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49640646 B2B Sales Coverage Model

49640646 B2B Sales Coverage Model

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John M. Coe

Today'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

JOHN M. COE is president and founder of the Sales & Marketing Institute In Scottsdale, AZ. He has logged 15 years in sales and sales managennent and 20 years in B2B direct and database marketing, and is the author of The Fundamentals of Business-to-BusJness Safes tfi Marketing, published by McGrawHill in 2003; e-mail: John.Coe@b2bmarketing.com

© 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

btit sales and marketing costs are. TODAY'S REALITY . most companies do not know what their sales call cost is. The net result is that the percent of revenue devoted to sales and marketing costs is increasing. deploy outbound telemarketing to qualily the inquiries more aggressively. in tum. have dropped significantly over the last 10 years. call rates of one or two per day are not unusual. Before the 1990s. and adjusting the model. (d) engineering the new sales coverage model. often exceeding 20 to 25% or more of total revenue. many companies are well below the average of three calls per day if their salespeople cover a large geographic territoiy. While seeming to be deceptively simple. In 1987. In essence. but separate. In addition.NTEGRATION OF DIRECT HARKETING AND FIELD SALES to close the gaps. the last year of the sur\'ey. If any of these activities resulted in inquiries or leads. Many estimates now place this average even lower. There is a real fear that. and trade shows. thus further limiting the capacity to generate topv-line growth. this framework realigns the sales organization to make best use of the company's full nssources and capabilities. In addition. what actually happened was the boom times and ever increasing sales revenue of the 1990s disguised the lack of real progress in improving sales and marketing efficiencies and overall producti\ity. largely due to the increasing resistance of buyers to see salespeople. were we wrong! While some progress in productivity was being made. For many companies. Sales call rates. as sales managers are quite nervous to have it calculated and broadcast internally. In these situations. sales and marketing groups have coexisted as complementary. if known. Sales 6f Marketing Manage- ment reported several years ago that ihv. the average sales call cost was $254. They provided marketing communications IitUe. sales collateral. The cost of a sales call has continued to increase faster than inflation and price increases can recoup. public relations. This decline did not occur overnight but rather was gradually happeniug throughout the 1990s. and (e) executing. silos in most B2B companies. they were passed directly to sales or the distributor network. The sales group. it will become the focus of management decree that it should be lowered. and so are the false assumptions of how much improvement actually occurred in the sales and marketing functions. feedback on the "leads" that were sent to them. Boy. as measured by the number of sales calls per day. Most recent surveys have placed the average now at belween $350 to $500. In fact. as many companies invested heavily in sales and marketing technology for the first time. companies have responded by cutting the marketing budget and eliminating sales head count. aloug with everything else related to selling the product or service to prospects and customers in their territory. the revenue results in the 1990s continued to cover over the productivity cracks in the B2B sales and marketing processes. average number of calls per day had fallen from the old standard of four to three—a 25% loss in sales force productivity. Generally. and build marketing databases. v^as responsible for following up on these leads. but discontinued the practice in the late 1980s. there is much debate as to bow to calculate the sales call cost. THE GOOD OLD B2B DAYS For decades. Companies must deal with the hard facts of today's B2B environment. So we thought that real progress was occurring since sales revenue grew and grew. measuring. McGraw-Hill annually reported the cost of a sales call. we all thought that progress was being achieved as many companies began to launch direct marketing campaigns. the marketing communications department was primarily responsible for advertising. if any. sales force automation (SFA) contact management systems gave way to customer relationship management (CRM) software. The methods to do so will surely not be pleasant for sales management. Surprisingly. Wliile the average is a good num- JOURNAL OF INTERACTIVE MARKETING • VOLUME Ifi / NUMBER 2 / SPRING 2004 . The 1990 boom times are over. that means that sales revenue is not growing. In the 1990s.

' 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. these people at times do not even reside in the same city. and advertising. Today. On the telemarketing side. which further complicates the sales challenge and coverage model required to communicate and sell all lhe key people. • Number of calls per year 52 weeks/year — 2 weeks for holidays — 3 weeks for vacation/time off/sick time ' — 2 weeks for meetings. Recently. have dramatically declined in the last two years primarily due to the glut of email in everyone's box each morning and. It is reflective of the methodology that McGraw-Hill used.200. etc. the key issue for B2B companies is "What is our sales call cost?" Here is a sample formula for calculating the cost of a sales call. of the selling and senicing functions.000. Several years ago IBM's cost per sales call was $1. e-mail. Marketing efficiencies also have decreased. Therefore.) + $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 of calls $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 yoti apply this fortnula.sed to 8 to 10 times due to this more complex and dissipated buying process. The buying process has become more complex with more decision makers and influencers involved. McGraw-Hill also reported the nuniber of calLs to close a complex sale was 5.sion influoncers involved as weil. it not all. In the "old" days. Direct mailing campaigns are lucky to see the standard 1 to 3% response rates unless high impact or 3-dimensional mailings are sent. the general feeling among sales executives surveyed is that this number has increa. Back in 1987. it would seem that the overriding goal for sales management is to make each one of these sales calls more productive. trade shows. purchasing decisions by compatiies were controlled by a relatively few nuniber of people. E-niailing programs and the response rates. the nuniber of steps in the buying process and the people involved has increased. The key isstte is that the ntimber of calls per year is a finite or limited ntimber. Today. assuming that the sales group has been organized and geographically located in the most efficient manner. They are continuing to deploy face-to-face salespeople to perform most. the actual JOURNAL OF INTERACTIVE MARKETING • HARKETING cost per call in specific situations can far exceed the average. evidenced by declining response rates for direct mail. bonus. not only has the increase in availability of information (pritnarily from the Internet) changed the buying process hut there are many more deci. commission. There is little a company can do to increase the number of calls per year. spam. Therefore. of course. As pointed out by these two examples. a dixision of DuPont reported sales call costs of $3.4. In large companies. etc. connect rates also have VOLUME 18 / NUMBER 2 / SPRING 2004 64 . even to opt-in lists. while no definitive survey exists. and provides a fair comparison to that discontinued survey.J O U R N A L OF I N T E R A C T I V E ber to know. The problem is that many sales organizations have tioi properly factored in this new and lengthier buying process to their sales coverage model.

are just a continuation of what has been occurring all along—it is just that we did not notice tliis gradual change. and face-to-face can deliver a relevant message and offer to a specific individual. the recognition and positive view of the company's brand. Only the four primary media of e-mail. DIRECT MARKETING WILL BECOME PART OF SALES! This is a strong statement to be sure. or service bas a valtte in the mat kef place. telephone.ssages atid offers. these tjictics are mostly "surround sound" in tbe new sales coverage model. The primary media for tbis new sales coverage model are tbe four targetable contact media of e-mail. as these types of communications again cannot reach specific individuals within targeted companies with relevatu me. how can we rethink how the marketing and sales organization goes to market to achieve the dicbotomotts goals of "sell more" and "spend less?" THE LAST GREAT FRONTIER FOR PRODUCTIVITY IMPROVEMENTS Wbile some productivity gains in sales and marketing were realized tbrotighout the 1990s. in fact.ss people are just too busy today to respond to or even hear most marketing messages. but it is "air-cover." as it does not talk to a specific individtial witbin a targeted company. and retention in a blended model. and retaining customers has contintied to increase in the last several years. Also not being ignored are the other traditional marketing communication activities such as trade shows and public relations. These four media are then deployed across tbe customer life-cycle phases of acquisition. and face-to-face. However. but those days are fast coming to a close. Clearly. companies are fully integrating them to achieve a much more ptoductive and accountable result. with all the clutter it has to fight through. now relying on voice mail to manage their time. more activities need to be meastired by their impacts on sales. prodtict. telephone. We all are painfitlly aware of this trend during the last three years. They have taken on more duties as staff levels have continued to be cut and as the sheer volume of marketing messages has grown dramatically. Marketing departments have largely been given a free pass iu accountability for sales results. retention. they were largely incremental. mail. Advertising remains important. assigning small accounts to telecoverage teams. and re ten tion/loyalty. growth. The BIG question is what to do to stem the tide and improve sales and marketing productivity? In essence. But in large measure. Therefore. Wlien these cost increases are compared to the lack of ability of companies to increase prices in the last several years. btit to meet the demands of revenue growth and profitability. bow much of tbe limited marketing commtinication budget sbould be spent on "air-cover?" The new sales coverage model is much more diiect than advertising in trade publications. mail. A NEW SALES COVERAGE MODEL IS NEEDED Fonvard-tbinking companies bave realized that dramatic changes are required in their sales and marketing organizational structure and are moving toward a "new sales coverage model. That means marketing is responsible for demand generation (inquiries and leads). the cost of acquiring. Biisine. No real integration and productivity improvements have been achieved across the customer life cycle of acquisition. instead of organizing the sales and marketing functiotis separately. and sales is responsible for everything else (conversion. But." In this new model. and loyalty). tip and cross-sell. the focus today JOURNAL OF INTERACTIVE MARKETING • VOLUME 18 / NUMBER 2 / SPRING 2004 65 . Tbese trends and pressures will not disappear and.I N T E G U T I O K OF DIRECT K A R K E TI N G A N D FIELD U L E S dropped as few people atiswer their phone. and setting stricter lead qualification criteria before setiding a salesperson produced some gains. Yes. it is no wonder that overall profitability has suffered. Therefore. growing. most companies are still selling using the same strategies and tactics. substituting etnail for direct tnail. growth.

Then and only then will significant improvements be achieved in sales and marketing productivit)-. This tibviously points to one area for improvement—measure— or in the words of Meg Whitman of eBav. sales organizations live with quantification on a daily basis.JOURNAL OF I N T E R A C T I V E HAUETIftG for most marketing and sales activities should be to measurably acqtiire. This will vary by media. and it is important to note tbese different costs by meVOLUME 18 / NUMBER 2 / SPRING 2004 66 . marketing might become part of sales rather than standing off to the side oi' the sales group. This illustrates the need to apply this five-step approach so that the required customization of tbe new sales coverage model will be obtained. But even in large companies. Marketing comtnunications will increasingly sbare tliese goals witb tbe sales group. This five-step process is critical because tliere are so many varied B2B business models and marketing situations that no one solution will fit this wide variety. There is no question that large firms. Thus. a rethinking of the role of marketing comnuinications is requited to achieve substantial marketing and sales pro ductivity gains. Under the new sales coverage model. and retain customers. To help bridge the gap. On the other hand." CLOSING THE GAP—FIVE CRITICAL STEPS Tbere is an obvious gap between where B2B firms are today in their marketing communications capability and where they need to go. From commodities (office supplies) to customized (compounded plastics) to engineered products (machine tools) or professional services (consulting). There are many entrenched processes and traditional views of how sales are generated within al! companies. as records may not be well kept. which describes many different types of business selling situations.to medium-size B2B companies. for many companies. but tbe critical issue is how to get there? This will be nt) easy task. This is particularly true for small. Not all meiisurements will be able to be qtiaiuified. the following activities should be benchmarked. "If we can't measure it. direct marketing will begin to share the responsibility for not only generating inquiries and leads but also communications to customers for sales conversion. JOURNAL OF INTERACTIVE MARKETING • BENCHMARK THE EXISTING SALES AND MARKETING PROCESS As previously mentioned. cannot continue to afford tbe costs associated with fielding sucb a large number of salespeople whose efficiencies are fast declining and whose costs are increasing. That is t>bviotts. The disconnect ditect marketer's had Irom tbe sales group was that the communication objectives were centered on generating responses for inquiries and leads and not generating sales. growtb. DIRECT MARKETERS NOW HAVE A GREAT OPPORTUNITY IN B2B The new sales coverage tnodel relies on the three previously mentioned media tbat direct marketers have traditionally used in B2B. most marketitig communication groups do not have a quantified meastu'e ou tbeir activity. and therefore any new sales coverage model must be highly customized to each company's unique market situation and business model. grow. with sales force head counts nutiibering in the htmdreds if not thousands. we don't do it!" COST OF INQUIRIES The cost of inquiries is simply the division of tbe number oi inquiries received into the cost of the campaign. marketing communications will begin truly sharing responsibility for sales revenue and will be measured accordingly on results and not activities. The following five-step approacb will uot only close the gap but also identify specific areas for improvement required to achieve substantial gains in prodttctivity. Consider the following matrix (Figtue 1). Long gone are ihe days of beating up tbe salesperson to make "one more call per day. In other words. They need to be squarely addressed or all efforts to develop a new selling model will fail. ihe vaiiety is extreme. and retention as well.

tbe average conversion rate in B2B across a wide array of categories from inquiries to qualified leads averages 10%.. This graph (Figure 2) illustrates the lost opportunity. machine tools or consulting) MEDIUM customized Co specifications (e." COST OF A QUALIFIED LEAD The logical next benchmark is the cost of the qualified lead. B2B inquiries cost between $25 to $150 to generate. If only one of 10 inquiries be- JOURNAL OF INTERACTIVE MARKETING • VOLUME 18 / NUMBER 2 / SPRING 2004 . To close this gap.g. The problem is that lead qualification was either not done properly or rushed. a lead development program needs to be instituted to keep the inquiries alive until they are ready to become a "lead.g. a. and the best you will hear is only 1-5%.shed new light on demand generation campaigns.to 24-month period. This.. and the inquiry was dropped. The average cost is around CONVERSION RATE OF INQUIRIES TO QUALIFIED LEADS Most firms are now qualifying inquiries into leads before passing them to the sales force or distributors for follow-up. combined with costper-inquiry. Ask any marketing commimication group how many inquiries result in a sale. That means that one of 10 inquiries are interested enough today to be leads and sent to sales. On average. compounded plastics) LOW commodities {e.g. will . There may well be another 10 to 20% that will become leads given enough time and continual communication. office supplies) ORDER/ SHIP YEARLY CONTRACT STATEGIC RELATIONSHIP NATURE OF SALES REUTIONSHIP WITH BUYER FIGURE I Type of Selling Situation dia. This is highliglited by past studies from both Penton Publishing and Cahners (now Reed Elsevier). The number of actual leads qualified by media source and offer will then providesomemeasureof the quality of the inquiries received. where it has been documented that between 20 to 50% of all inquiries received from print advertising media will buy the product or service they inquire about within an 18. Depending on tlie offer. and these should be part of a lead development program.s it is one way to compare what is being obtained from each type of media..I N T E G R A T I O N O fD I R E C T M A R K E T I N G A N D F I E L D S A L E S i VALUE Of= SALE HIGH designed or engineered (e.

Note that no additional cost for qualif^-ing the lead has been added at this point. WTien sales call costs are added to tliis calculation.000 when all lead qualification costs are added. if a lead costs $800+. it is not unusual to have qualified lead cost well in excess of $1. tlien the cost of the sale is at least $8. one sale will l)e made in the near term. The total cost per appointment ranged from $1. Tliis high cost will shock a number of people in any organization and will frequently be the first focus for tlie new sales coverage model to attack. There were three market segments. this JOURNAL OF INTERACTIVE MARKETING • VOLUME 18 / NUMBER 2 / SPRING 2004 . 12 Mo. this single calculation will show just how much money is being spent for customeracquisition efforts. Time comes a lead and the average cost is $80. NUMBER OF MONTHS BETWEEN INQUIRY AND SALE FIGURE 2 Percent of Inquiries Converted to Leads and Purchase vs. 6 Mo. the cost of a sale far exceeds $10.J O U R N A L O FINTERACTIVE H A R K E T I N G PBttMTOF TO LEADS/SALES 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% wrmotJT a lead development program The total number of Inquiries that buy the product/service Upon Inquiry 3 Mo. 15 Mo. 21 Mo. Therefore. AVERAGE NUMBER OF SALES CALLS PER DAY/WEEK/MONTH While Sales &" Marketing Management Magazine reported an average of three calls per day. This 10% conversion factor is surprisingly consistent across many industries. will be the first time anyone has benchmarked this cost. a B2B marketing service firm had switched to outbound cold telemarketing to create a lead and an appointment for their sales force. In fact. Recently. 24 Mo. for every 10 leads. and in almost all B2B situations. The interesting obsen'ation is that most sales organizations have no idea of how much their leads cost. each having their own unique characteristics about how difficult is was to find the proper decision maker and set an appointment.000. Once the sales force is aware of the lead cost. 18 Mo. all appointments are picked up by sales and the sales meetings are held. Therefore.450 between each of the three segments. NUMBER OF LEADS REQUIRED FOR ONE SALE OR LEAD CONVERSION RATE On average. 9Mo. then the cost of a qualified lead is $800 or more. considerably more attention will be paid to them and improved feedback will result.000 in most situations.220 to $2. and therefore treat them accordingly. The sales group did not make approximately 35% of these appointments until they were told just how much this was costing the company per appointment. Now.

in essence. Simply. Generically. is one of the key deliverables and productivity improvements of tlie new sales coverage model. NUMBER OF CALLS REQUIRED TO CLOSE A SALE This is another very important benchmark and one that also is not well documented in most companies. Clearly. it's still done in some organizations • Lead qualification—determining if the Hrm and/or individual qualifies • Lead development—keeping the sales opportunity alive • Proposal or closing—going for the sale • Up-sell or cross-sell — finding other opportimities within the customer • Relationship building—creating more indepth 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 percentage of these types of calls made will cause the sales force to become very defensive. $ VALUE OF SALE HIGH MEDIUM LOW $0 coMHoorrv PRODUCT/SERVICE $500 CUSTOMIZED PRODUCT/SeRVICE TYPE OF SALE $1. Marketing's new role is to help them by relieving the calls they either do not want to make or should not be making. there are eight types of calls made by sale. so be veiy careful. the number of sales calls should be an easy (ignre to determine from call reports. and that is a call is a personal visit (not a telephone conversation) to a prospect and customer no matter how many people are seen at the accoimt. Several years ago. On the otlier hand. this is the hot button. here is a graph (Figure 3) that demonstrates how the call cost increases with the type and the value of sale. COST OF A SALES CALL While the calculation of the cost of a sales call and average call costs has been previously detailed. the higher the sales-call cost becomes. it is the number of face-toface calls that are required to take an account from the prospect stage to a buying customer. it will vary by each customer situation. This is not the widely accepted definition of a sales call. For those who have not been in sales. Clearly. One definition is required here. as the real goal is to insure the salespeople are making the right kind of calls and not just a lot of calls. VOLUME IB / NUMBER 2 / SPRING 2004 . Roadway Express reported that their sales people averaged 12 calls per day.INTEGRATION O fDIRECT MARKETING AND FIELD SALES will vary for each company based on the size of territory and density of prospects and customers. the fact that a call is made does not tnily define the value of the call.speople. To put it bluntly. They are: ' • Cold calling—^yes. but when pressed they admitted that they counted one call for each person seen at the account or prospect—see four people and four calls were recorded.000 DESIGNED PRODUCT/5CRVICE FIGURE 3 TYPE OF SALES CALLS MADE BY PERCENTAGE OF NUMBER OF CALLS The type of call made is a potentially very revealing benchmark. this is the key JOURNAL OF INTERACTIVE MARKETING • The Impact of the Type and Value of the Sale on the Sales Call Cost benchmark for the new sales coverage model. Unlike the other calculations. That. the more involved the sale and ihe more dollars that are at stake.

tbe sales and markeiing areas that need improvement will quickly become apparent. As an exiunplf. ESTABLISH KEY GAPS BETWEEN THE BENCHMARKS AND COMPANY GOALS Once tlie basic sales and marketing benchmarks are established. the gaps will help set lhe priorilies and In-nchmarks for developing the new sales coverage model. as it is a key measure of sales efiectiveness. In fact. a medical equiptnent company selling such items as defibrillators measured several of these areas." Of course. he was talking about the Fedeml budget! While tliere may be other benchmarks and nu'asnrenu'ius appropriate to a specific comjiany's market situation. that it was 21%. to their sniprise. when tbey do. the cost will be much larger than thought and will quickly become a f*Kus for productivity improvements. In most al) cases. "A billion here and a billion there and soon you have some real money. Ihe one that quickly jumped out was that the salespeople were making 11 different types of calls. if asked. they are an 80-bilIion-doiIar company. In llir end. When pURIMAL OF INTERACTIVE MARKETING • VOLUME 18 / NUMBER 2 I SPRING 2004 70 . what is the percentage of revenue that is devoted to sales and marketing expense? At IBM in lhe mid-1990s.s are between 33 and 50%. and JRsi to clarify. they are one of tlie first companies to move toward the new sales coverage model. COST OF A SALE This intasiirenient was previously detailed. Simply. CUSTOMER DECAY RATE In Fredrick Reichheld's book. As a result. IBM significantly reduced the sales force while adding several thousand direct marketei*s to achieve tliis producti\ity improvement. as there will be a great \'ariance between office supplies and machine tools. Wiiatever it is.salcs cost to make one sale. as few if any companies know these basic measuienienLs of sales and marketing productivity. As mentioned. As mentioned. It may include otlier functions (e. recently calculated this decay rate for their business gift customei's and foimd. most companies do not evaluate these key metrics. it thus became the number-one objective of the new salesperson: Keep the current customers versus finding new ones. it i. and 15% times this equals 12 billion dollars.s climbed back to profitability. And in the now famous words of Everett Dirksen.JOURNAL OF I N T E R A C T I V E HARKEIING but most sales organizations will be able lo provide an average number of calls it takes to sell a customer. Faii7tale Brownies in Phoenix. former Senator from Illinois. technical service or engineering) and should be a realistic calculation as to how much money is really spent to acquire one customer. win rate. PERCENT OF REVENUE DEVOTED TO SALES AND MARKETING Most of the preceding benchmarks and measurements cascade to this calculation.5 to 18% range. several will jump out as obvious areas for attention. it needs to be benchmarked. these will be a great start. The nel result is tbat IBM wnmg out at least 15% in costs. he documents that. Past sales rcc()r<ls will l>e key to this calculation. AZ. 10% of cuslomci^ are lost each year for one reason or the other.g.. Normally. Today. it f)ecame one of the driving objectives within IBM to lower this percentage.s the total marketing and . on average. Most companies do not know this percentage and the conesponding dollar loss. This rate depends greatly on the product or service sold. Several years ago. 77?^ Loyalty Effect. WIN RATE OF QUOTES/PROPOSALS TO SALES Tbe average conversion rate of how many "wins" of quotes or proposals that it takes to close a sale is another key benchmark. most sales manageni feel thai tliis nuniber is between 8 10 today for a complex sale. In round figines. (he sales and general administration expense was in the low 30% range. and is one big reason IBM ha. it is in ihc !.

Then the sales process • VOLUME 18 / NUMBER 2 / SPRING 20(M 71 . Once this has been acccmiplished. Unless they are on board witli the changes. one or more of tbe data elements on an individual's busine. telemarketing will assume a more important role in such applications as lead qualification. a significant liability could occur. as it will be increasingly used to drive marketing communications to . both the salespeople and management identified that only four of these call types were what the staff should be concentrating on. the typical buying process of each key market segment should be established. In this situation. The problem was that no other resource was available to assist the territoiy salespeople. Building the outside and/or inside telemarketing resources will quickly become a top priority. so they were forced to make all these calls in their geographical territories. 65.2% company name change—new company name or changed jobs 3. improved or new capabilities will be needed. as in the past the salespeople were expected to know the current information. a new capability or senice will be required to keep the contact information accurate. As an example. this is an important activity for the company. which allowed them to call on more productive accounts where sales revenue was available. As can be seen. telesales. DEVELOP REQUIRED CAPABILITIES TO CLOSE THE GAPS AND EDUCATE EVERYONE To close the gaps. one type of call was checking on and/or delivering batteries to EMS units that had purchased their defibrillators. An obvious one is building a marketing database that is not only descriptive of the market but accurate as well.3% e-mail address change 34.9% phone number change 41. Under tlie new sales coverage model. Therefore. any initiative will fail. They were then relieved of low-priority calls by working in tandem. tomers and prospects is poor. and sales coverage. Upon developing and implementing elements of the new sales coverage model. In otber words. Clearly. Finally. a profiling. lead development.8% decay rate on a yearly basis. The single most significant change was to team an outside salesperson with an inside stipport person. and segmentation process must be completed to focus tbe efforts on the best prospect and customer groups. To effectively determine tbe contact strategy.ss card will change in a 12month period.INTEGRATION O FD I R E C T MARKETING AND H E L D SALES asked. Other capabiHties also will be required. if this was not done. sales revenue jumped by 17% in the following six months.9% address change 37. Then they teamed up to contact and therefore cover the territory. but not one that a field salesperson should be responsible for. titrgeting. it is not unusual for companies' own customer data to be badly inaccurate.8% title or job function change 42. and in particular to the sales group. Recent studies by the Sales & Marketing Institute documented that contact information on individuals has a 70.specific individuals in concert with sales calls. the inside sales person supported two outside sales reps. many B2B companies have used telemarketing. bul most have done so sparingly. This insured that the defibrillators remained in spec. education and training will be required to introduce these new sales and marketing methods to all. They just had not been able to devote the calls to new customers as they were tying themselves down with low-priority sales calls. Here are the sunnnaiy results of tbis research on change rate in personal contact information.8% name cbange (marriage or divorce) Changes in fax numbers were not totaled as this is typically shared between individuals and therefore ceases to be a personal-contact piece of data. As an example. Here lies a unique B2B problem—the accuracy of the information on cusJOURNAL OF INTERACTIVE MARKETING ENGINEER THE NEW SALES COVERAGE MODEL The new sales coverage model blends the four primary contact media across the customer life cycle.

The goal is to direct the limited and expensive face-to-face sales calls toward more "golden moments" and away from calls that could be handled by other contact strategies. The salespeople will initially resist this type of direction and loss of control over their activities. in late 1987. The question is.— 60% • Sales . But once they realize that they will be relieved of lowproductivity calls and given more time for key sales calls. "How many of these SiUes calls could be accomplished by direct marketing techniques versus face-to-face sales calls?" Most companies try to eliminate at least two or tliree calls in the customer-acquisition phase. Customer Acquisition (60% direct marketings 40% sales) I h e traditional role of direct marketing has been to generate inquiries. assuming tliat a lead qualification and development program is in place for marketing to execute. McGraw-Hill reported that it took an average of 5. Here is an example as to what this might look like (Figure 4). Not only do salespeople have to make fewer calls to close a sale but tiiey also have freed Uieir time hom sales calls that were devoted to the early customer-acquisition calls for more productive sales calls on qualified leads or customers. This is an immediate improvement in sales productivity.J O U R N A L O FINTE RACTIVE M A R K E T I N G Sales Cycle Phases 100% 90% 80% 70% S Ol Hi —— ^ "^ —— ^ ^M 60% ^ 1 ^ 1 ^ - 60% 50% 40% 30% 20% 30% 10% 0% 90% . and retaining customers will logically emerge.4 sales calls to close a sale. The activity of lead qualification and development results in marketing's handing over to salespeople oppoituniries that are far more qualified and ready to engage in a real purchase tiian in the old days. a game plan on how marketing and sales will share the responsibility of acquiring. JOURNAL OF INTERACTIVE MARKETING • VOLUME IB / NUMBER 2 I SPRING 2004 72 . their resistance will fade quickly as long as they are kept informed of other customer contacts. and pass them to sales for conversion. qualify leads. and so a reduction of one call translates to one additional call that hopefully will be more productive. These calls are obviously the ones early in tJie acquisition effort. Overall. salespeople have a finite number of sales calls they can make each year. The salesperson clearly should be involved in converting the sale and developing the initial customer relationship. as it is unproductive for . B Direct Marketing I 1 LJ Acquisition 4 Growth Loyalty Reactivation FIGURE Typical Blend of Direct Marketing and Field Sates across the Cuscomer Life Cycle should be matched to the buying process—a big change for most companies. Don't forget. This effort will then call out when each of the four primary contact media should be deployed. growing.salespeople to not only make cold calls but also qualify the iuquiries as well. There is not much change here. As mentioned. and is between seven or eight today. Most B2B sales managei^s will contend tliat tliis nimiber has increased in the 17 interceding yeai-s.

done during the time that salespeople did not want or even allow marketing to communicate directly to their customers.time. Al the same time. Overall. A strong telemarketing program will open up sales opportunities with many lapsed customers. retaining. in his book Vpside-Doivn Marketing. as the life cycle of a ctistomer mattnes to the loralt)' pluwe. and even recapturing ctistomers will logically emerge to form the sales coverage model for each company and market situation. verification of the appropriate contacts since many have changed. When a long-lime customer "fires" you. of course. the customer is lost l^efore il is even known thai they arc looking for a replacement. lhe salesperson should have identified other decision hilltiencers who also may not be worth the direct sales effort bul do need to receive relevant messages and offers from the company. Tlieir user experience is biised on the current product or semce. and at times. ovei. particularly one that presents no new sales opportunities in the future. The same can be said for past customers—it is easier to sell to past customers than to new ones. 70% sates) This phase of ihe cusiomer life qcle is where the sales pei"son plays the most important role. there also is a valid role for direct marketing to assume. this experience becomes "tired" or "old hat" or new iLsei^s anive without the prior knowledge as to why tliis particular product or semce was initially purchased. may not even know that these companies have bought in tlie past. We all knovv that it is easier to sell more products to current or past customers than to sell to new customers. highly targeted and relevant communications can keep up the conlact. if new in the territory. Failing to keep in contact is a big mistake as studies have indicated ihat. This teaming can be very cost effective while actually increasing the contact frequency for the customer. This research was. The sales group should not call on every customer. Customer Reactivation (90 % direct marketings 10% sales) Not many companies focus on past customers even though. Ihere is high piobability that pasl customers know your company and product. They probably did not think they needed to or felt it was a waste of their time. "How many of the ciLstoniei-s would have 'decayed' if better contact were maintained?" That is why there is such a large role for direct marketing in the customer loyalty phase. growing. Finding opportunities to up or cross-sell and secure the customer relationship is best placed in the hands of the sales staff. on average. So. aud tiie swd fact is that without ongoing contact. The salespeople. What it takes is information on tlu* past customer. In addition.) the question has to be asked.I N T E G R A T I O N O fD I R E C T H A R K E T I N G A N D M E L D S A L E S Customer Growth (30% direct marketing. an inside sales telemarketing effort can team with outside sales to share tlie contact responsibility. JOURNAL OF INTERACTIVE MARKETING • VOLUME 19 / NUMBER 2 / SPRING 2004 73 . the customer felt neglected and slopped buying. Direct mail or e-mail can play an important role in communicating in a cost-efficient manner to the entire "decision tree" in the customer growth and retention phase. these iLsers can frequently I>egin to look lor a newer and improved vei"sion. many new people and functions can be involved in the consumption of the product or semce. In some cases. George Walther (1994) reported tliat 68% of "past customers" said that the reason they stopped buying from tlie supplier was that they did nol feel "loved" anymore. Without an ongoing communication program from the vendor to all the decision makei:s and influencers. In fact. Customer Loyalty (60 % direct marketing. so the role a salesperson assimies is minimized. This response is a direct result of salespeople not keeping in contact. without any olher form of marketing communications. 40% sales) Salespeople can easily take the customer for granted. S<. 10% of the customer base decays each year—certainly a dramatic loss for any company. a game plan on how marketing and sales will share responsibility of acquiring. This can lead directly to a lost customei. it is a shockiug experience and hard to explain to management. and then a targeted campaign to reactivate these customers. the\' represent a larger and larger group. In addition.

The Loyalty Effect (pp. Many companies cannot afford to wait that long. JOURNAL OF INTERACTIVE MARKETING • VOLUME 18 / NUMBER 2 / SPRING 20M 74 . but that means it will take longer to achieve the improved results and increased productivity. Walther. 209115). or in golf terms: "Play nine and adjust/ Only by real integration of lhe . it will be critical to institute a measurement system to insure that progress is being achieved. At times. a product or market segment could he used as a heta test. in fact. with those improvements dropping directly to the profit line. Har^-ard Business Press. take several years. No doubt. 4. Upside-Down Marketing (p. (1996).F. McGrdW-Hill. At that point. Whether it is a group or the whole company. are not working anymore. adjustments will be needed along the way. Changing tlie basic sales and marketing processes within any company may. MEASURE. Resistance will come from many people tied to the previous methods that. F. Deploying a new sales coverage model will not be easy or painless. Inc.R. real sales and marketing prodtictivity improvements will be seen. of course. 76). (1994).JOURNAL OF INTERACTIVE MARKETING EXECUTE. REFERENCES Reichheld. AND ADJUST Now comes the hard part: execution.sales and marketing (unctions across the entire customer life cycle can B2B firms achieve the improbable goal of selling more by spending less. G. It will take a veiy firm resolve of senior management and senior sales and markeiing executives to execute the plan.

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