Doug Davidoff
A new research report from SiriusDecisions presents a pretty damning view on the state of sales today. The 2018 Global Chief Sales Officer Study surveyed the heads of sales from 250 companies covering a broad array of business, from small business through large multinational businesses.
Here are some of the key findings:
- Fewer than 50% of sales reps are hitting quota
- At 70% of companies, fewer than 70% of sales reps are hitting quota
- Marketing is contributing less than (a paltry) 25% to revenue
- Sales cycles are getting longer for 64% of companies, with 27% seeing an increase of more than 30% in just the last year.
- For the typical company, sales reps spend just 27% of their time on direct activities involved in selling to customer or prospects. Higher-growth companies reported their reps spent 53% more time selling (though I'd point out that’s still only? 41% of their time spent actually selling).
I’ve got to tell you, I had to read the report twice before I believed what I was seeing. The last five years have seen greater investments in customer acquisition and sales than ever before, yet these numbers indicate that nothing has improved.
Of course, I really shouldn’t have been surprised to see these numbers as I’ve got front row seats to this whole thing. While I caution people to be wary in reading too much in surveys, this report is another piece in a growing plethora of evidence that shows that selling organizations have still not made the necessary adjustments in their approaches to sustain and succeed.
Time is running out. As noted strategist and author Clayton Christensen says, “In business, the new game starts before the old game ends.” The old game is in its twilight, and if you haven’t made meaningful changes to your go-to-market and sales approaches, you’d better do that soon or suffer from these problems (if you’re not already):
- Higher CAC. Companies are still growing, but the primary tactic is to simply increase spend. So far, this year, I’ve analyzed more than 50 companies (including financials) and I’m seeing two trends.
- Companies that are growing are seeing their costs of customer acquisition growing faster than revenue growth (and much faster than gross profit). These companies are primarily funding this increased burn with outside funding.
- Those companies that don’t have access to outside funding are seeing growth stall and margins compress. A primary problem for them is that they’re not allocating enough resources to customer acquisition.
- Higher threshold risk. While it’s always been true that as a business gets bigger, the high wire increases, today the problem is more acute than ever. Far too many smaller, mid-market companies are driving growth through extreme hustle. Don’t get me wrong, I love hustle, but hustle alone has its limits. Companies are driving growth through greater spending and harder work. The problem here is that all margin for error disappears, and even the successful companies fail to create real wealth for their founders and executives. (Just look at how little ownership founders have been able to maintain in companies that have recently gone public).
- Sustainability. I’ll admit that I worry about the state of growing companies today. We’re seeing conditions similar to what we saw in 2007-08. The economy is on fire, businesses are spending money more easily than any time in the last decade, and companies are growing through brute force. The smallest disruption in the economy could be devastating. Companies are losing their core and when budgets tighten, the very sustainability of companies - maybe even yours - are going to be threatened.
The Three Causes
While we could write a book (I am - coming out soon) and talk for hours (I have) about why businesses are in the mess they’re in, there are three causes at the core that must be addressed or the study that comes out five years from now will look much worse:
- Misalignment. I’m not talking about sales and marketing alignment here (though that is certainly an area that is negatively impacting the vast majority of companies). Fundamentally, sellers still don’t seem to grasp that they no longer control the game that is being played and they are out of alignment with how businesses buy. Executives spend far too much time trying to optimize how they sell, and nowhere near enough time working to make engaging with them easier.
- Poor process & systems. I firmly believe there are two words that will put you on the fast track to commoditization and stagnation. Those words are ”best practices.” Theoretically, I have no problem (and even embrace) best practices, but the real-world application is an excuse to cheat (or to “hack,” if you want to sound cool) and be lazy. Best practices are like trying to run your company by reading 1980s case studies from the Harvard Business Review. They’re insightful and even interesting, but they tell less than 2% of the story. And here’s the key, you can take the greatest idea or the greatest strategy and if you don’t build the hard, boring and complex processes and systems to make it work, you’ll lose. As an old coach used to tell me you can steal the fixtures, but you can’t steal the plumbing. If you want better sales results, look at your plumbing.
- Lead Activation Syndrome. Five years of obsessing about lead generation has given companies bigger databases and bulging funnels. The problem is that (for the two reasons above) all those “leads” that have entered the top of the business funnel haven’t translated into greater opportunity velocity. Leads are being generated and pitched, but they haven’t been activated or engaged.
Building A Strong Engine for Growth - The Missing Middle
In Imagine’s 15 years, I’ve heard one comment more than any other from growth executives seeking a solution to accelerating their growth. They say, “Doug, we’ve great when people understand what we do, but we need to take greater advantage of the opportunities/leads we’re creating who don’t ‘get it’ as quickly.”
Here are the scenarios that present themselves in a growth-focused company’s funnel:
- A lead enters the funnel with a high degree of intent and flows through (relatively) quickly, easily and predictably
- A lead enters the funnel and bounces out, realizing there is no fit
- A lead enters the funnel, engages initially and then seems to disappear or gets stuck
The third scenario typically represents 50-85% of the leads and opportunities that are being generated. Winning this segment (at reasonable costs) requires an approach to the middle of the funnel.
If you’re looking to build a powerful engine, here are the 10 components we look at:
1. The Plumbing - Systems & Process Design
The middle of the funnel is fraught with complexity. There are tens to hundreds of scenarios that must be understood and planned for. A strong middle requires dynamic systems and process design. You wouldn’t build a skyscraper without a good blueprint; don’t treat your engine for growth any differently.
2. Automation
The amount of time that salespeople spend actually selling has been decreasing consistently since I started selling. One of the primary drivers of this problem is the amount of non-selling, administrative tasks that must be done to keep systems up-to-date and in compliance and to manage their days.
With strong systems and process design, you can automate the majority of non-value activities that salespeople must do. One of the primary reasons companies hire Imagine is to help them create strong playbooks. While we’re big proponents of playbooks, a playbook is only valuable when it’s integrated (and automated) into the working systems used by the sales team.
3. Segmentation
Larger databases are mixing with heightened demands for growth while markets get noisier and customers are getting pickier in allocating their attention and time. To survive, let alone thrive, you must develop a strong segmentation strategy that will enable you to personalize and contextualize your actions at scale. 1:1 marketing is no longer a dream or a soundbite, it’s a ticket to play for profits.
4. Database Management
I’m going to go out a limb here and predict that your database is a mess. Demand generation strategies have multiplied the leads you’ve generated, but if your database isn’t designed correctly (and maintained), you quickly lose the value of the lead.
Companies are spending more money than ever before finding new ponds to fish in, when they’d often be better off learning to fish in their own database.
5. Messaging
Top-of-the-funnel messaging is focused on gaining the attention of your prospect. Bottom-of-the-funnel messaging is focused on why the prospect should buy your solution. Middle-of-the-funnel messaging is far more complex. A strong Point-of-View Message must be designed to keep the attention and lead your prospect deeper into engagement.
6. Content
Strong content is absolutely crucial to build an effective middle of the funnel. Too many companies are asking their sales development reps and salespeople to drive higher volumes of output, with anemic messaging and content, then blaming them for failing to deliver.
7. Lead Engagement & Activation
I’m increasingly convinced that the fundamental cause of the sales problems of the last 50 years is because executives simply spend too much time thinking about what has to happen for a prospect to buy from them. In today’s customer-controlled market, the focus should be on what has to happen for prospects to be engaged. Engagement is the raw material for a sale, and it’s in the middle where engagement takes hold.
8. Sales Development/Defined Prospecting Activities
A strong outreach (whether you call it outbound or not) is another critical factor in building a powerful engine for growth.
9. Alignment
If you talk to anyone who is an expert in athletic performance, they’ll tell you that it’s the middle of your body (what they call your core) that creates the vast majority of the power that is exhibited. It’s the middle that enables one to transfer power.
The same is true when for demand generation and customer acquisition. The middle is where the engine that powers growth is located. A world-class lead generation process, matched with killer sales team that doesn’t have a strong middle, will struggle.
10. Data/Metrics
Lead generation and sales process are dominated by vanity metrics. Vanity metrics thrive in these areas because they’re easy to measure, make people feel good and their ineffectiveness can be overcome by merely increasing the volume of activities or inputs.
The middle of the funnel doesn’t tolerate vanity metrics. Where the top of the funnel focuses on inputs and the bottom of the funnel focuses on results, the middle must focus on outcomes. Outcomes are influenceable metrics that have a causal relationship with results. Identifying the key outcomes to track is harder to identify and measure. Those that do, however, enjoy a significant competitive advantage.
