Let's talk about sales growth and Taylor Swift
Podcast transcript from McKinsey
Barr Seitz: Hello, and welcome to the McKinsey Podcast. I’m Barr Seitz, global publishing head for McKinsey’s Marketing and Sales and Digital Practices, and I’m very happy to introduce our two guests today: Mitra Mahdavian, an associate partner in our Marketing and Sales Practice, focused particularly on tech in sales, and Maria Valdivieso de Uster, the director of knowledge for the Marketing and Sales Practice and coauthor of Sales Growth: Five Proven Strategies from the World’s Sales Leaders (John Wiley & Sons, May 2016), which has recently come out in its second edition. I’ll be talking to Mitra and Maria about how sales can drive growth, what strategies work, and how sales is evolving in today’s digital world.
Let’s talk about sales growth
Maria, the first question is for you. I was walking past the bookstore in an airport the other day and saw at least a dozen books on sales.
Does the world really need another book on this topic?
Maria Valdivieso de Uster: Hi, Barr. Yes, I think the world needs a new book on sales growth. This book is a conversation with more than 200 leaders across different organizations. It’s for sales executives and sales management, and it provides strategies and tactics that are proven on how to drive growth
Seitz: Great, so growth is certainly a topic that’s getting a lot of attention, particularly with the economic climate being so challenging. But, Mitra, there are companies that are still able to grow, even within the constrained environment we are in today. What are they doing that the others aren’t?
Mitra Mahdavian: It’s an interesting question, Barr. We did a lot of research, both an extensive survey of sales executives and many interviews, and
we found that there were five practices that shine through that differentiated the fast-growing companies from the slow-growing companies.
1. they find growth before their competitors do. So they invest in identifying growth opportunities, whether through understanding trends or drilling into big data or finding pockets of growth in their existing markets
2. they sell the way their customers want to buy. They use multiple channels to reach and serve customers of all different sizes and different markets. And they optimize and organize across direct, indirect, and digital channels very efficiently.
3. they soup up their sales engines, and especially, they invest in sales operations, presales, and the alignment between marketing and technology to fire up and build their engines for growth.
4. they focus on their people. This one goes without saying, that there’s a need to spend time training, coaching, and mentoring the frontline sales teams and to balance that between both the drive for near-term growth and building longer-term capabilities for the field.
5. they lead from the top: they invest in and gain commitment from the organization and are able to build the vision for their change and their plans from the executives and from the top down—but they also invest in change management and implement change from the ground up.
Barr Seitz: That’s a great overview of what the book covers and what sales leaders are able to do. In all those areas, what are the one or two that stand out for you, where sales leaders differentiate themselves?
1. One was the deployment and use of technology and analytics. We found that sales executives are continuing to invest in deploying analytics and technology to make their sales teams more productive, both in the front end of sales—digital channels, ecommerce capabilities—and in the back end with capabilities for their planning and sales operations. That was a clear theme that emerged.
2. The second was people. We know from our own research and the time we spend with our clients that talent and sales talent is always a critical topic, but we were surprised that many of the executives that responded to our research felt that they still didn’t have the capabilities they need for growth. And they still haven’t even been able to identify some of the capabilities they need for the future, and how they need to be moving their sales teams.
Maria Valdivieso de Uster: The one that also stuck for me is investing for future growth – companies and sales leaders are so busy thinking about the quarter and the annual quotas that it’s hard for them, but they push themselves to think about where growth is going to come from ten quarters from now.
What are some of the trends around technology, around demographics, around regulation, and how is that going to affect their current business and their future business? They are bold enough to invest in a current budget to capture that. We saw that fast-growth companies invest between 4 to 6 percent of their sales budget to capture future growth.
Barr Seitz: I imagine that future growth outlook depends a lot on analytics and digital, as you were pointing out, Mitra. That’s a key feature. Maria, in the first edition of your book, you cover digital and analytics, but the changes we’re seeing in those areas weekly, if not daily, highlight how much has changed since that first edition came out. Emphasizing the extent of that change, you open a chapter citing Taylor Swift. I’m going to ask a question I never thought I’d ask at McKinsey: What can sales leaders learn from Taylor Swift?
Maria Valdivieso de Uster: She is incredible at managing an omnichannel strategy. That is, she’s able to have fantastic engagement with her fan base, and she continues to build her fan base through her social-media channels.
At the same time, her concerts are phenomenal, money-making events. Then on top of that, she’s very good at figuring out what channels are going to work for her and which ones are not—so how she leverages iTunes and other channels for her benefit. I think she’s phenomenal at that.
What companies are struggling with in today’s world is how to create a seamless, omnichannel experience for their customers. Customers expect to be able to access products and services through a variety of channels: some of them are direct channels, some of them are third-party channels. But they’re expecting the same service levels, and they’re expecting that you—as a vendor, as a company—are able to understand them through all these different channels. That creates complexity, and it also creates cost. But we’ve seen that winning organizations are able to capitalize on omnichannel strategy.
Mitra Mahdavian: And that’s increasingly true with the modern buyer and the way customers want to buy today. We found the top channel for B2B buyers, when they’re doing research on what they want to purchase, is just an online search—the Internet.
We also did some research on B2B decision makers, and you wouldn’t be surprised to know that they’re always on for business, even during their commute, their evenings, and their weekends. They spend a lot of time on their cell phones and tablets, doing research on business products via their personal devices. More than ever, that omnichannel presence for B2B buyers is important in reaching target audiences for all companies.
Barr Seitz: What’s interesting about this point with integration is that it’s a theme that comes through in the book a number of times. But I was particularly struck by the point with presales, which is often overlooked. In presales, to really function, it needs to be an integral part of the sales pipeline. Mitra, can you tell us what presales is, and what its value is?
Mitra Mahdavian: Presales is a dedicated team of experts that spend their time on a mix of technical and commercial activities. Let me give you some examples: things like crafting solutions for customers’ problems or managing deal qualification and bid.
We found that companies that invest in this capability are able to achieve win rates of 40 to 50 percent in new business and 80 to 90 percent in renewal business, well above average rates of what we see with other companies.
What enables companies to achieve that kind of success is that they’re able to better deploy their resources against opportunities that matter. They don’t just identify leads; they spend the time to qualify and do the prework to understand which opportunities are going to provide the highest results, typically by doing advanced analytics or using historical trends as predictors.
Another opportunity in presales is submitting bids. We found that many companies end up not having acted on leads, even a few days after they’ve been submitted. Companies that have invested in presales are able to more effectively deploy resources against those leads and act on them more quickly. That integration of activities and deployment of resources—with some digital and technical abilities to make them more efficient and intelligent—is what allows those companies to capture additional growth.
Maria Valdivieso de Uster: One of the things I would add is that presales resources tend to be expensive, and you have to be mindful in how you align them and assign them to different projects. Many of the clients that I’ve worked with and many of the companies we interviewed—they’re thoughtful as to understanding what deals are competitive, which ones are strategic, and which ones are complex—and they develop a formula to assign resources based on need. Alternatively, you can end up spending in the wrong places, and you can end up decreasing your sales through that.