Salesopedia - Sales Aspects are Integrated in Our Corporate Strategy

Sales Aspects are Integrated in Our Corporate Strategy

Written by Christian Maurer

In their book “Spitzenleistungen im Vertrieb” (Excellence in Sales). Holger Dannenberg and Dirk Zupancic are telling us that according to a sales excellence study - carried out in 14 countries with 747 companies responding- almost twice as many companies ranked as top sales performers confirm the statement in the title; compared to the companies considered the lowest sales performers among the responding companies

Alignment of corporate and sales strategies seems thus to contribute to better sales performance. Questions coming to mind are then: How can you get to alignment? How do you know whether you have alignment? And what are possible consequences if you do not have alignment?

Getting alignment through a top down approach?
The book suggests getting alignment using a classical top down strategy formulation approach. It starts with the corporate strategy; defining what financial performance the enterprise wants to achieve with what business in what territories. The next level is the marketing strategy giving essentially more details on offerings and segments. The sales strategy, as third level has to answer the question on an even more granular level, namely: From which customer are we expecting what revenue stream?

Nothing could be found to easily answer the other two questions. Here are some of my own ideas on how to approach these questions.

The corporate view
For the corporate and marketing strategy, Igor Ansoff’s product/market grid is still frequently used. In its simplest application, the grid leads you to four generic growth strategies 1. market penetration, 2. market development, 3. product development , 4. diversification.

To cover the competitive aspects, we might use Treacy’s and Wiersema’s concept of discipline of market leaders, where we have basically the choice to focus on one of three modes to gain competitive advantage: customer intimacy, product superiority and operational excellence.

The sales view
I will demonstrate that for sales, Ansoff’s grid is not granular enough. In particular, the market penetration needs refinement if it is to be executable.

Except for start up’s very early in their life cycle, the market penetration strategy is crucial as it usually contributes the largest revenue portion. It makes sense to try to grow first with what you already have (existing products) and know (existing markets). Only if the growth target cannot be reached by market penetration alone, do we need to look for growth from product development and/or market development. Getting the market penetration strategy wrong has therefore knock on effects on the other strategies and has significant impact on the ability to meet growth targets.

As market penetration is the primary domain of sales, having the sales and the corporate strategies synchronized on the right level of granularity is thus crucial for the enterprise. .

The four generic sales strategies within the corporate market penetration strategy
For existing customers, where we enjoy a good wallet share, we can apply the ‘protect’ strategy. The expected revenue from those customers depends on their natural demand for our offerings in the next planning period. If we factor in some loss of customers and/or wallet share, we arrive at the revenue we can expect from the protection strategy. We also know how much revenue we have to get from the other 3 generic strategies together to meet the overall growth target.

The next best area to find revenue growth are existing customers who have not yet bought our complete offerings portfolio but also do not own a solution by having bought a comparable offering from the competition or by having developed it in house. Here we can apply the ‘develop’ strategy also know as cross- and up-selling.

In their early growth phase, companies have to approach primarily new customers. If the condition about the owning of a solution is as above, they use the ‘win’ strategy. Pursuing this strategy is costlier than the ‘develop’ strategy. There is additional effort to first find the customers and establish relationships. These efforts are significant. There seems to be a consensus among experts that gaining a new customer takes about 5 times the effort of keeping a customer. Caution should also be applied with the expectation at which point in time revenue starts to flow from this customer group.

Companies operating in saturated low growing markets have to focus on customers owning a solution bought from competitors or developed in house. The can be either new customers or existing customers. For these customers the ‘conquer’ strategy is applied. Offerings in this situation tend to have become commodities. Converting these customers to our offering can thus turn out to be a significant profit drain as price might be the only remaining differentiator. When we address new customers, we “buy” market share. When the ’conquer’ strategy is applied to existing customers, wallet share is bought. The latter case should normally have less of a negative impact on profitability as we do not have to build the customer relationship before we can start conquering the space. However potentially negative side effects on other offerings have to be considered there.

Is this additional complexity needed?
Let’s compare the four sales strategies model to the simpler Hunter/Farmer approach which focuses just on new and existing customers.

Unfortunately this simpler model cannot detect the significant danger of profitability erosion coming from executing a ‘conquer’ strategy which is not supported by an operational excellence initiative; going way beyond the sphere of influence of sales. The increase in operational efficiency is the only way to compensate for the price pressure inherent to the ‘conquer’ strategy

So I believe Albert Einstein’s recommendation: “Everything should be made as simple as possible, but not simpler” is respected.

The four sales strategies model considers simultaneously, customer and competitive position and can also be put to good use for aligning the marketing and sales strategies.

The outside in approach
Due to the pivotal role of the market penetration strategy and the needed granularity from a sales perspective, it is questionable whether a top down approach for strategy formulation will result in sufficient alignment. The proposed sales strategies start with the customer in mind. Starting the strategy formulation on that level can be a viable alternative. For customer centric enterprises, it should be easy to adopt this outside in approach which puts the customer at the top of the organization chart. Maybe to make it more palpable we could say, that sales is consulted in early phases of the strategy definition.

Christian Maurer
		About the author:
		Christian Maurer, The Sales Executive Resource, is an independent sales effectiveness consultant, trainer and coach. He has a proven track record of helping to increase the productivity of large, global B2B sales organizations. Link : http://ultimatesalesexecresource.blogspot.com/
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