Do we even need outside sales reps today?
Outside account executives are an expensive proposition whose statistical effectiveness is falling. Many CEOs and CFOs I speak with are frustrated with the results, and they resent the costs associated with salespeople often identified as “road warriors”, “big hitters” and “closers”. More and more frequently, companies are opting to replace outside account executives with channel partners and/or more (less expensive) inside sales resources. In fact, according to SalesLoft, inside sales is growing 15 times faster than outside sales. I’ve even seen major initiatives at Fortune 50 companies to develop the means to eliminate outside sales executives altogether.
Perception Problem or Real Issue?
As someone who has been and managed enterprise salespeople for over 20 years, I’m a little sensitive to this debate. The notion that you can eliminate highly skilled and experienced outside reps handling complex deals worth millions and even tens of millions of dollars, baffles me. However, whether you agree or not, let’s acknowledge that something is going on that is grounded in reality and not just an issue of perception – B2B sales and account executives aren’t working the way they have been for many years. There’s a couple factors that go into it.
(1) Buyers are unimpressed – Buyers are frustrated and overwhelmed. About 75% of buyers say they want to skip face-to-face interaction with a sales rep altogether. They would rather rely on technology to close gaps in product and service knowledge and if they have to interact directly, are happy to do so via webinars and videoconferencing. Further, they assert sales reps aren’t capable of understanding the problem the buyers are trying to solve and then how the product might address them. What they’re doing is pushing their own agenda and pitching feature and function.
(2) These numbers don’t lie – The percentage of account executives in B2B sales that are making their quota each year is dropping. It’s been falling for five years and is now down to 53% of account executives making plan. In addition, inside sales teams often cite 40-90% lower customer acquisition costs. This data frequently winds up senior management.
(3) Perceptions feeds detractors – Effective outside sales reps have outstanding people skills and are typically ambitious, self-motivated and results-oriented. They see themselves as “drivers” as do others, which can certainly rub some people the wrong way. They are typically male (74% of outside sales reps are male versus a more even split of 56-44 male-to-female for inside sales) and have more than 5 years’ experience. They are paid significantly more than an average inside salesperson and close deals – on average – about 40% of the time.
With that in mind if you’re a senior finance executive or a senior leader it’s hard not to look at an outside sales organization and say, “Can’t we be doing something to make it perform better and take some cost out?”
What’s the Right Mix?
If you have a nagging feeling that you are too dependent on the big hitter with the million-dollar Rolodex (this already sounds impossibly dated as I write it) to bring in deals, you may well be right. Ask some of these questions.
Transactional or Transformative? Buyers don’t need face-to-face meetings to get more information. In fact, they resent it as a waste of time, particularly if your representative is hawking features and functions. If your buyers are small to medium sized businesses with lower price points, lower LTV (life time value), they are more transactional in nature and can likely be handled by inside sales for the entire sales process. However, if your product or solution impacts many stakeholders (IT, engineering, marketing),requires integration of a complex technology stack, promises to deliver 10x better service or new business models, the game has changed. You need problem solvers who are capable of talking to executive level decision makers face-to-face, understanding the outcomes they need and winning their sponsorship.
Non-Strategic or Strategic? Do you use strategic account planning? Most companies have no formal approach for strategic account planning. These companies report their win rate on forecast strategic account deals was 7.7% lower than the average win rate for all forecast deals. You may not need strategic account planning if your business is not defined geographically or by size of buyer or the deal. What would it mean to lose a renewal / expansion opportunity from one of your top 10 accounts? If you are like most companies, and the top 20% of clients yield 80% of revenue, you may need to look at strategic account planning more closely and an outside sales rep may be a better option to develop the relationship with those important buyers.
Simple or Complex? Is your product and service provided customized or is it a standard offering? Do you use on-site assessments, interviews and collaboration or is your information gathering and fulfillment done remotely? Is your sales cycle defined by hours and days or weeks and months? The answers to these should guide your mix of inside or outside sales reps, though in complex cases also point to the need for more solution architects.
What we’ve got to be focused on is increasing the effectiveness of salespeople, particularly the outside salespeople:
- They’ve should be spending less time on tedious tasks.
- They’ve got to have more data and tools (AI).
- They must be problem solvers who are capable of executive level conversation.
- They must be focused on the right accounts and opportunities.
How do you figure out the right answer for your company?
Despite the desire, there is not one answer that fits all companies. What has worked best for me is to start on the quantitative side of analysis. What are the KPI’s for the organization and the sales reps? Examples of great starting points include win/loss/delay rates, close ratios, conversion rate for MQL to SQL, pipeline numbers and ages by stage.
By starting quantitatively, it provides a framework to dig behind the numbers and take a look at market conditions, whether you have the right people, their training, sales process, tools and overall sales management.
From there, it’s possible to understand the right size and mix of salesforce, what training and process changes are needed, where AI can boost effectiveness and how to deliver the performance that management and investors are expecting.
The key is not to make an up-and-down decision based on perception or even close rates. Look at your sales from a perspective of what you sell, to whom and how. From there, you can begin to engineer both the right sales organization and the right mix of people to meet your goals.
Andy Shober is a Partner in TechCXO’s Denver office. Send him a note at firstname.lastname@example.org and see his full bio here.