Sales Black Box – Open the Black Box of Sales – Imagine that your market is in a serious downturn…
You have to make changes. Like most leaders, cutting personnel is the last resort. Your squeezing every drop of savings out of your operations, cutting back on travel, perks, overhead, etc.
But in the end, there’s no avoiding the fact that your marketing and sales budgets have to be reduced if you can’t increase revenue.
And the nightmare of it all is that you don’t have enough information to know what should stay and what can be cut back. Your marketing and sales operations are a black box.
You’re not sure which trade shows produce sales and which don’t. You can’t tell which salespeople are C players and which ones are B players that just need a bit of training or coaching.
This scenario is playing itself out as we speak here in Houston. It’s a recurring theme. Energy prices drop and businesses directly related to oil and gas and many that are just supporting those businesses are thrown into a downward spiral.
If you’re not in Houston or another heavily energy focused area and not otherwise related to commodity prices, you may not know this nightmare intimately. However, it points out the biggest strategic risk that most businesses face, arguably second only to lack of proper funding.
Today, I was a panelist at a small meeting of CEOs here in Houston, all wrestling with surviving and thriving in today’s low energy price environment.
Imagine that you make pipes used in oil and gas well drilling. Demand has dropped to almost nothing. You had just expanded your plant to keep up with demand a couple of years ago. The capital outlay tapped your financial resources. Now nobody’s buying what you can produce.
So, someone realizes that the same type of pipe is used in drilling water wells throughout North America. A huge potential new market! Just a few tweaks to the specs and you’ve got hope for growth!
So, how do you target this new market? Unfortunately, for most businesses, the only answer is to duplicate the approach they’ve taken with their current market. This is just as true outside of energy as it is within… If your sales process is a black box, then expanding into new markets means duplicating the black box.
What do we mean by a “black box” in sales? This refers to large, long term investments in marketing and sales resources with no measurement of the effectiveness of the individual parts. The only measurements in a black box sales organization are the cost of the investments and the sales results that come out.
What’s wrong with duplicating the black box? Generally, it’s a huge investment that will take months or years to prove itself and show a profit. When trying to penetrate a new market, without pre-existing relationships and detailed knowledge of the customers and market, that’s a very big risk to take that’s not likely to go as well as you hope.
If that’s your only option, how would you do it?
You’d probably try to hire salespeople with experience in that market. They’ll have relationships and knowledge that you don’t have. They’ll also be highly compensated.
You’d probably also target industry groups via their trade associations, trade shows, etc. That’s going to be a big investment and take time.
And then, what you’ve done is taken a very bottom up, tactical approach to this new market. Your marketing, messaging and sales strategies will be driven by your new hire salespeople and you’ll show up at trade shows and learn the hard way what you got wrong. Then you adjust, retool and try again next year…?
Crazy! Yet, it’s done everyday. Why? Because most businesses don’t stop to measure their marketing and sales processes until they learn they have to, the hard way.
Then, instead, imagine that you already know your average cost per lead, cost per sale, close rate, calls per appointment, appointments per proposal, etc.
With metrics like this, you can try less expensive, more short term approaches initially to mitigate cost and risk and test this new market to see if you’ll be able to achieve similar metrics. Then, once you get a feel for the math, you can increase the investment. You’re also far more likely to see your salespeople in this new market find success if you have benchmarks for them to work toward.
And in marketing, the same is true. For very little money, you can run online ad campaigns to test messaging and generate initial leads. However, if you’ve never done this before, you won’t know if what you learn is encouraging or depressing. Even if large outlays on things like trade shows are your only options, if you know how to measure leads from the trade show, their quality and the close rate on those leads, you’ll be able to go in with solid expectations and benchmarks.
Sounds simple right? Unfortunately, it’s just not easy. Every business has its nuance that complicates the measurement. The energy business is a great example. ExxonMobil is undoubtedly on my target list. I may have make approaches to various contacts there with no success so far. Then I meet a contact from ExxonMobil at a trade show and shortly thereafter, I’m in a meeting with the new contact AND some of the folks I had previously targeted. What marketing effort gets the credit for the resulting sale?
There are no simple answers to questions like this. Each business has to work out it’s own standards based on experience.
And that’s the point! The time to start measuring your black box is now, while things are cruising along nicely. Don’t wait until you are forced to make changes by adversity. It’s too late by then.
Start simply and keep your goals reasonable but, start. Measure number and source of leads and figure out how to tie those numbers to sales results. Then build from there.
Do it with excel if that’s easiest for you. Use your CRM if you can but, don’t waste 3 months trying to figure out how to tie your marketing automation system and your CRM together just to get this data. Have your bookkeeper crunch the data in spreadsheets if that’s most straightforward. Then, with some data, you can make investments in more automation, implementing new marketing and sales technology solutions, etc.