Process Excellence Makes Sales Problems Solvable

What does a sales production system look like?

Published: Wednesday, January 27, 2016 - 13:30

This month Quality Digest Daily welcomes Michael Webb, a noted author and consultant who writes about how the quality and productivity sciences improve sales and marketing departments.

How well does your company benefit from quality improvement and productivity? For instance, how well do you leverage principles such as systems thinking?

You probably already know not to buy cheaper parts that ultimately increase costs and cause quality problems. That achievement required your employees to expand the boundary of the system they were working within to include the downstream supply chain. Yet when you step outside the “four walls” of your production operation, there are two directions. The other goes upstream, through sales and marketing, and includes your customers.

Everyone agrees that the quality of your customers—the extent to which they recognize and pay for your value—has a huge impact on your profitability and growth. Think of all the time, cost, and waste that happens when your sales force brings in the wrong kinds of customers (a problem that happens all the time). These customers won’t pay for value, so discounting occurs. Your product or service might not fit their situation so well, which stretches your capability and consumes extra resources, and that increases cost. You create special things for them that no one else will pay for. They aren’t delighted, so they are more likely to defect. And on and on.

On the other hand, if the sales force brings in the right customers, the work goes smoothly and nothing detracts from the profit. When the company is aligned with the right market needs and the sales force knows how to find, win, and keep the best of the best, the whole company operates faster and more profitably.

Think of customers with needs as the “raw material” in the market. Like a mining company, your business must find the most profitable veins of ore for itself, and proceed to win the best nuggets, and “keep” them by processing them correctly.

Yet, most executives can sense that commercial—i.e., customer-facing—functions are fraught with uncertainty and waste. How familiar are your marketing executives and managers with operational excellence? And if they understand it generally, how aware are they that they can benefit from it personally? Because operational excellence does benefit sales and marketing. And many sales and marketing people are starving for the more rational approaches it offers.

Sales and marketing executives in B2B companies seem to be working harder every year, yet consider some recent results:
• 62 percent of companies had difficulty making target revenues in 2014. (Forrester)
• 42 percent of all sales opportunities end in “no decision.” (HubSpot)
• B2B companies are delaying contact with salespeople. (Google and the CEB)
• A pass bet at a craps table has better odds than the average sales forecast. (CSO Insights)

To say the typical companies in these studies are trying to improve would be an understatement. They try sales training, customer relationship management (CRM) systems, lead generation, contests, compensation plan changes, changing out salespeople, and many other things. Revenue is so important, most companies have no choice but to spend on sales and marketing. In fact, the sales portion of sales, general, and administrative expenses is one of the largest costs in the typical company, and the most difficult to control.

With so much time, energy, and money at stake, why don’t things actually improve?

Three reasons why sales and marketing productivity don’t improve

One reason is that customers today want to look on the Internet to help them solve their problems. They are less likely to talk to salespeople, at least in the beginning. Yet, salespeople often have little to do with their company’s website. Worse, when companies try to improve their marketing and their websites, they often struggle. With divergent opinions around what changes will create improvement, how do you select the best approach? Without a clear payoff, it’s difficult to justify investment. So making changes is a difficult proposition.

Second, most companies have difficulty distinguishing value from waste in sales and marketing. Should the company spend money on the website, on sales training, or on recruiting more channel partners? Is attending trade shows more important than purchasing a new CRM system? With no easy rule or principle for distinguishing value from waste, companies can only muddle through. So how do you distinguish value from waste in sales? Value is created when you enable your customers to take the actions you want them to take. Anything else is waste.

Third, executives who think in terms of functions instead of value unwittingly make assumptions that limit their awareness. They “swim” in a world where the goals of marketing, selling, and servicing are independent of each other. They see the “sales process” as just a matter of detail and discipline—something else to consider alongside other departmental issues such as sales training, CRM, or lead generation. As the saying goes, “The last thing a fish discovers is water.”

Customers see your company as a single entity. Integrating your approach to finding, winning, and keeping them enables you to see the business as a production system that helps customers realize, prioritize, and solve their problems. These stages are called the customer’s journey, and it doesn’t matter whether helping the customer purchase something requires a marketing tactic or a sales tactic. What matters is implementing the appropriate tactic as efficiently and effectively as possible.

What does a sales production system look like?

When sales and marketing becomes a cross-functional production system, companies can achieve big increases in sales productivity and margins. For example, one client achieved a 1-percent increase in margin without increasing prices, simply by reprioritizing their deal flow. Another doubled sales productivity by figuring out and walking away from the least likely prospects. These changes actually happened quickly and without much fanfare.

How does that happen? The first step is to get everyone to define their terms in the same way. For example, it’s common for different people in a company to have a different concept of who the customer is. One employee might think the customer is the person at the distributor who signs the check in payment of your company’s invoice. Another might think the customer is the end-user who touches or uses the product. If the people in your company aren’t aiming at the same thing, how can anything improve?

Getting your team to tie their words to observable reality takes time and energy, but that effort is richly rewarded.

For example, the sales vice president at a machine tool company selling six-figure capital equipment felt his salespeople were spending too much time on the wrong accounts. Unfortunately, the problem wasn’t solvable in this form. How much is “too much time?” What’s the definition of “wrong account?”

The vice president realized certain observable characteristics, such as a prospect’s degree of interest in training and maintenance around their machines, were an indication of the customer’s willingness to pay for value. He and his sales team developed a list of traits that enabled them to convert these observations of prospect quality into a number. The higher the observed quality of the prospect, the higher the number.

Prioritizing their deal flow in this manner caused the best prospects to rank higher than when salespeople had forecast their deals informally. Like other clients, this company was surprised to learn its sales forecasts became far more accurate with this approach. Instead of working on its sales opportunities sequentially as it had in the past, this company started applying its scarce engineering resources to the highest-quality prospects first. In practice this had the effect of increasing the company’s margins. The company conservatively estimated this increase to be at least 1 percent, which amounted to nearly $1 million annually.

However, the impact went farther. Measuring deal flow enabled the company to detect a decline in the quality of sales opportunities. This was an important market signal, indicating the company might be facing the early stages of a recession (recessions are especially hard on capital equipment manufacturers). Instead of attempting to push harder on poor quality prospects, the sales team lent its expertise to help the marketing department develop a compelling return on investment model for a new product.

Rather than enforcing some arbitrary discipline around a “sales process” purchased from an outside sales training or CRM vendor, the management at this company simply encouraged the sales team to improve the company’s own process.

Traditional approaches to managing sales and marketing can’t produce improvements like these. By not defining and analyzing actual data around what is and isn’t working in the field with salespeople and their customers, these approaches fail to solve actual sales and marketing problems.

Process excellence makes sales and marketing problems solvable

No company has much direct control over the demand curve among its customers. However, by defining your terms, gathering data, and aligning the work to real customer value (the fundamentals of process excellence), you can remove the waste and misalignments that hamper conversion and productivity in your business. You can pick up information that will allow you to shift your resources to where customers need it.

Process excellence works because it provides a data-driven framework for identifying which kinds of changes will actually make the sales funnel flow faster. Precisely defining the problems you’re trying to solve has a much greater effect than just applying another version of the usual fixes, such as lead generation, sales training, CRM, or attempting to select even more talented (and expensive) salespeople.

Further, the simple, logical reasoning that process excellence encourages is respected by salespeople and marketers alike. Ultimately, improvements to the quality of customers that are input to your business increases the productivity, and therefore the profitability, of the entire enterprise.

About The Author

Michael Webb

More than 12 years ago, with much experience in field sales, sales management, and sales training, Michael Webb set out to create a data-driven, process-based alternative to the offerings of typical sales training, consulting, and customer relationship management companies. Since 2002, Webb has published numerous articles on ways B2B sales organizations can benefit from process improvement techniques, and consulted with companies like Burr Oak Tool, Danfoss, Wacker, Pentair, as well as many smaller B2B companies. His book, Sales Process Excellence (Sales Performance Consultants, 2014), earned the Shingo Research and Professional Publication Award in 2015. Learn more at his website.