differentiated objectives, which allocate sales resources to the strategically important market segments. 30 Sales targets Overall turnover targets per sales rep/team TOP 10% Average Bottom 10% 57 68 67 61 Targets customer satisfaction 41 51 Turnover targets per product/ product group 56 51 38 48 41 28 45 45 39 38 38 33 35 30 21 29 30 24 70 Margin targets per product/ product group No./turnover targets per customer/customer group No./turnover targets for new customers Margin targets per customer/ customer group No./turnover targets for re-buying customers 0 10 20 30 40 50 60 Illustration 10:To which extend do you agree the following statements (top 2 boxes out of seven), n= 747, more than one answer possible 31 Sales management The most differentiated objectives are of no use if they are not translated into activities. Or to put it more baldly, we cannot manage targets only activities. A target maps out the direction and may create motivation. It will only be achieved, however, if appropriate activities are carried out in order to achieve the target. In selling there are three groups of activities, which influence the achievement of goals. Quantity of activities Examples: Customer contacts Offers Demonstrations Quality of activities Examples: Personal behaviour Directing/structuring discussion Sales targets Direction of the activities Examples: customers products arguments If, for example, better sales results are to be achieved than in the past, more customer visits must be made –assuming constant conditions – either more visits or better arguments should be used or different products should be sold. 32 Sales management The model of selling processes already introduced here also takes account of this basic model for the planning of activities. First, a certain number of activities is planned for each phase of the process. The quality of the content of these activities is reflected in success ratios or performance indicators (PIs) between the individual phases. The direction of work is usually determined by the objective of the process, e.g. new customers, a new product or the selection criteria for target customers for the process. Achieving efficient sales management is not only a question of defining the objectives of activities but also of ensuring that the activities are actually carried out and constantly evaluating their contribution to the objective. Have the activities been implemented as planned? Have they had the desired success? Which activities should be intensified or changed? Only in this way can undesirable developments be recognised at an early stage and countermeasures taken. When divergences from the target become apparent in the results it is usually too late to counter this quickly. It is precisely in this point that we have discovered a further performance factor of the Top 10%. Roughly 80% of the successful companies not only measure and monitor the results achieved in sales but also activity volumes and success rates. However, on average the rate is only around 60% (Illustration 11, page 34). As far as the management differential and variable income systems are concerned there are no differences. On average 10 employees report to a sales manager and the variable success-related element of incomes is 30%. Conclusion: Structured activities management is one of the essential prerequisites for Sales Excellence. It is not enough just to structure sales processes. If top performance is to be achieved the implementation of processes must also be measured and evaluated. 33 Which of the following figures are evaluated monthly or quarterly? offer-order-ratio number of visits per sales process number of visits per sales rep Activities value of current opportunities number of visits per customer customer satisfaction number of new customers average order size Results potential turnover per customer 57 60 60 68 62 65 63 60 61 57 58 60 70 80 56 45 73 67 65 70 TOP 10% Average Bottom 10% 57 59 81 67 59 79 65 63 79 63 61 77 81 64 62 81 margin per customer number of lost customers 0 10 20 30 40 50 Illustration 11:To which extend do you agree the following statements (top 2 boxes out of seven), n= 747, more than one answer possible 34 Sales situations Most companies are confronted with a wide variety of sales situations: There are (potential) customers to whom one has no relationship, who do not expect anything and who do not signal any requirements. If a company wishes to succeed here, it will first have to create a demand before an offer can be made. Here the decisive factor is the charisma of the salesperson and for that reason we call it „Projective Selling“. There are, however, also customers who have already signalled their requirements and who above all are awaiting an offer which satisfies their requirements as well as possible. Now the specialised competence of the salesperson and his ability to provide solutions is paramount. For this reason this is termed „Expert Selling“ . Some customers, who know a supplier well, do not simply see him as a supplier, but also as a partner. They already involve him at the stage when they identify a problem or challenge and do not wait until a problem solution has been formulated in terms of requirements. Here the important thing is the enhancement of the customer‘s success, i.e. „Consultative Selling“. Finally, there are customers who purchase regularly without basically questioning the deal or negotiating.. Here the relationship competence of a salesman is called for, this is „Relationship Selling“. The companies interviewed are also confronted with these selling situations (Illustration 12, page 36). It is striking that the Top 10% are more frequently involved in projective or consultative selling situations. They approach companies more actively with which they do not yet have a relationship and whose requirements have not yet been defined (= Projective Selling) and with certain customers they have a stronger profile as partners (= Consultative Selling). Conclusion: The more strongly a company seeks out projective- and consultative selling situations and actively moulds its markets, the more it is possible to open up additional potential, the basis of top performance in sales.. 35 Sales Situations Projective Selling Situations “First you have to create a customer demand more or less from scratch. Afterwards you have to argue in a very persuasive way“ Top 10 Average Bottom 10 Expert Selling Situations “The customer is already aware of his needs. He expects you to offer the right products and/or services which satisfy these needs“ 23,6% 19,8% 17,5% 27,8% 33,1% 31,2% Relationship Selling Situations “The relationship is established and satisfying. The customer orders regularly without querying the business fundamentally” Consultative Selling Situations “The customer is confronted with a challenge/ problem but has no idea of a solution. You have to create a really customized solution and make an appropriate offer” 23,3% 20,8% 21,1% 25,4% 26,3% 30,2% Illustration 12:To which extend do you agree the following statements (top 2 boxes out of seven), n= 747, more than one answer possible 36 Sales Competencies It has been pointed out several times that the essential factor in the development of Sales Excellence is the interaction of structured approaches and personal selling competencies. For this reason a number of Top Performance Factors referred to sales competencies. (Illustration 13, page 38) ) In the case of the key competencies for dealing with the different selling situations the salespeople of the Top 10% are assessed much more positively. It is only in the case of production competence, a more traditional salespersoncompetence that the difference is not quite so big. However, the Top 10% invest 10 days a year in the training of their salesforce while the average is only 7 days. All the companies interviewed have wide differences in performance within their sales teams. Good salespeople achieve on average 20% better performance than the poor ones. Within the Top 10% the picture is basically the same. However, if the competencies of the good salespeople and the poor ones are compared (Illustration 14, page39), again distinct differences emerge: In the case of the Top 10% the good ones are really good. They have much better selling competencies than the poor salespeople. In the case of the Bottom 10% the differences are smaller.. The Bottom 10% have greater difficulty in describing differences, they make more general statements such as „more selling talent“, „they work in a more skilful way“ which shows that the subject of sales competencies is seen in a more unstructured way, which makes it more difficult to develop competencies systematically. Conclusion: The successful companies have better salespeople for all the relevant selling situations. Although like the others they have differences in performance within their sales teams, they do have top salespeople. 37 Sales Reps` Competencies “Your sales reps have a strong projection/charisma” “Your sales reps are product experts” Top 10 Average Bottom 10 76% 55% 39% 61% 79% - 37% 51% - 28% “Your sales reps have a high social competence” “Your sales reps are experts in their customer's business” 87% 65% 46% 58% 82% - 41% 46% - 36% Illustration 13:To which extend do you agree the following statements (top 2 boxes out of seven), n= 747, more than one answer possible 38 Sales skills - compared to unsuccessful reps, very successful ones … … are better in creating rapport/ established relationship … are better in creating an offer/solution … are better in closing, follow up … are better in negotiations 32 … are better in creating a need … work more structured … are better in argumentation 30 … are better in questioning and listening … work simply smarter, more quality 39 … have simply more sales-talent 37 …work simply harder, more quantity 32 0 10 20 30 39 33 45 57 55 63 58 49 51 53 54 52 54 51 59 62 61 67 66 65 72 71 74 33 37 43 41 36 40 50 60 70 80 Illustration 14:To which extend do you agree the following statements (top 2 boxes out of seven), n= 747, more than one answer possible 39 Internal basic conditions It is easy to understand that the basic internal conditions must be OK in order to achieve top performance in sales. Apart from „excellent image of sales“, „cross-functional selling approach“ and „qualifying with e-learning“ the Top 10% also differ in that sales topics are more frequently part of their overall corporate strategy and top management is more often directly and personally involved in sales (Illustration 15, page 41). Conclusion: only when the entire company is programmed for sales can top performance be achieved. Sales Excellence is not an achievement of sales but of the whole company. 40 Companies internal conditions for sales TOP 10% The image of sales inside your company is excellent. Average Bottom 10% 39 79 51 39 79 Your companies strategy covers sales topics explicitly 49 78 Your top management is fully dedicated to the sales function (directly involved in sales). 62 55 56 You use e-learning to develop the sales competence of your sales staff. 0 10 20 87 59 Your corporate structure fully supports cross functional approaches which are initiated by sales (e.g. matrix structures). 61 30 24 30 40 50 60 70 80 90 Illustration 15:To which extend do you agree the following statements (top 2 boxes out of seven), n= 747, more than one answer possible 41 Overall Conclusion Sales Excellence is no accident but follows certain rules. In examining the results of individual countries, despite a few differences, the same global basic principles can be recognised again and again. It is, however, not simply individual success factors that are decisive. It is at least equally important to combine them appropriately, depending on the situation of the market and the company, to weight them differently and interlock them with each other.. We wish you great success and are prepared to support you with concepts, training modules and coaching – taking sales to a higher level! Please add local Mercuri contact data 42