Transformation of Sales - From Selling Products to Selling Services

As the nature of the product has changed, the traditional model of selling product may not be suitable to sustainably generate sales. Take Microsoft as an example, when the main product were Microsoft office suite or operating system, the sales amount is based on the headcount of the customer’s office. The sales activity ends after the license has been authenticated in each computer. With the SaaS model being more popular, there is more requirement for sales team to adapt a new model to boost revenue for the firm. Instead of selling product and done for the day, the sales team is responsible for identifying the sales amount by estimating the usage of services, and the team is expected to stay with the client longer than before to identify potential opportunities throughout, such model is called consumption-based model. There are multiple steps to help the organization adapt to the new sales model.

Step 1 Rethink Customer Segmentation

The traditional method of estimating sales is based on the organization size by headcount. Under the SaaS model, the sales size is evaluated by the usage of the services. An example would be Netflix. A company like Netflix may only have 8600 employees, however its streaming services take up to 12.6% of all internet traffic. Thus, Netflix has a strong need in cloud service than any other other firms in manufacturing or other industries. To accurate estimate the sales potential, sales team now should not only study the organization size. But also the data flow, numbers of the cloud engineers and cloud usage.

Step 2 Restructure the Sales Organization

In the past, the sales activity ends at the time the contract is signed. So lots of efforts were taken to secure the signature. Afterwards, the team will be contacting the customers much less frequently for satisfaction. Now as the SaaS is being used more frequently, the sales team requires an update from purely sales experts to a combination of sales and technical experts who can work together to estimate customers’ need, narrow down target customers, and provide on-going services. Because with the new model, the business will continue growing only if the customers are doing well. The sales team will transform to consultants who provide insights of the marketplace and foresee the needs from customer.

Step 3 Use Sales Force management instruments to Drive the Right Behavior

There are some systematic changes required in the Sales Force Management framework to ensure the sales team is strong enough to meet the challenges and adapt to the new model driven by product type changes. From the aspects of hiring, compensation, training, performance management and culture, the new sales model raised new success factors.

For Hiring, it is important to make sure the candidates either have the background in technology or have the willingness to learn the technical aspect of the business to support the customer and identify the potential growth area in sales.

Compensation model will need to shift to create incentive for SaaS model. It is understandable that people do not like changes. A new compensation model that encourages changes in mindset, skills set, work style will push the changes smoothly.

Training and performance management is also an important element. The organization should provide sufficient training for the sales experts to keep up with the consumption-based sales model. The sales team need to be able to identify the next growth area with the customer.

Culture change also plays an important role. It will make the shift easier if the tone from the top has started to advocate such change. The CEO Satya Nadella from Microsoft support the mindset to be changed from “Know it all” to “Learn it all” to help the organization embrace changes and motivated to learn the new technologies.

Refefence: https://hbr.org/2021/03/how-to-shift-from-selling-products-to-selling-services