We’re entering a new year in the midst of tough economic challenges. The time could never be better to take a serious look at how your marketing and sales model has functioned in the past and how you can reposition it for optimized, unbeatable success.
Despite all the possible permutations of how you can get there, there are only three ways to grow your business:
1. Increase the number of customers
2. Increase the average transaction size
3. Increase the frequency of purchase
To be successful, you must align your marketing and sales model to meet one or more of these three objectives. If you can increase all three metrics, you will soon have a world-class operation. And while there are many possible ways to achieve a revenue objective, some organizations (perhaps yours) are not using the best strategy. You should not make decisions regarding your marketing and sales model simply based on what your competitors are doing, but rather on your unique assets and weaknesses.
Ask The Tough Questions
Before considering embarking on a new model, it is helpful to understand your current situation.
1. How did your current marketing and sales model evolve?
2. What’s your motivation for keeping the status quo?
3. Are you doing things out of habit or by deliberate choice?
4. Is your sales force earning its keep?
5. Are your current channel partners helping or hindering progress?
6. Where is the Pareto Principle (80/20) alive and well in your organization?
7. Are there any time bombs at your company?
Time bombs are those issues that, if not addressed, could have serious consequences downstream, such as: a cost of sales that is out of control, good products, but a very inefficient sales team, channel partners that are leaving you for the competition, a prohibitive cost-of-goods, and/or products that are more than one generation behind the competition.
Acceptance and Courage to Change
Reinhold Niebuhr, a wise theologian, wrote what is now known as the Serenity Prayer: “God, give us grace to accept with serenity the things that cannot be changed, courage to change the things that should be changed, and the wisdom to distinguish the one from the other.” This wisdom can be applied to how we conduct business. When it comes to things we cannot change, there are five that are most important to establishing the right sales model:
1. You cannot make bad sales reps into good ones, with some exceptions. You’ll need to face the situation.
2. You cannot turn weak channel partners into strong performers. Find and motivate the good ones.
3. Sales reps and channel partners always “follow the money.” A weak compensation plan leads to weak sales.
4. Sometimes you need to tweak the model and sometimes you need to overhaul the model. Holding on to a weak sales model is postponing the inevitable day of reckoning.
5. Customers have control, not you. Figure out your organizational strengths and align these with the way customers desire to do business.
Three key steps in the alignment process:
1. Survey how your customers buy now and how they want to buy in the future: sales rep, distributor, retail, Web, mail order, telephone, etc.
2. Align the key buying criteria with the ability of each selling model to fulfill specific criteria.
3. Offer flexibility as your customers change their needs/wants.
Comparing Sales Models
There are two major factors to take into consideration when choosing a marketing and sales model. The cost to complete each transaction and the value that each transaction brings to the business. It is not surprising that the direct sales force is both the highest cost and highest value option. At the other end of the continuum is Internet (Web-based) selling, where the costs can be very low, but the average sales size also tends to be low. The best situation is to have a high-value transaction facilitated with low-cost marketing and sales techniques. Conversely, the worst situation is to have a low-value transaction created using high-cost techniques (e.g., partners or direct sales). The overall objective is to drive the highest average transaction cost at the lowest cost-per-sales.
Direct, Channel and Hybrid Models
Pure direct sales models usually works best:
o When you have solid geographic coverage.
o When you sell big-ticket products.
o When you sell complex products.
o When you have funds to sustain a sales force through the start-up period.
o When you cannot afford to heavily discount your products.
o When a high costs of goods makes paying a channel margin prohibitive.
Pure channel sales models usually works best:
o When you can readily identify potential resellers who know your industry.
o When you have limited people to cover a geographic area.
o When you need specific vertical or horizontal expertise.
o When you have a relatively low cost-of-goods.
Mixed or hybrid direct and channel model works best:
o When you have a mix of geographic coverage.
o When your customer mix includes a blend of small and large companies.
o When you need the vertical/domain expertise that a channel brings.
o When the economics work for both models.
In the hybrid model, direct or field sales people focus on large and profitable accounts, complex sales, quality (not quantity), upgrading and cross-selling accounts, and becoming customer advocates.
Even if you decide the pure channel model is preferable for your company, it is a good idea to first establish the ability to sell directly. You will gain extremely valuable information about your marketplace, value proposition, price points, and so forth.