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Create Your Sales Strategy by Understanding Risk
By Andrew Rudin, CEO, Outside Technologies, Inc.

Inevitably, every entrepreneur must grapple with the following question: How do I make money with my idea?

Inevitably, every entrepreneur must grapple with the following question: How do I make money with my idea? The ensuing discussion often reveals a related, equally vexing question: How do I sell my product or service? Fortunately, a trip to Amazon.com or the local library provides a cornucopia of knowledge and advice. Titles such as "The 25 Strategies that Will Boost Your Sales Today" and "One Minute Sales Person" allure managers with the vision that sales achievement has a point-and-click simplicity. If you're like me, the breadth of titles becomes overwhelming because it's difficult to know what methods work best. The good news is--believe it or not--you are the most qualified expert for creating the best sales program for your company. How? By focusing on 1) the value that sales provides your organization, 2) the risks to achieving that value and how to measure the risk, and 3) ways to mitigate the risk. This article explores how this process can create a solid sales strategy.

The first challenge is to identify the different value drivers for sales in your organization. Ask most managers about the value sales provides to an enterprise, and they will respond "revenue generation." But is that all? Is revenue generation without profit valuable? Is profit without customer satisfaction valuable, and is it sustainable? It's not hard to see that your sales organization must deliver more value than just top-line revenue. The value that sales provides always connects to the business strategy and varies from company to company. Ask yourself about these sales value driver examples and whether they fit your organization:

1)     Acquire new business

2)     Transfer knowledge to others in the company

3)     Gather and share market feedback

4)     Forecast sales accurately

5)     Repeat and scale sales processes

6)     Generate targeted gross margin

7)     Generate targeted revenue

8)     Produce acceptable results

The last item--produce acceptable results--may seem vague, but it represents a key value driver for sales. Acceptable results can have a broad range, so it's easier to define by documenting what's unacceptable: a sales transaction that results in enmity between customer and vendor, lawsuits, slow payments, or unwillingness to provide a reference. Over time, unacceptable results will cause an organization to fail, even though other value drivers may have been met. The list of value drivers you develop for your company must be complete and interdependent. For each value driver, ask yourself, "If sales doesn't provide this, will our business strategy work?" If the answer is yes, then the value driver doesn't belong on the list.

The second challenge, risk assessment, involves figuring out what can get in the way of achieving each value driver. Above all, risk assessment requires candor and a culture of an open exchange of ideas. Consider the risks for value driver #1, acquire new business. What can happen that prevents a prospect from becoming a customer? The product or service doesn't meet customer needs? The price is higher than the customer is willing to pay? The sales team doesn't clearly understand the value the product represents to the customer? Risk identification generally yields more than one likely answer.

After the risks are identified, figuring out the likelihood of the risk and the consequences if the situation occurs will enable you to prioritize which risks to manage. Few companies have the resources to make all risks disappear. In the example, if your product is off-the-shelf and if the market demand is inelastic, a high price may not be as risky as a misalignment of the product to customer needs.

Finally, ask yourself, "How will I know when the risk is present?" The answer is to have at least one measurable indicator for each risk. For product misalignment risk, one measurement requires managing feedback from the sales team: How many proposals result in changes that require product customization? Or, when lost sales are analyzed, how many prospects identified the lack of specific capabilities as the reason they didn't buy the product? By comparing actual to expected values, you will be able to determine if the risk condition is present.

The last step, risk mitigation, requires careful thought and must be reviewed continually. Unfortunately, the adage "just hire the right people" won't alleviate the risks. Similar to the risk identification process, more than one answer for risk mitigation is correct. How would the risk "the product or service doesn't meet customer needs" be mitigated? There are several ways: 1) Survey your existing or prospective customers to make sure your solution aligns with high-value problems they want to solve; 2) adjust your target market because the product capabilities may be better aligned for a different niche; and 3) repackage the product or service.

How do you complete the circuit and translate value drivers and risk into an overall sales plan? By looking at the described example and scaling it to all your key sales value drivers (see Table 1). Effective sales execution requires collaboration and the collective insight of sales, product development, and customers and is far from a solo effort. By understanding the value that sales provides to your organization, the risks, and how to mitigate the risks, you will be able to apply your scarce resources to the activities that are directly tied to achievement of your business strategy.

Table 1: Tactical execution for Value Driver Acquire New Business

Risk

Measurement

Mitigation 1

Mitigation 2

Mitigation N

The product or service doesn't meet customer needs

Survey data reveal more than 25% of prospects require features not found in product

Realign target market

Repackage product offering to include desired feature set

Conduct scheduled meetings between sales and product development to share customer requirements

The price is higher than the customer is willing to pay

More than half of prospects provide feedback that the price is too high; over half of the proposals are discounted to win the order

Lower the price outright or by trading off features; realign target market

Adjust the marketing message to elevate the value of the product in the customer's mind

Create a financial value analysis that can be used for each customer's situation; develop a target financial return

The sales team doesn't understand the product's value

Inconsistent responses from sales team regarding the top three quantifiable product benefits

Collect and share market survey results so the sales team knows what is important to customers

Hold regular after-event reviews to discuss wins and losses

Conduct regular product and selling skills training



Andy Rudin is the CEO of Outside Technologies, a sales mangement consultantcy. His company helps clients generate more revenue through outsourced sales . For more information on the services offered visit http://www.outsidetechnologies.com. Andy can be reached at 703.371.1242 or info@outsidetechnologies.com

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