SalesManagement.org Research Brief Inside Sales Trends July 2014 This report summarizes findings from 66 participating business-to-business sales organizations, based on research collected in 2Q 2014.
About the Sales Management Association The Sales Management Association is a global, cross-industry professional organization for sales operations, sales effectiveness, and sales leadership professions. We provide our members with tools, networking, research, training, and professional development. Our research initiatives address topics relevant to practitioners across a broad spectrum of sales effectiveness issues. Our research is available to members on our site at www.salesmanagement.org. Research Approach This study aggregates participating firms responses to a web-based survey. Before reporting results, we eliminate invalid or ineligible responses, and sometimes contact respondents to clarify their responses. Survey results are only reported in aggregate, and never in a way that would compromise the identity of any single respondent. All individual respondent data are treated with strict confidentiality. This research represents summarized data from 66 participating firms, employing a total of 67,000 sales professionals. Respondent demographics and descriptive information is summarized below. Research Underwriter This study was made possible in part through the underwriting support of SAP. Page 2
Introduction Inside sales presents a distinct set of management challenges for sales leadership. This research identifies emerging issues, management priorities, and best practices associated with inside sales channels in large business-to-business sales organizations. Specific areas of focus for this research include: identifying current approaches in inside sales force deployment; determining leadership s prioritized inside sales-related challenges; assessing the adoption and effectiveness of enabling technology used to support inside sales forces; and quantifying inside sales force growth trends. Executive Summary Business-to-business organizations are growing inside sales, our research found, because they find inside sales more cost effective and productive than other sales resources. Yet inside sales chief value isn t in replacing traditional sales roles, but in complimenting them. Inside sales impact on other sales resources productivity is the foremost reason respondents are growing their inside sales functions. Inside sales value is best seen as a complimentary not competing sales channel. Inside sales channels are valued as collaborative compliments to other sales resources, including traditional face-to-face sellers. We found that respondents: Frequently team inside salespeople with other sales personnel, Consider their teaming ability as their most effective quality, and Respondents cite inside sales ability to make other aspects of the sales function. One in seven salespeople are inside. Roughly 15% of respondents salespeople are in inside sales roles. In smaller firms those with annual revenue of US$1 billion or less inside sales represents 35% of the total sales force. Inside salespeople are most effective in managing existing customers, teaming with outside salespeople, and covering assigned opportunities (whether geographical or industry-based). Contrary to popular belief,inside sales is considered least effective in winning back lost customers, servicing existing customers, transitioning new customers to other salespeople following onboarding, conducting demos, and setting Page 3
appointments for outside salespeople. Perhaps most surprisingly, inside salespeople s effectiveness in cold-calling received low effectiveness ratings (rated 12th-lowest of 17 categories). Improving existing inside salespeople s productivity, and delivering effective skills coaching are management s most significant challenges. These are rated as more significant challenges than recruiting or retaining inside salespeople. Few sales managers are responsible for both inside and outside sellers. Seventy-two percent manage only outside salespeople; 23% manage only inside salespeople; and only 5% manage both. Smaller firms are more than five times more likely to utilize a sales manager responsible for both inside and outside salespeople. Tools considered most effective for inside sales are calendaring tools, CRM, and sales content portals. Rated as least-effective are third-party prospecting data, online learning and development tools, and social media. Enthusiasm for future investment in inside sales tools is weak, with no future investments rated more than somewhat likely. Findings in Depth One in seven salespeople are inside. Roughly 15% of respondents salespeople are in inside sales roles which we defined as salespeople who rarely, if ever, make faceto-face calls on customers or prospects. In smaller firms those with annual revenue of US$1 billion or less inside sales represents 35% of the total sales force. Inside sales headcount growth is outpacing outside sales force growth. Respondents inside sales headcount grew 7.5% last year, more than 50% higher than corresponding growth rates for outside sales positions (these grew 4.8% last year). In the coming year, respondents inside and outside sales headcount growth is expected to narrow in variance, yet remain strong, at 7.3% for outside sales jobs and 7.6% for inside sales jobs. These growth rates are substantially higher than US Bureau of Labor Statistics published growth projections of 1% to 2% annual growth in all sales jobs, and substantially lower than other published research reflecting higher inside sales growth rates. Conducted by vendors focused on telesales sectors, these latter studies reflect a bias toward smaller, technology and software-as-a-service firms more likely to utilize inside sales, and far overstate the prevalence and growth of inside sales in the broader market, in our opinion. USBLS statistics include direct-to-consumer and retail sales jobs (approximately two-thirds of all sales jobs in the US). Our study s respondents are Page 4
predominately business-to-business firms, and firms with both US and non-us sales organizations characteristics which contribute to higher sales headcount growth than the US market as a whole. Management values inside sales channels productivity. Respondents are growing inside sales for three predominant reasons: (1) to enable sales productivity of other sales resources, (2) because inside sales represents a lower-cost alternative to other sales channels; and (3) because inside sales represents a more productive alternative than other channels. Inside sales value is best seen as a complimentary not competing sales channel. As evidenced by point 1 immediately above, inside sales channels are valued as collaborative compliments to other sales resources, including traditional face-toface sellers. Survey respondents frequently team inside salespeople with other sales personnel, consider their teaming ability as their most effective quality, and cite inside sales ability to make other aspects of the sales function more productive as the chief reason for further inside sales growth. Leadership s challenges are more focused in optimizing inside talent than in finding or keeping it. Management s chief challenges related to inside sales are (1) improving inside salesperson productivity and (2) providing skills coaching. Rated lowest (i.e., least challenging) were retaining inside salespeople and finding capable inside sales managers. Inside salespeople are frequently used to cold call prospects, but that s not where they are most effective. Cold-calling, in fact, represents the most common responsibility assigned to inside salespeople among survey respondents. Inside salespeople s effectiveness in cold-calling received relatively low effectiveness ratings (rated 12th lowest of 17 categories). Inside salespeople are most effective in managing existing customers, teaming with outside salespeople, and covering assigned opportunities (whether geographical or industrybased). Inside sales is considered least effective in winning back lost customers, servicing existing customers (the study asked respondent to consider servicing customers separate from managing them), transitioning new customers to other salespeople following onboarding, conducting demos, and setting appointments for outside salespeople. Few sales managers are responsible for both inside and outside sellers. Sales managers typically manage only outside salespeople (72%), only inside salespeople (23%), but rarely both (only 5%). (Percentages reflect the total number of salespeople managed by manager types.) Smaller firms (those with annual revenues of US$1 billion or less), Page 5
are more than five times more likely to utilize a sales manager responsible for both inside and outside salespeople. Tools considered most effective for inside sales are calendaring tools, CRM, and sales content portals. Rated as least effective are third-party prospecting data, online learning and development tools, and social media (though all tools were rated at least 4 somewhat effective on a seven-point scale). Enthusiasm for future investment in inside sales tools is weak, with no future investments rated more than somewhat likely. CRM and sales content portals are rated as the most likely candidates for future tool investment, followed by online learning and sales playbooks. Predictive dialing and other automatic calling systems represent the least-likely area of future investment for respondents. Respondent Descriptive Information Firm Size and Job Role.Firms were predominately large in size. Sixty percent of respondents were from firms with annual revenue in excess of US$100 million; 15% were firms with annual revenues in excess of US$15 billion. Thirty-six percent of respondents work in a direct sales management role (i.e., managing salespeople). Twenty-eight percent work in sales operations leadership, and another 21% as senior sales leaders (i.e., managing sales managers). Other respondents included managers from non-sales functions (including marketing, operations, and human resources; 7%), and salespeople (7%). (Figs. 1 and 2.) Fig.1: Respondent firm size Fig.2: Respondent job roles Page 6
Firm Performance. Seventy-one percent of respondent firms met or exceeded firm sales objectives in the preceding 12 months, and 73% met or exceeded profit objective in the same period. Respondents were asked to rate their firm s achievement of profit and sales objective based on a seven-point scale ( 1 for far underachieved objective; 4 for met objective; 7 for far exceeded objective). We use this performance rating approach in order to normalize company performance across large and small firms, and high and moderate growth sectors. Thirteen percent of respondents rated profit objective achievement in the highest two categories ( 6 or 7 ); 16% of firms rated sales objective achievement in the highest two performing categories.(fig. 3.) We also asked respondents to provide their firm s year-over-year percentage revenue growth for the preceding 12 months. Seventy-six percent of respondents reported positive revenue growth; 14% negative growth; and 11% no change in year-over-year revenues. (Appendix exhibit 1.) Fig.3 Page 7
Geographical Sales Coverage. Ninety-one percent of respondents operate a dedicated, direct sales organization in North America. Approximately one-third have a sales organization deployed in Asia, Western Europe, or Australia; approximately one-quarter have sales organizations in South America, Central America, or Eastern Europe; and fewer than 20% have sales forces deployed in the Middle East or Africa. (Fig. 4.) Fig.4: Distribution of respondents direct sales organization by global region Sales Force Size and Manager-to-Salesperson Span of Control. Respondents have an average of 114 sales managers, and 1,045 salespeople. Respondent firms sales managers have 9.2 direct-report salespeople on average. Corresponding median values are 8, 80, and 7.0:1 for number of salespeople, number of sales managers, and manager-to-salesperson span of control, respectively. In total, respondents firms employ more than 67,000 salespeople. (Appendix exhibit 2.) Page 8
Who s In, Who s Out? In our research, we defined inside salespeople as those who rarely, if ever, make face-to-face calls on customers or prospects. Outside salespeople were therefore defined as all other salespeople. Inside salespeople represent between 15% and 32% of the total sales population in our study. The firm average for inside sales (as a percent of total firm salespeople) is 32% (this measure averages each firm s populations equally). The corresponding average after weighting by sales force size is 15%. The Inside sales role appears more critical in smaller firms than larger, judging by the differences in how large and smaller firms deploy headcount across the two roles. Inside salespeople make up 35% of the total sales force in firms with annual revenue below US$1 billion twice the percentage of firms with revenue in excess of US$ 1 billion annually. Few sales managers only four percent manage both inside and outside salespeople. Managers are much more likely to be responsible for managing only outside salespeople (59% of the time), or inside salespeople only (18% of the time). Smaller firms are the exception in firms with less than US$ 1 billion in annual revenue, almost one-quarter (23%) of all sales managers manage both inside and outside salespeople. (Figs. 5 and 6.) Inside sales as a percentage of total salesforce (firm average) Inside sales as a percentage of total salesforce (average weighted by sales force size) Fig.5 Page 9
Inside sales as a percentage of total salesforce (firm average) Inside sales as a percentage of total salesforce (average weighted by sales force size) Fig.6 Inside Sales Growth Respondents inside sales headcount grew 7.5% last year, and is expected to grow at a slightly higher rate (7.6%) next year. Prior-year inside sales headcount growth rates in are more than 50% higher than corresponding growth rates for outside sales positions in respondent firms (these grew 4.8% last year). Growth for both inside and outside sales headcount are expect to narrow in variance, yet remain strong, at 7.3% for outside sales jobs and 7.6% for inside sales jobs in the coming year. Fig.7: Inside and Outside Sales Force Growth Sales Headcount Page 10
Fig.7: Inside and Outside Sales Force Growth These growth rates are substantially higher than US Bureau of Labor Statistics published growth projections of approximately 1% annual growth in all sales jobs, and substantially lower than other published research reflecting higher inside sales growth rates. Conducted by vendors focused on telesales sectors, these latter studies 1 reflect a bias toward smaller, technology and software-as-a-service firms more likely to utilize inside sales, and far overstate the prevalence and growth of inside sales in the broader market, in our opinion. USBLS statistics include direct-to-consumer and retail sales jobs (approximately two-thirds of all sales jobs in the US). Our study s respondents are predominately business-to-business firms, and firms with both US and non-us sales organizations characteristics which we believe contribute to higher sales headcount growth than the US market as a whole. Note also that our definition of inside sales (referenced above), may be more restrictive than other studies, resulting in lower population estimates. 1 Consider, for example, a recent study featured on Forbes.com here. Page 11
Assigning Inside Sales Responsibilities We asked respondents what responsibilities they assign inside salespeople. The responsibilities most frequently assigned to inside salespeople are (1) initiating contact with cold prospects, and (2) covering an assigned geography. Both these responses were rated 4.7 on a seven-point scale, where 1 indicated no portion of the respondent firm s inside salespeople, 4 indicates half of respondent s inside salespeople, and 7 indicates all respondent s inside salespeople. Fig.8: Frequency of Inside Sales Assignments Slightly less prevalent (4.3 to 4.5 on a seven-point scale) were the following: assigned a revenue growth quota (4.5 on a seven-point scale); teaming inside salespeople with outside salespeople (4.4); assigning inside salespeople to manage existing customers (4.4); focusing inside salespeople on one or more specific industries (4.3);and assigning inside salespeople to qualify leads subsequently passed on to other salespeople in the firm (4.1). Page 12
Least prevalent, with rating values less than 4 on a seven-point scale (indicating that fewer than half of all inside salespeople), were the following responsibility assignments: assignments based on customer or prospect size (3.7 on a seven-point scale); delivering demos to customers or prospects (3.7); winning back lost customers (3.4); servicing existing customers (3.3); appointment setting for outside salespeople (3.2); transitioning new customers to other salespeople after onboarding (3.0); and receiving newly-closed customers transitioned from other salespeople (2.9). Where is Inside Sales Effective? Inside sales received high ratings for overall effectiveness from survey respondents. Almost half (48%), rated their firms inside sales function as effective-to-extremely effective (ratings of 5, 6, or 7 on a seven-point scale, where 1 is not at all effective, 4 is somewhat effective, and 7 is extremely effective ); 25% rated their inside sales functions as somewhat effective (4.0) and 18% rated their inside sales as ineffective (1-3 rating). (Appendix Exhibit 3.) Fig.9: Rating of Inside Sales Function Effectiveness Page 13
Respondents judged inside salespeople most effective at managing existing customers, and teaming with outside salespeople (both rated 5.2 on a seven-point scale, where 1 is not at all effective, 4 is somewhat effective, and 7 is extremely effective ).Covering assigned geographies and industry verticals (5.0 and 4.9 ratings, respectively), and qualifying leads for other salespeople (4.8) rounded out the top five activities for which inside sales is deemed most effective. Inside sales is considered least effective in winning back lost customers (3.6), servicing existing customers (3.7; the study asked respondent to consider servicing customers separate from managing them), transitioning new customers to other salespeople following onboarding (3.9), conducting demos (4.0), and setting appointments for outside salespeople (4.1). Management s Inside Sales Challenges Optimizing inside sales involves significant challenges for most organizations. How many had more than three positive responses? Chief among these, for respondents as a whole, is improving inside salesperson productivity (4.3 on a seven-point scale, where 1 is not at all challenging, 4 is somewhat challenging, and 7 is extremely challenging to respondents inside sales optimization efforts). Next most-challenging is coaching inside salespeople (4.2) and systems to support inside sales (4.1). Fig.10: Management Challenges to Optimizing Inside Sales Page 14
Rated least-most-challenging is retaining inside salespeople (3.3), and finding capable managers to lead inside sales teams (3.6). Why Grow Inside Sales? Respondents are growing inside sales for three predominant reasons: (1) to enable sales productivity of other sales resources, (2) because inside sales represents a lower-cost alternative to other sales channels; and (3) because inside sales represents a more productive alternative than other channels. These response were rated 5.0, 4.6, and 4.5, respectively, on a seven-point scale where 1 is not at all relevant, 4 is somewhat relevant, and 7 is extremely relevant to respondents reasons for expanding inside sales. Fig.11: Management Justification for Further Expansion of Inside Sales Function Rated lower, and, notably, below the four-point median value, were inside sales ease of management compared to other sales channels (3.9), and inside sales ability to provide a superior customer experience (also 3.9). Page 15
Enabling Tools and Support Investments Tools used most by inside sales organizations are calendar tools (e.g., Microsoft Outlook), CRM, instant messaging, and online presentation tools. Those used least include predictive dialing and other automatic calling systems, call recording and monitoring systems, and online collaboration tools used with external-to-the-company partners or customers. Fig.12: Supporting Tools for Inside Sales: Frequency of Use Tools considered most effective are calendaring tools, CRM, and sales content portals. Rated least effective are third-party prospecting data, online learning and development tools, and social media. It should be noted that all tools were rated above the median effectiveness value of 4 on a seven-point scale (where 1 is not at all effective, 4 is somewhat effective, and 7 is extremely effective ). Page 16
Fig.13: Supporting Tools for Inside Sales: Ratings of Effectiveness Future investment in tools is most likely in CRM and sales content portals, followed by online learning and sales playbooks. Predictive dialing and other automatic calling systems represent the least-likely investment for respondents. Page 17
Fig.14: Supporting Tools for Inside Sales: Expected Future Investment Page 18
Appendix Exhibit 1: Year-over-year revenue growth (past 12 months) in responding firms Exhibit 2: Salesperson to sales manager span of control Page 19
Exhibit 3: Ratings of Inside Sales Overall Effectiveness Exhibit 4: Supporting Tools for Inside Sales: Usage, Effectiveness, and Expected Future Investment Page 20
Concluding Thoughts Inside sales resources offer significant cost and efficiency advantages over faceto-face salespeople. Inside sales continued growth in business-to-business sales organizations, at a rate substantially higher than other sales resources, reflects management s confidence in solid returns from inside sales investments. However, these are best considered outside the context of a binary choice between inside or outside salespeople. Our research defined inside salespeople as those who rarely, if ever, interact with customers or prospects face-to-face. As such, it likely understates the underlying growth of inside selling, as we suspect all salespeople are spending more time in virtual interactions with customers and prospects. Management must therefore consider how to enable buyer/seller interactions across a range of media, including telephony and web-based interactions, for all sellers. More importantly, management should consider the impact of inside selling capabilities on the entire sales function. Our study suggests inside salespeople are For larger organizations, inside sales chief value appears to be in enhancing the effectiveness of other sellers. This suggests that firms aren t simply replacing outside salespeople with lower-cost inside salespeople, but are instead enhancing overall the sales function effectiveness through an optimal combination of sales channels, including inside sales. Page 21