A study has revealed three ways in which companies can consistently grow sales faster than sales and marketing expenses – find out what these strategies are below
CREDIT: This is an edited version of an article that originally appeared on Harvard Business Review
Research has found that commercial productivity leaders systematically pursue, over a period of years, levers in three areas. They refine their go-to-market model. They raise productivity on the front line, trying to make every rep an A player. And they identify efficiencies in sales and marketing support.
Refining the go-to-market model
This entails an assessment of how to deploy sales and marketing capacity against the opportunities that will generate the highest return. Too many companies rely on backward-looking sales data and an outdated coverage model to determine how many reps they need and where to assign them. These coverage models tend to rust in place, decreasing the return on investment of the sales and marketing organisation.
It’s far more effective to rebalance account assignments based on customers’ expected future spending, creating the most suitable territories for each seller. Leading companies adjust their customer segmentation and reassign customers to more profitable routes to market, using lower-cost coverage, such as inside sales, offshore roles, and e-commerce where appropriate.
Turning every rep into an A player
To raise the productivity of individual reps on the front line, companies can call on a number of tactics. One is creating data-informed sales plays — a coordinated set of sales and marketing activities with target accounts, including tailored sales collateral and tracking to ensure that reps focus on the highest value opportunities.
Consistent training and coaching also help shorten rookie ramp-up time and improve veteran performance. Bain research has found that top-performing reps have more frequent and higher quality interactions with their managers than low-performing reps, such as weekly one-on-one sessions and regular pipeline reviews.
Making sales and marketing support efficient
Running a lean support team can produce major savings or free up operating expenses to use in customer-facing sales activities. Optimising spending on support requires finding the right digital and automation tools that will simplify complex processes.
In addition, other tactics include improving the accuracy of quotas for individual reps (set by the support team), reducing spans and layers in the organisation, and scrutinising non-selling and non-quota-carrying roles.
Productivity leaders systematically execute tactics from each of these categories. Consider how one computer app security provider refined its coverage after annual revenue growth slowed from about 40% to under 20%. The company expanded the number of customer segments and created more tailored sales motions for each segment.
It rebuilt sales territories based on the total addressable market, each customer’s propensity to buy, and the customer’s characteristics. These and other moves allowed the security provider to achieve a more than 10% lift in commercial productivity in three out of four consecutive years.
Other companies are embarking on similar journeys to unlock commercial productivity. A multinational food packaging company has begun to change its go-to-market model through several tactics. They include re-segmenting customers based on the opportunity and service needs, increasing the use of lower-cost routes to market such as inside sales and e-commerce, and pooling specialist resources globally.
Design and repeat
Besides continually revisiting a proven set of levers, what truly sets productivity leaders apart is that they take a deliberate and repeatable approach to executing the changes. Their approach has several organisational dimensions.
First, they assign a clear owner of commercial productivity, often with a dedicated role. This executive often reports directly to the chief revenue, financial, or operating officer, and has dedicated program resources. The staff help build a backlog of tactics to execute, drive progress against each one, and assist with changing processes and behaviours at every level of sales and marketing.
Veteran productivity leaders also tie commercial productivity targets into annual and multiyear planning, so that the effort expands beyond the sales group. To that end, the CRO, CFO, and COO must communicate regularly on explicit productivity issues. Revenue and sales/marketing cost targets from the CFO should reflect the expected productivity gains of the sales and marketing organisation, with a clear set of tactics to achieve these gains. And the multiyear commercial productivity roadmap must dovetail with the IT roadmap so that the company can plan the required technology investments.
Finally, a mature commercial operations team is essential for modelling sales and marketing capacity, communicating with the finance group, and creating go-to-market blueprints that are continually revised. The operations team ensures that tactics play out consistently across different geographies and business lines.
The right questions to ask in a downturn
CROs, CFOs, and COOs committed to sustaining their productivity gains will want to address a set of high-gain questions:
Does our organization know what factors drive commercial productivity and whether we are at, above, or below our targets?
Where do we need to increase productivity — and to what levels — by next year, three years, five years from now?
What tactics will combine to lay down a realistic path to the targets? Do we have the right structure, operating model, and senior leaders engaged to enable these gains?
Who is responsible for realizing the gains? Does he or she have the right reporting and communication mechanisms with leaders of finance, HR, and other functions?
Sustaining commercial productivity gains yields benefits for companies in any industry and at any stage of the economic cycle. But it’s particularly relevant in the current macroeconomic conditions because downturns rearrange the board.
During the recession in 2008–09, Bain analysis found, performance diverged sharply among almost 3,900 companies worldwide. Winners pulled away from losers and widened the profit and market-cap gap during the subsequent expansion.
The same logic applies today. A commercial productivity framework forces companies to make healthy trade-offs between top-line and cost savings actions, trade-offs that will help them accelerate past their competitors in the coming years.
Be the first to comment