Part 1. Functions
To help educate transitioning service members on the Sales profession or General Management opportunities, I thought it may be prudent to start on the organization itself, namely the functions it performs.
Before diving into the functions, let’s start by understanding the concept of “Go-To-Market” (GTM). Simply put, GTM is how a company organizes its resources to accomplish its business goals, namely in terms of revenue. Facets of the GTM include, but are not limited to, Ideal Customer Profile (ICP), Value Proposition, Sales Plan, Delivery Model, etc. The Sales Motion is important because it describes how the sales organization plans to achieve sales, typically by aligning resources to specific functions. I break these functions down into the following:
- Customer Acquisition
- Customer Expansion
- Customer Retention
- Enablement
- Operations
- Scaling
Customer acquisition is the function of winning new customers. Marketing organizations play a large role in securing these wins due to “top of funnel” activities (a topic for another Blog), such as awareness campaigns. You will often hear this function called “hunters” in a sales organization. A common metric is Customer Acquisition Cost (CAC) – cost to acquire a new customer.
Customer expansion is the function of growing the annual revenues of a current customer. This is primarily executed through upselling or cross selling. Upselling is moving a customer to a higher tier of product or service, while cross selling is them purchasing a new product within your portfolio. A common metric is Annual Recurring Revenue (ARR) – the total yearly revenue generated by a specific customer.
Customer retention is the function of ensuring customers continue to purchase your products and services. This requires a series of activities that promote adoption, trust, and loyalty. Customer retention’s importance has grown due to the movement toward a “subscription economy” and lower cost of change alternatives. A common metric is customer churn – the percentage of subscription revenue lost in a specific time period.
(If you are interested in customer retention, read this excellent book: Customer Success: How Innovative Companies Are Reducing Churn and Growing Recurring Revenue)
Enablement is the function that provides the tools to execute the mission of acquisition, expansion, and retention – sometimes called “Land, Expand, Renew (LER).” These tools can be in many forms, including presentations, training, and technology. This function will often coordinate with marketing and product management to ensure the messaging and positioning best supports LER execution.
Operations is a broad function. In my experience, I have seen operations in two ways. First, operations manages the sales funnel in two forms: a) forecast, b) pipeline. The forecast focuses on projecting future revenues for a specific time period, typically for a month or quarter. The pipeline evaluates the “health” of the business, i.e., does the business have the quantity and quality of opportunities to achieve long term revenue objectives. Second, operations provides contractual support for terms & conditions (T&Cs) and administrative support for Request for X (RFx). The contractual support is focused on invoice schedules, net terms, service level agreements, and pricing. However, it may also include legal matters such as intellectual property. The administrative support focuses on the “Request for” sourcing technique, meaning procurement organizations send information, pricing, and/or proposal requests as a means to select vendor solutions.
Last, scaling is the function of increasing sales. This can be accomplished two ways: a) organically, or b) inorganically. Organic scale requires the business to increase sales and marketing investment, namely in resources and/or technology. Inorganic scale focuses on distribution and/or channels. Distribution is typically used when the market and offering (products & services) are well defined, i.e., there is negligible customization required. Therefore, the offering doesn’t require a “high cost of sale.” Channels is the converse – the offering does require significant customization and the market is not well-defined. Consequently, the business will incur a “high cost of sale.”
Understanding the functions of sales is critical when embarking on a career in sales or general management. As my first Sales Engineering leader used to repeatedly ask, “what is the business trying to do? What is the problem they are trying to solve?” Understanding the functions will help you determine where to invest your time and energy.
In Part 2, we will examine the archetypes.
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