Every year, U.S. companies spend more than $900 billion on their sales forces, but typically see only 50 to 60 percent of the financial performance they're promised. The problem, Harvard Business School Professor Frank Cespedes says, is the "disconnect between selling behaviors and strategy. In his book Aligning Strategy and Sales, Cespedes discusses why bringing these two elements together is crucial for every company's longevity, and offers his advice for making the realignment a reality. He shared his insight with Associate Editor Maria Minsker.
CRM: In your book, you say that sales effectiveness is "a function of strategy." What do you mean by that?
Frank Cespedes: Despite all the hype about digital this and social that, the reality is that the amount of money that companies spend on sales and selling initiatives dwarfs the amount they spend on all media advertising—it's 20 times the amount they spend on all their digital media. But often the return doesn't meet the investment expectations. It's tempting to blame the sales force, but research indicates that there is no one good way or one bad way to sell—that's just nonsense. Selling effectiveness is a function of the company's sales task, and that task is determined by that particular company's strategy. There's no such thing as effective selling that isn't linked with strategy. Effective selling is an outcome of what the company does with strategy as well as with the "nitty gritty" of sales management.
CRM: How can companies start to reconnect the two in an effective way?
Cespedes: The reality is that most companies don't have a strategy because they confuse it with other important, but very different, things. Strategy isn't synonymous with vision, values, or purpose. So the first step is forming a coherent strategy, and I define that as a set of fundamental choices about where you play and how. Once you have a strategy, you need to understand what it means for people who have to actually go out and implement that strategy through sales, which involves determining how to leverage your target segments and your competitive advantage. This, of course, can change as the market changes, and as the strategy changes to deal with market changes.
CRM: The role of a salesperson has evolved in recent years. What are some of the biggest changes you're noticing?
Cespedes: The main trend I've seen is that there's been a lot of talk about e-commerce or digital media "disintermediating" sales forces in recent years, and that's simply not true. But that doesn't mean that the Internet is not a big deal for sales and selling. Rather, it's a big deal in ways that people don't understand. The question is not "Will salespeople go away?" They won't go away. The question is "What do these new technologies mean for sales tasks, pipeline management, and the sales funnel?"
CRM: And what do they mean?
Cespedes: Well, for one thing, what buyers can now do is realign tasks in the sales funnel that were controlled by the seller in the past. Most obviously, they can learn about a product and competitors' pricing even before they speak with a salesperson. But that doesn't make a salesperson obsolete. My favorite example of this is buying an automobile. There's a relatively trivial percentage of people who actually purchase cars online, but almost 90 percent research cars online before making a purchase. This doesn't mean the salesperson is unimportant—it means quite the opposite. People spend twice as much time researching the cars online as they do interacting with the dealer, which means dealers not only have less time to close the deal, but are also interacting with a more educated consumer. And that is true across industries. Salespeople have less face time with customers, and making the most of that limited time is more important than ever.
CRM: What effect will aligning strategy and sales have on the company as a whole?
Cespedes: Anyone who's ever taken a finance course knows there are four ways that a company can increase its value in the marketplace—invest in projects that have a positive net present value (meaning they earn more than their cost per capita); disinvest from assets and activities that have a negative net present value; increase profits from your existing capital investment; and reduce the firm's cost of capital. Most senior executives know that, but they don't know how their sales and selling activity directly affect each of those four elements. Sales effectiveness is one of the key drivers in those four factors of enterprise value. Aligning it with strategy is important not only when you're a sales manager or a sales vice president, but if you're the CEO or CFO of the company as well, because it's directly affecting what you're able to say to investors.