Wednesday, March 6, 2013

4 Layers of the Revenue Roadmap - Connecting Your Sales Strategy and Compensation.

The Four Layers of the Revenue Roadmap: Connecting Your Sales Strategy and Compensation

When thinking about sales strategy and sales compensation, it’s critical to have a framework.
The Revenue Roadmap identifies four major layers, or competency areas, and 16 related disciplines that must connect for the organization to grow profitably.

LAYER 1 - Insight

The first layer of the Revenue Roadmap, Insight, informs the organization about customers, the market, competitors and how the business is performing. Insight is the highest level competency. It involves understanding the voice of the customer, the macro market, competitor moves and performance, and the performance of the business. That understanding will drive certain decisions to the next downstream level, which is Sales Strategy.
Listening to the voice of the customer is a critical starting point. Sales leaders must understand the needs and expectations of their customers and their own performance relative to those expectations. That insight allows leaders to see any gaps and determine where they can improve value proposition, sales coverage, and the sales process.
Sales leaders also need to consider what’s going on in the macro market environment, especially as it relates to their industry. Certain shifts in the economic environment can, over the long term, drive decisions about the sales strategy and how they might plan for where the market is going, as opposed to where they are right now.
In addition, it’s essential to know how competitors are performing from a growth and financial perspective. Sales leaders also have to understand their competitors’ offers to the market and how competitors are positioning their products and services.
Finally, sales leaders should look at the company’s historic and projected revenue and profit performance. This evaluation should consider whether growth has come through the retention of current customer revenue, the penetration of customers through increased usage or additional products, or the acquisition of new customers. By understanding the business performance, they can see where they’ve been strong and where they’ve been weak, and they can adjust their sales strategy accordingly.

LAYER 2 - Sales Strategy

The second layer, Sales Strategy, defines the sales organization’s action plan to achieve its goal. The sales strategy will drive decisions concerning product and service focus, concentration on certain markets (i.e., segmentation and targeting), value propositions, and the resulting approach to market.
First and foremost to the strategy, it’s critical to define the core and strategic products and services the business provides. In many companies, these are developed based on the needs of certain customer segments. Too often, however, products and services are internally driven and may not align naturally with customer needs, requiring a significant change in the offer or value proposition.
The organization determines how it will organize and prioritize customers and prospects through its segmentation and targeting. The most effective segmentation and targeting considers characteristics such as customer industry, sales potential, profitability, common needs, and overall fit with the sales organization’s business. It’s important that segmentation and targeting flow into a plan that’s actionable by the sales organization. Simply defining the segment at a high level is not going to answer the sales rep’s question: “Who do I go see on Monday morning?”
The value proposition goes beyond what the sales organization communicates to customers and articulates the organization’s understanding of the customer’s business and issues, what the organization can accomplish for the customer, and how the organization differentiates itself from the competition. The highest level value proposition is usually communicated at a company level. To be effective for sales, however, the organization must convert its value proposition to sales messages that can be communicated at the segment level, customer level, and deal level to adapt to changing situations and customer needs.
Finally, when developing the approach to market, sales leaders should incorporate decisions about products, services, target segments, value propositions, and potential sales resources into a plan that can be executed by the sales organization. The Customer Coverage layer converts that plan into action.

LAYER 3 - Customer Coverage

Customer Coverage, the third layer, identifies how the organization will use its channels, roles, processes, and resources to go to market.
Sales channels outline the overall routes to market, whether they’re third party companies such as resellers, referral partners, or retailers, or whether they’re part of the company sales force, which could include a range of sales jobs. Sales leaders need to base the selection of their sales channel mix on factors like how the customer prefers to buy, how channel partners might improve the overall product offer, their ability to reach customers in different markets, and the financial efficiency of using lower cost channels to reach certain customers or conduct certain types of sales or service transactions.
Within sales roles and structure, sales leaders must consider the types of sales and support jobs they’re going to use and how the organization is structured around those jobs. Sales jobs typically align to customer segments and can range from global account management to field sales to inside sales. The structure may be developed around key segments—for example, the telecommunications industry or major accounts. It may also be defined around certain geographies, functional roles, or some combination.
Sales channels and sales roles integrate with the processes for working with customers. In fact, the best customer coverage models are built from the customer’s buying process with a sales process and roles that reflect how the customer prefers to work. Sales processes lay out the common approaches for how the sales team identifies prospects, qualifies opportunities, develops solutions, manages the momentum, closes the sale, and implements the product or service for the customer. While sales processes vary widely even within a single sales organization, it’s important to define the optimal or preferred sales process as a foundational point for the organization to manage and optimize performance.
Sales deployment maps the feet on the street and the level of sales resources needed for each of the sales roles by geographies, segments, or other forms of account assignment. Deployment is typically guided by a combination of sales capacity (available sales time and workload) to manage current accounts or sell to new accounts, sales role and customer alignments, and logistical factors like geography and travel patterns.

LAYER 4 - Enablement

Enablement, the final layer of the Revenue Roadmap, supports all of the upstream disciplines within Insight, Customer Coverage, and Sales Strategy. Enablement includes areas such as incentive compensation and quotas, which aligns sellers to the sales strategy. It also includes recruiting and retention, which define the current inventory of talent and determine how the organization is going to attract and retain the right talent for the long term. Training and development builds the capabilities of the organization for people currently in their jobs and for those in junior roles who will progress into key sales roles. Tools and technology provide leverage by enhancing the effectiveness of gaining Insight and implementing the organization’s decisions around Sales Strategy, Customer Coverage, and Enablement.
Jeff Connor, chief growth officer for ARAMARK—a global provider of food services, facilities management, and uniforms—is involved in the sales compensation process. He says:
People confuse incentives with alignment, and they jump to incentives as the answer, as opposed to the hard work of alignment. When you look at the Revenue Roadmap, sales and incentive compensation is at the bottom. In my experience, when you talk sales compensation, everybody wants to just take big business objectives and assign incentives, as if the salespeople will go after anything where there’s a buck.
In reality, anybody who’s ever worked on sales comp knows it doesn’t operate like that. The alignment work—getting the correct insight, aligning it to the sales strategy—has to happen first. The last thing you do at the end of the day is work on the incentive plan. Confusing incentives for alignment happens all the time. People just go right to the ideas without understanding context. I think this idea of alignment is really important.
The Revenue Roadmap helps a company to align its strengths and ensure that everyone is firing on all cylinders. While it begins with Insight, all 16 disciplines in the Roadmap are connected, and the decisions and actions flow from one to the next. When looking at sales compensation, it helps to know where it fits within the overall framework, downstream from Sales Strategy and Customer Coverage. That’s why issues in the upstream disciplines show up as symptoms in the sales compensation plan.
Sales compensation is inextricably connected to the other disciplines. For example, think about the document imaging business—copier companies. Over the past several years, they’ve gone through a major technological change, transitioning from analog equipment (copiers that make black and white copies) to digital networked equipment (machines that are connected to IT networks). That fundamental shift in technology has created a shift in the industry’s business model, which has created a shift in its sales model.
In the days of analog copiers, Joe the copier sales rep would typically sell a copier to the office manager. That sales process was pretty transactional. He’d canvass office parks trying to get past the receptionist to find the buyer. He’d usually close the sale in a week or two, most likely by dropping the price of the hardware. His company would make it up later, selling supplies like toner and services over the term of the contract.
But Joe can no longer do that with a digital copier. Now he needs help explaining how the copier will integrate with the company’s IT system. He’s also not going to sell to the office manager anymore. Joe now will sell to the IT manager or perhaps the owner of the business. Or, Joe may sell to a team that’s been put together to develop a request for proposal (RFP) on a document imaging system. In addition, he needs to elevate his value proposition and make the business case for why the customer should make a sizable investment with his company and how the customer will see a return on its investment.
That fundamental shift in technology has changed Joe’s sales role. It also changed the sales strategy, because the buying process is extended out further. Joe no longer goes in and makes a sale in a week. It may take him three months. It’s a much bigger sale, but it’s going to take a lot longer. The sales compensation plan needs to fit.
In this situation, looking at the Revenue Roadmap, the offer to the market has changed the Sales Strategy. The value proposition has to shift as well as the approach. The Customer Coverage also changes. The sales roles likely evolve; Joe now has a systems engineer to work with him because the engineer understands the specifics of the technology that didn’t exist before. But having a systems engineer isn’t enough. The organization must evaluate its current inventory of sales talent as well, including Joe, to determine if these people have the skills required in their new sales roles and if they need to be trained, coached, or replaced.
As the organization makes those changes, the sales compensation plan starts to pop like a circuit breaker. If this company has a compensation issue—perhaps people weren’t hitting their quotas or people weren’t earning as much or as quickly as they used to—it’s likely because the plan was designed for a different sales model.
The incentive plan for the analog world was a fast cycle compensation plan that supported a quick sale. Because Joe could make a sale in a week in the analog world, he probably had an aggressive commission-based plan with a lot of pay at risk. That plan promoted aggressive selling behaviors. But now Joe meets with a customer and tries to sell a complex networked product that requires the evaluation of an entire customer sales team and may take three to six months to sell. If Joe’s rhythm is geared to a one-week sales cycle because he’s motivated by a very aggressive commission plan, guess what will happen? The sale will break down, and he’s probably going to lose it.
These are the kinds of inconsistencies to look for as the upstream and downstream alignments shift. We see this situation play out over and over in different industries, from technology to manufacturing to business services. Where the business evolves, sales evolves as well, and sales compensation must evolve to support that change.

The author of the aboved writing: Mark Donnolo



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