Implications of Market Maturity and Decline for Sales Models

Your markets are maturing, even declining. Do you know how to evolve your Sales Model?

Lately, the topics of market maturity and decline have been coming up a lot in our discussions with CEO and business owners. There’s a growing sense, as the anemic economic recovery rocks along, that growth for many markets has peaked or is in a steeping decline.

You know the warning signs of maturity and decline:

  1. Profits are being harvested and paid to investors and management vs. re-invested in product innovation or market expansion.
  2. Consolidation of competitors is occurring at an increasing rate, and new entrants are innovating from the bottom.
  3. Price pressure is increasing significantly.
  4. Customer’s control over the buying process has increased markedly, it’s harder than ever to gain early access to stakeholders.
  5. Competitors are competing on brand, ancillary services that complement products, and process improvements instead of the products themselves.

Examples of industries in maturity or decline are abundant. One of the most prominent is the plumbing industry which is very mature in the developed world. And, immature in the developing world; it’s products are not well suited because the lack of public infrastructure, water, and energy. A short list of competitors: Sloan Valve, Kohler, Zurn, Toto, and American Standard have dominant market share and market share has been relatively static for long periods of time. Competition is somewhat oriented to products that conserve water, but is substantially oriented around price, and distribution channel control. So what must the plumbing industry, or others facing similar circumstances do to adapt their sales models?

Implications for Sales Models

Maturing and declining markets pose a number of implications of one’s sales model. In maturity, sales efficiency, or the cost of customer acquisition becomes critically important. Where as in decline, one’s ability to capture specific pools of profit becomes paramount. Here are strategies you should pursue:

In Maturity:

Sales Process, Sales Process, Sales Process. The first and most underutilized driver of sales efficiency is a sales process that is designed based on the customer’s buying process. Once you have a sales process that fits the customer’s buying process, it is critical to enable this process with a CRM system to measure and track sales cycle times and customer interactions, as well as tools to support quality conversations and information sharing with each customer stakeholder in the sales process.

Focus on Sales Management Processes. Having a sales management process that enables frequent inspection of sales opportunities and coaching of sales personnel around the efficient and effective execution of the sales processes is a critical, and often under-leveraged driver of customer acquisition cost.

Re-align Compensation. In the wake of maturity, it is important to ensure that compensation spending is aligned with the right revenue, profit, and/or product and market outcomes while appropriately rewards levels of performance. Quota setting accuracy, allocation of compensation dollars by product/market, and the shape of payout curves become critical drivers of cost of sales.

In Decline:

Customer Selection. Once decline begins, the identification and selection of profitable customers becomes critical. To do this, sales leaders, with the help of finance, must develop a detailed understanding of individual and customer segment behavior  and the drivers of profitability within the customer’s business and their own. These insights form the foundation of where and how to manage decline while sustaining value at the bottom line.

Channel Selection. Within decline, channel selection and, ultimately, consolidation become critically important drivers of sustained profitability. Before demand shrinks precipitously, sales leaders must begin reducing the number of channel partners while improving their ability, through informed selection and strong partnering programs (invested in and created by the channel partner and manufacturer) , to maintain customer access and ensure quality customer experience.

Sales Coverage. Similar to channel selection, the number and types of sales people deployed across markets must be adjusted as markets decline. Not surprisingly, many sales leaders face maturity without having developed much skill at coverage re-design. This is due primarily to the perceived risk of altering customer relationships by changing account assignments and team configurations. However, this risk is mitigated by maintaining a clear understanding of how, and from whom, customers want to buy – which informs the type and number of sellers required – and creates a basis for making regular incremental adjustments.

It’s not only critical to spot the warning signs of maturity and decline, but also develop the ability to adjust one’s sales model dynamically across the market life cycle, ideally in advance of each stage!

Is your market maturing or declining? If it is, how are you adapting your sales model? Comment here or on Twitter. Or contact me at tknight@evergreengrwothadvisors.com.

-TGK



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