In our recent paper, How to Maintain Sales and Pricing Discipline in a Downturn, we outlined how companies can build strong, strategic pricing capabilities in a recessionary environment so that they can excel in the recovery. Since publication, companies have faced waves of cascading challenges as a result of the COVID-19 lockdown.
While measures to stabilize businesses are surely top-of-mind, we believe that now is the time to think both strategically and tactically about sales and pricing capabilities, too. Doing so can help companies survive the downturn and start the recovery in better shape. With this paper, we focus on tactics to use right now to protect the existing business and improve win rates, despite the market environment.
For all companies, winning new business is good. Given today’s circumstance, winning behaviors are more important than ever. And, also because of the new economic reality, the bar is rising on what constitutes winning behaviors. For many companies, new sales wins are declining, profit-accretive wins are becoming elusive, and resources are strained; remote working arrangements impact the effectiveness of sales staff and the ability of customers to respond quickly.
In this article, we offer a timely perspective on how business leaders can expand their capabilities from simply chasing wins to winning “resourcefully” – capturing new opportunities with limited resources.
1. Winning is good
Not all sales leads are created equal. Most companies we work with understand this. They have seen that request for quote (RFQ) responses for one product line may be less competitive than for others and that sales teams have very productive relationships with some accounts and not with others. Understanding these variations helps companies accurately prioritize “winning leads,” but most companies do not do this systematically.
In our experience, companies that are good at prioritizing winning leads start by grouping leads data into four categories: macro level, customer level, product level, and quote level. Depending on the nature of the business, one of these factors will likely stand out as the dominant driver of wins.
There are two approaches to lead data analytics. The first is the traditional win/loss interview – asking customers why they bought (or didn’t). While this approach can provide rich insights at the individual customer level, it is extremely time-consuming and resource-intensive.
The second approach uses historical sales data. Companies are sitting on mountains of win-loss data – historical records stretching back years, with dozens of attributes per lead. Using advanced modeling techniques with such data, companies can find new insights in days, not months.
The data-driven approach provides an objective source of truth that bolsters some sales team assumptions, undercuts others, and surfaces new insights. Tactically, the data helps prioritize “high win probability” leads.
Strategically, it provides the baseline understanding needed to develop the capabilities to re-order “win influencers” – the factors that correlate most with sales wins. For example, companies can develop account plans to deprioritize types of customers that historically are associated with lower win rates.
We recently worked with an international industrial manufacturer to understand what factors drove its win rate. Armed with 10 years of historical RFQ, we employed random-forest machine learning techniques to analyze the impact of 40 variables over nearly 10,000 quotes. The analysis not only told us what factors were linked to winning, but also highlighted areas within those factors that correlated with above-average win rates (Exhibit 2).
This analysis spurred next-level strategic conversations. For instance, the tough-shaped win curve indicated that a two-pronged product strategy might work – trading margin for wins in low-complexity products, while pursuing aggressive pricing for premium products. The data also showed an outsized win rate for rapid responses (Exhibit 2). Now more than ever, harvesting easy wins where you can get them makes sense. But to achieve maximum yield, companies must also prioritize sales team activities to focus on those winning situations.
2. Winning resourcefully is better
Resourceful winning requires careful allocation of sales resources throughout the customer lifecycle. Companies have become so lean that they constantly struggle to place their sales people where it matters most. Now, with the workplace upheaval caused by COVID-19, resources are stretched thinner than ever. Traveling sales reps are grounded, employees are adjusting to the difficulties of working remotely, and customers are distracted. As a result, we see that sales agents are constantly having to decide whether to focus on one lead rather than another. Few companies are helping reps make these trade-offs in a consistent and objective manner.
However, companies that use the data-driven approach outlined above have the potential to bring order to the current chaos. By combining data analytics with thoughtful principles that factor in the current context (e.g. prioritizing the COVID-19 crisis), companies can create a forward-looking “win-likelihood” score to use early in the sales cycle. Top companies extend this analysis across the value chain, from initial win to upsell/cross-sell, and through to customer renewal.
Converting existing data into a “win score” and priority rubric is a straightforward exercise that can easily be done remotely during the lockdown using cloud-based tools. The difficult part is change management – rethinking routines to incorporate the data-based insights early in the sales process and allocate resources to act on the data. There is no one-size-fits-all answer: the team should agree on which scores to prioritize, and when and how to use them. The team should also re-assess its approach regularly and adjust as needed.
With the current market disruption, it may seem the wrong time to devote crucial energies to capability building in any area. However, capability building is not just a luxury to fund during peak-cycle times. As we noted in How to Maintain Sales and Pricing Discipline in a Downturn, moments like this create the ideal opportunity to build systems and skills that will help companies improve while their competitors remain idle or even scale back sales efforts. During the lockdown, mastering this new way of working can be positioned as a development opportunity for sales reps at home.
The starting point for any of this work is comprehensive data collection, an exercise that can create stronger links between your sales and data teams. Sales can provide critical perspective and guidance to the data team about variables to include. And, together, these teams can decide whether to focus on recent history or even create special scenarios leveraging data from other crises.
In this paper, we have outlined steps to take today that will not only position your company for success in better times, but also give you powerful tools to operate effectively in this challenging environment. Whether the company is just starting to understand what win influencers are or is already using data-driven insights to allocate resources, steps taken now are critical to achieving commercial excellence.