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Closers, Industry Dynamics, and Improving Revenue

March 2003 Marketing, Selling

When prospects’ decision cycle elongates towards infinitum and the overall revenue stream turns into a trickle, many an executive has turned to his team and definitively stated: “What we need is a closer.”

The first reaction by the executive team might be to attempt the fulfillment of his request. The executive team might review the unsolicited résumé file, write job requirements, contract headhunters, and search for the right resource. Alternatively, the executive team might examine courses that promise to train the existing sales team on how to close more sales. Money and time is expended in order to achieve results and hopefully they are achieved, but sometimes the challenge is greater than re-engineering the sales force.

To get a clear understanding of the causes and solutions to long sales cycles and low revenues that are being reported across the technology industry requires examining the economics.

Industry Economics

During the late 90’s, technology spending increased at a CAGR of 7.8%. For 2003, consensus forecasters predict technology spending to increase at 1% while investment banks range in their forecasts. Goldman Sachs anticipates spending to decline by 2% to 3% while Lehman Brothers anticipates spending to increase at 3%. Meanwhile, the overall GDP is anticipated to increase at 2.5 % during 2003.

These economic figures highlight the fact that the technology industry has exited a high-growth phase and has entered a mature phase. As the technology industry enters maturity, challenges to technology spending and their associated revenues shift from supply constraints to demand constraints.

Supply and Demand Constraints

In a supply constrained market, industry revenue growth is much greater than overall economic growth. Firm’s revenues increase according to their ability to attract talent and produce goods and services that meet the market’s demand. Revenue increases are associated with overall industry growth. Sales and marketing’s function is to contact prospects and close sales. And, sales and marketing is often lead by Strategic Sales.

In a demand constrained market, industry revenue growth is in line with overall economic growth. Firm’s revenues increase according to their ability to attract and retain customers. Revenue increases are associated with taking market share. The function of sales and marketing’s shifts towards communicating the value proposition in a compelling manner. And, sales and marketing is more often lead by Strategic Marketing.

Winning in Demand Constrained Markets
Closers are valuable, but competing and winning in demand constrained markets requires companies to increase their sophistication in managing the sales and marketing effort. Some of the steps that winners take include:

  • Communicating the value proposition transcends features and attributes and enters that of benefits and higher level values.
  • The emotional sale that salespeople are trained to manage is matched by the logical sale that delineates the business value.
  • Product and service positioning continues to be in relation to solving customer’s problems and broadens to include points-of-parity and points-of-differentiation with respect to competitors.
  • The value proposition of a product or service is communicated through multiple channels to re-enforce the buying vision in the manner most receptive by individual prospects.

While sophistication in sales and marketing increases in demand constrained markets, the budgets for managing sales and marketing are often held constant. To meet these requirements of increased sophistication and constrained budgets, the sales and marketing effort has to shift customers towards low-cost, economically efficient channels. These economically efficient sales and marketing efforts integrate low-cost-per-prospect broad marketing efforts with high-cost-per-prospect direct selling efforts.

Conclusion

To manage the longer sales cycles associated with a mature market, the “shooting from the hip” solution might be to get “closers” on the sales team, but the “ready, aim, fire” reaction calls for improving the marketing effort beyond brochures and websites towards supporting sales throughout the client development activities.



About the author

Tim J. Smith, PhD is the Managing Principal of Wiglaf Pricing, and an Adjunct Professor at DePaul University of Marketing and Economics. His most recent book is Pricing Strategy: Setting Price Levels, Managing Price Discounts, & Establishing Price Structures.

Tim J. Smith, PhD
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