Monday, November 23, 2009

A Strategic Guide Through the Perfect Storm for Sales Management

Changed customer behavior and increased negotiation power of the customer induced by technology together with the tough economic conditions create the conditions for a perfect storm that hardly can be weathered by sales management with tried and trusted old tactics.

The book “Rethinking Sales Management” by Beth Rogers is,as the subtitle suggests, “a practical guide for practitioners” how to become more strategic to cope with the challenges of these new normal times.

Beth Rogers has extensive practical experience in marketing and sales roles which she has complemented by in-depth consultancy, research and teaching. Her book therefore stands out from most sales and sales management books. Her advise is not of the type “here is how I was successful and I do not see why this should not work for you”. Instead, she provides the readers with strategic models and facts helping them to understand the 'Why' of a situation and then deduct the best course of action suited to context they are in.

In the era of customer orientation, Rogers argues, CSOs should have a seat at the strategy table of their enterprises. The first part of the book is an introduction into strategy; enabling CSOs to get familiar with the language talked there . The first chapter introduces well known strategic concepts like the business portfolio matrix (BCG matrix) used to categorize strategies from a enterprise point of view. (inside -out)

In the second chapter, the focus is on the purchaser's perspective of strategy (outside- in). Rogers suggest the purchaser's portfolio matrix as the vehicle to analyze this point of view. This concept is probably less known among C-level executives. Understanding it gives the CSO the opportunity to bring added value to the strategy discussion.

The purchaser's portfolio matrix first presented by Peter Kraljic in an article of the August-September 1983 issue of the Harvard Business review and then reintroduced by Rackham and DeVincentis in their book “Rethinking the Sales Force” recommends that purchasers should adapt their strategy depending on the complexity of the supply market and the financial impact of the purchase on the enterprise.

In the third chapter, the B2B Relationship Development Box is discussed in depth. This box, also a 2 by 2 matrix, combines the enterprise (internal) view with the purchaser's (external) view. This model suggests that the nature of customer relationships depends on the value the customers bring to the enterprise and the value the enterprise provides to customers (in their view).

The Relationship Development Box is the essential tool for CSO's to understand how to organize their resources to execute on their strategies. The second part of the book therefore shows how this tool is used. Each quadrant of the relationship matrix is explained in a separate chapter As not all relationships are worth to be maintained, this part also contains a chapter about exit strategies.

The four relationships discussed are:

  • Strategic (value of the customer to enterprise is high and value of the enterprise to the customer is high). This is the quadrant where Key Account Management is the best fit.

  • Prospective (value of the customer to the enterprise is high and value of the enterprise to the customer is low). This relationship is of transitory nature. Business development is the strategy that can elevate this relationship to a strategic one. But one cannot exclude that the value of the enterprise to the customer cannot be increased. In this case, the enterprise should move the relationship to the tactical quadrant in order to avoid continuous over investment in the relationship.

  • Tactical (value of the customer to the enterprise is low and value of the enterprise to the customer is low). This quadrant is often considered as not very attractive. Considering the use of other channels than a direct field sales force (e.g. Telesales or Channel Partners) is though more viable than considering this relationship as transitory and trying to elevate it to a strategic one.

  • Cooperative (value of the customer to the enterprise is low, value of the enterprise to the customer is high). This is probably the most delicate quadrant to handle. The balance must be found between avoiding over investing in the account and risking competitive vulnerability. The cooperative relationship might therefore also be of transitory nature.

The third part of the book entitled Strategic Focus for 21-st Century Sales Management

addresses four weaknesses observed in the management of the sales function.

  • Reputation Management can be seen as a part of corporate reputation management brought to the fore by new regulations like the Sarbanes-Oxley Act. Rogers though also cites results from own studies where “breach of trust” was quoted as the single most likely cause of the disintegration of a customer relationship. Maintaining integrity of the sales people as a form of reputation management has though also a direct impact on sales performance. Undue internal pressure and variable pay schemes can negatively influence this performance.

  • Working with Marketing can be a source of so far untapped profitability. Kotler, Rackham and Krishnaswamy in their article in the Harvard Business Review of July/August 2006 believe that there can easily be a gap of 20% in profits between organizations where marketing and sales are aligned compared to companies where sales and marketing work independently in separate silos or even worse fight each other. Also this chapter has a link to the Relationship Box. Rogers suggest that Marketing should have the lead for tactical relationships, whereas Sales should be leading for strategic relationships.

  • Leadership: Five tools are discussed: Awareness (incorporating self awareness and awareness of others), Framework (strategy and values), Extensive Communications, Coaching and Development and finally Trumpeting. The last point is probably not readily understood. It means telling and rewarding people for things they have done right. Although financial rewards are the culture of sales, those rewards do not necessarily have to be only in monetary form.

  • Process Management as a necessary prerequisite for continuous improvement is discussed in this chapter.

This book is a great eye opener to sales people contemplating to become sales managers. After having read it, they will understand the kind of strategic thinking needed to succeed in this role. For sales managers and executives, coming to the realization that their current approach will not bring the expected results in the future, it is an excellent source for understanding how they can evolve their role and being more successful with a strategic approach.

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