Large companies (especially in the tech sector) are conducting layoffs and cutting costs. For sales teams selling to clients in cost-cutting mode, this requires new tactics. B2B sellers must recognize that a slow economy creates different kinds of opportunities: that buyers’ time horizons become shorter, their willingness to take the risk of working with a new vendor goes down, and their focus on core, profitable business units go up (making it harder to sell to experimental or peripheral businesses within a larger company). Sellers need to avoid a spread-the-peanut-butter approach and instead concentrate resources on the most promising opportunities.
The economy is slowing, and hundreds of layoff announcements are in the news, including Goldman Sachs (3,200), Pratt & Whitney (900), United Furniture Industries (2,700), and Meta (11,000). If you’re a B2B seller and your customers are cutting costs, what should you do?
With many organizations, we are seeing sales force reductions that parallel the layoff announcements. At others, we see sales force hiring freezes. And every sales organization is rethinking its strategy and scale.
In our view, the worst strategy is a peanut butter method — spreading uniform sales force reductions or hiring freezes everywhere. The emerging winners will be the ones who take a more nuanced approach, tailoring the answer to the strength of their own products and markets, as well as to how economic uncertainty affects their customers. For example, as Alphabet (the parent company of Google) announced weaker-than-expected third quarter earnings, CEO Sundar Pichai asserted that the company is “sharpening our focus on a clear set of product and business priorities.” Through cuts, restructuring, and resource reallocation, Google seeks to become “20% more efficient.”
Surprisingly, the current environment creates opportunities (although different ones) for sales forces in both winning and troubled businesses, as we will explore.
The mindset of buyers is shifting on two fronts: the time horizon of their focus, and their definition of value. When the going is good, as it was for so many businesses in 2021, the “now” is assured, the “near” looks rosy, and the “far” holds promise. But as the economy falters, the “now” sees slowdowns, the “near” is uncertain, and the “far” appears fuzzy. Buyers pivot to doubling down on the near-term, while attention to the long-term fades. A promise that a purchase will lead to long-term revenue growth is often insufficient without proof of short-term productivity gains. Buyers are still interested in “painkillers,” but not so much in “vitamins.”
Sellers Have to Take a Proactive and Customized Approach
A sales leader told us, “Last year, the fish were jumping in our boat. This year, we have to go fishing.” Sellers will need a more differentiated and proactive approach.
When seller offerings are strong relative to competition, and a customer is poised to do well in a slowing economy (for example, banks often benefit as interest rates climb), the answer is to double down and look for opportunities to grow. Sellers can expand their reach and increase market share by aggressively going after new opportunities and customers while looking to drive innovation in products and services. We expect Google will expand its customer-facing organizations in its focus areas (cloud, search, and YouTube), even as it pares back other businesses and reduces the number of non-customer-facing positions. With the cloud business booming, a decision to continue investing heavily there is clear. Search is a perfect example of a business requiring a more nuanced approach. Search advertising revenues experienced a sharp slowdown in areas such as insurance, loans, and mortgages. While reducing ad sales efforts in these segments, we expect Google to boost investment in high growth sectors. Dialing back everywhere would be precisely the wrong approach.
On the other hand, even if seller offerings are differentiated, customers facing a weakening business will invariably have do more with less on their minds. Sellers have to engage in proactive conversations with customers on squeezing more value to help them weather the storm. By listening to and understanding customer needs, sellers can redefine offerings to align with the customer’s revised source of value. They might offer contracts with shorter duration, leaner versions of the solution, or favorable payment terms. And sellers can help the customer look around the corner and anticipate what the future may bring.
When a seller’s offerings are in a weak competitive position, whether customers are affected by a slowdown or not, the best approach is to focus on select relationships, activities, and sources of value. When seller-buyer relationships are strong, trust is a prominent source of customer value. Sellers can emphasize their ability to deliver reliably and consistently.
There Are Opportunities Out There for Everyone
Like Google, most companies have multiple businesses and segments, some of which are doing well, while others are not. For businesses that are strong, there is opportunity to take market share from weakened competitors and to hire excellent sales talent as others downsize. For businesses that are weak, difficult economic times create opportunity to implement tough decisions, such as selective downsizing and portfolio rationalization. It’s also a great time to get rid of excess fat and administrative creep. Google, for example, has nixed the next generation of its Pixelbook laptop, cut funding to its Area 120 in-house incubator, and closed its digital gaming service, Stadia. As cuts get implemented, it is imperative to hold on to top customers and key salespeople.
In addition, opportunities vary with a seller’s relationship with a customer, which can range from strong incumbency to no relationship. When uncertainty is high, buyers tend to become risk averse. If a current supplier is meeting the customer’s needs, buyers will see any change as being risky; a new supplier might make a good thing worse. Therefore, incumbents have an advantage. Incumbents also have excellent customer access. Especially in service industries, by spending more time with customers, sellers can discover new opportunities. (By the same token, if a current supplier is failing, buyers will switch quickly to a new promising seller that offers markedly lower costs.)
The sellers that thrive will have one thing in common — a strong digital backbone that enables them to adapt customer engagement to each situation. Informed by data, hybrid sales strategies (a strategic mix of digital, virtual, and in-person customer connection) are critical for continued success. To seek efficiency and cost savings in some areas, sellers can use digital channels more and automate simpler sales tasks. To seek effectiveness and impact in other areas, face-to-face selling will need a boost. In both cases, the use of analytics can drive smarter allocation of resources.