Your key to reducing sales cycles is by battling complexity
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It's no secret that things that once took a certain amount of time to do now take longer. And, no, it's not just because we are getting older. Closing sales, according to exclusive VARBusiness research, takes longer than it did a few years ago, and for more reasons than the age of the salespeople.
Since the dot-com bust, customers have scrutinized IT purchases more than ever. And they have also asked for specific answers to questions regarding risk, alternatives and return on investment (ROI). Furthermore, the Internet has given rise to a new kind of buyer, one who is empowered at an unprecedented level. With a simple browser and a bit of time, buyers can learn nearly everything about the sales of IT goods and services--including information that was once little known outside the distribution supply chain. Armed with that knowledge, customers have been able to press would-be sellers to degrees never before possible. That has had a chilling effect on companies that, frankly, counted on their customers' lack of understanding to accelerate sales decisions.
That's no longer the case. Today's savvy customer knows discount structures, reseller rebates and end-of-quarter specials inside and out. And it shows. According to VARBusiness' exclusive 2006 State of the Market data, 42 percent of VARs and solution providers say their sales cycles have increased during the past year. That's up from last year, when 35 percent of survey respondents said their sales cycles were increasing. It is also the third consecutive year in which solution providers reported an upward trend in the length of time it takes them to close a deal (see "Sales Cycle Trends," above, right).
Part of the problem is the increased complexity of technology products and solutions sold today. As reselling evolves from point-product selling into true solutions selling, complexity has inevitably increased, elongating sales cycles along with it.
Indeed, our research reveals that the most complex of IT products--a.k.a. business software, network infrastructure and operating systems--requires the most amount of time to sell (see "Week By Week," below, right). Business software, on average, can take an entire calendar quarter to sell. And many in that line of work report that sales can take six months to one year to close on extremely complex deals. (At the other end of the spectrum, solution providers say highly coveted items, such as wireless devices and security products, are actually selling at a faster clip than one year ago.)
To combat the ever-increasing sales cycle, VARs have resorted to all sorts of stop-gap measures. Those with great confidence in their ability to demonstrate an ROI are offering to fund pilot projects for customers. They are hiring proven "closers" and signing up for advanced sales training. They are also embracing proven sales methodologies, such as the solutions-selling principles. And many are also availing themselves of help from old allies.
Where Vendors Can Help
Partners struggling to reduce the time it takes customers to sign on the dotted line can improve their chances of success in several ways. One is to take advantage of the many uplifts and financial incentives vendor companies extend to their partners to generate new business. When economic conditions deteriorate, for example, vendors that rely on partners often spend money to spur sales and reduce sales cycles.
Few, however, take it to the extent that Cisco Systems has, relying on incentives in both bad times and good. Among other things, Cisco created three programs to help improve partner profitability and reward sales performance: the Value Incentive Program (VIP), the Solutions Incentive Program (SIP) and the Opportunity Incentive Program (OIP). Since the launch of VIP more than three years ago, Cisco has doled out upward of $100 million on various incentives.
Of the three programs, OIP was specifically designed to reward sales prowess and drive new sales. It rewards partners for registering and closing deals. Partners, whom Cisco senior vice president and chief marketing officer James Richardson credits for being his company's "route to revenue," get additional sales support when they register a deal through OIP. They also are invited to follow Cisco's proven sales methodology, which has been extremely successful in the enterprise market.
To date, some $900 million worth of new business is registered in the OIP program, which itself is credited for generating some $280 million in new business for Cisco in fiscal 2005.
Other vendors have also increased the sales assistance they provide to partners in several very successful ways. Take CA, for example, whose sales are on the increase at Ciber, according to CTO Tony Ferrigno. Ciber's CA business has doubled in the past year. One reason is the nearly 100 new people CA has assigned to work with partners. Another is the custom, go-to-market strategies that CA has devised for partners of all sizes and ilk. That's a big change from the past, when the company lavished the bulk of its attention on its best enterprise partners. These and other reasons have convinced Ciber that it no longer needs a strategic association with Hewlett-Packard's OpenView platform; it ended that so it could concentrate more of its energies around CA's products and services.
"When we approach outsourcing, our goals are twofold: to lower customer costs and improve service levels," Ferrigno says. "We're able to do that consistently with CA."
Pulling Yourself Up
As much as vendors try, however, their assistance can go only so far. The rest is up to you. Experts who help VARs super-charge their sales engines believe far too many of them are falling behind. Take sales consultant Ken Thoreson, founder and CEO of Acumen Management Group. Thoreson has counseled thousands of IT solution providers during the past decade, including here on the pages of VARBusiness, where he has penned several columns. Like our own research has shown, Thoreson, too, has heard quite often from his prospects about lengthening sales cycles--particularly in the past two years.
Thoreson's experience has shown him that most VARs cannot clearly articulate their value propositions or what sets them apart from their competition. With no "unique selling proposition" to offer clients, their proposals get lost in endless decision-making and sit idly until a client is ready or forced to buy due to some internal circumstances over which VARs have no control, such as a merger or catastrophic IT failure.
There are several reasons why some VARs struggle in that respect. In some cases, their salespeople lack the skills necessary to convey to a client where he or she needs to commit to a proposal. In addition, some companies rely too much on relationship selling and fail to do proper prospecting.
"In many cases, when we scrub sales pipelines, we find deals that are poorly qualified and are never going to close, or are simply misforecasted," Thoreson says. "Salespeople do not take the time to 'perform' a discovery phase and translate what they learn into why the prospect should buy now."
Proper selling, he notes, is making a transaction or relationship occur based on skill, knowledge and trust.
"Selling is motivational, emotional, and the ability to have empathy [is fundamental to get] the prospect to move--without always offering a discount," he adds.
Experts, including Thoreson, believe many solution providers also could do a better job when it comes to hiring salespeople. That's especially true as VARs move into managed and professional services that depend on people trained in the art of consultative selling, which requires different skills than transaction-based selling.
For example, solution providers, such as David Carswell, president of the VIA Group of Houston, have endured significant turnover in their salesforces when they moved into managed services. In Carswell's case, he replaced half of his sales team over the course of a five-year business transformation. Those he let go couldn't make the transition to annuity-based, consultative selling. Thoreson is even more sober in his belief that just 25 percent of product salespeople can transition to solution sales.
The reason is because the difference between consultative selling and product selling is stark. In consultative engagements, salespeople must fully understand their prospects' business strategies, needs, competition and financial situations. That's quite different from product-based sales, which relies more on understanding the technical underpinnings of the products being sold.
In addition to rethinking their go-to-market strategies, their brands and the composition of their salesforces, savvy solution providers are investing more money, time and energy into professional-quality sales tools and services. That includes spending on salesforce automation and customer-relationship software like never before.
For years, solution providers say they have used such products as FrontRange Solutions' GoldMine package or Involve Technology's Web-based Sales Knowledge Automation solutions (including StreetSmarts) to help combat elongating sales cycles. StreetSmarts, for one, provides a common place where sales representatives can share knowledge and experiences, while FrontRange's new GoldMine 7.0 Corporate Edition, released in November, now integrates better with external systems and offers enhanced workflow tools and special features designed to help small and midsize enterprise users.
Partners not only rely on it themselves, but sell it to their customers with sales teams of their own. During fiscal 2005, FrontRange added more than 50 new resellers while increasing license revenue from productive partners approximately 15 percent, according to the company.
Chances are somebody, somewhere, is using the software to close a deal at this very moment. Hopefully, that person is on your team.