Commentary from WSJ Aug 17, 2017 "How Oracle Engineered Its Sales Staff for the Cloud”
As sales transformation experts, we often advise our clients to be wary of “the strategic accounts that you cannot afford to lose.” Typically, customer-facing teams are bending over backwards to service these big “strategic” accounts to the detriment of smaller customers who provide better margins and access to new markets. This unbalanced behavior can be dangerous; procurement teams in large accounts are adept at crushing margins, using clever negotiation tactics to get lower prices.
Most mature organizations are inclined to focus their attention and energy on the largest customers – we often hear about the 80/20 rule – 20% of our customers drive 80% of our profits. Instead, I’d like to challenge you to think about the '20/225 rule' – 225% of your profits come from 20% of your customers…take a look at your accounts and address the negative margin customers who are eroding your profitability.
Oracle has made a huge change in their sales force to reach new customers, while addressing the changing market dynamics. Their sales team has doubled over the past six years and new hires have been tasked to land the start-ups and small businesses that Oracle has largely ignored in the past.
Mark Hurd, Oracle co-CEO, acknowledged that their traditional sales model targeted existing relationships, such as with CIOs, while ignoring new opportunities: “We didn’t know the head of HR. We didn’t know the chief marketing officer.” Many sellers do not have the relationships within their customer’s organizations that influence the purchase, and this may result in lost deals or an inability to develop new opportunities in the organization.
Here’s what I’d recommend after thinking about Oracle’s crafty maneuver:
- Adapt your sales strategy and sales teams to unlock profit by focusing on often overlooked accounts and addressing new markets
- Review your customer strategy with the 20/225 lens and take a proactive approach by addressing unprofitable customers and shifting your attention to more profitable opportunities
- Go beyond qualifying the account to qualifying each opportunity. Take a hard look at the customer’s buying center to determine if you really have a relationship with the true decision maker
I encourage sales teams to seek out blind spots and mine those opportunities going forward. What do you think of the 20/225 rule? How many of the accounts in your portfolio have gone overlooked in favor of behemoth ‘strategic’ accounts?