Sales and Marketing Best Practices Boost Profits for Professional Services Firms

Posted by Ed Marshall, GM for Services, NetSuite

Professional services (PS) firms invest more than 11% of their total services revenues into their marketing and sales efforts, according to The 2013 Professional Services Sales and Marketing Maturity™ Benchmark by Service Performance Insight (SPI). Yet those same PS companies express great dissatisfaction with their sales and marketing results: The majority consistently give themselves a failing grade, says SPI, which has surveyed PS companies for several years.

One major reason for the dissatisfaction, says SPI, is the relative immaturity of the PS sales and marketing disciplines, which are still in their infancy. That means that only the largest, well-established companies like IBM and Accenture, which have the expertise and money to invest in sales training and planning, are likely to have successful PS sales departments.

SPI identified five levels of maturity in sales and marketing for PS companies. The lowest levels are the least mature, operating on an ad hoc basis with sales people doing their own thing, taking opportunities where they find them rather than mapping out lead generation strategies, not collaborating with sales partners or with major customers, and unlikely to receive much training in sales and marketing best practices.

At the other end of the scale are the most mature, and most sophisticated, PS companies. These companies have sales and marketing staff that work as a team, follow sales and marketing strategies that adhere to best practices, invest time into cultivating leads that will ensure quarterly sales quotas are met, regularly engage in professional development, and collaborate with sales partners and customers to generate new services packages and sales referrals.

And those differences in maturity show up clearly on the bottom line. Some examples:

The average deal size for a mature company is much larger--$171,000--compared to $77,000 for less developed, immature sales departments.Mature firms achieve gross margins from packaged services of 43.5%, and 41% for non-packaged services, compared to the least mature firms which make, approximately, 30% from each. Mature firms bring in $255,000 per year per billable consultant, versus $129,000 for the least mature.
Improving sales and marketing maturity is clearly worth the investment. But how does a company go about becoming a more mature sales and marketing organization? The ways that these companies evolve from low to high maturity include implementing a sales methodology, standardizing prices and creating more packaged services, standardizing contracts and proposals, developing full service solutions that incorporate sales partners, focusing more on the value to the customer and quantifying that value with better KPIs and metrics, turning to customers for feedback and sales referrals, and moving to an integrated professional services automation platform.

The SPI report concludes, as companies improve their sales and marketing effectiveness, the efforts pay for themselves. They see a higher percentage of sales quotas met, more accurate sales forecasts, better cost estimates and pricing. That result in fewer project overruns, shorter sales cycles thanks to better leads, more services revenue per customer, larger deal pipelines and better reference clients. The outcome is much higher revenues and ROI.

Interestingly, the report also found that PSA software is a surefire way to boost services profit.

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