By Michael Lock, Shasta Ventures
I was a sales leader in 2001 when the dot.com bubble burst and when the planes hit the towers. I was a sales leader when Lehman Brothers failed and we questioned the very foundations of our banking and capitalist systems. However, this downturn is different. It’s more sudden, more shocking, more lethal. That having been said, I think there is much for sales leaders to learn from 2001 and 2008.
These are the seven most important lessons I learned from those downturns:
1. Customers first. Always.
My guess is that your forecast for gross retention and net retention was based on data for 2018 and 2019.
Times have changed.
You can't take high renewal rates and robust upsells for granted anymore. You should go through your renewal list line by line, account by account, situation by situation and reassess your assumptions. Look at the usage rate of your product in those customers and assess the financial health of the customer in a post COVID economy.
If you have customers who do not robustly use your product consider them at high risk. Work with your customer success department to make sure they're getting value and stay in close touch with them before that renewal date.
You’ll also have customers who love your product but are worried demand for their products and services won’t return to normal. For example, if you have airlines, hotels, restaurant chains as customers, please understand that it is going to be difficult for them to pay the bill. For those hardship cases, do your best to be flexible while maintaining the customer relationship and the long-term value of the customer over the long term. Do not just optimize for renewal amounts in this upcoming year.
The largest portion of your customer base will fall in the middle. These customers like and use your product, and yet--while they will be hurt by the downturn--they aren't hardship cases. Don't take these customers for granted either. Don't make customer success carry the ball the entire time. Reach out to those customers. Listen to them. Understand their situations. Walk them through features of the product that they are not using so that they see more value.
You will undoubtedly get requests for pricing concessions to accommodate requests from their finance departments. Heck, in 2008, the automotive companies sent me letters that they were simply planning to short-pay their invoices, and they expected credit notes. They didn't ask for concessions-- they just took it. In some cases, it will make sense to take a temporary drop in revenue but revert back to higher pricing next year. What I did in 2001 and 2008 was try to keep the value of the contract up while providing more value. Sometimes that means giving a feature set or an additional product that you hoped to upsell to them included in this year's contract. Sometimes that meant giving them extra users or extra months on their contract so they perceived value in these difficult times.
2. Focus on deals in the middle or late-stage pipeline
Getting a brand new sales cycle started is going to be difficult in this environment. Not impossible, but certainly more difficult. So make sure that you are concentrating on the opportunities that are in the late- and mid-stages of your funnel.
Because these are customers who have already shown they understand your value proposition and have often committed to doing a project. They are much more likely to close. Make sure you are pulling out all the stops on those deals. Make sure you are selling high. Make sure you are selling value and make sure your entire company is involved in these deals.
And don't get too greedy. We would all like to land the largest deal possible, but be realistic about your customers’ financial situations. Every one of your customers will be asked to tighten their belts, so find ways to make it easier for them to commit. Give them easier on ramps to your products even if that means accepting a smaller deal. It’s OK. You can expand it when times turn around.
3. For new business, concentrate on your top target markets.
With regards to new business efforts, it will be tempting to place resources on any prospect that will take your call or hold meetings with you. I can tell you from my experience that that's a bad idea.
During difficult times the answer is almost always to focus your energies on customer sets who get the most value out of your product. You might have business plans from the beginning of the year that call for expansions into new industries or new geographies, etc.
I would revisit those assumptions very carefully. Concentrate on your best markets and those that are most likely to buy.
4. Sell to clients less affected by this downturn
Review your pipeline carefully during this downturn. Different industries and customer segments are affected differently by this pandemic. Make sure you understand what is happening to your customers’ revenue and expense lines before selecting which deals to place the most emphasis on.
All Industries and segments are being affected at the current time but some services (e.g. travel, hospitality, retail, restaurants, etc) are being crippled.
In 2008, the banks were the epicenter of the recession. In 2001, it was technology. Both of those segments will be less affected by the current threat, and some less elastic segments like Pharma and CPGs will also be less affected. Make sure you are spending your selling and prospecting efforts in the industries and customer segments that can actually buy this fiscal year.
5. Reconsider the emphasis of your value proposition
n this downturn, like other downturns, products that produce hard cost savings or clear ROI will do better. For the past decade, we've been selling value propositions like business agility, improved cycle times and the ability to attract employees in a time where labor was scarce. Put yourself in your customers’ shoes or in the shoes of the Chief Financial Officer of your customers. Your customers will be missing their revenue forecasts, considering layoffs and slashing discretionary spending.
If your product can help your customers save costs, then you might be selling more than a product but also peace of mind--a new powerful tool they can use to slash costs, find inefficiencies, etc at a time when they need it most. Your product could very well be a vital new arrow in your clients’ quiver of essential tools.
So dust off your ROI models, get out your calculators and your value assessment methodologies. In good times, customers might have purchased without an iron-clad financial case. That will no longer happen. You can still sell on emotion but understand you will need to justify with fact.
6. Set realistic expectations
In every downturn sales leaders and sales people too frequently act like Chicken Little. “The sky is falling, the sky is falling.” Don't be Chicken Little. You are not being paid to be emotional. They are not paying you simply to report that selling is hard. You are being paid to find a way to make this happen.
So while setting high expectations in this environment is illogical, so too is forecasting that your sales will fall to $0. Be data-driven in your pipeline and deal analysis. Make sure that every “t” is crossed and every “i” is dotted in every deal. Track conversion rates from every sales stage and carefully monitor new opportunities created. These are signs of what will happen in the quarters ahead.
7. Have the right attitude
Please don't whine like a school child. Everyone knows this is a difficult time to sell. You will need to work harder, smarter and faster than you have in the past few years. And, yes, that hard work will likely produce fewer results. Deal with it. Admit to yourself that good times have made us softer than we should be. Steel yourself to the task. People are dying and health workers are risking their lives to save us. We are just sitting in our home offices, drinking coffee and getting more no’s than yeses.
Let's face it: even the mediocre can make their numbers when times are good. Only the exceptional power through downturns of this magnitude.
We will get through. It won't be easy. It wasn't in 2001 or 2008. And we will be stronger and better for it on the other side.