Sales Is The Company Driver

…But Don’t Ignore The Changing Marketing Landscape

Without sales, no company can survive. However, making positive sales decisions has become even more important and complex as we move deeper into the second decade of the 21st Century. For small business leaders, the changing marketplace has wrenched them away from traditional sales models and into a whole new world. Personal sales have morphed into a multi-media environment where the Internet and the resulting “apps” have replaced the personal touch that was a keystone of small business sales.

Against this background, several trends have emerged:

• The purchasing decision-making process has lengthened
• The telephone is no longer the prime source of leads and sales
• The printed Yellow Pages have lost their drawing power for small businesses
• Getting an appointment to see a prospect is twice as hard, by some estimates, as 2005
• Financing is tight
• Competition is fiercer and from further afield

Balanced against these negatives are positives:

• New channels are often cheaper to enter than in the past
• Tools are now available to better manage the sales process
• New marketing outlets are opening on local, national and even international levels
• Channels to these marketing outlets recognize the importance of small business advertisers
• The geographic sales footprint has doubled in just a few years and is still expanding
• Sometimes buyer decisions are impulsive or urgent, and new technologies permit small firms to be there when needed
• Changing environments offer opportunities, as well as challenges

For the past 10 years, Information Strategies, Inc. (ISI) has monitored—through quarterly surveys, online audience reactions and focus groups—the changing tactics used to succeed in the landscape where small businesses sell.

During this period, we have watched as business leaders succeeded and failed, primarily through their efforts to manage the sales process. We have seen them in the good times (2004-2007) and the bad times (the past four years, 2008-2011).

Specifically, small business leaders have struggled with:

• Learning about and using new sales channels
• The demise of once easy-to-use and effective sales channels
• The changing ways customers research and choose their purchases
• Technology that puts up new barriers to sale
• Evolving demographics
• Foreign competition
• Recessions
• Tight money
• New payment methodologies
• Workforce changes

All of these factors have posed challenges that needed (and need) to be addressed. These factors have also required small business leaders to change their management practices.

No challenge is more difficult than managing the sales effort. One example, as shown in the following chart, is particularly noteworthy. Notice that small business leaders have devoted almost double the amount of time to Internet-related activities in just five years. Digging deeper into these numbers, it’s evident management is switching the sales focus from personal selling to online venues. Unfortunately, the metrics that measure successful Internet sales efforts are still evolving and, as they do, many small businesses have wasted important dollars on useless sales tools.

The chart also reveals the consistency of management time devoted to marketing and sales, which reflects the perceived separation of these functions from Internet-related activities. The striking switch from infrastructure management, physical plant and equipment to the Internet highlights the trend to place more IT-based functions into online categories. These figures show the impact the Internet is having on small business operations. The sales focus switch from personal selling to online venues is another notable trend.

Below is a chart demonstrating the changes over the years ending in 2011.

This chart also reflects the changing roll of the Yellow Pages in the small business sales mix.

For decades, the Yellow Pages represented a significant source of revenue for generations of small business leaders. These fat yellow books offered an easy-to- use vehicle for clients and businesses. Today, that vehicle is as outdated as black and- white televisions.

Unfortunately, for many small business owners, the Internet is new territory, and the rise of the Internet and e-Commerce is changing the way we sell in America and around the world. A key decision matrix being wrestled over in many small businesses today involves replacing the Yellow Pages with online efforts at a time of rapid transitions.

Until recently, companies usually used one or two main channels to sell their products or services. With the explosion of media and the downsizing of personal sales efforts, the sales picture and management matrix has become much more difficult to decipher. As a result, many small businesses discover, sometimes too late, that sales are not as profitable as they thought.

Traditionally, a product or service profitability model included cost-of-goods sold, marketing expenses and other tangible measurements. By factoring in overhead and other ancillary expenses, a profitability model could be constructed, as most costs were finite and somewhat predictable.

With the advent of new media such as the Internet, there are new variables small business leaders are learning about through an often painful and expensive experience. Whether the marketplace is local, statewide, nationwide or international, sales efforts are rapidly changing. Old models don’t work and new models have yet to be measured by proper, consistent tools.

The good news is that the Internet has broadened the sales footprint for many companies.

In fact, when ISI first began measuring and reporting on small business activities in 2001, the average sales footprint was less than 35 miles. Today, the average footprint is more than 70 miles and rapidly expanding. Most of this expansion can be directly attributed to the Internet. These changes apply to companies who once thought they only serviced local clients.

As Groupon and other bargain-rate providers have demonstrated, local has a much broader meaning today. At the same time, providers such as Google, Verizon and others are increasingly focused on providing local advertising offerings geared to geographic areas.

It’s now possible for a local dry cleaner to utilize the Internet to reach only those customers located within 20 miles of its physical location.

Another example is the explosion of mobile advertising geared to so-called smartphones. Today, small businesses are just coming to grips with mobile advertising and “in place” advertising. This trend, providing smartphone users with instant information based on where the recipient is physically located when a query is dispatched, is also frustrating to small business leaders. A short example: Smartphones can deliver information on restaurants, dry cleaning establishments and hotel availability that is limited to an individual coverage area from the phone’s location. More “apps” are coming. The bad news is that many companies are unsure how to accurately measure the true costs of sales and marketing, as changing sales channels are not solely driven by the Internet.

As a sales director once told us: “You eat what I kill.” While not a very pleasant sounding simile, he was right. Sales do drive the company, and salespeople are the front line troops. They are still an important cog in the sales wheel and need to be looked after and nurtured.

In summary, sales are good:

• Sales are the company drivers
• Without sales, no company can survive
• Every product or service must have a sales component
• New tools, such as the Internet, can build sales
• Additional sales are nice, but only if they are profitable

Not all sales are created equal. In the Midwest, there exists a company with a unique niche in the marketplace. It provides very light material for jackets, dresses, tablecloths and a host of other finished garments. It has been largely immune to competition from Asian competitors because its products are light but bulky. The overseas transportation costs make the product expensive to produce and ship long distances. For years, it has been able to keep significant market share because of this built-in geographic advantage.

In recent years, and particularly as the recession has drastically reduced bulk and container shipping rates, this advantage has been eroding. Seeking to diversify, the company moved up the cloth density in an attempt to expand its markets. This idea was in line with what most advisors would suggest; however, with the higher density, the firm’s geographic advantage disappeared.

After careful preparation and with encouragement of potential buyers, the company entered these new markets with an aggressive sales program aimed at competing directly with Asian providers. Overall sales increased and the owners were pleased. Then, the competition started to cut prices to meet the new challenger. Undaunted and prepared for such a move, the company met competitor prices.

After two years, the CFO quietly showed senior management the company was losing money on every bolt shipped. What went wrong? In the drive for sales, company leaders forgot to check the bottom-line on these sales. What’s more, they had taken their eyes off of their main product line.

The moral of this tale is simple: Additional sales are nice, but only if they are profitable.

Every product or service must have a sales component. But sales must be profitable before they can drive the company’s growth. Information Strategies, Inc. research has often detected neglect of the sales process is one of the most significant factors in growing or losing a small business. In many cases, and for a variety of reasons, small business leaders have taken their eyes off of this vital area, often to their sorrow.

There are many reasons for these happenings, including:

• Company leaders concentrate on keeping finances in balance, with little time for sales
• Company leaders get tired of being the rainmakers and give the role up to others
• Sales are not their primary area of expertise
• The sales effort and client contact devolves on one or two salespeople
• The company stops listening to its customers
• The real cost of producing and selling a product or service is ignored
• Reliance on one or two major clients and efforts to diversify are desultory
• The personal touch in sales and service is neglected
• The company does not adjust to the changing landscape or environment

There are other reasons, as well, but the key finding is that small business leaders somehow lose sight of the sales effort. The results are stagnant or negative growth and possibly even disaster.