Why are we leaving money on the table


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This new CSO Insights Research Brief provides sales professionals with a behind-the-scenes look at the impact of missed opportunities to up-sell, cross-sell and introduce new products and shares how to overcome some of the obstacles in realizing the full potential of an existing customer base.

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Why are we leaving money on the table

  1. 1. Call Center/Telesales Effectiveness Insights – 2005 State of the Marketplace Review Why Are We Leaving Money on the Table? Part 1 Overcoming the Comfort Zone Challenge Jim Dickie Barry Trailer Partner, CSO Insights Partner, CSO Insights Boulder, Colorado Corte Madera, California
  2. 2. Copyright © 2008 CSO Insights All Rights Reserved. Terms & Conditions Printed in the United States of America. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be produced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher. For additional information, contact CSO Insights, 4524 Northfield Court, Boulder, CO 80301, Phone: (303) 530-6930, email: jim.dickie@csoinsights.com. The reader understands that the information and data used in preparation of this report were as accurate as possible at the time of preparation by the publisher. The publisher assumes no responsibility to update the information or publication. The publisher assumes that the readers will use the information contained in this publication for the purpose of informing themselves on the matters that form the subject of this publication. It is sold with the understanding that neither the authors nor those individuals interviewed are engaged in rendering legal, accounting, or other professional service. If legal or other expert advice is required, the services of a competent professional should be sought. The publisher assumes no responsibility for any use to which the purchaser puts this information. All views expressed in this report are those of the individuals interviewed and do not necessarily reflect those of the companies or organizations they may be affiliated with, including CSO Insights, Insight Technology Group, or Sales Mastery. All trademarks are those of their respective companies.
  3. 3. Why Are We Leaving Money on the Table? Part 1 EXECUTIVE SUMMARY Picture the following scenario. You are out in the hills of California circa early 1850. You run into a miner who tells you that the previous year, while panning for gold in a river, he came upon nuggets the size of quarters. He then spent weeks tracking the source of those nuggets upstream to the point where he found the mother lode at the base of a hillside, where he then staked a claim. You then ask him how much additional gold he has taken out of his mine since then, and he says, “None, I haven’t started digging yet.” What would your reaction be? We would think he was insane. Yet that is the same behavior we see from all too many sales teams today. They work hard to find new customers and get that initial order, and then never realize the full potential of that relationship. Consider the following results from our 2008 Sales Performance Optimization survey of over 1,500 companies worldwide. When we asked participating firms to rate their effectiveness in areas related to “mining the gold” in their customer bases, we received the following responses seen in Figure 1: Figure 1 The fact that nearly one in two firms are underperforming in at least one (if not more) of these key aspects of selling should raise red flags, especially as we continue to see the economy soften. In this white paper we will explore why companies are experiencing challenges maximizing the value of their existing customers, and what that is costing them. Then, in Part 2, we will explore what firms can do to start to address these issues to motivate and support reps in their quest to maximize their performance. Questions or comments regarding the findings presented in this white paper should be directed to Jim Dickie, (303) 530-6930, jim.dickie@csoinsights.com or Barry Trailer, (415) 924-3500, barry.trailer@csoinsights.com. © CSO Insights - 2008 1 No portion of this report may be reproduced or distributed in any form or by any means without the prior written permission of the authors.
  4. 4. Why Are We Leaving Money on the Table? Part 1 INTRODUCTION Before we dive into why we are leaving money on the table, let’s take a moment to consider how much money we are potentially talking about. Is getting great at effectively cross-selling/up-selling or rolling out new products into our customer base really a big deal? Well, let’s do a little comparison and number crunching. We segmented the 1,500+ companies who took part in our recent 2008 sales performance study into two groups: those who excelled at “mining the gold” in their customer bases and those who were average or poor at the task. Figure 2 reflects the percentage of the overall revenue target that firms in each of these two groups achieved in 2007. Figure 2 If you could move from underperforming to excelling at “gold mining,” it would be worth a 9% revenue boost. Clearly this is something worth exploring. OVERCOMING THE “COMFORT ZONE” CHALLENGE So why does this disparity in performance exist? As CSO Insights has been benchmarking the performance of thousands of sales teams over the years, we have continually encountered a phenomenon that we call the “comfort zone ,” which almost always dictates how effectively even the best sales rep will sell. The comfort zone effect results from the fact that successful salespeople will inevitably figure out the right way to sell something, and as they do so they will get more and more © CSO Insights - 2008 2 No portion of this report may be reproduced or distributed in any form or by any means without the prior written permission of the authors.
  5. 5. Why Are We Leaving Money on the Table? Part 1 comfortable selling that product or service. As that comfort level increases, they will dedicate more and more of their time to those portions of the product line that they excel at selling. And that leads to a problem, because it also means they will tend to spend less and less time trying to sell things outside of that zone. A case in point was the situation we found at an insurance firm we benchmarked. The firm was the result of a roll-up of several insurance companies: selling policies for property and casualty insurance, employee benefits, director and officer liability, etc. One of the key justifications for the roll-up concept was that salespeople would become “universal reps,” selling all parts of their product line to all customers, significantly increasing the revenue from each business account. Great theory, but it didn’t happen! Why not? The comfort zone got in the way. The reps that were great at selling property and casualty insurance, which was a CFO-sale, showed little interest in selling employee benefits insurance, which was a VP of human resources sale. And the employee benefits super reps had little interest in selling director and officer liability coverage, as that was a sale to the board of directors. And so on. We ended up conducting a number of interviews of the sales team to understand why cross-selling was virtually nil. One of their best reps boiled down the issue to its base form when he told us, “Management told me what they want me to do, but they neglected to tell me why or how I should want to do it.” We need to realize that when we ask sales professionals to get out of their comfort zone, we are asking them to change, and change is not always a desirable thing to them. But we have found companies that have made significant advances in getting reps to sell broader and deeper into accounts. And they do so by ensuring that salespeople know three things: • Why they should change, • What that change entails, and • How to effectively sell something new. In our recent report titled Closing the Pay/Performance Gap, we covered the “why” in detail, discussing the issues that need to be considered in developing effective compensation plans in order to get reps motivated to try new things. In this white paper we will focus on the “what” and “how” aspects of this equation. Then, in Part 2, we will present examples of how companies are leveraging process, technology and knowledge to accomplish this sales transformation. DEALING WITH THE “WHAT” FACTOR Assuming a sales person understands what is in it for them to get out of their comfort zone, the next hurdle they need to get over is getting their arms around what it takes to be successful selling these other products or services. Here they need clear guidance into what types of prospects they should go after, and then what strategies and tactics they should utilize to get the client all the way from interested, to educated, to convinced, to closed. © CSO Insights - 2008 3 No portion of this report may be reproduced or distributed in any form or by any means without the prior written permission of the authors.
  6. 6. Why Are We Leaving Money on the Table? Part 1 Let’s start with the issue of what prospects to go after. In any given territory we see that all prospects are not created equal. In fact, in a mythical sales territory we might see a distribution that resembles Figure 3. Figure 3 With this distribution of prospects, logic says that a sales rep should focus on calling the “likely” and/or “very likely to buy” accounts before spending any time with the “unlikely” ones. This is something they clearly know for the products in their comfort zone, but it is often an unknown for things they have not sold. To help point reps in the right direction, many companies can turn to software. For example, a medical products firm we benchmarked started generating reports based on data from their CRM and ERP systems that showed their salespeople that certain classes of customers, who were already purchasing certain types of products, were also very likely to need other types of complementary products they manufactured. By having their business intelligence system surface these opportunities for the reps, they saw almost a 90% increase in attempted cross-sell activity. The next thing reps may well ask is, “What do I do with the prospects once I identify them?” Again, when in their comfort zone they know what they need to do: “What I need to do is get an appointment with the CXO. Then I need to create a sense of urgency to make this project a priority for them to deal with. I also need to anticipate that Acme will be the main competitor, and that price will be an issue unless I get them to think ‘lease’ from the beginning....” But for offerings outside of the comfort zone, the “what” of selling can be a mystery, and salespeople hate walking into the unknown. Here is where we need to turn to “liveware” for help. What is that? It’s your people. If one rep knows how to effectively sell products A, B and C, and another sales person is great at selling X, Y and Z, why can’t they become mentors for each other and help expand their comfort zones by leveraging each other’s insights? In Part 2 of this white paper series we will overview innovative and cost-effective ways to accomplish this, but for now let us share why it is a critical thing to do. Our research has © CSO Insights - 2008 4 No portion of this report may be reproduced or distributed in any form or by any means without the prior written permission of the authors.
  7. 7. Why Are We Leaving Money on the Table? Part 1 shown that firms that excel at prioritizing which accounts to focus their selling time on, and have a formal process for doing so, enjoy a 12.5% higher close rate than other less focused/organized sales organizations. And there is nothing like success to get a rep to start to sell something new again and again. DEALING WITH THE “HOW” FACTOR So your people understand “why” and they know “what;” now you have to deal with “how” if you are going to see real improvement in sales performance. How does a rep get an appointment with a CXO? How do they then surface the real customer needs? How do they demonstrate competitive differentiation? How do they create a sense of urgency? How do they sell value? This is where the rubber meets the road; now the issue is all about execution. Again, inside their comfort zone, reps already know the “how” because they have debugged the right process for selling over multiple opportunities. However, outside the zone is a totally different matter. In a world where expense was not an issue, an approach for having reps learn the “how” of selling would be to have the experts with them on each call, so they could leverage those people’s knowledge of how to effectively engage the customers. • The marketing expert would know the right features and benefits to present to the various stakeholders involved in the decision. • The product expert would know what technical product questions to anticipate and how to effectively answer them. • The finance expert would know how to handle the negotiation of terms and conditions and deal with pricing models. • The support rep would know what it would take to get the solution fully implemented, and so on. But the practicality today of making four-, six-, or eight-legged sales calls is not a viable alternative for ensuring that reps have access to the sales knowledge they need to effectively sell. Again, we will overview alternative methods for accomplishing this type of sales collaboration in Part 2 of this paper, but let’s make sure we see the value of why we need to ensure that we do so. In 2006, CSO Insights did an analysis of the impact of sales-knowledge management (SKM) on sales performance. In Figure 4 we present one of the key findings of that study: what the ultimate win rates were for companies who excelled at SKM versus those companies who were average or poor at managing that task. © CSO Insights - 2008 5 No portion of this report may be reproduced or distributed in any form or by any means without the prior written permission of the authors.
  8. 8. Why Are We Leaving Money on the Table? Part 1 Figure 4 Clearly, there is a great payback for investing in new methods of making the right information and insights available for reps to use when selling products or services outside of their comfort zone. CONCLUSION As 2008 progresses and feelings of uncertainty about the economy persist, it is becoming evident that companies need to start maximizing the value of every deal if they are going to meet their revenue targets for the year. So far we have presented a business case for why we need to mine more from the accounts we already have, and we have reviewed the roadblocks that stand in our way. In Part 2 of this white paper series, we will focus on how to support your salespeople through the smooth transition of getting out of their comfort zones. Using case study examples of what your peers in sales are doing, we will overview how to get reps to sell more of the product line to more buyers within your customer base, and in doing so, maximize the value of your customer base. Jim Dickie Barry Trailer (303) 530 6930 (415) 924 3500 jim.dickie@csoinsights.com barry.trailer@csoinsights.com © CSO Insights - 2008 6 No portion of this report may be reproduced or distributed in any form or by any means without the prior written permission of the authors.