Last Updated Nov 24, 2009 1:50 PM EST
McKinsey's November Chart Focus, a case study (from a more detailed March article) for "how to cut sales costs in a recession", exemplifies the rigid thinking of "business-school" consulting.
Don't get me wrong, there are a lot of good things in the bigger article, but there are a couple of real concerns in there, too, that any B2B provider would do well to avoid.
In the case study, McKinsey takes a very rational, fact-based approach to change. They don't do "soft stuff". But soft stuff is important, and ignoring it can lead to a real mixed bag of results. Here are the good, the not so good, and the downright ugly implications of the case study
The Good: Target the buyers
The biggest win in the case study comes from shifting the client from spending all of their sales efforts building customer relationships with senior management, to focusing their efforts on those individuals, further down the customer organisation, that actually make the day-to-day purchasing decisions. To achieve this, McKinsey's client reduced the field sales-force and developed a more efficient telesales + Web-based operation, driving measurable sales benefits in the case study.
The Not-So Good: Differentiate customers (but do it properly)
In its case study, McKinsey uncovered the true profit by customer (after all the sales and service costs) and split customers into two groups. So far, so good. But then they applied the same business process (telesales) to both groups to drive maximum efficiency saving, which rather defeats the object of the exercise. Here (in my humble opinion) is the right way to segment customers into different service models:
- Group A: Customers who highly value what makes you different. They will typically be your most profitable customers. This group should receive more management time to cultivate the relationship, generate collaborative service innovations, and if possible create templates and referrals for future business development.
- Group B: Customers for whom you are just one of a number of comparable suppliers. Valuing your differentiation less, they are more price-focused and are usually less profitable to you. Service to this group should be standardised as much as possible, to reduce cost-to-serve. But consult themfor service improvements relevant for this category, and regularly prospect them for potential Group A customers.
- Group C: Loss-making customers. Standardisation and cost improvement may move some into Group B customers. If not, the alternatives are price increases or a polite exit.
According to McKinsey, the biggest savings came from reducing the "unproductive face-to-face time with customers", and focusing what was left of the field-sales team on new business bids.
That's great if your customer offer is perfect, your current customers don't want anything different, and you operate in a competitive vacuum.
But life isn't like that, and focusing purely on the measurable misses valuable benefits that a really good sales manager, spending quality time with good customers, can bring.
This may be a valuable insight into the customer condition, innovative ideas for service development, new leads as key contacts move business, and a sense of personal ownership that has a material benefit on motivation and productivity. A telesales operation alone can't deliver any of these.
McKinsey's client may be much more efficient now, but without at least some of those face-to-face "inefficiencies", I'd place a big bet that it's also less adaptable, less capable of innovation, and more distant from the customer. Not the ideal recipe for long-term success.
That's my opinion. I'd be interested to hear yours.