Key customers slash budgets, your pipeline bloats with opportunities stuck in a holding pattern, decisions become more complex and are taking longer, you lose deals and don’t know why, good salespeople leave the company, you spend more on advertising and cut back on training – the downward spiral gets deeper and deeper.
If any of these danger signs look familiar, you’re in good company. Most executives who turned their companies around in former recessions first fell into the same traps because they represent a natural response in times of uncertainty. People go to risk and get tactical.
But these same executives report the secret to pulling out of the nosedive is to act contrary to the natural impulse, keep your head, and take a contrarian path. Those that did so achieved stability and even growth while their competitors fell by the wayside. They cite the five most dangerous mistakes a company can make as:
1. Ignoring the problem
Fear and panic can cause indecision. When they do, business leaders can fail to evaluate options rigorously, and so make inappropriate decisions to maintain the status quo. Poor choices – or safe choices made too late – cause a company to go backwards. When the warning signs appear, take swift action.
2. Increasing advertising
For fast moving consumer goods, brand advertising can sway preference and so take market share away from competitors in the short-term. But in complex B2B sales, advertising does not lift short-term revenue because institutional buying decisions require a protracted period of assessment that outlasts most advertising campaigns. So don’t advertise and expect an impact on B2B sales this year. However, consulting firm PIMS Associates reports how companies that advertise more end up growing faster over the long-term than firms that drop off the customer’s radar, seemingly swallowed by the downturn.
3. Cutting the price
Buyers in a tight market will naturally gravitate to low prices. But this simply reduces your margins, which must be paid for by cutbacks to operating expense elsewhere. It leads to short-term gain but long-term pain; the loss of sustainability. Conversely in the B2B space, higher prices positioned as necessary to reduce the customer’s risk, actually plays better to executive perception than ‘getting a cheap deal’. Sometimes putting your price up is the best way to grow your market.
4. Freezing sales expenses
Putting a hold on sales costs such as travel, entertainment and training are typical areas targeted by nervous CFOs. But a study reports: Only 27% of companies that indulged in intensive cost cutting were growing as a result of their pains.
5. Pushing more calls
Pressuring salespeople into making more intrusions on the same number of prospects actually reduces sales. Neil Rackham (author of SPIN Selling and Rethinking the Sales Force) concludes: ‘The least successful people are the ones making the most calls. Increasing the call rate results in fewer orders, not more.’
To avoid reinventing the wheel, learning from executives who weathered past recessions is a sound approach to reducing risk. In your own organisation, your alumni or your online social network, there may reside active or emeritus officers with deep experience to share. Talk to them. Pick their brains.
But one thing is certain when an ailing economy mimics a black hole – piecemeal remedies fail to achieve escape velocity. Cutting back on cost, though logical, is the opposite of what has pulled businesses through recessions in the past. Increased investment in the sales process, governed by greater discipline, is a more reliable approach for achieving sustainable revenue growth, even in difficult times.
Nicholas Read is president of consulting firm SalesLabs (http://www.saleslabs.com) and co-author of Selling to the C-Suite (McGraw Hill, 2010).
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