Sales and Pricing Strategies for Value Creation
Craig Group’s Libby Covington recently moderated a panel discussion for the Association of Corporate Growth about sales and pricing strategies. Joining her were Ben Humphreys, senior operating executive at Monomoy Capital Partners; Tracy Burzycki, an operating partner focused on commercial excellence with Apollo Global Management; and Zorian Rotenberg, an operating partner focused on go to market sales excellence and revenue growth at Charles Bank Capital Partners.
Panelists outlined some key takeaways that leadership in high growth companies can use to create value during uncertain economic times.
USE PRICING AS A GROWTH LEVER
While commercial leadership may not always maximize its use as a growth tactic, pricing is an important growth lever. While price increases do have a volume impact, leadership often thinks about these impacts from the perspective of the top line, and not necessarily the impact to the bottom line performance of the business.
“With the use of data driven tools we can dramatically reduce the uncertainty around revenue growth as a value driver,” Humphreys said.
Any pricing strategy should include foundational elements like data and analytics to understand profitability drivers and control pricing lists. More mature strategies involve assessing risk and understanding customer preferences through market research.
“Commercial leaders shouldn’t be afraid of pricing,” Humphreys said. “It can be an area of much lower risk than they probably think and result in much higher certainty of value creation than they give credit for.”
Timely reporting, and coaching, is key to inform sales reps and help them have pricing conversations with customers. A deep knowledge of the buyer helps companies manage price increases with the customer perspective in mind.
“What are customers actually saying and what are they willing to pay for?” Burzycki asked. “That’s my favorite question for companies right now. How do you know?”
Humphreys suggests implementing incremental price increases and testing their effectiveness, while also exercising caution with customer segments that represent significant contribution or concentration of a business.
“When you illuminate the data and show how much volume in some cases you need to lose to break even, some of that fear goes away,” he said. “It’s also important to understand we’re not trying to achieve perfection, we’re trying to get incrementally better. Small price increases over time can really compound.”
The customer can be a partner in finding a solution. They might also be experiencing price increases on their raw materials.
“If you have a collaborative discussion with the customer where you can have a little bit of data to back up why you’re asking for certain price increases, it goes a long way,” Burzycki said. “We’ve seen success arming sales reps with that information.”
BUILD A SALES STRATEGY AROUND THESE FIVE THINGS
Rotenberg said that companies need to learn to do more with less and continue to focus on revenue growth. He shared five things that Chief Revenue Officers and VP of Sales need to focus on right now: the sales team, existing customers, sales execution, effective leadership, and alignment between the board and sales.
“Look at your existing team and skill matrix.” Rotenberg counseled. “What skill sets do you need? Invest in their development right now. Identify who your top talent is. Focus on the culture at a time when morale might be shaky.”
The statistic that it can cost five times more to attract new customers than to retain the existing ones is an impetus to focus on existing customers. Getting feedback from any customers who may have had a negative experience can be a great source of insight.
Improving sales execution involves a number of things, including managing the pipeline effectively, refining the sales process, increasing productivity, and focusing on high pay activities.
“If there’s no pipeline, there will be no sales,” said Rotenberg. “You only have so many of these extremely valuable opportunities in that pipeline and really each one matters more than ever before.”
In periods of prosperity there can be a lot of new tactics introduced that have an incrementally lower return. Humphreys noted that a downturn can be a great opportunity to reset the tactics used around lead generation.
“This is not the time when we just run after everything that’s in our funnel,” Burzycki added. “It’s about having robust discussions and even almost customized discussions based on the sales rep and the region and the product based on data and focused on those highest priority, most likely to win opportunities.”
Productivity is another aspect of sales execution. One study showed that only about a third of a sales rep’s time is focused on revenue generating activities. Redirecting activities away from administrative tasks to more “high pay activities” should be a priority.
Everything can be measured, including sales leadership. Effective leadership can improve win rates and gain new buyers. Strong sales leadership is also integral to the alignment of the board and the revenue generating team.
“Being more thoughtful and intentional about your go to market and sales strategy with your board really matters because things are changing,” Rotenberg said.
ENCOURAGE EFFECTIVE BOARD SUPPORT
Having a go-to-market expert at the board level can provide great value to private equity investors. In addition, boards also benefit from a market specialist who can help stakeholders interpret sales data during an economic downturn.
“There’s not always someone there with that battlefield experience who’s actually run global sales teams or go to market or revenue teams,” Rotenberg said. “Having an operating partner or someone on the deal team with that kind of experience is critical because that creates alignment through deeper understanding.”
Burzycki adds that if you really want to know which tool to use, someone sitting at the table who has “been there and done that” makes a strategy much easier to implement.
The market specialist can be a great resource to a private equity firm which may not always be experienced in the nuances of each sub sector.
“There are lots of times where the sales team can be performing outstandingly well and revenues can be down and the inverse can also happen,” Humphreys said. “Having a person with true industry expertise and perspective that can help inform the discussion as to whether you’re winning or losing share is incredibly important.”
MAKE FUNCTIONAL COLLABORATION – AND CRM DATA – A GIVEN
Cross-functional collaboration between sales and marketing teams is necessary to proactively and profitably obtain new customers.
One way to make this happen is to set up a lead council to review campaigns, which establishes a kind of service level agreement between sales and marketing, and improves win-loss programs within the organization.
“This is not groundbreaking but it’s a tried and true way to drive alignment between sales, marketing and a revenue officer,” said Burzycki.
To this end, all the data needs to be in the CRM system to be able to forecast and to measure win rates and sales cycles. Companies that are behind the curve on data collection and management will face challenges in making high-quality decisions, which can lead to lost deals and missed opportunities.
“There’s a quote by Peter Drucker, ‘if you can’t measure it, you can’t manage it,’” said Rotenberg. “The data is not there just for the sake of being there, it’s there to really understand if your opportunities in the pipeline are high probability and if you’re focused on the right ones.”
While the pandemic has presented numerous challenges for businesses, it has also accelerated the adoption of digital marketing and the use of technology, particularly in customer relationship management. It is a plus that companies now own their customer data more than ever.
Now companies need to effectively leverage these tools and strategies to grow business with new and existing customers and increase sales. For more information about panel insights, or to learn more about integrated go to market strategies for sales and marketing, contact Libby Covington at Craig Group.