The current economic expansion is long by historical standards, and thus the risk of recession rises with each passing month. Recessions catch many companies by surprise, with predictable results. In the 2001 recession, total sales for the S&P 500 declined by 9 per cent from its pre-recession peak to its trough 18 months later — almost a year after the recession officially ended. But these periods also present opportunities for well-prepared companies to take advantage of the turmoil and gain share.
The best time to undertake major changes that will strengthen a company during recession is before it hits. Before the past recession, both eventual winners and eventual losers in a group of 3,500 companies worldwide experienced double-digit growth rates. Once the recession struck, however, performance began to diverge sharply — the winners continued to grow while losers stalled out. The performance gap widened during the recovery. What did the winners do that losers didn't? They pursued a variety of tactics before the recession that were designed to fortify the firm when the downturn hit — moves both within sales and beyond, like adding a low-cost channel to serve small accounts or simplifying the product assortment.
We'll focus here on what the sales organization should be doing now to prepare for the next recession, with an eye toward using new digital tools. The starting point, of course, must be to make sure you have the basics squared away: aligning sales capacity with the market opportunity (capacity tends to get rusted in place, leaving companies over- or under-resourced); sweating the details of daily execution (things like putting controls around discounting); and getting the back of the house in order (a nimble commercial operations group is critical).
Digital tools and analytic techniques can help make sure those basics are taken care of. Our recent benchmarking of nearly 900 B2B companies underscores the importance of these tools. On average, roughly four times as many winners — defined in this case as those companies that grew absolute revenue at a significant rate and gained market share within their industry over the previous two years — as losers have digital tools embedded into their core commercial capabilities. Digital tools can also open new go-to-market approaches.
ZERO-BASE SALES CAPACITY: Too many sales teams use outdated practices in making account and territory assignments. They rely on backward-looking sales data and broad-brush reports to calculate overall market size and gauge how many reps they need and where to assign them. Digital tools such as Vertiv's opportunity calculator can help make more accurate matches.
KNOW WHEN TO WALK AWAY: Many sales teams lose track of which accounts consume most of their time and how they spend the time they do have with customers. Worse, most don't have a quantified view of profitability by customer, product line and transaction.
To counter this problem, one cloud services provider went through a data-intensive effort to quantify transaction-level profitability and concluded that, no matter how it cut the data, deals under $2,000 were unprofitable. This analysis gave executives a rationale for prohibiting the smaller deals.
AMPLIFY LOW-COST SALES CHANNELS: In other situations, rather than walking away from smaller revenue streams, some companies devise a channel that can close small deals profitably. It's a myth that a field sales rep always needs to touch the customer in order to make a sale; in some cases an inside-sales group is the cost-effective way to pursue a sale.
New data sources and predictive analytics software can help inside-sales organizations identify target accounts and allocate marketing and sales resources in real time.
DETECT AND REINFORCE EFFECTIVE BEHAVIOURS: To understand what separates top-performing sales reps from the rest, companies have increasingly turned to analytics engines (such as Microsoft Workplace Analytics) that mine online calendars and email traffic in order to help identify exactly which behaviours correlate with superior performance. Those behaviours can serve as the basis of training, reinforced daily by frontline managers.
AUTOMATE ACCOUNT MANAGEMENT: Strong account managers keep an up-to-date view of the opportunity, share of wallet, decision-makers and influencers, and actions needed in each account. Software applications such as Revegy and Altify automate this process and plug into a firm's customer relationship management platform, turning a tactical opportunity-tracking tool into a powerful strategic-planning tool.
Analytics can also support retention and cross-selling efforts. An industrial equipment distribution company uses artificial intelligence powered by Lattice Engines to identify the right products to cross-sell to customers.
STREAMLINE AND DIGITISE THE BACK OFFICE: Commercial operations groups tend to be early targets for cuts in a recession. It pays to get ahead of cost pressures here by digitizing and automating large portions of the work, which reduces the need for employees to pull reports and manually reconcile numbers. The best commercial operations groups use their staff to execute analytics that produce valuable insights, such as mining the installed customer base for cross-selling opportunities.
RAISE THE GAME IN PRICING: Almost all B2B companies could do better on pricing. Bain's recent survey of sales and marketing leaders at more than 1,700 companies found that 85 per cent of companies believe their pricing decisions could be improved, yet only 15 per cent believe they have the right tools and dashboards to do this. Even high performers on pricing see opportunities to unlock additional value through digital approaches, including dynamic deal scoring, algorithmic pricing and iterative machine learning.
The vast number of digital sales tools can be overwhelming. Where should sales executives start?
We have seen commercial organisations successfully work through these questions with small teams that test and learn as they go. Many use Agile principles, setting up sprints to produce real business results, not just an improved process. Their sole measures of success are incremental sales and profit margin. Starting small allows the team to quickly work out kinks in the process and try things that might not work, because the consequence of failure is also small. And successes can be scaled up quickly.
There's little point trying to predict a recession with any precision. But winning companies focus on controlling what they can control well before and during the recession, including their sales organization and go-to-market tactics. And becoming more proficient at digital sales technologies gives companies an upper hand over competitors that lag in digital adoption. Armed with the right digital tools, sales teams might almost look forward to the coming recession rather than fear it.
-
Written by: Mark Kovac and Jamie Cleghorn
© 2019 Harvard Business School Publishing Corp. Distributed by The New York Times Licensing Group