An interview with Stephan Herrmann, Steinbeis Entrepreneur at the Steinbeis Consulting Center for Sales Engineering and International Business Development.
Combined with current political and economic developments, the trend toward digitalization, which was accelerated by the pandemic, poses new challenges for sales. This also affects technical sales and the selling of transfer and consulting services. TRANSFER magazine spoke to Steinbeis expert Stephan Herrmann about the responses managers can make to current developments.
Hello Mr. Herrmann. Among other topics, you deal with technical sales. What exactly is that?
In simple terms, it’s the selling of products, goods, or services that require technical explanation. This mostly happens in B2B markets and involves capital goods, for example machinery, equipment, vendor parts such as specialized assemblies or components, but also high-tech solutions such as software. That could be a large contract relating to a project, or comparatively inexpensive vendor parts, which customers buy in large volumes to work on their own customer contracts. Sales in the narrower sense, i.e. purely securing sales and processing orders, is only a subdomain of technical sales. Among other things, technical sales also includes strategic focus, troubleshooting capabilities, and your ability as a supplier to acquire customers, but also professional customer support, and thus medium- and long-term customer loyalty.
Human, financial, and time resources are often limited in medium-sized companies, so as a result it’s imperative to maintain a clear focus, to offer guidance based on goals, and to have corresponding penetration and impact in technical sales. When it comes to clearly distributing resources, the first thing I recommend is to define key thrusts: Do you want to penetrate more deeply into existing markets, with products that are already available? Do you want to reach out more effectively to existing customers with new products, i.e. do you want to invest in product development? Should existing products be extended into targeted areas within new markets, or do you perhaps even need to diversify? The success models of medium-sized tech firms prove that often, it’s precisely ‘market development’ thrusts that have had such a positive impact on company growth in recent decades.
Specializing and acquiring core competencies over many years has enabled companies to open up additional areas for products or services to be used in, or even enter international markets. So for me, international market development is inextricably linked to technical sales because it’s precisely in this environment that there have been and still are good opportunities for our manufacturers to safeguard their existence and focus on growth, even when things are difficult. So basically, for me technical sales is much more than just selling products and services that require technical explanation. It has to be backdropped by a well-defined strategy and marketing focus, and quite often, especially for a company with a sales focus, it affects the actual nature of the business model.
What are the particular tasks and requirements of technical sales?
Technical sales managers are the interface of the company with the customer. On the customer side, you often work with development and the production department. You need a good understanding of problem-solving and the right know-how. Likewise, the wishes of the customer have to be integrated properly into your own company operations. In other words, the general task in technical sales is to apply consulting skills, good technical knowledge, and carefully adjusted interpersonal skills to gain access to customers using appropriate tools of project and product acquisition – and to succeed through tangible sales.
But what are the “real” challenges for companies with a leaning to technology? Well on the one hand, one thing that’s often underestimated is the time things take. For example, it’s quite common for customer and order acquisition – and ultimately, actually generating sales from new B2B customers – to take several years, so it takes a lot of careful planning. When you’re working on a foreign market, it can take as long as five or even ten years after entering the market to derive profit from the market. Also, it’s rare to have enough sales and project capacity to deal with all the customer projects that come up, and give them sufficient attention. One way to deal with this dilemma is to divide current and future business into sensible combinations of products and markets, and for example assess them according to the criteria of market attractiveness and competitive strength. The approach you adopt is to distinguish between strategically unprofitable and profitable areas, and then maintain a clear focus by allocating the required selling capacities to the latter. It’s a similar approach with international business development. The process model that’s proven its worth in technical sales is clearly structured around different stages, starting with market analysis, market evaluation, market entry and development, and then the final step of cultivating the foreign market profitably.
Let’s switch from selling highly complex technology and services to selling transfer and consulting services: What do you see as the greatest challenges in this area?
Since my professional experience is mainly in technical sales, I’d first like to answer that by drawing parallels to selling transfer and consulting services.
Both involve services that need careful explanation in the B2B sector – based on similar circumstances and the pronounced focus on consulting. Successful technical sales usually hinges on a spotless selling concept. That first involves analyzing skills and your own capabilities, you then turn the spotlight on the market and the competitive situation, and then you move on to the customer segments you want to aim for, or the target customers, and finally you start working out suitable sales channels, selling processes, and ultimately the required marketing measures. For me, this approach also feels fundamentally right for the consulting business.
According to recent studies, the consulting market in Germany can be roughly divided into the following areas: operational areas (approx. 35%), IT (approx. 20%), transformation processes (approx. 20%), strategic planning (approx. 15%), and HR development (approx. 10%). In terms of target groups, traditionally industry has been the most important sector, with the financial and public sectors of secondary importance, and a large proportion is also accounted for by a variety of customer groups, such as the healthcare sector, media, or the tourism industry. As far as the customer’s concerned, apparently the sector’s broken down on different levels, with larger, international consulting firms at the top of the pyramid in acceptance terms. So on the one hand, one challenge is to clearly divide your consulting services into the aforementioned areas of expertise and the defined customer groups, and on the other hand, you have to build the required reputation in the market when it comes to costs and benefits. On top of that, there was a significant downturn in consulting projects in recent times, in what used to be the strongest customer segments in industry such as mechanical engineering and machine construction, the automotive manufacturers, the supply industry, but also SMEs overall, and this is difficult to fathom given that there’s demand out there for consulting.
But even in the day-to-day work of a consultant, you often discover that there are relevant issues and projects lining up, but the decision-makers haven’t got the time to put aside enough management capacity for projects or ask for projects to be dealt with by people outside the company. As such, another challenge when you’re taking on new customers is first of all getting your range of services across to potential contacts and explaining them professionally.
The situation in the economy, but also in society in general, is tinged with so many uncertainties and challenges at the moment. What consequences will these developments have on both technical sales and the selling of transfer and consulting services?
Unfortunately, we’ve been a bit preoccupied with international upheavals recently, be they political conflicts, increasing trade barriers, strains on supply chains, or even slumps in sales or revenues – in foreign markets that used to be quite profitable. If you think about international business, one way to spread risk will be to restructure supply chains and how you operate within markets. This is where technical sales are called upon to be systematic and look in a forward direction at markets in new, previously unfamiliar countries. It’ll be increasingly important to evaluate information digitally, based on the methods of market or competitive intelligence.
But the thing that really hit us in sales in recent years was the coronavirus pandemic.
When everything went into lockdown, not only did people have to cope with restrictions, short-time working arrangements, or even the fear of losing their livelihoods; society also witnessed a completely new dimension of social interaction – in industry and business, but also on a personal level. Of course people were already talking about “sales digitalization” before the crisis, but for the digital tools that now became established – and people’s attitudes towards those tools – there was no going back now. In sales, especially customer acquisition, there’s increasingly a reversal from what used to be push selling to what’s now pull selling. This is redefining the nature of sales, and in some cases it’s redefining business models. Previously, you could still actively get through to potential customers by using the consulting approach, by visiting the company, going to trade shows, or meeting people personally, but now it’s reversing the way you make contacts. Contacts at potential customers are sometimes completely dismissive about requests to set up an appointment – if they need something, they first research products or services on the market online. So suppliers are designing their websites and the way they provide information in the best possible way to pick up potential clients virtually – during the customer journey – to help them with their digital research, and ultimately to receive queries as “qualified leads” that can then go into sales processing. As a result, sales force capacities are, for example, being consciously put aside for existing customers, potential A and B customers, or C customers, who are predominantly supported online.
What’s then crucial is no longer the number of customer contacts, but their quality, expertise, or the viability of contacts. But also, shifting roles around in sales goes hand in hand with the increasingly important role played by central marketing, which needs more powerful IT systems and, for the supplier, becomes a kind of digital control center for new customers.
What trends do you think will determine the future of sales, especially when it comes to selling services?
As I said, I think the developments I mentioned are irreversible, so the trend toward digitalization and “depersonalization” of the first touchpoint with new customers will continue through internet presence, being visible online, or the social media. I also think this applies to the selling of transfer and consulting services – to gain initial access to the client, individual consultants also need this kind of “central back-up” from technical marketing. So on the other hand it’s important to pay even closer attention to existing customers, the ones you already know personally. The term you hear in industry when you extend additional or further offers to existing customers is cross-selling. Of course, it’s also possible to do something like that in consulting, but this requires a clear understanding of different service packages, what makes each one different, and the willingness to move around within your own company or overall organization, as part of a powerful and internally coordinated network.
Stephan Herrmann (interviewee)
Steinbeis Consulting Center Sales Engineering and International Business Development (Singen)