The Arrival Of Sales Optimization
In most sales organizations, a precious few star performers outperform their peers. They communicate more effectively with customers, sell more rapidly and spend their energy on the most productive sales activities; in short, they sell more. How do these individuals achieve this level of success? They dont necessarily work harder, but they seem to understand customers more completely, knowing instinctively when to call and what to say to a customer.
Star performers might represent the top 20 percent of the sales organization, but most salespeople fall into a middle tier. This group has the ability to become star performers but lacks training or experience. They are potential performers. To become stars, they must replicate the skills and practices of their most successful colleagues in the course of daily activities.
Untapped Wealth
To elevate this middle tier, industries as diverse as retail, industrial manufacturing and high technology continually invest in sales productivity. Yet, productivity does not grow ever higher, and star performers remain rare. Why? In fast-moving industries, managers face constant change that offsets investments in productivity. Experienced salespeople leave to be replaced by recruits. Familiar products are replaced with new innovations. As a result, the collective selling ability of the organization is always eroding.
Software technologies such as CRM, salesforce automation and knowledge management begin to address the problem of sales productivity. With the advent of the Internet and mobile Web-enabled devices, these technologies have produced remarkable gains in a companys ability to organize and track customer and sales data. But these systems are limited in that they are passive storage. They require users to know about, or at least suspect, the existence of information they need. At best, these systems offer alerts that are pre-defined pop-up reminders, but even these are usually initiated by those who will receive them. The software itself is still passive.
Though CRM and SFA technologies store valuable data, their passive nature prevents a company from extracting value except as summary reports for executives. The value proposition of these technologies has focused on informing management rather than guiding salespeople. It is not surprising that SFA systems are unpopular with those they purport to help (salespeople), since they can extract little value that helps them sell. The bulk of valuable knowledge goes untapped.
The Arrival Of Sales Optimization
A blend of technology and business processes termed sales optimization is emerging to deliver the promise of sales productivity. With sales optimization, an organization can capture, organize and distribute the collective sales knowledge of the organization to the salespeople who need it at the moment that they need it. Sales optimization systems are able to push knowledge whether or not a recipient is aware of it. This proactive use of knowledge is the key characteristic because it maximizes the value of stored knowledge and thus optimizes the ability to sell.
Recent advances in technology make sales optimization possible for the first time. The new key component is an intelligent agent an engine that organizes information with logic for how and when to distribute that information. An intelligent agent should track both product information and process information. Product information includes features, prices, product combinations, configuration options and so on. With this information, a salesperson can select or customize optimal products based on customer needs. The intelligent agent also tracks process information. This logic controls the sequence and timing of guidance to salespeople.
With product and process information, these systems are able to send guidance to salespeople at the moment it is most helpful, improving their tactics and leveraging the best practices of the organization. It helps salespeople make the best use of their limited time.
Leveraging Tribal Knowledge
Every organization develops knowledge about how to sell. In most companies, the bulk of knowledge is distributed across all employees and even people outside the company, such as salespeople at resellers. This tribal knowledge comprises experience with tactics, messages and competitors. It is priceless if it can be recalled during similar sales situations. Unfortunately, it rarely is. Instead, knowledge transfers only within small social circles during water-cooler conversations. Without a structured mechanism for capturing and disseminating this collective wisdom, the information is short-lived and confined.
In order to boost sales productivity for all team members, a sales optimization system must utilize the components illustrated in Figure 1.
To walk through the process of sales optimization, consider the numbered steps:
1. Record. Sales activity between salespeople and customers is captured in various forms, including transactions and customer profiles. Most companies already collect a wealth of data like this, but it often sits untapped.
2. Analyze. Many CRM systems include some variety of analytic tools, and these are also important for sales optimization. Customer data is delivered to analytic tools; ideally, these should be suited to discerning patterns in large quantities of data (e.g., data mining).
3. Plan. Marketers, sales support or even executives view the results of analytic processing to draw conclusions about how best to sell to different types of customers. They translate their analytic insights into actions that will improve sales. One might construe these as if-then rules, but different sales optimization systems will structure the logic in different ways. The collection of rules resides in the intelligent agent. For example, a retailer might define a link between customers with a particular brand preference and the arrival of a new product with that label. The marketer could specify an action such as notifying the customers personal shopper to place a call and promote the new arrival.
4. Monitor. The intelligent agent may manage thousands of potential actions, but of course these all work best at different times. For example, some actions might depend on a customer event, such as a store purchase. Others might depend on a sales reps activity, such as opening a new account or beginning a custom configuration. To regulate the timing of actions, a state machine keeps track of the current state of every monitored event. When conditions change, all relevant states are updated in real time, which may in turn trigger relevant proactive guidance to the appropriate salesperson.
5. Deliver. The proactive guidance typically contains useful content (such as product or marketing information) so the intelligent agent must retrieve the right content from a repository and deliver it to an interface to reach the salesperson. Ultimately, a customers response to this offer or suggestion should be added to the collection of data about that customer, which may in fact alter the customers state in the state machine and trigger subsequent guidance.
6. Interact. The salespeople rely on their sales optimization interface for daily guidance. The interface is Internet enabled, although it need not always be connected, such as with personal mobile devices. Of course, email is a common vehicle for delivering guidance. At this step, some tribal knowledge gets collected, since the tasks undertaken by the salesperson reveal something about customer activities and preferences. Ideally, however, there should be a mechanism here for soliciting explicit feedback from salespeople (e.g., did your particular customer find this brochure helpful?).
7. Update. The final step (which happens on a continual basis) is to update marketing information such as product brochures and marketing messages and to somehow describe this content in a sufficiently universal language that the intelligent agent will be able to find and distribute as appropriate. Since this shared task falls to a great many nontechnical people, the interface for doing so must be intuitive.
The Value Of Sales Optimization
As knowledge is shared throughout an entire sales organization, the financial impact can be substantial. Sales optimization can:
- Increase revenue per customer and per salesperson;
- Increase conversion and close rates;
- Decrease customer turnover;
- Shorten time to make a sale;
- Reduce discounting and returns;
- Accelerate new salespersons learning curve; and
- Decrease reliance on technical sales staff.
Figure 2 shows inputs to an ROI model for a manufacturer. In this model, sales productivity is increased in three ways. Sales reps spend less time on proposals and training, which means that each of them is able to work on more deals. The sales cycle is reduced because each rep is able to perform at star level with less collaboration. And the close rate is higher because reps know how to match products to customer needs, position the products correctly and prepare accurate and compelling proposals.
The financial impact is shown in Figure 3. The hypothetical manufacturer has increased its $1 billion revenue by 12 percent after two years. Of course, sales optimization allows the manufacturer to do this with the same investment in sales and marketing. (The SG&A expense increases due to increased sales commissions only.) Because of this operating leverage, net income after tax (and thus earnings per share) increases by more than the gain in revenue. Assuming typical software costs for sales optimization, including license, hardware, maintenance and services, the EPS gain after just two years is 22 percent.
In the real world, it can be difficult to pinpoint the exact cause of observed revenue gains, but anecdotal evidence suggests that sales optimization does increase revenue. It is reasonable to expect an increase in revenue of 2 to 20 percent, and a larger increase in EPS, due solely to sales optimization. By most any financial measure, sales optimization is a good investment.
The State Of The Art
The defining characteristic of all sales optimization systems is proactive guidance. However, there are different approaches to delivering guidance. The technical challenge that will distinguish these systems is how they structure and organize a companys knowledge. Organizing a companys collective knowledge is difficult. The sheer volume of data is huge and growing. Moreover, there are infinite ways to structure and describe data.
One way for sales optimization systems to approach this challenge is to centralize the task. In other words, a company might assign one or more persons to perform regular maintenance on the collection. The two major drawbacks of this approach are that it doesnt scale to a large company and, more importantly, it is nearly impossible for one person to describe each contribution in a way that others will recognize.
Blue Martini Software has taken an alternative approach inspired by constraint-based configurators. Blue Martini allows users to define a large number of attributes such as: industry, customer size, product cost and so on. Then users can link those attributes in any combination to sales knowledge, such as tips on how to sell, or product knowledge, such as which products combine with which services. The result is that most knowledge can be entered, organized and exploited by salespeople and marketers without assistance from IT. Thus, a large organization can keep its collection complete and current.
Conclusion
In the years ahead, sales optimization will continue to evolve. Companies will not be satisfied with CRM investments that simply organize data and provide analytic tools. Instead, they will demand that the collective experience is put to good use, influencing the daily activities of the salesforce. It will become possible to elevate the performance of the entire salesforce.
In the end, the greatest determinant of success will be the votes of salespeople who use the systems. While salespeople view CRM chores as burdensome, users of sales optimization actually adopt it by choice. Perhaps this is because sales optimization does for salespeople what CRM has only promised it helps them sell.
