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German penny coins sift through the fingers of a worker at a copper refinery in northern Germany in this December 11, 2001 file photo. (CHRISTIAN CHARISIUS/REUTERS)
German penny coins sift through the fingers of a worker at a copper refinery in northern Germany in this December 11, 2001 file photo. (CHRISTIAN CHARISIUS/REUTERS)

Commentary

Small sales teams should chase profit over market share Add to ...

Alignment is an important but often overlooked practice in sales.

There is internal alignment between departments: sales and operations, sales and marketing. There is alignment between a customer's buying process and the sales process. But the most overlooked and ignored alignment is between a company's objectives and its sales strategy and execution.

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Business owners and executives need to make some fundamental decisions relating to their sales objectives before developing a sales strategy and a related execution plan. Without clearly setting and committing to these objectives up front, they risk deploying an ineffective or less-than-effective sales strategy and action plan. The challenge for small and medium-sized businesses is the lack of options they have in setting these objectives versus their larger counterparts.

One example is a company's growth objective. Everyone wants growth, but there are different types: businesses can pursue market share or increase profits. While the two are not always mutually exclusive, leadership often makes a clear and active choice for any given period of time. A focus on market share suggests aggressively pursuing new and competitive accounts, while increasing wallet share in existing accounts. Going after the first two usually suggests a willingness to make price concessions to win business, and that often translates to reduced profits.

When done intentionally, actively and systematically, it’s not as risky as it sounds. Many companies have achieved long-term growth in profitability with a short-term focus on market share by adopting a “win on price, retain on value and service” approach for a quarter or two, then shifting gears to profit from new accounts and revenue streams. Prices are raised slowly, as they prove value and service to the customer.

Focusing on profit over market share implies a willingness to forgo certain sales or clients that fail to yield a minimum level of profit. This will lead to fewer customers, while those that are maintained or pursued are better and more profitable accounts. It’s not about one versus the other, but more about the plan making sense and being carried out intentionally and actively.

Larger companies have more options in this regard – one area is the makeup of their sales talent. If a company’s objective is to pursue market share, it is more likely to have a “hunter” oriented strategy, sales team and tactical approach. “Hunters” are skilled at winning and penetrating potential accounts, and doing whatever it takes to bring them on board. Companies focused on profit tend toward a “nurturer/maintainer” strategy and sales team, ensuring their higher-profit customers are covered and serviced to a level that prevents them from being enticed by lower-cost providers, with slower organic top-line growth.

Larger companies can skew the skillsets of their sales teams to drive their objectives. Market-share focused companies would have more hunters and fewer nurturer/maintainers to support the base. Profit-focused businesses stack the team with nurterer/maintainers and maybe a small ratio of hunters. SMBs are much more restricted in this regard.

In practice, most smaller companies have little choice but to focus on being profitable to fund their growth. Investors and lenders look for profits. Larger companies can fund the cost of gaining share – either with other products, or other regions – but smaller companies cannot diversify this way. In fact, one of the levers they have to find and maintain higher-profit accounts is that they are often localized and deliver a greater level of service than larger companies.

SMBs frequently fail to commit to one stream, preferably profit, and often end up trying to do both, succeeding at neither. In part, it’s because they can’t afford to hire both types of sales reps, and they end up hiring what they see as a hybrid rep to sell a “blended” market share and profit objective. This jack-of-all-trades seller, who is often more of a product person with personality than a genuine sales professional, ends up being ineffective at both hunting and nurturing, leading to negative consequences for the business.

Many SMB owners accept that they cannot be all things to all people in their product or service offering – losing focus is a clear sign of desperation. They need to extend that knowledge and focus to their sales objectives, execution and hiring.

Tibor Shanto is a principal at  Renbor Sales Solutions Inc.  He can be reached at tibor.shanto@sellbetter.ca. His column appears once a month on the  Report on Small Business  website.

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