Q. I’m frustrated with my sales people. They always tell me we need to drop price by xx% because the customer says it wants an xx% drop. Why doesn’t my sales force do a better job of pushing the interests of our business to the customer? Why don’t they take more ownership for the performance of our business?
A. As someone who has been in sales, general management, and procurement, and worked with organizations selling everything from livestock feed additives in South America to personal care ingredients in Asia to exhibition booths in North America, I have some perspectives on sales force effectiveness, channel management, and related topics. Let’s touch on a few areas and see if they generate ideas that will help your organization…
First, some psychology mixed with customer negotiating tactics...a good sales person is externally focused and has more contact with customers, especially high value customers, than with his/her employer. A good sales person, almost by definition, manages much of the customer relationship and brings the voice of the customer into their employer. Sales people hear every customer complaint, especially complaints about price, with the volume of complaints rising in the run up to contract time. Customers also tell sales people about “serious” efforts to qualify other suppliers. In short, sales people may have a lot of empathy for their customers and may have difficulty discerning real competitive threats and true customer dissatisfaction given the negotiating skills of some customers.
There are several responses to these issues, ranging from (a) “If the customer is going to set price, what do I need a sales force for?” to (b) injecting objectivity and analysis into the discussion to discern reality. Sometimes both (a) and (b) are needed to shake sales people out of retreat mode, stimulate solid thinking about how to profitably keep customers, and build confidence going into contract negotiations.
Second, risk aversion plays a role in sales person behavior. The easiest, lowest risk way to keep a customer is to state that the customer is "too big to risk losing” and recommend giving the customer exactly what it has asked for. Conversely, the highest risk play is to recommend counter-punching with the customer on big issues in the absence of solid, confidence-building analysis about the customer’s options and constraints. By recommending the price decrease that the customer has requested, the sales person is essentially asking his/her management to “call the play” and take responsibility for the risk. This recommendation may also be the sales person’s indirect request for help because he/she has neither the time nor the skills to analyze the situation and formulate a better negotiating strategy. Finally, some sales people will recommend the customer’s steep discount request to test the mettle of their own management, particularly new management, to see if management will “put its money where its mouth is” with respect to pushing back against customers.
Lastly, stepping back to think about sales force design, there are some important questions that executives and managers should objectively ask themselves about their offerings and sales force mission, capability, incentives, and support. The answers to these questions will identify actions to improve sales force effectiveness.
1) What are the characteristics of the firm’s offerings and markets that impact the design of its sales force?
Understanding the characteristics of the firm’s offerings and markets, i.e., Market Understanding, will validate or refute the need for big price decreases.
For example...Does the business sell a mature, low tech product line into low growth markets? Is the business launching an innovative new product into a high tech, high growth market? Are there many competitors of similar size with similar offerings? Is there one “dominant” supplier and your firm isn’t it? Is there one leading customer that drives demand? Are your products or your customers’ products mainly sold through “big box” retailers? Are downstream markets expanding or contracting? Do your offerings enjoy favorable government incentives, intellectual property protection, or other regulatory protection (e.g., only approved biosimilar for EPO, etc.)? You get the idea - there are a number of ways to characterize offerings and markets - offerings and markets impact sales force design and effectiveness.
2) What is the primary mission of the sales force today? Identify, force rank, and weight the relative importance of the top 5 objectives.
Is it aggressive volume or share growth, share maintenance, high manufacturing utilization without expansion capital, price maintenance, sales growth, profit growth, margin improvement, “showing the flag”, finding opportunities to offer innovative and proprietary solutions to customers, contract negotiation, real-time resolution of customer order issues with improved customer satisfaction, some of the above, something else, all of the above and more? Is it to convey information between supplier and customer? Is it to manage their part of the business with full P&L responsibility? Are there conflicting mission objectives?
3) What is the desired mission of the sales force (if different from today)? Identify, force rank, and weight the relative importance of the top 5 objectives.
4) What decision making authority does a sales person currently have?
Does a sales person have the authority to make price and service decisions, within some boundaries, as long as his/her territory meets certain performance targets? Are all price and service decisions made at HQ? If a sales person does have decision making authority, from their career perspective, is the upside to being right small while the downside to being wrong looms large?
5) What decision making authority should a sales person have given the desired sales force mission?
6) What metrics are currently used to determine sales force effectiveness?
7) What metrics should be used to determine sales force effectiveness given the desired sales force mission?
8) What personal characteristics (skills, traits, aptitude) and training are needed for a sales person to carry out the desired sales force mission?
9) How should a sales person’s compensation package and career growth path be structured to attract and retain the necessary talent while encouraging behavior consistent with the desired sales force mission?
10) How does the current compensation package and career growth path for sales people differ from the answer to the previous question? What are the implications of this difference on sales force effectiveness and, talent recruitment and retention?
11) Are the necessary tools and infrastructure in place for the sales force to achieve its desired mission?
How does the employer support its far flung mobile sales force intellectually, operationally, and emotionally? Are there “thinking partners” that a sales person can bounce ideas around with? Are the mobile electronics, ERP systems, and supporting functional infrastructure (e.g., supply chain, manufacturing, customer service, marketing, technical support) in place so that a sales person can provide real-time resolution of customer issues? Is there a human network in place to keep sales force motivation high amid the ups and downs of sales calls, customer management, and dealing with internal bureaucracy?
12) Is the sales force equipped with an effective message explaining how the supplier and its offerings are relevant to customers today and in the future?
Does the sales force have something new, exciting, and value-added to speak with customers about in between contract negotiations?
Trout Creek Consulting offers several Immediate Impact Workshops that readers of this blog entry might be interested in, including Sales Force Design, Customer Segmentation and Management, Negotiation Support, and Competitive Gaming.
Q. I’m frustrated with my sales people. They always tell me we need to drop price by xx% because the customer says it wants an xx% drop. Why doesn’t my sales force do a better job of pushing the interests of our business to the customer? Why don’t they take more ownership for the performance of our business?
First, some psychology mixed with customer negotiating tactics...a good sales person is externally focused and has more contact with customers, especially high value customers, than with his/her employer. A good sales person, almost by definition, manages much of the customer relationship and brings the voice of the customer into their employer. Sales people hear every customer complaint, especially complaints about price, with the volume of complaints rising in the run up to contract time. Customers also tell sales people about “serious” efforts to qualify other suppliers. In short, sales people may have a lot of empathy for their customers and may have difficulty discerning real competitive threats and true customer dissatisfaction given the negotiating skills of some customers.
Is it aggressive volume or share growth, share maintenance, high manufacturing utilization without expansion capital, price maintenance, sales growth, profit growth, margin improvement, “showing the flag”, finding opportunities to offer innovative and proprietary solutions to customers, contract negotiation, real-time resolution of customer order issues with improved customer satisfaction, some of the above, something else, all of the above and more? Is it to convey information between supplier and customer? Is it to manage their part of the business with full P&L responsibility? Are there conflicting mission objectives?
How does the employer support its far flung mobile sales force intellectually, operationally, and emotionally? Are there “thinking partners” that a sales person can bounce ideas around with? Are the mobile electronics, ERP systems, and supporting functional infrastructure (e.g., supply chain, manufacturing, customer service, marketing, technical support) in place so that a sales person can provide real-time resolution of customer issues? Is there a human network in place to keep sales force motivation high amid the ups and downs of sales calls, customer management, and dealing with internal bureaucracy?