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  Where's the Beef?  Cost-Justifying Sales Automation

"Our studies show our reps are really only selling about 25% of their time. If I can free up just 10 - 15 more hours per week per rep, our sales should double, shouldn't they? A decent color laptop computer only costs about $3,000 now. If we can increase a rep's sales by only $3,000, shouldn't our sales automation project should pay for itself this year?"

In a recent interview, a reporter started the conversation by asking, "I've heard from a number of sources that 50% of all SFA projects fail. Do you agree with that number?

The answer to these three questions is "No!" "No!" and "It doesn't matter!" in that order. Let's look at the questions and their answers, one by one. Hopefully a closer examination will keep you from getting burned on sales automation.

The erroneous logic that 10-15 rep hours saved equals doubling your sales is repeated all too often, usually by over-zealous sales types bitten by the technology bug. The rationale is usually based on an initial analysis that only about 25% of a rep's time is spent on selling-related activities, which may be true enough. The logic breaks down in assuming that all the time saved will be applied to selling activities alone. Not so. In sales, time saved is usually allocated among the proportion of activities that comprise the remaining process. In our example, if the actual proportion of time spent selling is not altered, only 25% of the 10-15 hours saved will be spent selling.

A further process control principle applies. In any given system, output is limited to the throughput of the tightest bottleneck, or constraint. If the capacity to sell doubled in a year, could production keep up? Does the market exist for twice as many units? Are higher sales incented properly? The sales process is limited by constraints other than selling time. One must be calm enough to look at the big picture before leaping to grandiose conclusions.

On to the next pitfall. "If the cost of a laptop is only about $3,000 these days, all a rep has to do to recover the cost is sell $3,000 more this year." There are two problems in a statement like this; both are related to what we should count in the sales automation cost/benefit equation. First, only counting hardware costs is disastrously shortsighted. The first year cost of sales automation has been pegged variously at between $8,000 to as high as $17,500 when internal and training costs are factored in, with between $2,100 and $2,500 in support costs per person, per year in between major upgrades (Selden, 1995). Second, counting each sales dollar as a dollar the company can use to offset new investments is naive. For every dollar a company brings in as Income, most is already spent elsewhere on the Cost of Goods Sold (COGS), and on General, Sales and Administrative expense (GSA). Often, only about a dime is left to divvy up among everything else.

The good news is that, with the potential for incremental sales increases of between 10% and 30% (Moriarty and Swartz, 1989), the payback for well-executed efforts can indeed be positive, even at realistic amounts of investment. The potential ROI is so high that membership in bellwether professional organizations such as the Sales Automation Association has grown more than twenty-fold in the past five years alone. The opportunity for improvement in the sales process has sparked a veritable gold rush of excitement, for good reason.

Sales automation and process improvement can be a tremendously rewarding endeavor, as trail-blazing companies like Yellow-Freight, Ascom-Timeplex, Nalco Chemical, and many others have shown. The Conference Board found that 45% of sales and marketing automation projects delivered payback in 24 months or less. As with many pioneers, some are successful, while others, regrettably, do not make it to the promised land.

So the question, "Do 50% of sales automation projects fail?" may be fair, but it's not highly relevant. Like a magician's diversion, such a question shifts attention from the real issue. Successful efforts succeed; improperly executed ones do not. There's no news in that. Unsuccessful attempts at flight didn't stop the Wright Brothers. The more important pragmatic issue is, what is it about sales automation projects that increases their chances of success?

The answer is to that question cannot lie solely in how well the software and hardware works, per se. Electronic mail, electronic sales presentations, and contact management software all work, physically. If automation is not the real issue in the first place, then the quality of execution must be paramount. If you select electronic mail as the solution for a process problem that only an electronic sales presentation can solve, what will happen?

For a quality effort, you need well trained people who understand the sales and marketing process, modern technology, and the economics of what makes for positive cash flow. The team also needs to have the time and resources available to do the job. User training is critical. A peer-reviewed guideline such as the Sales Automation Audit Standards and Excellence Program (Sales Automation Association, 1994) contains a more complete checklist of good practices to follow as the effort progresses.

Budgeting for sales automation efforts is not a black art; it's simply a new one. Risks are involved. Some of the numbers may be less tangible than others. But those familiar with the sales process know there's plenty of solid opportunity for waste reduction and quality improvement. Have the opportunities been explored? Have the rough calculations been transfered onto a spreadsheet to see whether hopes for a positive cash flow are realistic? Have simpler alternatives been examined? With proper training in sales process analysis, budgeting becomes an integral part of the business case one develops to begin with. The more solid the due diligence, the less need to accept risk.

So, in answer to the question, "Where's the beef?" the answer is deceptively simple. Opportunity is all around you; you just have to know where to look. Is there room for improvement in your rep's closing ratios? In their sales presentations? In their customer needs analysis approach? In their ability to connect customer needs with your company's solutions? In your order entry process? Chances are, most companies have lots of room for improvement. As with any business problem, the opportunity needs to be quantified and workable alternatives must be explored. The key is in good execution, as is true with so many things in life -- such as grilling a good burger!

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