The sales growth imperative : how world class sales organizations successfully manage the four stages of sales growth

Can you handle SUCCESS? With business growth come great things—larger market share, increased revenue, happy shareholders. However, sustaining revenue growth is seldom easy. Sales departments must quickly and seamlessly change sales strategies and tactics to grow sales. Unfortunately, sales departments are often ill-equipped to make the right changes at the right time. At long last, a solution to this common problem is at hand. It’s called the Sales Growth ModelTM. Created by David Cichelli and his team at the Alexander Group, a leading sales effectiveness consulting company, the Sales Growth Model explains how to keep sales results improving during all phases of market maturity. In The Sales Growth Imperative, Cichelli uses his game-changing approach to help you anticipate impending challenges and take the right action, enabling the growth to continue— and the sales department to flourish. He shows you the four stages of business growth and illustrates the challenges of each one: STAGE 1: START–UP Growth at an accelerating rate Challenges: adding additional selling capacity STAGE 2: VOLUME GROWTH Growth at a declining rate Challenges: finding new customers, keeping current ones, and launching new products STAGE 3: RE-EVALUATION Little to no growth Challenges: price management and cost reduction STAGE 4: OPTIMIZATION Profitable revenue growth Challenges: new value proposition, reaching new markets, and specialization As growth rates change, new sales solutions are necessary. You need to anticipate and execute your own successful sales strategy accordingly. Don’t let growth become an obstacle to success. the culmination of 30 years of experience consulting for such companies as FedEx, Verizon, American Express, HSBC, and Starbucks, the Sales Growth Model is the only way to ensure smooth sailing through the surprisingly troubled waters of success. “David’s expertise regarding compensation and sales effectiveness is clearly articulated in The Sales Growth Imperative. This book outlines effective tools that can be used at each stage of your business growth.” —Bruce Dahlgren, Senior Vice President, Managed Enterprise Solutions, HP Imaging and Printing Group “Interested in growing your sales? David Cichelli has crafted a comprehensive guide marketing professionals can use to understand and work effectively with their sales teams. . . . If you are in marketing and need to work with your sales force, get this book!” —John L. Graham, Professor of Marketing, The Paul Merage School of Business, University of California, Irvine

Excerpt

CHAPTER 1

The Sales Growth Imperative

Senior management expects sales departments to deliver year-over-year sales revenue growth. Expanding wealth creation derives from higher sales. Owners expect expanding wealth creation. A sales force is accountable for this revenue growth.

WHY GROW?

This book promotes a simple premise: For a business to be successful, it must grow; and for it to grow successfully, it needs an effective sales force. For the vast majority of business entities, great products and services cannot create expanding wealth unless there is revenue growth driven by effective selling. However, before accepting the sales growth solutions offered in this book, we need to challenge two assumptions: First, why must commercial entities grow? And second, why is a sales force necessary?

Driven by ambition and accomplishment, human endeavor and capitalism provide a rewarding outcome in the form of wealth creation. By adding the word "expanding" to the phrase "wealth creation"—expanding wealth creation—you establish the imperative for continuous revenue growth, which is the founding charter of all sales forces.

Consider the alternative: no revenue growth and therefore no expanding wealth creation. To accept no revenue growth, current operations must successfully satiate current and future wealth requirements of the owner. Consider these rhetorical questions from the "no-growth" family business owner: "Why grow? Things are pretty good where they are right now! If we spend money on growth, we could waste both our time and profits and worse, maybe lose it all." Sounds like something a sole proprietor would say to the next generation of family members eager to grow the family business. However, the math is irrefutable. Without additional revenue growth, there is not enough wealth to share with the next generation of owners. Here is the situation: The business must grow or it will fail.

Beyond the realm of family business owners lay the majority of business entities. These small and midsize companies borrow money and hire ambitious talent to create wealth for the owners and employees. These constituents expect expanding wealth. Without revenue growth, expanding wealth is not possible.

Finally, large companies exist in highly competitive environments. Lack of growth leaves these companies vulnerable to business failures, including less than competitive products, promotion, distribution, and pricing. Needless to say, it's not greed that drives growth in these enterprises, but survival.

However, not all businesses need to grow. Some might have a very narrow purpose. An example might help to illuminate. For generations, one family has won the bid—over and over again—to provide ferry service between an upscale residential island and the commercial district in a wealthy area. The family uses the money to pay for operations and summer jobs for the children. The remaining profits are set aside to pay for college educations. There is no need to grow to increase wealth. The financial need of the children for each generation remains manageable. Even with normal, albeit modest, price increases, the price level is so low that the family keeps competitive control over the ferry service generation after generation. The family's limited need for expanding wealth reduces the need for aggressive and risky revenue growth that would inevitably raise costs and thus raise prices. These higher prices would put the ferry contract in competitive jeopardy. Why risk it?

Other industries may not have the luxury of growing. In mature markets, the customers' needs are flat—not growing. Current vendors are fully meeting customer needs and thus no growth opportunity exists unless at a competitor's expense. The only means to gain competitive market share is to reduce prices or wait for a competitor misstep. Further reduction in pricing might not be an option. And competitor missteps may occur only infrequently. In such a situation, growth remains tethered to the buying needs of the customers. Finally, some commodity markets dictate consumption. For firms in these markets, sales growth is subordinate to cost management and productivity improvement.

Shareholders' Expectations

Shareholders of publicly traded companies expect a return on their investments. Sales revenue growth drives economic value for shareholders. Those who purchase shares during public offerings provide working capital for the corporation. The purchase price reflects a presumption by the new shareholder of an expected return on these invested dollars. The shareholder is making a bet on earning a competitive rate of return through payments of profits in the form of dividends or the resale value of the stock. Well-constructed executive compensation packages use stock, or stock-valued incentives, to align the interest of the executive team with that of the shareholders. What's good for the shareholders should be good for the leadership team and vice versa.

The financial well-being of a company drives the market value of its stock. A convenient and neutral arbiter of a company's value is the secondary resale market for its shares—the stock market. For most companies, it's a simple formula: the larger and more profitable the enterprise, the higher the stock price. While stocks as an asset class will compete for investment dollars, causing ups and downs in market value, a company's relative movements within its market provide a pretty good assessment of how well management is increasing shareholder value.

Conveniently, the stock market also provides an assessment of future prospects, too. The better the prospects for the company, the higher the market price of a stock. Three variables drive investor assessment: size, profitability, and growth rate. Without growth, a company cannot realize increasing size and, in most instances, future profits. Investors will accept a lower growth rate for substantial dividend payments. However, this assumes that the company can maintain profitable pricing without sales loss to the competition. For the most part, this seems only possible in regulated or near-monopoly markets where management has ensured pricing. In most other cases, the only means to increase shareholder value is to increase size and profits through growth. Setting aside mergers and acquisitions and new products, the sales department has the obligation to drive "organic" growth. This solidifies the sales department's true north: sales growth.

Employee Expectations

Why would employees care about expanding wealth creation? Talented employees expect career and personal income growth. Without the investments provided by wealth creation, the organization would become stagnant. Employees would soon find that there was "no future" in working for the company. One of the primary risks to any company failing to provide growth for its employees is an exodus of ambitious personnel. While the negative impact of this exodus might not be readily apparent at first, over time the declining quality of personnel would soon threaten the ability of the company to respond to competitive threats or shifts in market practices.

But Why Do We Need a Sales Department?

Sales forces typically occupy a very prominent role in commercial enterprises. In a sense, we almost take them for granted. In fact, we marvel at companies that can scale up without sales entities. They seem so unusual. For example, businesses built around social networking and viral communities seem to have an almost unlimited supply of customers all acquired without the use of a sales department. However, if you look closer, every commercial business entity requires three customer contact protocols to create wealth: access, persuade, and fulfill. But not all enterprises need a sales department. However, even those without sales departments still must access, persuade, and fulfill. For example, your local grocery store—without a sales force—successfully employs all three of these elements in its business model. "Access" is store location. "Persuasion" is weekly advertising and in-store promotions. "Fulfillment" is the stocked shelves and checkout lines. Even our viral companies need to use this model to achieve economic gain. It's much easier to grasp this concept if you think of the "community" as the product. The Internet company accumulates a community. The community is the product. The real customers are the advertisers. Locating advertisers is the access part of the equation. Securing advertisers is the persuasion component, and paid click-throughs are the fulfillment element. As expected, many viral community owners use sales people to sell advertising.

But not every commercial enterprise needs a sales force. A sales force is unnecessary when the customers already have a need for the product and they view the purchase as a low-risk decision. In these cases, the enterprise simply needs to provide product availability. Later, we discuss how rising customer knowledge can lower customer uncertainty, thus potentially reducing the need for high-priced sellers.

However, most business-to-business (B2B) commercial enterprises need sales people to help with all or parts of the customer contact protocols of access, persuade, and fulfill.

SALES DEPARTMENTS: THEIR CHARTER, LEGACY, AND FOLKLORE

No question about it: The sales function elicits divergent views. Some observers are major advocates of the sales function. They see successful selling as a key to improving company revenue. They promote the interests of the sales department. They celebrate the sales department's success. They advance the political interests of the sales organization. They celebrate seller-driven customer acquisition. They view talented sellers as company assets eligible for well-earned rewards and acclaim. You might find these attitudes in companies that rely on sales personnel to differentiate their products, particularly in commodity or free-trade sectors. Also, if the company is in rapid growth, an aggressive sales force will help accelerate market share growth thus earning the respect and appreciation of senior management and the workforce in general.

Then, there is the alternative, darker view of the sales function. In this world, the sales department is a necessary evil. Sales personnel are expensive and of low utility. For example, product inventors believe that the company's value resides in the creative and market-making nature of the product and should not need sellers. Elsewhere, finance is unhappy with the amount of money spent on the sales department. Product managers complain about the degree of sales support they get from the sales function. Customer service and fulfillment specialists have disdain for the unrealistic customer commitments made by the sales force. In a worse-case scenario, there is open hostility to the sales department. You might find this distasteful condition in companies that are suffering revenue declines. There are many suspects to accuse during any period of revenue decline, including the very visible and accountable sales department.

Serving Two Masters

Sales departments serve two masters: product divisions and customers. These two independent groups define the sales department's value proposition—that is, increase customer value by accomplishing the product division's sales objectives. Buyers, competitors, and regulators will affect the preferred sales approach. And specific sales actions will need to pass the tests of other internal sublords such as finance, human relations (HR), information technology (IT), and legal.

But the sales department's charter is clear. To internal resources, the sales department needs to be the vocal advocate for the customers. To external customers, the sales department needs to promote the product divisions' value propositions. This dual accountability creates great challenges for a sales organization. To illustrate, consider two ships at sea. The first ship is the product division. The second ship is the customer. The sales department, acting like a supply line linking these two ships, copes with the turbulent seas as it attempts to sustain alignment between the two ships. When successful, the sales department is in "alignment" with buyer preferences and product manager needs. When not in alignment, a sales department will fail to sell products or meet customer needs. Driven by changes occurring at the product divisions and with the customers, sales departments must continuously adapt in order to successfully maintain optimum alignment.

Access, Persuade, and Fulfill

Successful customer coverage requires three customer contact competencies: access, persuade, and fulfill.

Access is the art and science of locating potential customers. Persuasion is the process of moving a customer from being a nonbuyer to a buyer. And fulfillment provides the services and products as purchased by the customer.

These contact competencies act as descriptors to help define various customer contact methods. The division of responsibility for these three competencies varies widely. In some cases, field marketing is responsible for locating potential customers. Or the salesperson is responsible for locating and signing new customers. In this instance we might call the salespeople new account sellers or "hunters." Likewise, if a salesperson has access, persuade, and after-the-sale fulfillment support, we call them generalists. Finally, when the salespeople are responsible only for fulfillment, we refer to their jobs as customer care.

The combination of these three competencies—access, persuade, and fulfill—specifies the configuration of numerous and different types of sales and customer service jobs.

Direct and Indirect Channels

A "sales channel" is a sales pathway to customers. A "direct" channel sells company-created products to end users. The end user does not resell or reconfigure the product for sale to any third party. A B2B direct sales force will have titles such as account manager, territory representative, global account manager, national account manager, and others. A team of pre- and postsales specialists might support these direct sales personnel.

An "indirect" sales channel is a method to promote products and services to end users by one or more third parties. There are many types of indirect channels, including agents, wholesalers, distributors, retailers, and numerous types of partners. With an indirect channel, there are normally two sales forces. The first sales force sells for the product creator to channel partners and might help with downstream end-user demand creation. Titles for this job include channel manager or partner executive. The second set of sellers works for the channel partners. Channel partners will have their own sales force calling on end users or other subordinate channel partners. Some indirect channel partners create and add value to the final product. Others simply fulfill without adding any product value.

As we will discover, while the "path" for direct and indirect channels differs, the objective remains the same: Grow revenue.

Dedication to Revenue Growth

The sales departments must grow revenue. From its inception, senior management gives sales leadership the mandate to grow top-line revenue. All future wealth creation stems from revenue growth. This at-birth charter gives the sales department its purpose: provide incremental revenue growth year over year over year.

As we will learn later, this blind growth imperative might lead to conflicting objectives and potentially detrimental efforts by the sales department. But, for the time being, we will accept that the unquestioned mission of a sales function is to grow revenues. Some would say that sales departments have no other mission.

CHAPTER 2

How Sales Departments Function

Sales departments are complex, changing entities. They differ in their application given the industry, size of company, types of products, sales complexity, and channels employed. However, regardless of their circumstances, sales departments share a common set of competencies as described by the Sales Management System(tm) a comprehensive sales-effectiveness framework.

SEARCHING FOR THE UNIVERSAL SALES MANAGEMENT MODEL

First let us define sales effectiveness. It describes the degree of seller alignment between the company's product ambitions and the buyers' needs. The outcome of an effective alignment is to improve customers' outcomes and, at the same time, grow company profits. Is sales effectiveness a situational competency? That is, are the best solutions a function of the industry, size of company, types of products, sales complexity, and sales channels employed? Some would argue that no one model can explain how sales departments work or explain why one sales entity is successful and another is not. Let's examine these factors and see how they affect sales management practices.

Industry

Consider several different industries: aerospace components, pharmaceuticals, consumer packaged goods, and commercial banking. What's true about the sales forces supporting these industries? Do the sales forces of these disparate industries have anything in common? On the surface, not much.

• Aerospace component manufacturers—such as avionics and flight-deck controls—sell into the "programs" of aircraft manufacturers throughout the world, including North America, Europe, Brazil, and areas of emerging opportunities in Asia. Sales cycles are long, production runs are shallow, and long-term maintenance contracts follow the life of the product.

• Pharmaceutical representatives call on general practitioners, clinical specialists, hospital pharmacies, insurance companies, and health-care service organizations. Sales management might organize pharmaceutical representatives by geography, types of doctors, types of buyers, and even size of accounts. Pharmaceutical representatives do not sell to doctors; they influence doctors to prescribe medications. In this case, doctors are not the end-user buyers; patients and their insurance companies are. On the other hand, some pharmaceutical sales representatives make direct sales to central buyers at dispensing clinics and hospitals.

• Consumer packaged goods salespeople work with their channel partners. These partners might be major or minor retailers or independent brokers. Sales management might assign consumer packaged goods sellers to a retailer's headquarters or perhaps to a geographic territory calling on retail outlets. Selling consumer packaged goods places a high emphasis on placement, promotion, and order fulfillment.

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(Continues...) Excerpted from THE SALES GROWTH IMPERATIVE by David J. Cichelli. Copyright © 2011 by David J. Cichelli. Excerpted by permission of The McGraw-Hill Companies, Inc..
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site. "Can you handle SUCCESS? With business growth come greatthings-larger market share,increased revenue, happy shareholders. However, sustaining revenue growthis seldom easy. Sales departments must quicklyand seamlessly change sales strategies and tacticsto grow sales. Unfortunately, sales departmentsare often ill-equipped to make the rightchanges at the right time. At long last, a solution to this common problemis at hand. It's called the Sales Growth Model. Created by David Cichelli and his team at theAlexander Group, a leading sales effectivenessconsulting company, the Sales Growth Modelexplains how to keep sales results improvingduring all phases of market maturity.In The Sales Growth Imperative, Cichelli useshis game-changing approach to help youanticipate impending challenges and take theright action, enabling the growth to continue-and the sales department to flourish. He showsyou the four stages of business growth andillustrates the challenges of each one: STAGE 1: STARTUP Growth at an accelerating rate Challenges: adding additional selling capacity STAGE 2: VOLUME GROWTH Growth at a declining rate Challenges: finding new customers, keepingcurrent ones, and launching new products STAGE 3: RE-EVALUATION Little to no growth Challenges: price managementand cost reduction STAGE 4: OPTIMIZATION Profitable revenue growth Challenges: new value proposition, reachingnew markets, and specialization As growth rates change, new sales solutions arenecessary. You need to anticipate and executeyour own successful sales strategy accordingly.Don't let growth become an obstacle to success.the culmination of 30 years of experience consultingfor such companies as FedEx, Verizon,American Express, HSBC, and Starbucks, theSales Growth Model is the only way to ensuresmooth sailing through the surprisinglytroubled waters of success. David's expertise regarding compensation and sales effectiveness is clearlyarticulated in The Sales Growth Imperative. This book outlines effectivetools that can be used at each stage of your business growth. -Bruce Dahlgren, Senior Vice President,Managed Enterprise Solutions, HP Imaging and Printing Group Interested in growing your sales? David Cichelli has crafted a comprehensiveguide marketing professionals can use to understand and work effectivelywith their sales teams... If you are in marketing and need to work with yoursales force, get this book! -John L. Graham, Professor of Marketing,The Paul Merage School of Business, University of California, Irvine."-- Provided by publisher You beat the recession. Are you ready for the "rebound"? As quickly as the economy went bad, things are getting better. But the rewards won't be automatic. You need to "prepare" for the new business-growth trend. "The Sales Growth Imperative" steers you in the right direction. Foreseeing the unique challenges business growth presents to sales departments, sales guru David Cichelli offers proven models for anticipating and implementing the right management solution for your specific situation, ensuring that your organization's growth continues. "The Sales Growth Imperative" illustrates the nuances of what happens at each stage of growth so you can design the perfect models and solutions for each phase. It provides examples of what can go right and what can go wrong, and more importantly, what are the right actions to take to ensure continuing sales force effectiveness. Don't squander the best opportunity in years. Use "The Sales Growth Imperative" to help grow your business--and keep it growing." Table of Contents Chapter 1: What Makes a Great Sales Organization Chapter 2. Why Sales Organizations Fail Chapter 3. Shopping for Sales Effectiveness Answers Chapter 4. Sales Growth Model--How Growth Drives Solutions Chapter 5. Phase I Growth: Start-Up Sales Departments Chapter 6. Phase II Growth: Volume Growth Chapter 7. Phase III Growth: Reevaluation Chapter 8. Phase IV Optimization Chapter 9. Beyond Growth Phases Chapter 10. Annual Strategic Sales Management Planning Chapter 11. Considerations for Sales Leaders Chapter 12. Summary Observations

For a sales department nothing says "job well done" more clearly than the first signs of business growth. But before you start celebrating, you need to prepare for the unique challenges this kind of success introduces-and The Sales Growth Imperative shows you how. Learn the smart approach to.

Sales Coverage Strategy

Job Design

Productivity

Organizational Structure

Technology

Quotas

Compensation

Resource Deployment

Pt. 1. Sales growth challenges pt. 2. Sales-effectiveness solutions pt. 3. Keeping the sales force current.