Unsustainable Cost of Sales

Many sales organizations recognize that their cost of sales is too high, but don’t fully understand the drivers of those costs. New ownership or leaders, an acquisition or divestiture, or significant product launch often triggers organizational soul-searching, but usually without an effective framework with which to analyze underlying root causes. As a result, few organizations are able to adequately address the problem of a rising cost of sales, which can adversely impact both their profit margins and earnings per share.

At the heart of the cost of sales problem lies the question of resource optimization. When sales resources fail to align correctly against the 4Cs (customers, coverage, capacity, and capability), then investments in those resources are less likely to yield a healthy return in terms of sales productivity or a compensation cost of sales. Among the symptoms are:

• Too many salespeople calling on the same customer
• Salespeople expending too much time on low-profit or low-probability deals
• Lack of adequate coverage in high potential, growth markets

• Inefficient handoffs through the sales cycle resulting in higher costs
• Mismatch between sales compensation and actual seller productivity.

Many organizations focus primarily on increasing top-line revenue without addressing the “low hanging fruit” of reducing cost of sales and sub-optimized resources. We work with our clients to identify the drivers of a high cost of sales while developing frameworks for aligning the 4Cs and optimizing sales resources to reduce costs and improve productivity.

This approach helps our clients to:

Improve their overall cost of sales ‘mix’
Many organizations rely on highly paid field sales professionals to engage in low-leverage and low-skill tasks such as order handling, data entry, and other administrative tasks, when a lower cost resource could do the job more efficiently and better.

Improve the customer experience
Customers get frustrated when it’s unclear who they are working with from the sales organization and when too many sellers call on them. Customers also don’t want to be ignored and would like the right attention from the sales and support organization.

Increase sales productivity
Sales roles that are ‘matched’ to the right accounts and ‘coverage area’ are more productive and can give each of their accounts the right level of attention and focus to maximize revenue and relationships.

Improve the right skills and capabilities
Depending on the different roles that are utilized in the buyer-aligned sales process and coverage plan, each defined role has different skill and capability needs given their customer set, the types of conversations they are having, and the offerings they are selling. We also want to ensure that sales professionals have the requisite skills that align to the future state market needs.