by Stephen J. Meyer
I am the CEO of the Rapid Learning Institute. We provide “bite-size e-learning” modules for today’s short-attention-span workforce. Our content is primarily on sales and leadership topics. We’re really interested in how modern employees learn. My team and I scour academic and institutional research searching for insights into how organizations can train and develop better leaders and employees. Many companies do it all wrong. But many do it right, or want to, and I’m inspired by them. I started my career as an investigative journalist, spent three years at Advertising Age magazine, then did an MBA at Wharton. After working 10 years for someone else in publishing, I started my own publishing company in 2002. In 2007 traditional publishing was dying, so we morphed ourselves into a Web-based e-learning company. Smartest business decision I ever made.
“You’re messing with the magic!”
That’s a cleaned-up version of one of the greatest lines in American business history. Uttered by Viacom VIAB +0% CEO Mel Karmazin in the presence of Google GOOGL +0% founders Larry Page and Sergey Brin in 2003 – using a saltier word than “messing” – it crystalized a fear salespeople then felt: that online advertising might give customers a totally quantifiable way to spend ad dollars.
What would become of the relationship selling, the wining-and-dining, the charm offensive – the magic! – that great sellers always relied on to make deals?
Karmazin got one piece right: Technology would change the B2B selling process. But not in the way he feared.
The death of the salesman never happened. The interaction between the salesperson and a high-probability prospect hasn’t changed much. Once a prospect with intent-to-buy engages with two or three competing salespeople, the choice is made based on capability and trust, same as it ever was.
The big shift
What’s new is something called “sales development.” In the past 10 years, technology companies in particular have led a transformation of the traditional sales process, creating a new function and a new paradigm for generating and qualifying leads.
The key, according to Ken Krogue, founder of InsideSales.com, is specialization. “Companies realized that they could be more leveraged if they broke the sales role into closers and appointment setters,” he says. “We did a study with Northwestern’s Kellogg School of Management a few years ago and found that the close ratio goes up seven points. That is, a 10% closing rate goes to 17% when you separate setters and closers.”
Trish Bertuzzi, CEO of The Bridge Group, a sales development consulting firm for tech companies, agrees sales development is a new and powerful phenomenon. “People have been using the term ‘sales development’ since the 1980s,” she says. “But only in the past four years or so has it become reality.”
Today, caveat venditor
I grew up in the golden age of direct mail and telemarketing. Pre-Internet, those channels generated prospects cost-efficiently. Today, caveat venditor. Direct mail is too expensive (though, some say, it could make a comeback simply because few now do it). And legacy telemarketing? “Cold calling is dead,” says Bertuzzi. “The term implies that you’re not using available technology to find out whether somebody is in your ‘sweet spot’ before you call them.”
Email emerged 20 years ago as an obvious alternative to direct mail and telemarketing. But it’s no panacea. A decade ago it might have been able to generate qualified leads, back when relatively few companies were buying huge lists, batch-blasting, and coming up with clever ways to avoid blacklisting by Internet Service Providers (ISPs).
But in recent years ISPs have eased up on mass emailers who are CAN-Spam compliant (that is, they include a physical address and an unsubscribe link in every message). Everybody now blasts email, which is why we all receive dozens (hundreds?) of unsolicited emails each week from people we don’t know – “Download my white paper” or “Read this e-book” or “Watch this video.” Bertuzzi calls it “content spam.” Unless you’re a world-class clutter buster, email on its own won’t fill a B2B sales pipeline with enough qualified leads.
Enter the new discipline of “sales development,” which combines data analysis tools, email nurturing and phone prospecting teams, what Bertuzzi calls the marriage of “technology, process and people.” Sales development, in its purest form, isn’t about selling. It’s a specialized process that is only about qualifying leads and setting appointments.
Sales development addresses the most important question for sales organizations today – How do I get the right people in front of my “closers” at the lowest possible cost?
Inbound vs. outbound leads
The simple answer is to have your sales development team only call “inbound” leads – people who have sought you out or in some way raised their hands and said, “I’m interested.”
Problem is, few companies can generate enough of these leads. The best, what you might call “Tier One” inbound leads, come from the Web. Somebody filled out a form on your Website after a search or by clicking through an ad. Studies show that most companies get 20% to 30% of their leads from the Web. That’s what my company gets, and these leads are incredibly profitable.
Another source of “inbound” leads is email nurturing, which differs from the reviled batch-blasting of old only because it’s more targeted. These “Tier Two” inbound leads received an email and perhaps downloaded an e-book or white paper. A state-of-the-art sales development system calls all inbound leads immediately after they fill out a form. And for good reason. A study out of MIT showed that your contact rate will be 100 times higher if you call someone in less than five minutes vs. 30 minutes. And the qualifying rate will be 21 times higher.
What’s not to like about inbound leads? Nothing. But for most companies there aren’t enough of them. So enter “Tier Three,” which is outbound calling to people who did not raise their hands and probably have no idea who you are. Nobody wants to associate outbound lead-generation with legacy “cold calling” – which is a fishing expedition in the arctic waters. The preferred model is “smart calling” in warmer waters. Appointment-setters are given lists that have been sorted, scrubbed and scrutinized by list analysts. In an ideal world, reps only call high-probability prospects that are in what you’ve defined as your “sweet spot.”
In the real world, things are messier. Let’s look at how things can unravel at three key seams in a sales development process. 1. List acquisition and analysis (usually conducted by Marketing); 2. Recruiting and retention of reps; and 3. Managing and training of reps.
1. List acquisition and analysis. Companies like InsideSales.com hire teams of “data scientists” who pore over lists to identify high-probability names. Data mining tools like predictive analytics help them isolate markers such as company size, title, industry, and geographic location that influence response rates. They’ve even discovered that it pays to call certain records based on weather patterns or the recent performance of a data segment’s local professional sports team.
But it’s hard to find lists that aren’t being hammered by your rivals. We bought an industry list from a compiler who called every name on the list every four months to verify the data. It was as high-quality a list as you could find. But our email campaigns were wildly unresponsive because everybody was mailing the same list.
I asked Allen Nance, CEO of the email service provider Whatcounts, which area of sales development is the most important and he was emphatic that, “Data analysis is number one. I’ve had world-class sales development reps using bad data and it was unsuccessful. I’ve had mediocre reps calling great data and they’re successful. If you don’t have the right person to call, nothing else matters.”
2. Recruiting and retention of reps. Ideally, sales development reps would conduct deep enough discovery to qualify outbound leads effectively. The model sales development team consists of ambitious, educated reps who see sales development as paying their dues – learning the organization, learning the product – before getting promoted to a high-paying enterprise sales job. If you’ve got the chops to make unscripted, conversational calls that probe for authority, need and urgency, you don’t want to dial 160 times a day to make 13 contacts and set one or two appointments. This breed of sales development rep hangs around only for 14 months. The churn is brutal.
If you want less churn and more stability, you go down market and hire less expensive, less ambitious reps. But that comes at a cost. “There’s no question you sacrifice the quality of the conversation when an SDR makes the call vs. an experienced sales rep,” says Chad Burmeister, Vice President of Sales & Marketing at ConnectAndSell, a Los Gatos, CA-based lead-generation firm.
3. Management and training of reps. Leading a sales development team is management intensive and stressful. In many organizations, the process of generating high-quality leads is the company’s biggest cost center, and inefficiency can kill profitability. When the process falters – due to bad hires, poor training or lax oversight – enterprise reps start grousing about “bad leads,” panic sets in and – assuming the data Marketing provided was okay – all eyes turn to the sales development leader. That’s why Burmeister says the biggest mistake you could make in sales development is, “Hiring a weak leader. Don’t just promote a good rep to manager. You need someone who knows how to build a team. Don’t go on the cheap.”
So what’s next? The Bridge Group shows that only 40% of tech companies currently have sales development functions. That’ll likely grow. Nance, who as head of an email service provider has a panoramic view of how businesses do lead-gen, says he’s seeing sales development move into other areas. Financial services in particular, but also commercial real-estate. “Those are areas where deals were made on the golf course. Sales development is starting to make its way into what used to be purely relationship-oriented sectors.”
That sounds a bit like “messing with the magic.” Krogue, for one, isn’t worried.. “We’ll see more specialization in the future,” he says. “But people will always want that human touch.”