What are the drivers that drive sales and also profit? We explain the key ingredients for sustainable growth.
Profitable growth – imperative and challenge
Profitable growth (the growth of sales and profitability) is the imperative for the modern B2B company because it is the source of securing the future viability of the company. More and growing profit (starting from prices and from contribution margins) means more / growing funds to cover direct and variable costs (e.g. for better production and better supplies), indirect and fixed costs (e.g. for more and better R&D, more and better paid staff in marketing, sales, admin, IT, etc.), depreciation (on assets), lower interest rates (lower risk for the bank), higher dividends (shareholders), financing CAPEX (investments in machinery, IT, etc.) and building equity. (without brackets and with enumeration)
At the same time, profitable growth is a challenge for executive management: CEOs aim at growth-oriented corporate development to increase corporate value, CFOs have to maintain liquidity, secure financing and increase profitability while reducing risks, and CSOs have to realize growing, more stable and better order intake in the face of complex, dynamic and uncertain market conditions.
Profitable growth – the drivers
Of the many drivers of a company’s profitable growth, the 10 most important are the underlying
- Value propositions and USPs
- (Target) market segments and customers
- Marketing mix
- Sales pipeline
- Business Process Management
- Management and Strategy.
Ideally, all these drivers should work together as a value-enhancing system.
However, marketing and sales, including pricing, are of outstanding importance in profitable growth, as they ensure the ongoing and best possible supply of cash to the company.
Profitable Growth – Marketing & Sales Process Management and Digital Tools
In the management of profitable growth of B2B companies, the process-based organization has long prevailed with the four process classes: Idea-to-Market (I2M), Market-to-Order (M2O), Order-to-Cash (O2C) and Procure-to-Pay (P2P). The marketing and sales (and pricing) processes belonging to the M2O class structure the systematic transition from sales opportunities to incoming orders, define the results of the process phases and the activities. To manage marketing and sales processes using digital data, Customer Relationship Management (CRM) IT systems have been used for 20 years, often complemented by Configure, Price, Quote (CPQ) tools as well as numerous other innovative apps, such as marketing automation, SEO, social media integration, etc., etc.
However, the beautiful picture of this new colorful digital world is cracked in view of the fact that many B2B companies, despite digital upgrades, still often fail to generate a profitable order intake as planned. What are the causes?
Profitable growth and sales management
The current and especially future order intake and profit of the B2B company is significantly described by the sales pipeline, i.e. the portfolio of order acquisition processes (sales opportunities … ) of a sales organization across all acquisition phases, time horizons, acquisition & customer types, across all relevant perspectives and uncertainties. For larger B2B companies, the sales pipeline is a highly complex multi-perspective dynamic system, which is unfortunately still today often equated with the 70’s simplest image of the so-called ‘sales funnel’. This comparison is about as meaningful as if one wanted to describe a modern multi-core CPU (e.g. Intel i9) with 5 billion transistors by showing the original prototype of the transistor from 1947.
In practice, typical effects occur that hinder the effective management of the B2B sales pipeline: processes are only on paper and in reality work is done differently, data from CRM and ERP are (unintentionally or intentionally) wrong, concerning plan as well as actual data, there is no / little sales control, no (or too late or uninformative) reporting and performance monitoring, no / wrong forecasting, no functioning controlling and especially no optimization. As a result, management is not dynamic but static. In addition, sales management primarily manages individual sales and not the sales pipeline as a whole. Moreover, profitable growth does not require pure sales pipeline management, but profit & sales pipeline management.