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Redesigning the Work of Sales

April 4, 2016 by David Crankshaw

In my last article I described four principles that Justin Roff-Marsh recommends we adopt to dramatically improve Sales productivity.

Scheduling should be centralized.
Workflows should be standardized.
Resources should be specialized.
Management should be formalized.

Let’s look at how Roff-Marsh applies these principles to the sales function. Although this article only summarizes the application of these principles, you can find many more important details in Chapter 3 of Roff-Marsh’s book, The Machine.

We’ll start with the traditional model where the salesperson does all the work. It’s just the Business Development Managers (BDM) working on their own. They do everything–prospecting, sales, administration, support, and solution design. This leaves them little time for meaningful sales interactions.

Principle One: Scheduling Should Be Centralized

The first principle tells us to divide the labor between the salesperson and someone to schedule the work. We’ll call this person a business development coordinator (BDC).

The BDM no longer needs to schedule appointments with customers nor arrange internal meetings. The BDC manages the schedule and pushes work to the BDM.

Note that the Business Development Manager works in the field. This enables the BDM to spend more time directly with customers. It also saves the BDM from the difficulty of switching back and forth between field and office activities.

And conversely, the BDC works in the head office (not a regional office). The BDC is more able to coordinate with production and customer service when the BDC is located near them. It also helps the BDM to feel directly connected to the rest of the organization if the BDM’s scheduler is working in the head office close to everyone else.

Now you might be thinking that Business Development Managers would find it awkward and demeaning for their work to be scheduled by a more junior BDC. Let’s frame it a different way. The BDC is more like valued executive assistants who support and protect their executives. The executive (and by analogy, the BDM) find their status elevated by working closely with a scheduler.

The economics of this relationship are compelling. Roff-Marsh has found that a BDM and BDC working together can increase the BDM’s capacity to 20 meetings per week, a tenfold increase over a BDM working alone. That’s leverage!

Principle Two: Workflows Should Be Standardized

Before we consider other resources that could relieve BDMs from responsibilities that prevent them from more meaningful sales conversations, let’s look at principle number two and study how workflows could be standardized in sales. Then we’ll return to how we resource the workflows.

Roff-Marsh divides the sales workflow into two stages. In the first stage the work is about how we originate opportunities, in the second we prosecute those opportunities.

In the the illustration below you can see the sequence of a typical sales workflow.

Roff-Marsh separates these workflows because companies can originate opportunities in batches, but they must pursue them one at a time.

Which raises the question, do salespeople need to follow a standard sequence of events when they pursue an opportunity? Do they have to follow the same workflow each time? Should all the salespeople in a department use the same workflow?

Roff-Marsh suggests we look at the customer and ask this question: Does the customer follow a standard workflow when making a purchase?

For small purchases, yes customers follow a standard workflow. And for large purchases, they may not follow a standard sequence simply because they make these purchases infrequently. But an optimum sequence probably exists and it will be to the seller and the customer’s benefit if we figure out what it is.

So the answer is, yes, it’s to our benefit (and our customer’s) to adopt a standard workflow for the pursuit of opportunities.

The point of a standard workflow is to enable your company to scale your sales function by dividing the labor of the BDM among multiple people. A standard workflow engineers complexity out of your system and makes it possible for people to hand off their work when they complete an activity in the workflow.

Principle Three: Resources Should Be Specialized

Now that we’ve established a standard workflow for the sales function, let’s return to the question of how to divide the labor of the BDM among different specialist resources.

So far we’ve got a project manager (the BDC) and the BDM is doing everything else.

By everything else, Roff-Marsh identifies these types of activities:

promotion (i.e. the origination of sales opportunities)

administration (i.e. critical supporting activities)

sales (i.e. meaningful selling conversations)

technical (i.e requirement discovery and solution design)

semi-technical (i.e. quoting, order processing, and issue management)

So let’s see how Roff-Marsh assigns these activities to other people.

Promotion

Although salespeople could originate their own sales opportunities, it would be highly inefficient. Promotion includes building lists of contacts, developing compelling campaigns, and testing multiple campaign versions. These promotion activities are best done in batches.

Therefore Roff-Marsh identifies a Campaign Coordinator as the next person to join the resource pool. Although the campaign coordinator could live in marketing (where the campaigns originate), in practice it works best if the coordinator resides in sales. This enables this person to be in close contact with the conversations that the campaigns produce and to make adjustments to those campaigns.

Administrative Tasks

Few would argue that the BDM could transfer responsibility for many administrative tasks to the BDC—data entry, reporting, calendar management and travel planning. But, Roff-Marsh asks, “what about appointment setting and follow-up calls?” These calls are traditionally considered part of the salespersons purview and include a level of salesmanship that is beyond the ability of an administrator.

Roff-Marsh explains that if the salesperson has sold the next meeting in the buying/selling sequence, then appointment setting simply becomes a scheduling task. Even the initial appointment-setting call is a scheduling exercise if the salesperson has effectively sold the initial meeting.

Technical Tasks

Companies that sell engineer-to-order products encounter a common problem. Above a certain level of complexity, salespeople simply cannot extricate themselves from the handoff from sales to production. It becomes impossible to communicate everything production needs to know in order to complete a clean handoff.

Roff-Marsh solves the problem by adding a third party to the mix, a project leader. The project leader works closely with the BDM throughout the opportunity prosecution stage of the sales cycle. In particular, the project leader assumes responsibility for the requirement discovery and solution design stages of the sales workflow. The project leader becomes well-equipped to be the liaison between the customer and production which frees the BDM to move on to the next customer.

Semi-technical Tasks

Roff-Marsh assigns a variety of semi-technical tasks to the Customer Service Representatives (CSR). These include “the generation of standard proposals, the processing repeat transactions, and the provision of after-sales support (e.g. issue resolution).”

In order for the customer service team to take responsibility for these activities (and relieve the BDM from the need to own them), two changes must be made.

First, the customer service team must upgrade their skills so they can own customer service activities. And second, salespeople have to extricate themselves from immediately assuming responsibility for customer service issues when they arise.

Principle Four: Management Should Be Formalized

When you divide the labor of one person among multiple people, you create a system that is vulnerable to miscommunication, misunderstanding, and mistakes. The fourth principle from Roff-Marsh addresses this problem by requiring a formalization of management. Since many of the people in the newly organized sales function are more junior, it’s necessary to put in place a more senior person to manage issues and to make sure the relationships with production, marketing, and finance are working smoothly.

Four Principles that Precede the Division of Labor in Sales

March 31, 2016 by David Crankshaw

Four-Principles

If the sales function has not kept up with the productivity gains that we’ve seen on the production side of the house, what has been holding us back from making the changes that would improve productivity?

Well, for a long time the traditional sales model worked, so changes were unnecessary. But those times of the traditional model are behind us. The world has changed. First, sales is more competitive now that the rate of product innovation has slowed. Second, sales is more complicated. Companies are selling products that are built-to-order instead of simply selling from their stock of inventory.

It’s hard for us to adjust when the world changes. Usually we respond first by attempting to use the methods and tools that have always worked for us in the past. We make incremental adjustments. But then we find the old tools no longer work. Finally, we are forced to confront our assumptions about how the world works.

Time to Challenge our Assumptions

And what assumption have we been making about sales? Justin Roff-Marsh says that from the time that sales became a profession in the U.S., we’ve assumed that “sales should be the sole responsibility of autonomous agents.”

But if sales is more competitive, can we really expect salespeople to do everything—prospect, sell, support, and administrate? If companies are offering build-to-order products to their customers, can we expect salespeople to sell and then to work closely with production on every order to design and engineer solutions?

A new world requires a new assumption. To enable salespeople to be successful in a more competitive and fluid environment, we have to divide the labor among more people. Roff-Marsh explains that we need to make sales the “responsibility of a centrally coordinated team.”

Salespeople should be able to do what they are best at, selling. And others can pick up the prospecting, the support, the administration and the design.

Divide the Labor

Ok, if we were to divide the labor that a salesperson traditionally performed, what would that look like? What would be the roles on a centrally coordinated team?

Before we can answer those questions, Roff-Marsh cautions us to slow down before making changes. You face many challenges when you transition from a craft shop to production team where labor is divided among multiple players. Before making significant changes, study the principles that have worked in production. They have been experimenting with process improvement for a long time.

Study the Principles of Manufacturing and Learn Their Ways

Roff-Marsh identifies four principles that have come out of our experience with the division of labor and process improvement in manufacturing environments.

Scheduling should be centralized. When you have multiple people working on different parts of the same problem and each has a different role, they have to coordinate their activities so that the right work is done at the right time. In this environment someone has to manage the schedule. There’s nothing new here, it’s common in other work environments to centralize scheduling and project management. Just ask the master scheduler in a factory, the project manager on a software team, or the conductor of an orchestra.
Workflows should be standardized. When a salesperson works as an autonomous agent, there’s no need to standardize workflows. Each salesperson has their own ways of responding to opportunities and producing outcomes. But once you divide the labor among multiple people, you can only manage the work if you standardize how you route the flow of work from opportunity to outcome.
Resources should be specialized. As the flow of work moves through a standardized route, who will do the work? The answer is that the work is done by people who are specialized in that task. It’s not enough to divide the labor and then ask people to do many types of specialized work. When people perform only one type of work, they become very good at it. And they avoid the costs of switching between significantly different types of work.
Management should be formalized. A certain fragility is associated with an organization that schedules work to flow along established routes to specialized resources. Someone has to pay attention to the whole organization. The manager makes adjustments, resolves problems, and improves the design.

Now that we have firmly established Roff-Marsh’s four principles in our minds, we can begin to learn how he reimagines the sales function.

What Caused the Traditional Sales Model to Collapse?

March 30, 2016 by David Crankshaw

The traditional model of sales no longer works.

Salespeople find that they spend:

Too much time doing customer service and account administration work.
Not enough time in meaningful sales interactions that lead to additional business with current and new customers.
Too much time working with production and finance on non-standard orders.

How did we get here? Those traveling salesmen that traveled by rail after the Civil War were well-suited to a model where the salesperson functioned as an autonomous agent. This remained true throughout much of the twentieth century.

Justin Roff-Marsh explains that gradually two things changed. Production ceased to improve as rapidly. And companies shifted more of their work to build-to-order.

The Rate of Product Innovation Slows

Throughout the 19th and 20th century we experienced an astounding rate of invention and production improvement. Companies continuously invented whole categories of technology and product. Roff-Marsh explains that the primary role of the salesperson was to “take a highly differentiated product and demonstrate it to potential customers.” Salesmanship counted, but most of the value was contributed by new product development and production.

Today that pace of innovation has slowed. Markets have become more competitive as product differentiation has declined. It’s no longer enough for the demand-creation side of the house to demonstrate a product and display a little salesmanship. Companies cannot afford to have their salespeople spending most of their time on customer support and administration issues.

As the pace of product innovation slows, sales has been revealed as the constraint in the system. The model of salesperson as autonomous agent no longer works in this environment.

Companies Shift from Build-to-Inventory to Build-to-Order

The second pattern in industry has been the way it organized its value chain. Historically companies forecast their production needs and built to stock.

Salespeople then sold product from the stock of inventory. This value chain made it possible to deliver orders quickly to a customer. The clean separation between production and sales also made it feasible for salespeople to operate as autonomous agents.

As production has become more flexible and as communication between seller and buyer has improved, more companies have shifted from build-to-stock and have moved to build-to-order production. This method reduces their inventory holding costs and gives the customer more choice in their purchase.

For salespeople though, the world has gotten more complicated. As Roff-Marsh explains, “it no longer makes sense for the salesperson to simply sell as much as possible; the salesperson needs to sell only what production has the capacity to produce.” Now salespeople must stay in close contact with production and its capacity constraints.

To further complicate matters, many products and services are engineered-to-order. Salespeople work closely with production to design a specific solution for the customer.

Both of these trends have reduced the autonomy of salespeople. These changes in the production and sales environment force us to challenge the long-held assumption that “sales should be the sole responsibility of autonomous agents.”

A New Assumption for Sales

March 28, 2016 by David Crankshaw

In his recent book, The Machine, A Radical Approach to the Design of the Sales Function, Justin Roff-Marsh recommends a new assumption for Sales. The old assumption is broken, he says, and no longer fits in our world.

What is the old assumption? In the old model a salesperson owns the relationship with the customer and all interactions with that customer. In this model, we assume that “sales should be the sole responsibility of autonomous agents.”

After the Civil War, Traveling Salesmen Criss-Crossed the Country

Well, of course they should. The model of the salespeople as autonomous agents is integrally tied with the history of our country. After the Civil War traveling salesmen (yes, they were all men) fanned out across the country using the newly built rail networks. They developed relationships with the general stores in each town in their territory. Since they worked for wholesalers (not the manufacturers), they sold a wide variety of goods. They cultivated relationships with their customers and advised them on business practices and promotion. They had the power to issue credit and to offer discounts. By necessity these sales people operated as autonomous agents.

The sales profession attracted people who thrived in a work environment where they could operate independently. They created a culture that encouraged independence from management.

The Traveling Salesman Model Ceases to Work

Roff-Marsh explains that this model no longer works. How do we know? Because the role of the sales function is not only to sell, but to “consistently sell all of the organization’s production capacity.” Whether it is a manufacturing plant with machines and equipment or a software company with teams of engineers, investors expect a return on their equity that can only come about if the sales function can keep up with the company’s ability to produce.

Alas, the sales function has simply not kept up with the productivity gains in production.

Measured against this more meaningful goal, sales consistently fails in most organizations. In recent history, the modern organization’s capacity to produce has accelerated past its capacity to sell, and idle machines and production personnel are costing shareholders dearly, month after month and year after year.

What causes this underperformance? Roff-Marsh identifies three primary reasons:

Salespeople aren’t selling. Too much of their time is taken with “customer service and administrative activities, to solution design and proposal generation, and to prospecting and fulfillment-related tasks.”
Most sales opportunities arise from existing customers, not new customers. So even if management reallocates the work of salespeople (quality declines) or hires more salespeople (costs go up), they all simply end up spending their time on existing customers.
Salespeople are difficult to manage. Their profession is all about the ability to function as autonomous agents and so they “run roughshod over production and finance personnel, they ignore management directives, and they make frequent references to “their” customers, implying that they can leave and take the organization’s goodwill elsewhere—which, to some extent they probably can.”

Time for a new assumption

Of course, it’s our own fault that sales is consistently failing most organizations. We are the ones who have made salespeople autonomous agents. We hold them accountable for the outcomes they produce, not the activities they perform. If a sales opportunity is lost, we hold them responsible. If a customer is unhappy or falls behind in their payments, the salesperson must take ownership.

We give them full responsibility for a customer, including all the administration and solution design. Then we expect them to also prospect for new customers.

If making sales the sole responsibility of autonomous agents is the wrong assumption, what is the right one?

For the answer to that question, we need look no further than the production function in any company. Unlike the craftsperson of two hundred years ago who did everything to make clothing or farm implements or bread, today’s modern manufacturing plants have divided the labor among many specialists. Specialization of labor enabled production to drastically improve its productivity. Yet sales is still largely stuck in the craftsman model.
Sales will only improve its productivity if it adopts a similar model to the successful one in the production side of the company.

Therefore, Roff-Marsh recommends this new assumption: “Sales is the responsibility of a centrally coordinated team.”

Roff-Marsh has worked with many companies who are willing to adopt this new assumption. He’s seen them achieve massive performance improvements as field salespeople spend 100% of their time in the field and regularly schedule 20 business meetings a week, as inside sales people generate high rates of sales at low costs, and as customer service meets all customer needs for administration and order completion.

In his remarkable book, Roff-Marsh explains how they do it.

Inbound vs. Outbound Marketing—a False Dilemma?

June 26, 2015 by David Crankshaw

HubSpot’s founders invented and popularized the idea of inbound marketing. They wanted to contrast their marketing methods to the disadvantages of outbound marketing.

Outbound sellers work by reaching out to potential buyers. They contact buyers with advertising, direct mail, email, and phone calls. They even go door-to-door to find buyers.

With outbound marketing, sellers control the time and place of the interaction. But buyers view unexpected contact from sellers as an interruption in their life. Most of these people are not potential buyers; they will never become a customer. They resent the seller. This resentment leads to low conversion rates on outbound marketing. Low conversion rates are a waste of time and energy. They create a negative perception in the market.

Inbound Marketing Is Better Aligned with the Buyer’s Journey

Inbound marketing and selling is better aligned with the interests and the pace of the buyer. Buyers search for something on Google and see the seller’s entry on the Google response page. They click on the entry and absorb the material on the seller’s site.

The advantage for sellers of inbound marketing is that buyers initiate the contact. Buyers are better qualified and conversion rates are higher.

The disadvantage is that it takes a lot of work to create the content and the visibility for buyers to find and digest the information from the seller.

Inbound and Outbound Marketing Are Perceived to Be in Opposition

These two approaches to marketing and sales are often discussed as if they are in opposition to one another. Proponents of inbound marketing assert that they are aligned with buyers, that they avoid interrupting their buyers, and that they are focused on educating their buyers.

Traditional outbound marketers cite their ability to control the timing of their contacts. Especially in B2B markets and other considered purchases, they often know who their buyers are and they want to be able to reach out and cultivate a relationship with these buyers.

Here’s How to Resolve the Contradiction

How to resolve these apparent contradictions and disagreements?

Look to the buyer. Ask what will create value for the buyer at each stage in the buyer’s journey.

In the earlier stages, attract buyers to you with inbound marketing. Make yourself easy to find in the search engines and provide useful information about your industry, best practices, and trends. Invite buyers to continue to learn from you with tools, short education courses, and email subscriptions.

As buyers move along on their journey and become educated about the problems you know how to solve, invite them to learn more about your products and how they work.

For buyers who signal interest, reach out with outbound invitations to learn more about you.

Once your buyers become customers, continue to use both inbound and outbound methods to assist customers as they adopt and implement your product. Make tutorials and advice easy to find and easy to use. If a customer exceeds a threshold that indicates a problem, reach out to them and offer to help.

When HubSpot introduced the concept of inbound marketing a few years ago, it provided a useful counterpoint to the disadvantages of outbound marketing. But for B2B sellers, the idea of inbound versus outbound is a false dilemma. Both are valuable when they are used in ways that create value for the buyer and help buyers move forward on their journey.

If Salespeople Can’t Close Their Deals, Who Is Responsible?

May 21, 2015 by David Crankshaw

In a recent article, Emma Snider points to a survey on the obstacles that prevent sales reps from closing deals. Training company Richardson asked for the opinions of over 300 B2B and B2C salespeople from a variety of industries and company sizes. One survey question asked about the top three obstacles that prevent salespeople from closing deals:

Competing against a low-cost provider (30.61%)
Creating a compelling case for change to prevent a “no decision” (16.89%)
Positioning competing value proposition (11.87%)

Management’s first response will be to assume that salespeople are responsible for closing these deals. If they are unable to close, then managers will likely take actions which improve the abilities of their sales reps. Perhaps the reps need more training, different incentives, or stronger discounting options.

But maybe management’s instincts are wrong. Let’s challenge the assumption that the salespeople are responsible for deals that won’t close. To challenge that assumption, we first ask whether these buyers are ready to make a purchase and become customers. Let’s re-examine the list above in light of that question.

If salespeople think they are ready to close with a buyer but find themselves competing with a low-cost provider, then maybe they haven’t helped the buyer to understand the value that their company brings. Or maybe they are working with a buyer that is not well-qualified.
Salespeople cannot expect to close a deal without first creating a compelling case for change. If they are still creating that compelling case, then their buyer has not moved to the purchasing stage in the buyer’s journey. In this situation it’s time to stop closing and to start educating.
Salespeople must resolve questions about competing value propositions long before they try to close with their buyer. Once again, maybe the salespeople are not as far along in the buyer’s journey as they had thought.

These challenges to the assumption that the salespeople are responsible for deals that won’t close make it clear that we don’t yet know why these deals won’t close. We know the undesirable result: the close rate is too low. But we don’t know the root cause of the problem.

Who is responsible for discovering the root cause of the problem and finding a solution? Not the salespeople, they are responsible for implementing the sales work they do and they are responsible for helping to improve the way the sales work is done.

Michael Webb explains in Sales Process Excellence that managers must own the responsibility for “designing, developing, and managing the sales process” and for “solving sales process problems.”

Unfortunately, managers often relinquish those responsibilities. Sometimes they relinquish the responsibilities because they don’t see sales and marketing as interconnected parts of a continuous sales production system and sometimes they relinquish them because managers perceive sales as an exercise in value-extraction from customers, not value-creation for customers.

In B2B sales, Webb observes that “management tends to trust the salespeople to do their jobs but fails to see that, like all workers, salespeople do their jobs best within a well-designed, properly organized production system.”

Salespeople who work in a smooth running sales production system are less likely to face obstacles to deal-closure than the ones who responded to Richardson’s survey.

Why Do Salespeople Buy So Many Books on Personal Productivity?

May 5, 2015 by David Crankshaw

As you scroll through the list of Amazon’s top-selling books in the Sales category, you quickly see that they have a common premise: they teach salespeople how to improve their personal productivity.

Amazon’s Top-Selling Books on Sales

Go Pro – 7 Steps to Becoming a Network Marketing Professional by Eric Worre
Pitch Anything: An Innovative Method for Presenting, Persuading, and Winning the Deal by Oren Klaff
The Magic of Thinking Big by David J. Schwartz
Influence: Science and Practice by Robert B. Cialdini
Go for No! Yes Is the Destination, No Is How You Get There by Andrea Waltz
Sell or Be Sold: How to Get Your Way in Business and in Life by Grant Cardone
The Challenger Sale: Taking Control of the Customer Conversation by Matthew Dixon
DotCom Secrets: The Underground Playbook for Growing Your Company Online by Russell Brunson
Unmarketing: Stop Marketing, Start Engaging by Scott Stratten
To Sell Is Human: The Surprising Truth About Moving Others by Daniel H. Pink

You are probably familiar with some of these titles: Pitch Anything, Go for No!, The Challenger Sale, Sell or Be Sold. Salespeople read these books to improve their sense of motivation, to increase the size of their personal network, and to strengthen their negotiation skills.

And why wouldn’t these books be popular with salespeople? Personal selling is hard. They have to telephone people who aren’t expecting their call and who would rather not talk to them. They constantly meet new people, not for the fun of it, but to increase their network of influence. They have to listen carefully to people and guide all their conversations toward conversion of prospect into customer.

Manufacturing Book Buyers Study Process Excellence, Not Personal Productivity

What a difference when you look at Amazon’s top-selling books in Manufacturing. These titles fall into two categories. The first category covers books about the history and the future in manufacturing. The history books include a story about a furniture-maker in New England that fought the forces of offshoring. Another is about the battle between Ford and Nissan. The books on trends cover topics like the impact of 3D printing and open software on manufacturing.

The titles in the second manufacturing category are all about manufacturing process: Lean Six Sigma, the Toyota Way, and continuous improvement.

Amazon’s Top-Selling Books on Manufacturing

Lean Six Sigma Pocket Toolbook by Dave Rowlands
The Toyota Way: 14 Management Principles from the World’s Greatest Manufacturer by Jeffrey K. Liker
Factory Man: How One Furniture Maker Battled Offshoring, Stayed Local—and Helped Save an American Townby Beth Macy
Toyota Kata: Managing People for Improvement, Adaptiveness, and Superior Results by Mike Rother
Makers: The New Industrial Revolution by Chris Anderson
Fabricated: The New World of 3D Printing by Hod Lipson
The Reckoning by David Halberstam
Standardized Work and Standard Operating Procedures: A Solid Base For Continuous Improvement by Krasimir Kirov
A Factory of One: Applying Lean Principles to Banish Waste and Improve Your Personal Performance by Daniel Markovitz
Meet You in Hell: Andrew Carnegie, Henry Clay Frick, and the Bitter Partnership That Changed America by Les Standiford

Nowhere in the manufacturing section do you find titles to help individual manufacturing workers improve their motivation or their personal productivity.

In other words, the top-selling books in Manufacturing are aimed at management because managers design and organize the work that manufacturing employees do.

Manufacturing people don’t have to buy books to improve motivation and personal productivity because they work in a system that is designed to motivate its workers and to help them improve their productivity. They are not left on their own to design their daily activities. They work within a team and within a system.

Salespeople Operate Primarily on Their Own

Unfortunately, most salespeople must work on their own. They operate independently from their company. They are given a quota and some product information and expected to produce results.

Salespeople are primarily measured on the revenue they generate against expected forecast. They are not measured on interim results, so they have no way to know how they are doing at each stage of any particular deal.

From Personal Selling to a Sales Production System

Michael Webb asks this question: what would it look like if salespeople operated in a sales production system, one that “organizes marketing, sales, and service activities to transform the “raw materials” of people in the marketplace who may need what you sell into customers by adding value to them in specific ways?”

Webb says that a sales production system could transform the work of marketing, sales, and service:

Marketing is transformed from a function dedicated to generating awareness and any type of leads in scattergun fashion to one dedicated to locating people who need what you sell and to nurturing relationships with the right prospects.

Sales is transformed from a team of individuals who push customers into buying your products or services to one that works with people who face certain problems or opportunities that your company can help them solve or improve.

Service is transformed from a cost center or necessary evil into a function that ensures that customers get what they pay for and into a mechanism for learning how you can continually improve your value to customers.

Who knows, one day when you look at the top-selling books on Amazon in the Sales category, you’ll see fewer books on personal productivity and more books on sales process excellence.

Are B2B Marketing, Sales, and Service Ready to Adopt Process Excellence?

May 2, 2015 by David Crankshaw

Many B2B companies struggle to find, win, and keep customers. Their buyers have changed, but B2B companies have not. In his new book, Sales Process Excellence, Michael Webb explains the problem this way:

Customers rely more today on cost and performance data than relationships with sales people, yet many companies cannot give customers the right information at the right time.
Potential buyers scour the internet to get the information they want, yet few companies exploit the internet’s ability to share information and nurture buyers.
Buyers’ perception of value changes over time, but companies have no way to gauge customers as their perception of value shifts between “price, durability, performance, delivery, maintenance, service or warranty.”
Companies depend more than ever on their distribution channels, yet they know little about their end customers nor do they exert much influence on the behavior of their channels.
Fiercely competitive markets drive companies toward a low-cost or high-quality position in the market, yet companies remain unclear on who their customers are, which position in the market they want to occupy, and how to communicate their market position.

It wasn’t that long ago that manufacturing grappled with similar issues. Here’s how Webb describes the problem they faced:

What is the nature of this “production system?” Years ago, executives viewed production as a series of separately managed functions that included purchasing, inventory control, scheduling, operations, maintenance, warehousing, and shipping.

Like the management of production years ago, sales, marketing and support today are managed as a series of separate functions. Each organization operates with its own goals, activities, and culture. Each organizes its own work and is only loosely coordinated with other organizations.
Webb says that although production has changed dramatically over the years, sales and marketing has not:

Thanks to process excellence, that view (of production) gradually changed. Most CEOs now view production as a series of interdependent processes, which include the entire “supply chain.” They understand that the interdependencies among functions can create effects that may seem counterintuitive at first yet have a huge impact on overall productivity. Unfortunately, most executives continue to view marketing, selling, and servicing as separate, independent functions that deliver, rather than create, value—and they manage them as such.

B2B companies have been slow to adopt process excellence in marketing, sales, and service. However, that is likely to change soon. The opportunities for improvement are too great to miss. And people like Michael Webb are showing us how to move forward.

Structured Sales Processes Separate High-Performing Sales Teams from the Rest

April 2, 2015 by David Crankshaw

What sets high-performing sales organizations apart from their lower-performing counterparts? To answer that question, Steve Martin, author and professor at the University of Southern California’s Marshall School of Business, conducted a survey of sales professionals.
The results reveal “that the best sales teams regularly set more aggressive goals, employ more structured sales processes and share more optimistic opinions about their team members and sales organizations.”
Regarding structured sales process specifically, Martin came to these conclusions:

High-performing sales organizations were almost twice as likely as underperforming organizations to describe their sales processes as “closely monitored” or “strictly enforced or automated”.

High-performing sales organizations ranked “disciplined sales process and systems usage” as the second most important factor separating great from good sales organizations. They were also more likely to closely monitor lead follow-up than lower-performing organizations.

Leslie Ye at HubSpot observes that “it gets even more interesting when survey participants ranked the most important factors that separate good from great sales organizations.”

Here are the top two components, according to each respondent cohort:

Underperforming organizations: “team morale and collaboration” and “talent of salespeople”

Average performers: “lead generation” and “quality of sales leadership”

High-performing organizations: “lead generation and pipeline activity” and “disciplined sales process and systems usage

Martin concludes that “High-performing sales teams think in terms of strategic sales process management, while underperforming sales teams are more focused on personal sales prowess.”

How Does HubSpot Staff for Inbound Marketing?

November 19, 2014 by David Crankshaw

Hubspot, a software company in Boston, has grown rapidly since its formation in 2005. It has achieved an amazing Compound Annual Growth Rate of 88% over the five years starting in 2009.

The company sells marketing software for small and medium sized companies. Through articles, tools, and e-books, HubSpot ceaselessly educates these businesses on how to become more successful with their marketing and selling practices.

Which raises the question, how does HubSpot structure it’s own marketing staff? What kind of people does it hire and how are they deployed? As you add members to your own marketing team, in what order would HubSpot recommend you hire them?

If you knew how the staffing pieces fit together at Hubspot, then you could use their model to guide the staffing decisions for your own marketing team.

Let’s look at the structure, production output, and costs of the marketing team at this successful company.

[Note: Some of the figures in this article will not correspond exactly to values in the HubSpot S-1 document. I used the publicly available information on HubSpot, but I didn’t use it to write a financial report. This article constructs a simple business model of their Marketing process. With it you can see how all the pieces fit together and use the information to model your own Marketing system.]

Create a lot of leads by investing in the top of the funnel

HubSpot accomplished its growth through the use of Inbound Marketing and a large Inside Sales group.

No one is surprised that HubSpot fueled its growth with Inbound Marketing. After all, the company invented the term and has relentlessly evangelized the use of Inbound Marketing methods. Using these methods, it has become a leader at acquiring customers in the small and medium business tier.

Mike Volpe, the CMO at Hubspot, explained recently how to structure a marketing team of any size. He recommends that you assign each member of the marketing team to one of the first three inbound marketing stages: attract, convert and close.

Attract: Your content writers, designers, SEO specialists, and social media managers.

Convert: Everyone involved in conversion optimization, including landing pages, calls-to-action, lead scoring, and nurturing.

Close: Your sales enablement marketers helping the sales team close opportunities.

As your team grows Volpe recommends that you put the most staff on attracting visitors to your website.

Source: How to Structure a Marketing Team of Any Size by Mike Volpe

What would this mix look like at Hubspot? The 2014 S-1 document for their Initial Public Offering states that 351 people work in Marketing and Sales. In previous statements, Volpe said that the ratio of people in Marketing versus Sales is 4:1. With 351 people, that breaks out into 70 people in Marketing and 281 in Sales.

HubSpot Marketing & Sales Staffing

If you subscribe to the HubSpot blog or visit their site often, you have seen that the company publishes a torrent of posts, articles, tools, and webinars. Now you can see how many dedicated staff are required to produce all this high-quality content. Eleven people are writing for the blog. Eight are producing e-books, tools, and webinars. And sixteen are working on a combination of search marketing and design. In all, thirty-five people are working at the top of the funnel alone.

So what is the output for the HubSpot Marketing team and how much do they produce?

It takes a lot of leads to produce a customer

Marketing produces leads and Sales converts them into customers. The HubSpot S-1 states that Hubspot produces 40,000 leads per month. Over 85% of these leads come from inbound marketing. These inbound leads are crucial to Hubspot’s success. They are cheaper to obtain than outbound leads and they convert into customers at a higher rate.

Hubspot converts about 5% of its marketing leads into sales opportunities and 15% of its opportunities into customers. These conversion rates enable HubSpot to acquire 274 customers per month.

HubSpot Conversion Rates

Costs

Now that we know how many leads and customers Hupspot produces with its Marketing and Sales staff, we can ask “How much does all this cost?” SaaS companies cannot allow their Customer Acquisition Costs (CAC) to get too high. If they do, each customer becomes a losing proposition. If the margin from an average customer’s lifetime value is less than the acquisition cost, suddenly you have a business that can never get out of the red.

Sales and Marketing Costs

Close the loop

Finally, let’s apply the information we know about marketing production at HubSpot to smaller teams. How many leads and customers would the teams on Mike Volpe’s chart produce?

We’ll assume that these teams have the same staffing ratio. For every Marketing person they have four Sales people.
Staffing by Team Size

We’ll also assume that they have the same conversion rates as HubSpot.
Monthly Production by Team Size

A marketing team of one person working with four sales people would need 5,190 visitors a month to produce four customers. A larger marketing team of nine people working with 36 sales people would need 46,000 visitors to the site and would produce 39 customers.

With its relentless focus on inbound marketing to generate leads and a smooth relationship with Sales to convert them into customers, Hubspot has been able to post some of the highest growth rates in the history of SaaS companies.

You can infer Hubspot’s business model for demand generation from the information the company has shared and use it to model your own business.