It nearly goes without saying that raising sales and marketing expenses at the same rate as revenue growth is necessary. The majority of sales and marketing executives firmly feel that their teams cannot become more effective over time. Yes, teams can identify cost savings and efficiency improvements, but not substantial, long-term productivity benefits. Our research demonstrates that this detrimental, self-reinforcing notion is not always true.

The indicator we’re concentrating on is known as “commercial productivity,” which calculates the amount of revenue (or gross profit) generated for every dollar spent on commercial activities. It also assesses how quickly revenue increases in comparison to increases in sales and marketing costs. We did a study in order to better understand whether managers’ claims that it is challenging to foster long-term progress in commercial productivity are accurate.

From 2017 to 2021, we examined 1,254 public business-to-business enterprises across 10 different industries. The average corporation exhibited flat commercial productivity across industries, with revenue increasing at the same rate as sales and marketing costs in any given year. In any given year, about 19% of businesses increased their commercial output by more than 10%, although the majority subsequently decreased it. Only 5% of businesses were successful in achieving increases in commercial productivity in three of the four years.

These top businesses, who lead in sustained productivity, also benefited greatly. They outperformed their peers in terms of annual total shareholder return (TSR), with an average difference of 12%. From 21% points in logistics and transportation to 4% in paper and packaging, TSR had an advantage.

Our research found typical productivity-boosting strategies that are either bound to failure or, at best, function mediocrely. One strategy impedes long-term growth by concentrating primarily on costs. In other instances, businesses heavily rely on cutting-edge sales or marketing software or unproven artificial intelligence capabilities, which causes expenditures to rise without matching increases in revenues. Others may include irrational productivity increases in their plans without providing a clear path to achieving them, which can cause sales representatives to miss deadlines and leave their jobs.

What leaders in productivity do differently

According to our research, leaders in commercial productivity consistently pursue levers in three areas over the course of years. Their go-to-market strategy is improved. They increase front-line output by making every rep an A player. They also note improvements in sales and marketing assistance.

Improving the go-to-market strategy.

This involves determining how to allocate sales and marketing resources to the prospects that will yield the maximum return. Too many businesses base their decisions about how many salespeople they require and where to place them on sales data from the past and an out-of-date coverage model. These coverage models have a propensity to corrode over time, lowering the sales and marketing organization’s return on investment.

Rebalancing account assignments based on consumers’ anticipated future spending, which creates the best territories for each seller, is significantly more effective. Leading businesses use lower-cost coverage options, like inside sales, offshore jobs, and e-commerce as necessary, to change customer segmentation and reassign clients to more lucrative routes to market.

Transforming each rep into an All-Star.

Companies can use a variety of strategies to increase the productivity of individual front-line reps. One is developing data-informed sales plays, which are a coordinated series of sales and marketing initiatives with target customers, including customised sales literature and tracking to make sure that reps concentrate on the opportunities with the biggest potential value.

Additionally, consistent training and coaching speed up the ramp-up process for rookies and enhance veteran performance. According to Bain research, top-performing reps connect with their supervisors more frequently and more effectively than low-performing reps, such as through weekly one-on-one meetings and regular pipeline reviews.

Optimising sales and marketing assistance.

Running a lean support team can result in significant cost savings or free up operating expenses for use in sales activities that directly involve customers. Finding the appropriate digital and automation tools that will streamline complex operations is necessary for optimising support spending. Other strategies include lowering organisational spans and layers, scrutinising non-selling and non-quota-carrying responsibilities, and increasing the accuracy of individual rep quotas (established by the support team).

Productivity leaders consistently put these strategies into practise. Think about how one company improved its coverage after seeing its annual revenue growth decline from roughly 40% to under 20%. The number of customer segments was increased, and each segment’s sales motions were improved. Based on the total addressable market, the buying propensity of each client, and the attributes of each customer, it rebuilt sales regions. These and other actions enabled the security provider to increase commercial productivity by more than 10% in three of the subsequent four years.

Similar endeavours by other businesses to increase commercial productivity are underway. Through a number of strategies, a multinational food packaging company has started to alter its go-to-market approach. They consist of resegmenting client bases in accordance with opportunities and service requirements, expanding the use of less expensive channels of distribution like inside sales and e-commerce, and combining specialised resources around the globe.

Create and iterate

What truly sets productivity leaders different is that they adopt a methodical and repeatable approach to implementing the adjustments, in addition to consistently returning to a tested set of levers. Their strategy comprises a number of organisational facets.

They start by designating a distinct owner of commercial productivity, frequently with a specific role. This executive typically works closely with programme resources and immediately reports to the chief sales, finance, or operating officer. The team works to create a backlog of strategies to implement, monitor their success, and support every level of sales and marketing with changing procedures and behaviours.

In order to extend the work beyond the sales group, seasoned productivity leaders also integrate commercial productivity targets into yearly and long-term planning. To that aim, regular communication on concrete productivity challenges is required between the CRO, CFO, and COO. The CFO’s revenue and sales/marketing expense targets should take into account the anticipated increases in productivity of the sales and marketing organisation and include a clear plan of action for achieving these increases. Additionally, the IT roadmap must be aligned with the multiyear commercial productivity roadmap so that the business may make the necessary technological investments.

The ability to forecast sales and marketing capacity, collaborate with the finance team, and develop iterative go-to-market plans requires a competent commercial operations team. The operations team makes ensuring that strategies are applied consistently across all markets and business lines.

The proper inquiries to make during a recession

In order to maintain their productivity improvements, CROs, CFOs, and COOs will need to answer a number of high-gain questions.

• Does our company understand the factors that influence commercial productivity and if we are meeting, exceeding, or falling short of our goals?
• Where must production rise, and by how much, by next year, three years from now, or five years from now?
• Which strategies will work best together to create a realistic path to the targets?
• Do we have the ideal operating system, organisation, and senior leaders on board to facilitate these gains?
• Who is in charge of making the gains? Has he or she established effective channels for reporting to and communicating with the heads of the finance, HR, and other departments?

Businesses in each sector and at any point of the economic cycle can benefit from maintaining commercial productivity gains. But given the current macroeconomic circumstances, it is more important because downturns reshuffle the deck. According to a Bain investigation, performance among roughly 3,900 global corporations diverged significantly during the recession of 2008–2009. During the ensuing expansion, winners distanced themselves from losers and exacerbated the profit and market-cap disparity.

The same reasoning holds true now. A commercial productivity framework compels businesses to balance top-line growth with cost-cutting measures—trade-offs that will enable them to outpace rivals in the years to come.