Revenue Growth Model (Book Summary)

Revenue Growth Model: Chief Revenue Officer’s Guide to B2B Sales Success by David Cichelli

Preface

• In a nutshell, the Revenue Growth Model provides the chief revenue officer a road map for commercial success by following these actions:
  • Provide leadership
  • Target customers
  • Confirm value propositions
  • Specify the customer engagement process and revenue motions
  • Assign channels to serve buyer populations
  • Define organization structure and job responsibilities
  • Determine staffing levels and placement
  • Hire the right people, make them productive
  • Set objectives, measure outcomes
  • Reward performance
  • Provide operations support

Section 1: Revenue Growth Charter

• Each element of the Revenue Growth Model contributes to revenue growth:
  • Revenue Leadership
  • Strategy: Revenue Segments
  • Strategy: Value Propositions
  • Strategy: Engagement and Motions
  • Structure: Channel Coverage
  • Structure: Organization and Job Design
  • Structure: Sizing and Deployment
  • Management: Talent and Enablement
  • Management: Metrics and Quota
  • Management: Performance and Rewards
  • Revenue Operations

Chapter One: The Revenue Growth Mandate

• Every commercial business entity requires three customer contact protocols to create wealth: access, persuade, and fulfill.
• A revenue function force is unnecessary when the customers already have need for the product and they view the purchase as a low-risk decision. In these cases, the enterprise simply needs to provide product availability and ease of purchase.
• While shortsighted sellers will assign adoption as a buyer responsibility, strategic sellers will ensure buyers achieve return on the purchase.
• There are many types of indirect channels, including agents, wholesalers, distributors, retailers, and numerous other types of partners.
• With an indirect channel, there are normally two selling teams.
  • The first team sells the maker’s products to the channel partners and might help with downstream end-user demand creations. Titles for this job include channel manager or partner executive.
  • The second selling team works for the channel partners. Channel partners will have their own revenue team calling on end-users or other subordinate channel partners. Some indirect channel partners create and add value to the final product. Other simply fulfill without adding any product value.

Chapter Two: The Revenue Growth Model

• Revenue management methods are different for different channel types, such as original equipment manufacturers (OEMs(, value-added resellers (VARs), retailers, e-merchants, catalogs, agents, distributors, and wholesalers.
• The five key components of effective leadership:
  • Provide an ambition destination
  • Allocate & apply resources
  • Solicit and secure commitments
  • Measure for improvement
  • Drive transformation efforts
• The coverage model specifies revenue accountabilities for each revenue segment.

Section 2: Applying the Revenue Growth Model

Chapter Three: Revenue Leadership

• Research about customers, competitors, and channel partners provides fact-based information for decision-making purposes.

Chapter Four: Revenue Segments

• A revenue segment is the intersection of three independent and often changing factors:
  • A customer population
  • A product set
  • A customer acquisition function such as a sales channel
• New, dissimilar segment opportunities might require dedicated filed overlay support, such as a product or market overlay specialist.
• Analyzing organic growth opportunity with cross-sell analysis (new solutions to existing customer) and expansion selling (current products to new buyers at the same company) provides a profile of total customer value.

Chapter Five: Value Propositions

• Effective value propositions meet the four “Cs”:
  • Customer-centric
  • Compelling
  • Competitive
  • Cost-justified
• The best brand value propositions avoid saying, “who we are,” and instead sy “what we commit to do for you.”
• A segment value proposition refines the brand proposition by offering a solution to a similar group of customers residing within a revenue segment. A segment value proposition will acknowledge customer’ opportunities and challenges and describe how the company’s configured solution will meet their needs.
• An account/entity value proposition describes the benefits of purchase to a specific account
• A buyer value proposition is a unique value statement crafted for individual buyers, such as users, decision-makers, and stakeholders.
• Value propositions express different levels of benefits to buyers:
  • Level I: Functional benefit
  • Level II: Purchase priorities
  • Level III: Self-benefit
  • Level IV: Altruistic benefit
• Channel partners need value propositions
• Reputation and relationships shape value propositions
• Has the buyers had many jobs or employers with a track records of advancement? Anticipate they are a risk-taker.
• What can LinkedIn tell you about buyer personas?
  • If their profile displays few jobs, stable employment, consider them a risk-avoider.
  • Expertise: technical jobs and education? Consider them rational thinkers.
  • If work experience and education have a bias to process, anticipate the buyer to be a collaborative decision-maker.
  • Professional Designations: If they list leadership designations, consider them opinion leaders.
  • If they have a preponderance of technical awards, consider them logic-based decision-makers.

Chapter Six: Engagement Motions

• Customer engagement is how buyers buy and how sellers sell.
• Customer engagement means activities: actions impacting buyers.
• Revenue motions are interactive themes – selling styles – taken by the company’s customer contact personnel, digital resources, and partners.
• We have grouped revenue motions into three types:
  • Fulfillment: Execution excellence, choice options, relationship
  • Advocacy: Decision guidance, offering assurance, purchase justification
  • Innovation:  Functional advance, insight-led solutions, new platform adoption
• Buyer roles
  • Users
  • Qualifiers: Sometimes known as “gatekeepers,” qualifiers help search, assess, and select suitable vendors.
  • Coaches
  • User authority: This person will advocate for and own the purchased solutions.
  • Purchase authority
  • Procurement
  • Stakeholders
• Buyer persona:
  • Propensity to act: A high propensity to act means a rapid purchase decision.
  • Propensity to analyze: Those who require extensive purchase analysis will seek demonstrable proof of effectiveness.
  • Propensity to control: High-control buyers will require significant seller investment to reduce uncertainty, gain trust, and advocate for purchase action.
  • Propensity to reach consensus
  • Propensity to change
  • Propensity to spend: The degree of economic courage varies from buyer to buyer.
  • Propensity for self-promotion
  • Propensity to judge: Is the buyer agreeable or disagreeable?
  • Propensity to connect: Some buyers are eager to be friends.

Chapter Seven: Channel Coverage

• In its simplest form, a go-to-customer strategy outlines who will sell the company’s products to which customers.
• Channel coverage strategy describes the different means fo accessing, persuading, and fulfilling revenue segments.
• We display the first two channels: direct (sell to) and indirect (sell through), and add a third, another form of indirect (sell with).
• Makers using the “sell with” indirect channel help the channel partner by persuading the end user to purchase but fulfill the order via a channel partner.
• The four types of indirect channel types:
  • Embedded solutions: Some partners embed other companies’ products into their offering. Examples include joint offerings, alliance partners, outsourcers, and OEMs.
  • Value-added: System integrators resell and install others’ software. VARs add services to others’ products.
  • Choice availability: Choice availability partners advise and make products available to buyers. These include brokers, delivery dealers (e.g., furniture stores), distributors (including most industrial products), and manufacturer representative, who do not purchase the product for resale, but sell products on behalf of the makers.
  • Fulfillment: Fulfillment partners make products available to ubyers without the seller’s assistance. Most fulfillment partners offer self-serve purchases.
• At one time, OEM referred to those who produced equipment, which eventually integrated into the final product. However, today many refer to the company with the logo on the product as the original equipment manufacturer, even though others have made the components; a misnomer, but now widely adopted.
• Select channel partners by using the following criteria: market coverage, reach, customer access, cost, skills, synergy, speed, and fulfillment capacity. Screen partner candidates by considering their reputation, sales strength, customer base, financial stability, technical competency, current compatible products lines, and partner management.
• To successfully sign desired partners, offer expanded market reach, training, marketing dollars, competitive commissions, technical support, customer support, minimal to no channel conflict, and ease of conducting business.
• An omni-channel approach is both a channel technique and a customer philosophy. The company ensures customers can make channel-neutral product purchases.
• Direct & Indirect Channels – Features for Consideration: Inventory; pre-sales support; post-sales support; customer configuration’ competencies; financial commitment; quality of personnel; dedication of resources; qualifications; longevity; reputation
• Best practices group customers into revenue segments served by dedicated channel resources. However, when exclusive channel assignment is not possible or undesirable, then revenue management should embrace being channel neutral, designing programs, which encourage serving customer-purchasing preferences regardless of the revenue channel selected by the customer.
• Disintermediation occurs when product makers bypass historically used channel partners and sell directly to end users.
• Market managers within the revenue organization should be constantly reviewing competitors’ actions, both those of traditional competitors, as well as new product and channel disrupters.
• Buying preferences should shape the channel approach.

Chapter Eight: Organization and Job Design

• Channel partners need unique channel solutions, such as product configuration, marketing support, technical support, demand creation efforts, special pricing, product fulfillment, and terms and conditions.
• SBUs have product production, marketing, and sales teams. Marketing Business Unites (MBUs) only have marketing and sales teams.
• Service teams will provide pre-sales and post-sales support specialists.
• Sales management should strive to reduce an excessive sales headcount, unnecessary staff, and redundant management.
• The most common way to segment accounts is by revenue size, from smallest to largest.
• Indirect sales jobs:
  • Channel Manager – Sells to channel partners in region or partner HQ
  • Alliance Partner – Collaborates with alliance partner to win sales
  • HQ Retail Sales-In – Sells to HQ retail buyer/category manager
  • Partner Trainer – Provides training programs for partner personnel
  • Merchandiser – Works with local retail outlets to display brand
  • End-User Demand – Sells to partner end users to create demand
• Personal sales assistants: The better approach is to reengineer the sales job and assign non-selling tasks to a central group, who can use economies of scale and institutional knowledge to solve seller challenges.
• Sales time management
  • Pre-sales: prospecting/market development; account/opportunity planning
  • Engaged Selling: account/deal development; closing
  • Sales Completion: back-office closing requirements; order entry; implementation challenges; customer service
  • Sales facilitation: administration and reporting; coaching, training, development; nonproductive travel
• Bid Desk: A bid desk will respond to request for proposals, pricing/availability requests, and send customers contracts for signature.
• Competitor displacement selling: A unique form of selling is attempting to replace an incumbent competitor now selling products to current customers.
• OEM selling: The OEM sells its product to a producer that embeds the product into a final configured product.

Chapter Nine: Sizing & Deployment

• Normally, assigning sellers to different buyers within [the same] company is appropriate when the products sold are different.
• The average span of control ratio is close to 1:7 to 1:8 for most field sales functions

Chapter Ten: Talent and Enablement

• We define talent as the sourcing, selection, hiring, and development of team members.
• Broad market benchmarks identify 10% as the median turnover rate for sellers.
• Sellers (and the rest of humanity) learn best practices through applied or experiential learning
• Most training professionals admit that the best learning takes place on the job with manager coaching and real-time outcome feedback.
• What sellers need to learn
  • Knowledge: Company fundamentals; product fundamentals; customer fundamentals
  • Skills: Time/territory/account planning; prospecting and qualifying; meeting presentation techniques; call execution; negotiation
• Sales process: The selling system prescribes a suggested customer interaction strategy, sales methodology, and sales process management.
• Sales methodology: Selling system have one or more sales methodology revenue motions based on revenue segment buyer characteristics.
• Classic sales challenges:
  • Access to decision-makers, influencers
  • Better competitor offerings
  • Buyer ignorance
  • Cold-calling
  • Former customers
  • Irreversible decisions
  • Low-priority purchase status
  • “No decision” deals
  • Price negotiations
  • Scarce buyer information
  • Senior executive “no” decision
  • Stalled deal progression
  • Vendor obstacles to purchase

Chapter Eleven: Metrics and Quotas

• Revenue organizations employ four classes of measurement types: planning, productivity, performance, and program management
• Bimodal [quota attainment] distribution occurs when the seller population splits between best performers and below-objective performers.  This outcome can be the result of poor quota setting, an “unfair” assignment of accounts, or potential evidence of two distinct jobs. This occurrence also increases costs with the incentive budget exceeding its goal while the overall revenue team does not achieve the company’s objective.

Chapter Twelve: Performance and Rewards

• Most businesses-to-business direct sales jobs (and indirect channel managers) use the 3x [leverage] uncapped design. The leverage expresses the upside earning potential for the highest performers, defined as the 90^th percentile performance.
• 2x capped plans are a popular design for management incentive plans provided to director level and above.
• For each job, 55% to 65% of all sales personnel should reach and exceed goal.
• Sales crediting: Divides sales credit by a fixed formula among those who contribute to sales success. For commission-paid sales personnel, split the sales credit. For those paid on a quota-based program, double-assign the quota an double-credit the sales outcome.
• Hurdle bonus formula: Hurdle ensure minimal level of performance on a second measure.
• Equity (stock) grants to sales personnel may occur for young, cash-starved start-ups, but for more established companies, equity is seldom a significant part of compensation for revenue team members.
• Spiffs (special performance incentive field funds): Generally, revenue organizations spend an additional 3% to 5% of the summation of target total compensation for the eligible personnel on these programs on an annual basis. These monies are additive to the target total compensation.

Chapter Thirteen: Revenue Operations

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Section 3: Revenue Growth Opportunities

Chapter Fourteen: Digital Revenue Segment

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Chapter Fifteen: Growth Phase Solutions

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