Business Perspectives

Targeting Revenue Growth and Reducing Sales Cost in Downturn

Extraordinary economic times force companies to take every opportunity to cut costs and arrest declining revenues and margins. One of few steps taken by companies, mostly, is by reducing the number of sales force in order to cut its sales force costs. Unfortunately, companies fear experimenting with the sales force: it is the engine that drives revenue. Reducing sales staff and functions in the belief that this will hurt revenues and will bring greater complexity after the downturn.

In fact, there’s perhaps only one universal truth: being smarter about the way a company cuts its sales force costs greatly improves the odds of success. There’s a simple, overriding principle for companies to follow when they reduce their sales costs: do no harm. Small changes can have large unintended consequences, so companies must walk a fine line between reducing expenses and maintaining resources sufficient to protect current revenue and future growth. The key to these cuts is to be systematic—identify the best value customers/ sales channels; promote efficiency in the sales organization; and instill “best thinking” consistently to sales forces.

Companies need to address several questions to identify the best value customers/ sales channels: How much effort really goes into each customer and transaction? Which products/ services does each of them need? What are their real profit margins? Which customers and markets are growing and which are shrinking? Understanding customers allows companies to focus sales resources where they are needed and to cut waste, not value.

By better understanding to its customer portfolio, companies also can allocate its sales budget effectively and efficiently: big accounts generally get more coverage than little ones, though a few small, high-potential accounts get extra coverage. The reason to take this approach is straightforward: in most industries, the move that has the single biggest impact on sales force costs is adopting a sales model that makes desirable customers profitable to serve.

Moreover, companies needs to increase win rates by using the whole company’s best thinking, drawn from experience with similar offerings (and those of competitors) across the sales cycle and superior information can make all the difference. Best thinking is critical, especially for tight budgets make it even more important to focus sales resources on the best opportunities.

Challenge in action

The challenge to execute these approaches is managing change in the organization. The brutal fact of the reality: Sales teams typically resist change; they not only worry that it will imperil relationships with clients and revenue but also wonder why a company would risk tinkering with a sales force that gets the job done, even imperfectly. These teams fear the unknown rather than change itself. And the unknown is particularly frightening today: the order books of many sales reps are drying up, and their bonuses—and sometimes jobs—are on the line.

A company’s specific actions to these issues depend on several factors, including its current state, as well as its need and capacity for change. Thus, three change aspects have to be addressed holistically: cultural change, change process and change tools. Company culture is often the inherent inhibitor for change that must be rehabilitated. A clearly defined change process enables companies to measure change program results for all organization layers. A set of standardized change tools that are customized to companies specific environments are critical to influence and transform the organizations and individual behavior and capabilities.

In summary, by executing these approaches, companies may realize the bulk of their savings by matching sales resources with customers more appropriately. Others may already have finely tuned sales channels but benefit from centralizing support resources. Targeting revenue growth and reducing sales cost in downturn are not that hard, right?

Welcoming your opinion…

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