Cost Reduction Within Marketing and The Sales Process

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Yes, there is pressure throughout firms today to reduce costs—and the sales department is not exempt. The paradox is that during slow times there is an even greater need for the work done by sales and marketing. In an ideal world, firms would increase their investments in lead generation, in spite of cost-pressures, so that new business development could offset business cycle weakness. The question is…how?

First, recognize that sales and marketing costs decrease as a percentage of sales the more successful the sales effort is. Therefore, the focus needs to be on generating new, additional revenue. We may in fact increase the marketing budget—if funds are available—so that revenue can be generated, and the cost of sales can fall in percentage terms.

Here are 11 steps you can take that will help increase revenues and hopefully reduce costs:

• Eliminate the weakest direct sales people (Group “D” below). Every organization has sales people who perform with varying degrees of success. The “A” sales people are the 20% of the sales force that usually produces 70-80% of new business. Leave them alone. The “B”s are not as productive, but have the potential. They usually require motivation and support training to make them even more productive. The “C” group makes up the majority of the 80% of the sales force that produces 20% of new business. They require extensive training and are open to learning. The “D” group is not capable of learning, has not tried that which has been taught them, and just cannot be carried any longer. The “D” group must be let go now.
• Put the “C” group on notice that only the top half of them will survive, and set a deadline. You can’t afford to carry Cs that won’t move up to A and B levels in the coming months.
• Separate customer service from new business generation and have some portion of the sales force working only on new business development. Too often, taking care of existing customers keeps sales people from also working on suspects and prospects.
• Out source lead generation: Most sales people (97%) are not very good at cold calling and don’t like to do it. The combination is costly. They waste away the time or don’t do it at all. Recognize that cold calling requires special skills and personality types and the people good at making face to face calls will most likely not be good at cold calling. Outsourcing your lead gen can double the time that the business development people spend with prospects, face to face.
• Shorten the sales cycle: Most companies have an inflated view of how much calendar time and what number of calls are required to close new business. We encounter very few companies that don’t have the potential to cut their sales cycle in half. This can be done by analyzing the strategy of each of the calls, and determining how efficient the first, second and third calls are. This is often difficult for a company to do on their own. Consider hiring a consulting firm to assist. A two or three day audit of your sales process can usually identify the weakness.
• Use a post card for the next direct mailing to your database. Post cards have high response rates and cost less than “heavier” mailings.
• Increase the size of your prospect database. Most companies we talk to have too small a database. Buying a list of a new niche or target market can often breathe life into an over used list of prospects. The new names also will enlarge the list to where the small, expected response rates have a chance to come home. (If mail produces a ½-of-one percent response, and you mail less than 200, you most likely will have disappointing results.)
• Consider expanding the use of independent sales representatives. They only get paid when they produce new business.
• Rethink your sales presentation: Is it educational or persuasive? If too educational, you are experiencing too low a conversion rate of prospects into customers/clients. By increasing your conversion rate you will drop the cost of sales dramatically.
• Begin to manage your sales pipeline: New software is available that allows top management and sales management to see “into the funnel”. This will enable you to know what specific training the sales force requires, and when the sales manager should intervene to help. While contact management software makes you more efficient, and CRM software helps you store data on customer relationships, the new sales management software provides tools that help the sales person manage his time better; and the sales manager manage his people more efficiently.

Do something - NOW! We see too many companies “waiting for the holidays to be over” or “waiting for a big new order to come in” prior to taking action. Investing in marketing and sales is like putting money into a savings account. The sooner you start is more important than the quantity involved. The time value of action is impressive. You have the time during slow periods to engage management other than sales to help in the sales process. The CEO, the head of quality, HR,. …Many of these folks should devote a percentage of their time to business development during times that their normal workload has been lightened by the business cycle.

Labels: leadership  managing and supervising