Reinventing the Commercial Organization: COVID-19’s Lasting Impact on Sales Organizations
For some time now, a fundamental shift in buying behavior has been driving changes to traditional sales models. As growing numbers of customers show a preference for researching and transacting online, with as little human interaction as possible, many companies have been building out their digital selling capabilities. The COVID-19 crisis has accelerated this evolution. With many customers and sellers now working from home, the future model of selling is being forced to evolve much more quickly than anticipated. Companies that have not begun to adapt their sales models to accommodate the radical shift in buying behavior risk being unable to Climb Back Up The Revenue LadderTM in 2021.
This is not about making the necessary short-term adjustments in response to the COVID-19 crisis; it’s about fundamentally reinventing the commercial organization to adapt to a buying landscape that was already changing pre-COVID. The future model of selling incorporates digital communication channels to generate new leads, nurture customer/prospect relationships and connect customers with the internal expertise they need to make decisions. It demands companies work in new ways that more effectively engage the customer, develop new insights, and reduce costs while improving revenue growth.
We believe that future commercial model front-runners in the post-COVID world will be stronger in five key areas that will enable them to achieve a 50% or more increase in sales productivity while reducing overall commercial costs. Together, these five levers will enable companies to climb back up the revenue ladder faster than competitors and to win in the marketplace.
1. Stronger Commercial Leadership Through Better Use of Data Analytics
Post-COVID-19 commercial organizations will require strong commercial leadership that is anchored in data analytics. Managing an organization effectively means having ready access to data that provides actionable insights. In this way, leaders will need to become much more rooted in the science of selling and sales leadership than the art. There are three aspects to pulling this lever effectively:
- Improve the use of data to understand, guide and lead the commercial team to a more effective and productive place, in a more strategic way. This includes leveraging integrated market data about customers and prospects (TAM, white space analysis, share of wallet); targeting new logos using insight-driven prospect targeting with data-driven value attributed to each channel and program; and building deeper customer relationships. It’s also important to take a new look at post-COVID market segmentation and product alignment and adjust these to reflect new customer buyer values and buying processes.
- Deliver consistent and predictable commercial performance through better use of data on the sales process. This means leveraging data to build consistent sales processes and playbooks across the business to enable repeatable sales approaches that generate more predictable results. Standardization is powerful in other areas as well—for instance, a standard recruiting and onboarding approach that allows for scaling the size of the commercial organization will ensure that the right people— and the right numbers of people—are onboarded and accelerated productivity most effectively. As you establish metrics, focus on forward-looking and predictive data that drives the sales process, not just reporting what happened. Integrate key data to deliver more accurate revenue forecasts for the CEO and Board (+/-5% 60 days out) and offer a deeper analysis of pipeline performance based on key attributes such as flow rate, drop-out points, predictive activities, stalls points, etc.
- Move to an ROI-driven commercial model using data and analytics to improve efficiency. Too often, commercial model investments do not pay back as expected. Understand what parts of your organization are delivering results by looking at each function and team (marketing activities, lead generation, inside sales, account management, hunters, channel partners, etc.) and asking: What is the return on our commercial investment (ROCI)? Dig into the data to get real numbers you can use to make important decisions about where to increase investment to capture high returns, and where to reduce expenses in areas that aren’t performing. Create economic models for current and future performance based on predictive analytics of the sales funnel seller activities and processes.
2. Improved Seller Efficiency
The global, ongoing shift in buying behavior means customers increasingly move far through the buying cycle on their own, seeking and wanting little help from sellers early in the sales process. Companies that have already adapted to this preference for independence by adding a Virtual Account Executive (VAE) role are seeing dramatic improvements in seller efficiency, underscoring that this is the way forward. Three powerful aspects of improving seller efficiency include:
- Optimize the value of a sales hour, moving from a typical 30% of time spent selling to 60%. This can be achieved by applying remote selling capabilities in each sales role to improve productivity and customer/prospect satisfaction. Through more effective virtual engagement, companies can also minimize travel, which frequently claims one-and-half to two days per week and more of a seller’s time. Greater specialization ensures high-value sellers are focused on the most critical high-value opportunities. In other words, pay sellers for what they are good at—selling and closing—and offload other functions like cold calling and administration to other roles.
- Accelerate the sales cycle by restructuring the sales organization to speed up the response time to customers. In traditional sales models, sales reps meet with prospects face to face and when prospects have a question the rep can’t answer, the rep sets up a call or a visit with an expert at some point in the future. In the sales model of the future, this isn’t fast enough, and the need to prepare for additional calls creates inefficiencies (scheduling, coordination, etc.). When customers want answers, they want them immediately; sales teams must have instant virtual access to pre-sales engineering support and other specialists they can call on in the moment when a tough question is posed. Other keys to accelerating the sales cycle include automating key work steps and integrating sales processes and workflows to speed the steps in the sales cycle.
- Evaluate talent against a standard threshold for existing and new roles. Not everyone will be successful selling virtually. Look at each role in your commercial organization, make sure each one is defined appropriately, and that each person in those roles can meet the requirements. If they cannot, move them to a position better suited to their skills or transition them out of the organization. Weak performers will drag down efficiency and cannot be tolerated. Keep in mind that not every role will be virtual; while there is a move toward increased use of virtual engagement, thoughtfully match VAEs to the appropriate customer segments. When used well, virtual sellers allow a company to break away from geographic restrictions so that your best sellers can be put against your best opportunities no matter where they are located. Make your company easy to sell for through streamlined processes and tools.
3. Stronger, More Analytical Frontline Sales Management
Frontline sales management is the critical point of leverage in any sales organization. In the post-COVID-19 commercial organization, this role must be transformed to drive the improved performance of sales teams. The three areas to focus on in sales management transformation include:
- Focus frontline managers on the science of sales management. Data is the currency of the most effective commercial organizations. Put in place a structured, data-driven frontline sales management process and cadence. Make sure that analytics and data on seller/customer engagement guide managers’ coaching and performance expectations. Data and performance should be fully transparent across the sales team, particularly with the virtual sales model. In the new, more virtual sales world, managers can ‘ride along’ with sellers daily and/or review actual seller-customer conversations. Managers must lead their teams more aggressively based on the data and results, setting clear expectations while retaining, motivating and enabling the best performers. Technology helps immensely here. For instance, video platforms can let managers know exactly how much video each seller used, who they called, for how long, etc. You can leverage Artificial Intelligence and analytics to monitor those video communications to predict whether, based on the intonation, responses, and facial expressions, the deal will move forward. Just like on a factory floor, managers can constantly assess how the “factory”—their team—is performing.
- Evaluate frontline management against new requirements. Just as you’ll need to evaluate sellers for new roles, be sure to assess whether your managers can be effective data-driven managers. Are they skilled and comfortable with using data, technology, and a structured approach to sales management? Are they comfortable managing through a more hands-on approach? Can they lead more cross-functional sales teams requiring a broader skill set (i.e., direct outside sales, virtual sales, inside sales, lead generation, etc.)? Take a hard-nosed approach to the performance of current sales managers and potential hires—you cannot afford sub-par performance in this critical role. By the same token, resist simply promoting the best sales rep into the manager role. These are typically not your best manager candidates and it takes your best reps away from what they do best—selling and driving revenue for your company.
- Share efficiency gains with the sales team to fuel further productivity growth. This includes greater alignment of incentives against the specific actions and behaviors of the various roles in the new model. Use data to determine who is driving the right results and how to compensate them fairly. At the same time, increase pod/team- based targets and shared variable compensation. At one company we worked with, the leader of the highest-performing team brought home seven figures year after year—and he deserved it given the level of performance his team achieved. Pay for performance; if you have a team doing well, reward the leader and reward the team and you’ll see continued improvements in that performance.
4. New, More Relevant Sales Plays
Innovate more creative sales plays for attracting new customers, retaining customers, and expanding wallet share. Just as in #1 above, use hard market data to understand customers and prospects, the share of wallet, segmentation, etc. Make it easier to sell by detailing your solutions and how sellers should be thinking about them and presenting them, how competitors are thinking about them and talking about them, how to overcome challenges, and how to meet the needs of customers with a more integrated package solution and so on. There are three areas to think about in designing creative sales plays:
- Use market and prospect data to capture new customers. Solid prospect information, analytics, and segmentation are the keys to identifying specific opportunities and targeting high-value customers. In many cases, customer buyer values and processes have changed, and you need to sharpen your sales messaging associated with existing products. Look for rich areas for geographic and end-market expansions, all made easier through the virtual sales model. Become more creative in lead generation and nurturing through the better use of relevant knowledge capital, engaging with customers during online research, and leveraging all relevant channels for engagement.
- Deepen relationships with current customers. Like so much else in the post- COVID-19 commercial function, creating sales plays for current customers is about improving the use of data. Two fundamental areas to focus on are (1) understanding and quantifying the value of your current wallet share and the remaining white space for each customer, and using this to focus on cross-selling activities and sales plays, and (2) identifying indicators of attrition and integrating them into the renewal process to preempt cancellations.
- Add new products/services in high demand and reinvigorate the old, consistent with a company’s brand. Frequently, companies overlook near-term opportunities in new product areas and let competitors in the door, such as in aftermarket services or technology that can help provide a more integrated and easier-to-buy solution for customers. Refresh your customer knowledge and dig deeper to understand the pain points, the emerging use cases, and evolving needs. Push the customer segmentation further to understand these customers, their buying behavior, and how to engage and start a dialog.
5. Stronger Pricing Discipline
Pricing is a powerful profit lever, but it is frequently neglected due to perceived risk—price too high and you may upset customers and lose sales; price too low and you leave money on the table. Pricing right creates unparalleled enterprise value by accelerating profitable revenue growth. High-Impact PricingTM, enabled through better data, processes, and execution, allows companies to capture the full margin of their products and brand. As you reinvent your commercial organization, look for ways to (1) take quick action to reorient your pricing strategy and architecture to best reflect a market environment that may look radically different from a few months ago, and (2) strengthen your ability to execute the pricing strategy effectively, including clear accountability and ownership, as well as tightened processes for price discounts and messaging to customers.
- Reorient pricing strategy and architecture to reflect the new market reality. Many sectors have seen large disruptions in demand, as well as in the cost and risk profile of their supply chains. For these companies, the pre-COVID pricing levels (and in some cases the whole pricing approach to valuing their products and services) need to be re-thought in fundamental ways. This has implications for customer segmentation, analytics and pricing decisions. To accelerate profitable growth, these companies must take action to quickly identify what’s changed and the pricing opportunities (and risks) in the market, to reorient their pricing strategy and improve their capabilities for the current and rapidly changing environment.
- Strengthen ability to execute the pricing strategy. To implement changes in strategy and pricing architecture quickly and effectively, many companies need to clarify accountability and ownership for pricing processes, while also tightening how these processes are managed and how changes are executed in the market. Improving clarity around ownership and accountability for pricing decisions is critical to a company’s ability to take pricing actions that are impactful in the market and in an unpredictable environment. Such organizational changes should include clear leadership, such as a named “Pricing Czar” with end-to-end responsibility for pricing. With the right team and leadership in place, companies that can reorient the commercial organization towards better use of data analytics and more efficient digital workstreams will also be better positioned to improve pricing.
- Improve pricing strategy and tactics through better data capture and analytics. With better visibility into the deal flow and pricing data capture, companies will have the ability to identify issues earlier and optimize for win rate and margin. Companies will also be able to leverage more complete pricing data to inform pricing negotiations based on patterns in customers’ decision-making, improve efficiency in the approval process, and optimize pricing strategies.
It’s important to remember that COVID-19 did not create the shift in buying behavior that is driving the need for these changes to the commercial organization; the pandemic merely accelerated a trend that was already underway. This is a critical distinction because it means resolution of the pandemic will not revert sales back to traditional methods. A new selling model is needed for a new buying approach that is here to stay. The five areas above, all interrelated and all rooted in better data and a more scientific approach to sales, underpin the successful reinvention of the commercial organization to win in the post-COVID marketplace. While the level of transformation necessary to succeed in the new selling environment can seem daunting, companies that are leading the race up the revenue ladder have already started making the changes necessary to ensure that 2021 is a success.