Solving the Sales Conundrum: Special Report
The relationship between growth and sales seems easy enough: Sell more stuff and your business gets bigger. But it's not quite so simple—and a failure to understand that could be the difference between success and failure, says Jeff Hoffman, founder of MJ Hoffman and Associates, a Boston-based sales consultancy. Hoffman, who teaches sales at Harvard and MIT and works with companies large and small (he recently created a sales-training program for Google), recently spoke to Inc. magazine executive editor Larry Kanter about what sales-conscious CEOs need to understand to navigate today's market.
What's the biggest thing CEOs of growing companies don't understand about sales?
When you're going through periods of high growth, the sales are coming in in such a frenzy that it can almost seem as if every deal is happening a different way—say, through a referral, a marketing event, a lead, a list, etc. A CEO can easily come to the conclusion that there's a randomness to the growth. And that's very dangerous.
Why is that?
Because even in the hottest markets, there are trends and shapes to the sales process that can allow you to determine what your optimal customer acquisition looks like. And that is critical when you start to scale your business.
So it's not just a question of finding customers and selling them things and then finding more customers and selling them more things.
There are generally significant events that occur in a relationship between a buyer and a seller. In the business-to-business world, it might be a meeting or a product demonstration. In the business-to-consumer world, it's a click-through or a request for information. For a business owner, it is very important to understand which of these events have the greatest impact, which ones really accelerate the sales process. You want to be collecting data on every step of every sale and looking at that data, and constantly fine-tuning the process.
In practical terms, what do you advise entrepreneurs to do?
I like to think in terms of an abbreviation that's been around for years—AIDA, or attention, interest, desire, action. No matter what you're selling, you have to guide a prospect through each of those emotional states, and each one requires a different focus, a different language, and a different strategy. In the simplest terms, you want to make sure that you're building your process so that each of those letters is being represented.
So how are you getting your customers' attention? Is it through a website, word of mouth, through buying lists, through a direct-sales organization? From there, how do you get them interested? How do you communicate why they should give you their attention? Maybe it's through demos or free trials or testimonials. Then it gets even harder—most young companies have the biggest hurdle getting from interest to desire, getting someone to go from understanding what you do to actually wanting it. And even if you can create some kind of event or process around that, you're not done. You have to have another strategy or event around the customer actually buying.
Now, all these things can happen on one phone call or one meeting or one visit to your website. But all four of them have to be contemplated.
And in your experience, that does not happen?
Generally, people make educated guesses. But what's really important is that you start asking, What is happening here? Am I getting too much drop-off at a certain stage? Am I seeing a bottleneck at any particular point? Do certain events speed things up or slow things down? Capturing these things in real time is the difference between companies that have high growth, stumble, and then die and companies that have high growth, maintain it, and continue to grow exponentially.
You talk about capturing and responding to this data in real time. How do you do that?
There's a wide variety of CRM and automated tools available. But even without technology, you need to make sure that you're recording the activity aligned with each of those four stages. So if you believe that the best way to get the attention of a customer is through a database and outbound calling, you have to capture your team's efforts. It could be as simple as tracking every call in a spreadsheet. But you need to generate numbers that allow you to calculate your conversion rate. Because there are two ways to take advantage of a sales process: You can increase the volume of activity in each of these four stages; or you improve the efficiency of each of these stages.
In other words, how many interests does it take to get someone to actually desire your product? Imagine you're selling high-level enterprise software that has a starting price in the millions of dollars and takes 18 months to sell. Imagine the power if you can start to shrink the time between interest and desire by 10 percent. The same holds for products or services with much shorter sales cycles.
A-I-D-A makes sense, but it strikes me as being as old as selling itself. You can imagine the same calculus going on in the mind of a rug merchant in the Grand Bazaar in Constantinople. But here we are now in 2012, in a very tricky marketplace.
You have to be more surgical than ever. There is a tremendous amount of consumer fatigue. People are subjected to a tremendous number of attempts, being made by all kinds of organizations, to get their attention. At the same time, the buyer has a variety of ways to self-educate and even self-buy. In the old days, the sales organization owned the whole process. Now, a customer can make decisions and purchases with no company involvement at all. The salesperson's ability to touch the customer has changed. So you have to be much more creative.
Does this require a different kind of salesperson than we've become accustomed to?
I think it may. When I was coming up in sales, the classic great rep was that kind of C student who had three jobs to put himself through school, who wasn't book smart but was street smart. But I'm seeing a lot of companies doing things differently, moving the profile to someone with extraordinary intelligence. In the current environment, the best reps may be those who are curious, can expand a meeting to talk about things that they may not have been prepared to talk about, who can learn from customers and can get deeply engaged. And those people probably are not the old-style reps.
How do you get someone who is reluctant to sell to embrace sales?
I often coach people to think less in terms of selling than learning. Once you approach your prospects and customers from the point of view of "what can I learn from you," you will feel anxiety start to melt away. No one wants to talk about what a salesperson thinks will work. But prospects do want to talk about what they think will work. Salespeople need to indulge that.
I wonder if the negative impressions many of us have about salespeople stem from the way they are compensated. If the bulk of your pay comes from commissions, doesn't that add a kind of intensity or even desperation to the process?
Ultimately, sales commissions are designed to inspire what most people have difficulty doing—closing. Who would subject him- or herself to hundreds of no's a week, many of them in a rude fashion, if he or she didn't also have the promise of great earnings? Now, there are different ways to structure compensation. Some organizations are beginning to tie compensation not only to the sale but to the life cycle of the customer—which mitigates the impulse to get bad deals just to get a deal done and collect the commission.
Speaking of deals, many companies seem obsessed with the big deal: identifying it, chasing it, closing it. And then moving on to the next big deal. Is that a problem?
It's sexy—you're the big whale hunter. We all want to know if you closed Ford, if you closed Hilton. It's a big brand, and there's also the hope that it can have a domino effect and lead to more sales. So organizations put a high value on these whales. But I often advise companies not to make a big investment in the whale hunting. The most profitable space for many organizations is the next tier down—the large midmarket account space. A $1 million deal looks better than a $100,000 deal. But if the $100,000 deal can be closed with four steps and the $1 million deal takes 30, which is the better path to success?
So I often advise people to go after the big whales but do it judiciously. If you've determined that in your market there are 100 big whales and 10,000 midmarket opportunities, you should spend your resources in the same ratio.