- Andris A. Zoltners, PK Sinha and Sally E. Lorimer
What Subscription Business Models Mean for Sales Teams
Across the technology industry, subscription sales models are growing in popularity. The trend is having a big impact on sales forces. For example, an enterprise software company recently transitioned from selling custom software as a one-time product to selling monthly SaaS (software as a service) subscriptions. The company’s salespeople were used to seeking out new customers, closing big deals, and then moving on to the next prospect. Now, they also had to cultivate ongoing customer relationships to ensure contracts got renewed, in addition to seeking out opportunities to expand business. As ongoing account management activities consumed more and more sales time, new customer acquisition slowed down–and the company’s revenue growth began slowing, too.
The subscription sales trend in cloud computing (and many other industries) means more companies are facing a classic sales management dilemma: Should the same salesperson be responsible for both account acquisition and account management? Or is it better to have one “hunting” role for finding and closing deals with new accounts, and another “farming” role for retaining and growing business with current accounts?
The Pros and Cons of a Single Sales Role
There are several advantages to having the same salesperson who acquires an account also manage the ongoing relationship with that account.
It encourages customer focus and accountability. There is no question of who is responsible for each customer.
Customers like it. They are not disappointed when they can no longer work with the person who sold them initially.
Most salespeople like it. They are motivated by the entrepreneurial culture that comes with “owning” the customers they bring in.
It’s efficient. Salespeople work smaller territories and can live closer to their customers. Also, there are no miscommunications and errors that can occur when handing off customer responsibility from one salesperson to another.
Subscription sales require salespeople to divide their time among many diverse sales activities in order to both acquire customers and support their ongoing needs. Often, salespeople’s bandwidth gets challenged and they start neglecting some strategically important activities. They gravitate toward easy work (e.g. supporting friends and family) or urgent work (e.g. putting out fires for demanding current customers). The difficult and important work of business development gets shortchanged.
In some cases, training, incentives and performance management can redirect salespeople’s effort to strategic activities and enable success with a single sales role. But if such approaches don’t work or are only partially effective, it’s likely time to split the sales role.
The Pros and Cons of Two Roles
Having two sales roles (one for account acquisition and another for account management) has several advantages.
Salespeople are more effective. You can select salespeople whose personality matches each role. Salespeople who are persistent and independent and love to network can take account acquisition roles. Those who are more patient, collaborative, and focused on gaining loyalty can become account managers. In addition, with two sales roles you can train and develop salespeople on a more focused set of competencies, allowing them to bring deeper expertise to customers.
You directly control sales effort allocation. If you want more sales time devoted to new business development, you simply put more people in account acquisition roles. With a single sales role, you can influence sales effort allocation with training, incentives and performance management, but such strategies are not guaranteed to be successful.
You can drive efficiency by using inside sales. Often, the work required to support and retain customers can be performed remotely using video and text chat. By assigning account management responsibility to a less-expensive inside sales role (particularly for those accounts in geographically-remote locations), you can drive substantial cost-savings with little or no effectiveness loss.
Along with the benefits, a two-sales-role model creates some stresses and challenges that must be managed for the model to operate successfully. Continuing effort is required to ensure efficient, effective and customer-focused transfers of account responsibility from one salesperson to another. Requirements include:
Defining how and when the handoff should occur. By specifying the transition steps required and which sales role is responsible for each step, you help ensure nothing falls through the cracks. Most companies set guidelines for when an account manager should take over. For example, the transfer might occur right after the initial sale, 6-12 months after the sale, or once the account’s opportunity is well-penetrated (say 40% or more). Such guidelines need flexibility. Some divisions of an account may be well-penetrated while others still have growth potential. Guidelines must address these gray areas. If the handoff takes time, you may want the account acquisition person to share incentives with the account manager for a brief period.
Ensuring customers see value in the transition. Customers who have become dependent on the salesperson who sold them initially need to know the transition is aligned with their best interests. One strategy is to get the account manager involved during the implementation phase of the customer solution. That way, customer personnel get to know the account manager (and vice versa) and gain confidence they will be in good hands. Well trained, talented and motivated account managers will be able to succeed in the transition.
Creating systems and processes for capturing and sharing customer information. At a minimum, customers shouldn’t have to “train” the account manager taking over. CRM and other systems can organize key customer data and ensure no information is lost in transition.
Synchronizing account acquisition and account manager responsibilities/territories. Coordination efficiencies and teamwork are encouraged when each account acquisition person works consistently with the same account manager(s).
By splitting the sales role at the right time and then managing the ongoing challenges, you can profitably retain and grow a subscription sales business.
Courtesy : Harvard Business Review