Marketing Expert's Corner
This article written in 2009
Destiny is a tough word, because it's usually used in the context of a Greek tragedy, a Wagnerian opera, a Tolkien epic, a Star Wars dialogue, or a pop R&B group.
But destiny is the right word here.
When you hire your first sales rep, recruit your Sales VP, and design your sales force, you've set the course for your company. The range of your possible outcomes is largely constrained from the beginning. So those first sales hires are a critical bet: they will set the destiny of your whole company.
Your Sales Force* is Your Destiny
You might think that of all the choices a CEO can make, product strategy determines more about the direction the company will go than any other. After all, the product is what will attract customers and create the cash flow to build your company's future.
And that would be right, in some abstract economic world with zero friction and perfect information.
But people buy from people, and in B2B markets the customer has complex purchasing processes that must be worked by sales reps who have the contacts and know the ropes. In these markets, if the rep doesn't do the right things the product won't sell well no matter how good it is.
It becomes ironic after a while: marketing may do a brilliant segmentation, have strong branding, create cool ads, and execute a great go-to-market strategy. But if the sales reps don't buy it -- they don't believe that they can tell your story credibly, or that it'll work with their customers -- the reps will sell what they know... to whom they know. Often with very poor results.
From day one, your company's destiny is intimately tied to the quality, fit, and effectiveness of your sales force.
*You might wonder why I didn't say "channel" here. While some of the same issues apply to channels, you don't
invest as much, or make as many tough choices in the channel as you do for a direct sales organization. Further, with a channel you can't directly control as much as you do with a direct sales team, and the effects of your decisions are less dramatic.
So job one for any marketing department is selling the sales team: making them believe that the product is easy to sell and will make them -- personally-- a ton of money.
And to do this well requires throwing a lot of stuff you learned in business school out the window. Professors of marketing tend to believe that marketing is more powerful than sales, which could be true in the sense that marketing decisions can have much greater leverage than sales ones. But in the real world of B2B and in much of B2C, no amount of marketing -- in and of itself -- will bring in a single dollar of revenue. The Sales VP is driving the boat because he provides all the gasoline for the voyage.
This basic reality is why the textbook approach for marketing often yields such dismal results and a political mess. As I wrote in constraint-based management, the most common constraint for business is access to demand: the underlying customer interest and the ability of the channel to close deals. Since that's the constraint, that's where marketing should focus in the short run. The product is the wrong starting point if you have an existing sales force and have to move quickly in the market.
Instead, develop your marketing plan and messages by asking these kinds of questions:
- what customers can my direct sales force (or channel) get access to?
- what kinds of value propositions have they been successful with in the past?
- what kind of licensing model (e.g., perpetual, recurring, transactional, SaaS...) are they comfortable with?
- what kind of price points do they like working with?
- how many transactions can they close in a quarter?
- how many prospects can they handle at a time?
- and the ultimate "gotcha:" what is their current compensation plan telling them to do?
Sales people are coin operated. All the good intentions and meetings and jaw-boning and positioning papers and collateral pieces and web sites and press releases will not hold a candle to what the sales rep is being told to do through the comp plan. For the Sales Rep, the universe more or less ends every 90 days...so altruism and long-term thinking really doesn't help them much. The successful rep will focus on doing precisely -- and only -- what she is being paid to do.
So it's really important for marketers to know what the comp plan is when launching a new product or reinvigorating an old one. You don't want to know the details for individuals, but you need to understand the basic drivers and measurements that are in place. Ironically, this essential information can be a tightly guarded secret, even at the management level.
Comp plans need to be clear, unambiguous, and coherent across the organization. Simplicity and congruence are what make them effective, and an individual's comp plan should try to drive only 3 or 4 behaviors. That said, you can have several comp plans working in concert across your organization, for the:
- sales mgr/vp
- sales rep
- account mgr
- partner rep
- business development
Even with multi-level comp plans, resist the temptation of having a bunch of objectives. As Peter Drucker wrote, an organization can only maintain and drive toward five priorities over the course of a year. Unfortunately, in many companies the comp plans are incredibly complex, with overtones of political intrigue. Comp plans that read like they were written in Congress are less-than-wonderful as management tools.
That Perfect First Hire
Sure, sure, you've already got the perfect CEO and CTO...you wouldn't have gotten funded without it, right? But if there's one early stage hire that really matters, it's the VP of Sales. Her specific skills, energy, and Rolodex will be what determine your early deal wins. She (and/or the CEO) will probably close your first deal, bring in your first reference, and establish your first beachhead market.
She'll also be hiring the first generation of reps who will probably grow into regional directors, so every character flaw will be echoed and magnified through the chain of command.
Selecting this hire is tough because really great salespeople really know how to sell themselves. They may never sell your product as well as they sell themselves to you. Really dig into references, friend-of-a-friend, or even enemy-of-a-friend comments on the VP's:
- Ability to open doors
- Ability to close deals
- Understanding of and comfort with the company's business model
- Creativity and imagination
- Empathy with customers and genuine concern for customer satisfaction
- Emotional need to take business from competitors
- Instinctive discipline and affinity for repeatable sales cycles
- Ability to hire, manage and grow great people
- Ability to work with and recruit channel partners
- Raw emotional persuasive / seductive power
Of course, nobody can score 100% on all these -- the point is to have a reasonable balance of these qualities, being coherent with your business strategy.
If at all possible, hire your first Sales VP and Marketing VP at about the same time: they should definitely interview each other -- preferably at a bar. They may not really like one another, but they must be able to communicate at both emotional and intellectual levels. It's important that they not be competing with each other -- each must intuitively understand that he cannot succeed without the other succeeding.
Send in the Clones
When you hire reps, you're hiring your market. In the first year or so, they'll be selling to people they sold to before...not necessarily your target market or the people who could sustainably consume the product you make. It can be a self-fulfilling prophecy of reps selling in their comfort zone, rather than attacking the market in a new way.
Look for reps who are flexible: don't develop a sales team that can't -- or doesn't want to -- consume the prospects that the rest of the company is aligned to produce.
If you think of the sales organization as a revenue engine, you want to understand what the failure modes are. Virtually any rep can close customers who really want the product. Most reps can also work deals properly once the selection and business case are underway. The two key problem areas are earlier in the sales cycle:
- the evaluation / proof-of-value stage, which is the longest and most expensive, and
- the prospecting / qualification stage, which doesn't take long but has a huge mortality rate (sometimes 99%).
Find reps who have proven they don't get trapped in those two areas of the sales cycle. The RIGHT reps are not always the most high-octane ones: over time, the most effective reps are the ones most in alignment with the rest of the company. Here are things I like to see in a rep interview:
- did they ask about the cost of acquiring a new customer?
- did they ask about the lifetime value of a customer?
- did they ask about who your customers have been, and why they bought from you?
- did they ask for stock options or other deferred compensation?
- are they just out for the immediate big deal, or are these guys farmers and upsellers?
- do they have domain knowledge? do they really know about a specific industry or business process?
As You Grow Your Field, Hire Specialists
Who says that every sales rep has to be good at everything? You don't hire engineers that way -- why should a business process as tricky as revenue generation be handled by generalists? Some reps are terrific at opening doors, others are great at closing, and some are superb at account management. It's actually very unusual for an individual rep to be fantastic at all parts of the sales cycle (if they are, they'll soon become VPs or CEOs or VCs).
So instead of growing your sales organization by hiring a bunch of generalists who have to manage "everything" in a geographic territory, grow by specializing. Make your pipeline an assembly line than can be way more leveraged and efficient. Look for sharpshooters who really know an industry, or a set of partners, or a product domain, or a customer lifecycle. Look for ways to offload every rep of the things they're not that great at -- so that each individual can be working on the things where they are outrageously productive.
Yes, this kind of team will demand more of your managers. But if you give them the ability to focus, they can achieve breakthrough sales performance -- knocking deals out of the park on a repeatable basis.
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