Guest author Indus Khaitan is a co-founder of Bitzer Mobile.
Classical sales models are an artifact of the assembly line economy. Manufacturing builds parts; assembles finished goods, ships them to a warehouse and relies on sales and marketing to bring in revenue. This is how cars, medicines, beauty products, books, food and beverages, and many other things have long been built and sold.
Applying the classical model to enterprise software is doomed to failure.
The 3 Components Of Classical Sales
Territories, quotas and commissions are the three components of the classical sales model:
1. Territories were created to increase customer coverage based on how far a sales representative can drive, meet a customer and be back home in the evening.
2. Quotas further divide a territory between multiple individuals or simply create a target number to help assess how much a territory could add to company revenues.
3. Commission plus a fixed monthly retainer constitute the total compensation. If the sales numbers are above the agreed quota, commissions may be higher.
Why It Doesn't Work For Enterprise Software
The buying process of enterprise software is fundamentally different today, making the classical sales model obsolete:
1. Buyers are informed. Thanks to Internet, people know about the product before they start a conversation with a software vendor. As a result, few buyers are willing to spend time with classical sales professionals. Instead of a sales pitch, they are looking for thought leadership, education and the advice of a trusted partner. The new rule is, “show me how you’ll solve my problem," not “tell me about your product.”
2. Inbound Marketing is trumping outbound marketing. Prospects discover a product or a company via influencers, search engines and other channels before they start a conversation. Website content, videos, product literature, blog posts and so on enable customers to understand the product before they meet a salesperson. Inbound marketing helps them self-select or eliminate a product.
3. Enterprise software is assembled after buying. Software does not work in isolation; it gets orchestrated with pre-existing pieces. An enterprise solution is a sum of individual parts a company may have bought from multiple vendors. A database, a middleware server, an identity framework, an application builder, a security appliance… the list goes on. Fast-paced innovation is creating companies that are good at one or two things and enterprise customers may be looking for a collection of best-of-breed products.
4. Multi-functional teams work for closing deals. As the complexity of software grows, product management, R&D and sales must work together to create a “solution” before a purchase transaction is made. The days of individually “shrink-wrapped” software is over; even ordinary enterprise apps are produced using a variety of enterprise tools working together, each serving its own purpose.
5. Buyers are distributed across geographies. In today's connected world, a lead in the sales funnel may originate from New York, but the decision makers are based out of Washington DC while the implementation team is based in India.
In the new normal, enterprise software buyers increasingly seek solution white-boarding sessions - not sales pitches. Traditional sales models simply can't cope with the changes, but effective replacements have yet to appear. Until a solution is developed, enterprise software vendors - and buyers - will find themselves under increasing pressure.
Image courtesy of Shutterstock.