Grow Your Profit Margin through Sales and Empower by Implementing Artificial Intelligence
Grow your Profit Margin through Digital Transformation, Implement Artificial Intelligence to Empower Sales
Recently I was invited to a summit on ‘how can businesses increase profit margin’. Speakers in the panel were mostly CFOs and CEOs from organizations covering a wide range of industries. Each one of the speakers was candid in expression, committed to the success of their business, and willing to do almost anything to improve a few points of profit margin.
Surprisingly none of them had considered examining the sales function as a place to improve margins, with the exception of employee compensation and travel costs. Reducing costs in these areas will create more issues rather than address any. The strategy may provide short-term bottom line relief in exchange for the longer-term top-line decline in performance.
Actually the top leaders, CFOs and CEOs, missed the latent margins in the sales organization and this is usually the case with most of the businesses. These finer line items of potential profit are inconspicuous, but they are very much there. Sales resources, making effective sales calls, are likely to increase revenue through conversion. Fewer sales resources, making fewer effective sales calls, are likely to bring down the revenue. Statistics and historical data prove that every single sales call made on behalf of your organization, influences the margin. So let’s do a treasure hunt of those margins and check for their hideouts:
1. Pursue the Right Opportunities
CEOs and CFOs would be spellbound if they realized simply how much amount was lost pursuing, meeting, traveling to, and working on prospects or clients that will never convert as good business for you. The money lost in these efforts dramatically erodes margins in two ways. It unnecessarily blows up the cost of sales in a profligate manner. Finally, if you win the deal, clients outside the ideal profile are unlikely to value your solution enough to pay the premium price.
To sell solutions, you need to identify solution buyers. It is a fact that all companies or particular buyers within a company will not buy in your value proposition. In other words, your products or services may not get the right buyer who values your solution perspective in the actual sense. Your business strategy should identify your ideal client profile. The sales team (hopefully with some help from marketing) focuses all pursuit efforts on those clients. It is also reasonable to be adaptable to a business that is outside your ideal client profile, provided it does not require many resources to acquire and is easy to deploy. Chasing this kind of sale is alright when it is an exception.
It is more likely for you to experience draining of profit margin when substantial amount of your business comes from outside your target market or target customer profile. Those clients aren’t going to have the size, scale, or specific requirements that make your solutions ideal for them. Consequently, they are more likely to be cost-centric or require levels of service and support your business isn’t ready or willing to deliver or doesn’t get profitability. Further, your investments in research and marketing are sub-optimized when the clients you’re trying to reach and serve are ignored in favor of whoever can get to buy from you today. Certainly, that should not be the desired outcome of your growth strategy.
2. Focus on Core Capabilities
Core capabilities are the ones that you talk about to prospects, partners, investors and the ones that people get excited about within the company. The ones that you have invested significantly in building, improving, or acquiring and want to provide to customers. Your core capabilities provide for the very existence of your company. Usually the sales team is slow to adopt selling new products and services, and consequently the ROI declines. They may not have complete knowledge about the new offerings, may lack an understanding of how the new offerings help clients, be unfamiliar with the kind of selling approach needed, or even experience difficulties around trying something new or untested. At worst, a sales team may express hesitation or exhibit outright resistance to selling a new product or service.
With evolution of businesses, they create new products, approaches, services, technologies, strategies and so forth. The transformation strategy is built on premise that your business will be providing a new product, service or solution to customers tomorrow than you are today, and earning greater margins because of its uniqueness or value. The margins you expect to earn can never be realized if the sales team doesn’t propose these new offerings at the pace you planned or expected. This is an exercise that has to be driven by the top leadership for actual results, it won’t happen by announcement.
You need to have the HR team working closely with the top leadership team to draft a training plan for orienting the sales force. A proper monitoring process has to be in place to keep a tab on the progress. If capability building is done appropriately, it will show up in sales results.
At times leadership team may opt to hire resources with specific skills for pre-sales, sales engineering and pure sales. Options are ample, but your decisions and actions make all the difference.
3. Give the Buyer a Valuable Sales Experience
Preparing decks and giving walkthroughs of product features are obsolete. The old approach of presenting and pitching has lost the ground. Internet is overflowing with all the information a buyer needs. So when your sales resource gets an appointment from prospects or customers, you need to ensure that your representative is well prepared with the value-add. It’s of utter importance for your sales team to be crystal clear on the value proposition of your business. At the same time, the sales professional needs to do research to get insights into the prospect’s business so that he or she is able to grab opportunities identified through his or her own expertise during initial discussion with the prospect, helping customers see the unintended consequences or impact of a given course of action.
If you emphasize on your sales team to focus on value-added sales calls, it will increase the value of your offerings and remove the price reduction mechanism to win business deals. When sales team members do not bring this added value, sales calls devolve to a pitch of features and benefit statements, putting your offerings in the category of commodity, where you will get stuck in margin-killing price negotiations. No matter how much you may try to defend this kind of sales strategy, it is a self-killer and will become a bottleneck in long-term business sustenance.
If you are a growing company, hire a few chiseled professionals who understand what difference it makes to give a wonderful sales experience to the buyer. You can then utilize these professionals to train your core sales team, a step very well used by successful industry leaders like SAP, IBM, PWC, P&G, GSK, just to name a few.
4. Drive your Sales Strategy through Strong Leadership
Every sales call has significant amount attached. It goes a long way if your sales professional is able to connect well with the prospect in the initial call. Extracting more value out of sales calls is not a quick fix, it is an iterative process of training, monitoring and taking corrective action consistently to have a result-oriented sales team boosting up your top line. It is not the work of an individual, rather it is the collaborative effort of the leadership team to infer what’s actually working well and then driving the right values to expand profit margins. You have a direct impact on each of these areas in the way you drive your sales strategy through the business and the leadership you provide to the sales organization.
When your sales team is under intense pressure from the leadership to achieve targets, the tension percolates down to the clients and the result is never good. In any kind of business requiring a long-term commitment, high-pressure closing techniques will not go well. The prospects can sense they are being compelled and that creates discomfort to the extent of moving away from any partnership with you.
You need to understand that when this behavior becomes habitual customers will recognize the pattern. I worked with a Fortune 500 IT firm that routinely put excessive pressure on the sales team to make the numbers Quarter-on-Quarter. After a period of time, the company’s revenue pattern illustrated that more than 75% of the revenue for the business was logged in the last three-four weeks of each quarter. Prospects knew that if they hung on long enough, the pressure to get a deal done at the end of a quarter would override the company’s margin goals and sales representative would give in a major way on price.
It requires a concerted effort on the part of leadership team and top executives to formulate sales strategy, define best practices and drive sales numbers consistently. You will soon realize the increasing profit margins coming in through profitable value-added selling.
Now let’s find out if your sales team is well equipped with latest tools and technology to contribute in steady growth of your business. At times, your sales representative may be talking to a new client about a product or service and finds out that this company is already using it. Furthermore, to add to the frustration, another sales representative from your organization had called upon this client earlier to discuss about the same product or service, which is not recorded anywhere to avoid repeat call to the same client. A sales call gone futile for no fault of the sales resource. At other times, you may find yourself reaching at a critical point on a deal, and you don’t know exactly what to do next.
The underlying problem is that most sales teams are still stuck with esoteric or opaque sales tools. Instead of working as trusted and knowledgeable consultants, they spend time manually extracting data from multiple systems and chasing leads that have low probability of closing. They don’t have the tools to find or navigate through valuable customer information that could make them much more effective at selling and also could make customers much more likely to buy.
As more companies embrace exponential technologies such as artificial and adaptive intelligence (AI), machine learning (ML), robotics, a better, more productive sales is underway. Artificial Intelligence promises to reshape how sales teams operate and interact with clients. The technology makes it possible for companies to get closer to the customers, design highly personalized experiences, and deliver relevant, even preemptive customer engagement in real time.
To stay ahead in business, sales organizations need to be proactive and implement modern sales execution process, one which is data-driven, predictive selling enabled by cutting-edge technologies such as AI, machine learning, and natural language processing. Modern sales execution process is accelerating the sales cycle, strengthening pipeline generation, and significantly increasing year-on-year revenue. The future lies in Intelligent Sales and organizations that embrace it are poised for positive results at every stage of the sales process.
Let’s briefly outline what constitutes modern sales execution process:
1. Access for the Sales Team to Quality Database of Leads with Client Insights
This will help sales resources drive proactive, contextual, and personalized interactions with prospects. Such modern sales tools can help sales team correlate leads with important historical data such as past purchases, details of interactions across channels, and the identity of competitors vying for the client’s business. sales resources can identify key decision-makers and influencers within the client’s organization, helping them understand the identity and role of people they need to connect with. They can also access third-party data that gives them important information, such as updates on recent industry trends or a client’s primary competitor, which helps them have more meaningful conversations with the target account.
A modern sales application system equips the team with valuable information about client’s interests at the inception phase of the engagement and it should make all of this information accessible through a streamlined user interface that can be easily accessed by sales professionals, so that they can analyze the needed insights at any time.
2. Guidance on the Next Steps in Sales Process
Conventional insights can help sales professionals move deals forward faster. Conventional guidance on the next best action helps sales team members drive deals forward with confidence. Additionally, conventional insights on how a deal is progressing compared to similar deals can help resources decide how much effort to expend on one deal weighed against other opportunities, which can increase overall productivity
3. Suggestions on the Correct Product Combination for the Changing Client Needs
Once resources have established contact with the prospect and begun having those intelligent, personalized interactions, they need to know how to offer products and services that closely align with that client's unique and evolving business requirements. This is hard work: only 40% of enterprise technology companies recently surveyed by management consulting firm Deloitte felt they thoroughly understood their client's changing needs and expectations.
The right AI-powered sales tool can address that challenge by continually analyzing a customer’s environment and providing recommendations, or adaptive insights for what would benefit that customer at any given time. Has the company recently grown through an acquisition, or had to downsize? These developments can greatly affect its optimal combination of products and services.
Cloud computing leaders like Google, Amazon and Microsoft are offering such intelligent applications through their respective cloud platforms to empower sales professionals develop a more modern approach to sales execution. Sales organizations embracing Artificial Intelligence capabilities early on can lead to higher revenues, while companies that continue to do sales the traditional way, depending on a small group of high-performing sales resources for success, have already lost. In a well-connected environment, a sales manager can use AI to inform the human resources team about specific attributes sales is looking for in a new hire. Adjusting to the changing requirements and demands of the customer is key to winning customer intimacy which is possible if you empower your sales process by implementing evolving technologies like artificial intelligence. You will watch your profit margins soaring high.