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Risky Business
May 30, 2007
Research shows new products and new customers are fueling growth, but sales organizations must invest before they can reap the rewards
By Joseph Kornik
In 2007, it's all about what's new. Although the conventional wisdom is get more from what you already have, the introduction of new products and services—and the new customers that may come with that—is a major corporate growth strategy this year, according to the 2007 Performance-Driven Selling Survey from MarketBridge, a Bethesda, Md.–based provider of integrated sales and marketing consulting services.
More than three quarters of sales executives said new products or existing product extensions was a top-three priority over the next three years. "This is certainly an emerging trend," says Mark Donnolo, senior vice president with MarketBridge. "What I think is significant is that this is an expensive trend. It is a strategy that requires a tremendous amount of expense and coordination throughout the entire organization."
Coordination includes how you take that product to market, how you develop the right sales messages for it and ultimately how you motivate people to sell it, Donnolo says. The survey, conducted earlier this year, asked senior sales and marketing executives from 120 companies across several industries to identify their companies' top priorities right now and for the year. Other top growth strategies include focusing on the right customer segment (63 percent of companies had it in its top three), sales and marketing alignment (50 percent), and hiring more salespeople (46 percent). These three tend to make the every year, Donnolo says. "But the new products and services [category] is something we're really seeing gaining momentum as a growth strategy."
As for customers, companies still want to keep the ones they've got, but may not be trying as hard to keep them as they have in the past. Companies are spending less time on retaining current customers (there was a 21 percent drop in emphasis on customer retention) and spending more time on developing new ones (there was a 17 percent increase in emphasis on customer acquisition). They are also focusing on new market expansion (a 50 percent increase over last year).
"I think the focus on customer penetration is a smart one, but I think the shift in focus toward new market acquisition, in combination with the shift toward new products, could be a little risky and a little expensive in terms of strategy," Donnolo says. "That's one point of caution I see when I look at the results."
One fact that isn't surprising, Donnolo says, is that companies are still focused on direct sales as the most effective sales channel in terms of revenue performance, with 41 percent rating it their top-performing channel. More than half of companies say they plan to increase the direct sales channel over the next year. "With all the various options on channels out there, companies are still very much focused on the direct sales force as their most effective sales channel," Donnolo says.
More good news: Companies plan to increase sales headcount across all roles by 5 percent next year. The largest increases will be for field reps focused on new customer selling, with 40 percent of companies increasing headcount there. Meanwhile, 28 percent of companies are planning to hire more general sales reps.
So what are the greatest challenges that lie ahead? Well, increasing productivity remains a top challenge for 66 percent of companies, followed by tackling solution selling rather than transactional selling (64 percent), and recruiting the right sales talent (59 percent). When it comes to bang for the buck, companies are spending the most on sales compensation programs (72 percent) and also feel those comp programs are providing the greatest benefit (59 percent). That's the good news. The bad news is, with all the money that companies are investing in sales compensation, they feel they are losing about 20 percent on their investment, Donnolo says. "Unfortunately, companies still have a lot of holes and challenges when it comes to compensation plans, the biggest being the ability to set achievable quotas."
The quota challenge has ascended to the top spot for executives, with 58 percent reporting it as the greatest compensation challenge they currently face. "Clearly, something is going on here," Donnolo says. "Quotas used to be the number-three or number-four challenge, but this year it's number one. That is because quotas, traditionally, are more historically based and are not reflective of true market opportunities or the capabilities of the sales force."
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Sales & Marketing Management Magazine
This article is brought to you by Sales & Marketing Management, the leading authority for executives in the sales and marketing field.
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