Selling stuff is getting harder! Salesforce's State of Sales report reflects changed buyer behaviors

As Salesforce’s World Tour series hits New York today, the firm has released the fifth edition of its State of Sales report (registration required), based on a survey of 7,700 sales professionals around the world. With this year’s study taking place against a backdrop of global macro-economic uncertainty, the conclusions make for some interesting reading.

The elongation of the sales cycle is a trend that many enterprise software vendors have been airing of late. At the UBS 50th Annual Global TMT Conference this week, Salesforce’s own CFO Amy Weaver talked in some depth about about what sales execs were telling her in July was “a new world in terms of how the customers were buying”. She said:

I don’t know if something magically changed around the July 4 weekend or whether this was changing and it really hit us in the face in July, because that’s when we have the most sales, but what we noticed is that customers who [we] typically saw on a very steady, very predictable manner were shifting. And what was happening is sales cycles were elongating. There were additional layers of approval, as everyone was having to go get their CFO to sign-off on the deal, which, frankly, I could appreciate. But other deals were having to go to Boards of Directors at the last minute for amounts that were lower than we would typically see.

The company also started to see “some deal compression” in July. Larger enterprise deals that might  be expected to come in at $20 million were compressing to $15 million and $16 million. That led to a debate around whether this was an anomaly or a trend, with the conclusion being the latter, said Weaver:

We decided that this was likely to be the next trend and you saw that in our guidance and we cut our guidance pretty significantly in August. We were right, it was the trend. And we have seen these trends continue throughout the year. In fact, if anything, I would say that they have become incrementally more challenging throughout the third quarter and it’s what I am anticipating as I am going into Q4.

She added that the expectation is “continuing challenging times” in the macro-climate. She cited three factors to consider in the new year: :

First, increasingly unpredictable customer behavior. Our sales team is a machine. They can tell you when a deal is going to close down to just about the minute. With the elongating cycles, the additional approval, the deal compression, that has become much harder to pinpoint, especially on where it’s going to hit on the quarter. So we’re looking at that, we are looking at  the questionable economic situation, and we’re looking at foreign currency. That is extremely volatile.

The study

So if that’s what Salesforce itself is seeing, what does its research throw up from sales people around the world? There are a number of broad trends identified, beginning with the conclusion from over two-thirds of respondents (69%) that, yes, selling is getting harder these days, while 82% say they’ve had to adapt - and fast! - to new ways of selling.

But only 28% of respondents believe that their sales teams will hit 100% of annual quota, while a similar percentage reckons that hitting 50%-75% is more likely. Over a third (34%) believes that they’ll manage upwards of three-quarters of their target, but a gloomy ten percent believes that they won’t even hit the halfway mark.

There are five factors cited for sales being more challenging, all of them macro-environmental in nature. These are supply chain issues; the impact of inflation; shifting regulatory regimes; political instability; and ongoing health precautions in the Vaccine Economy.

All of these are leading to changes in the behavior of sales leaders, with 70% of respondents claiming that their organization is less willing to take risks. Of sales leaders polled, over half (55%) admitted that they’re now prioritizing low-risk initiatives that offer modest, but guaranteed growth.

The top five growth tactics are cited as improving cross-functional alignment between departments, which has, let’s face it, been an operational Holy Grail since forever; adapting to hybrid/virtual selling; improving data accuracy; targeting new markets; and modernizing technology.

On that cross-functional alignment point, there is a problem here. While 81% of respondents say that team selling helps to close deals, a higher percentage (82%) finds aligning with other sellers to be at least ‘somewhat challenging’.  Sales reps most commonly partner with sales operations (48% of respondents), followed by other sellers (43%), marketing (42%) and customer service (38%).

Buyers up their game

At the same time, buyers are getting more demanding and their expectations are getting higher.  While there’s been much talk of late about the return to face-to-face customer meetings - something Salesforce COO Brian Millham made reference to in the company’s recent earnings call  - customers still seem quite happy on the end of a Zoom call. According to the State of Sales study, 57% of buyers prefer to engage through digital channels. Nearly a third (32%) of sales deals were closed entirely virtually over the past 12 months.

That said, 34% took place completely in person, while the same percentage followed a hybrid approach of some virtual, some in-person contact.

But the overall conclusion is that high performing sales organizations are those that are on top of using online chat, online portals and mobile apps. Organizations use an average of ten channels to sell to customers. The report notes:

Top-performing sales organizations are more likely to engage with customers across channels. Online portals, in particular, can offer self-service options that free up sellers to spend more time on strategic accounts, new customer acquisition, and current customer satisfaction.

There’s an interesting finding to the effect that sales reps now reckon that they’re only spending 28% of the working week actually selling. The rest of the time is being taken up with more strategic tasks, such as getting involved in customer conversations. Given that widespread perception that vendors are being called back more often into conversations with potentially nervous - or at least additionally cautious - buyers, this need for more ‘sweet talking’ is perhaps unsurprising.

(Salesforce State of Sales )

In addition, according to the study, sales reps are now being looked to by buyers to act as ‘trusted advisors’. This is a positioning that has long been a favorite among Salesforce execs, articulated in the State of Sales report as:

Sales reps are under pressure to show up with sophisticated insights for buyers, who often conduct research on their own before connecting. Canned scripts won’t cut it when dealing with informed buyers. Reps need to act as trusted advisors with insights and guidance on which products deliver the best value.

Building relationships that will last after the deal is closed is increasingly important with customer retention becoming a key performance indictor for 92% of all respondents. The short term win isn’t in vogue. Among high performing sales organizations, 90% of respondents said their leadership teams prioritize long-term customer relationships.

My take

Given the macro-economic climate, the fact that selling has become tougher is hardly a surprising conclusion - and given the low-heat outlooks from many enterprise firms of late, that’s not likely to change much any time soon. As with previous editions, this year’s State of Sales throw up some interesting insights into the realities of the marketplace. Worth a look.