b2b sales coverage model

THE INTEGRATION OF DIRECT

MARKETING AND FIELD SALES

TO FORM A NEW B2B SALES

COVERAGE MODEL

J o h n M . C o e

A B S T R A C TToday's sales organization operates in a much different

environment than that of the past. Sales and marketing must work

together for the organization to operate at peak efFiciency, It is only

with such integration that sales can focus on the customers and

channels most likely to provide the revenue necessary to reach

their goals. The 21st century sales coverage model is built upon a

multistepped process v hich integrates the toots and techniques of

direct marketing with measurements, quantifiable business benefits,

and capabilities that help salespeople remain fixed to an optimal set

of goals. The process includes (a) benchmarking the existing sales

and marketing process, (b) establishing gaps between the

benchmarks and company goals, (c) developing required capabilities

© 2004 Wiley Periodicals, Inc. and

Direct Marketing Educational Foundation, Inc.

JOURNAL OF INTERACTIVE MARKETING

VOLUME 18 / NUMBER 2 / SPRING 2004

Published online in Wiley InterScience (www.interscience.wlley.com).

DOI: IO.I002/dir.20005

JOHN M. COE is president andfounder of the Sales & MarketingInstitute In Scottsdale, AZ. He haslogged 15 years in sales and salesmanagennent and 20 years in B2Bdirect and database marketing, andis the author of The Fundamentalsof Business-to-BusJness Safes tfiMarketing, published by McGraw-Hill in 2003; e-mail:[email protected]

N T E G R A T I O N O F D I R E C T H A R K E T I N G A N D F I E L D S A L E S

to close the gaps, (d) engineering the new sales

coverage model, and (e) executing, measuring,

and adjusting the model. While seeming to be

deceptively simple, this framework realigns the

sales organization to make best use of the

company's full nssources and capabilities.

THE GOOD OLD B2B DAYS

For decades, sales and marketing groups havecoexisted as complementary, but separate, silosin most B2B companies. Before the 1990s, themarketing communications department wasprimarily responsible for advertising, sales col-lateral, public relations, and trade shows. If anyof these activities resulted in inquiries or leads,they were passed directly to sales or the distrib-utor network. The sales group, in tum, v asresponsible for following up on these leads,aloug with everything else related to selling theproduct or service to prospects and customersin their territory. They provided marketingcommunications IitUe, if any, feedback on the"leads" that were sent to them.

In the 1990s, we all thought that progress wasbeing achieved as many companies began tolaunch direct marketing campaigns, deploy out-bound telemarketing to qualily the inquiriesmore aggressively, and build marketing data-bases. In addition, sales force automation (SFA)contact management systems gave way to cus-tomer relationship management (CRM) soft-ware, as many companies invested heavily insales and marketing technology for the firsttime. So we thought that real progress was oc-curring since sales revenue grew and grew. Boy.were we wrong! While some progress in produc-tivity was being made, what actually happenedwas the boom times and ever increasing salesrevenue of the 1990s disguised the lack of realprogress in improving sales and marketing effi-ciencies and overall producti\ity. In essence, therevenue results in the 1990s continued to coverover the productivity cracks in the B2B sales andmarketing processes.

TODAY'S REALITY .

The 1990 boom times are over, and so are thefalse assumptions of how much improvementactually occurred in the sales and marketingfunctions. Companies must deal with the hardfacts of today's B2B environment.

For many companies, that means that salesrevenue is not growing, btit sales and marketingcosts are. The net result is that the percent ofrevenue devoted to sales and marketing costs isincreasing, often exceeding 20 to 25% or moreof total revenue. Generally, companies have re-sponded by cutting the marketing budget andeliminating sales head count, thus further lim-iting the capacity to generate topv-line growth.

Sales call rates, as measured by the number ofsales calls per day, have dropped significantlyover the last 10 years. Sales 6f Marketing Manage-ment reported several years ago that ihv. averagenumber of calls per day had fallen from the oldstandard of four to three—a 25% loss in salesforce productivity. This decline did not occurovernight but rather was gradually happeniugthroughout the 1990s. Many estimates nowplace this average even lower, largely due to theincreasing resistance of buyers to see salespeo-ple. In fact, many companies are well below theaverage of three calls per day if their salespeo-ple cover a large geographic territoiy. In thesesituations, call rates of one or two per day arenot unusual.

The cost of a sales call has continued to in-crease faster than inflation and price increasescan recoup. Surprisingly, most companies donot know what their sales call cost is, as salesmanagers are quite nervous to have it calculatedand broadcast internally. There is a real fearthat, if known, it will become the focus of man-agement decree that it should be lowered. Themethods to do so will surely not be pleasant forsales management. In addition, there is muchdebate as to bow to calculate the sales call cost.

McGraw-Hill annually reported the cost of asales call, but discontinued the practice in thelate 1980s. In 1987, the last year of the sur\'ey,the average sales call cost was $254. Most recentsurveys have placed the average now at belween$350 to $500. Wliile the average is a good num-

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ber to know, the key issue for B2B companies is"What is our sales call cost?"

Here is a sample formula for calculating thecost of a sales call. It is reflective of the meth-odology that McGraw-Hill used, and provides afair comparison to that discontinued survey.

• Number of calls per year

52 weeks/year

— 2 weeks for holidays

— 3 weeks for vacation/time off/sick time

' — 2 weeks for meetings, trade shows, etc.

' 45 selling weeks

5 days/week

— 1 day for calls/paperwork

4 days/week selling titne

2-3 face-to-face calls per day on average

45 weeks X 4 days X 2-3 calls per day= 360 to 540 calls per year

• Yearly cost of a salesperson

' $75K average compensation cost (salary,commission, bonus, etc.)

+ $15K in benefits at 20% of salary

+ $45K in travel cost @ $lK/week average+$40K allocated for sales management

cost @ 20% of $200K

$175K total cost of field salesperson

• Cost per call as a function of number ofcalls

$175K divided by 540 calls/year = $324/sales call

$175K divided by 360 calls/year = $486/sales call

Average cost per call using these totals is$405

Your own results may be different when yotiapply this fortnula. Recently, a dixision of Du-Pont reported sales call costs of $3,000. Severalyears ago IBM's cost per sales call was $1,200. Aspointed out by these two examples, the actual

cost per call in specific situations can far exceedthe average. The key isstte is that the ntimber ofcalls per year is a finite or limited ntimber.There is little a company can do to increase thenumber of calls per year, assuming that the salesgroup has been organized and geographicallylocated in the most efficient manner. There-fore, it would seem that the overriding goal forsales management is to make each one of thesesales calls more productive.

The buying process has become more com-plex with more decision makers and influencersinvolved. In the "old" days, purchasing deci-sions by compatiies were controlled by a rela-tively few nuniber of people. Today, not onlyhas the increase in availability of information(pritnarily from the Internet) changed the buy-ing process hut there are many more deci.sioninfluoncers involved as weil. In large compa-nies, these people at times do not even reside inthe same city, which further complicates thesales challenge and coverage model required tocommunicate and sell all lhe key people. There-fore, the nuniber of steps in the buying processand the people involved has increased. Back in1987. McGraw-Hill also reported the nuniber ofcalLs to close a complex sale was 5.4. Today,while no definitive survey exists, the generalfeeling among sales executives surveyed is thatthis number has increa.sed to 8 to 10 times dueto this more complex and dissipated buyingprocess. The problem is that many sales organi-zations have tioi properly factored in this newand lengthier buying process to their sales cov-erage model. They are continuing to deployface-to-face salespeople to perform most, it notall, of the selling and senicing functions.

Marketing efficiencies also have decreased,evidenced by declining response rates for directmail, e-mail, and advertising. Direct mailingcampaigns are lucky to see the standard 1 to 3%response rates unless high impact or 3-dimen-sional mailings are sent. E-niailing programsand the response rates, even to opt-in lists, havedramatically declined in the last two years pri-marily due to the glut of email in everyone's boxeach morning and, of course, spam. On thetelemarketing side, connect rates also have

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dropped as few people atiswer their phone, nowrelying on voice mail to manage their time.Biisine.ss people are just too busy today to re-spond to or even hear most marketing mes-sages. They have taken on more duties as stafflevels have continued to be cut and as the sheervolume of marketing messages has grown dra-matically.

Therefore, the cost of acquiring, growing,and retaining customers has contintied to in-crease in the last several years. Wlien these costincreases are compared to the lack of ability ofcompanies to increase prices in the last severalyears, it is no wonder that overall profitabilityhas suffered. We all are painfitlly aware of thistrend during the last three years.

Tbese trends and pressures will not disappearand, in fact, are just a continuation of what hasbeen occurring all along—it is just that we didnot notice tliis gradual change. The BIG ques-tion is what to do to stem the tide and improvesales and marketing productivity? In essence,how can we rethink how the marketing andsales organization goes to market to achieve thedicbotomotts goals of "sell more" and "spendless?"

THE LAST GREAT FRONTIER FORPRODUCTIVITY IMPROVEMENTS

Wbile some productivity gains in sales and mar-keting were realized tbrotighout the 1990s, theywere largely incremental. Yes, assigning smallaccounts to telecoverage teams, substituting e-tnail for direct tnail, and setting stricter leadqualification criteria before setiding a salesper-son produced some gains. But in large measure,most companies are still selling using the samestrategies and tactics. That means marketing isresponsible for demand generation (inquiriesand leads), and sales is responsible for every-thing else (conversion, tip and cross-sell, reten-tion, and loyalty). No real integration and pro-ductivity improvements have been achievedacross the customer life cycle of acquisition,growth, and re ten tion/loyalty.

A NEW SALES COVERAGE MODEL ISNEEDEDFonvard-tbinking companies bave realized thatdramatic changes are required in their sales andmarketing organizational structure and aremoving toward a "new sales coverage model." Inthis new model, instead of organizing the salesand marketing functiotis separately, companiesare fully integrating them to achieve a muchmore ptoductive and accountable result. Theprimary media for tbis new sales coveragemodel are tbe four targetable contact media ofe-mail, mail, telephone, and face-to-face. Thesefour media are then deployed across tbe cus-tomer life-cycle phases of acquisition, growth,and retention in a blended model. Advertisingremains important, but it is "air-cover," as itdoes not talk to a specific individtial witbin atargeted company. Clearly, the recognition andpositive view of the company's brand, prodtict,or service bas a valtte in the mat kef place. But,with all the clutter it has to fight through, bowmuch of tbe limited marketing commtinicationbudget sbould be spent on "air-cover?" The newsales coverage model is much more diiect thanadvertising in trade publications. Also not beingignored are the other traditional marketingcommunication activities such as trade showsand public relations. However, these tjictics aremostly "surround sound" in tbe new sales cov-erage model, as these types of communicationsagain cannot reach specific individuals withintargeted companies with relevatu me.ssages atidoffers. Only the four primary media of e-mail,mail, telephone, and face-to-face can deliver arelevant message and offer to a specific individ-ual.

DIRECT MARKETING WILL BECOME PARTOF SALES!This is a strong statement to be sure, btit tomeet the demands of revenue growth and prof-itability, more activities need to be meastired bytheir impacts on sales. Marketing departmentshave largely been given a free pass iu account-ability for sales results, but those days are fastcoming to a close. Therefore, the focus today


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for most marketing and sales activities shouldbe to measurably acqtiire, grow, and retain cus-tomers. Marketing comtnunications will increas-ingly sbare tliese goals witb tbe sales group.Thus, for many companies, marketing mightbecome part of sales rather than standing off tothe side oi' the sales group. This is particularlytrue for small- to medium-size B2B companies.But even in large companies, a rethinking of therole of marketing comnuinications is requitedto achieve substantial marketing and sales productivity gains. There is no question that largefirms, with sales force head counts nutiiberingin the htmdreds if not thousands, cannot con-tinue to afford tbe costs associated with fieldingsucb a large number of salespeople whose effi-ciencies are fast declining and whose costs areincreasing.

DIRECT MARKETERS NOW HAVE A GREATOPPORTUNITY IN B2BThe new sales coverage tnodel relies on thethree previously mentioned media tbat directmarketers have traditionally used in B2B. Thedisconnect ditect marketer's had Irom tbe salesgroup was that the communication objectiveswere centered on generating responses for in-quiries and leads and not generating sales. Un-der the new sales coverage model, direct mar-keting will begin to share the responsibility fornot only generating inquiries and leads but alsocommunications to customers for sales conver-sion, growtb, and retention as well. In otherwords, marketing communications will begintruly sharing responsibility for sales revenueand will be measured accordingly on results andnot activities,

CLOSING THE GAP—FIVE CRITICAL STEPSTbere is an obvious gap between where B2Bfirms are today in their marketing communica-tions capability and where they need to go. Thatis t>bviotts, but tbe critical issue is how to getthere? This will be nt) easy task. There are manyentrenched processes and traditional views ofhow sales are generated within al! companies.

They need to be squarely addressed or all ef-forts to develop a new selling model will fail.The following five-step approacb will uot onlyclose the gap but also identify specific areas forimprovement required to achieve substantialgains in prodttctivity. This five-step process iscritical because tliere are so many varied B2Bbusiness models and marketing situations thatno one solution will fit this wide variety. Fromcommodities (office supplies) to customized(compounded plastics) to engineered products(machine tools) or professional services (con-sulting), ihe vaiiety is extreme, and thereforeany new sales coverage model must be highlycustomized to each company's unique marketsituation and business model.

Consider the following matrix (Figtue 1),which describes many different types of busi-ness selling situations. This illustrates the needto apply this five-step approach so that the re-quired customization of tbe new sales coveragemodel will be obtained. Then and only then willsignificant improvements be achieved in salesand marketing productivit)-. Long gone are ihedays of beating up tbe salesperson to make "onemore call per day."

BENCHMARK THE EXISTING SALES ANDMARKETING PROCESSAs previously mentioned, most marketitig com-munication groups do not have a quantifiedmeastu'e ou tbeir activity. On the other hand,sales organizations live with quantification on adaily basis. To help bridge the gap, the follow-ing activities should be benchmarked. Not allmeiisurements will be able to be qtiaiuified, asrecords may not be well kept. This tibviouslypoints to one area for improvement—mea-sure— or in the words of Meg Whitman of e-Bav, "If we can't measure it, we don't do it!"

COST OF INQUIRIESThe cost of inquiries is simply the division of tbenumber oi inquiries received into the cost ofthe campaign. This will vary by media, and it isimportant to note tbese different costs by me-


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i VALUE Of= SALE

HIGHdesigned orengineered

(e.g., machine tools orconsulting)

MEDIUM customized Co specifications(e.g., compounded plastics)

LOW commodities{e.g., office supplies)

ORDER/SHIP

YEARLYCONTRACT

STATEGICRELATIONSHIP

NATURE OF SALES REUTIONSHIP WITH BUYER

F I G U R E I

Type of Selling Situation

dia, a.s it is one way to compare what is beingobtained from each type of media. On average,B2B inquiries cost between $25 to $150 to gen-erate. The average cost is around

CONVERSION RATE OF INQUIRIES TOQUALIFIED LEADSMost firms are now qualifying inquiries intoleads before passing them to the sales force ordistributors for follow-up. The number of actualleads qualified by media source and offer willthen providesomemeasureof the quality of theinquiries received. This, combined with cost-per-inquiry, will .shed new light on demand gen-eration campaigns. Depending on tlie offer, tbeaverage conversion rate in B2B across a widearray of categories from inquiries to qualifiedleads averages 10%. That means that one of 10inquiries are interested enough today to beleads and sent to sales. There may well be an-other 10 to 20% that will become leads givenenough time and continual communication,

and these should be part of a lead developmentprogram. This is highliglited by past studiesfrom both Penton Publishing and Cahners(now Reed Elsevier), where it has been docu-mented that between 20 to 50% of all inquiriesreceived from print advertising media will buythe product or service they inquire about withinan 18- to 24-month period. Ask any marketingcommimication group how many inquiries re-sult in a sale, and the best you will hear is only1-5%. The problem is that lead qualificationwas either not done properly or rushed, and theinquiry was dropped. This graph (Figure 2)illustrates the lost opportunity. To close thisgap, a lead development program needs to beinstituted to keep the inquiries alive until theyare ready to become a "lead,"

COST OF A QUALIFIED LEADThe logical next benchmark is the cost of thequalified lead. If only one of 10 inquiries be-


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PBttMTOF

TO LEADS/SALES

50%

45%

40%

35%

30%

25%

20%

15%

10%

5%

The total number of Inquiriesthat buy the product/service

wrmotJT a lead developmentprogram

Upon 3 Mo. 6 Mo. 9Mo. 12 Mo. 15 Mo. 18 Mo. 21 Mo. 24 Mo.Inquiry

NUMBER OF MONTHS BETWEEN INQUIRY AND SALE

F I G U R E 2

Percent of Inquiries Converted to Leads and Purchase vs. Time

comes a lead and the average cost is $80, thenthe cost of a qualified lead is $800 or more.Note that no additional cost for qualif -ing thelead has been added at this point. Therefore, itis not unusual to have qualified lead cost well inexcess of $1,000 when all lead qualificationcosts are added. The interesting obsen'ation isthat most sales organizations have no idea ofhow much their leads cost, and therefore treatthem accordingly. Once the sales force is awareof the lead cost, considerably more attentionwill be paid to them and improved feedback willresult.

Recently, a B2B marketing service firm hadswitched to outbound cold telemarketing to cre-ate a lead and an appointment for their salesforce. There were three market segments, eachhaving their own unique characteristics abouthow difficult is was to find the proper decisionmaker and set an appointment. The total costper appointment ranged from $1,220 to $2,450between each of the three segments. The salesgroup did not make approximately 35% ofthese appointments until they were told justhow much this was costing the company per

appointment. Now, all appointments are pickedup by sales and the sales meetings are held.

NUMBER OF LEADS REQUIRED FOR ONESALE OR LEAD CONVERSION RATEOn average, for every 10 leads, one sale will l)emade in the near term. This 10% conversion fac-tor is surprisingly consistent across many indus-tries. Therefore, if a lead costs $800+, tlien thecost of the sale is at least $8,000. WTien sales callcosts are added to tliis calculation, the cost of asale far exceeds $10,000 in most situations. Tliishigh cost will shock a number of people in anyorganization and will frequently be the first focusfor tlie new sales coverage model to attack. In fact,this single calculation will show just how muchmoney is being spent for customeracquisition ef-forts, and in almost all B2B situations, will be thefirst time anyone has benchmarked this cost.

AVERAGE NUMBER OF SALES CALLS PERDAY/WEEK/MONTHWhile Sales &" Marketing Management Magazinereported an average of three calls per day, this


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will vary for each company based on the size ofterritory and density of prospects and custom-ers. Unlike the other calculations, the numberof sales calls should be an easy (ignre to deter-mine from call reports. One definition is re-quired here, and that is a call is a personal visit(not a telephone conversation) to a prospectand customer no matter how many people areseen at the accoimt. Several years ago. RoadwayExpress reported that their sales people aver-aged 12 calls per day, but when pressed theyadmitted that they counted one call for eachperson seen at the account or prospect—seefour people and four calls were recorded. Thisis not the widely accepted definition of a salescall.

TYPE OF SALES CALLS MADE BYPERCENTAGE OF NUMBER OF CALLSThe type of call made is a potentially very re-vealing benchmark. For those who have notbeen in sales, the fact that a call is made doesnot tnily define the value of the call. Generi-cally, there are eight types of calls made bysale.speople. They are: '

• Cold calling—^yes, it's still done in someorganizations

• Lead qualification—determining if theHrm and/or individual qualifies

• Lead development—keeping the sales op-portunity alive

• Proposal or closing—going for the sale• Up-sell or cross-sell — finding other oppor-

timities within the customer• Relationship building—creating more in-

depth relationships with key people• Roudne servicing—sometimes referred to

as "go see" calls• Problem resolution—handling some type

of problem

The attempt to determine the split or per-centage of these types of calls made will causethe sales force to become very defensive. To putit bluntly, this is the hot button, so be veiycareful. On the otlier hand, this is the key

$ VALUE OF SALE

HIGH

MEDIUM

LOW

$0coMHoorrvPRODUCT/SERVICE

$500CUSTOMIZEDPRODUCT/SeRVICE

$1,000DESIGNED

PRODUCT/5CRVICE

TYPE OF SALE

F I G U R E 3

The Impact of the Type and Value of the Sale on theSales Call Cost

benchmark for the new sales coverage model, asthe real goal is to insure the salespeople aremaking the right kind of calls and not just a lotof calls. Marketing's new role is to help them byrelieving the calls they either do not want tomake or should not be making. That, in es-sence, is one of the key deliverables and pro-ductivity improvements of tlie new sales cover-age model.

COST OF A SALES CALL

While the calculation of the cost of a sales calland average call costs has been previously de-tailed, here is a graph (Figure 3) that demon-strates how the call cost increases with the typeand the value of sale. Clearly, the more involvedthe sale and ihe more dollars that are at stake,the higher the sales-call cost becomes.

NUMBER OF CALLS REQUIRED TO CLOSEA SALE

This is another very important benchmark andone that also is not well documented in mostcompanies. Simply, it is the number of face-to-face calls that are required to take an accountfrom the prospect stage to a buying customer.Clearly, it will vary by each customer situation.

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but most sales organizations will be able lo pro-vide an average number of calls it takes to sell acustomer, if asked. As mentioned, most salesmanageni feel thai tliis nuniber is between 8-10 today for a complex sale.

COST OF A SALEThis intasiirenient was previously detailed, andJRsi to clarify, it i,s the total marketing and ,salcscost to make one sale. It may include otlierfunctions (e.g., technical service or engineer-ing) and should be a realistic calculation as tohow much money is really spent to acquire onecustomer. In most al) cases, the cost will bemuch larger than thought and will quickly be-come a f*Kus for productivity improvements.

WIN RATE OF QUOTES/PROPOSALS TOSALESTbe average conversion rate of how many"wins" of quotes or proposals that it takes toclose a sale is another key benchmark. Nor-mally, win rate,s are between 33 and 50%. Thisrate depends greatly on the product or servicesold, as there will be a great \'ariance betweenoffice supplies and machine tools. Wiiatever itis, it needs to be benchmarked, as it is a keymeasure of sales efiectiveness.

CUSTOMER DECAY RATEIn Fredrick Reichheld's book. 77? Loyalty Effect,he documents that, on average, 10% of cuslom-ci^ are lost each year for one reason or theother. Most companies do not know this per-centage and the conesponding dollar loss. Pastsales rcc()r<ls will l>e key to this calculation. Asan exiunplf. Faii7tale Brownies in Phoenix. AZ.recently calculated this decay rate for their busi-ness gift customei's and foimd. to their sniprise,that it was 21%. it thus became the number-oneobjective of the new salesperson: Keep the cur-rent customers versus finding new ones.

PERCENT OF REVENUE DEVOTED TOSALES AND MARKETINGMost of the preceding benchmarks and mea-surements cascade to this calculation. Simply,what is the percentage of revenue that is de-voted to sales and marketing expense? At IBMin lhe mid-1990s, (he sales and general admin-istration expense was in the low 30% range. Asa result, it f)ecame one of the driving objectiveswithin IBM to lower this percentage. Today, it isin ihc !.5 to 18% range, and is one big reasonIBM ha.s climbed back to profitability. IBM sig-nificantly reduced the sales force while addingseveral thousand direct marketei*s to achievetliis producti\ity improvement. In fact, they areone of tlie first companies to move toward thenew sales coverage model. The nel result is tbatIBM wnmg out at least 15% in costs. In roundfigines, they are an 80-bilIion-doiIar company,and 15% times this equals 12 billion dollars.And in the now famous words of Everett Dirk-sen, former Senator from Illinois, "A billionhere and a billion there and soon you havesome real money." Of course, he was talkingabout the Fedeml budget!

While tliere may be other benchmarks andnu'asnrenu'ius appropriate to a specific comjia-ny's market situation, these will be a great start,as few if any companies know these basic mea-suienienLs of sales and marketing productivity.

ESTABLISH KEY GAPS BETWEEN THEBENCHMARKS AND COMPANY GOALSOnce tlie basic sales and marketing benchmarksare established, tbe sales and markeiing areasthat need improvement will quickly become ap-parent. As mentioned, most companies do notevaluate these key metrics; when tbey do, sev-eral will jump out as obvious areas for attention.In llir end. the gaps will help set lhe prioriliesand In-nchmarks for developing the new salescoverage model.

Several years ago, a medical equiptnent com-pany selling such items as defibrillators mea-sured several of these areas. Ihe one thatquickly jumped out was that the salespeoplewere making 11 different types of calls. When

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asked, both the salespeople and managementidentified that only four of these call types werewhat the staff should be concentrating on. Theproblem was that no other resource was avail-able to assist the territoiy salespeople, so theywere forced to make all these calls in theirgeographical territories. As an example, onetype of call was checking on and/or deliveringbatteries to EMS units that had purchased theirdefibrillators. This insured that the defibrilla-tors remained in spec; if this was not done, asignificant liability could occur. Clearly, this isan important activity for the company, but notone that a field salesperson should be responsi-ble for. Upon developing and implementingelements of the new sales coverage model, salesrevenue jumped by 17% in the following sixmonths. The single most significant change wasto team an outside salesperson with an insidestipport person. Then they teamed up to con-tact and therefore cover the territory. In thissituation, the inside sales person supported twooutside sales reps. They were then relieved oflow-priority calls by working in tandem, whichallowed them to call on more productive ac-counts where sales revenue was available. Theyjust had not been able to devote the calls to newcustomers as they were tying themselves downwith low-priority sales calls.

DEVELOP REQUIRED CAPABILITIES TOCLOSE THE GAPS AND EDUCATEEVERYONETo close the gaps, improved or new capabilitieswill be needed. As an example, many B2B com-panies have used telemarketing, bul most havedone so sparingly. Under tlie new sales coveragemodel, telemarketing will assume a more impor-tant role in such applications as lead qualification,lead development, telesales, and sales coverage.Building the outside and/or inside telemarketingresources will quickly become a top priority.

Other capabiHties also will be required. Anobvious one is building a marketing databasethat is not only descriptive of the market butaccurate as well. Here lies a unique B2B prob-lem—the accuracy of the information on cus-

tomers and prospects is poor. Recent studies bythe Sales & Marketing Institute documentedthat contact information on individuals has a70.8% decay rate on a yearly basis. In otberwords, one or more of tbe data elements on anindividual's busine.ss card will change in a 12-month period. Here are the sunnnaiy results oftbis research on change rate in personal contactinformation.

65.8% title or job function change42.9% phone number change41.9% address change37.3% e-mail address change34.2% company name change—new com-pany name or changed jobs3.8% name cbange (marriage or divorce)

Changes in fax numbers were not totaled asthis is typically shared between individuals andtherefore ceases to be a personal-contact pieceof data. As can be seen, it is not unusual forcompanies' own customer data to be badly in-accurate, as in the past the salespeople wereexpected to know the current information.Therefore, a new capability or senice will berequired to keep the contact information accu-rate, as it will be increasingly used to drive mar-keting communications to .specific individualsin concert with sales calls.

Finally, education and training will be re-quired to introduce these new sales and market-ing methods to all, and in particular to the salesgroup. Unless they are on board witli thechanges, any initiative will fail.

ENGINEER THE NEW SALES COVERAGEMODELThe new sales coverage model blends the fourprimary contact media across the customer lifecycle. To effectively determine tbe contact strat-egy, a profiling, titrgeting, and segmentationprocess must be completed to focus tbe effortson the best prospect and customer groups.Once this has been acccmiplished, the typicalbuying process of each key market segmentshould be established. Then the sales process

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100%

90%

80%

70%

S 60%OlI 50%

1 40%

30%

20%

10%

0%

Sales Cycle Phases

^ 1 ^ 1

Hi——"——

L J

^M -60%

30%

-

^

- — 60%

90%

- -

• Sales, B Direct Marketing

Acquisition Growth Loyalty Reactivation

F I G U R E 4

Typical Blend of Direct Marketing and Field Sates across the Cuscomer Life Cycle

should be matched to the buying process—a bigchange for most companies. This effort willthen call out when each of the four primarycontact media should be deployed.

The goal is to direct the limited and expen-sive face-to-face sales calls toward more "goldenmoments" and away from calls that could behandled by other contact strategies. The sales-people will initially resist this type of directionand loss of control over their activities. But oncethey realize that they will be relieved of low-productivity calls and given more time for keysales calls, their resistance will fade quickly aslong as they are kept informed of other cus-tomer contacts. Overall, a game plan on howmarketing and sales will share the responsibilityof acquiring, growing, and retaining customerswill logically emerge. Here is an example as towhat this might look like (Figure 4).

Customer Acquisition (60% directmarketings 40% sales)

I h e traditional role of direct marketing has beento generate inquiries, qualify leads, and pass themto sales for conversion. There is not much changehere, assuming tliat a lead qualification and de-velopment program is in place for marketing toexecute. The salesperson clearly should be in-volved in converting the sale and developing the

initial customer relationship. As mentioned, inlate 1987, McGraw-Hill reported that it took anaverage of 5.4 sales calls to close a sale. Most B2Bsales managei^s will contend tliat tliis nimiber hasincreased in the 17 interceding yeai-s, and is be-tween seven or eight today. The question is, "Howmany of these SiUes calls could be accomplished bydirect marketing techniques versus face-to-facesales calls?"

Most companies try to eliminate at least two ortliree calls in the customer-acquisition phase. Theactivity of lead qualification and development re-sults in marketing's handing over to salespeopleoppoituniries that are far more qualified andready to engage in a real purchase tiian in the olddays. These calls are obviously the ones early intJie acquisition effort, as it is unproductive for.salespeople to not only make cold calls but alsoqualify the iuquiries as well. This is an immediateimprovement in sales productivity. Not only dosalespeople have to make fewer calls to close a salebut tiiey also have freed Uieir time hom sales callsthat were devoted to the early customer-acquisi-tion calls for more productive sales calls on qual-ified leads or customers. Don't forget; salespeoplehave a finite number of sales calls they can makeeach year, and so a reduction of one call translatesto one additional call that hopefully will be moreproductive.

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Customer Growth (30% directmarketing, 70% sates)

This phase of ihe cusiomer life qcle is wherethe sales pei"son plays the most important role.Finding opportunities to up or cross-sell andsecure the customer relationship is best placedin the hands of the sales staff. Al the same time.there also is a valid role for direct marketing toassume. The sales group should not call onevery customer. In some cases, an inside salestelemarketing effort can team with outside salesto share tlie contact responsibility. This teamingcan be very cost effective while actually increas-ing the contact frequency for the customer. Inaddition, lhe salesperson should have identifiedother decision hilltiencers who also may not beworth the direct sales effort bul do need toreceive relevant messages and offers from thecompany. Direct mail or e-mail can play animportant role in communicating in a cost-effi-cient manner to the entire "decision tree" in thecustomer growth and retention phase.

Customer Loyalty (60 % directmarketing, 40% sales)

Salespeople can easily take the customer forgranted, particularly one that presents no newsales opportunities in the future. In fact, in hisbook Vpside-Doivn Marketing, George Walther(1994) reported tliat 68% of "past customers"said that the reason they stopped buying fromtlie supplier was that they did nol feel "loved"anymore. This response is a direct result ofsalespeople not keeping in contact. They prob-ably did not think they needed to or felt it wasa waste of their time. So, without any olher formof marketing communications, the customerfelt neglected and slopped buying. This re-search was, of course, done during the time thatsalespeople did not want or even allow market-ing to communicate directly to their customers.

Failing to keep in contact is a big mistake asstudies have indicated ihat, on average, 10% ofthe customer base decays each year—certainly adramatic loss for any company. S<,) the questionhas to be asked, "How many of the ciLstoniei-swould have 'decayed' if better contact were main-tained?" That is why there is such a large role for

direct marketing in the customer loyalty phase;highly targeted and relevant communications cankeep up the conlact. In addition, as the life cycleof a ctistomer mattnes to the loralt)' pluwe, manynew people and functions can be involved in theconsumption of the product or semce. Tlieir userexperience is biised on the current product orsemce, and at times, this experience becomes"tired" or "old hat" or new iLsei s anive without theprior knowledge as to why tliis particular productor semce was initially purchased.

Without an ongoing communication programfrom the vendor to all the decision makei:s andinfluencers, these iLsers can frequently I>egin tolook lor a newer and improved vei"sion. This canlead directly to a lost customei, aud tiie swd fact isthat without ongoing contact, the customer is lostl efore il is even known thai they arc looking for areplacement. When a long-lime customer "fires"you, it is a shockiug experience and hard to ex-plain to management.

Customer Reactivation (90 % directmarketings 10% sales)

Not many companies focus on past customerseven though, ovei- time, the\' represent a largerand larger group. The salespeople, if new in theterritory, may not even know that these compa-nies have bought in tlie past. We all knovv that itis easier to sell more products to current or pastcustomers than to sell to new customers. Thesame can be said for past customers—it is easierto sell to past customers than to new ones. Whatit takes is information on tlu* past customer,verification of the appropriate contacts sincemany have changed, and then a targeted cam-paign to reactivate these customers. Ihere ishigh piobability that pasl customers know yourcompany and product, so the role a salespersonassimies is minimized. A strong telemarketingprogram will open up sales opportunities withmany lapsed customers.

Overall, a game plan on how marketing andsales will share responsibility of acquiring, grow-ing, retaining, and even recapturing ctistomerswill logically emerge to form the sales coveragemodel for each company and market situation.


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EXECUTE. MEASURE, AND ADJUSTNow comes the hard part: execution. Deployinga new sales coverage model will not be easy orpainless. Resistance will come from many peo-ple tied to the previous methods that, of course,are not working anymore. It will take a veiy firmresolve of senior management and senior salesand markeiing executives to execute the plan.At times, a product or market segment could heused as a heta test, but that means it will takelonger to achieve the improved results and in-creased productivity. Many companies cannotafford to wait that long. Changing tlie basicsales and marketing processes within any com-pany may, in fact, take several years. Whether itis a group or the whole company, it will becritical to institute a measurement system to

insure that progress is being achieved. Nodoubt, adjustments will be needed along theway, or in golf terms: "Play nine and adjust/

Only by real integration of lhe .sales and mar-keting (unctions across the entire customer lifecycle can B2B firms achieve the improbablegoal of selling more by spending less. At thatpoint, real sales and marketing prodtictivity im-provements will be seen, with those improve-ments dropping directly to the profit line.

REFERENCESReichheld. F.F. (1996). The Loyalty Effect (pp. 4, 209-

115). Har^-ard Business Press.Walther. G.R. (1994). Upside-Down Marketing (p. 76).

McGrdW-Hill, Inc.

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