Facing a tough economy — demand down, interest rates up, disruption and uncertainty everywhere — companies are cutting back. A survey of 3,000 global executives conducted by consultancy AlixPartners, where we work, reveals that 20% have already conducted layoffs, 20% expect to, and 25% have imposed hiring freezes. In addition, 33% said they are building cash reserves, and 36% have embarked on expense-reduction programs. It’s the usual — and usually necessary — playbook.
But you can’t cut your way to prosperity. Our experience shows that a recession toolkit needs more than sharp knives. There are often-overlooked opportunities to grow the top line — a lot and fast, even in the face of a down market — with a set of tactical actions designed to improve sales and margins. These are not strategic initiatives like identifying new markets or staking out a new market position, and are not meant to replace those long-term strategies. Instead, they’re activities that improve the focus and effectiveness of things you’re doing now.
Tactical they may be, but trivial they are not. We’ve found that companies that use tough times to maximize their bang for their buck in sales and marketing are able to increase revenues by tens or even hundreds of millions of dollars within one to two quarters. They’re also the companies that emerge stronger than ever as markets turn around.
How do they do it? By identifying a set of quick-impact opportunities in three areas:
Improving Commercial Effectiveness
Commercial functions often remain unchanged in the face of stalled growth, on the theory that the company can’t afford to disrupt revenue-producing activities. When leadership considers hard decisions, the first phrase often uttered is, “Hands off my sales organization.” The result can be a sales force that’s burdened by legacy structures or out of alignment with a changed strategy. Even during a cost-optimization effort, sales leadership can pursue these avenues of improvement:
Optimizing market intelligence, segmentation, and sales coverage models.
We commonly find latent opportunities to clean up sales coverage and account management to bring them better into line with changing market conditions or segments. For example, one top media company reconfigured its global revenue organization to focus its resources on the biggest and most profitable customer segments in each market. And one medical device company switched its sales coverage model from territories to channels after analysis showed that the latter would be more efficient. The result of actions like these is an injection of energy and drive into a sales force that can pursue growth more effectively.
Enhancing sales pipeline visibility.
In many companies, sales pipeline reviews are mostly backward-looking. Because the agenda is about what has happened, the team finds itself in a reactive stance to market conditions. We’ve had significant success implementing AI tools that provide full visibility into sales-rep productivity and engagement, accounts at risk, and other areas where proactive action can be taken. In one case, we helped a telecom client increase their enterprise customer revenue by more than $50 million within three quarters by integrating AI into their sales reviews so that they could ask the right questions in their pipeline sessions.
Increasing Marketing ROI
If your organization is facing disruption and uncertainty, now is the best time to reevaluate your marketing spend and channel investments into the most effective avenues of growth:
Optimizing marketing campaign spend.
It’s healthy to evaluate campaign spend on a periodic basis to overcome out-of-date habits and to reinvest in the right areas. How well can you trace campaign results back to investment? What are your key areas of priority now? For example, given shifting conditions on the ground, should you be emphasizing brand awareness, product launches, or targeted campaigns? We’ve seen organizations take a “clean sheet” approach to marketing campaign spend and build the strategy from the bottom up in under four weeks to generate 15 to 20% cost improvements.
Converting marketing qualified leads (MQL) into sales qualified leads (SQL).
Optimizing lead management can have similar impact. We worked with a digital-services company that was converting less than 40% of its leads because it lacked an integrated lead-management process. We worked with them to integrate AI-based lead scoring, end-to-end visibility on status, and accountability for follow-up. The result: Lead conversion rates soared to 87% in just two quarters, and revenue increased by $20 million.
Enhancing Customer Success, Defending the Existing Customer Base, and Improving Loyalty
Given uncertain economic conditions, optimizing revenue from your existing customers is an excellent way to quickly improve topline performance while cementing loyalty with your customers. Here are three ways to accomplish meaningful results fast:
Focus on retention and reduce churn (net retention revenue).
Start an initiative that gives extra attention to customer retention. A coordinated and programmatic customer-success approach will have goals, measurements, incentives, training, and communication plans, and each business unit leader should be accountable for key transformational initiatives. We’ve seen initiatives like that drive retention rates to exceed 90%, in one case resulting in $100 million of accretive renewal revenue within one year.
Improve share of wallet.
Organizations tend to succeed when they include a coordinated effort to train, align, and reward their teams to cross-sell and up-sell, especially in conjunction with new product launches or re-segmentation of their target customers.
Enhance customer lifetime value (CLV).
Reorienting the team to optimize CLV can be a game-changer, especially when combined with incentives. In one instance, a B2C client organization realized $450 million in improved revenues in the first year after re-segmenting its high-value customers and reorienting its product offerings and loyalty programs to maximize revenue from them.
What It Takes
We’ve honed this approach working on acquisitions, in the course of detailed operational and commercial due diligence and in subsequent post-merger integration. It can be easier to dig into these areas and make change during the intense period when a deal is closing, but there’s no reason why the same approach wouldn’t work in any circumstances. It takes three things:
- The industry experience to know which levers are likely to produce the biggest results — that is, knowing where to look.
- The ability to go deep into the data — for example, to examine sales volume and profitability by product, region, channel, even sales rep — and to bring similar granularity to marketing and customer experience activities.
- The determination to turn those findings into specific actions.
A critical part of turning insight into action is making sure that sales and marketing leadership see themselves as allies with the financial team. Both functions can be leery of finance. In downturns, marketers have come to expect that the CFO comes with a hatchet, not a helping hand, and sales and finance teams have a long history of mutual suspicion. A cross-functional “revenue win room” — something we often advise in post-merger integration work — can identify and solve frustrations that bedevil both organizations by improving data reliability and increasing back-office support for sales. Most important, revenue win rooms bring all the commercial teams together, which helps them move faster and helps executive management set and drive priorities. Practical actions like this help create a climate of trust on both sides.
That’s not to say that initiatives like these are pain-free. Marketing and sales need to shoulder their share of the burden of recession readiness. But the same mindset that looks for places to weed the garden can also be looking for places to plant. A program like this can be particularly welcome now, because it’s a way to protect — even grow — the top line in a down market.
Indeed, these tactics are even more effective in a volatile or downward-trending market than they are in more prosperous times. That’s partly because it can be easier to overcome organizational inertia when revenue and profit forecasts are grim. But this toolkit becomes more valuable in tough times because so many other companies are resorting to retrenchment. They’re cutting marketing, not making it more effective; they’re counting pennies on customer service, not focusing on ways to reduce customer churn. There’s no better time to advance than when the other guy is retreating.
Courtesy Harvard Business Review. By Jason McDannold and Yale Kwon. Article available here.