by Tiffani Bova
Unfortunately, they rarely come up for air to reevaluate how they are selling. This means that current sales practices, processes, and organizational structure may in fact be hindering their growth more than any external factor they believe they are facing. This isn’t a new issue. There wasn’t a seismic shift in market context that made this more important today than it was a decade ago. But what has changed is the ease with which companies can now identify the areas to improve because of the advancements in technology. It used to be that we had to spend hours, days, and weeks analyzing the data, and by the time we uncovered an issue or even an opportunity, the reality had shifted.
Today’s winners need to be much smarter sellers, leveraging the advancements of artificial intelligence (AI), machine learning, customer relationship management (CRM), marketing automation, and other sales enablement and digital capabilities. They need to be willing to disrupt the status quo and fully optimize sales resources (both human and online) around various sales channels.
It’s a tall order. Companies are scrambling to keep pace with their customers’ demands, especially when it comes to the way in which they sell across a multitude of sales channels (online, off-line, mobile, apps). This changing market context has given rise to the resurgence within companies to focus more on optimizing sales, not just developing new products—that is, increasing productivity and performance with current resources (number of salespeople and selling channels) that the company has in terms of its sales operations (tools, systems, CRM) and sales enablement practices—all while leveraging technology in new ways.
What does that mean? It could be things like:
Adding more of what customers want (products available in new sales channels, promotions, recommendations, etc.).
Getting rid of what is unnecessary (reducing steps required to place an order).
Integrating online (digital) and off-line routes to market.
Leveraging more of new (sales) enablement tools (digital signatures, payment methods, mobile order tracking, etc.).
Defining the right size of a sales force (inside vs. outside, online vs. storefronts, insource vs. outsource).
Rationalizing sales coverage models (by size, industry, region).
Reorganizing around customers rather than products (like what PayPal did).
Taking advantage of both online and retail (brick-and-mortar) storefronts.
Improving training and hiring practices—just to name a few.
MIGHT NOT BE NEW—BUT IT’S STILL IMPORTANT
Why is Optimize Sales so important? Companies do two things—make things and sell things—and generating sales is the revenue engine that moves the business forward. Without sales, there is no revenue coming in, bills don’t get paid, products don’t get made, employees don’t get their paychecks—and in big-business Fortune 2,500–size companies that are publicly traded, if sales aren’t met, stock prices drop and executives, including the CEO, are at risk of being fired.
Optimize Sales is like the Customer Experience path in the sense that it should be a constant, underlying focus for any company that “sells” a product or service. There should never be a time when a company isn’t focusing on increasing sales effectiveness—it ought to be as critical as reviewing financials. As a matter of fact, if you have decided to pursue one or more paths, such as Market Acceleration, Customer Base Penetration, Customer and Product Diversification, the first thing you should do is engage in a sales effectiveness assessment to make sure you have the appropriate sales models (people, processes, and systems) in place prior to launching a new growth path.
Unfortunately, when companies are experiencing strong growth, they begin to believe that their sales efforts are infallible, and they make the mistake of hiring more salespeople to increase revenue without first looking at overall productivity. This can be a slippery slope if you aren’t careful. More headcount may in fact deliver you additional short-term value (revenue production), but it can also mask fundamental issues lurking below the surface, which ultimately manifest themselves in a growth stall. Pulling the same levers will only get you so far. Before you hire more people, you need to test and validate that your existing (sales) resources are actually performing at the optimal levels.
STORY
1
SALESFORCE
FOUR MEN AND TWO DOGS
If I’m right—and I’m convinced I am—this on-demand model will totally change the way technology is bought and sold. In other words, it’s the end of software as we know it.
—MARC BENIOFF, CEO of Salesforce.com
TODAY’S ENTERPRISE-CLASS TECHNOLOGY IS BEING sold in new ways (more self-service) and at far lower prices per unit. Shifting to a mass-market model dictates a fundamental change in how you sell things. A traditional IBM-type sales organization has almost become too slow and expensive to be competitive in this digitally driven, twenty-first-century world.
Using the old tactics to increase sales—cut prices, spend more marketing dollars, hire more salespeople—is no longer as effective as it once was. What works now is leveraging more and more of what new technology advancements offer to help improve salespeople’s productivity—gaining greater sales with existing resources as well as improving predictable and measurable growth.
In the 1990s, CRM looked a lot different than it does today. Back then, CRM software vendors operated through a product model in which clients would make large up-front purchases to operate the systems on-site.
Then Marc Benioff, at the time an employee of Oracle, had a revolutionary idea: offer CRM as a service rather than as a product, allowing customers to pay lower monthly fees rather than spending millions at the time of purchase.
Salesforce started its life in a tiny one-bedroom apartment atop Telegraph Hill in San Francisco in March 1999. Four men—Marc Benioff, Parker Harris, Frank Dominguez, and Dave Moellenhoff—and their two dogs began the “No Software” revolution, disrupting an entire industry and forever changing the software and cloud landscape.
Salesforce was betting on the future state of enterprise software. The increased demand to access CRM from various devices was the exact shift in market context it was hoping for. Salesforce had $5.4 million in revenue two years after launch, $22.4 million at three years, and $51 million after four years. But it was its “No Software” mantra and its extravagant marketing tactics that propelled the brand forward toward its now more than $10 billion run rate. Yes, its aspirations were big, but so was the market opportunity. Between 2012 and 2017 the CRM forecast netted a 56 percent increase in CAGR—that’s a growth rate anyone would want to pursue. Also, CRM leads all enterprise software categories in projected growth, showing a 15.1 percent CAGR (Gartner).
The fact that Salesforce was born in the cloud and had no “on premise” solution gave it a first-mover advantage for businesses looking to take advantage of any otherwise “too costly” investment. Salesforce was built around the one main idea—that software should be delivered 24/7 to people over the cloud by taking the benefits of the “consumer Web to the business world.” But being first doesn’t always guarantee success. Salesforce knew that it needed to be better not only at its technology but at the way it sold if it was going to win against market leader Siebel early on, and eventually Oracle (which purchased Siebel) and SAP. Benioff knew that if he was going to win against these much larger software companies, he needed to focus on building a high-performing sales culture, and he has never wavered from that philosophy.
The basic premise is that Salesforce summarily dismantled Siebel through its revolutionary software-as-a-service (SaaS) business model and its sales strategies, and it took so much market share away that by 2005 Siebel was forced to sell to Oracle. The proverbial story of “David defeats Goliath” played out in the high-tech industry.
Siebel Systems was founded in 1993 by Tom Siebel
and Pat House. Within five years, the company went from little-known start-up to a nearly $2-billion-a-year powerhouse, with eight thousand employees and a market cap of $30 billion. It was the leader of the CRM market. In 1999, Siebel Systems was recognized by Deloitte as the “Fastest Growing Company” in U.S. history, with 782,978 percent growth over five years.
CRM continues to be the fastest-growing business application market and is expected to cross $36 billion by the end of 2017. The total SaaS market is expected to reach over $75 billion by 2020 (Gartner).
By 2002, the company’s top line had stalled, the stock had fallen to a fraction of its former stratospheric level, and on September 12, 2005, Oracle signed a definitive agreement to acquire the company. The transaction was valued at a little more than $6 billion. On March 1, 2006, Siebel Systems no longer existed as an independent entity, a rather inglorious end to a once unassailable company.
SALESFORCE ON SALESFORCE: THE SALES PLAYBOOK
Since the beginning, Salesforce has set its own counterintuitive course. With a single product focus, CRM (Sales Force Automation [SFA]), its cloud-based service allowed customers to learn about it, subscribe, and get it up and running with a few clicks on their computer. No long, drawn-out sales process full of customized demonstrations, scopes of work, and price negotiations. Think about how easy Amazon made it to buy a book—Salesforce wanted to do that same thing to CRM.
Making it easy was a great start, but in the beginning Salesforce went one step further: it leveraged a concept known in the software industry since the 1980s called “freemium,” offering a free functional trial for five users for a year. It was a critical component to its “land and expand” strategy. While that seems like table stakes today, in 1999 it was unheard of. Giving away a fully functional version to five users was especially unheard of in the enterprise software market from the likes of Oracle, Siebel, or SAP. The benefit of taking this approach was threefold: it allowed prospective customers to try out the service, it got people talking about the product if they were using it for free, and it provided Salesforce with live customer feedback to help it improve its products going forward.
THE FIFTEENTH EMPLOYEE
As a start-up, hiring your first full-time sales rep is always a delicate balance. It wasn’t until Salesforce had a handful of beta customers that it decided to hire its first dedicated salesperson to help acquire additional free customers and also to convert the existing (free) customers to paying customers. This was a classic Customer Base Penetration strategy, albeit on a very small scale. Salesforce had to be highly effective in its sales efforts early on—every move they made could have incredible impact to its early growth.
Salesforce, more specifically Marc Benioff, embraced the philosophy of “How to energize your customers into a (multi) million-member sales team.” That one sentence is at the core of a sales organization that now counts thousands of salespeople on its payroll. But the founding principle of making sure customers are successfully using the product has served Salesforce well. If the customers are happy, if its sales teams are more productive, if it is able to have better predictability in the business and greater pipeline visibility, then it is more likely to grow its own business. And if it does that, it will in turn need more CRM. It was a win-win.
However, it doesn’t end there. Benioff believed that inside every customer “there was an unrealized potential.” By offering training and support, it could build a sales army that was not limited to a finite number of Salesforce salespeople but could scale to hundreds of thousands, and, one day, millions of customers who would advocate and tell the Salesforce story to other companies. If you have ever attended the Dreamforce conference, Salesforce’s annual customer event in San Francisco, which attracts over 170,000 registered attendees, you will totally understand what I am talking about. The extent to which customers advocate for Salesforce is unprecedented. It is a brand that has created tremendous loyalty among its customer base, and that loyalty has helped Salesforce grow to the size it is today—revenues have grown nearly 11,000 percent since Salesforce went public in 2004.
Optimize Sales isn’t just about making sure your internal resources are optimized and enabled with the best tools and customer insights—you must never forget about your customers and the success they will gain from using your products and services. You can’t get caught in the trap of internally focused processes and how you can constantly squeeze every last drop out of your salespeople. Instead, you must look from the outside in, so you can match customer expectations and their buying journey with how you organize, enable, train, and scale your sales force.
SALESFORCE
KEY TAKEAWAYS
Improving sales performance isn’t always about what you can do with your own internal resources; it may include your customers as well. Look beyond your four walls to uncover unrealized potential.
For small start-ups, hiring the first sales rep can be one of the biggest (early) decisions you can make. The sequence in which you do this can have implications for the business. This is a classic case of “need vs. want.” Do you need a salesperson? Or do you want a salesperson? Depending on what you are selling, it may make sense for founders to do the initial selling, so they can understand the needs of the business and the customer, which will help define what skills will be needed when it hires its first salesperson.
Great brands aren’t just looking to make a quick sale—they want to make sure customers value what it is they are buying. You want to do as much as possible in the sales process to avoid having a problem later with Churn.
In 1999, when Salesforce was founded, most software companies were using a freemium business model in a limited-time or feature-limited version to get prospective customers to try out its products. Why? So they could eliminate the cost as a barrier to entry. While Salesforce didn’t invent the concept, it put its own spin on it, going above and beyond what its competitors were doing. It offered a free, fully functional trial for five users for a year. Looking at an existing sales model from a competitor or even another industry can provide you with a starting point from which you can develop your product. Using familiar sales models in an innovative way can help differentiate you from the rest of the pack and give your customers something to talk about.
STORY
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WALMART
THE ULTIMATE RETAIL MATCHUP
The ideal way to win a championship is step by step.
—PHIL JACKSON, American basketball player and coach
IMPROVING SALES PERFORMANCE DOESN’T ALWAYS mean that companies must have traditional “sales representatives”—read: “humans with the title of ‘sales representative’”—to optimize. Optimize Sales operations now has an equally large component that focuses on the various sales, “routes to market,” or channels that customers want to leverage and transact with.
No longer can companies strictly compete within a single buying channel (online or off-line) or sales model (face-to-face, retail storefront, phone, catalog, partners, etc.). Combining online and a retail storefront as an example is table stakes for many, if not all, companies that sell a “product.” Remember, Sears owned the catalog channel and then combined it with storefronts, but it chose not to keep up with the changing market context to invest in online and e-commerce, at its own peril. It discontinued the catalog without thinking about the role it played for customers during their buying journey—albeit now online.
Given all of the technological changes of the last twenty years, it is easy to forget that at the end of the twentieth century, giant retailer Walmart was considered almost unstoppable. Through relentless expansion, revolutionary innovation in supply-chain management, and a tight focus on pricing, Walmart had all but destroyed many smaller retailers—and put considerably more buying power in the hands of America’s lower-income and middle-class citizens. It was widely assumed that Walmart had estab
lished a new, hugely competitive, and operationally efficient retail paradigm that might be impossible to top for generations.
Yet, that dominance has lasted fewer than twenty years. Today, Walmart, even with its 2.3 million associates, 11,695 stores (as of January 2017), and clubs in twenty-eight countries, operating under sixty-three different names and having amassed 260 million customers, is beset by other, equally efficient giant competitors—notably, Amazon. It’s not hard these days to find retail industry analysts making predictions about Amazon’s impact on Walmart using the same language they used to use about Walmart’s impact on “Main Street” all those years ago.
How is that possible? What happened was customer-facing technology; notably the Internet and e-commerce empowered a much more connected, demanding, and educated buyer, who was finding an easier sales experience and selection online than in brick-and-mortar storefronts. Now Amazon was knocking on Walmart’s door—and the retail giant had to decide whether to hunker down and hold on to its market as long as it could, keeping the status quo (as we saw in Path 2 on Sears), or figure out a way to fight back and stay in the game. And if it was going to do the latter, having already perfected the supply side of its business, and carrying an immense brick-and-mortar inventory of more than eleven thousand stores worldwide, any solution was going to have to come from rethinking how the company served its customers. In other words, it would need a revolution in its sales practices.