Since the coronavirus pandemic began sales teams have been displaced by work at home and stay at home mandates, forcing every sales organization to adapt their commercial model in response. All of this is putting pressure on sales organizations to develop virtual sales channels and transform their commercial models to dramatically increase visibility, engagement, speed, and productivity – while cutting cost to sell to adapt to reductions in demand and shortfalls in the revenue plan.
This is dramatically reconfiguring the cost structure and composition of sales organization based on conversations we have with growth leaders, and new research we’ve just undertaken with the Wharton School of business with growth. Specifically, we are seeing big shifts in the go to market investment mix:
- 97% are changing their go to market
- Over 80% are cutting business travel and event budgets
- Two thirds are extending work at home or work from anywhere policies into 2021
- About half are cutting field sales forces
- And sales force productivity has dropped 20% as organizations struggle to figure all this out
At the same time, the pandemic induced recession and displacement of employees is forcing businesses to accelerate the transformation of their selling channels to a digital and virtual commercial model. Most growth leaders believe the migration of customers to home offices and increased use of direct to consumer and e-commerce channels will help them improve marketing effectiveness and competitiveness. 88% of CMOs surveyed by Wharton agree the pandemic represents a big opportunity to change the way they reach and engage customers (e.g., media mix, channels). This sentiment is being reflected in the way they are re-allocating their budgets in the recession. 81% of the traditional businesses are increasing investment in digital technologies to improve market coverage and client engagement despite budget cuts in other areas. Even direct selling channels are being reconfigured and transformed to deliver higher degrees of visibility, speed, coverage, and a superior digital customer experience. Almost half (45%) of the CMOs from ecommerce and omnichannel businesses are increasing investment in new direct to consumer channels.
With 2021 planning and budgeting on the horizon, business leaders are now looking hard at ways they can transform their selling approaches to increase client access and coverage while retaining the cost savings they get from remote selling. As they do, they are starting to embrace the notion of a new form of selling channel, or role, with the selling characteristics of a high-end field sales rep, but the visibility, coverage, cadence, and productivity of digital and direct channels. We’ve been calling this a Virtual AE. Regardless of the name, a new form of channel this is going to dramatically impact the commercial model in terms of big shifts in sales travel and real estate overhead and the use of technology and skills to leverage and enable sales reps in digital channels.
Through the course of their response to remote selling, sales organizations are moving in a logical progression from a traditional field sales model to a Virtual AE model that is more technology enabled, data-driven and virtual. The pandemic has served as a trigger to accelerate that transformation.
The immediate response of most organizations has been to immediately cut travel and market development budgets, both to conserve cash (they are discretionary expenses) and because travel is off the table in the short term. Sales performance has taken a bit of a step back in the absence of face to face selling time (by 20%) but overall, most organizations are realizing they can sell many things remotely, and the customers like it. And several Chief Financial Officers tell us these sales overhead cuts are keeping them on budget, and they are reluctant to give all of these funds back in the recovery.
Next year in 2021, we’ll have our first real planning cycle in the new buying reality. With a longer time-horizon, and most firms moving to work at home for some or all of their employees, the prospect of real estate portfolio configuration and cuts become an option. Here we’ll see organizations start to evolve their model to reconfigure their real estate portfolios to accommodate work from anywhere or hoteling options which will these economics to reduce cost to sell even further.
But there are limits to how far you can cut back on sales support without sacrificing performance. And remote sales reps will need new tools and skills if they are to adapt to the cadence, touch points and level of engagement required to succeed in virtual sales. Replacing some of all of this overhead with technologies and training offers the potential to double visibility, speed, productivity, and engagement while still yielding a net reduction in cost of sell.
Obviously, sales travel, events and offices are not going to disappear from the selling formula. Every organization is going to refine this model based on their competitive situation, buyer preferences, and go to market model. But our experience tells us that a virtual sales model can generate sales productivity gains of over 50% with cost reductions of 10% compared with traditional field sales. These performance gains will come from a variety of sources:
- Selling to customers the way they want to buy
- More efficient use of selling time to support current customers
- Faster sales cycle from improved workflows and coordination with specialists
- Improved management– better visibility
- Higher conversion rates from specialization and better alignment with selling skills
- Expanded account coverage
These benefits are based on a Blue Ridge Partners sales cost to sell benchmarks – compensation (67%), benefits & overhead (20%), training & enablement (3%), and T&E (10%) – as a baseline, and factors is 3% reductions in travel time reallocated to selling. Source: BRP benchmarks and modeling.
Every organization is going to have to figure out to what degree they incorporate a Virtual AE role into their commercial models in the next few months as 2021 planning commences. They will need financially valid criteria to navigate these difficult budget trade-offs and reconfigure their selling channels in ways that are both cost effective and competitive.
Any decision to redesign and reconfigure your sales channel to take advantage of virtual selling economics should center around the eight points of what we call the Virtual AE design compass.
- Coverage: redefine coverage to release geographic and functional constraints to leverage talent and deliver expertise “on demand”
- Customer experience: increase responsiveness, personalization, and content relevance with analytics and access to experts on calls
- Control: redefine measurements based on activity-based measures and incentives of account health and customer lifetime value to create a common purpose
- Speed: increase contact frequency, volume, and the cadence of customer response to near real time by accelerating the digital workflow
- Engagement: improve skills and the level of customer engagement in digital, social, mobile, and collaborative channels
- Cost: reduce cost to sell by replacing travel, market development and events with quality digital engagement
- Visibility: give line sales managers and sales reps better forecast accuracy, customer engagement, account health and seller activity data
- Productivity: automate key seller tasks and eliminate low value activities, and hyper focus reps with analytics and guided selling.
These design criteria are often in conflict. And no channel system can excel in all eight. But they create a strategically sound and financially valid basis for developing a channel strategy that reflects the new buying reality and fits into the 2021 budget.