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10 Powerful Ways To Inject Discipline Into The Revenue-Generation Process

CEOs need to push sales reps out of their comfort zone by focusing them on customers with the most potential for growth and the lowest share of wallet

6Feb

Many CEOs of middle market companies view sales and marketing functions as autonomous. When problems or inefficiencies arise in operations, finance, manufacturing or other areas of a company, CEOs zero in on well-established metrics and processes to pinpoint trouble spots and address them. However, that same kind of rigor and discipline is often absent in sales and marketing.

As a result, the CEO may be unsure of the underlying causes of disappointing revenue performance and often miss the real source of the problem. Is it the market, pricing, sales team, go-to-market strategy, or something else?

To improve performance, where should CEOs get involved? By analyzing multiple clients across several industries, we identified 10 common trouble spots that yield the greatest revenue improvement potential. By beginning with the three or four that resonate most strongly for their company, CEOs will see revenue expansion and establish a systematic approach for driving continued growth.

1. Segment the market and target high-priority customers. All customers are not created equal. Therefore, the time a company spends parsing new customers should not be evenly allocated among its prospects. Nor should it be left to individual reps to determine how to spend their time. They tend to gravitate to accounts that are most comfortable, the loyalists, and not necessarily those that will bring the most growth, such as customers where the company has a lower share of wallet. Nudge them to step out of their comfort zone.

An effective segmentation and targeting strategy identifies the most attractive customers, both prospective and existing, so sales and marketing organizations know where to focus. It also accounts for buyer values and decision-making criteria so the sales team clearly understands how to win in each segment. When salespeople understand what is important to different buyer groups - and which prospects in that group are most valuable - they can hone in on the messages that will best resonate with them, increasing the likelihood of a high-value win.

2. Develop meaningful account plans. Requiring clear action plans for each customer account with tasks, owners, and timing allows for a shared vision of what needs to happen. The account becomes a company asset, not just an individual salesperson’s asset. Many sales reps view account planning as unnecessary additional paperwork - a 'homework assignment' more about checking boxes than creating something of value. But a good account plan is indispensable in proactively determining how to grow a customer.

Sales organizations lacking detailed and effective customer account plans will struggle to focus on the right actions to grow their business. They simply wind up reacting to requests. Good account plans allow for tracking of progress and building organizational learning on what works and doesn’t. Plans facilitate coaching conversations, giving sales managers a tool to measure progress and coach strategy. In short, meaningful account plans drive revenue growth.

3. Monitor progress via a simple set of metrics. There are two important elements in monitoring: metrics and simplicity. CEOs aiming to inject discipline into the revenue-generation process must establish and track a defined set of metrics that aligns with their growth initiatives. Metrics provide a fact base about a company’s revenue performance, reveal growth opportunities, help CEOs gauge progress and guide sound decision-making. They are fundamental and must measure activity as well as outcome. Without the right metrics, companies can only base decisions on assumptions, anecdotes and outdated information, perpetuating poor revenue performance.

The second element is simplicity. Good metrics-tracking plans encompass only those data points most relevant to growth. To be effective, track only those metrics that relate directly to your growth aspirations and levers. Don’t track metrics simply because others track them or because it’s the way things have always been done.

4. Provide effective coaching and sales supervision. Putting effective sales management at the helm of sales teams has far greater impact on performance than upgrading the talent of individual reps. Great sales managers lift the performance of the entire team while a mediocre manager degrades team performance and often prompts top performers to leave.

Great sales managers know the importance of good coaching and do it consistently. In its 2014 Sales Management Optimization Study, CSO Insights found that of companies with a formal coaching process, 62.3% of reps meet or exceed quota and the organization hits 91.2% of revenue plan attainment - sharply higher than companies with informal coaching. Yet only 21% of companies have a formal coaching process identifying appropriate coaching activities (group meetings, individual meetings, ride-alongs, celebrating successes, etc.), appropriate activity cadence, and tracking across managers. About eight in 10 firms are missing out on a potent opportunity to drive revenue growth.

5. Document the 'company way' of selling in a sales playbook. Over time, every company builds knowledge about the most effective method of selling. A key to revenue growth is spreading this knowledge throughout the company so it becomes truly institutional, not just resident in the heads of a few senior people. The best way to codify and document the company way of selling is to create a playbook - a manual of best practices that provides step-by-step instructions for accomplishing the key responsibilities of different sales roles. Playbooks are living documents that provide the tools and templates to help guide thinking and activities, improve the effectiveness of the average rep, speed onboarding and training of new reps and ensure institutional knowledge isn’t lost through turnover.

6. Analyze pipeline data for a better understanding of flow rate and revenue forecasts.Tracking the pipeline of growth opportunities for both new and existing accounts is critical for the CEO and his team. It provides a leading indicator of sales performance, enables resource/ production planning and reveals the drivers of customer win rates. But many organizations lack a real-time window into the sales pipeline and a method of analyzing pipeline data that isn’t cumbersome and time-consuming. As a result, many mid-market companies are overly optimistic in estimating probabilities and forecasts.

By looking at how many new opportunities make it through the pipeline funnel, the organization can better understand how many new leads are needed in a given time period to deliver against sales goals. Tracking where leads tend to fall out of the funnel can pinpoint where problems may exist in the sales process. Identifying and addressing such leakages is essential to growing revenue.

7. Maximize selling time. How does a CEO know whether his company’s sales force is spending enough time on customer-facing activities? In almost every organization, sales teams complain of being overburdened with administrative activities, not having enough time to spend with customers. Most companies don’t have a factual basis for addressing this issue. By requiring a short study to identify how much time the sales force spends on different activities, the CEO can help the company better understand how sales people spend their days and discover opportunities to increase selling time.

A key goal in any study is to identify ways to eliminate non-value-added activities. Should the study reveal sales reps are spending a large percentage of their time on administrative activities, those activities could be shifted to sales support, freeing up more of their time for customers. Processes and responsibilities need to change to drive results. Similarly, it is important to circle back and measure that reps are using any additional time gained through this effort on customer-facing activities. Without follow-up, it is easy for the extra time to get absorbed by other low-value activities.

8. Track sales activity with a Customer Relationship Management (CRM) system. CEOs and sales leaders of companies without CRM systems suffer from a lack of visibility into customers and sales activities needed to systematically drive growth. Many middle-market companies may see these systems as too costly and complex to use and may not understand the value they provide. For instance, CRM systems enables increased sales productivity through contact management, tasks, calendars, etc.; better customer profile information; greater visibility into buying behavior; and, a more complete understanding of market penetration. For marketing, an automated CRM system provides a more complete contact database for marketing activities as well as a source for measuring the relative value of content, channels, cost per lead, etc. And for sales managers, the systems provide visibility into sales time allocation and more accurate measurement of activity and performance in sales and marketing.

CRM systems do not automatically yield the benefits described above. Those benefits are only achieved if support is driven from the top, everyone uses the system, if the information is accurate and current and if there are clearly defined metrics aligned with the desired growth levers.

9. Optimize pricing effectiveness. Pricing is one of the most effective profit-generating levers available to the CEO. On average, a 1% increase in price yields a double-digit increase in operating profit. However, effective pricing isn’t about simply raising prices - it is a complex area that encompasses many elements including base pricing, discounts, recouping cost-to-serve elements, charging for ancillary services and more. For most middle-market companies, the initial goals for pricing effectiveness should be to reign in unwarranted discounts and to get paid for customer practices that increase the cost-to-serve. Such costs include inventory carrying costs, rush orders, freight costs, customer delivery rules, technical support services and other special efforts.

Achieving these goals starts with monitoring unearned customer discounts and understanding why customers with similar volume levels are given vastly different prices. It also means developing a complete understanding of total cost-to-serve at a customer level. Most companies do not capture the full extent of cost-to-serve components and thus do not get full compensation in their prices. When the CEO can assure his company captures the right cost elements, better pricing decisions can be driven for those customers who are being over-served, either by raising prices or reducing services.

10. Align incentives with specific growth aspirations. As CEOs evolve their growth and go-to-market strategies, they need to ensure the compensation plans for the sales force remain aligned with those changes. If not reviewed and aligned, companies risk failing to incent new growth behaviors, or worse - incenting the wrong behaviors. This puts their revenue goals at risk.

The most effective incentive plans disproportionately reward the top performers; pay explicitly for growth year on year; balance the amount of base pay vs. variable pay based on the control, responsibilities and risk inherent in different roles; are simple enough for employees to directly connect their actions to their pay; and are made up of both financial and non-financial components. Like pricing, compensation is a complex area. However, by ensuring these basic elements are followed, mid-market organizations will drive the sales behaviors necessary for increasing revenues.

Sources

Article originally published in Chief Executive Magazine.

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