When you get the facts, you can cut the fat Until recently, most companies have been able to offset rising commodity, transportation, and energy costs by passing on higher prices to consumers. But given the current economic downturn, companies have limited room to raise prices and must focus increasingly on the cost side.

Undoubtedly, an economic downturn requires that companies eliminate any unnecessary expenses. The average sales organization can typically reduce administrative expenses by 2-3 percent without negatively affecting pipeline or performance, at least in the short term. But beyond temporary cuts to sales administration there are more long-lasting and significant efficiencies that can be gained, again without hurting overall sales effectiveness.

However, no company ever “cost-cut” its way out of a downturn. Should a company theoretically cut out all expenses it still would not turn a profit without income. In fact, a downturn in an industry makes finding sources of income even more critical. The single most important key to your company’s economic health as it emerges from this slowdown is its ability to sell.

To help sales executives through periods of downturn, Deloitte has identified 6 key priorities:

1 Focus on your best customers Paying special attention to the most profitable customer segments permits a company to control a larger share of revenue and, consequently, ensure more sustainability during difficult times.

While many sales executives are keen to develop short-term action plans to boost sales, many fail to analyze and communicate customer priorities to their sales force, thus leading to the dilution of efforts and sub-optimal revenue impact.

Identifying your best customers starts with determining their revenue contribution and costs. The revenue should include the value of their current product and/or service portfolio as well as their potential lifetime value. The cost should integrate the customer acquisition cost, the cost of goods and services sold, and if available, the cost of follow up and product support.

While a complete and detailed customer profitability analysis can require extensive effort and time, a high-level estimation can prove to be extremely valuable.

Skinny SalesManaging your sales in a downturn

2 Modify the sales organization’s structure to lower costs and improve productivity Sales organizations are often more complex than they need to be. In many cases the problem is that there are too many layers of management or too many regions. If you have 17 regional sales managers, ask, “Why not 10?”. If you have seven regions, ask, “Why not four?”. Greater complexity equals higher administrative (non-productive) costs.

The sidebar, “Sales Metrics Relative to Span of Control,” displays several sales metrics that could indicate opportunities to optimize organizational structure costs. The conclusion is clear: collapsing geographic territories can reduce sales support costs, while increasing spans of control can lower sales management expense.

3 Automate to reduce the time and cost of sales administrationIn many companies, the sales organization is not leveraging technology to its greatest potential. For example, many companies continue to use spreadsheet or other desktop applications to harmonize data and determine the effectiveness of promotional programs (Figure 1).

Sales Metrics Relative to Span of Control 0%

20%

40%

60%

Outsource theanalysis to athird-party

Packagedenterprisesoftware

Home-grownsoftware

applications

Spreadsheetsand otherdesktop

applications

Figure 1 - Technology used to harmonize data and conduct promotion analysis

59% 36% 29% 17%

Source: AMR Research

As a quick gut check, ask yourself: •Doesmyorganizationrelyondisparatemanual

spread/worksheets to monitor and report on the business?

•DoI“reinventthewheel”eachtimeapresentationiscustomized with customer data?

•Howmuchtimedoesmysalesforcespendmanuallyentering promotional codes?

•Howmuchtimedomyrepswastecollectingandreporting in a manual fashion?

•Howmanymanualformsdoesthesalesforceneedtomaintain and complete?

Sales force automation tools can free up precious selling time for the sales force. Selling time equates to money for the company. For example, planning tools and analysis templates can reduce “start from scratch” procedures, while standardizing administrative back-office processes – two advantages that not only reduce costs but free up the sales force for more productive activities.

Metric Definition

Accounts per Sales Rep Average number of accounts assigned to each sales rep.

Sales Force Size per € 1B Revenue

Total sales headcount. Includes all staff for which labor expense is part of the sales budget - such as sales managers, direct sales reps, account managers, channel reps, inside sales reps, sales engineers, sales operations, marketing professionals, customer service professionals, training and sales support staff.

Sales Management Expense

Percentage of company revenue spent on sales management.

Sales Productivity per Sales Rep

Amount of total new business sales produced per sales professional.

Sales Rep to Sales Manager Ratio

Number of sales professionals for each sales manager.

Sales Reps per € 1B Revenue

Total number of quota-bearing sales professionals. Includes individuals responsible for increasing direct business by developing and pursuading new procspects to buy specific products and/or services.

Sales Support Staff per € 1B Revenue

Total number of sales support resources supporting the sales force. Includes sales-specific analysts, financial controllers, sales operations, competitive intelligence, admins, and managers of these resources. This does not include customer service, cusstomer support, pre-sales engineers, or marketing staff.

Hand-in-hand with technology goes better training, which can be extended beyond the use of the tools to include sales techniques, such as relationship building. The sidebar, “Sales Metrics Relative to Technology Utilization”, shows other sales metrics that could help a company to understand the degree to which the deployed technology optimizes sales activity. 4 Centralize or outsource support processes to improve efficiency Do all your customers require sales calls or would some do just fine placing their orders online or through a call center? For customers requiring a sales call, how often is often enough? The answers to these questions depend, to a large extent, on your understanding of whether a product is commodity-like and whether a customer is profitable.

Buyers of commodity products ask two questions: What is the price? Can the product be delivered when we need it? Buyers of specialty products, on the other hand, want to know “How can we get the best performance?” This is a key argument in favor of new marketing strategies that emphasize “solution selling”. The greater a product’s “uniqueness,” the more important the sales function especially when “uniqueness” comes from a high level of brand equity among consumers.

If a product is being sold as a commodity, a sales call might not be necessary at all (or at least not often). A call center – whether from an outsourcer or from an internal, centralized function – can take and fulfill orders for commodity products, thereby enabling the sales organization to reallocate resources (sales staff, money, and time) to more value-added activities. Just as important, time spent with high-value accounts will be more productive and profitable.

Sales metric relative to technology utilization

5 Minimize sales expenses to save money Some sales expenses – such as budgets for travel, entertainment, and “perks” (autos, conferences, and meetings) – will have to be reduced.

When considering the reduction of one sales expense category or another, you should ask: •Howwillthesalesforcedelivertheexpectedlevelof

service to key customers? •Howwillmanagementmotivatethesalesforce?•Howwillexpectationsbemanaged?•Hasthelevelofservicetothecustomerbeenwell

defined so that cuts in peripheral programs do not impact the core value proposition?

•Howwillthecustomeracquisitioneffortsbeimpactedand can substitutes be found?

There are more than several ways to “skin the cat.” In some cases, the reduction in one large expense can be offset by increased efficiencies in other areas that more than compensate for the loss. For instance, improved route planning can enable a salesperson to call on more accounts in the same time, or the deployment of video conferencing webinars can help maximize selling time while also leading to a better work/life balance.

6 Invest in satisfying new demandWhile this topic is not about cost reduction, per se, it is relevant. Just when the sales organization is coming under heightened cost scrutiny, customers are sometimes asking for different products that better reflect the economic circumstances.

Therefore, as you consider ways to cut costs – through restructuring, automation, outsourcing, or expense management – be mindful of the ways that you could spend more wisely.

Metric Definition

Cost of Sales Percentage of company revenue spent on sales.

CRM/SFA Utilization Percentage of sales team using CRM/SFA daily.

Knowledge Management Utilization Percentage of sales team using Knowledge Management daily.

Mobile Technology Utilization Percentage of sales team using Mobile Technology daily.

Sales Productivity Per Rep Amount of total new business sales produced per sales professional.

Virtual Conferencing Utilization Percentage of sales team using Virtual Conferencing daily.

Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in 140 countries, Deloitte brings world-class capabilities and deep local expertise to help clients succeed wherever they operate. Deloitte’s 165,000 professionals are committed to becoming the standard of excellence.

Deloitte’s professionals are unified by a collaborative culture that fosters integrity, outstanding value to markets and clients, commitment to each other, and strength from cultural diversity. They enjoy an environment of continuous learning, challenging experiences, and enriching career opportunities. Deloitte’s professionals are dedicated to strengthening corporate responsibility, building public trust, and making a positive impact in their communities.

Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu and its member firms.

Member of Deloitte Touche Tohmatsu

© February 2009 - Deloitte Consulting. All rights reserved.Designed and produced by the Creative Studio at Deloitte, Belgium.

First, facts – then, actions To find and exploit the best opportunities to cut the fat, but not the muscle, from the sales organization, you need to have some standard or scale against which to work. For cost cutting to be effective and in line with the company’s core strategic objectives, the best step forward is to leverage sales benchmarking. Such benchmarks can help to prioritize the many cost-cutting options that are possible.

By being proactive you can realize the benefits of a new cost structure quicker; if you wait, you’ll more likely suffer the pain of having cuts forced on your organization. By taking the initiative you can keep budget cuts focused and appropriate.

The right benchmarks and business intelligence can give you the power to reduce spending while improving performance at the same time.

ContactFor further information, please contact:

Deloitte Belgium:Patrick Callewaert Koen Vandaele Patrick JouckenEMEA CRM Leader Technology Leader CRM Partner+ 32 495 59 49 22 + 32 497 59 61 52 + 32 496 57 48 37pacallewaert@deloitte.com kvandaele@deloitte.com pajoucken@deloitte.com

Yvo Vandeweyer Olivier de Groote Sophie JanssensPricing Leader FSI Leader Life Sciences Leader+ 32 478 80 04 63 + 32 495 59 48 43 + 32 477 88 29 86yvandeweyer@deloitte.com oldegroote@deloitte.com sojanssens@deloitte.com