The Science Of Sales Growth In A Recession: The 5 Most Dangerous Mistakes A Company Can Make

The Science
Of Sales Growth In A Recession: The 5 Most Dangerous Mistakes A Company Can
Make

by Nicholas
Read

As the
global economy continues to tighten, most businesses appreciate they won’t get
different results by doing things the same way. But much of the science for
growing in a recessionary market is counter-intuitive, and managers whose hands
were on the rudder in previous downturns are no longer in the workplace. Few of
today’s executives therefore have ever faced this kind of storm in their
career.

It’s a
situation primed for old mistakes to be made all over again.

Former
executives of Fortune companies and start-ups, who captained the ship through
the ’70s stock market crash to the ’90s dot-com bubble, reveals some useful
home truths. They report a range of signs that it’s time to rethink how your
company sells:

• Tenders
appear to be an exercise to justify decisions that are already made, and not a
serious opportunity to win the business.

• Key
customers slash budgets or rationalize their number of suppliers.

• Deals you
thought were ‘hot to trot’ go ‘off the boil’.

• Your
pipeline bloats with opportunities stuck in a holding pattern, with the seller
not achieving any forward progress for several months.

• Decisions
become more complex, involving more people and taking longer to get across the
line.

• Price and
risk mitigation become main topics for discussion in the negotiation phase.

• Sales are
for amounts far less than forecast.

•
Salespeople spend time on low-yield activities like prospecting because the
quality and quantity of leads from Marketing is too low or dries up.

• Your
forecast is murky when you look out further than six months.

• You win
deals, but can’t repeat success across the sales force.

• You lose
deals and don’t know why, or when it became irrecoverable.

• Good
salespeople bail out into management roles in other departments or leave the
company altogether.

When
organizations are dealt with these challenges, their typical gag reflex is to:

• Spend
more on advertising.

• Cut back
on salespeople.

• Cut back
on training coaching.

• Cut back
on pricing.

• Tell
salespeople to “work harder and smarter”.

So what
happens next?

• A
downward spiral commences.

• Managers
focus on activity metrics and demand more calls, more leads, more proposals.

•
Salespeople chase anything that moves, filling their funnel with unqualified,
low potential deals to meet the activity targets.

• Forecasts
fill with fiction.

• Managers
start weighting the forecast report, which sends the message they don’t trust
their team.

•
Salespeople invite managers to help close their big deals, knowing that if the
manager can’t win, the salesperson is off the hook.

• Customers
invite managers to attend the final pitch, knowing they can approve larger
discounts.

• Coaching
stops as managers don the cape of “SuperRep”.

• Non-standard
promises made in the heat of battle are off-menu for what the delivery team
actually does, establishing a gap between the customer’s expectations and what
they then experience.

• Repeat
business drops, as promises are not met.

• Margin
erosion begins.

• Managers
focus on even more activity metrics, more calls, more leads, and more
proposals.

• The
downward spiral gets deeper and deeper…

If any of
these danger signs look familiar, you’re in good company. Most executives who
turned their companies around in former recessions first fell into the same
traps because they represent a natural response in times of uncertainty. People
go to risk and get tactical.

But these
same executives report the secret to pulling out of the nosedive is to act
contrary to the natural impulse, keep your head, and take a contrarian path.
Those that did so achieved stability and even growth while their competitors
fell by the wayside. They cite the five most dangerous mistakes a company can
make as:

1. Ignoring
the problem

Fear and
panic can cause indecision. When they do, business leaders can fail to evaluate
options rigorously, and so make inappropriate decisions to maintain the status
quo. Poor choices–or safe choices made too late–cause a company to go
backwards. When the warning signs appear, take swift action.

2.
Increasing advertising

For fast
moving consumer goods, brand advertising can sway preference and so take market
share away from competitors in the short-term. But in complex B2B sales,
advertising does not lift short-term revenue because institutional buying
decisions require a protracted period of assessment that outlasts most
advertising campaigns. So don’t advertise and expect an impact on B2B sales
this year. However consulting firm PIMS Associates1 reports how companies that
advertise more end up growing faster over the long-term than firms that drop
off the customer’s radar, seemingly swallowed by the downturn.

3. Cutting
the price

Buyers in a
tight market will naturally gravitate to low prices. But this simply reduces
your margins, which must be paid for by cutbacks to operating expense
elsewhere. It leads to short-term gain but long-term pain; the loss of
sustainability. Conversely in the B2B space, higher prices positioned as
necessary to reduce the customer’s risk, actually plays better to executive
perception than “getting a cheap deal”. Sometimes putting your price up is the
best way to grow your market.

4. Freezing
sales expenses

Putting a
hold on sales costs such as travel, entertainment and training are typical
areas targeted by nervous CFOs. But a study reports: Only 27% of companies that
indulged in intensive cost cutting were growing as a result of their pains.

5. Pushing
more calls

Pressuring
salespeople into making more intrusions on the same number of prospects
actually reduces sales. Neil Rackham (author of SPIN Selling and Rethinking the
Sales Force) concludes: “The least successful people are the ones making the
most calls. Increasing the call rate results in fewer orders, not more.”

To avoid
reinventing the wheel, learning from executives who weathered past recessions
is a sound approach to reducing risk. In your own organization, your alumni or
your online social network there may reside active or emeritus officers with
deep experience to share. Talk to them. Pick their brains.

But one
thing is certain when an ailing economy mimics a black hole – piecemeal
remedies fail to achieve escape velocity. Cutting back on cost, though logical,
is the opposite of what has pulled businesses through recessions in the past.
Increased investment in the sales process, governed by greater discipline, is a
more reliable approach for achieving sustainable revenue growth, even in difficult
times.

Nicholas
Read is president of consulting firm SalesLabs (www.saleslabs.com) and
co-author of Selling to the C-Suite (McGraw Hill, 2010). For more information,
please visit www.cxo-selling.com.