In part two of our blog series, we continue our Q&A discussion with Harvard Business School professor Frank Cespedes as he expands on his new sales book, Sales Management That Works: How to Sell in a World That Never Stops Changing (Harvard Business Review Press, 2021). This time we’ll dive deeper into comprehending the links between buying and selling, the importance of using sales enablement tools, and how to embrace the best B2B strategies that work for your business.
The Cause & Effects of Buying and Selling
Q: You emphasize the importance of understanding the cause-and-effect links between buying and selling. What paths should sales teams take to do this better?
A: As usual in business, there’s data and analysis, and then there’s management and action—using the data to drive productive behavior. Let’s start with the analytics. Every business has a customer conversion dynamic or set of activities that do or don’t result in a sale. Some conversion dynamics are long and complex, while others are short and relatively simple. The time and expense salespeople spend on each activity drive your economics and growth requirements. In turn, the purpose of sales metrics is to manage behaviors that impact customer conversion. But which metrics?
Understanding Sales Metrics
“Wins”—closed deals—are the most common metric used to track selling activity. One reason is that most CRM software automatically weights revenue expectations by pipeline stage on the assumption that the odds of closing increase in successive stages—an assumption, by the way, that is at odds with current buying-stream realities.
On average, firms measure closed deals and rep production against quota monthly. But a closed deal is a lagging indicator. It tells you where you were and, in running a business, what’s happened has happened. Conversion analytics uncover leading indicators, which are more often within a rep’s or manager’s ability to affect via their allocation of time and resources.
Here, technology is the seller’s friend and, if used wisely, aids conversion analytics. New sales enablement tools allow firms to understand in more depth which collateral reps use and prospects do or don’t read; what moves a prospect to do a demo; which demo’s lead to proposals, and so on. That ongoing information should inform account assignments, where salespeople (versus other marketing vehicles) should spend their time, and required coordination between sales and other functions.
Management and Action
The other dimension is management and action. Here, performance reviews are crucial. In many B2B businesses, much of the information required to understand and affect conversion dynamics occurs at the account level and only becomes apparent via performance reviews. When sales managers do sloppy or drive-by reviews (and many do), they not only perpetuate a culture of under-performance, they also inhibit the flow of vital information to and from their sales teams and other functions.
Also, as sales jobs become more cross-functional, there are fewer immediate sources of feedback about whether you are doing the right things as part of that interdependent chain of activities. You want your people focused on the correct causal relationships and not just enacting the natural human tendency to ascribe credit for good outcomes to oneself and the causes of bad outcomes to someone or something else.
Also, notice what happens in the absence of feedback. Many people will assume that no news is good news. If managers are not clear about priorities, people create their own priorities, spending time and effort in areas and activities that have a hit-and-miss relationship to performance. Managers must manage, and performance feedback is more important than ever.
Creating Coherent B2B Sales Strategies
Q: How can B2B sales teams and leaders begin to create a sales strategy that aligns with business goals?
A: A company must have a coherent business strategy. No sales model can substitute for a flawed or incoherent business model. And despite what you often hear in TED talks and inspirational speeches, don’t confuse strategy with other important things like mission, vision, purpose, or values. Strategy is more than picking a big number or aspirational goal and then motivating people to “go for it.” It’s about making choices concerning where in a market you do and don’t play, the sources of advantage in the areas where you choose to play, and a pattern of resource allocations that supports those choices.
Then, linking a good strategy to sales involves the following. In any business, value is created or destroyed in the market with customers. The market includes the segments where you play and the buying processes in those segments. Those factors determine the required sales tasks — what your business developers must be good at to deliver value and implement your strategy. Then, the issue is aligning selling behaviors with those sales tasks. Managers basically have three core levers to do that:
This is who you hire, what they know, how you develop their skills so they can execute your firm’s sales tasks, not those of a generic selling methodology or what they learned at another firm with a different strategy. Good coaching is a key in developing salespeople, and nobody is “against” coaching. But it often gets lip-service in many sales organizations, not behavioral commitments from managers.
These are performance management practices, including sales compensation and the metrics used to measure effectiveness. Most firms base sales incentive compensation solely or primarily on top-line revenue, irrespective of CAC, cost-to-serve, selling cycle, margin, or profitability. In a comp system like that, the message is that there is no such thing as a bad customer, and sales generates diverse orders that soon fragment the firm’s resources and capabilities. My book discusses comp in some detail and provides good- and bad-practice examples in different types of B2B businesses.
This is the broader company context in which sales initiatives get developed and executed, and how communication works (or not) across organizational boundaries. In many firms, the sales force is siloed from the rest of the firm. Product groups throw products over the wall, salespeople are then expected to “sell it,” and the firm tracks the lagging indicator of revenue. But sales is ultimately an organizational outcome, not only the result of good salespeople and relevant selling skills.
Conversely, sales activities have a domino effect on other functions in a company. For example, the pandemic demonstrated, painfully, the importance of cash. Well, in most businesses, the biggest driver of cash-in and cash-out is the selling cycle. Accounts payables accrue during selling, and accounts receivables are mainly a function of what’s sold, at what price, and how fast.
That’s why in recovering from the pandemic, selling is a strategic issue as well as a sales-management responsibility. Divorcing sales from these links between product, customer behavior, and capital investments is dangerous, but that’s what many companies do.
The B2B Sales Talk Continues
In our third Q&A with Frank to discuss his new book, we'll go into more detail about the necessary connection between B2B marketing and sales, and ways that B2B sales management continues to change in the modern economy.