Many industrial companies are currently facing numerous challenges: Supply bottlenecks, rising raw material prices and changing customer requirements are just a few examples. At the same time, many industrial companies are successfully holding their own and maintaining or even increasing their turnover. The first glance at the balance sheet therefore often looks good to very good. One topic that is often hidden and forgotten in companies is sales efficiency. Sales efficiency is about continuously making better use of existing resources and skills and improving profits – not turnover! Many companies are not aware of the enormous potential that lies dormant in their company in this area. But how can sales efficiency be increased for industrial companies?
A central component is customer value(see blog post). If a company has a customer value model – initially usually a contribution margin model, later a scoring model and even later a customer lifetime model – then the foundation has been laid for improving sales efficiency for industrial companies. There are 4 points to consider:
- In order to increase sales efficiency for industrial companies, future potential should be integrated into the customer value analysis as early as possible. Therefore, although a contribution margin model should be used to start with, this should be replaced by a scoring model after 2-3 years at the latest.
- In many publications on scoring models, turnover and contribution margin are cited as two independent evaluation dimensions for customers. Assuming a 20/80 distribution (20% of customers account for 80% of sales), it does not make sense to integrate sales into a scoring model. The argument of production plant utilization is irrelevant in a 20/80 distribution. The sales between the individual clusters are so large that no additional sales analysis is required. Generally speaking, it is important to pay more attention to the contribution margin in sales.
- The customer value model provides a clustering of the customer base. For many industrial companies, a four-part segmentation into A/B/C/D customers makes sense. Otherwise, 80% of customers are often “crammed together” in the C segment.
- Based on the clustering of customers, the central challenge of increasing sales efficiency is the annual adjustment of the customer care plan.
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Systematic approach to a support plan to increase sales efficiency for sales companies
How is a customer care plan structured? The first step is to systematize the various touchpoints or contact channels. For industrial companies, this includes, for example: personal visits AD, telephone AD, telephone ID, email AD, email ID, email automation software (marketing). This list quickly makes it clear that the general touchpoint systems published in many places fall short when it comes to increasing sales efficiency. In sales, it is important to break down the touchpoints more granularly according to their costs. Does the specific sales representative call or a person from the back office? Over the course of a year, this has a major impact on the time budget of individual people and therefore on costs.
Systematic approach to a support plan to increase sales efficiency for sales companies
Studies show that sales representatives spend 70% of their time on administrative tasks and only 30% on customer service. This ratio needs to be fundamentally improved and illustrates the enormous potential for efficiency in many companies.
The first three steps for developing a support plan are presented below. This must be further subdivided for the respective industrial company and worked out as two separate activities for repurchase and cross-selling. The first step in developing a support plan is to define the number of personal visits and telephone calls by the sales force for A and B customers. This is different for every industrial company. The size of the product range (cross-selling!), purchasing cycles, need for explanation of the product range, intensity of competition, etc. are dimensions that need to be taken into account. The second step is to determine for which activities and how often the back office contacts B and C customers by telephone or email. This shows how important it is to use four clusters for industrial companies. Otherwise, too many customers would fall into the C segment and clarity would be lost. The third step is to determine how to improve the efficiency of support for D customers. The use of marketing automation software is a good option here, as a large customer base usually needs to be addressed, which, if managed individually, quickly results in high sales costs.
Following the development, the support plan must be discussed with the respective employees and it must be ensured that the existing CRM system (or Excel or Google Sheets) also maps the respective support activities. Such an introduction in sales will meet with resistance in many companies. The sales figures often show no necessity at all. In general, performance indicators are not popular in sales and many employees have been with the company for a long time and are deeply convinced that they know exactly how the respective customers should be optimally supported. A major misunderstanding needs to be explicitly cleared up. Sales efficiency is not the same as sales effectiveness. The approach presented here does not help to improve sales effectiveness. Which sales arguments are used, which people are processed in the buying center, how the price is set, etc. are questions of sales effectiveness. Efficiency is aimed at optimizing employees’ time as a resource and thereby increasing profits.
Once the support plan has been drawn up and data documentation has been ensured in an IT tool, how often should the sales team discuss the results? It is important to understand that this approach is not aimed purely at control and punishment, but at the sales team learning together. For example, the impact of the support plan on the respective customer segment can be reviewed every quarter based on the number of deals and lost orders. If it becomes apparent that a more efficient form of support has an impact on the probability of profit, particularly for A and B customers, other efficiency measures need to be defined so that the goal of increasing efficiency is not “bought” with a decrease in effectiveness.
Our introductory video on the topic of systematic sales.
Sales efficiency for industrial companies in the area of customer acquisition
While a great deal of information is (or could be) available for customer service in industrial companies, the information available for customer acquisition is very limited. The pressure to acquire new customers is also very high. This raises the fundamental question of whether sales efficiency should even be an issue in customer acquisition? If you go through the costs of the individual sales touchpoints, it quickly becomes clear how important sales efficiency is in customer acquisition. The assessment of potential by employees is of great importance here. This means that instead of the customer value, an assessment of potential is made and the same customer care system is then used for customer acquisition. D customers should not be acquired via the “expensive” sales force. On the other hand, potential A and B customers must also be acquired. The challenge for industrial companies here is when and by whom the potential assessment is carried out. It is advisable to set up a meeting every two weeks to classify potential customers together. This is because increasing sales efficiency for industrial companies is closely linked to the learning success of a company’s sales department.
Conclusion on increasing sales efficiency for industrial companies
Despite numerous external factors influencing sales, it is worthwhile for many industrial companies to put the topic of sales efficiency on the agenda. In the example presented, the topic of e-commerce was not mentioned, which can increase the opportunities but also the complexity of the topic. Customer value and the assessment of potential are the central foundations for increasing sales efficiency. This finding is in line with the success factor research on sales excellence (link page), which confirms the great importance of this information for sales success. If the information is available, a support plan must be drawn up, which will not be optimal, especially at the beginning. Sales efficiency is closely linked to learning success in sales. It is therefore important to continuously optimize the support plan (quarterly or semi-annually) and thus systematically increase efficiency. It can be assumed that an improvement in sales efficiency takes two years to develop its full potential. In our consulting projects and our students’ master’s theses, the high impact of increasing sales efficiency on the company’s profit increase has already been confirmed several times. Usually with very surprised faces of those responsible…
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