The Sales Benchmark Index—a strategic research and advisory firm that tracks the sales performance of 11,000 companies across 19 industries— reports that in the third quarter of 2008, the top 100 world-class companies were able to achieve a growth rate of 30 percent and deliver a return on sales1 as high as 80 percent, while reducing their SG&A (sales and general administrative) expense to 11 percent of revenue. (See the charts in Figure 1.1) This is amazing!
These results are extraordinary even in a normal growing economy. But in a recession, these kinds of results are jaw-dropping. I don’t know about you, but I look at these results with great envy and really want to know how they did it. Let's find out. Are you ready to be the hero of your own CSI episode?
The first question is: Is inclusion of big companies with small are skewing these results? Of course not. We are comparing averages, so we are comparing apples to apples or oranges to oranges. Big and powerful corporations, however, do have deep pockets and unlimited resources, even in today’s credit crunch, that allow them to make stupid mistakes and still get bailed out, but that's not the case in this report. The report shows that there are world-class companies in almost every revenue category, as you can see in Figure 1.2.
World-class sales organizations, whether they are micro, small, medium, or large, are outperforming the rest of the 11,000 worldwide companies by significant margins. For example, in revenue growth and operational efficiencies, medium-sized companies are doing three times better at almost 70 percent less cost than the rest of benchmark companies. Smaller world-class companies have an even more impressive scorecard: They are growing nine times faster at half the cost of their counterparts. Their operational efficiencies are almost 200 percent greater! What’s the secret?
Not so quick. We are CSI detectives and can’t pass verdict so soon. We need more evidence that concludes that world-class companies are really world-class.
Let’s look at these companies from a different angle. We know the slowing economy is not affecting everyone at the same level. Finance, banking and housing are a few industries that are going through tough times right now, whereas pharmaceutical, health care, management, scientific, technical, and consulting markets are booming. Are there world-class companies in each industry? How they are performing? Luckily, the Sales Benchmark Index (SBI) report provides the same data for 19 industries that they are tracking. Figure 1.3 shows the results.
The Return on Sales measure shows that world-class companies are outperforming their counterparts in every industry. Even in troubled industries like finance and insurance, world-class companies are growing at 10 times the rate of their counterparts. Of course, world-class companies are really shining in the technology sector, where they are beating their competition like Nikolay Valuev, heavyweight boxing champion of the world.
What’s the story behind these world-class companies? How are they beating their competitors left and right? I invite you to do what I did. Download a copy of the SBI report and walk through the list of world-class companies. You will find that each of them has products that are not very much different from those offered by their competitors. Of course, when you ask them, they will point out the differences. As a consumer, however, I really don’t care about those un-differentiating differentiating features.
You will also find that there are a few big brands like Apple, Google, Garmin, Oracle, Microsoft, and Crocs, but the majority (60 percent) are not well-known brands and a few of them are even in commodity markets. Yet they are outperforming the rest of the world. Close scrutiny of these world-class companies reveals the secret: They all use innovative ways to sell.
First, world-class companies are using multiple sales channels2 to reach their target markets. They are using their sales force to build relationships with top clientele, serving mid-markets through partners, and creatively using digital sales channels (telephone, the Internet, video, social media, etc.) to sell and build a strong bond with their customer base. This use of hybrid channels is nothing new. The real innovation, however, is the way world-class companies are integrating these channels into one coherent system that pushes the rudimentary tasks to low-cost channels, which results in significant cost advantages and improves the productivity of their sales organization.
Second, world-class companies view their way of selling as a competitive advantage. They realize that their competitors can counter any product in just few months; as a matter of fact, their competitors already have as good a product as they have. However, the barrier they are creating by establishing an innovative selling organization—establishing strategic alliances, building customer loyalty, and putting together a network of wholesalers, distributors, and value-added resellers—is not easy to copy or defeat. That is why world-class companies are pounding their competitors with such big margins, growing at such a fast rate, delivering big returns on sales and gaining customer loyalty.
The new answer for the age old-riddle of how to stay afloat and thrive in tough times is: Treat your way of selling as a competitive advantage. Implement an integrated multichannel sales and marketing strategy.
1. Return on Sale (ROS) is a widely used ratio to evaluate a company’s operational efficiencies. It is calculated as follow: ROS = Net Income (Before Interest and Tax) / Sales
2. A Channel is any pipe that connects your products and services with your target customers. A channel enables information to flow both ways between buyers and sellers, thus making sales transactions possible.