Customer Business Outcome Evaluation

Evaluation of business outcomes is not easy. For a corporate customer, products are purchased to deliver positive business outcomes. So it is very important for the selling company to come up with a product that significantly and quantifiably brings positive business outcomes for its customer or their business. It is therefore necessary to identify quantifiable, positive business outcomes that the product can provide, to develop the sales value proposition.

A quantifiable outcome represents the tangible value of the offering to the customer. This value is typically expressed in numbers, percentages, and timeframes. In addition to this, there are also intangible outcomes. E.g. Opportunity Cost. Opportunity cost is the loss that is incurred when one option is chosen over the other. It is something that must be identified and considered in establishing the sales value proposition.

The information that the company gathers after evaluation helps it to understand the desired attributes of the offerings according to market segments. The customer business outcome evaluation documents business outcomes based on these attributes.

Another way of doing customer business outcome evaluation is by interviewing existing customers. Customers being the user of the product validate the evaluation process by their practical experience. Interviews can be conducted across different areas and positions in the customer organization to determine the impact of the offering. New, desired, business outcomes may emerge and existing business outcomes can be validated.

Internal analysis is another way to do customer evaluation. The collective sapience combined with experience of the company holds a broad overview of business outcomes from a customer’s perspective. However internal analysis must be validated by customers to escape the risk factors associated in it. Direct input provided by the customers is typically more valuable and reliable input when determining customers’ business outcomes.

Strategists evaluate investments and actions in terms of likely cost and benefit outcomes. The product offering must draw substantial improvements in client’s business in terms of customer satisfaction, service delivery etc. The seller must narrow down its focus and align sales and marketing activities around its customer. The segment specific sales attempt combined with customized offering helps develop sales value proposition.

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Channel Performance Measurement: A Close Overview

Channel performance measurement is a key activity when a sales organization employs different types of channel partners. In more complex multi-channel structures, it becomes even more important due to the number of people, processes, and roles involved. The performance of a channel can be measured across multiple dimensions. The parameters that are measured usually are effectiveness, efficiency, productivity, equity and profitability of the channel. 

The various channels have different purposes in the value chain; however, each task needs to support the overall corporate goals. As the number of channel partners increases, it is difficult to ensure that the channel partners are performing their specific roles as effectively as required. For example, the goal of a business might be to increase the number of strategic accounts. However, in order to gather maximum possible commission, channel partners might be engaged in getting the maximum number of accounts possible with total disregard towards prioritizing the acquisition of strategic accounts. It is therefore important to audit the channel partners and incentivize them for activities that are aligned with the corporate goals. The channel performance should also be judged on the ability to fulfill given tasks. A few carefully chosen metrics can give a good indication of the performance of each channel.

The channel performance measurement is primarily a four-step process.

1. Define the Sales Objectives
2. Determine Channel Performance Metrics
3. Set Channel Partner Targets
4. Manage Channel Performance

1. Define Sales Objectives

The first step in channel performance measurement is to define the sales objectives for the company. These objectives are outlined and discussed in sales meetings to ensure a shared understanding between members of the marketing and sales teams.

2. Determine Channel Performance Metrics

Evaluating the performance of a distribution channel depends largely on the agreed upon performance metrics. Choosing the right number and type of performance metrics can help to monitor and improve the performance of channel partners. These metrics provide an understanding of how well the channel partner is doing in reaching its performance targets.

Though it is possible to evaluate a channel on hundreds of performance metrics, this would make reporting and analysis of the performance a cumbersome job. When determining channel performance metrics, a key performance driver, such as sales or units sold, should be chosen to identify and measure the most important tasks. A series of performance metrics are then decided based on the key performance driver.

3. Set Channel Partner Targets

After overall sales objectives are defined, it is important to assign specific targets to each of the channel partners to ensure they are in alignment with the overall objectives. Properly set targets provide a benchmark to measure channel success, monitor performance, and take corrective action to meet expectations. Each channel partner has a specific role towards fulfilling the overall sales objectives. Performance targets should be set to reflect the channel partner’s contribution to the overall objectives

4. Manage Channel Performance

This is the final step in channel performance measurement. It uses the agreed upon goals, assigned performance targets, and identified performance metrics to manage channel performance on an on-going basis and to identify the performance shortfalls of the channel partners. During this step, management gains an understanding of the strengths and weaknesses of each channel. Management can then take corrective action to ensure efficient performance of the channel.

The success of a channel and its efficiency are determined by the efficiency of channel intermediaries in delivering goods and services to customers and the quality of services offered in the process. Developing a comprehensive marketing plan that provides clear and concise direction about marketing activities and strategy is critical to the organization's success.

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Build Relationships with Negotiation Training

In sales, all that matters is the bond between the seller and buyer. The buyer always finds arguments to have a better deal than the quoted one, and that is when the negotiation skills of the seller comes in! Negotiation skills are much like a language. People who are unacquainted with the concepts and terminology of negotiation may find it intimidating.  With proper training, constant use and practice, it can be learned and mastered.

Negotiation Strategies

• Distributive Negotiation - This type of negotiation often results in a win-lose scenario. The parties involved in this type of negotiation work towards getting the most out of a fixed value or sum. Hence the gain of one party results in the loss of the other. Say for example, you are bargaining to buy a gift from a foreign trip where you are not going to purchase from the seller again. Given the nature of this strategy, very few negotiations are truly distributive.
• Integrative Negotiation - This type of negotiation is carried out with the objective of achieving a win-win scenario. The deals negotiated with this strategy are meant to create and deliver value for both the parties by integrating their interests.  Examples for this type of negotiations can be mergers and acquisitions or the relationship between a manufacturing company and its suppliers.

Negotiation Styles

Kenneth W. Thomas identified five styles of negotiation based on dual-concern model.

• Accommodating - Individuals who emphasize on preserving personal relationships and consider other party’s problems during negotiation.
• Avoiding – Individuals who do not enjoy negotiation and try to avoid the confrontational aspects of it.
• Collaborating – Individuals who enjoy the problem solving aspect of negotiation and tend to use creativity to come to mutual agreement.
• Competing – Individuals who enjoy and dominate the negotiation process.
• Compromising – Individuals who are eager to close the deal by being fair to all the parties involved.

Preparing for Negotiation

There are four steps to prepare for a negotiation:

• Consider what would be a good outcome for both parties. The negotiator should determine the interests and objectives of his party as well as those of the other party. This is to done by thorough research or by having a dialogue with the other party. Areas of common ground, compromise and opportunities for favorable trade need to be understood.
• Learn about the people on the other side before negotiation. Negotiating is an interpersonal activity. Experienced negotiators know this and try to learn as much as they can about the people on the other side. Experience of the negotiators, their negotiation style, their levels of authority, the culture of their organization and the importance of the deal for their organization are some of the things that can help you during negotiation.
• Gather external information about the deal points and negotiate from your positions of strength. Each side wants to get a fair and reasonable deal at the end of the negotiation. It is a good practice to benchmark with industry standards for the negotiation. There are many criteria for fairness and reasonableness. During preparation, it is essential that the team research the criteria that is more favorable to them and should be ready to show that those criteria are more relevant than other factors.
• Determine the authority position of the person with whom you are negotiating. Ideally, the negotiator on the other side should have similar authority as the negotiator on your side. To determine the authority of the negotiator on the other side, one must try to figure out the decision making process of the other side. 

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Importance of Questions During Lead Generation Process

Questions are an effective tool for the Needs Assessment for Each Qualified Lead process. Asking questions is especially useful when the qualified lead does not have clearly stated needs.

Even in cases where requirements are documented, questions are an effective approach to gain a better understanding of the need or needs driving those requirements. Questions are also helpful in conveying a better understanding of the lead’s industry. Answers to the questions during this phase serve as inputs for designing, creating, or customizing a solution.

The questions asked during the Needs Assessment for Each Qualified Lead process are generally classified into two types:

Closed Questions - Closed questions can be answered with either a simple “yes” or “no,” or the answer may lie in a single word or phrase. Typical examples of closed questions include the following:

• Is your annual revenue above $5 million?
• Does your company use an ERP system?

Open Questions - Open questions require longer answers and cannot be answered with a “yes” or “no.” Typical examples of open questions include the following:

• What can you tell me about your current business environment?
• What can you tell me about your manufacturing process?

Needs assessment uses a combination of closed and open questions.

Effective Methods of Determining Sales Force Size

In most companies, the sales force is the most critical part of the business; thus determining the sales force size is critical in planning for sales governance. Although the corporate sales team is one of the most valued assets of the company, it can also be expensive to maintain. Increasing the size of the sales force may increase sales volume but at a higher cost to the company. It is therefore necessary to determine the optimal sales force size. The size of the sales force will also affect territory design.

The three most commonly used methods to determine sales force size are as follows:

Breakdown Method

This is the simplest method among the three. In this method, each member of the corporate sales team is assumed to possess the same level of productivity. In order to determine the size of the sales force needed, the total sales figure forecasted for the company is divided by the sales likely to be generated by each individual.

However, this method fails to account for differences in the ability of salespeople and the difference in potential of each market or territory. It treats the sales force as a function of the sales volume, and does not take profitability into account.

Workload Method

The workload method is also known as the buildup method. In this method, the total workload (i.e., the number of hours required to serve the entire market) is estimated. This is divided by the selling time available per salesperson to forecast the size of the sales force. This method is commonly used since it is easy to understand and to recognize the effort required to serve different categories of customers.

However, this method also has some shortcomings. It assumes that all accounts in the same category require the same effort. Other differentiating factors such as cost of servicing, gross margins, etc. are not considered after the accounts are categorized. It also assumes that sales persons are equally efficient, which is generally not true.  One way to overcome this shortcoming is to adjust the sales force size, determined in the last step, for efficiency. The sales force can be classified into different categories based on their efficiency and the actual number of sales persons required can then be calculated with this adjusted number.

Incremental Method

The incremental method is the most precise method to calculate the sales force size. The underlying concept is to compare the marginal profit contribution with the incremental cost for each sales person. The optimal sales force size as per the incremental method is when the marginal profit becomes equal to the marginal cost and the total profit is maximized. Beyond the optimal sales force size, the profit reduces on addition of an extra sales person. Therefore, sales people need to be added as long as the incremental profit exceeds the incremental cost of adding sales people. The main shortcoming associated with this approach is that it is difficult to estimate the additional profit generated by the addition of one salesperson and is therefore difficult to develop.

Thus sales force needs to be properly organized, motivated and compensated in order to have the right size to do the workload, alignment to cover all needs, and keeping them happy and selling. At the end of the day, they are the ones who get the customer to give up their money for the company’s product or service. 

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