FROM MONO- TO OMNICHANNEL SALES – THE CAR IN MIND

The reorganization of a company from mono- to omnichannel sales begins with understanding its origins and developments. A smart sales organization not only increases revenue but also enhances the customer experience. Thorsten Küppers, Head of International Inside Sales Strategy at Berner Omnichannel Trading Holding SE, takes you on his sales journey.

Solid, confident, sacrosanct – this is the image of the German Mittelstand in industry and commerce. Numerous hidden champions, inventive spirit, down-to-earth approach. The somewhat dusty economic miracle spirit of the 1950s and 1960s still lingers in some places. Portraits of mostly aristocratic and gracefully aged or deceased company founders adorn the entrances or conference rooms of the headquarters of globally operating companies, where the term "Mittelstand" often seems to be a mere understatement.

Often, the second generation is already in the executive suite, driving digitalization, seeking expansion, and conquering new markets – while the founding fathers or mothers, as gray eminences, still have to approve crucial decisions and technical evolutions.

We all know the legendary stories of young post-war entrepreneurs who seized opportunities with pragmatic determination, personally visiting the first customers in their often-rickety cars, laying the foundation for their companies' later success. After that, growth was often rapid. Within a few decades, they achieved national market penetration and international expansion. The main sales channel? The German Mittelstand relied on field sales.

And for a long time, there was no need for anything else. When the internet was not yet invented and phones were bulky Bakelite devices with rotary dials and coiled cords, the technical prerequisites for e-commerce and telesales simply did not exist. Sure, there was inbound telephone customer service for handling complaints and product inquiries. However, the primary customer touchpoints were regular field sales visits, flyers and special offers sent by mail or fax, catalogs, price lists, and personal contact at trade fairs and events.

Subsequent generations in company leadership, new communication channels like the World Wide Web, e-commerce, mobile phones, mobile computing, rapidly growing data transparency, analytical capabilities, software solutions, the globalization of supply chains, and increasing demands for speed, accessibility, and service levels led to the rise of omnichannel sales models in the early 2000s. Initially adopted by retail, these models aimed to place the customer at the center of economic activity. It quickly became apparent that additional sales channels like telesales and e-commerce could unlock new sales potential that "field-sales-only" organizations could hardly reach. The cost per customer interaction is significantly lower via phone or internet than through physical field sales visits. Consequently, many companies could now profitably address low-value and small customers, significantly expanding their market reach.

Despite the benefits, many companies struggle with the transition to multi- or omnichannel sales – why is that? Customers are assigned to different clusters and sales channels based on various evaluation and scoring methods, according to their value to the company. The goal is to ensure that the revenue or potential per customer is in a financially healthy ratio to the interaction costs.

Often, it is discovered that current customers under field sales generate little or no value for the company, sometimes even losses. Sales costs exceed the contribution margins, and the expected revenue growth based on analyzed customer potential does not materialize. A closer look at sales controlling reveals that up to 80% of customer visits often account for only about 20% or less of the channel's revenue. Conversely, this means that sales costs are too high relative to the revenue generated.

Or, to put it bluntly: In a real-world scenario, reducing field sales costs by 60%, i.e., cutting personnel, would result in only a 10% drop in revenue – provided no orders are placed through other channels. This doesn’t immediately reflect the profit-and-loss perspective. However, a detailed examination often reveals that a significant portion of customer interactions generates revenue but not profit.

Example Analysis of Customer Visits in a Direct Sales Organizations To illustrate the efficiency of customer visits in a direct sales organization, let's consider a hypothetical analysis of a company's field sales performance. The data reveals that 60% of customer visits generate only 10% of the total channel revenue.

The solution is clear: The appropriate customers should be assigned to suitable sales channels with lower sales costs. This will once again achieve a positive Customer Contribution Margin. This process partly affects customers who are currently being actively managed by the field sales team (see example above). It is not uncommon for the responsible employee to resist handing over "their" customers to another sales channel.

After all, even a customer with a negative P&L contribution ultimately generates revenue for the company. For field sales representatives, whose income is incentivized by variable salary components, every customer has a real value.

Additionally, the management sometimes struggles to confront the Field Sales channel with internal competition for customers and revenue shares. After all, the company initially grew with the field sales team. The car in mind.

There are often emotional aspects involved as well, especially when there has been a long-standing – sometimes even personal – relationship established with the affected customers. The top management must weigh between economically viable channel assignments and a field sales organization that quietly or loudly opposes any "lost" customers.

There's no blueprint ready to be pulled from the drawer. Integrating additional distribution channels entails a comprehensive change process for every company, one that needs to be taken seriously and given top priority. Backgrounds should be transparent, and the specific impacts should be explained. When set up and communicated correctly, omnichannel distribution is advantageous for all involved. For the customer, it means no longer having to wait for a visit from an employee and being able to reach the sales support team via hotline, email, or digital means at any time. For the field sales team, it means that the time saved can be invested in acquiring new customers or intensively developing existing ones, ultimately leading to greater success. For the company, it means sensibly expanding the market contact surface and addressing all customer segments in a economically sound manner.

This process is time-intensive and resource-intensive for all involved. The most important requirement is the unwavering conviction of the management and leaders in the company. Equally important is a rollout strategy that considers indirect consequences. Are field sales employees capable of developing existing customers and acquiring new ones? Does the controlling department measure the right metrics for an omnichannel distribution organization, or are the channels still viewed and measured as silos? Does the existing IT infrastructure, including CRM, align with the new approach? And last but not least, does the existing salary model follow the new distribution structure and provide the right motivational incentives?

The metamorphosis from a field sales-dominated distribution to a true omnichannel organization is a Herculean task and can only succeed as a strategic project with the participation of all stakeholders in the company. And the benefit? The efficiency and growth potentials to be realized are enormous. The costs for a resource in the internal sales department are often 30% or more lower than those of an FTE in the field sales team – with the same revenue potential! Contrary to widely held prejudices, which assume a generally lower productivity per employee in the internal sales or telesales department, practice shows surprisingly that there is no corresponding natural law, and the internal sales department can achieve just as high revenues as the field sales team – with lower costs and better measurability and controllability.

Start now with the transformation to multi- or, better yet, omnichannel distribution organizations! Banish the car from your mind.