Market Recovery Boosts Sales

The economic recovery is improving the performance of sales organizations in virtually all industries according to the 2005 “Miller Heiman Sales Effectiveness Study,” scheduled for release in March 2005. A majority of sales leaders reported their salespeople increased sales results, 51% of sales leaders reported new account acquisition increased during the past year and 70% of salespeople believe there were more opportunities to pursue new business in 2004 compared to the prior year. Yet of the 3,400 sales professionals surveyed, only 188 senior-level sales leaders truly capitalized on the market recovery by growing their average deal size, improving customer retention and increasing their revenues. How did they do it? Here are two trends on which they capitalized.

1. Selling strategy shift. In 2003, which was a tough selling environment, sales leaders said they would grow their business by selling new products in new markets. In 2004 they did an about face and decided they would grow by selling new products to existing customers in existing markets, says Jeff Brunings, director of marketing and research at Miller Heiman. “I think sometime during the year they said let’s go back to the people and markets that got us here in the first place,'” says Brunings. “Companies were able to grow top-line revenues by refocusing on their existing customers and selling more within their existing customer base.” Still, the shift was not without its challenges. Even as they were selling more, sales reps felt increased pressure to provide more service and support for reduced prices. “We’ve seen it a bit in years past, but it intensified this year,” says Brunings. “Miller Heiman believes an organization’s ability to effectively respond to these pressures will greatly influence their ability to grow both revenues and profitability in 2005.” Still, there are signs these pressures may be easing: Miller Heiman’s Q4 2004 Sales Performance Index rose above the Q3 index, due in part to diminishing discounting pressures (see sidebar).

2. Focus on executive-level decision makers. Purchasing decisions continued to move upward in organizations in 2004, albeit at a slower pace than 2003. According to Brunings, 57% of sales leaders in 2003 said the responsibility of decision makers was moving up higher in their customers’ organizations, but that number dropped to 48% in 2004. It is likely, says Brunings, that decisions were moving from director to VP in 2003 and now they’re moving even higher, from VP to the C suite. A recent Miller Heiman poll of approximately 2,000 sales professionals upholds these findings. Salespeople said three out of every four opportunities being pursued today require the approval of an executive-level decision maker, and more than half the opportunities lost were directly attributed to not winning the approval of an executive. Companies are responding to the trend. In 2003 28% of salespeople believed they were good at identifying and reaching senior-level decision makers. In 2004 that number rose to 52%. “You’re seeing top performers consistently access and win the approval of senior-level decisions makers. They are doing this by understanding the underlying reasons why executives buy,” says Brunings. “Someone at the C level has a different set of problems in a different context than someone in middle management.”

The full report will be available at www.millerheiman.com in March 2005.