What do sales reps at some of today’s biggest B2B vendors have in common with Fuller Brush men of yore? They both have relied on the foot-in-the-door approach to sales: Establish the relationship by leveraging price and performance advantages over competitors, then expand the business by methodically migrating from one adjacent sales opportunity to the next. That approach may still work if you’re selling home care products door-to-door in the suburbs, but it’s inefficient—and often ineffective—when your customers are located in big enterprises and your goal is to become a long-term strategic partner and solutions provider.
Among the major challenges vendors now face is that the skills needed to sell, say, replacement printers to a large customer’s IT organization are very different from those required to get buy-in from a customer’s senior managers on a long-term strategic alliance. So how can vendors anticipate and meet enterprise customers’ diverse needs? First and foremost, they should enter accounts at several management and administrative levels with resources that are tailored to each sales opportunity. By matching capabilities to specific opportunities and providing carefully considered support, vendors can optimize their return on their sales efforts.
The companies that do this best, we’ve found, are those that take a portfolio approach to managing sales. In 2000, we described in a Harvard Business School case study how Hewlett-Packard reorganized its sales functions around defined sales opportunity portfolios. Since then, we have studied variants of this practice at dozens of companies in industries ranging from financial services to pharmaceuticals. Teams using portfolio tools have new-business growth rates that are on average three times those of their peers.
The portfolio approach divides potential sales opportunities into four categories—repurchase, replacement, expansion, and innovation—and then supports sales reps in ways that maximize their performance for each type of sale. The skill sets required to manage each type of opportunity may overlap, but they are substantially different. Therefore, vendors can benefit by reorganizing their sales forces and redefining the roles of reps to best service the portfolio customers represent. This means giving salespeople more autonomy and allowing them to function more like account managers.
Repurchase occurs when customers buy more of a product from a given vendor. To win repurchase orders, a rep needs to remain front and center in customers’ minds, have their full confidence, anticipate their needs, and be there when those needs arise (an absent rep invites competitors to steal away business). The rep must also, of course, be able to meet customers’ specifications for features, delivery, and price.
Because ongoing service typically adds great value to product purchases, it is usually the vendor’s service organization, rather than the sales rep, that is critical in securing repurchases. Yet firms rarely leverage service to support sales. As a result, sales reps waste time and effort juggling service-oriented tasks related to their customers’ previous purchases when they should be nurturing the relationship and selling.
In addition to increasing the service organization’s overall involvement in selling efforts, a shrewd vendor will establish a dedicated in-house sales support team to serve as the contact point for customers in repurchase relationships. This group keeps abreast of customers’ repurchasing needs by performing such tasks as responding to requests for quotations (RFQ) and customer inquiries on pending RFQs. It also heads off rejections by defending quotes that might marginally deviate from customers’ specified needs and monitors customers’ future purchase requirements to help sales reps forecast demand. These support activities free reps to focus on higher-level sales efforts that can help secure repurchases.
Replacement occurs when customers with repurchase opportunities substitute a new vendor for an existing one. To successfully seize replacement opportunities, vendors need to be good at monitoring competitors’ sales activities at both the customer and the market levels. Vendors that keep close watch on rivals are best positioned to replace them when they slip up in product or service performance. Several companies we studied support their sales reps in this arena by assigning competitive intelligence groups within their market research function to track industry trends, competitors’ product and services failures, and impending product or technology changes that could benefit or harm the vendor.
Expansion occurs when a vendor identifies and fulfills customer needs that are not currently being serviced. Expansion opportunities demand that reps develop a more strategic view of both the customer’s business and their own.
A common way companies support sales in expansion efforts is by creating business development organizations. These cross-functional groups, which may include people from marketing, R&D, and finance, generate detailed expansion project proposals that reps can utilize to engage product users and managers in the customer company. Freed from much of the distracting proposal development work, reps can focus on building the trust in their own firm’s technical and project management skills that is essential to securing expansion accounts. This also allows reps to devote more energy to influencing customers’ specifications and budgets.
Innovation occurs when vendors engage with existing customers to identify needs they didn’t realize they had—and (often jointly) develop new solutions. These opportunities are almost always supported by senior executives in the customer company, are little influenced by mid-level managers there, and usually require a sizable budget.
Gaining access to customers’ top executives isn’t easy, but it is essential in developing innovation possibilities. Often, those executives expect to meet with their counterparts in the vendor firm to discuss long-term vision and strategy. One company we studied was a telecom vendor whose software could spot potentially catastrophic service problems before failures occurred. The vendor initially created a dedicated sales force to build relationships with mid-level executives in prospective accounts and used these to sell up. Though the team made progress, the sales message was slow to climb through the customers’ hierarchy, and it took 22 months to make the first major ($110 million) sale.
Then the sales team tried a new strategy: It identified the customers whose business was most vulnerable to a service failure and therefore could benefit most from the vendor’s software. The team then used existing mid-level contacts in the business to arrange a meeting between the CEOs of both firms. About 30 minutes into the meeting, the customer CEO asked his management team to evaluate the financial impact of a service failure and determine a timeline and costs for implementing the vendor’s solution. A few weeks later, the vendor made the sale; over time, it became a trusted ally in the customer’s business development strategy.
Vendors that manage innovation opportunities well, we’ve found, explicitly empower sales reps to serve as emissaries between senior management at their own companies and at customer firms, fostering the formation of strategic partnerships.
Companies that free their sales reps to manage opportunities, rather than simply sell products, will find not only that they can steal business from competitors but also that they can create new business their competitors hadn’t even conceived of.