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2010.sbps.business services

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  • 1. Business ServicesBy Leff Bonney, Professor of Marketing, Florida State University analyzed using statistical techniques to detect differencesAfter reviewing the data from the 2010 Miller Heiman Sales between the 2009 and 2010 survey data and to look for majorBest Practices Study, it appears the main challenges facing differences in the responses from business services staff andthe business services group are quite similar to those of 2009. staff representing World-Class Sales Organizations. This typeThe down economy continues to apply downward pressure of analysis yielded interesting insights as to the state andon business services companies in terms of pricing strategies trends in the business service sector. It also provided someand general financial performance. Like last year, business interesting insights into the ways that business services firmsservices customers are applying commodity buying strategies may be able to overcome the apparent commoditization of theto these services and it appears that business services sales services that they provide.personnel are at a loss when it comes to formulating effectiveselling strategies. Unfortunately, the down economy is continuing to hurtThe business services industry is made up of firms that business services firms with general financial performancespecialize in support services for commercial businesses. decreasing from the 2009 to 2010 versions of the MillerExamples of the type of firms operating in this industry include Heiman study. In 2009 it appeared the business servicescommercial document management companies, staffing firms firms were showing very low growth across the spectrumand facilities management. There were 140 business services of performance metrics indicating the these firms were stillrespondents who completed the 2010 survey. showing some positive performance in 2008-2009. However,Two research methods were employed in generating this now these same firms are beginning to see actual declines inbusiness services report. First, interviews were conducted with key performance measures. For example, the average sale persales representatives and managers working in the business customer in 2009 was flat compared to the previous year but inservices sector. The interviews were analyzed looking for this year’s study business services respondents indicated thatspecific trends or patterns. Second, the hard data obtained sales per customer were down 1-5 percent. In some sense,from the 2010 Miller Heiman Sales Best Practices Study was this is a logical progression of events given the slow recovery
  • 2. in the general economy. Services tend to lag product declines reported lower quota achievement compared to most of thein that business services are often seen as key aspects of other industries reported in the 2010 Miller Heiman Sales Bestdoing business that cannot be reduced as easily as product Practices data. However, this could also be due to a slowexpenditures. However, it appears that as the economy response of business services firms to the downward pressurecontinues to show little to no growth, service expenditures are of the economy and the fact that the industry was still showingfinally beginning to decrease on a per customer basis. signs of growth in late 2008 resulting in unachievable quotas in the following year. Regardless, it represents an area of concernThe interviews with business services managers reinforced for business services firms.this idea as one manager indicated that their customers arebeginning to apply more traditional, commodity purchasing In terms of customer retention and growth, the businessprocesses and procedures to business services purchasing. services sector is in a holding pattern. 2010 respondents“Things are changing quickly. It has been a long time since indicated that customer retention was flat compared to verywe made sales calls on purchasing managers, but in the last low growth in 2009. The same pattern exists for new accountcouple of years, we have had to build relationships with the acquisition and the number of qualified opportunities/leads;purchasing department. We are also having to comply with 2010 shows no change in new accounts and leads whilemore stringent purchasing requirements which unfortunately 2009 showed slight growth for these two important metrics.means more bidding on projects compared to years past,” In summary, the business services sector can best besays Bill, a manager at a major business services firm in characterized by no growth in new customers and holdingTallahassee, Florida. steady with current customers. Downward pricing pressure however, has eroded sales per customer resulting in lowerFurther analysis of the 2010 data supports the centralization of sales revenues for business services organizations in 2010purchasing processes of business services clients. Differences compared to slight growth in revenues in 2009.between the 2009 and 2010 data show that business servicessales reps are dealing with fewer decision makers. Likewise,the smaller buying center uses more stringent selection As previously mentioned, the analysis of the 2010 data includedcriteria in the purchasing process. In 2010, business services a review of the perceptional gaps between business servicesrespondents were more likely to say that customers required respondents and respondents from companies identifiedformal ROI calculations in purchasing decisions than in 2009. as World-Class. Specifically, a group of high-performingA business services sales representative interviewed for the companies was used as a point of comparison and labeledstudy said, “We are getting pretty beat up by the purchasing “World-Class Sales Organizations.” A robust system forprocess. Our customers are asking for bigger discounts which determining World-Class Sales Organizations was developedwe are giving without much upside for us other than we get based on complex factors that contribute to revenue growth.to keep a customer.” Again, the survey data supported this To be considered as a World-Class Sales Organization,in that more 2010 respondents indicated that they are giving companies were evaluated based on an algorithm thatprice concessions while getting less in return compared to incorporates their activities in each of the six sales elements2009 respondents. Ultimately, this is beginning to spill into covered within this survey. Additionally, these sales elementsrep quota achievement as business services respondents correlate to superior sales performance. Once all World-Class
  • 3. Sales Organizations were identified, comparisons to business World-Class Sales Organization respondents said that theirservices firms across all aspects of the survey were made. performance review process includes a coaching element.The largest gaps between World-Class firms and business This is more than two times the number of business servicesservices firms were identified as a means of highlighting respondents with only 39 percent reporting that their firmmajor areas for business services firm improvement. included coaching elements in performance reviews. Finally, World-Class respondents were 3.5 times more likely toThis comparison method revealed two major areas for say that the sales meetings effectively reinforced the salesimprovement that business services firms may want to process than sales staff representing business servicesconsider in the near future. The first theme relates to managerial firms; 82 percent for World-Class firms versus 23 percentsupport of business services sales representatives. The data for business services firms. From the analysis, it seems thatfrom the survey revealed that sales managers from World- World-Class firms are achieving superior sales performanceClass Sales Organizations spend more than twice as much in the down economy by leveraging the talent and knowledgetime coaching reps compared to managers from business of their sales managers via a more conscious effort to coachservices firms. Respondents from World-Class firms the sales force.indicated that their sales managers spend 40 percent of theirtime coaching sales representatives compared to business The second area that business services trail far behindservices sales managers who spent just 15 percent of their World-Class Organizations is in the level of coordinationtime coaching sales reps. Similarly, nearly 90 percent of all across key groups within the company. The biggest indication that business service firms lack a coordinated response to the commoditization of their services is in the alignment between sales and marketing. Close to 90 percent of World- Class firms indicated that sales and marketing were aligned 35% 90% versus just 25 percent of business services firms. Another indication of poor coordination between the marketing and sales functions is found in business services firms’ inability to put together a coherent, formalized value proposition necessary to satisfy more sophisticated services buying 22% 84% 31% 90%
  • 4. centers. Eighty-nine percent of World-Class Organizations switching to other service providers.” The analysis of World-indicated that they have a compelling value proposition versus Class and business services firms demonstrated that there36 percent of business services firms. is a direct correlation between sales manager coaching and coordinated actions across the firm and being able to getThis lack of coordination not only exists between marketing and value in return for price discounts. This is evidenced in thesales in business services firm, but also between sales reps fact that high levels of coaching and coordination led to 60and upper management. Seventy-five percent of respondents percent of World-Class firms reporting that they are able to getfrom World-Class firms indicated that there was a formal value in return for price discounts. In contrast, the low levels ofprocess for engaging upper levels executives in the selling coaching and coordination led to only 18 percent of businessprocess. This is three times more than business services firms services firms reporting that they are able to leverage theirwhere just 22 percent of the respondents said that there was a discounting efforts.formal process for executive-to-executive selling in their firms.In firms where the executive management team is not involvedin direct selling efforts, managers will often still be involvedin evaluating deals that sales representatives are pursuing.One way that upper management exerts influence on deal- 17% 57%making is by setting established procedures for investingin large deals; more importantly, by setting procedures forwhen to stop investing in large deals. The heavy emphasison established procedures for working on large deals is yetanother area where World-Class firms outpace the businessservices group at large. Fifty-seven percent of World-Classfirms reported having established procedures in place for Another key aspect to overcoming pricing pressure is to lookinvesting in large deals whereas only 21 percent of business for non-traditional customers who may not be as familiar withservices firms reported having similar procedures. the business services industry as traditional customers. Again, the impact of manager coaching and coordinated action inThe two themes, managerial support and coordinated reaching out to non-traditional markets was assessed in bothresponses to changing markets, are key drivers that can the World-Class and business services groups. Like leveragingreverse the effects of downward pricing pressure. Regardless discounts, coaching and coordination were directly correlatedof the industry, when faced with downward pricing pressures, with success in selling into non-traditional markets. The endfirms should try to leverage price discounts into something result was that World-Class firms were roughly twice as goodthat provides some value in return. An example of leveraging at moving into these new markets as business services firms.pricing discounts is to get longer time commitments from These results suggest that business service firms shouldcustomers. One manager interviewed for the study mentioned, strive to get managers more involved in guiding sales reps“We have not been doing a good job with asking customers into new markets and that marketing staff and the executiveto agree to longer-service agreements despite the fact that management team should also become active participants inwe continue to offer lower prices to keep the customers from the effort to sell to non-traditional clients.
  • 5. leaving the printing firm to work for a major pharmaceuticalThe business services industry is not immune to the negative company where he served as a senior sales representative. Ineffects of the down economy. As revealed in this year’s Miller 2003, he returned to the University of Georgia where he earnedHeiman Sales Best Practices Study report, business services his master’s in Business Administration and in 2004 he enteredfirms are experiencing downward pricing pressure from the doctoral program at the University of Tennessee-Knoxvilleestablished clients with no growth in new accounts. The end where he received his PhD in marketing.result is an industry whose firms are faced with decreases inoverall revenue. However, as demonstrated by World-Classfirms, business service firms may be able to offset some of The 2010 Miller Heiman Sales Best Practices Study is thethose negative effects by becoming more adept at leveraging seventh annual effort to determine the broad challengesthe price discounts they offer to established customers. currently facing the sales profession. The respondents includedBeing able to move into non-traditional service markets is an in this report are limited to those who are selling in whatadditional avenue for overcoming the performance challenges Miller Heiman has defined as a complex selling environmentin the business services industry. To accomplish these two - those who are required to influence multiple decision makersstrategies, the data shows that business services firms should in what is typically a long sales cycle. Looking at the salesencourage more active coaching of the sales force from organization in six main areas, study participants were askedfront-line sales managers and more disciplined, coordinated to respond with their level of agreement regarding 51 criticalactions from other groups such as marketing and the upper sales activities. This report is specific to responses from themanagement team. business services industry, which included 130 participants.Leff Bonney The survey was designed as exploratory research to collectLeff is a professor of marketing at Florida State University. He primary data using a structured design. Formal statisticalspecializes in B2B marketing with research interests including procedures were used to analyze the data. Such proceduressales force integration into other organizational functions and included exploratory factor analysis, reliability analysis,sales force innovation. Leff has authored articles appearing in regression analysis, and frequency analysis. This is the seventhThe Journal of Marketing Theory and Practice, The European year of this study.Journal of Marketing, and Industrial Marketing Managementas well as other leading academic publications. In addition to After the broad issues and metrics were reviewed, the instrumentresearch, Leff teaches in the Florida State University Sales was subjected to a pretest. The final instrument contained sixCenter (www.fsusalesinstitute.com) which has won numerous sales elements and a customer environment section with a totalawards for its sales education and training. of 51 closed-end questions based upon a 7-point Likert scale forPrior to returning to academia, Leff spent nearly 10 years in sales responses of Strongly disagree, Disagree, Somewhat disagree,and sales management. He started his selling career as a sales Neutral, Somewhat agree, Agree, Strongly agree. Fourteenrepresentative for a large commercial printing company. Leff metric-type questions were included in this study. Finally, sixheld several positions in sales and sales management before demographic questions were included.
  • 6. Data for this study were collected from late-September 2009 Busines Services Titlesthrough late-October 2009. C-Level Executive 13 President/GM 14 Sales VP/Director 37Responses were solicited globally from sales professionals Sales Manager 22who are currently or have been in contact with Miller Heiman. Sales Representative 15However, the study was not limited to Miller Heiman clients. Marketing 3We actively pursued a cross section of participants, industry Training 13and geography, for the study from a variety of databases. Human Resources 2The comparisons provided in this report include World-Class Business Development 22Sales Organizations compared to business services sales Account Management 9organizations in the study and perception gaps among C-level, Sales Operations 2sales management, and sales force positions. Business Services Size of Deal $0 - $5K 19The large number of responses to this survey adds to the $5K - $25K 39previous six years’ momentum and validates that this is one $25K - $100K 35of the most comprehensive and statistically reliable research $100K - $250K 20efforts on sales effectiveness done to date. More than 25,000 $250K - $500K 13sales professionals have participated in these studies to date. $500K - $1 million 5 $1 million + 19The substantial number of responses received for this year’sreport was from a broad cross-section of industries, positions, Business Services Sales Geographiesand company sizes. Respondents included in this report are North America 63%only those who are in the complex selling environment, defined Europe 24%as needing to influence three or more people in the sales cycle. Australia 6%(In addition, this self-reported factor was cross-validated within Africa 1.5%the study.) Of over 1,992 total responses, 1,502 responses met Latin America 1%the criteria of “complex selling environment.” Other 4.5%