SBS International Research Exposes Inefficiencies in B-2-B Sales

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Many well-established business-to-business sales teams close on only 7% of their vetted prospects. Since the sales cycle is often 10-18 months long, this low success rate can be very expensive. SBS International, a UK-based project-rescue consultancy, has just released the results of its 10-year study of the business-to-business sales processes. The study identified inefficiencies in sales cycle management.

Many well-established business-to-business sales teams close on only 7% of their vetted prospects. Since the sales cycle is often 10-18 months long, this low success rate can be very expensive. SBS International, a UK-based project-rescue consultancy, has just released the results of its 10-year study of the business-to-business sales processes. The study identified that the issue was the paucity of good resources: There are a finite number of good large prospects in the marketplace and a limited number of trained, knowledgeable sales people. The real goal is using these limited resources efficiently to generate revenue. The issue is time and focus, rarely money. SBS research shows that most companies should and can expect to double efficiency of their sales resources by applying a few simple principles. The most important of these principles is to assess success by stages rather than at the end of the sales process--enabling management to make timely and informed improvements along-the-way regarding training, product development and hiring.

Key Findings of the SBS research:

•    Business-to-business sales success rates are near 7% from identified prospect to implemented client. This success rate is measured from experienced sales teams selling to well-qualified prospects.

•    The best Blue Chip sales teams with well known products lose 22% of the prospects who said “yes” at close. This means a salesperson invests over 250 days to get a “yes” and then loses more than one-fifth of those victories!

•    There are a finite number of good, large prospects in the marketplace and a limited number of trained, knowledgeable sales people. Neither good sales people nor good prospects are a commodity—yet many large companies act as if they are.

Background:

Dissatisfied with the cost and productivity of your salesforce selling to the world’s largest companies and institutions?

The SBS study, based on their consultants’ experience with some of the world’s most successful and respected sales teams, has been validated by heads of sales in 15 companies and 3 countries. SBS identifies commonalities across borders and across industries and concludes that by paying attention to a few key levers, companies can double the productivity of their business-to-business sales teams.

SBS based its analysis on data from its work with professional sales teams in Blue Chip companies in the UK, across Europe and in the USA. The data and results are largely independent of size (10-300 sales people), nationality or industry (insurance, payment systems, travel and transportation …). Although success rates remain comparable across industries, cycle times are longest where the product/service is integral to a prospect’s core business.

SBS says its findings apply to companies where the sales cycle is 8-18 months and the purchasing decision is made at a senior level in the prospect company. Nonetheless, many of the findings relate to direct sales, generally.

Success Patterns:

The study shows experienced business-to-business sales teams have had success rates of 7% when selling to well-qualified prospects. This conversion rate may be affordable for direct mail but it is very expensive for face-to-face sales.

Companies quickly doubled or even tripled sales results by taking simple steps at appropriate stages of the sales cycle. Improving each stage by only 10% produced a 95% increase in sales.

Suppliers to large companies faced several common sales dynamics:

•    The long sales cycle makes timely judgement difficult regarding the impact and effectiveness of incentive systems or new programmes/products.

•    The decision-maker, usually a senior manager in the company—head of Finance, head of Purchasing, a department head or even Managing Director—is a sophisticated industry buyer.

•    Complex product features require the sales person to be expert not only in his own product but also in the industry concerned.

•    Fully dedicated sales people meet prospects face-to-face. This very expensive sales channel is the only one known to work. None of the companies in the study found distance selling as efficient as face-to-face selling.

•    After-sales relationship management is essential to delivering, keeping and growing the won business. Resources spent on professional account management were always cost justified.

To improve results and control costs, SBS has identified a few simple tools as well as two essential ingredients: tenacity and on-going senior-management commitment.

The diagram below shows the average levels of success in each stage of the sales cycle for the companies studied. Out of 100 qualified prospects, we see the number of prospects that make it to the various stages of the sales cycle.

The success rate from step to step and the variation in this rate among individual sales people provide indicators for action and for allocation of resources to improve sales training, product development, marketing activity and pricing.

The areas with potential for biggest impact when improved were:

Stages 1&2: Qualified Prospect List and Getting a First Meeting,

Stage 7: Gaining Closure (the “yes” decision), and

Stage 8: Implementation

Stages 1&2: Qualified Prospect List & Getting a First Meeting: The single least successful stage (loss of 71% of the prospects) is getting a first meeting with the decision-maker . SBS examined the quality of the prospect list as well as the success rate in getting a first appointment. When insufficient care was given to selecting and vetting the prospect list, the result was much lower success rates than those reported in the findings.

The number of well-vetted prospects per sales person varied by industry. In financial services the norm was between 70 and 80. In transportation the number was closer to 50.

Suppliers with prospects in more than one product line and/or in multiple geographic areas were able to improve first-meeting success rates by securing introductions from a prospect’s divisions which were already clients. Many multinational companies ignored this advantage and relied unnecessarily on “cold calls” and Requests for Proposal (RFPs). Another oft overlooked source of introductions was the methodical and in depth tapping of the personal networks of the company’s senior executives, including the Board.

One company in the study discovered it could increase its existing business by 43% just by getting a higher percentage of its existing clients’ business—from 46% penetration to 66%. In fact, by concentrating on existing clients they were expecting to meet growth targets for several years going forward.

Stage 7: The “yes” decision: “The competition undercut us on price.” “They had more pressing matters and decided not to buy at this time.” “Our product just doesn’t deliver what they want/what the competition has to offer.”… So go the reasons for not getting to “yes.” Much of sales-force management literature over the past 10 years has focused on Closure in isolation. SBS analyzed Gaining Closure as one part of an integrated eight-stage process.

Each sales force contained at least a few salespeople whose prospects were piled up at the Closure stage. These sales people did not know how to close. Although their reasons for failing to close may be true, these salespeople could have addressed the objections in time if his/her homework on previous stages had been thorough. In other words, the loss of a sale at this stage correlated highly with weaknesses earlier in the cycle. One frequent failure was in mis-understanding the prospect-buyers’ needs and matching them to appropriate products or product configurations. Needs are constantly changing and the successful salesperson saw and responded to these changes.

One team we worked with addressed this issue by assigning a Closure Team to help with big sales. Eventually, the team became involved in supporting sales people at earlier stages of the cycle to help overcome some of the closure issues before they arose.

Stage 8: Implementation: The best Blue Chip sales teams with well-known products lost 22% of the prospects which said “yes” at closure. This means that, on average, a salesperson invested over 250 days to get a “yes” from a prospect and then lost over 1/5 of his/her victories! What is wrong?

Examining these losses can be profit-enhancing. For most companies the problem was systemic and reflected weaknesses earlier in the sales cycle:

?    The implementation process took so long that the decision-maker changed his mind.

?    The salesperson sold a product which did not meet expectations or could not be delivered, i.e. a failure in the Needs Analysis Stage.

?    The prospect’s management had not bought into the terms of the sale.

In some cases, it may just be bad luck: bankruptcy, unanticipated mergers, a change in key players or major industry developments. However, over the entire 10-year study, these external factors came into play less than 5% of the time.

Conclusions:

In hard times, when companies reduce headcount, they rarely cut sales staff. In fact, SBS observed that in these times companies often increased the number of sales people. But throwing numbers of sales people at the problem was seen to have little impact on results. The issue was actually the limitation of good resources: There are a finite number of good large prospects in the marketplace and a limited number of trained, knowledgeable sales people. Using these resources efficiently to generate revenues is the real goal.

Successful companies divided the work among sales, account management, marketing, training and operations. A dedicated project manager— with an analytic marketing orientation—will ensure the project keeps a focus while being responsive to changing business priorities. Some small consultancies or interim managers have these skills though much of the initial data collection can be done by bright, well-directed summer interns or new hires. In fact, it is a great way for them to learn your business! Although 90% of the time-consuming work can be outsourced, it is essential that internal owners are involved throughout to ensure a sustainable programme.

The SBS findings do not point to a need for a rocket-science approach to sales management, incredibly high-tech developments or even high costs to implement. Any company spending resources on B-2-B sales will see the benefit of performing and using a simple, analytic, multi-stage approach to directing sales and improving results. However, few do it. The issue is time and focus, rarely money. With the pressure to deliver now, people in a position and with the competence to do such analysis rarely take the time to focus on the opportunity to make them more successful.

For leaders needing to improve sales by a certain time in order to keep their jobs, beginning with the end and working backwards through the cycle stages should deliver at least some measurable results in 3-6 months.

For leaders who can spare the resources (how can you afford not to?) and can allocate several hours per week to manage the development process, you could be well on your way to good short-term results and the basis for an efficient sales management programme going forward. You will not only have measurable improved results in 3-6 months but also further measurable improvements in 6-12-18 months, depending on the length of your sales cycle.

Questions and comments are welcomed by John Whetsel at 07939 157 519 or via SBSIntl@SBSInternationalLtd.com

SBS International: Whom We Serve

SBS does not publish a list of its clients. Most of our work is confidential. However, the following summary should give you an idea of the nature of our client base and our work.

•    77% of SBS consultants' clients are from the world's largest 500 companies. 5% are SMEs. The remaining 18% come from other large companies, governmental departments and national and international associations.

•    SBS consultants have worked with companies from 18 industries.

•    SBS projects range from 2 days to 24 months and from consulting to research to interim management. We even manage other consultants for our clients.

•    Client-company sizes vary from 35 to over 100,000 employees.

•    SBS consultants have served companies in 35 countries: Australia, Austria, Belgium, Canada, Cyprus, Denmark, Egypt, Finland, France, Germany, Luxembourg, Mexico, New Zealand, Norway, Portugal, Romania, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, UAE, UK, USA

•    Projects managed range in size from £5000 to $116 million.

•    SBS writings include white papers for governments and benchmark and feasibility studies for companies looking to major change.

http://www.SBSInternationalLtd.com

John Whetsel is the Managing Director of SBS International. He lives in the UK and has an MBA in Marketing and Finance. His principle focus is on strategic solutions to issues in business-to-business environments. He is also an experienced project rescue specialist. John can be reached via John.Whetsel@SBSInternationalLtd.com or on +44 7939 157 519.

Mary Ellen Devanny is the Head of the Sales Improvement Practice for SBS International. She lives in the US and has been an award winning sales leader in several major US Blue Chip companies. Mary Ellen can be reached via MaryEllen.Devanny@SBSInternationalLtd.com

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