How to Develop Sales Strategy

How to Develop Sales Strategy

One of the fundamentals of sales leadership is ensuring that the sales organization has the right strategy in place to win today and in the future. What is strategy? Strategy is the intelligent allocation of limited resources used to create a unique system of activities to outperform the competition. Being unique in the market is the result of the system of activities being different or being performed differently than the competition. Being unique is how differentiated business value is created for customers and prospects.

How can sales leaders create the right strategy? According to Michael Porter, Professor at Harvard University and author of Competitive Advantage, the starting point to creating strategy is industry analysis. Industry analysis consists of two parts: First, understanding your industry and two, understanding your total position within your industry. To help perform an industry analysis, Porter developed the “five forces” model. The five forces model helps address competition for both customers and profits. The five forces are:

1 – Bargaining Power of Buyers – Do customers have the ability to easily switch to the competition? If yes, pricing pressure will be high. Companies can combat by making switching costs high. For example, a company changing its ERP system from Oracle to SAP would have high switching costs.

2 – Bargaining Power of Suppliers – Do suppliers have the ability to put pricing pressure on the company? If yes, profitability will continually be under pressure. For example, Intel has leverage, including pricing pressure, on high-tech manufacturers that need its components.

3 – Rivalry between Existing Competitors – Does the company have significant competition? If yes, pricing pressure will be felt from both competitors and customers. Companies can combat through differentiation. For example, Zappos uses exceptional customer service as its key differentiator from the competition.

4 – Threat of New Entrants – Is the market highly profitable and have low barriers to entry? If yes, new competitors will enter it and put pricing pressure on existing products and services. Companies can combat by creating a barrier to entry. For example, the network effect caused by LinkedIn’s 375 million users.

5 – Threat of Substitute Products and Services – The existence of products and services outside common boundaries increase the likelihood of customers switching to alternatives. For example, Apple’s iPhone was outside the common boundary of traditional cameras offered by companies like Canon.

Sales leaders should focus on creating competitive advantage around the most significant forces. They should also focus on potential changes within the industry. According to Harvard Business School, 95% of employees do not know or understand the strategy. Sales leaders then should regularly communicate strategy to sellers. Why? Successful execution requires understanding the strategy (the what), as well as the how and why. When sales leaders take strategy down to a personal level, from 10,000 feet to 10 feet, they create seller buy-in, commitment and performance.

All contents copyright © 2016, Josh Lowry. All rights reserved.

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