Selling Strategies from the Top

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Selling Strategies from
the Top is a must read
for anyone involved in
professional selling and
sales management. By Rob Hartnett

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Selling Strategies from the Top

  1. 1. Selling StrategieS from tHe toP Selling Strategies from the Top is a must read for anyone involved in professional selling and sales management ComPiled by rob Hartnett Contains valuable information for today’s market whether you are a small business selling to big business or a large business involved in complex sales
  2. 2. Selling Strategies from the Top Contents 4 Contributor Biographies 7 Introdu n Rob Hartne 8 One – Strategies for Senior Managers 8 Secrets of Winning Sales ons Rob Hartn 16 Muscle Building the Sales Team Sam Reese* 18 Strategic Customers as Corporate Assets Bob Miller* 29 Involving Exec s in the Selling Process Tim Call* 33 Two – Strategies for Sales Managers 33 How to Forecast Accurately Bob Miller* 43 Weekly Forecast and Deal Status Calls Damon Jones* 46 Learn from Losing Bill Golder* 49 Leveraging Sales Talent Miller Heiman* 55 Three – Strategies for Sales Professionals 55 Sales Messaging for Success Rob Hartn 59 Improve Your Prosp Techniques Miller Heiman* 62 Phone Prosp Strategies Miller Heiman* 64 Are you being Outlistened? Rob Hartn 66 Are you really losing on price? Rob Hartn 68 for Win-Win Miller Heiman* 73 Info n on Miller 75 Info n Selling Strategies Int l 76
  3. 3. *Miller Heiman Inc  Copyright by Miller Heiman, Inc. All rights reserved. No part  of this report may be reproduced in any form or by any electronic  or mechanical means including information storage and retrieval  systems without written permission from the publisher.  Publisher  Miller Heiman, Inc.  10509 Professional Cr., Suite 100  Reno, NV 89521  877‐678‐3389  www.millerheiman.com    **Selling Strategies International  Copyright by Selling Strategies International . All rights reserved. No part  of this report may be reproduced in any form or by any electronic  or mechanical means including information storage and retrieval  systems without written permission from the publisher.  Publisher  Selling Strategies International  Suite 156 66 Kingsway  Glen Waverley, Victoria 3150  61 3 9560 1188  www.selliingstrategies.com.au   
  4. 4. Contributors    Rob Hartnett  Rob Hartnett is the Managing Director of Selling Strategies International  and a thought leader in sales, marketing and leadership in Australia. He  has won numerous awards for sales and marketing leadership and is the  author of several books in this area. Rob is also known as an  inspirational and entertaining speaker on sales performance & business  growth.     Sam Reese  Sam Reese has led Miller Heiman to its position as the foremost thought  leader and innovator in the strategy, process and training that drives  sales performance. Since he joined the company in 2000, Sam has grown  Miller Heiman’s revenue by more than 150 percent, expanded product  offerings and e‐learning initiatives and amassed a partner network of  world‐class sales consultants. His passion for achieving results has  inspired individual team members to strive for top performance, and has  contributed to a culture based on ethics and integrity. Prior to joining  Miller Heiman, Sam held executive leadership positions at British  Telecom, Kinko’s and Corporate Express. His experience and success in  sports, business, technology and leadership give him a unique  perspective on what it takes to win in today’s competitive business  environment.    Bill Golder  Bill Golder has extensive sales and sales operations experience working  within complex, multi‐channel,matrix management organizations. His  primary expertise is leading business‐to‐business sales of professional  services, as well as multi‐unit operations management. He has proven  success in leading key change initiatives related to sales compensation,  organizational realignment, sales optimization, training, product  development, and operational improvement. His key strengths are in  driving results, developing and implementing strategy, and managing  and leading sales teams. Bill has a reputation for taking on tough  assignments and successfully turning around difficult situations    Tim Call  Tim Call brought to Miller Heiman impressive experience as a top‐ performing sales manager with a strong track record of sales leadership  04
  5. 5. resulting in double and triple digit percentage increases in revenues.  Tim’s experience includes both B2B and B2C sales management in large  company and startup environments. He maintains a proven record for  closing large, complex deals and has a sound reputation for strong  customer orientation. As executive vice president, Tim leads Miller  Heiman’s efforts and works with the sales vice presidents and sales  consultants to develop stronger and more productive relationships with  the company’s accounts. Tim received his Bachelor of Arts in Business  Administration from the University of San Diego, California    Damon Jones   Managing Director, Strategic Accounts  Damon Jones heads Miller Heiman's global strategic accounts program.  In his role, he develops and implements the strategy behind Miller  Heiman's growing business within existing accounts. Since joining the  company in 1999, he has been instrumental in establishing a strong  international presence for Miller Heiman. His previous roles in the  company included COO, president and managing director of  international, and vice president of international sales.    Damon has more than 25 years of industry experience covering all facets  of business and sales management. His involvement with Miller Heiman  began while at Guardian Royal Exchange Assurance, where he  implemented the Strategic Selling® program as part of an innovative  move to relationship marketing. During his tenure there, the company  saw sales revenues double and sales expenditures cut in half. Damon's  background includes account management, sales management, and  group sales training management.    Robert B. Miller  Thirty years ago, Bob Miller developed and introduced  Strategic Selling®. Since then, his passion for elevating the role of the  sales profession has resulted in several additional methodologies, all of  which are incorporated inThe Miller Heiman Sales SystemTM. He  continues today in a consulting and advisory capacity, focusing primarily  on product development. His mentorship drives innovations in sales  performance that are consistent with the vision for the company he  started three decades ago. 05
  6. 6. About Selling Strategies Interna�onal Selling Strategies Interna�onal are Australian based Sales Performance Specialists to Business. As Miller Heiman accredited sales performance consultants Selling Strategies Interna�onal consult, design and deliver sales performance strategy and training solu�ons to clients in Australia and overseas. Selling Strategies Interna�onal Suite 156 66 Kingsway Glen Waverley, Australia 3150 Ph 61 3 9560 1188 rob@sellingstrategies.com.au h�p://www.sellingstrategies.com.au About Miller Heiman Inc Miller Heiman has been a thought leader and innovator in the sales arena for almost thirty years, helping clients worldwide win high-value complex deals, protect and grow key accounts, manage talent and op�mize sales strategies and opera�ons.With a pres�gious client list that includes Fortune 500 clients, Miller Heiman helps companies in virtually every major industry to build high performance sales teams that deliver consistent sustainable results to drive revenue Miller Heiman Corporate Headquarters 10509 Professional Circle Suite 100 Reno, Nevada 89521, USA Miller Heiman Europe Nelson House No 1 Auckland Park Milton Keynes MK1 1BU, England Miller Heiman Asia Pacific Level 2 12 Waters Road Neutral Bay NSW 2089 Australia h�p://www.millerheiman.com 06
  7. 7. Introduction This is eBook is for those who employ, manage or earn their income as sales professionals. The specific market for this eBook are those involved in complex business to business sales whether they involve products, services or a combination of both which is most common today. You don’t need to work for a large organisation however the content is focused on those that sell to large organisations. Sales is a noble profession. Professional selling often takes a number of different forms depending upon the selling organisation, sales cycle and customer base. You might be familiar with such terms as business development, pursuits strategy, strategic account management, key account selling and the like. However what these all have in common is the word professional. When we think of a professional be it a doctor, lawyer, sportsperson the one thing they all have in common with selling is that without constant and relentless focus on continued learning and study you will not be successful. Unlike the professions of medicine, accounting and law sales does not have a professional body that insists on professional development to maintain your credentials. It is a profession that leaves this to the individual and their employer and this is why true professional selling requires the skills of determination and most importantly discipline. This eBook features some of the most qualified professionals in sales performance from the worlds number one sales performance company Miller Heiman. Much of the content is based upon the continued and contemporary global research of Miller Heiman. The eBook is broken into three sections. Section one is for senior executives and business owners, Section two for professional sales managers and Section three for professional sales people. However all three sections are valuable for anyone involved in the sales process in their organisation. Good reading and may your selling always take a professional approach. Here’s to win-win outcomes every time. Rob Rob Hartnett Managing Director Selling Strategies International Melbourne, Australia 07
  8. 8. Secrets of Winning Secrets of Winning Sales Sales Organisations Organisations What are the habits of Winning Sales Organisations and how can you acquire them by Rob Hartnett, Managing Director, Selling Strategies International Rob Hartnett, Managing Director Selling Strategies International Every year for the past five years, Miller Heiman a leading sales performance company has surveyed sales professionals – executives, leaders and representatives – to better understand what differentiates the most effective sales organisations. This global study contains the input of more than 17,000 participants to date and is considered the world’s largest ongoing study of complex, business-to-business selling and sales management practices. Importantly 46% of the respondents were in sales management/leadership positions with the balance spread between senior executives 12%, sales people 32% and human resources, learning & development roles making up the balance of 10%. Winning Sales Organisations (WSO) are defined as: • 20 % or more growth in average account billing • 20 % or more growth in revenue compared to previous year • 20 % or more growth in new account acquisition Of the total number of organizations who submitted information for the 2008 survey only 7% made the cut of exceeding in all three areas above. While there are a number organisations that focus on sales methodologies more than others key industries that seem to do well as a group are Financial Services, Health and IT&T. Due to the size of the financial services industry in Australia I have provided some additional comments as they relate to this important industry category. 08
  9. 9. Customer Centric Systems WSO’s excel in the following key areas which are represented in the diagram below. Firstly they have the customer at the centre of everything they do. This is not a clichéd statement. WSO’s understand their customer, their customers customer, their customers competitors and their customers key industry issues. Secondly they also have sales systems that are scaleable and transportable meaning you can move within divisions or offices and use the same sales systems which ensures consistency and leads to improvement in critical areas such as sales forecasting. WSO’s have systems for creating opportunities, managing opportunities they deem worth pursuing and systems for managing relationships once they have won the account they desire. This is very important in today’s business world where people are more transient than ever which often results in key account knowledge walking out the door. WSO’s also have a consistent approach to protecting and growing their strategic accounts. This goes way beyond just organising the sales process. WSO’s align key stakeholders, such as sales, marketing, product management, and finance with the strategy. With global organisations this can become a challenge to ensure global teams are not frustrated by the competing priorities of local country managers however with global executive sponsorship of the sales approach this can be overcome. At financial services organization Allianz, they aligned their processes this way, “Prior to 2003, our four distribution divisions had each adopted their own approach to selling. We recognised that to grow the business we needed to break down our divisional silos and develop a consistent approach to sales and fulfilment that sat across the whole organisation. The process of standardisation initially focused on four key areas: rewriting job descriptions for key sales roles; reviewing reward and recognition systems; streamlining the Account Management process and introducing interpersonal skills training for all sales people.” 09
  10. 10. An implication for financial services organisations is to maximize vast amounts of customer information to create more effective sales cycles. This means an alignment of CRM systems with consistent sales process and methodologies so they act in a seamless way which today thankfully should be a thing of the past for those using leading CRM tools such as Salesforce.com or Microsoft Dynamics for example. Internal Systems & Processes Thirdly they have extensive internal systems that focus on ensuring their organization and importantly the people that work within their organization in many cases the biggest assets the organization has are surrounded by a culture that ensures they can deliver the best results to their customers. The Miller Heiman Sales System™ 10
  11. 11. A Formalised, Compelling Value Proposition According to Tim Call, Miller Heiman’s executive vice president of strategic accounts, “today buyers are more sophisticated; they’re bringing in more salespeople, comparing them, and saying, ‘The only difference is price.’ What we are seeing is commoditisation taking place more than ever especially in competitive areas such as financial services. Therefore creating a position far removed from the perception of being a commodity is a key strategy companies should use to protect themselves from profitability erosion. So it is surprising that while 62 % of WSOs report having a “formalised value proposition that is very compelling to our prospects,” only 34 % of all other organizations say they have such a value proposition. WSOs announce their value propositions, distribute them, print them, talk about them, and remind sales representatives of them at every step in the sales process. Today there is even technology available that allows key sales messages to be made available enterprise wide via rich media to ensure that from the C-level to the street the same key messages are being used and I expect financial services to be one of the first industries to utilise these solutions such the example below from Corporate Visions Inc. 11
  12. 12. Sales Cycles are Involving More People While most respondents said they must persuade four to five people in the typical sale, more than a third report that they need to persuade six or more people for each opportunity they pursue. The number of decision makers involved with each sale shifted up by 16 % compared to last year’s study. The reason for this increase is the buying process is becoming more complex, more technical and often include procurement departments often consult back to IT or other specialist areas of the business when they make buying decisions. Secondly, in today’s economy, buying decisions are being escalated up one or two management levels.. According to Bill Golder, Miller Heiman’s executive vice president of sales, “They’re getting better at internal collaboration in decision making.” That not only means more people involved, but more knowledgeable people. Get Accurate Feedback In 2007, less than one-third of respondents agreed with the statement, “Win or lose, we get accurate feedback on all proposals from our customers.” 12
  13. 13. In 2008, the figure decreased to 26 %. It is not easy to go back and get feedback from someone who has just rejected you. But it is definitely worth pursuing. You need to take a long term view to major accounts so you learn what the issues are and you can leverage this knowledge into new opportunities. In 2009/10 this is even more important, even when you win. You may be surprised why you won! Sales and Marketing Alignment Forty-three % of C -level (CEO/CFO/CSO/CMO) respondents agree that, “sales and marketing are in alignment in what our customers want and need.” But only 25 % of salespeople agree. This is a major gap. Call suggests that this perception gap occurs because organizations don’t always define the terms they use to describe events. “It’s easy for sales to say, ‘The lead wasn’t qualified,’ and for marketing to say, ‘A good salesperson could have closed that sale.’ This is because they may not be on the same page regarding the definition of a lead.” Or they may not have a system in place to get true data about the quality of leads. So how do WSO’s do it differently? The most successful companies have a strategy and a market focus that is customer-driven, based on customer-response surveys or even regular discussions with salespeople about customer needs. In high performing organizations, the sales and marketing teams know each other, talk, meet, and understand each other’s business.” Leverage Best Practice WSOs are 110 % more likely than other organizations to leverage the best practices of their top performers to improve everyone else’s performance. Yet, less than 50 % of WSOs do this. These findings suggest there is room for improvement across the board in this vital area. What is interesting in many industries and especially financial services is the amount of money spent on technology solutions such as CRM which often dwarf the money spent on analyzing what makes 13
  14. 14. great sales performers despite the fact that there are today many profiling tools that can make this exercise simple and easy to execute on a regular basis for most organizations. This is especially intriguing when most C-level people acknowledge that sales people are a particular breed and there are two distinct types. The 'hunters' are intuitive, passionate and often neurotic who focus on winning the next deal and then move on, whereas the 'farmers' befriend the customer and focus on building long-term relationships. Benchmarking the best in each area would undoubtedly show a different make up of person yet as the research shows it is rarely done. The key is to find out which of your sales team should be on which account and then to find a way to manage and reward the hunters and farmers differently and to create a structure that capitalizes on the strengths of both types and then train them accordingly. Few companies do this effectively because of the potential political battles that may arise. How does the world of sales vary? While only 3% of respondents were from Australia and country specific data between respondents is not available at the time of printing there are some differences between regions. In the North America training sales training is seen as a mandatory requirement especially training in a robust sales methodology for winning or retaining key accounts. In Australia based companies sales training tends to be more common around the “21 Techniques to Closing” variety where organisations are looking for a quick fix. This long term approach was also reflected in the induction processes of global companies for new sales people. For example global WSO’s were most likely to have formal sales methodology and processes training, CRM Training and a likely career path communicated to new hires before they even hit the streets. Regular benchmarking for overseas companies against their competition was a common practice compared to Australian organisations. 14
  15. 15. Another area of difference was that of training in channel or dealer management. In North America & Europe there is more of a focus on developing channel sales managers to understand the dynamics of channel members and how developing them as profitable businesses is to the benefit of the suppler. In Australia and Asia especially, channel managers are often those from strong direct sales backgrounds who are given a channel to manage as a career progression without fully understanding the different dynamics of building healthy channel relationships built on partnerships as opposed to winning big deals. So what’s like working for a WSO? Working for a WSO has some major advantages for a sales leader. WSO have structure behind their thinking and planning and they all have a definite focus on growth which they measure consistently. They are also more likely to reward for results and have clear incentives for achieving the objectives they seek. This is especially the case in financial services. Nicola Morley from Allianz said “When developing a new sales culture you need to look at the whole picture. Of course, it's important to have a sales process that you can rely on, but to ensure it is utilised effectively it needs to be linked into an effective accountability and reward system. In addition, you need to have systems and procedures in place to ensure all your sales data is managed accordingly.” In terms of career stability WSO’s are not reliant on just a few accounts and they have sales training programs in both methodologies and techniques as part of their ongoing talent retention programs. For those seeking new opportunities it would be worthwhile benchmarking any new companies that are looking to hire you against the WSO criteria mentioned at the start of this article. Summary Many organizations do well in a number of the key components in the WSO Wheel above. What makes the difference is that WSO’s consistently do well in all components all the time. As we move into an uncertain economy globally the activities of WSO’s provide valuable direction for sales leaders to focus. 15
  16. 16. MUSCLE BUILDING THE SALES TEAM by Sam Reese, President and CEO I was speaking at a client event a few weeks ago when hands started going up during my presentation. The key topic sales leaders wanted to discuss that day was my opinion on how to determine whether someone on their sales team is going to make it or if it is time to let them go. It seems this challenging economy has made it difficult for average performers to hide among the weeds. This is a GOOD THING. In high tide times, it’s easy to have a great smile and a pleasant demeanor to keep a high income sales position. But when things get tough, the pretenders fear exposure and will sometimes head for safer careers. The hard part about muscle-building the sales team is that things aren’t always what they seem on the surface. You can’t afford to make a bad decision. Performance evaluation isn’t just looking at their quota attainment and making cuts. If it was that easy, then we would have no need for sales management. Over the years, I have seen great sales organizations look at performance as a combination of three essential things: skills, activities and results. This performance triangle can be a simple way to help separate the wheat from the chafe in any sales organization. Skills are best described as the acumen and intelligence to be able to perform the duties of the job. It is more than just product knowledge and proposal writing. It pertains to the skills required to navigate complex sales situations: the ability to work within one’s own corporate structure, the understanding of how to connect company capabilities with customer requirements, and so on. Activities are the day-to-day movements that take the business forward such as calling on customers, prospecting, performing follow up © 2009 Miller Heiman, Inc. All rights reserved. 3 www.millerheiman.com | 1-877-678-0272 16
  17. 17. What Sales Leaders are Doing Now actions, organizing next steps, etc. Old school sales managers used to have a myopic focus on activities. They have this “it’s a numbers game’ mentality. But over the last 10- 15 years, many sales managers have completely ignored any sort of activity monitoring because it seemed too invasive. You definitely need to know if activities are happening. Otherwise, you will be confused when you try to make adjustments. And results are simply the metrics that measure success - quota attainment, growth, new business, and income. Effective sales leaders need to look at all three of these factors when they evaluate their teams. The key guiding principle in this process is that 2 out of 3 isn’t too bad. If any one salesperson is capable in two of the three categories, then they should remain on the team. If they are only capable in one of the three, then it may be time to go. For example, a salesperson with high activity levels and critical skills is a keeper - even if he’s not making the numbers yet. Conversely, if a rep is making his numbers but has weak skills and low activity levels, then there is probably a huge opportunity cost associated with keeping this person in his current role. Maybe his territory is rich with opportunities or maybe the customer base continues to deliver even if the salesperson is not that strong. A motivated salesperson with strong skills and high activity levels will most likely take this territory to new heights. Inherent in this discussion is the role of the sales manager. A person who brings the right skills and activity levels to the job can succeed in almost every situation. It’s up to the sales manager to make these assessments and to stand behind them when questioned about the success potential of one of his salespeople. The sales manager needs to be the one who makes this determination of his team members. At the same time, he also needs to coach to ensure his A-players succeed. Unfortunately, there is no shortcut for muscle-building sales teams. © 2009 Miller Heiman, Inc. All rights reserved. 4 www.millerheiman.com | 1-877-678-0272 17
  18. 18. Treating Strategic Customers as Corporate Assets by Robert B. Miller, Founder, Miller Heiman The conventional wisdom: “Corporate assets include people, property, plant, equipment and intellectual property, such as patents, copyrights and trademarks.” The reality: “In addition to traditional corporate assets like people, property, plant, and equipment, one of the biggest -- and often overlooked -- assets of a company is its strategic customer accounts.” S everal years ago, Brothers Gourmet Coffees Inc., business quickly. And there are trickle effects, including a loss based in Boca Raton, Florida, saw its annual coffee of credibility and reputation in the marketplace, which could production plummet from nine million pounds to lead to additional defections. Moreover, Wall Street takes a 300,000 pounds, virtually overnight. The reason? Proctor dim view whenever a company loses a major customer. When & Gamble, which had been its largest customer, decided Quest Diagnostics, a multibillion-dollar provider of medical to move production in-house, leaving Brothers in the testing services, lost a major contract with UnitedHealthcare lurch. As a result, the coffee wholesaler had to shutter in 2006, the company’s stock fell 14 percent. (Meanwhile, its manufacturing plant in Houston, which had been in Laboratory Corp., which picked up UnitedHealthcare’s operation since the late 1950s. business, saw an uptick in its stock price.) The defection of a key customer is every executive’s nightmare. Given all the dangers of losing a key customer, it’s amazing In the worst of cases, as with Brothers Gourmet Coffees, how little attention many companies pay to keeping their major the loss can be disastrous if the company can’t replace the accounts. Amazingly, some firms sometimes realize they’re www.millerheiman.com 18
  19. 19. Treating Strategic Accounts as Corporate Assets in trouble only after a big customer has already switched of having to educate those customers who are unfamiliar to a competitor. Part of the problem is educational. When with your product). business schools teach students how to manage corporate assets, the subject never includes arguably the biggest For those and other reasons, customer turnover, or “churn,” asset of any company – its customer base. Thus many is a huge issue in many industries. In particular, it plagues executives have a good understanding of how to manage many consumer markets, including financial services; people, property, plant, equipment and even intellectual insurance; cable, direct TV and Internet services; magazine property, such as patents, copyrights and trademarks. publishing; and so on. In banking, for example, one estimate 1 But they generally know painfully little about managing is that the average annual defection rate is 12.5 percent. important customers. That’s a huge folly because the And the situation is more than twice as bad in the wireless defection of just a handful of major customers can cripple industry. The annual churn rate for cell-phone subscribers even a large corporation. Sometimes, as with Brothers in the United States has been estimated to be somewhere 2 Gourmet Coffees, the loss of a single strategic customer in the range from 26 percent to 34 percent. In other words, can bring a business to its knees. wireless businesses are losing more than one out of every four of their customers every year! To make matters worse, Understanding Customer Churn people who switch services tend to be higher margin because 3 Customer defections inflict damage to a company in a they use more add-on applications like picture messaging, number of ways. Obviously, there’s the drop in revenue and the average cost of acquiring a new customer ranges from the loss of business, but there are also a number of from $250 upwards. secondary costs. The defections could, for instance, make potential clients think twice about doing business with you. Not surprisingly, customer churn is wreaking havoc with the In addition, the cost of finding new customers to replace bottom line of many companies. A recent study of the Asia- the lost revenues can be considerable. The general rule of Pacific region, for example, found that customer turnover was 4 thumb used in many markets is that the cost of acquiring costing firms there $66 billion a year. That figure includes a new customer is five times that of retaining an existing various B2C businesses such as telecom, insurance, travel, one. But in some industries, that cost can be much higher and medical services. Unfortunately, customer churn hasn’t if, for example, the market is saturated and it’s difficult to been studied as extensively for B2B selling, but the dynamics get the existing customers of other suppliers to switch are likely just as bad, and they could be significantly worse, their business to you. Acquisition costs include – but are particularly for complex deals that might involve a team of not limited to – marketing and advertising costs, sales salespeople working together to land a single account. In expenses (including commissions), and the costs of signing such cases, it could easily take a company more than a year up and servicing new accounts (in particular, the expense and substantial resources to replace the loss of a single www.millerheiman.com | 1.877.678.0274 19
  20. 20. Treating Strategic Accounts as Corporate Assets customer – or to woo back the lost business. When Coca- Amazingly, though, many salespeople still don’t get it. Cola lost Burger King’s business to Pepsi-Cola in the early They will spend their time pursuing even “pie in the sky” 1980s, it took Coke several years of planning and strategizing prospective deals instead of working hard to secure their to regain that major account. existing accounts. But even a slight improvement in retaining existing customers can pay big dividends. According to Losing a key customer has always been a big headache, research by Frederick Reichheld of Bain & Co., the strategy but today the loss is all the more painful because of consultancy based in Boston, just a 5 percent reduction in increased pressures. As a result of greater globalization, customer turnover can lead to an increase in net profits by as 6 the competition has grown fiercer than ever before. In the much as 20 percent. In the banking industry, that same small 7 past, rival vendors might have been nipping at your heels reduction in churn can boost net profits by up to 80 percent. eight hours a day, but today that pressure is constant: the Given such statistics, I’m continually perplexed at how little Internet and foreign firms have now made competition attention many companies pay to retaining their existing a constant threat, 24 hours a day, 365 days a year. You customers. And I am absolutely shocked by how lightly simply can’t rest for a moment because you could easily some organizations treat their most important accounts – lose a customer. “It takes years to win a customer and only those customers that are essential for their business. seconds to lose one,” notes Catherine DeVrye, former IBM executive and author of “Good Service Is Good Business: 7 Interestingly, firms have all sorts of processes for handling Simple Strategies for Success.” And when you do lose any their corporate assets – excess cash, various properties, business, it’s all the more difficult to replace it. and so on. They might, for instance, have an entire department devoted to managing their real-estate holdings, To exacerbate matters, customer loyalty in many industries and the CFO is typically held accountable for that activity. is on the wane. A recent study of British wireless customers, But companies don’t always look at important customers in for instance, found that the defection rate had increased the same way – that is, as corporate assets. In fact, many 5 from 33.5 percent in 2005 to 38.6 percent in 2007. That’s organizations consider customers to be basically the sole an increase of more than 15 percent in a relatively short responsibility of the sales department, and the chief sales or period of time. In the B2B arena, as your customers are marketing officer is held accountable. But that’s just asking finding themselves under increasing pressures from their for trouble, because certain customers are just as important customers, they are in turn demanding more from you; and to a business – if not more so – than those other, traditional if you can’t keep up, they will find another vendor that can. assets. As such, those customers need to be managed, In short, no deal is safe in today’s world. Even contracts nurtured and grown, just as with any other crucial asset. And that in the past might have been slam-dunks are now being that process needs to have the attention of the CEO, COO, hotly contested. CFO, or some other top-level executive. www.millerheiman.com 20
  21. 21. Treating Strategic Accounts as Corporate Assets Not Created Equal Whenever I’m explaining the concept of “strategic accounts” In today’s world, all customers aren’t equal. The well- to executives, I always ask them this question: when you’re known adage is that 80 percent of a company’s business lying in bed in the middle of the night and you can’t sleep might come from just 20 percent of its customers. For because you’re worried about work, what customers are some firms, the breakdown might be 70/30 or 90/10 you usually thinking about? Often, the list might be as short instead of 80/20, but the point is that a minority of your as three or four accounts and, interestingly, there’s often a customers will usually account for a proportionately larger uniformity of opinion about the names of those customers. fraction of your revenues. Moreover, just a handful of Recently, I had lunch with a friend of mine who’s the head of customers might be absolutely essential for your success; the U.S. operations of a large Japanese corporation. When those firms are your “strategic” accounts. I asked him the “awake in the middle of the night” question, he immediately answered with three customer names, Every business has them. I don’t care whether you’re and everyone on his executive team who was at the lunch a “mom and pop” dry cleaner on a street corner or a quickly nodded their heads in agreement. multinational corporation like Unilever, you will have a number of customers who can, quite simply, make or break Strategic accounts are so important that not just the sales your business. Thirty years ago, in the early days of Miller organization knows about them; everyone, including the Heiman, I was well aware that 65 percent of our business CEO and COO will recognize their importance. But the larger was from one customer – Hewlett-Packard. So I made sure point is this: because strategic accounts are crucial to your I had all my bases covered at that account, and I would company’s success, they can’t be treated like any ordinary personally spend two or three days out of every week at customer. Remember that they are your corporate assets – HP’s various field offices. your company’s crown jewels – and they must be managed in that way. But strategic customers don’t necessarily have to be your largest sources of revenue or profit (although they often So, for starters, the management of strategic accounts has are). A “prestige” customer could also be a strategic to have the attention of a high-level executive. Ideally, you account. Years ago, when I was a manager at Kepner- need a very senior person in charge. At Miller Heiman, that Tregoe, a consultancy that specialized in executive problem individual is Tim Call, the executive vice president for strategic solving and strategic planning, one of our clients was Rolls- accounts, who manages various teams that interface with Royce’s jet-engine business, and we worked hard to retain our different strategic customers. Call reports directly to that account because it provided a special cachet that Sam Reese, the CEO of Miller Heiman. At a client of ours established our firm in the marketplace and helped us to – a large shipping and logistics company – the president attract new business. himself oversees the overall process, and each member www.millerheiman.com 21
  22. 22. Treating Strategic Accounts as Corporate Assets of his executive circle is in charge of at least one team that Remember that although revenues are important, doing manages a strategic account. Those top executives are business with a customer should always be profitable. called “sponsors.” They work with the salespeople and Otherwise, the relationship isn’t win-win. That’s why when others on their team, and they attend all meetings to keep Bank of America CEO Kenneth D. Lewis wanted to increase up-to-date on the status of that particular customer. shareholder value back in early 2001, he emphasized operating profits over revenues. So as the company’s The important thing to note here is that any program for Global Corporate and Investment Bank unit began to managing strategic accounts must be owned, driven, and target key customers, it didn’t pursue the low-margin overseen from the top. The responsibility can’t reside with relationships it had with large corporations like Wal-Mart the head of the sales operations or the chief marketing and IBM. Instead, it focused on more profitable deals with officer. It has to reside in the C-suite because you need other clients, specifically those companies that needed corporate executive sponsorship. Only someone at that global treasury and cash-management services (for level can help perform certain crucial tasks, including the example, funds collection and financial forecasting) as well following: 1. Evaluate the strategic importance and potential as investment-banking services. The results were stunning: of accounts to determine a list of strategic customers, 2. For Within two years, revenues for the Bank of America unit each strategic customer identified, formulate and implement had fallen 4 percent but operating profits had increased 12 an account strategy that is consistent with the company’s percent and shareholder value added had nearly doubled. overall business objectives, and 3. Get resources allocated Moreover, the business unit had gained “lead bank” status that will help reach those objectives. at more than one third of its targeted customers, up from 8 just 12 percent in 1999. Identifying Strategic Customers There’s no one best approach to identifying strategic Also keep in mind that potential business from a customer customers. Companies need to use the criteria that make can be just as important – if not more so -- than current the best sense for their own overall organizational goals. business. To assess those opportunities, you can simply ask At Miller Heiman, we use five criteria for selecting strategic customers for their estimates of how much of their business accounts, namely that the customer must: is being handled by other suppliers. National Gypsum Co. 1. Be an existing account. uses that approach and reports that it receives accurate 2. Have the ability to generate revenue in the coming year. figures more than 90 percent of the time. Of course, some 3. Provide a win-win environment. customers will want to know what’s in it for them, that is, what 4. Desire a long-term relationship. they’ll receive in return for their cooperation. The obvious 5. Provide access to all buying influences (that is, access answer is that the data will help you respond better to their to key execs at the customer firm). future needs. But Lubrizol Corp., a manufacturer of high- www.millerheiman.com 22
  23. 23. Treating Strategic Accounts as Corporate Assets performance polymers and specialty additives, provides just a handful of customers for the first year of our strategic another incentive. Lubrizol will often encourage a customer accounts program and then we’ve continued to expand it on to provide details of its purchasing by offering complimentary a measured basis. market reports for certain products – information that a 9 consulting firm might charge more than $40,000. The next step is to assemble teams for managing the strategic accounts. Each team should be cross-functional, A strategic account could also be a customer who has involving sales, marketing, operations and other functions given you a black eye in the marketplace, regardless of the that are pertinent for that particular account. For example, volume of his business. Consider Jeff Jarvis, a journalism if your relationship with a customer involves multiple professor, who might at first glance seem like your typical structured deals that are specified in complex contracts, Dell customer. But Jarvis is a popular blogger, and after he your team needs to include people from your finance and reportedly received a defective laptop computer from Dell legal departments. Each of your strategic customers needs he wrote about his experiences in postings entitled “Dell to assemble a similar cross-functional team that will then Hell.” Soon Jarvis’ ongoing saga was being covered by other interface with your team. The members of the customer’s blogs as well as by the mainstream media, unleashing the team will depend on the specifics of your relationship. If, wrath of other disgruntled customers. As the tide of negative for example, you provide value by offering just-in-time press grew, Dell rightly recognized that the situation wasn’t delivery, then your customer should assemble a team simply going to blow over by itself. In response, the company that includes a logistics manager and head of the supply assembled a cross-departmental team to actively scan blogs chain operation. Ideally, the members of your team would so that it could defuse customer issues before they became have their corresponding functional counterparts on the major problems, and Jarvis was invited to Dell headquarters customer’s team. to meet with some of the company’s executives, including none other than Michael Dell, company founder and CEO. To encourage customers to participate in your strategic accounts program, you should emphasize your desire A company might easily have a dozen or more strategic to establish a long-term relationship in which you’ll be customers, but my strong recommendation is that you select providing direct access to key people in your organization. no more than a handful for the first year of your program. In other words, the customer will gain a window into your It’s a matter of resource allocation. Remember that strategic operations – what products are coming down the pipe, customers need to be treated like corporate assets, so you areas in which you’ll be investing in the future, details of your want to start small because doing things the right way for competitive strategy, and so on. In short, the huge incentive even a handful of strategic customers will take an enormous for a customer to participate is that they will have access to amount of time and effort. At Miller Heiman, we selected inside information that will enable them to implement your www.millerheiman.com 23
  24. 24. Treating Strategic Accounts as Corporate Assets products and services better to maximize their return on of electronic components; it began offering services to help their investments. However, as a cautionary note, you should coordinate its customers’ supply chains and to perform hold off before formally announcing to customers that you’ve engineering design work. All that should have helped make established a strategic accounts program until you’re sure Arrow become a more important business partner, but a that you’ve worked out all the kinks. That is, you might refer decade later it made a startling discovery: the customer to the program internally but not let the outside world know companies that were using those important services on a about it until you’re sure that it’s ready for prime time. regular basis didn’t even know that Arrow was providing 10 them! The crucial thing here is that you and the customer Moving Up the Hierarchy need to have an open dialogue to determine your true position One of the first tasks for a strategic accounts team is to on the buy-sell hierarchy. Not only will that conversation help determine the organization’s true position on the buy-sell correct any misperceptions, it will also help build trust. hierarchy. There are five levels, depending on the buyer’s perception of what the seller does. From the lowest to the Next, you must develop a plan that will help you either highest level, the buyer could view the seller as secure your position on the hierarchy or get you to a higher level. This process has also got to be transparent between 1. Delivering a commodity that meets specifications. you and the customer: you present your goals and get the 2. Delivering “good” products and/or services. customer’s feedback. Moving up the buy-sell hierarchy 3. Providing “good” service and support. has its advantages because, as you’re able to go from 4. Contributing to business issues. one level up to the next, your competition will decrease 5. Contributing to organizational issues. and price sensitivity will lessen. Moreover, not only will The process of determining your position on the hierarchy a customer’s loyalty increase, the customer will also be might not be as clear-cut as it may seem. Sometimes, you more willing to endorse your product in the marketplace, might believe that you’re on level 3 but your customer thinks collaborate with you on new product development, and you’re only at level 2. That’s crucial information because, even invest in your firm. Simply put, a higher position in if you hadn’t learned of the discrepancy, the mismatch in the hierarchy makes you more indispensable and less perceptions could have eventually led to your losing the vulnerable to losing the customer. customer. In some cases, you could discover that you’ve mistakenly been harboring an overly inflated view of the Consider the strategy of KLM Cargo, a unit of KLM Royal value you’re delivering. Other times, the customer might Dutch Airlines that supplies cargo space on aircraft. not have a full appreciation of your importance. Late in the Customers viewed this service as essentially a commodity 1980s, for instance, Arrow Electronics tried to move up the (that is, level 1 of the hierarchy). So KLM worked hard with buy-sell hierarchy by becoming more than just a distributor a particular market segment – those firms that needed www.millerheiman.com 24
  25. 25. Treating Strategic Accounts as Corporate Assets to transport perishable goods – in order to move up the not saying that no company should ever lose an important hierarchy. For those customers, KLM Cargo began to provide account. Some defections can’t be helped, for instance, if a point-to-point service: initial pickup by truck to a warehouse, relationship is no longer win-win and the customer isn’t willing transportation by plane, and then storage in a warehouse to work with you on correcting that. The problem, though, followed by final delivery to the customer. KLM Cargo also is that many firms don’t take the necessary precautions to offered three levels of service -- fresh regular, fresh cool, and avoid being caught off-guard. At a minimum, companies fresh supercool -- depending on how perishable a product need to watch out for the following five common traps. is. A flower trader might, for example, opt for “fresh cool” service to transport orchids while a fish wholesaler might 1. Becoming complacent. The loss of a customer to your choose “fresh supercool” for sushi-grade tuna. As a result, biggest rival is actually more common than you might think. KLM Cargo was able to reposition itself from a commodity Remember how Coca-Cola initially lost its business with supplier to a provider of an end-to-end business solution, Burger King to Pepsi? Pepsi had shrewdly told Burger 11 thus moving itself significantly up the buy-sell hierarchy. King that, “You’ll never be number 1 with Coca-Cola because McDonalds is a customer of Coke. But you can The ideal situation is when the customer is strategic to you be number 1 with us.” And that’s how even entrenched, and you are strategic to the customer. The perfect example leading vendors get usurped. Sometimes, a company of that is i2 Technologies’ relationship with Dell Inc. Based might be the only game in town – it might, for instance, have in Dallas, i2 sells sophisticated supply-chain management a proprietary technology – but then lose that edge as the solutions that enable Dell to efficiently assemble computers market matures and competitors offer competing products. that consumers can customize and order online. Dell’s The classic example here is Digital Equipment Corp., which very business model depends on the efficacy of i2’s dominated the market for minicomputers during the 1970s products, such that the fates of the two companies are fairly and 80s. But DEC’s arrogance and disdain for smaller intertwined. personal computers – espoused by founder Ken Olsen’s infamous remark, “There is no reason for any individual to Avoiding Common Pitfalls have a computer in his home” – left the company woefully Given all the ramifications of losing a major customer, I unprepared for the coming PC revolution. Eventually DEC am continually astonished at how few precautions some was acquired by PC maker Compaq, which itself was later companies take to guard against that possibility. And it’s merged with Hewlett-Packard. remarkable to me that any firm should be shocked (or even surprised) after it loses a major account. Whenever that Part of the problem is that the leading company in a market happens, my immediate reaction is that a number of people frequently gets tagged as being arrogant. “They’re getting just didn’t do their homework. But don’t get me wrong – I’m too big for their britches” and “they’ve become difficult to www.millerheiman.com 25
  26. 26. Treating Strategic Accounts as Corporate Assets work with” are the common complaints, whether they’re • Are there any basic issues that we need to address justified or not. In fact, some customers will even look for that for the customer? kind of behavior and misinterpret every tiny miscue on your part as a sign of your supposed arrogance. So, especially Note that the questions probe the overall process being used when you’re the leader in a market, you almost need to bend to manage the account as opposed to any specific items. over backwards to fight even the slightest perception that A common mistake that executives make in performing a you’ve become arrogant or complacent. Otherwise, you review is to start by telling the account manager, “Tell me leave yourself vulnerable to the competition. what’s going on here.” And then after being given the status of an account, they’ll follow up by saying, “If I were you, 2. Succumbing to denial. Interestingly, sales reps are I’d do the following.” But that type of approach only leads often the last people to realize that they’re in trouble with to account managers feeling like they’re being second- an account. The problem is that they misread the warning guessed. In other words, when conducting reviews, you signs, or they go into denial. In their minds, they might want to coach people so that they can figure out on their mistakenly assume that just because an account has been own what they need to do; you don’t want to do that thinking with them for years, that customer will remain loyal. And for them. that’s another reason why you need a team of people in charge of your strategic customers, because you don’t 3. Missing a warning sign. Whenever there’s an important want to end up paying for the mistakes of a sales rep or change at your or your customer’s company (a reorganization account manager who’s in denial mode. or shift in strategy, for example), you need to follow up to ensure that all your bases are still covered. One of the most The team should regularly conduct account reviews that common ways to lose an account is through a change in will force account managers to confront reality. Some of personnel – say, for instance, that a key executive at your the types of basic crucial questions that need to be asked customer’s firm leaves. Remember that the people at both include the following: your and the customer’s company will frequently change. • Do we have our bases covered with all the buying In some industries, for instance, the annual turnover rate is influences? For example, do we know who gives more than 25 percent (and sometimes as high as 50 percent) final approval for our deals? for sales personnel. And this is yet an additional reason why • What are our strengths that we can leverage in having a team of people to handle your strategic accounts serving this account? makes so much sense. When an account manager leaves, • Do we know what the customer is trying to fix, for example, the rest of the team members will still be able accomplish, or avoid by using our solution? to provide a reassuring sense of continuity to the customer, • What are the red flags for this account? helping to ensure that business will proceed as usual. www.millerheiman.com 26
  27. 27. Treating Strategic Accounts as Corporate Assets Again, regular account reviews can be a very effective program, because they view it essentially as free help in their mechanism here, helping you to catch any early warning efforts to strengthen a customer relationship. signs. The main focus of the reviews should be the customer’s business results. As discussed earlier, you 5. Failing to get support from the top. As I mentioned should always know where the customer perceives you earlier, a program for managing strategic accounts must have to be on the buy-sell hierarchy. In addition, you need to support from the top of your company. Ideally, the CEO, COO have a plan either for securing that position or for moving or some other C-suite executive would be in charge, and that up a level. The account reviews should then take a hard person would get other high-level executives to participate. look at your progress in that process. Say, for example, The surest way to strengthen the relationship between that for a particular customer you’re currently at level 1 your and your customer’s firms is to get top executives at (delivering a commodity that meets specifications) but your both organizations involved. But the top managers at your plan is to move to level 2 (delivering “good” products and/ customer companies won’t be likely to participate if they or services). Then you need to continually monitor your don’t see a similar commitment from the executives at your progress, specifically in terms of how improvements on your own firm. end are helping the customer’s business. Is, for instance, your implementation of just-in-time delivery enabling that 6. Relying on defense instead of offense. Sales managers customer to slash its inventory costs? will often tell me about an important customer that they’re losing to a competitor. Then, half-panicked, they’ll ask, 4. Not obtaining “buy in.” Although every company should “What should we do?” I’m sorry to report that, at that stage, set up a program to manage its strategic accounts, the they may have already lost the account and even a flurry process can trigger resistance from the sales group. At of heroic “firefighting” activity won’t be enough to save it. worse, a turf battle could ensue between corporate and sales. So the lesson here is that you have to make sure that you To prevent that from happening, you need to be mindful of don’t let your customer relationships devolve to the point at the politics involved. At Miller Heiman, each of the strategic- which a client is seriously entertaining sales pitches from account teams has a designated leader who coordinates all your competitors. In other words, the best defense is indeed activities and meetings, but important decisions are made a good offense. As in football, you’ve got to keep possession through group discussions and consensus, taking into of the ball and keep advancing it. One effective way to do consideration any concerns from sales, corporate, and other that is to continually make efforts to secure your position or parties. In addition, all sales reps continue to receive their move up a level on the buy-sell hierarchy. Remember that usual commissions even if one of their accounts is selected your existing relationships with customers should confer as a strategic customer. Because of that, the sales reps you with a substantial advantage (assuming, of course, that want their customers to be placed in the strategic-accounts you’ve maintained good customer relationships). The truth www.millerheiman.com 27
  28. 28. Treating Strategic Accounts as Corporate Assets is that inertia is a huge factor: Customers would rather avoid become big obstacles. They have increased the amount the hassles of switching vendors unless they perceive that of negotiation and procedural red tape, leading to an they’re not getting the value that they’ve paid for. So you’ve atmosphere of distrust between buyer and seller. The got to do all that you can to avoid the customer reaching situation is exacerbated by increased globalization and that point. In my experience, the vast majority of customer heightened competitive pressures. Today, it’s easier than relationships break down because of what I call “benign ever for companies to lose important customers. But many neglect,” which can be something as simple as not returning firms still have their heads in the sand, unaware how quickly a customer’s phone call quickly enough. Of course, it’s that a major account could take its business elsewhere. In difficult to maintain the same level of attention and service my view, not having a program that treats your strategic to an account that you gave when the customer first came customers like corporate assets is simply asking for trouble, on board. But companies that drop the ball in managing and those companies that fail to see that are going to be in an account will eventually find themselves having to play for a rude awakening, probably sooner rather than later. defense, which is what you don’t want to be doing. About Robert B. Miller In the best of cases, corporate purchasing departments act Thirty years ago, Bob Miller developed and introduced as a facilitator between seller and buyer. They might perform Strategic Selling®. Since then, his passion for elevating important screening functions like a “better business the role of the sales profession has resulted in several bureau,” helping to qualify vendors so that the buyer has to additional methodologies, all of which are incorporated in consider just a short list of products instead of dozens (or The Miller Heiman Sales SystemTM. He continues today in even hundreds) of options. Or, by understanding the benefits a consulting and advisory capacity, focusing primarily on of strategic partnerships, they might encourage collaboration product development. His mentorship drives innovations in between the seller and buyer to help ensure a long-term sales performance that are consistent with the vision for the win-win relationship between the two parties. Unfortunately, company he started three decades ago. though, some corporate purchasing departments have 1. “The Cost of Customer Churn: What’s at Stake for Banks in the Competition for Customers?” Financial Publishing Services. 2. Lisa Pierce, “What the Cost of Customer Churn Means to You,” Network World (November 12, 2001). 3. Charles S. Golvin, “Who’s Winning and Losing Mobile Subscribers?” Forrester Research (2005). 4. Victoria Ho, “Customer Churn is Businesses’ Greatest Fear,” ZDNet Asia (March 19, 2008). 5. “Pitney Bowes Group 1 Software Customer Churn Report” (2007). 6. Frederick F. Reichheld and Thomas Teal, “The Loyalty Effect: The Hidden Force Behind Growth, Profits, and Lasting Value” (Harvard Business School Press, 1996). 7. “The Cost of Customer Churn: What’s at Stake for Banks in the Competition for Customers?” Financial Publishing Services. 8. James C. Anderson and James A. Narus, “Selectively Pursuing More of Your Customer’s Business,” MIT Sloan Management Review (Spring 2003): 42-49. 9. James C. Anderson and James A. Narus, “Selectively Pursuing More of Your Customer’s Business,” MIT Sloan Management Review (Spring 2003): 42-49. 10. Das Narayandas, “Building Loyalty in Business Markets,” Harvard Business Review (September 2005): 131-139. 11. James C. Anderson and James A. Narus, “Selectively Pursuing More of Your Customer’s Business,” MIT Sloan Management Review (Spring 2003): 42-49. www.millerheiman.com 28
  29. 29. INVOLVING EXECUTIVES IN THE SELLING PROCESS by Tim Call, Executive Vice President People ask me all the time: “How can we get our executives involved in the selling process in a proactive and efficient manner?” The first thought that comes to my mind is to answer their question with more questions: “Why do you want your executives involved in the selling process?” Is it because you need help closing deals? Because they are needed to negotiate pricing? Or because they want to feel they are being supportive? For any organization that wants to begin an executive selling program, the above questions should be asked of senior leadership. In the current climate, decisions are being pushed to higher levels within a company and an executive selling program can help establish and maintain critical account relationships between C-Suites. Many of the successful executive selling programs I have seen solicit input from all of the functional departments so everyone knows the expectations for the program and understands the criteria for success. Your organization may start down the path of establishing an executive selling program only to realize early in the process that there are perception gaps between what the executives think they know about critical accounts and what the sales teams see as reality. In Miller Heiman’s annual sales best practices study, we see a fair amount of differences between C-Level respondents and sales reps. For instance, the responses from these two groups typically indicate a wide perception gap for this simple question: © 2009 Miller Heiman, Inc. All rights reserved. 8 www.millerheiman.com | 1-877-678-0272 29
  30. 30. What Sales Leaders are Doing Now We have a disciplined process that is continually utilized to review all large deals. The C-Level is generally less likely to agree that processes are in place to review large deals compared to sales reps. A larger gap exists when we ask our survey participants to weigh in on another topic: Our executive leadership is actively engaged in our selling process. The 2009 Miller Heiman Sales Best Practices Study revealed that 66 percent of C-level executives say they are involved, but only 41 percent of sales reps say the executives are involved. This disparity stems from a misalignment regarding what involvement means to these two groups. Most executives consider involvement as an awareness of the sales representatives’ activities, knowing one or two people in the client organization, and an expectation that they will come into deals if, and when, it is necessary. In these cases, the sales force will say that executives don’t bring any value to the client relationship. Because they don’t know an executive’s role in the selling process, they are forced to leave them out of the equation because in the past they have hurt more than they have helped. Creating an executive selling program doesn’t need to take years. But to eliminate confusion, your first step to building an executive selling program is to get everyone on the same page. Discuss what happens with these large deals, and discuss how an executive’s involvement might help or hinder these relationships. Here are a few suggestions to get started now: 1. The Right Level. An executive should only get involved in relationships that are peer to peer. They should not be asked to come to a meeting with lower-level buying influences where tactical or logistical solutions are being discussed. The sales rep needs to ensure all possible bases are cover before involving an executive. 2. The Right Time. Executives are often expected to step in to try and save a sale that is in trouble. Get executives involved when they can provide the greatest value, not salvage something that is likely already beyond repair. Drawing in an executive will likely look to the customer as if you are in panic mode, and may potentially worsen the situation. 3. Maintain Schedule Integrity. Make sure executives don’t skip out of a sales call because something more important has happened in the office. If they are committing to the initiative, then they must stay committed to all scheduled meetings. © 2009 Miller Heiman, Inc. All rights reserved. 9 www.millerheiman.com | 1-877-678-0272 30
  31. 31. What Sales Leaders are Doing Now 4. Thorough Preparation. The sales team needs to take the time to review the customer relationship, current opportunities, and the meeting objectives with the executive before a customer meeting. The better prepared an executive is, the more value he or she can add to the relationship and the better the coaching s/he can provide. 5. Provide Strategic View. Without a strategic perspective, executives will not bring much to the client in the way of value. Don’t let the executive talk about a product or service. They should be asking questions or providing high-level industry knowledge during these meetings. Clients love it when you bring new information or introduce new ideas related to the important issues they face. 6. Get Things Done Internally. It is easy for an executive to go back to the office and delegate all of the next steps to the rep. But executives need to own at least one of the next steps. Ideally it should relate to the point from the meeting that is of strategic value to the customer. 7. High Level Information Conduit. Most executives are aware of changes in the company before everyone else. Make sure that new and relevant information is shared from one executive to another, as this type of knowledge has the potential to undermine their authority if divulged by someone on a lower tier. 8. Mentor or Coach. The executive should be the person in these critical deals providing coaching and mentoring sales reps. This should not be the same type of coaching the reps might receive from their sales manager, but coaching on high- level issues, industry intelligence, and solutions important to the customer. 9. Hold Executives Accountable. The executive should be held responsible for his role in the success of the customer relationship. Without a certain level of accountability, resentment may build and potentially jeopardize future internal interactions. It’s crucial to remember that rep and executive are on the same team and need to pull their respective weight. 10. Share Success Stories. When executives stay involved with clients, it can be perceived as a positive opportunity for your company. Take advantage of the publicity that can be generated by promoting and sharing the success stories as a result of executive involvement. © 2009 Miller Heiman, Inc. All rights reserved. 10 www.millerheiman.com | 1-877-678-0272 31
  32. 32. What Sales Leaders are Doing Now 11. Maintain Executive Status. Many reps may jump at the chance to tout their executive at a social call, but this is not the best use of their time. Unless a client specifically requested it, bringing an executive may seem a thinly veiled attempt to solidify a client relationship or secure additional commitment. 12. Avoid Exclusive Meetings. Executives should not attend sales meetings alone, unless a request has been made. The goal is to develop the standing and credibility of the rep, and sending an executive in alone makes him or her the de facto rep, undermining that goal. An effective program will ultimately serve to bring clients closer to your organization. But the most important contributing factor to a successful executive selling program is the dedication and commitment to stick to it. © 2009 Miller Heiman, Inc. All rights reserved. 11 www.millerheiman.com | 1-877-678-0272 32
  33. 33. How to Forecast Sales Accurately by Robert B. Miller, Founder, Miller Heiman The conventional wisdom: “Sales managers can’t forecast accurately because there are too many uncertainties involved.” The reality: “Sales forecasting can indeed be turned into an accurate, reliable process.” J udging by the continual news of company after company increase its market share and its stock jumped another missing its quarterly numbers, you would easily be 16 percent, but then the company hit a snag in the third forgiven if you thought that businesses had no clue how to quarter. It reported revenues of $10.6 billion, which was a forecast their sales. Every week seems to bring yet another solid increase of 17 percent from the same time period in headline of a firm that missed its quarterly numbers because 2005. But the problem was that those numbers fell short of of some unexpected shortfall in demand for its products. the company’s forecasts and analysts’ estimates of $11.1 Wall Street is generally unforgiving of such lapses, typically billion. CEO Ed Zander explained that the lower sales were punishing the company with a drop in stock price. due, in part, to an unexpected delay in capital spending by customers in Europe, the Middle East and Africa. In spite of Consider what happened to Motorola. After lagging behind his reassurances, though, the market response was swift Nokia for years, the company had been gaining ground in and unyielding: Just a day after Motorola announced the 2005 and its share price had risen 31 percent. Everything shortfall, its stock price fell $1.21 to close at $23.64, a drop looked rosy the following year as Motorola continued to of nearly 5 percent. www.millerheiman.com 33
  34. 34. How to Forecast Sales Accurately To make matters worse, forecasting is becoming all the of some illicit accounting sleight of hand, prompting more difficult because customer loyalty is on the wane and shareholders to claim in 2000 that the firm had misstated global competition has increased such that companies more than $500 million in revenues. After an investigation are less sure of where their future sales will be coming by the SEC found that Computer Associates had routinely from. Moreover, distribution channels have become more included revenues from orders that hadn’t officially complex and the lifespan of products has decreased, all been booked, eight CA executives pled guilty to fraud, resulting in greater uncertainty. Indeed, research by Sales including CEO Sanjay Kumar, who was sentenced to 12 Benchmark Index has found that roughly two-thirds of all years in prison. sales forecasts have a margin of error that exceeds 25 percent. Amazingly, more than 10 percent of forecasts What happened at Sunbeam and Computer Associates have a margin of error of greater than 75 percent! is perhaps the most egregious examples of accounting schemes gone wild, but the fact is that many companies In the worst of cases, a potential shortfall leads to continually suffer from sales forecasts that are inaccurate desperation as executives succumb to the temptation of and unreliable. When the projected numbers are questionable remedies, even if they involve some shady unrealistically optimistic, the manufacturing division ramps accounting practices. The classic story here is the tragic its operations up for products that end up sitting in the saga of Sunbeam under the leadership of Al “Chainsaw” warehouse collecting dust. Or, conversely, the demand Dunlap. To keep pace with his aggressive financial for a hot item shoots through the roof but the company projections, Dunlap offered huge discounts to entice is caught off-guard, thus missing a crucial window in the retailers to take on more merchandise than they could market. And it’s not just big mistakes that hurt the bottom sell. The products were then shipped to warehouses line. Sometimes even a small increase in the accuracy of where they sat, and the inventory continued to pile up. your forecasts can lead to substantial savings because But the problem was that Sunbeam was booking those your distribution chain will be returning fewer products, sales as if they had actually been made. Eventually, the thus decreasing your shipping, handling and storage fees. entire accounting house of cards came tumbling down For large corporations, such savings could amount to and Sunbeam investors were rightfully outraged. Dunlap millions of dollars. was shown the door and later agreed to pay $15 million to settle a shareholder lawsuit. Let me put it this way: I have never heard a CEO or senior manager complain that the forecasts from his or her sales Sadly, Sunbeam is hardly the only company that’s tried to group were too accurate, but I have heard countless execs cook its books. Computer Associates, a global software grouse that they simply couldn’t rely on their company’s corporation based in Islandia, N.Y., was also a practitioner sales projections. And an inability to forecast sales www.millerheiman.com 34
  35. 35. How to Forecast Sales Accurately usually means that you’ve lost touch with your customers typical sales process is like a funnel (see accompanying -- a deficiency that can lead to disaster when the market illustration). At the bottom are deals that you’ve almost makes a turn in one direction and your firm is still headed closed. All you need to do for those opportunities are to down a different path. The result: You end up developing remove any remaining obstacles (for example, you might and marketing products that nobody wants. need to meet with the final decision maker to iron out the specific financial terms of the contract). In the middle of Okay, I’ve heard it all before. According to the naysayers, the funnel are other prospects that are in the works. Here, organizations that believe their sales group can make you need to do important background work (for example, accurate forecasts are setting themselves up for failure. identifying all the people at the prospective customer who People will just fudge their numbers to game the system. could possibly veto the deal). And above the funnel are For instance, salespeople will underestimate their numerous leads that need further investigation. These projections so that they’ll look good when they make or leads need to be screened to identify which ones should exceed those numbers. So why even pretend that you can be pursued. As a prospective deal moves down the funnel, forecast sales accurately when the process will be just two important things happen. First, the time required another exercise in futility? to close the deal will tend to decrease. Second, the probability of your actually closing the deal will increase Excuse me, but that defeatist attitude is nothing but a pot (or, in other words, the uncertainty that you will close the of crock! Let me be clear: It’s a cop-out for sales managers deal will decrease). to claim that sales forecasting is inherently impossible. The simple truth is that companies can indeed reliably Each location of the funnel (bottom, middle or above) has forecast their sales, and all the leading organizations do a quantitative metric for the likelihood of the deal closing it because they absolutely need that crucial information. in a given amount of time. That period can be based on a Otherwise, a business can’t be run efficiently. How, typical sales cycle. Let’s say that the typical sales cycle for example, can the manufacturing department plan for your products is eight months (that is, you usually its resource allocation without knowing the volume of take eight months to close a deal from the time you get a shipping orders for the upcoming quarters? The trick to solid lead, such as when a prospective customer requests accurate sales forecasting, though, is that you need the information about your product or otherwise engages with right system in place. you about a solution offered by your company). So, for instance, your potential deals at the bottom of your funnel Understanding the “Sales Funnel” might generally have a 70 percent probability of closing Before you can begin to improve your sales forecasting, within half the sales cycle (or four months). Your prospects you first need to understand a fundamental concept. The in the middle of the funnel might have a 40 percent chance www.millerheiman.com 35
  36. 36. How to Forecast Sales Accurately of closing within that time. And your prospects above the of dollars annually because the manufacturing group was funnel might have just a 10 percent chance of becoming then able to allocate its resources more efficiently to plan a finalized deal within the typical sales cycle (or eight better for future orders. months). Of course, that aerospace company didn’t just implement Now here’s the part about forecasting. To obtain an the system and magically have the accuracy of its sales accurate projection of your sales, all that you to do is to forecasts improve. Although simple in concept, the sales categorize every one of your potential deals into the right funnel takes a concerted effort and sustained commitment location (bottom, middle or above) of the funnel, along with from everyone in the sales organization. And, as with your estimates of the size of the potential order. Then you other kinds of similar initiatives, the devil is definitely in add up those opportunities for each location of the funnel the details of implementation. and apply the appropriate probability and time period. The total sum of those numbers will then be your sales Managing the Sales Funnel forecast. Okay, you might be skeptical about how such a The first important detail is that you have to classify simple concept could actually be effective in practice, but your customer opportunities accurately. If you’ve been I have seen numerous companies dramatically improve mistakenly placing companies in the middle of the funnel the accuracy of their sales forecasts by implementing it. when they actually belong above, then of course they will take much longer to close and a smaller percentage of them Consider the operations of a large aerospace company that will become finalized deals than you’ve expected. This was having trouble years ago because its sales projections then means that your sales forecast will be substantially were all over the map – the average accuracy was just 35 off because of the shortfall. percent. Then the company implemented a program that taught the fundamentals of funnel management. To begin Categorizing customer opportunities correctly is with, managers clearly delineated and codified specific easier said than done. The problem is that many sales criteria that helped define prospective customers. For professionals will fool themselves into thinking that a deal example, a lead had to meet specific objective criteria is closer to being closed than it really is. They’ll be overly before it could be moved to the middle of the funnel. And the optimistic, now realizing the amount of work that needs company conducted formal reviews each week to ensure to be done. So you need to get them to be realistic, and that all the salespeople were using the new system. Within the way to do that is by having some good metrics, both just one quarter, the accuracy of the company’s sales qualitative and quantitative. Everyone has to agree to the forecasts had improved to 60 percent, and it eventually criteria, and each person has to abide by them. You should exceeded 75 percent. That change saved the firm millions consider having a standard form that salespeople would www.millerheiman.com 36
  37. 37. How to Forecast Sales Accurately fill out for each solid lead, especially for potentially large thing before: “Because Roger always estimates low and deals, and that form would include questions that help sandbags his numbers, I’ll adjust his forecasts upward by determine the location of that opportunity with respect to 20 percent. And because Marcia is always wildly optimistic, the sales funnel. I’ll cut her projected sales by half.” That’s the kind of game that sales managers often find themselves having to play, You might use an acronym like “DUNCE” to help people but the funnel criteria, when selected properly, will help remember the criteria. “D” is that the customer has dollars prevent that kind of number fudging. allocated to pay for the project; “U” is that there’s urgency on the customer’s part; “N” is that you understand the But you also need someone in charge of the funnel system customer’s true needs; “C” is that you have coaching; and to ensure that all the salespeople are using it and that “E” is that you know the identity of the economic buyer, everyone is abiding by the same criteria. The important or final decision maker. Before a lead can be placed into thing here is that that person has to have enough clout to the funnel, you might stipulate that the salesperson has hold people accountable for their individual funnels. You to satisfy the D, U, and E requirements. And before a can’t turn this important function over to some low-level prospect can be moved from the middle to the bottom staff person, because then the salespeople and account of the funnel, the salesperson must meet the N and C managers will try to game the system or they won’t take it requirements. At a minimum, companies need a list of seriously. You need someone who can hold people’s feet general questions like DUNCE, but they also should have to the fire. That individual might be the head of the sales criteria that make sense not only for their specific industry operation or one of his or her key lieutenants. but also for their own business. For instance, one criterion for moving a potential customer to the middle of the funnel The funnel “meister” should be empowered to hold people might be that a salesperson has to perform a live product accountable. If, for example, customer prospects have to demonstration at the customer’s site. You might need a have a 50 percent probability of closing before they can few iterations to define all the necessary funnel criteria. be placed in the middle of the funnel, then a salesperson You should involve key managers in that process, not only who is closing just 25 percent of those deals needs to because they typically know what criteria are important be taken to task. Could that salesperson, for instance, but also because their participation will enable you to gain be prematurely placing those leads into the middle of their buy-in when implementing the system. the funnel before they’ve been properly qualified? That’s why the criteria need to be specific enough to make such The criteria should be designed to help managers refrain assessments, and you need at least about three or four from the common practice of second-guessing the sales for each funnel location. Interestingly, experienced sales estimates from their staff. We’ve all done this type of managers usually know what those criteria should be www.millerheiman.com 37

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