How B2B Sales Disrespects Buyers
Hi, I'm Ed Marsh. Thanks for joining me today for this episode of Signals from the OP. Today, we're going to talk about what I believe is a really important strategic issue that many, many manufactures aren't even aware they have: a broken sales structure. What do I mean by that? Let's back up, let's understand the context.
I often discuss a disconnect that I think manufacturing companies have between the way they manage their backend and the front end. In other words, the back end of the business; manufacturing and operations, are very rigorously managed. There are processes in place; scientific approaches; Lean & six sigma. There's an instinctive, explicit and deliberate understanding of every aspect of the business and very careful management of it.
In contrast, the front end, the revenue growth side of the business is treated very differently. It's a much more casual approach, much less scientific. You say, "What's the sales going to be next year?" The answer is something like "Well maybe this year plus 5%." Asking "How are you going to get there?" is met with an answer like "Maybe you'll add another sales rep, do another trade show. We'll figure something out. The business grows that way."
There's a real dissonance between the two. There's an analogous dissonance between the way companies sell and the way their buyers want to buy. What does this come from? It's hardly news that the buying journey has changed, and the internet's changed it. So it used to be that there was asymmetrical information. Sellers had the information, buyers wanted the information, so buyers had to deal with sellers to get it. And buyers were kind of subject to the ideas that happened to hit them, either through associations, through interaction with people in business organizations, or maybe even through cold calls, where a sales person would come in and say "I see what you're doing. I've got a better way of doing it."
A buyer would kind of go along, getting a little bit better every day, gradually aware of some issues they had, things they'd like to improve, problems they had. When it became clear they needed to do something, they'd perhaps ask for some suggestions. They'd figure out what the right solution was. And then they'd go to some sort of a directory, maybe the yellow pages or that big wall full of green books that I'm sure we saw in many people's offices back in the day, and they'd look for some vendors. They'd summon three to five of them for meetings, and they would start saying, "This is what I want, this is a solution product or service. Tell me what you've got," and there'd be a discussion about features, benefits, and price.
That's the way people used to buy, and that's the way companies are set up to sell. They have a small PR department and a small marketing department that typically has responsibilities for trade shows. We call it marketing but really it's more like advertising, relying on bingo cards in direct mail and maybe some magazine ads. The big effort is in field sales and sales channel, and then some sort of a success function called customer service.
But buyers today have a very different approach. Buyers today will come up with an idea. They'll be sitting in traffic. They'll be driving home at the end of the day. They'll be coming out of a staff meeting and have a new directive. "You have to figure out how to blank blank blank." And so they'll begin to search. They'll turn to Google. They'll ask Google questions. And they'll begin a journey which is hardly linear. We kind of show it in a linear way, but it's all over the place; in fact, it starts very early sometimes. And then there's long breaks. And then they come back to it in a chaotic and non-linear process.
Buyers go and do this research. They educate themselves, and then eventually they reach the point where they're ready to talk to a sales rep. There are a few statistics that I love to cite to try to put this all into context.
- 3% - Only three percent of the potential buyers for any given product or service are in the market at any given time. Statistically, some people say there's maybe 20 or 30% that are open to it, if they're aware of it or think about it or happen to have the bandwidth to consider it. But the point is, if this is your total addressable market, only a small percentage is actively thinking about it, and a relatively small percentage is even open to it.
- 93% - 93% of B2B purchases originate with an internet search.
- 70% - Buyers are 70% of the way through their buying journey before they wanna talk to a sales rep. Now, some people say 67%, some say 90%. But nobody says it's like it used to be. Buyers have done most of the work. They've defined their problem. They've understood their issue. They've got ideas on how they can fix it. They understand several different solutions. They've identified some potential vendors for each possible solution. And now they're ready to talk to a sales rep.
- 74% - 74% of the time, buyers select a vendor that first provided value as they were trying to understand their problem and quantify a solution. 74% of the time, buyers select a vendor that first provided value. Not the cheapest, not the most features, not the first to respond. Those that provided the first value. So the point is that during this buying journey, there's an extensive self service portion of the buying. This isn't news to anybody. Obviously there's research. There's internet research. They're checking reviews. They're reading documents. They're downloading documents or watching videos. They're trying to understand how people have solved problems like theirs, what the kinds of solutions are that they could avail themselves of, and what sample vendors, or what the best vendors might be for each of those solutions.
What that means though, is that we've got this disconnect that I'm talking about. Companies are structured with this traditional sales model. Not only are they structured this way, but obviously the organizational headcount and resources and perception of authority in the organizational center all go along with that. So we see that buyers don't wanna talk to a sales rep, but companies are determined that they need to.
That creates a conflict. It creates a disconnect. It creates salesforces creating lots of quotes that never get opened or read, or never get followed up on. I hear more and more from companies about how they're doing more quotes than they've ever done, but they're not even hearing back. They're not losing orders, there's just no decisions. The status quo is winning business. That's because the sales people have accountability; they're being measured by how many calls and meetings and quotes they're doing. People aren't interested in quotes.
Then we have a situation where the buyers wanna have a short productive interaction with sales people, which traditionally ends up being field sales people, or sales channel in the industrial manufacturing space. But there's this period here when they're doing research. When they're not saying "We won't interact with a company," they're saying they don't want a field sales rep pestering them "How many you wanna order? Do you have aproved budget?" et cetera. They want somebody that's gonna help them understand their problem and fix it.
A good way to understand this is if you think about when you go to a website, you submit a chat request for a company. Do you submit the chat request saying "I've got a technical service question, only technical service should answer this," or "I've got a question about a product, only sales should answer this," or "I want a brochure, only marketing should answer this?" No. Of course not. You go to the company expecting that you're gonna have some sort of a continuum of relationship with them, from the time you're thinking about it, asking about it, the time you're trying to buy it, and later on when you're trying to use it, or maybe even thinking about buying more or reordering. You've got a relationship with the company, not with some sort of a silo department.
So we end up with this clear mismatch between the way companies staff their revenue growth, and the way buyers wanna buy. And what's interesting is if you talk to many companies that staff this way, they'll tell you that they wanna buy in the different way. So it's not just buyers from a different industry that have a different circumstance or context, these are the same companies. Oddly they persist in staffing and selling in a way which conflicts with the way they now want to buy themselves.
So what does this mean? This means, obviously, that revenue growth becomes a CEO responsibility, and not just in the traditional buck stops here kind of way, but in a very practical way. We're talking about implications to budgets, to headcount, to organizational clout. We've got a VP of sales and a Director of Marketing and neither of them is going to be in charge of their fiefdom going forward. Instead we'll likely have a Chief Revenue Officer (CRO) that develops a staff with a continuum of skills (of course PR skills are different than customer service and tech support skills. But we need people that are blended, that have responsibility, that can fill in when somebody's out, that can answer the chat regardless of what department they're in.)
So that means that the staffing has to be done differently, but more importantly, there's tremendous change management and philosophical work that has to be done. We're not talking just about and admin question like having a sales person spend a half an hour sitting with marketing to work on a blog post. We're talking about changing the way we approach and view and deal with customers.
That's why I put this in the context of a big strategic challenge that many manufacturers haven't quite fully wrapped their minds around, and haven't begun to work on. I think it's a big task for CEOs, and I think it's a task that boards need to be aware of and need to be thinking about, need to be asking about. When they look at revenue results, I think they need to ask what's the plan not only to get the number next time, but how are you structuring to do it? How are you addressing the fact that buyers are changing the way they buy? (Learn more about the questions boards should be asking in this guide.)
If you enjoy this kind of a provocative look at some of these big strategic issues that challenge manufacturers today, I'd welcome you to subscribe to this series of videos. You can do that at SignalsFromTheOP.com, SignalsFromTheOP.com.
I'm Ed Marsh. Thanks very much for joining me. It's been a pleasure. See you next time.