At a glance
- Only one in five technology companies grows revenue 10 percentage points faster than sales and marketing expenses, and only 3% do so consistently over four years, according to Bain’s research.
- Productivity leaders continuously improve the sales scope model by taking four specific steps.
This article is part of Bain’s 2022 Technology Report.
One ratio has been for years the gold standard of long-term success in technology: revenue growth that exceeds growth in sales and marketing expenses. Although difficult to achieve, some companies are doing it, and many others are aiming (see Figure 1). Now, with tech valuations down significantly, a tighter funding environment, and a less experienced salesforce due to the Great Resignation, it’s more important for tech companies across the board to grow without huge increases in spending.
Research by Bain & Company found that median productivity for technology companies was generally flat. Only one in five grew revenue 10 percentage points faster than sales and marketing expenses in a given year. And only 3% continue to do so for four years.
Even the fastest-growing companies can effectively increase revenue at a rate that far exceeds growth in sales and marketing spending.
Today, many executives believe the route to the top of that chart lies in some combination of better training, demand generation, and deploying one or more of the nearly 10,000 digital sales and marketing tools that available now.
One thing not often on their list: the sales scope model. It’s no wonder that following the disruption of Covid-19 and the rapid introduction of virtual sales, many executives are hesitant to revisit their coverage model, but productivity winners recognize the value of doing so. They recognize that getting the right people engaged in the right activities for the right customers at the right point in the sales cycle is a dynamic process that benefits from regular tuning. It’s a strategy that reduces attrition, accelerates new sales reps, and cost-effectively ensures that the right sales experts connect with customers at the right point in their journey.
Four areas of opportunity in the scope model
Many elements of coverage models can be optimized, but top companies consistently do four things.
Streamline and simplify specialty sales coverage. Growth through acquisitions or new product launches often leads to the creation, and eventually proliferation, of specialized sales organizations. While initially important, if neglected, these roles often rust, leading to overlapping responsibilities for sales reps and frustration for both customers and reps. When the salesforce has extensive knowledge about new products or customers, sales teams can subvert specialized organizations and avoid this issue. This streamlining improves the customer experience, and the reduction in total interactions per customer can unlock significant team productivity. When, a few years after acquiring EMC, Dell consolidated the server and storage specialist teams in its corporate segment, rep productivity jumped by about 20%.
Structure inside and outside sales roles to minimize travel and make it possible to cover more accounts. One of the many lessons from the pandemic is that inside sales reps can be as or more productive than outside reps when they put their time away from traveling into customer engagement with more accounts. Specialists or presale reps may find it easier than account executives to transition into these within sales roles, as they are typically not the primary relationship owners. A strong inside sales group ensures that customers can work with subject matter experts, wherever they are located, improving customer service and bringing real value to the company, often at a lower cost.
Train new reps within sales academies. In a world where talent is scarce and attrition is on the rise, a best-in-class inside sales academy that feeds the account executive pipeline is extremely important. Time in a role is the single largest contributor to rep productivity, according to Bain’s research, with every two percentage points of attrition associated with a one percent drop in productivity.
When a hardware company builds its sales development program, it has a “rookie ramp” of about 12 months. How long does it take new reps to reach their steady state of productivity. With many sales reps new to the job due to rising attrition and talent shortages across the industry, the company built a well-designed inside sales academy to strengthen its bank (see Figure 2). Academic graduates reach their quotas twice as fast as external hires and meet or exceed those quotas 30% more often. They are significantly more likely to stay with the company and more than twice as likely to be promoted to manager. Even before they took on account executive roles, these reps’ performance as inside sellers improved by 30% after the training program was launched.
A sales academy strengthens a company’s sales staff
Maximize productivity by moving some high-value quota roles to lower-cost, high-performing support staff. When reps have to carry a product bag with too much coverage, their productivity starts to suffer, and that’s an easy mistake to make when a company is growing rapidly. In smaller companies with high growth rates and expanding product portfolios, optimizing sales functions likely involves injecting more specialized, back-office resources into the same process as sales and after sales.
At ServiceNow, a workflow management and enterprise-operations cloud-computing platform, revenue grew more than 30% last year to $5.9 billion, while sales and marketing expenses grew 24%. One of the many steps that contributed to that result was an effort launched by executives to ease the administrative burden on their busy sales staff. In surveys, both customers and sales staff report that renewal planning is among their biggest struggles. So the company made a move that saved account executives as a group tens of thousands of hours and improved their job satisfaction: shifting certain data collection and renewal planning to a cheaper team in India. Renewal planning for customers with sinking goods can be a bit tricky. The renewal team determines the best replacement options to offer these customers, freeing reps to focus on other areas of customer service. And since this group in India is heavily involved in this work, it recognizes patterns and better identifies the best options, improving customer satisfaction. As the business grows over time, these patterns can form the basis of a recommendation engine that automatically maps transfer options, allowing these specialists to focus on evaluating more plans and refining transfer strategies, which will further improve productivity.
Regardless of the company’s stage of growth, sales rep productivity can be greatly improved by making the right changes to the coverage model and supplementing them with initiatives and digital tools that improve individual productivity. representative By consistently growing revenue faster than sales and marketing costs, leading companies demonstrate the benefits of systematically improving coverage models while simultaneously investing in the productivity of frontline reps. For these elites, dynamic sales scope models and a broader approach to productivity provide a strong competitive advantage.