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A Sales Organization Structure Study Based upon Interviews and Surveys with Vice Presidents of Sales at Top Technology Companies
The Truth About the Field Sales to Inside Sales Migration Trend
Over the past several decades the structure of sales organizations have remained largely the same. They have been primarily based on outside field salespeople who make face-to-face sales calls with prospective customers and current clients. In turn, the field salespeople would be supported by inside sales representatives who helped them complete their daily tasks.
Today, the traditional sales organization structure is undergoing a significant change. Many sales organizations are transitioning from a field sales model to an inside sales model, where the inside salespeople work independently from the field and are directly responsible for closing business. In order to understand the magnitude of this trend, in-depth interviews and extensive surveys were conducted with over one-hundred vice presidents of sales at leading high technology companies and business services providers. The resulting research provided detailed insights about the evolution of sales organizations along with the following key finding:
Over the past two years, forty-six percent of study participants reported a shift from a field sales model to an inside sales model. Twenty-one percent reported a shift from inside sales to a field sales model. More than twice as many study participants reported moving to an inside sales model. WHY?
There are three key factors that determine when a sales organization will utilize a field or inside sales model. They are the sales organization’s stage of development, the complexity of the products that are sold, and to a lesser extent, the sales leader’s perception of inside and outside sales model effectiveness.
Sales Organization Development Stage
Every sales organization can be classified into a "Build," "Compete," "Maintain," “Extend,” or "Cull" stage based upon its development. The Build stage is when the sales organization is first establishing itself. If successful, it will proceed to a high-growth Compete stage and then to Maintain stage that is contingent upon predictable success. As the sales organization ages, it will enter either the Extend stage and enjoy longevity or the Cull stage, where it declines and is forced to reduce its size. The ratio of outside or inside salespeople changes as the organization moves from the Build to Compete to Maintain development stages.
The challenges sales organizations face is dependent upon the stage of their development. The top sales challenge in the Build stage is creating sufficient sales coverage to push the product into the market. The Compete stage challenge revolves around quickly scaling the sales organization so it can compete effectively against larger established competitors. The focus shifts to maximizing sales productivity by lowering the cost of sale and increasing the average sales price in the Maintain stage. The Extend stage challenge is to attain widespread customer adoption so their solution becomes the de facto standard. The Cull stage challenge is to revitalize a demoralized and marginalized sales force. These challenges directly influence the sales organization’s structure and whether a field or inside sales model will be deployed.
Sales Cycle Complexity
The complexity of the sales cycle determines the evolution of the sales organization and at what point outside field or inside-based sales models will be implemented. Sales cycle types can be classified by complexity as Enterprise, Platform Cloud-based or Point-specific. Each of these sales cycles vary in complexity depending upon the number of individuals and departments involved in the selection process, the size of purchase, and sophisticated nature of the solution offered.
Enterprise sales typically are large capital expenditure purchases that involve long sales cycles. Multiple departments of a company and all levels of the organization (C-level executive, mid-level management, and lower-level personnel) are needed to approve the solution’s functionality and its purchase. A point-specific sales cycle is usually targeted to solve the business problems of single department within an organization and the purchase decision is made by a small number of decision-makers usually at the lower-level of the organization. The Platform Cloud-based sale provides a turnkey business solution for the customer over the internet and is sold directly to the business users of an organization. There is a preferential field and inside sales model strategy for each of the sales cycle types. For example, a field sales model is preferred for enterprise sales cycles and an inside sales model is preferred for Platform Cloud-based sales cycles.
Sales Leaders Perception of Field and Inside Sales Models
While the goal of this study was to gather quantifiable metrics based on surveys and interviews with sales leaders, there is another aspect of sales model decision making that cannot be ignored. Ninety-eight percent of study participants responded that the characteristics between inside and outside salespeople are significantly or somewhat different.
Most sales leaders believe that outside salespeople have superior sales skills and the most accomplished sales professionals are in the field as evidenced by the sales leader comments below. This in turn can influence their decision and whether they implement a field or inside sales model.
“Field Sales is more strategic, meeting with C-level executives and developing strategic business innovation to help them grow their business versus inside which is more quantity and not as in depth majority of the time.”
“Inside Sales is a transactional engagement and the focus is on opening opportunities. Outside teams are solution and relationship based.”
“Outside sales requires far more emotional intelligence, situational awareness and planning. Our inside sales, while equally demanding, requires persistence, research, and back end work.”
Furthermore, many sales leaders have a personal bias toward deploying outside salespeople over inside sales. In some cases, this inclination was based on their own experience from many years ago when they were in field sales. However, this historical disposition is being offset by the changing nature of how customers buy today. Customers are smarter and information is not only easier to find, but available in greater detail than ever before. In addition, technology has become a way of life and completely disrupted the buying process. Via the Internet, customers can research products, prices, and opinions.
This situation is driving more sales leaders to consider and then deploy an inside sales model. For example, study participants were asked to rank the influential factors that are responsible for the migration from field to inside sales. Sixty percent responded that it was due to the increasing pressure on business performance and profitability. Fifty-four percent said it was due to technology advancements. Forty-seven percent felt that buyers more readily accept the remote selling process and thirty-four percent believed it is because of societal changes such as a mobile workforce and personal online purchasing habits.
Study participants also cited the following advantages of an inside sales model compared to field sales model. Eighty-four percent believe it is easier to onboard new salespeople and share best practices. Seventy-nine percent responded that inside sales allows the organization to scale faster. Increased call activity and selling volume was cited by seventy-eight percent of responders. Seventy-six percent acknowledge that inside sales provides a better strategy to penetrate small businesses and mid-markets.
Today, there is a changing perception among sales leaders about the strategic role inside sales performs. This change is due to the benefits that sales leaders believe the inside model provides in terms of scaling activity, growing the organization, and attacking specific markets.
Top senior-level sales leaders from over one-hundred leading high technology and business services companies participated in this study. These senior executive sales leaders manage the sales organizations of computer software, computer hardware, Cloud-based/SaaS, telecommunications,
and business services companies. Study participants by business type included:
What is the Truth About the Migration from Field Salespeople to Inside Sales?
The answer to this question is exactly what Steve W. Martin, a well-known sales author and sales organization researcher set out to find. To do so, Martin conducted in-depth interviews and extensive surveys with over one-hundred top sales leaders at leading high technology companies and business services providers. The resulting research, The Truth About the Field Sales to Inside Sales Migration Trend, provides detailed insights about the evolutional nature of sales organizations along with key sales performance metrics.
Over the past two years, more than twice as many study participants reported moving to an inside sales model as shown in the figure below. For thirty-four percent, the shift was slight, but twelve percent of study participants reported a significant shift from a field sales model to an inside sales model. Conversely, twenty-one percent reported a shift from inside sales to a field sales model including thirteen percent who reported a significant shift and eight percent who reported a slight shift.
The research included in-depth interviews and extensive surveying of the participants. The average interview lasted forty-two minutes and the survey required eighty-two separate responses. The goal was to gather qualitative information, including trends and future predictions along with quantifiable sales organization metrics. Participants were also asked to share their top sales challenges and future sales strategies. They candidly shared their experiences, opinions, and advice. In exchange for their candor, it was agreed that their names and organizations would remain anonymous. Sample questions participants were asked included:
• What are your organization’s top sales challenges inhibiting growth?
• How have your sales strategies changed over the past two years?
• How are you planning to change your sales organization to achieve your short and long-term revenue targets?
• What is the distribution of field sales, inside sales, and channel sales personnel and how is it changing?
Study Participants by Title
Top Sales Challenges
Obviously, the top sales challenge always is exceeding the monthly, quarterly, or yearly revenue target. However, the sales challenges that inhibit a company from achieving revenue growth vary based on the sales organization stage. This is due to the "push" versus "pull’ market characteristics of each stage. For example, in the Build stage a small group of salespeople must push themselves into new accounts and introduce their solution and its benefits. Conversely, a well-known company in the Maintain stage is pulled into new sales opportunities because of its market position. The figure below highlights the different sales organization challenges in the Build, Compete, Maintain, Extend and Cull stages.
Fifteen Key Study Findings and Metrics
While the goal of this study was to identify the migration trends between the field and inside sales models, fifteen additional key findings and their associated metrics were identified as a result of the research.
1. Percent of Organization Achieving Quota. The overall average for percentage of salespeople that achieved one hundred percent of quota last year was sixty percent. However, the number of salespeople who achieved one hundred percent of quota varied greatly by sales organization. Twenty-six percent of sales leaders reported that seventy percent or more of their salespeople made quota. Fifty-four percent of sales leaders reported that between fifty to sixty-nine percent of their salespeople made quota. Twenty percent of sales leaders report that less than half of their salespeople made quota.
2. Quota Attainment Average. The average percentage of salespeople that achieved one hundred percent of annual quota last year varied by type of industry:
Computer hardware 60%
3. Average Annual Quota for Field Salesperson. The overall average annual quota for an outside field salesperson was $2.7 million. Quota for computer hardware salespeople was the highest at $4.2 million. Telecommunications salespeople averaged $3.3 million and software was $3.2 million. Cloud/SaaS salespeople had the lowest quota at $1.6 million.
4. Average Annual Quota for Inside Salesperson. The overall average annual quota for an inside field salesperson was $985,000. Annual quota for computer hardware inside salespeople was $1.35 million, for computer software it was $1.22 million, for Cloud/SaaS inside salespeople the average was $795,000 and telecommunications was $730,000.
5. Average Range of Annual On Target Earnings. The range of average annual on target earnings including salary, commission, and bonuses for field and inside salespeople at one hundred percent of quota are shown by industry below.
Outside salesperson Inside salesperson
on target earnings on target earnings
Software $180,000 - $240,000 $80,000 -$120,000
Cloud/SaaS $140,000 - $210,000 $70,000 - $100,000
Computer hardware $140,000 - $180,000 $70,000 - $80,000
Telecommunications $120,000 -$150,000 $65,000 - $85,000
6. Average New Deal Size. The average new deal size reported for field sales was $166,000 and new deal size for inside sales was $19,000.
7. Sales Cycle Length. Seventy percent reported an average sales cycle length of sixty days or less for inside sales while fifty-four percent reported an average sales cycle length of ninety days or more for outside sales. Twenty-four percent of inside sales cycles and twenty-three percent of outside sales cycles were between sixty-one and ninety days in length.
8. Vertical Sales Adoption. Sixty-four percent of study participants have vertical sales specialists on their sales force (calling on verticals such as public sector, finance, healthcare, manufacturing, etc.). Seventeen percent are planning to add vertical sales specialists in the future while nineteen percent do not have any plans to do so.
9. SMB Specialization. Sixty-three percent responded that they have specialized inside salespeople that are dedicated to SMB (small to medium business) or mid-market sales. Twenty percent of these inside sales representatives are allowed to make field sales calls when necessary.
10. Field Sales Revenue Trends. Trends for 2013 and 2015 projected annual revenue attributed to field sales as opposed to inside sales varied by industry. The overall trend is for the number of companies that derive more than ninety percent of their revenues from field-related sales to decrease dramatically. For example, twenty-eight percent of software companies will derive more than ninety-percent of their revenues from field sales in 2013 and this number is expected to decrease to zero in 2015. The number of computer hardware, Cloud/SaaS and telecommunications companies with more than ninety percent of their revenues from field sales in 2013 is also projected to drop by half in 2015.
11. Inside Sales Roles. Sixty-two percent of participants reported their outside field salespeople are assigned an inside salesperson. Seventy percent of inside salespeople carry a quota and fifty-five percent indicated that the revenue generated by the inside salesperson is applied to outside salesperson’s quota. Forty percent of inside salespeople schedule meetings for the outside salesperson. Seventy percent of inside salespeople perform lead generation and telemarketing activities.
12. Sales Preparedness. Eighty-three percent of participants thought their outside field sales teams were equipped with the sales strategies, tools, and skills to exceed their numbers, compared to fifty-seven percent for inside sales and forty percent for channel sales.
A Special Thank you to Velocify For Sponsoring this Study
Velocify is a market-leading provider of Cloud-based intelligent sales software, designed for high-velocity sales environments. Velocify helps sales teams keep pace with the speed of opportunity and improve conversion rates by driving rapid lead response, increased selling discipline, improved productivity, and actionable selling insights. Velocify has helped more than 1,500 companies across a variety of industries improve customer acquisition practice s and sales performance. Learn more at www.velocify.com.
Steve W. Martin
Steve W. Martin is the foremost expert on Sales Linguistics and the Human Nature of Complex Enterprise Sales. He is the author of the "Heavy Hitter" Series of books for Senior Salespeople.
Steve Martin will energize, enlighten, and entertain your sales team with real-world sales strategies, proven tactics, and helpful advice delivered with a healthy dose of humor!
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