The Financial Impact Virtual Selling Channels are having on the Commercial Model
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. The decisions they make on where to cut, invest, and refocus sales resources in the coming year will disproportionately define their future profitability and competitiveness in the post Covid economy. As they look at ways to sell more for less, sales executives are starting to embrace the notion of virtual selling channels as a way to do both. Virtual reps offer the selling capabilities of a high-end field sales rep, but the visibility, coverage, cadence, and productivity of digital and direct channels.
The shift to virtual channels will dramatically impact the economics of selling in terms of big reductions in sales travel and real estate overhead and the increased use of technology and skills to leverage and enable sales reps in digital channels. The economic impact on selling can exceed the mass adoption of direct and tele-web channels that led to a transformation in selling two decades ago. In the 1990s channel innovators like Dell, IBM.com, GEICO, and Charles Schwab dramatically reduced the cost of selling more than two fold by migrating lower value PC, software, insurance and financial transactions from expensive field sales reps to less expensive direct channels. B2B selling organizations can achieve similar or greater gains if they choose to fully embrace virtual selling.
Since the coronavirus pandemic began sales teams have been displaced by work at home and stay at home mandates. This has forced every sales organization to adapt their commercial model in response. You couldn’t have designed a better experiment to financially prove the notion that technology can drive sales productivity and performance if you tried. The shift to 100% remote selling for six months forces guaranteed free time (take away travel), adoption (100% digital sales calls), and visibility (every sales conversation is recorded). And the results have proved you can effectively sell big ticket, B2B, experiential offerings in a virtual setting without face to face engagement. “B2B selling organizations learned they can get 50% higher engagement, speed of response and productivity from their sales reps at lower costs by incorporating virtual selling channels into their commercial model,” according to Michael Smith, a managing Director of Blue Ridge Partners.
All of this is putting pressure on sales organizations to transform their commercial models to increase visibility, engagement, speed, and productivity – while cutting selling costs to adapt to reductions in demand and shortfalls in the revenue plan. Financially, this is dramatically reconfiguring the cost structure and composition of sales organizations. New research from the Wharton School of Business reveals the response to the pandemic induced recession and displacement of employees is leading to big shifts in the go to market investment mix:
- 97% of organization 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
- 81% are increasing investment in digital technologies to improve market coverage and client engagement
- 88% agree the pandemic represents a big opportunity to change the way they reach and engage customers.
This puts business leaders between a rock and a hard place as they set budgets for the coming year. They are being forced to find ways to reduce costs while pushing harder to retain, expand and acquire customers in a down business cycle that looks to last over 14 months according to the Wharton study. The only way to do this is to transform their selling approaches to increase client access and coverage while retaining the cost savings they get from remote selling. CFOs are starting to realize this can be achieved by shifting funds that previously went to sales travel, real estate overhead, entertainment, and events into technology and skills that leverage and enable sales reps in digital channels.
This has already started to happen. As they respond to remote selling, sales organizations are moving in a logical progression from a traditional field sales model to a Virtual Account Executive model that is more technology enabled, data-driven, digital, and measurable. 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.
The 2021 budget process represents the 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 reconfiguration 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 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 or all of this overhead with sales enablement technologies and training offers the potential to double visibility, speed, productivity, and engagement while still yielding a net reduction in cost of sell.
The notion of reinvesting travel and real estate savings in training and technology is no longer such a risky or unproven bet. Six months of leading remote revenue teams has given senior executives the patience, experience, and motivation to finally get serious about finding better ways to use digital technology to boost sales productivity and performance. The most successful have achieved large productivity boosts by knitting together the 20 or more pieces of their legacy growth technology stacks into highly productive “ecosystems” that support selling (Digital Selling Platforms), Learning (Integrated Learning and Development Systems), and intelligence (Data Driven Algorithmic Selling).
For those willing to innovate, virtual selling offers even greater untapped potential to harness the power of readily available but not broadly applied technologies– including Artificial Intelligence, Augmented Reality, 5G communications and haptics – to truly transform the selling experience. The pressure of the pandemic induced business cycle is waking up CMOs to this potential. 82% of CMOs believe their response to the COVID-19 epidemic change provides them the opportunity to redefine the customer experience in digital and virtual channels, according to Professor Reibstein’s in-depth analysis.
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 through better visibility and accountability
· Higher conversion rates from specialization and better alignment with selling skills
· Expanded account coverage.
These benefits are based on Blue Ridge Partners cost to sell benchmarks that use compensation (67%), benefits & overhead (20%), training & enablement (3%), and T&E (10%) as a baseline, and factor in 3% reductions in travel time reallocated to selling.
Every organization is going to have to figure out to what degree they incorporate virtual selling into their commercial models in the next few months. To do so, they’ll 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 a proven set of virtual selling strategies that span the eight points of the channel design compass. These are:
1. Coverage: Redefine coverage to release geographic and functional constraints to leverage talent and deliver expertise “on demand”
2. Customer experience: Increase responsiveness, personalization, and content relevance with analytics and access to experts on calls
3. Control: Redefine measurements based on activity-based measures and incentives of account health and customer lifetime value to create a common purpose
4. Speed: Increase contact frequency, volume, and the cadence of customer response to near real time by accelerating the digital workflow
5. Engagement: Improve skills and the level of customer engagement in digital, social, mobile, and collaborative channels
6. Cost: Reduce cost to sell by replacing travel, market development and events with quality digital engagement
7. Visibility: Give line sales managers and sales reps better forecast accuracy, customer engagement, account health and seller activity data
8. 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 next year’s budget.
You can learn more about virtual selling channels, and the Wharton Business School research at this link.