Blurring the Line or Death of a Salesman? How Convergence is Changing Sales Forever.
Sales or operations? Operations or sales? The conundrum over which comes first has been hotly debated by businesses for decades. But it could be that the traditional division between the two is becoming irrelevant. Indeed, it’s likely that future business generations will look back and wonder what all the fuss was about.
There’s a trend emerging in Europe and the US among providers of XaaS subscription services for the ‘LAER’, or Land, Adopt, Expand, Renew, model of business. If LAER takes off, it will undoubtedly transform the relationship between sales and operations. We’re already seeing IT services providers bringing together their sales and operations silos into one customer success unit devoted to monitising services.
The theory is that a combined sales and operations function increases knowledge of customers, upselling opportunities, sharing of data and insights, and overcomes some of the pressures that IT services providers have been grappling with as they change from hardware-centric businesses to providing XaaS subscription services.
Very simply, LAER breaks down the customer acquisition process into: Land a customer; the customer Adopts add-on services; revenue Expands and, when the time comes, the customer seamlessly Renews their subscription.
But is Adopt and Expand the responsibility of the sales team or the operations team? Some might argue that it’s the sales team’s job, but another approach is to see Adopt and Expand as operational processes with a sales outcome. And that’s exactly how more and more US and European IT subscription services providers are looking at it.
Statistics cited at the Technology Services Management Association conference in California in May 2017 demonstrate just why ‘expansion sales’, where the operations team is as responsible for sales as the sales team itself, is gathering momentum in the US and Europe.
– It costs US$200 for a salesperson to generate an outbound lead; US$65 to US$85 for a lead to be generated by marketing; and between US$7 and US$25 for a lead to come from an operations team member.
– While sales and marketing have an average conversion rate of 25%, operations teams achieve an average of over 50%.
– Once customers are onboard, salespeople average 3 to 5 interactions per quarter with each customer compared to the 50 to 70 that operations people have over the same period.
Clearly, operations teams are the quiet achievers. Their relationships with customers tend to be equitable. They have the freedom to ask the questions that sales teams dare not pose. By looking after customers’ day-to-day needs, they gain deeper insight into how the service is working, and are the first to know when a customer is not happy. As the saying goes, helping always sells, but selling never helps.
It’s no wonder then that US and European businesses regard expansion sales as vital to protecting market share and creating the ideal environment for expanding the product mix taken up by customers.
The last part of the LAER model, Renew, emphasises just how significant an impact subscription services are having on the sales function. The decline of the long-term contract and the rise of monthly and annual subscriptions mean that renewals barely garner attention from happy customers. Automatic direct debit payments make renewals completely frictionless and, in effect, make redundant a salesperson’s need to pursue renewals.
It’s natural to ask then, does sales have a future? Should salespeople be shifting their focus to becoming trusted advisors while operations teams take care of customers’ immediate needs?
Despite the outlook, it’s not over yet for sales. The LAER model is similar to the approach that’s been working successfully for the big advisory firms for years. It is perhaps the logical step in the transformation we’ve been experiencing in IT services over the past decade. The advent of customer success teams offers new types of sales opportunities and ways of doing business that could be seen as an upside, especially for those who would like more time for relationship building.