The CEO message to Commercial Leadership when the downturn hits
The experienced leader will have seen it before and know that a potential recession like those before will come and go, but that how you manage it will have severe and long term implications for the company.
Research from the previous recession shows that some companies not only survive the crisis but come through it thriving, increasing annual sales by 9% and profitability (EBIT) by 3 pct. points, while in general, companies see a sales decrease of 2%.
The message from the CEO to Sales & marketing leadership should be that they play a key role in balancing the company’s need for operational cost-cutting while reducing risks of topline impact and long term growth. History shows, that those companies that fare well during and after recessions have two things in common: They prepared well and acted fast both when the downturn hit and when the following uptake came.
Of course it is not up to the CEO to provide the blueprint, but her involvement in qualifying needed preparations and push for timely action could quickly show very valuable. The CEO could insert her self in these important conversations by asking three key questions to Commercial Leadership.
Three key questions for Commercial Leadership when the downturn hits:
- Cut: How will we improve efficiency and effectiveness in commercial operations?
- Focus: What high-value accounts and deals do we focus resources towards?
- Invest: When do we start investing to take advantage of recession opportunities?
1. CUT: Reap operational efficiency gains instead of broad FTE cuts
Together with cutting low performers, sales & marketing leaders should look towards areas where cost can be lowered through operational efficiency gains, without compromising short term revenue and long term growth.
1. Shift selling towards Inside Sales: Avg. customer acquisition costs are 40-90% lower for inside sales compared to traditional field sales. Inside salespeople not only have a lower avg. salary compared to field sales but associated expenses (traveling, accommodation, food, etc.) are cut to zero. As B2B buyers increasingly demand -and are comfortable with virtual interactions instead of face-to-face meetings, a large portion of deal & account management activities can be managed by inside sales rather than field sales, without compromising effectiveness.
2. Insource marketing: By removing agency overhead and margin costs, companies can save as much as 50% of their current agency and content-development costs. Upon starting his job, one CMO at a Nordic professional service company we are working with found the company was paying their agency €100k per year to create their monthly newsletter. As marketing is increasingly enabled by new technology to perform tasks previously too specialized to be done inhouse (e.g. content creation, distribution, performance marketing etc.) the need for agency involvement is lowered. The same activities can be managed in-house at a lower cost, without compromising effectiveness.
3. Strengthen sales & marketing collaboration in revenue operations: Sales & marketing misalignment is estimated to cost B2B companies a whopping $1 trillion per year, from generating content in marketing that is never used by sales, leads that are never followed up on or opportunities lost from poor collaboration. This is why Organizations with good alignment not only achieve 27% faster three-year profit growth, they also close 38% more deals. This starts with a complete mapping of your market-to-order process (revenue operations) and agreement between sales and marketing on activities, roles and responsibilities throughout this process. Large efficiency gains from process optimization can be achieved without lowering selling effectiveness.
Although economic downturns can be a good catalyst for initiating change initiatives, many commercial leaders are already now initiating these commercial development plays, to reap the benefits.
2. FOCUS: Be obsessed about winning the 20% of accounts & deals that generate 80% of your revenue & sales
In our experience two commercial development plays stand out as most effective:
Structure & strengthen strategic account management: 60% of B2B companies don’t use account planning for the strategic accounts, although this has been shown to deliver significant improvement in win-rates for forecasted deals. Staying close to your company’s strategic accounts becomes critical during the more turbulent times of a recession. Although the broad commercial organisation should rally around focus on the top 20% accounts and deals, it is recommended that specific teams are put together around those mega deals & accounts strategically important for the health and future of the company.
Implement a Deal Accelerator for high priority deals: Doing much for the few rather than a little for the many, is not only the mantra of commercial downturn management, but the general principle that should be followed by B2B companies working with big deals. Investing top sales & marketing resources in winning the few selected deals that can make or break the year is critical at all times, but especially when the downturn hits. An effective approach is to have top sales people in the organisation propose 9-12 deal candidates for a beauty contest from which Commercial Leadership and the CEO will choose that 3 candidates based on potential, strategic importance and deal-owner capability. In the Deal Accelerator, a set deal team will receive support on how to accelerate and win high priority deals through bi-weekly deal strategy sessions over a set period of time depending on typical sales cycles.
3. INVEST: Be ready to invest in opportunities on the uptake
When competitors are sacrificing customer satisfaction for short term budget cuts (amputating their commercial organisation and ability to serve key accounts), there is a great opportunity to invest in focused customer acquisition. Look for signs of discontent to create new opportunities and a beachhead to new accounts.
When competitors are sacrificing sales talent in broad FTE cuts, there is a great opportunity for picking up star-performers. Look for signs of discontent to prospect for new people to your commercial organisation.
Recessions on average last no more than 12 months and the next one will pass too. What matters is how commercial leadership prepares and responds before and during.
Managing Partner at Kvadrant Consulting+45 40410043
Watch the virtual event: “The Growing Power of Inside Sales in B2B”
Inside Sales (i.e. sales people operating from inside the office only) is on the executive agenda, as B2B buyers go digital and increasingly want to engage with vendors through other ways than face-to-face meetings. The function delivers value to both sales and marketing with 40-90% lower new customer acquisition cost and 7x higher conversion rates on leads.
While running the engine to achieve immediate goals and developing to fix immediate challenges are important, the commercial leader holds the responsibility for balancing the need for success in both the short and long term.
Separate sales and marketing functions has been the standard organizing principle for the commercial organisation. However, in the new B2B buying environment, where buyers use channels interchangeably selling is a product of sales and marketing collaboration
THE FUTURE OF HUMAN-LED SALES INTERACTIONS Sales organisations will need to find their feet in a new normal. The new normal is shaped by a shift that has been underway for quite some time but the speed of change has been greatly accelerated by the recent COVID-19...