02 February 2009

7 Quick Tips for Sales Cost Reduction

There is considerable pressure to reduce cost in sales and marketing. But how to cut sales costs without shooting oneself into the foot?

Usually, the budgets for sales and marketing are derived not top-down strategically, i.e. the planned revenue drives the amount of resources to invest into sales. But, more often the budget is derived by top-down "That´s all the money we have for sales." (see percentage-of-sales)

Therefore, many sales departments are chronically underfunded and will not deliver the amount of leads, contracts, orders and revenue that would be possible and profitable. CEOs and CFOs need to be also aware that the higher the achieved revenue, the lower the relative cost of sales & marketing. Therefore, the task is not to minimize cost but to maximize sales productivity: more sales at lower cost.

In reality, reasons for less than optimal productivity in sales & marketing are manifold. However, in my experience there are a few actions that drive higher sales at lower cost quickly:

1. Work Intensity: Ensure that sales people are actually visiting clients selling to them, instead of sitting in the office doing administration, powerpoint, brochures, calculations or a myriad other things that holds them away from the prospects.
Result: Increased selling time from (average) 11% to 30% of sales rep working time

2. Outsource Lead Generation: Salespeople hunting for leads is often very inefficient and yield low results. Better to use outsourced lead generation marketing, e.g. mailings, e-mail, phone, events, etc. that delivers more and better opportunities for sales; the key here is testing and accountability for delivering high quality leads.
Result: More and higher-quality leads for less cost

3. Split Defense & Offense: Like in football, make a division between routine & new/special sales work. Focus all in-bound, routine selling & customer service work in an internal sales team working on the phone. On the offensive side build and train a strong field sales team that is out and about, winning new accounts and negotiating tough problems and contracts.
Result: Routine work done faster at lower cost and more high value conversations with prospects for new business

4. Speed Up the Sales Cycle: Many default visits are not needed and even not wished by the client. Ensure every call and presentation delivers on the closing of the contract. Cut the "nice to meet" events and deliver real value each time your client is talking with your people.
Result: Faster sales with fewer work hours

5. Set Customer Priorities: An intuitive, gut-driven segmentation of customers often lies at the core of waste in sales and marketing; seemingly attractive segments, "heavy users", "volume buyers," "18-35 year olds," "high-margin targets," "loyal customers," etc. turn out to destroy profit. In some cases, 30% of customers sap 50% off the profit. In order to seriously save cost, sales & marketing need to look at the data for real profitability of segments and set their priorities accordingly.
Result: Cut the profit-eating targets and build business on truly profitable customers

6. Specific Sales Training: Often sales persons are not trained to really master their job tasks. Yes, they can do much of it at some level of proficiency, but not well enough for breakthrough success. Here specific training and coaching can effectively double or triple the sales person´s effectiveness. Although this requires individual analysis and hard work on part of the sales rep and his coach and manager, it does pay off. For a list of skills, see here.
Result: Doing the right sales work consistently delivers the right sales results: leads, orders, revenue.

7. Get Started Today: Often I observe managers agree on all the cost cutting measures, and then do ... nothing. People wait for the holidays to be over, Jack to be back, or for Godot.... It is like starting with a fitness work-out, if we wait to long, we´ll gain a few more pounds again. The best is to start right away and to improve the results a bit every day.
Result: Small wins every day motivate the team to deliver ever better results. Because, there is no end to improvement.

For comments contact me at asattlberger@fortee.com or write below.

No comments: