How to Reverse a Revenue Decline Quickly and Permanently
Highlights
- Revenue declines are seldom caused by a single factor or the first factor discovered.
- Declining sales are most often the result of a relatively small number of common occurrences, many of which occur before the sales cycle begins, and all of which can be systemically remedied.
- The goal of a revenue turnaround is to spur revenue growth with high impact methods and without sacrificing margin, customer losses or staff turnover.
Revenue declines may occur from time to time without panic. But recurring sales declines foretell business deterioration or worse.
At a macro level, when sales are in decline at least one of two things are happening. There are not enough leads going into the sales pipeline or not enough closed deals coming out. Here are some revenue turnaround best practices to remedy those situations.
Increasing Sales Leads
Marketing too broadly is inefficient, wastes the marketing budget and delays growth. So, marketing must consider the total addressable market (TAM) but quickly drill-down to focus on high purchase propensity target audiences.
It's essential to identify your best prospects. That's those customers that will most benefit from the company's products. They also complete their purchases in the shortest time and at the highest price. These prospects and customers are your Ideal Customer Profile (ICP) and should be prioritized.
Revenue analysis begins by measuring sales lead inflow, or more specifically, the quality and volume of sales leads going into the pipeline.
Rather than coming to a quick determination that you need more leads, start by measuring exactly how many sales leads are needed to meet revenue goals. For this calculation you will need to know or figure out your lead-to-customer conversion factor.
You are identifying how many leads need to go into the top of the funnel for one closed deal to come out the bottom. There's a methodology called Revenue Performance Management (RPM) that brings specificity to this process. It's a powerful tool, but when revenues are in decline, you don't have a lot of time. So, for now just figure out how much inflow is needed to produce the desired financial result.
If the volume of sales leads is insufficient to meet revenue goals, you need to drill down to responsible sources. Most B2B lead generation is allocated among the marketing organization, SDRs (Sales Development Representatives), sellers and possibly partners.
Research published in The Marketing Transformation Report shows that for many B2B industries, most marketing departments generate 20-40% of all sales leads with SDRs and salespeople acquiring the rest. That's not a financially healthy allocation but it's the norm. The marketing research also shows that Best-in-Class marketers generate 45-65% of total sales leads. Even better, they produce higher quality leads at a much lower cost per lead.
If you need more sales leads, there are many choices. But as time is of the essence, first consider what are often the highest impact lead generation programs.
- Precision marketing
Narrowing marketing focus increases lead conversions. Targeting the company's best customers (aka your Ideal Customer Profile), that is those customers that close the fastest and with the highest win rates, will lower marketing cost, increase sales velocity, and grow revenues. Precision marketing should include messaging that speaks directly to the target audience biggest problems and offer clear and compelling solutions. The biggest uplift will occur when you apply buyer insights and customer intelligence to deliver specific and differentiated messaging, offers and value. - Campaign portfolio management
Individual and single flight campaigns deliver far fewer qualified leads then nurture marketing campaigns that leverage multiple flights and channels. The performance differences are huge. Analyze your campaign results, segment them into categories (such as inbound and outbound) and either invest or reapply funds from low to higher performing campaigns.
If you are kicking off new types of campaigns, don't spend a lot of money up front. Instead, run short trials and quickly scale your investment based on conversion results.
- Lead lifecycle management (LLM)
Not all sales leads are equal. In fact, for most industries about three-quarters of new leads are not sales-ready when received. Nothing zaps sales productivity more than investing scarce time into leads that cannot be won. Lead lifecycle management (LLM) classifies leads by type (i.e., MQL, SAL, SQL) so they can be measured and actioned based on their value and progress.
LLM also applies technology to measure each lead's propensity to buy, scores the leads, and transfers sales-ready leads to the salesforce. It holds back unqualified leads to be nurtured until they become qualified.
- Marketing automation
Marketing software automates marketing processes such as lead tracking, lead acquisition, lead scoring, nurture campaigns, lead transfer to sales and lead analytics. This technology is an add-on to your CRM software. It's also essential to ensure unqualified leads are nurtured until qualified, only sales-ready leads are transferred to the salesforce and the entire process is measured and automated.
A defined process is essential to simplify, streamline and automate the lead to opportunity conversion progression. A process example is illustrated below.
- Strategic Pricing
Lower margins and profits accompany a sales decline not just because of reduced revenues, but because the company more easily agrees to more aggressive discounting and promotions. Price optimization, often called Strategic Pricing by practitioners that do this type of work, applies price and demand elasticity models to forecast the revenue impact of price changes. Making calculated price changes is a low cost method to increase revenues quickly.
- Product Innovation
Revenue declines may suggest product marginalization. In fact, product inferiority is a frequently cited cause for sales decline. Product commoditization cycles are accelerating, and the availability of substitutes is unending. Product innovation is the response for commoditization.
Innovation starts with customer insights. Many executives need to abandon the presumptuous mentality of believing they know what problems their customers most want solved and how well the company's products solve them. It's important to accurately know exactly what customers want and are willing to pay for. Then you can co-create with customers to come up with new or improved products that are enthusiastically acquired and embraced by markets.
- Brand Building
Brands are powerful assets that provide competitive differentiation and support price premiums. A new brand may be helpful, but don't jump to that conclusion. It's been our experience that a brand refresh or upgrade can achieve similar benefits in far less time.
Taking an evolution over revolution approach should start by revalidating the attributes that made the company successful. Customer research can unveil what brand attributes are appreciated and where customers aspire for more. Once you have the right brand identity it's a matter of expanding brand reach and recognition. An expanded brand can be positioned in concert with other business development recommendations in this document.
Improving Sales Effectiveness
Once you have addressed getting leads into the sales funnel you need to shift from input to throughput.
Revenue turnaround can occur using short-term incremental methods or longer-term transformational programs. Incremental methods occur more quickly but deliver smaller results. Many times, these methods are just doing more of the same things but doing them better. This can be a valid response when sales are sluggish, but the sales decline is not dire.
Transformational methods take more time and effort but deliver much more revenue impact and generally deliver continuous improvements year after year. The best choice is likely a combination of both.
Below are a few incremental sales growth methods that can be achieved in short order.
- Increase average deal size
For B2B selling, creating processes and technology enablement to promote up-sell, cross-sell and bundles can be done quickly and as a low-cost method to grow revenues and margins.
In the B2C industries, and especially the retail industry, average sale size can be improved with a capture management program, omni-channel engagement and customer loyalty program.
- Stop the lead leakage
Our experience shows that all companies in sales decline incur lead leakage. That includes sales leads that are not followed up timely or at all. Marketing automation software can reduce or eliminate lead leakage by scoring all leads and only distributing qualified leads to the salesforce. They should also recycle leads that later stall and bring visibility to lead progress and results.
Sometimes incremental methods are not enough.
Sales transformation is about creating new value and differentiation for significant uplift. As paraphrased by management guru Michael Porter, strategic efforts are ones aimed at differentiating a company from its competitors in a way that is sustainable.
The most recent Business Growth Report shared how several of the below sales programs delivered the highest impact revenue results.
- Growth Strategy Assessment
A sales decline due to a change in market conditions may suggest it's time for a company pivot. Considering new or adjacent customer markets or growth strategies may better position the company but must be carefully considered. - Consider the 4 Highest Impact Revenue Growth Accelerators
Research published in the Business Growth Report found four revenue growth programs that stood above all others in accelerating sustained company growth. They included a growth culture, product innovation, customer affinity and business intelligence.
These accelerators shift from departmental contributions by marketing, sales or customer service to an all-of-company impact. The research found these revenue growth platforms accelerated systemic and scaled business growth and helped every other business development program be more successful.
- Build on the Four Sales Cornerstones
Sometimes called the 4 strategic selling assets, or the 4 cornerstones for sales growth, the Sales Plan, Sales Strategy, Sales Process and Sale Methodology bring the structure to achieve streamlined, consistent and repeatable sales efforts. These assets must be a part of any sales transformation plan as they are prerequisites to systemic and sustained sales acceleration.
- Increase Sales Win Rates
Increasing sales win rates is the most direct method to accelerate revenues. It is also much more effective and far less costly than just playing the numbers game of increasing the volume of sales pursuits.
However, the goal is more difficult than it may seem as poor sales win rates are often a manifestation of factors occurring before the sales cycle even begins. For example, if marketing campaigns do not target your ICP the salesforce will acquire less qualified leads that result in lower sales closure rates.
Once leads are transferred to the salesforce, research shows that applying buyer insights will increase sales win rates. But these insights are normally created by the marketing team, not the sales team. So again, improving sales win rates must be considered in advance of sales pursuits.
Low barrier offerings are another tactic proven to increase sales win rates. But like the prior examples, offerings are normally created by marketing. These examples show how successful marketing and sales alignment are needed maximize sales conversions.
However, the salesforce is not without its own capabilities to improve sales close rates. Sales research shows several of the top methods include improved lead qualification, more differentiated sales strategies, more precise sale opportunity win plans, more rigorous sales loss analysis and more formal sales coaching to name a few.
There's a lot than can be done, so a best practice is to simplify and automate using a Sales Playbook that facilitates guided selling. You can also apply technology to automatically suggest the right Play and recommendations at the sale opportunity record in your CRM system.
- Increase customer retention
For companies in revenue decline, customer retention is a top business growth strategy. Existing customers deliver a continuous stream of orders at a much lower cost of sale than new customers. A three-fold approach often aids improved customer retention.
First, identify the leading factors that proceed customer churn. With those data points, most CRM systems can construct a customer health monitor and customer churn predictor. Health scores are automatically calculated and inserted to every customer record. Threshold scores then predict customers at risk and trigger retention levers.
Second, initiate a customer reacquisition campaign. When done as part of a nurture marketing program these campaigns realize high conversions (often over 9%).
Third, consider a Customer Experience Management (CXM) strategy as these programs are extremely effective at increasing customer share and customer retention.
- Data and Analytics
All of these return to revenue growth programs require real-time information reporting to measure progress and initiate quick iterations or course corrections. It's essential that sales leaders apply data and analytics to be alerted in near real-time of any program or method under-performing so they take quick action.
See the revenue turnaround best practices to reverse a revenue decline.
Click to TweetOne More Thing
For many companies the biggest challenge to reversing a revenue decline is creating change.
Change is not natural for many sales leaders and is often resisted by salespeople.
Our experience has been that the biggest impediment to reversing a sales decline is clinging to past success – and doing what you did before in a market that is not like before.
A strategy of hope and wishful thinking is not enough.
Failure to act timely prolongs the pain and exhausts cash. It also increases business continuity risk. Revenue recovery is available to business leaders that take quick and decisive action to accurately diagnose root causes and implement proven revenue growth methods.