An Industry in Transition

The manufacturing industry is undergoing a dramatic transformation: technology has enabled revolutionary changes to what traditional manufacturers can offer. Customers now demand flexible solutions, not just products. And competition drives the need to adapt or lose share. What are leading companies doing to adapt their sales models?

The Alexander Group recently completed a study among 40 manufacturers of building materials, building systems, industrial and automotive goods. While the study revealed a wide range of insights, this article highlights four critical actions high performing manufacturers are doing to modernize their sales organizations.

1) Portfolio Selling

Traditional manufacturing sales organizations were built around relationships and product knowledge. Sales teams were organized by product division and reps sold just their division’s product. Today, according to 95 percent of our study participants, portfolio selling is critical for revenue growth, yet only 32 percent of participants believe they are prepared for this challenge. Leading manufacturers recognize addressing this problem requires a solution that is more than about process and roles. It requires structure and people changes, often moving sales teams out of individual product divisions and into a company-wide sales force organized around customer segments. Then leaders can effectively implement a consultative sales process and roles.

2) More Specialists

With portfolio selling comes the need for new roles – namely Account Managers and Specialists. Account Managers orchestrate the consultative sales motion. But they typically only have product expertise in one or two areas, hence the need for more specialists to help sell the full breadth of offerings. Specialists reduce the rep’s need to spend time learning the intricacies of new or complex products and enable them to focus on selling the full portfolio of products into an account. In fact, our survey results revealed that companies with a rep to specialist ratio less than 11:1 had 22 percent more revenue from new products.

Today, only 57 percent of survey participants currently deploy specialists, yet almost 90 percent agree they are necessary and see them in their near future. This transition to portfolio selling leveraging specialist roles has occurred in other industries, namely high tech, and our research shows that manufacturing is at the beginning stages of this transition. Where manufacturers deploy specialists today, the rep to specialist ratio is 11:1. The high tech industry ratio is 5.5:1. In other words, the average high tech company has double the investment in specialists!

3) More Inside Sales

With firms facing increasingly diverse buyer profiles and shorter sales cycles, inside sales is quickly becoming an integral part of the new manufacturing sales model. While only 50 percent of participants deploy inside sales teams today, this is expected to increase to 62 percent within the next three years. As with specialists, the manufacturing industry currently has a higher field to inside ratio than the technology industry (5:1 vs. 3:1), but that gap will close as manufacturing companies start adding more inside sales to boost solution selling (See Table 1 below).

Table 1:
Modernizing Manufacturing_Table1_Ast

To get the most from an inside sales organization, leadership must be clear on the role of inside sales in the sales process. In both the survey and our project work, Alexander Group finds that designating inside sales as lead generation reps, renewal reps and even as full quota-bearing reps are some of the best ways to derive higher value. Inside sales can increase customer touch point frequency in low coverage territories, serve as a training ground for field reps or can even be used to promote cross-selling. Regardless of how you choose to deploy your inside sales team, it’s important to clearly define the components of the role.

4) Compensating for Solution Selling

Today, only 38 percent of participants believe their compensation plans strongly promote the company’s objective of solution selling. At the heart of this challenge is the typical emphasis on pay for performance, reflected in the amount of pay at risk. Our benchmarks indicate the average sales rep’s comp plan in manufacturing has 31 percent at risk, or in the form of a bonus or commission. That compares with 46 percent at risk on average for high tech sales reps. But does increasing pay at risk really drive results? In short, yes. Survey respondents with 30 percent or more of field rep pay at risk reported 18 percent higher annual revenue growth as well as increased revenue from new accounts.

To drive solution selling, performance measures will also need to change to focus on strategic product growth. And while individual performance measures will remain important, team measures will increase to support collaboration across roles. Here’s a summary of plan changes you can expect to see in manufacturing sales roles (Table 2).

Table 2:
Modernizing Manufacturing_Table2_Ast


Portfolio selling, more specialists and inside sales, and updated compensation plans are four critical strategies for manufacturing companies to modernize their sales models. To support these changes, leading manufacturers are also building stronger sales ops functions, investing in playbooks, utilizing the internet for new business selling and re-vamping their channel partner programs.

Please contact us to learn more or obtain a full copy of the 2015 Manufacturing Sales Strategy Survey results.

Manufacturing practice leaders: John Drosos and Kyle Uebelhor
Learn more about our Manufacturing Practice.

Originally published by Josh Ast


Insight type: Article

Industry: Manufacturing

Role: C-Suite, Sales and Marketing Leadership

Topic: Strategy

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