It is almost obvious that increasing sales requires a simultaneous increase in sales and marketing expenses. Most sales and marketing managers believe that their teams cannot be more productive in the long run. Teams may see cost reductions and efficiency improvements, but not full and lasting productivity gains. This is a harmful and self-reinforcing belief, and our research shows that it is not necessarily true.
The metric we're focusing on is what's called "business productivity," which measures the revenue (or gross profit) generated per dollar of business spending, and then how much revenue is growing relative to the increase in business spending. sales and marketing. Wanting to better understand whether managers' belief that it is difficult to consistently improve sales productivity over time is true, we conducted a study.
From 2017 to 2021, we analyzed 1,254 public B2B companies in 10 industries worldwide. We found that the average productivity of a company across all industries was stable year over year, and revenue grew at the same rate as sales and marketing. Receipts Roughly 19% of companies increased their business productivity by more than 10% in any given year, but most figured it out eventually. Only 5% of companies saw productivity growth three out of four years.
These elite companies, leaders in sustainable productivity, have provided another great advantage. They delivered a significantly higher annual total shareholder return (TSR) than their peers, by an average margin of 12%. The direction of TSR in logistics and transport varies from 21 percentage points to 4% in paper and packaging.
Our research has identified common approaches to increasing business productivity that are destined to fail or, at best, underperform. One approach is to focus only on cost, which hinders long-term growth. In other cases, companies rely on the latest sales or marketing software or unproven artificial intelligence tools and then experience increased costs without a corresponding increase in revenue. Others may plan disproportionate increases in productivity with no concrete way to achieve them, which can cause the sales rep to lose focus of their goals and give up.
What productivity leaders are doing differently
Our research has found that corporate productivity leaders consistently seek leverage in three areas over a number of years. They improve their marketing model. They increase frontline productivity by striving to make every rep an A player. And they identify efficiencies in sales and marketing support.
Improve the marketing model.
It's about evaluating the application of sales and marketing skills in terms of opportunities that bring the greatest return. Many companies rely on historical sales data and an outdated coverage model to determine how many employees they need and where to put them. These deck designs are prone to rust, reducing the sales and marketing organization's return on investment.
It is much more efficient to rebalance account allocations based on future customer spending, creating optimal territories for each salesperson. Large companies adjust customer segmentation and distribute their customers to more profitable sales channels. By doing so, they can use lower cost sales channels such as inside sales, offshore roles and e-commerce.
Make each player representative A.
To increase the productivity of individual frontline representatives, companies can use a number of tactics. One is to create data-driven sales efforts: a coordinated sales and marketing activity with target customers, including personalized sales collateral and follow-up to ensure sales reps are directed to the most compelling opportunities.
Continuous training and practice help reduce preparation time for beginners and improve performance for veterans. Bain research shows that high-performing salespeople engage with their managers more frequently and with better quality than low-performing salespeople, such as weekly one-on-one and regular reviews.
Effective sales and marketing support.
Running a small support team can result in significant savings or free up operational costs that can be used for customer-facing sales efforts. Optimizing support spend requires finding the right automation and digital tools that simplify complex processes. Additionally, other tactics include improving the accuracy of quotes for individual reps (defined by the medium), reducing the scope and levels of organization, and revising non-sales and non-quota roles.
Productivity leaders consistently use tactics in each of these categories. Consider how one IT application security vendor reduced its coverage as annual revenue growth fell from about 40% to less than 20%. The company expanded the number of customer segments and created more personalized sales proposals for each segment. Rebuilt sales territories based on total addressable market, each customer's propensity to buy and customer characteristics. These and other measures have helped the security vendor increase business productivity by more than 10% four years in a row.
Other companies are following similar paths to increase business productivity. A multinational food packaging company began to change its marketing model through various tactics. This includes re-segmenting customers based on opportunities and service needs, increasing the use of lower-cost marketing channels such as inside sales and e-commerce, and pooling specialized resources around the world.
designed and repeated
In addition to constantly reviewing proven levers, productivity leaders are characterized above all by the fact that they take a conscious and iterative approach when implementing changes. His approach has several organizational dimensions.
First, they appoint a clear business productivity leader, often with a specific role. This director often reports directly to the senior director of revenue, finance or operations and has program resources. Associates help create a strategy to implement, drive and change processes and behaviors at all levels of sales and marketing.
Even experienced productivity leaders tie sales productivity goals to annual and multi-year planning, so the effort extends beyond the sales team. To do this, the CRO, CFO and COO must regularly communicate about explicit productivity problems. The CFO's sales/marketing expense and revenue targets should reflect the expected productivity gains of the sales and marketing organization and provide clear tactics for achieving those gains. And the multi-year business productivity roadmap needs to be linked to the IT roadmap so the business can plan for the necessary technology investments.
Finally, a mature business operations team is essential to model sales and marketing capabilities, communicate with the finance team, and create continually revised go-to-market plans. The operations team ensures that tactics are consistently implemented across regions and divisions.
The right questions to ask yourself in times of crisis
CROs, CFOs and COOs determined to support productivity gains want to answer a number of important questions:
- Does our organization know what factors affect business productivity and whether we are within, above or below our targets?
- Where and at what level should we increase productivity, next year, in three years, in five years?
- What tactics combine to map a realistic path to goals?
- Do we have the structure, operating model and dedicated leaders to enable these achievements?
- Who is responsible for making the profit? Do you have accurate information and communication mechanisms with finance, human resources and other functions?
Sustained growth in business productivity is beneficial in all industries and at all stages of the economic cycle. However, this is especially important in today's macroeconomic conditions as recessions change the landscape. During the 2008-2009 recession, Bain's analysis found that nearly 3,900 companies worldwide performed very differently. Winners outpaced losers, widening the gap between earnings and market cap in the subsequent period.
The same logic applies today. An enterprise productivity framework forces companies to make fine trade-offs between profitability measures and cost reductions, trade-offs that will help them outperform their competitors for years to come.
