One of the most talked about trends among sales thought leaders today is the increased importance of inside sales. If you believe the hype then just as Black Friday in-store shopping is being rapidly overtaken by online gift buying, field sales teams are rapidly being replaced by remote sales teams. Inside sales teams are cheaper to hire and operate, faster to ramp up, and many business buyers and consumers alike no longer want a sales person to be present when they are making their buying decision; a remote relationship is preferred.
As someone who creates sales software for a living I have a vested interest in continuing the hype cycle around the inside sales movement since technology like Velocify is critical to how a remote sales team functions. However, I don’t think it’s that simple. As far as I am aware there is almost no factual, empirical evidence to substantiate the inside sales trend or properly quantify it and it has always struck me that there are a broad array of sales situations in which inside sales is the wrong solution.
This was the basis of a conversation I had some months ago with a sales thought leader who I think is one of the most profound thinkers in our field, Steve Martin. Since then Steve has done a great deal of research on the subject and recently wrote a seminal paper and an accompanying Harvard Business Review article based on his interviews with and surveying of top-level sales leaders from over one-hundred leading high technology and business services companies. Here are some of the fascinating findings from his research:
1. Most sales teams are indeed moving towards an inside-sales-dominant model
Almost twice as many sales leaders that Martin spoke with were switching the emphasis of their sales teams towards inside sales and away from field sales as we’re going in the other direction. What this really speaks to is that inside teams are certainly gaining popularity with the majority of sales leaders, but they are not right for every situation. In some situations companies have tried to put in place an inside sales capability and found it not to be the right model and in other cases the needs of the organization and the product focus has changed, making an inside sales team less relevant.
2. Inside sales teams suit certain sales organization lifecycles and not others
Martin articulates that just like a company has a product lifecycle, so does a sales team. He breaks these stages down as the “Build Phase”, “Compete Phase”, “Maintain Phase” and “Extend or Cull Stage.” The “Build Phase” is when a sales team is first getting established, and as Steve puts it, “The top sales challenge in [this]… stage is creating sufficient sales coverage to push the product into market.” For this reason many early stage sales organizations rely primarily on an inside sales team as it allows the organization to scale the coverage much more quickly than putting in place a field sales organization.
During the next sales organization stage (The “Compete” Phase) Martin says that the “challenge revolves around quickly scaling the sales organization so that it can compete effectively against more established competitors.” At this stage it is my observation that the ratio of inside sales team and field sales team starts to become a little more balanced. An inside sales team is used to create the scale but given gaining credibility is also important at this stage, most sales leaders start to build out their field territory strategy at this stage.
In the “Maintain Stage” the goal usually becomes maximizing sales productivity. Whether or not this stage favors an inside or field sales model is largely down to the quota size and attainment of the field sales team relative to their compensation versus the same ratio for the inside sales team. For example, if a field sales person on average achieves $2 million in bookings and is compensated with a $200,000 annual salary then their efficiency ratio is 10:1. If the inside sales team averages $1M in bookings achievement but their annual compensation in $80,000 then their sales efficiency ratio is 12.5:1. In this example the goal of maximizing sales productivity favors a bias towards the inside sales team. In reality however, Martin finds that in all of the industries he studied the average sales efficiency ratio favored an outside sales organization.
Finally in the “Extend Stage,” Martin explains that “Sales organizations… seek to deflect attacks from Compete and Maintain stage competitors, extending their presence within existing customer installations.” In other words, the emphasis switches towards Account Management in the field and away from acquisitive sales.
3. Inside sales teams would be even more prevalent if it were not for the biases of many sales leaders
I come across this bias myself quite a lot. A typical senior sales leader at some point in their career has often come up through the ranks of the outside sales organization. This tends to create a personal bias towards deploying field sales teams versus inside sales teams. In general they believe that “outside sales people have superior sales skills and the most accomplished sales professionals are in the field.” That said, what Martin did find, however is that this bias is rapidly disappearing as sales leaders become increasingly aware that the “nature of how customers buy today” is fundamentally changing. “Customers are smarter and information is not only easier to find, but available in greater detail than ever before.”
Over three quarters of sales leaders also reported their growing acceptance of inside sales teams was driven by the following factors:
a.) It is easier to onboard new salespeople and share best practices
b.) Enables a sales organization to scale faster
c.) Enables sales organization to be more productive
d.) Provides a better strategy for penetrating SMB and mid-market accounts
4. Inside Sales cycles tend to be extremely short
As one might expect, Inside Sales teams, due to the lower complexity of the sales engagement, tend to produce more immediate pipeline results than a field sales team. In Martin’s study he found that 70 percent of inside sales teams had a sales cycle of two months or less, with nearly half reporting a less than 30-day sales cycle. For field sales however, the most common length of sales cycle was three to nine months. These rapid results are obviously one of the highly seductive aspects of building an inside sales team.
Overall, Martin’s research goes far beyond what can be covered in a blog article, but these were my main “take-outs” from the piece. It is clear that inside sales is a pervasive and accelerating trend but there is always going to be plenty of reason for inside and fields sales teams to coexist. Field sales and account management continues to be an absolutely critical component of any long-term sales organization strategy.
