The performance of the top companies around the globe is indicative of our current economic environment — and also offers direction forward for where sellers can best Seek to Serve™ for sustainable revenue performance.
In Mereo’s sixth annual revenue performance report of Fortune 500, Global 500 and Russell 2000 companies, we have identified a continuing trend of slow revenue growth and a new issue of poor profit performance. A variety of issues have influenced this negative performance trend, and uncovering these faults will help us explore strategies to move forward successfully — and may help your organization avoid these revenue pitfalls altogether.
NOTE! This article was written in collaboration with Austin Greene, Mereo’s 2020 summer intern and rising Baylor University senior majoring in Professional Selling, Entrepreneurship and International Business.
Performance Evaluation Highlights
- In the past fiscal year, 47% of Fortune 500 companies experienced a profit reduction compared to the previous year — meaning that profitability has become a major issue for these companies.
- In the year before COVID, we see a doubling of Fortune 500 companies with a loss to 31% and another 16% with profits below 5%, meaning nearly 50% experienced this poor profit behavior.
- On the revenue side, the number of companies with declining revenue was steady at 16% from one year to the next.
- Those with a meager revenue growth rate (below 5%) were also steady at 40%.
- This means in total, 56% of companies in the Fortune 500 grew slower than 5% or had a revenue decline.
This slow-paced growth or decline in revenue is a departure from last year’s State of Revenue Performance Report findings — where overall revenue growth was increasing, with loss on a downward trend. With the issue surrounding growth and profitability identified, let us dive deeper into what influences are causing this — and how to combat declines moving ahead.
The Revenue Performance Opportunity for B2B Sellers Moving Forward
Revenue and Profitability Pitfall 1: Customer-Driven Only Perspectives
One explanation for top companies’ issues with growth and profitability may stem from their internal structures. A number of these suffering companies have pushed to be more customer-driven only in the past years — rather than upholding a dual customer- and market-oriented perspective.
This customer-driven approach leads to companies solving the problems of today (being responsive) but missing the problems of tomorrow (being innovative). While customer experience scores – measured by Net Promoter Score (NPS), for example – may increase in the near term, allowing a customer (or set of customers) to have such a heavy hand in guiding the product strategy or commanding a significant investment of the company resources to satisfy their needs can be a double-edge sword.
For example, the pandemic took almost every industry by storm, and while there was not much time to prepare, businesses that could adapt to a virtual platform faster than others tended to perform better. Market-driven companies tend to identify and invest in new opportunities and technologies earlier and are therefore prepared to take advantage of changes ahead of those focused only on satisfying today’s client needs.
Revenue Performance Solution 1: Balanced Customer- and Market-Oriented Perspectives
Companies need to balance being responsive to customers’ short-term needs with being innovative to embrace market-driven demands bringing improved value to the client in turn. This equilibrium creates true value for customers while producing clear differentiation to improve pricing and avoid product and service commoditization. Companies that have not differentiated themselves in both message and product are likely to be the ones that perform the worst as we continue to get the results from the pandemic’s impact on the economy.
Revenue and Profitability Pitfall 2: Failing to Adjust Content Strategy to Virtual Platforms
The traditional business world continues to shift to a virtual environment. According to a recent Salesforce report, “State of Sales,” 60% of sellers report an increase in virtual meetings since 2015, while sellers have increased their time connecting virtually with customers at a rate three times greater than connecting in person.
In the coming months, one of the greatest challenges that will be faced by executives is developing compelling content with marketing teams to virtually cater to coaching the sales teams. Research has found that only 1/3 of buyers believed most their vendors were well-prepared and had already enabled digital channels (PROS Global Survey). Yet, looking forward, B2B companies see digital interactions as two to three times more important to their customers than traditional sales interactions (McKinsey).
While continuing to place an emphasis on aligning sales and marketing efforts to perform and adapt to various situations is vital to driving revenue, it is simply not enough to focus solely on past content standards and expect continued growth. Many organizations are struggling to identify and enable their teams with vital tools in today’s market.
Revenue Performance Solution 2: Adaptation to a Virtual Environment
By understanding what you can do to drive positive performance, you can set your organization above and apart during these turbulent times and enable your teams to adapt. This links to companies arming their sales and marketing teams with better tools that enable them to continue to differentiate their portfolios of products while not falling behind due to a lack of technical capabilities. Already almost 90% of sales have moved to videoconferencing, phone or web sales models, and while some skepticism remains, more than half believe this is equally or more effective than sales models used before COVID-19 (McKinsey).
By evaluating the effects of the pandemic on sales teams, Mereo has established a model on how to capture a prospect’s attention through this new virtual environment in Lead in Virtual Selling with RICH™ Content. RICH™ content stands for Relevance, Innovation, Complexities, and Hard data and proof. Incorporating these four areas into content development, meeting preparation and other interactions is critical to ensuring an effective sales force as we move into the new virtual age of business.
At Mereo, we thrive on enabling teams to identify issues and move forward to provide value industry and serve their clients. For guidance on how to have these conversations, contact us.