Nothing says “read me” like – “we need to start with some math”
One of the great challenges related to sales and marketing today is coming up with effective measures that help show cause and effect relationships among investments, actions, results, and how the combination of those move the needle on the income statement. Modeling these relationships is a fundamental requirement to move away from comparing sales teams (benchmarking) to baselining the performance of your sales force and then being able to perform what-if analysis to determine what the real drivers of sales productivity really are (and what the results would look like in different scenarios).
A common challenge I run into with executive teams is they are so time-crunched and pressured to drive results – they want to get to an answer really fast. Unfortunately, we’re looking at the sales productivity through the wrong lens and I have to earn the extra time to make my case and I imagine I will need to with you as well.
So, I like to lead with one of my favorite quotes from Albert Einstein.
” Not everything that matters can be measured and not everything that can be measured matters”
This is relevant because today with CRM systems, sophisticated financial systems, the drive for more analytics, and an increasingly insatiable appetite for greater transparency into the sales pipeline the focus on performance metrics has never been greater – but are we measuring the right things?
Simply stated – no, we are not. We are collecting mountains of data to track: activity, attendance in courses, downloads of materials, or various cuts of product-based transactions. Fundamentally – all of this data assumes a few things. 1) That the role of the salesperson is to drive transactions, 2) the value of the exchange rests with the product and 3) that more activity translates into more results.
Essentially, the types of metrics we are collecting assume there is demand in the market for our products and that the salesperson is the primary conduit to fulfill this demand. This might be true – but, the metrics are so heavily biased to a transactional / activity-based model that you cannot determine the economic contribution of value-add selling efforts.
Thus, in order to effectively measure what the sales force’s actual contribution to the value of your business (and then actually assess the real productivity drivers) is to properly example the role of a salesperson. The best way to do this is actually to ask the question “why do we have salespeople in the first place?” The door to door vacuum cleaning salesperson was disintermediated (fancy way of saying “replaced”) by a combination of mass marketing techniques and the expansion of shopping centers. Today, most of us buy appliances either by going to a store or even going online for them.
There are far more efficient ways for Whirlpool to sell you a washing machine than by hiring a salesperson in your neighborhood to ring your doorbell and try to help you see you need a new one. Why? Well – you can get whatever information you need for the appliances you need online – or at a store. The need to have a high touch interaction with a human being with specialized expertise doesn’t make economic sense for a company to invest in if you can get the information you need to make the exchange of money for a toaster.
So, the real reason you have a sales force is that they still play a key role in the value communications process between your company and your customers. There is some degree of information that those customers require that you cannot provide on your website. Therefore, in order to determine how productive our sales and marketing efforts REALLY are – we need to understand the information flow that happens over a buying cycle that allows the customer to exchange their money with your products or services. In other words, salespeople are actually a medium (interpersonal communications) no different from a billboard ad or a TV spot. The real thing you should be focused on improving is the information flow between your company and your customers. In other words, you should be focused on evaluating the value communications process.
Let’s start with something simple
I acknowledge that a “value communications process” seems pretty abstract but we need to deal with the reality that the speed, volume, dimensions, and sophistication of what information B2B businesses must share with its clients is exploding. The primary focal point for a B2B business needs to be the value exchange that results from conversations.
Conversations happen overtime
Unfortunately, few B2B sales are made with one interaction because the information required has to flow over a period of time (the cycle time). Tracking this flow of information is very difficult if you are looking to either control the conversation one-way (ie through a sales process) or only by the end results (ie a transaction). So, actually determining what the information is – let alone how you would measure is a challenging task.
Fortunately, we have an outstanding body of work that’s already been completed to build upon. In 1949, Claude Shannon and Warren Weaver published what is widely considered the birth of information theory titled “A Mathematical Theory of Communications.”
Engineers by trade, Shannon and Weaver created the model to describe the flow of information from one source to the other so they could determine ways to complete the circuit. The concept of “byte” was created for them to provide a common unit to measure electric information. The researched different communication patterns from drums in Africa to smoke signals in the Americas.
I’d get the book if you want to know more about the details – its been a great source for me to refine my thinking and test my math as well. However, there are a few foundational points we need to take away from this model.
- Sender: For us, this could be anyone. In a B2B environment – a marketer can send a signal to the same person that a sales person (who might be sending a different signal) is trying to communicate with. Thus, we need to understand all of the people sending out information.
- Encoder: This how we organize information in a way that is meant to be digested. In this article – the Volkswagen commercial would be an example of “encoding”
- Channel: How the encoded message gets to the target is what’s meant by channel. Marshall McLuhan coined the phase “the medium is the message” in 1964. What he meant was that a channel (print, radio, conversation, TV, etc) and the contents of what’s being communicated are o. Philosophical concepts aside, for our problem this is very true with sales. In many cases, HOW the sales person engages with a customer dictates the overall impression that account has of your whole company. I have a lot of proof for this I will explore in other articles.
- Noise: From Shannon and Weaver’s perspective, noise means anything that could prevent the signal from reaching its destination with clarity. Think about listening to AM radio and hearing static when you are driving and that interfering. Today, and for our problem of B2B communications, the problem is very different. The noise problem is about information overload. We will zoom into this topic with much more specifics later.
- Decoder: When you are dealing with interpersonal communications there are many factors to consider. One example, each person bring bias to every conversation and reacts different to words. Because we give our customers so many different things to react to, we don’t know for sure how they are absorbing the information. In practice, it is really hard to separate the “decoder” from the “receiver” because both are humans. For the purposes of sales conversations – let’s refer to “decoder” as for how the person translates what we are sharing with them into something meaningful for them.
- Receiver: Shannon and Weaver are referring to any receiver of information (it could even be another machine) but in our case we need to make this much more tangible. For us, a receiver is a person. What makes this increasingly difficult is that many sales processes involve many different people. Tuning and modeling out conversations with each person would create far too many permutations of nuance to calculate, but it is a reality.
- Feedback: From a strictly technical perspective, this would be similar to confirming that the other party received the signal. That would be knowing the other person picked up the phone, or today – you knowing that I received and opened an email. However, interpersonal communications are tremendously more complex. When I say something to you like “value communications process” if you don’t give me feedback on how you are understanding it – I don’t know if the meaning behind it is effectively conveyed. So, for our communication problem, we have to heavily factor in “feedback” to our model.
The key point is that all of the engineering models behind all of the various forms of digital communications today (wireless, texting, networking, social networking, video, etc) have their technical roots in this core model.
The technology is running far ahead of our tactics…
If you take a step back and contemplate how fast the advances in communications have happened over the course of humanity, I think you will be both astonished and sobered at the same time. I think this conversation between Louis CK and Conan O’Brien is a great point of reflection about how far we’ve advanced in such a short time.
It really is remarkable and the potential is very exciting. The number of ways salespeople can now have interactions with buyers is practically incalculable. The richness and power of new media that is fundamentally transforming whole industries (I am still blown away that Newsweek was sold for $1 in 2010) isn’t being fully factored into how we conceive, design, or measure our sales and marketing efforts. Shannon and Weaver defined three different levels of communication problems with this first they described as technical (layer one).
Over the past 20 years, there has been an explosion of communication innovations that are impacting how businesses communicate information to their customers and how customers can find it. In my first sales job out of college in 1992, I sold industrial supplies to various maintenance departments in huge buildings, factories, and government agencies. One of the products I sold was called the “handy bundler” and I sold this for $100 each, but the exact same thing could have been purchased for $20 at Home Depot. That was because I had way more information than my customers. Today, there’s no way I could get away with it. Those buyers today would have a simple web-based app to look up the product or service and have it delivered to them the next day. Think of all of the digital ways sales people can engage and how buyers can find information.
All of this innovation is behind the total explosion of sales and marketing technologies we’ve seen over the past 10 years. However, one of the core design points companies have when trying to implement and operationalize these platforms is that they expect to drive more sales transactions. When the expected results fail to materialize, more metrics and demands are put in place. Unfortunately, the problem isn’t with the technology its with the two other communication problems that Shannon and Weaver envisioned: semantic problems and effectiveness issues. In order to understand the effectiveness issue, we need to understand the semantic challenge.
…and we’re increasingly divided by words
A former customer and friend of mine, Tim Lambert used to say that a scene from Seinfeld can describe any business problem and I want to help prove him right. If you know the episode where Jerry commits to wearing a puffy shirt on late night TV, where he actually agrees to it is an exaggerated example of a semantic communications problem.
A real-world example if this is where your salespeople have no idea what your customers (or sales engineers) are talking about. In today’s complex buying environment it is not uncommon for buyers from different groups to talk past each other as well.
Why Should You Care?
Am I advocating everyone in sales and marketing learn the Shannon-Weaver model, then develop a variety of engineering level algorithms to model out and accurately measure communications? Of course not. I want to establish a few things.
- Imagine how silly you would feel if you were the last vacuum cleaner sales force arguing for more coverage and headcount? Yet, today companies still have a static sales resourcing model tying headcount to revenue.
- Look at how quickly the effectiveness of mass advertising improved once they started applying the RIGHT science to the field? Yet, today sales are still transactions and we try to montoir results based on models developed by accountants. (Note: wrong science).
- Imagine how much potential there is to STOP viewing sales and marketing as two separate organizational functions and START putting their talents together to find entirely new techniques and methods to communicate by leveraging different forces of communication.
- Think about the massive improvements in overall productivity where some value communications processes can be moved to a more streamlined and less expensive model. Or imagine the efficiency gains with your strategic accounts teams are actually resources and supported well enough to massively expand your footprint within those accounts? Now – imagine doing both! It’s possible right now.
But, in order to accomplish that – you need a framework and approach to “see” it, measure it, and help collaborate with other people inside your company. So – here is a simple Audience, Message, Messenger model I’ve used quite successfully to bring many large organizations together. Here’s how you do it.
Step one, understand the audience
Since B2B sales (and the whole value exchange between buyer and seller) is so much more complex than other business processes, we need to make sure the semantic communication problems are more predominately factored into the flow. Since we are selling, we should first model our target customers (I call it modeling the customer’s agreement network) and really understand the information they require in order to see enough value from your company in order to make an exchange. To make this even easier, I’ve worked with a lot of people to create different buying archetypes to help determine these informational requirements and these are based on 1500 surveys and over 300 interviews with executive-level buyers (shameless plug to capabilities).
Step two – organize your value messages in such a way that’s most consumable for your audience
Your value message is a combination of all of the products and services a given customer type might buy from you, your pricing strategy, and also all of your positioning messages. You will then need to determine a common set of reasons that an audience type will by from you, organize the mountains of disparate content that exists across your organization into useful categories for customers, and then make sure all of that information is consistent in tone and voice in order to avoid semantic communication problems. Some businesses today are still applying a checklist approaches to creating various forms of content. Because these checklists (for example an old product launch checklist or perhaps an inventory of assets to create from a strategic consulting firm) are following traditional thinking, they don’t factor in the huge communications shift that’s occurred over the past 10 years. As a result, the volume of resources created following the checklist approach actually creates noise to the sales force in the form of information overload. NOTE: The responsibilities to create all of these things are so distributed throughout your organization that it’s going to be impossible to catch the massive disconnects you are sending on to your customers (and salespeople). I have a variety of tools to help create an inventory for these disconnects, methods to address it, and even have some workshops to help get everyone involved on the same page.
Step three – determine the right type of messengers who can match audience with the right message patterns to complete the value exchange
Regardless how skilled (or well trained) a salesperson is to have a conversation, it still needs to be about something – so it is very important they have the right messaging strategy and supporting content. However, even if you have all of the right content if a salesperson isn’t able to artfully connect it to a given audience – the information those buyers require will be either delivered or effectively decoded. As a result, the value exchange will not occur. For example, a CMO (audience) who is looking to implement a complex omni-channel digital marketing strategy might be interested in your company’s approach to helping her transform along the recommended path you’ve helped guide other CMO’s through (message). That CMO isn’t going to be able to hear that message if the salesperson (messenger) is too focused trying to show the features of one of the many products involved in the approach and pushing for a buying decision because he’s got a monthly quota commit. Interesting enough – most sales assessment models do not factor in the type of conversation they need to have or what relationship they need to build to drive the most value. To assist here, we’ve developed a sales talent assessment model based on different customer types.
Step four – measure the process over time and the quality of the signal being conveyed
If you know the general decision-making process (NOTE: NOT buying process) the audience will go through, have the right messaging strategy and the right sales talent (and developmental plan) you can measure two different things. The first thing you will want to do is break down the customer’s decision making stages into a handful of binary and verifiable steps. This will allow you to objectively track how well the messengers (sellers) are engaging with your audience and providing them with the information they require to meet a milestone on their journey to success. (Note: I’ve developed a framework for this I refer to as “four selling objectives” that I use to radically improve forecasting accuracy and also massively simplify the burden of sales reporting).
The second thing you will need is a way to measure the quality of the interactions between the sales people and the buyers. What you want to track is how well the sales people are exhibiting behaviors that help their audience accomplish specific milestones and to the degree the messages resonate. Both are important to capture and track at both an individual level and across an entire sales force if you are going to create the right feedback loops to provide continuous improvement. (Note: This is addressed through a model called the “value equation” which helps provide some common structure to salespeople and their managers and a way to help critique the messages.)
BOTTOM LINE: Activate Profitable Growth by Tuning Your Value Communications Ecosystem
Just as the Shannon-Weaver communications model provided the catalysts for explosive growth in communications, the value communications process lays the foundations for accelerated, profitable revenue growth. Why? First, by shifting the focus from figuring out what you should communicate based on your products – to understanding what outcomes your customers want to achieve, your company will be far more differentiated. Secondly, your company is spending as much as 15.9% of its SGA expenses on random acts of sales support. By having a common model for it, you will be able to significantly cut those costs by eliminating redundancy and also improving the overall quality of those resources. Thirdly, knowing what the talent profile required to engage with your targeted buyer type makes the whole process of hiring, on-boarding, managing, developing, and evaluating your sales force so much easier. Finally, armed with simple, objective, and verifiable metrics to help move customers through decision-making milestones and a measurable way to evaluate how well your messages are received creates a continuous improvement cycle focused on adding value to customers. As a result, you will win more customers who will pay premium prices; you will spend less money supporting the sales force and it will be higher quality, you will be able to scale your sales force based on market needs, and continuously improve the productivity of its execution.