The reputational impact of overselling
Updated: Jun 29, 2020
Business leaders know that reputation goes a long way in impacting a sales outcome, in fact 25% of market value can be attributed to reputation, and reputation is closely linked to cashflow; this is why - more-so than ever - reputation will be critical as businesses open their doors following the catastrophic disruption of Covid-19, and with customers being more selective.
Of course, in the current climate, with businesses recovering and rebuilding, the temptation, (understandably) will be to sell what the customer or prospect ‘wants’, close the deal, find a way to deliver it, get the revenue, and nurse that damaged bottom line. Regardless of whether the ‘want’ is something your business already has in its portfolio or feature set.
And surely, if your business is adding product features to meet the needs of every customer, this is going have a positive impact on reputation, cashflow, and bottom-line right? Wrong.
Deloitte reports that 41% of businesses say that the biggest impact of a negative reputational hit is revenue, with a further 41% citing brand value; therefore, being overly accommodating and negatively impacting reputation can cost more in future sales opportunity than the value of the single sale.
It is easy in theory to say (or write) that your business should only sell what you already offer, but, in reality all businesses need to have an element of flexibility, especially now – but how can this work in practice?
In order to balance the ability to flex and increase revenue with a structured portfolio and supporting operational infrastructure, you have to understand the trade-off between effort and impact.
Effort versus Impact
Standardised services, products, and product features are a known entity within your business (or they should be), people know how to manage and deliver them. At a foundational level, your salespeople should have solid product, service, and feature knowledge (see this article/link on Sales and the Impact of Overselling), and the rest of the business should have product and service knowledge at a level that is appropriate for their role. This means orders can go through your existing delivery or on-boarding process in a standard way, as fast as the process allows (even standard practices aren’t always efficient), with few or no unexpected hurdles.
As soon as you allow your business to creep from your standard products or feature-set you introduce friction into the process, create unknowns for your delivery teams, slow delivery tasks down, and increase the effort required to deliver. All of this extra work and effort is referred to as process ‘noise’. Process noise uses up time that the standard portfolio doesn’t, and a 20% variation in orders can require anything around or beyond 10% more resource to manage and deliver. This creates a backlog of orders and lengthens lead times – and not just for the exception orders, but potentially for all of your business’s orders.
The impact of the ‘noise’ becomes tangible in your business and bottom line when you pay for extra resource (whether it’s additional staff or overtime), to keep the lead time steady; develop new features; or to resolve queries with the client and internally. If your cost-of-sale starts to increase, your profit-margin is likely to decrease, and then you consider increasing prices which are passed onto customers.
If you choose not to implement additional resource then you may have to accept longer lead times, which is felt by your customers when expectations are not met, or you are slower than the competition.
Of course, the other option is to mandate to your teams that they deliver within the same standard timeline. The risk here is that delivery is rushed, mistakes are made, and effort is spent on rework and remediation, manifesting itself as dissatisfaction with your customers, and frustration for your teams.
We have seen all three approaches used, and whichever route you take the customer experience is often negatively impacted, and you will suffer reputational damage that will propagate throughout your existing customer base, market, competition, and future customers, as well as having a long-term impact on your reputational resilience. 95% of customers are likely to share a bad experience, compared to 87% of good experiences, and it can take only one bad experience to break years of good experience and reputation.
Enabling Structured Flexibility
So, whilst you need to have some flexibility, there still needs to be some structure around it:
- Is the addition to, or amendment to, a product feature something that is a one-off, or is it something that can become part of your standard offering? One-off requests are going to have a longer life-time cost than something that can be integrated and offered to all customers to drive incremental revenue.
- Does the additional product feature deliver sufficient revenue to cover cost-of-sale and gross margin targets for the next 6 months, or 1, 2, 3 years?
- Are you truly understanding the customers’ needs, or are they potentially not understanding the breadth and depth of your existing products and services? It’s remarkable how often the customers interpretation of their problem – and solution - isn’t what you should be solving for, and your team need to guide the customer through this exploration.
- What are the delivery implications of the additional product feature? How much additional resource is needed? What is the impact on the rest of your orders commitments? And are you willing and able to absorb these impacts; be them operational or financial? Of course, you should not be absorbing anything that is damaging to your reputation.
If you can consider all of the above you can make an informed decision, you can accept or reject additional product feature requests with eyes-wide-open, for the right reasons.
At a foundational level, your teams – sales, operations, finance, need to be on board, so that they can sell, deliver, and support your products and services. They are likely to be aware of some of the challenges of selling outside of your standard offering, but often unaware of the bigger implication around reputation and cashflow. Conversely, your business functions also need to understand that an additional product feature, or product variation may be necessary in some cases, and can have a really positive and long-term benefit to the business. If they [where appropriate] are involved in the discussion, and understand how decisions are made, then they will be best placed to deliver your products and solutions as you and your customers want it delivered.
And, when it comes to measuring, if you measure Quality as well as Quantity and Customer Satisfaction you will be able to understand whether you have the right level of flexibility. Has productivity reduced (quantity), have queries increased (quality), has your customer satisfaction changed, and is revenue increasing and profit margins steady? If all of these KPIs are stable or going in the right direction then you are enabling structured-flexing.
Building, maintaining, and protecting your reputation doesn’t have to mean being everything to everyone, it is ok to decline some business in the same way that it is ok to flex for other business.
Your businesses Reputation does precede your business, and once damaged can take years to recover, therefore it is crucial that you make your decisions in a structured way, being consistent, and executing with consideration.
1: Deloitte 41% of businesses surveyed
2: World Economic Forum
3: Customer Thermometer
This article is part of the Sales and Operations Dynamics series that explores business challenges from both the sales and operational perspective. To help business leaders, sales leaders, operational leaders, and teams understand how to align these functions through understanding, process, structure and collaboration.
Other articles in this series:
About the Authors:
Sonya Kimpton de Ville: with 20 years of experience in operational design and leadership I have seen and dealt with first-hand the challenges due to disconnect between sales and operations, and the impact on customers and the broader business; and have coached teams and leaders on how to work more effectively together. Now running my own technology start-up Grapvyn (www.grapvyn.com), I am helping businesses become more efficient and work smarter, to increase the opportunity, accelerate sales, and drive business growth.
Gert Scholts: I help sales professionals and their leadership create more sales opportunities and close more deals. After 25 years in sales and sales leadership roles, transforming large sales and account management teams at BUPA, Bank of Scotland and Travelex I founded www.thebestsalescoach.co.ukin 2012. I believe corporates can learn from start-ups and start-ups can learn from corporates. This particularly applies to the natural tensions between sales teams and other functions in organisations.
Photo Credit: Linus Nylund - https://unsplash.com/@doto
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