The economic downturn has forced companies to change their sales strategies to stay in business. We talk to three CEOs about how they’ve adapted to tough trading conditions.
Unite and rule
Rick Hudson, CEO of IT company Star
I was brought in as chief executive of Star 18 months ago to grow the business from its roots in networking and hosting to a full cloud computing offering. I took six months to decide on our new strategy and launched it at the beginning of last year.
We began by training our sales people to forget about technology and products and focus on the business benefits we can deliver to customers. We’ve also changed our distribution model: we used to have resellers but I believe that people outside the company can’t fully portray the value or make the necessary commitment, so now our efforts are concentrated on direct sales.
The changes didn’t suit everyone, but there were no redundancies as about one third of the sales team left of their own accord. They were replaced with people who had the relevant skills and knowledge.
I’ve also introduced changes in the way salespeople are paid. Sales tends to be quite macho, so I said I want 20 per cent of each person’s commission to be based on the whole team’s performance. That way, if someone asks a colleague for help, they won’t just get a glib response.
When salespeople think only of their own personal agenda, they become selfish. Then when they are promoted to being sales managers, they can’t do it because they have no empathy with their staff – they will push them out of the way and go off to complete a sale.
The changes we’ve introduced haven’t been popular with everyone, but it’s important that your reward mechanism supports the culture you are trying to create within the business.
Paul Morris, MD of additives developer Addmaster
Our business model depends on developing additives for our clients, then having them made by UK manufacturers with spare capacity. About nine years ago, the business went into anti-microbial additives, which can be added to a range of materials, from textiles to door handles, to slow down the spread of infections such as MRSA.
During the downturn, while most companies have been reducing prices, we’ve focused on developing more products and being more innovative. We haven’t lowered any prices and some have actually increased. That approach has worked because the companies we sell to have reached the point where they can’t cut any more costs or discount more heavily, so they have to offer products with added value. Using an anti-microbial additive might increase their raw material cost by 5 per cent before packaging, but they can typically charge 20 per cent more for that product because it is potentially a life-saving item.
Over the past five years, we’ve made a big international push. While we only have five full-time staff, our distribution network means that there are 100 people across the world talking about our products. It’s important to pick the right distributor: as our products are many times more expensive than others in the market, you need salespeople with a track record in high-value products and in introducing new products to an area. That’s why we research each market and hand-pick our agents rather than advertising and choosing from the ones who come to us.
As part of our service, we’ll offer to adapt clients’ marketing material with full information about a product’s anti-microbial qualities. We’ll check that the claims being made are legal in the relevant territory and we’ve even commissioned our own animation to show how anti-microbial products work, which can be tailored for each client.
All this isn’t cheap, but if customers come back to us, everyone’s a winner.
Go beyond the web
Luke Barlow, director of online shoe retailer Fitness Footwear
We’ve grown fast since we set up the company five years ago. That’s partly because the market for “healthy shoes” has been buoyant, and partly due to the massive expansion in online retail.
But in the recession, we’ve been hit by larger competitors slashing their prices and grinding their margins down to the bone. If we had been on the high street, we would have gone out of business.
We tend to stick to discounts of around 10 per cent. But there are now certain brands where it is hard for us to compete because other retailers are offering them so cheaply, for instance, reducing an RRP of £79.95 to £49.95. So we had a review of which brands were working for us and which weren’t, and had a cull.
Our marketing has been built on natural search. Half of our business comes through Google searches for brands such as Skechers Shape Ups and Reebok EasyTone. We also use pay-per-click advertising, so we’ve covered all the bases. But in order to get to the next level, we have to market ourselves through non-online channels, such as TV and print. That’s been a learning curve for us, because we’re used to all our marketing being measurable – clicks, conversion rates, ROI. We’ve seen a big uptick in sales since we were quoted as a stockist in a Skechers TV ad.