Contact our Team
E-Newsletter
Health checkSales
As customers become more demanding and markets become more accessible to new entrants, additional challenges are presented to an organisation’s sales team.
These challenges include:
- More fierce competition
- Pressure to reduce price
- Perception of outdated product range
- New market entrants with (slightly) different products (i.e. poor differentiation)
- Long sales cycles
If these challenges are tackled in similar ways to the competition (usually at the expense of margin) then it is likely that a few (common) undesirable effects manifest.
These undesirable effects are usually:
- Declining (or static) sales
- Reduced margin
- Fewer opportunities
The TOC approach tackles these challenges with a different set of tactics. This, in itself, provides the organisation’s sales team with a differentiator which ultimately can be used to increase sales whilst increasing margins.
Sales focus
By using the basis of Throughput Accounting, current sales and future opportunities can quickly be prioritised against true bottom line impact.
While this sounds as if it should be common practice, frequently sales teams are focussed on opportunities which ultimately contribute less Throughput than desired.
With this new focus on Throughput contribution sales teams can truly prioritise the opportunities with the highest return in the projected horizon. This may include freezing or even closing opportunities which do not offer the required level of contribution within this horizon.
Furthermore, assuming an internal constraint exists, this approach empowers the sales team to focus on selling products which provide the highest contribution to the company whilst ensuring that the available capacity is not overloaded.
Managing opportunities as projects
Again, using the principles of the TOC approach (this time to projects), sales opportunities should be managed as projects by implementing a clearly defined and managed sales pipeline process.
All opportunities should be released into this pipeline in a controlled manner (choking the release) and managed as projects, with frequent reviews.
To reduce multi tasking the number of open opportunities for each sales person is limited to a predefined level and new opportunities are only released when existing ones are won or closed.
As is the case with TOC project management each project (opportunity) will have its own buffer and buffer status. The buffer status is displayed usually as a colour which reflects the health of the buffer. The health of the buffer is determined by its rate of consumption relative to the rate of progress of the project. Projects which are making slow progress (i.e. risk of running late) are essentially consuming their buffer at too high a rate. These projects buffer status will begin to move from green (ok) to yellow (warning) to red (blocked).
As part of buffer management, those projects (opportunities) with a red buffer status are focussed on as a matter of priority to remove any blockage and recover the progress.
This enables the sales team to ensure that no opportunities are wasted or lost to the competition due to a lack of proper attention and empowers the organisation’s management team to identify and focus upon the slow moving prospects only and prevent unnecessary multi tasking.
Creating a sales team and environment where these principles of choke release, buffer management and prevention of unnecessary multi tasking are embraced has a dramatic impact on the sales cycle and conversion rate.
Execution
The execution can be divided in to sales operations and customer facing sales.
Sales operations
The sales operations, defined as the process of dealing with customer enquires and request for quotes should be managed in a similar way to production operations.
This involves creation of a process flow for each enquiry (e.g., acknowledgement, estimating, quotation, chase). The constraint within the system should be identified and further work released into the system in relation to the speed at which the work is processed by the constraint.
Each enquiry is buffer managed (again similar to operations) to enable appropriate action to be taken on slow moving or blocked enquiries.
It is important that all necessary improvement activity is undertaken to move the constraint externally to ensure that the response time to the customer is a short as possible.
Customer facing
Adopting a process orientated approach to sales will ensure that the sales execution is as repeatable as possible with little variation (including variation in conversion rate).
Identification of key leverage points and use of these as in an effective and well planned sales meeting forms the underlying principle.
This approach requires the shift from product based selling (where product features, technological advantages and price are key) to value based selling which relies on a very different skill set.
Incorporation of the TOC solution (which draws upon the proven Thinking Process) in combination with well documented techniques enables sales teams to quickly identify the significant needs of customers, highlight the value behind satisfying that need (or indeed the implications of not, or only partially satisfying that need) and close a win-win sale more frequently and more quickly than the competition.
Continued use of the process orientated approach from lead to closure enables more accurate analysis of the performance and any weak points identified and addressed to further improve the conversion rate.
Finally, to mitigate as much risk as feasible from the redirection of the sales team from product based selling to value based selling, extensive roles plays are conducted to identify any potential clarity concerns before developing the fine points of the offer with “friendly” customers in advance of any market launch.
Benefits
Typically, the implementation of the TOC solution for sales will deliver the following benefits:
- Reduced sales cycle time
- Less sensitivity to minor changes in competition
- Higher conversion rate
- Less pressure to reduce prices
- Higher sales with increased margin
