Tuesday, July 13, 2010

Trust, Reputation, and Inside Sales

There is a significant shift underway in how we establish and build trust. Craig Newmark (of Craigslist fame) discussed this transition in quite some detail in an article on GigaOm that's worth a read.

The shifting of how trust is built has numerous profound implication for society in general, but more specifically, it is causing significant shifts in the way that people buy. While the general evolution of buyers is causing some challenges for field sales teams, the evolution of trust is opening up new opportunities for inside sales teams.

As the emphasis on face-to-face interaction as a way to build trust decreases in lieu of other ways of building trust, the need to be “in the field” also decreases. It is unlikely that field sales as a discipline will disappear any time soon, the economic bar at which a face-to-face interaction is “necessary” is in the middle of a dramatic shift.

Trust and Economics

The amount of trust we put into a vendor has a strong relationship with the size of a deal we are willing to sign. The economic value must of course be there, but without the element of trust, the deal is unlikely to close. This trust shift therefore has major implications on the size of deals that are likely to be closable through an inside (over the phone/web) sales model.

Whereas historically, inside sales teams would generally close deals with an average selling price (ASP) of below $20,000, these teams are now able to close deals at much larger ASPs. Some organizations are seeing effective use of inside sales up to $100,000 in ASP. This shift towards an inside sales model reduces both the cost and complexity of the sales process, and in doing so opens up a significant economic opportunity.

David Skok of Matrix Partners wrote an excellent piece that looked at sales cycle complexity as a driver of the economics of a business that explores this concept in great detail. His article is well worth a read, but the short story is that any reduction in sales cycle complexity (such as moving from a field sales model to an inside sales model) can remove an order of magnitude from your overall costs (and hence required price points).

Trust and Reputation

Inside sales teams are able to develop the level of effectiveness that is being seen in recent times by building trusted relationships through online interactions and presence in communities, and understanding key players in the buying committee through LinkedIn and other online tools.

These teams also relying on their company's reputation to a large amount. That company reputation, if built on a foundation of corporate openness and transparency, can contribute greatly to the amount of trust prospective buyers are willing to give to the salesperson they are dealing with.

Although face-to-face interactions remain immensely valuable in building trust, and will remain necessary for very large transactions, the efficiencies of the inside sales model give it a significant advantage in smaller transactions. This efficiency win, combined with the new ability to build trust through means other than eye contact, are moving inside sales in many organizations from small transactions to much larger transactions. This trend is likely to continue as the communication tools and trust-building approaches continue to tip the balance in favour of the inside sales model.
Many of the topics on this blog are discussed in more detail in my book Digital Body Language
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trish bertuzzi said...

You have hit the nail on the head Steve. Our recently published 2010 Inside Sales Metrics & Compensation study backs up your supposition.

Average deal size for inside sales reps has increased from $16K in 2007 to $54K in 2010.

Average size of inside sales team has risen from 5 in 2007 to 14 in 2010.

These stats have been driven by by the buyer. They are more comfortable communicating via phone and web and with technologies in place that assist in the self education process, they are ready, willing and able to move the sales process forward without face time.

The same holds true for Lead Generation teams. They are responsible for more and more of the front end of the sales process. The times they are a' changing and smart companies are changing with them. Thanks for listening!

Steven Woods said...

Thanks Trish - and thanks for the additional stats to back up the trends I was commenting on, much appreciated. If you are interested in sharing a link to the Inside Sales study, I'm sure many would enjoy it.

It will be interesting to see where these trends go, and what the role of the field salesperson transitions into in the coming years.

Anonymous said...


David Tiltman has some very interesting thoughts on marketing metrics - here:

Also lately I've noticed a number of comments and negative press on combining personal trust (social friendship) with automated marketing efforts.




Would you comment or maybe dedicate a full post to this? Thanks.