Many large companies in business-to-business (B2B) markets struggle to contain the cost and complexity of their sales teams. As customers increasingly demand deeper expertise, and B2B companies add more offerings and pursue new markets, these companies have been augmenting sales teams with industry and domain specialists.
Their intent is good: Customer-centric companies strive to sell the best products to the right customers in the right way.
Yet adding specialists also can add creeping complexity that undermines the ability to sell efficiently and effectively. Worse, it stifles the very growth the expanded offering set was intended to provide.
How big is the problem? Bain & Company analyzed the 2003-2011 income statements of roughly 200 large, US-based companies in healthcare, technology and financial services. Sales and marketing expenses as a percentage of revenueincreased at more than half of these companies during this period or failed to demonstrate the economy-of-scale benefits that one would expect from their growing size.
Some complexity is unavoidable, of course, but poorly managed complexity can ruin the economics. In particular, it’s critical to get the mix and sequencing of specialists right, by redeploying some specialists as their capability becomes more mainstream. Too few specialists may jeopardize a sale because there’s no expert available to cover an area the customer considers crucial. Too many may make the cost of the sales effort uneconomic relative to the revenues achieved.
How do you know whether you have too many or too few specialists, and whether they’re deployed in the right places? Combining several types of analyses can produce a reliable picture of where it makes sense to add and where to cut back.
At the highest level, the task first involves estimating the full system cost of hiring, training, compensating and integrating each specialist into the organization, and weighing the cost against the specialist’s value—the amount of profitable revenue you would not get without that specialist. This can be done through a regression tool called counterfactual analysis.
Bain ran a regression model for one technology company to determine what each major account would have generated in sales and profit over the previous year if they did not have specialist support, compared to what they actually generated. Because some accounts had intense specialist involvement while others had little or none, the Bain team were able to isolate the variables related to specialists.
That analysis showed that specialists contributed a gross profit of $236 million at a compensation cost of $20 million, for a net contribution of $216 million or a return on investment (ROI) of more than 1,000%. Even figuring that the additional costs of hiring, training and integration would lower the ROI, and that other “fixed” parts of the selling system had to be used, the profits would still be quite attractive.
The real payoff comes from improving the ROI. To that end, Bain determined the optimal number of specialists for a given territory, product or other category (see chart below). Examining the relationship between specialists spanning across accounts and account manager performance revealed how many account managers a specialist can successfully support, and how to improve assignments across territories and products.
Determine The Optimal Number Of Specialists
Further productivity gains come from identifying the factors that have a pronounced effect on account performance. These range from an account manager’s tenure and number of accounts, to a specialist’s tenure or certifications, to the attributes of assigned territories.
Sales productivity also depends on smart teaming. That’s partly because salespeople who get to know and trust one another tend to sell together more effectively, like musicians who seamlessly improvise back and forth after they’ve played together several times. There’s another rationale for teaming: Some special areas of knowledge need to become common knowledge over time in order to improve the economics of the selling model.
Investment in specialists thus should be “perishable” as a solution moves through its life cycle. Deploy specialists early in the cycle to gain a foothold, and expand to build expertise ahead of the competition. Once sales increase, make sure the account manager learns the basics from the specialists, in order to independently generate and qualify leads. When sales have ramped up sufficiently, reserve use of specialists only for the biggest, most complex deals, and redeploy them to other potential high-growth areas that are at the early stage of the cycle.
Given that business customers increasingly want their providers to have expertise in some combination of product, industry, and capability, sales specialists are here to stay. Taking a more scientific approach to the sales team is helping some B2B providers to once again grow revenues faster than expenses.