Top Down vs. Bottom Up Selling Strategies – What Is Best for Your Business
Some say that a true sales person cannot be taught; their skills are inherent in their personality. But whether you have a team of natural salespeople or a group of people who need training and coaching, the sales strategy you choose will have a large impact on their sales.
In many business and enterprise sales, you will encounter one of two sales strategies.
- The first strategy, top down, is a traditional strategy that works from the top of the organization down. It is one of the oldest and most established strategies.
- You will also encounter the bottom up sales strategy. While this strategy incorporates a newer approach to sales, it has proven to be just as effective as the top down strategy in the right situations.
Choosing the right sales strategy is vital to the success of any sale. To best choose the right strategy, you need to understand both the strategy and the situations that they are best applied to.
In the following article, you will learn about 1) the difference between these two sales strategies and 2) the positive and negative aspects of each strategy. When you combine this information with the research you have gathered about your client and your product, you will learn 2) how to choose the right strategy for your business.
TOP DOWN VS. BOTTOM UP SELLING STRATEGIES – WHAT’S THE DIFFERENCE?
Before you begin to consider which strategy is right for your business, it is important to distinguish between top down and bottom up strategies. These strategies exist in many aspects of business, not just in sales. Top down and bottom strategies are also employed in management and investments. However, the way that they differ from each other in the case of sales strategies is important to note before employing either strategy.
What is a top down selling strategy?
When using a top down sales strategy, your sales people will need to appeal to the key decision makers and executives from a prospective customer. This kind of strategy is well-known in the business-to-business sales world. It is an approach that would be well-recognized by any large company. These sales almost always include large, encompassing products that will be implemented throughout the entire organization.
The reason that this top down mentality exists is to keep uniformity in the company. Companies and teams are more organized when they all run on the same IT and HR systems. Decision makers like this because it simply means that fewer decisions need to be made. It also means that they can utilize an IT department to support the software throughout the company.
Top down systems are essential for securing large deals more effectively. In addition to all of the money that is spent on the product itself, the customer will also be spending a significant amount on implementing it. They will also usually purchase training services, licenses and consulting services directly from the seller.
The larger the sale, the more comprehensive service a customer will usually need. Some enterprise software systems like SAP and Oracle are implemented across entire global companies. However, these customers rely on the training and resources offered by SAP and Oracle to make their purchases work for them. These resources often operate in addition to the customer’s in house specialists.
Even though the sales people working a top down sales method will be dealing with fewer people, there is more pressure and more service required with a top down model.
What is a bottom up selling strategy?
Bottom up selling strategies are more widely used within the business to consumer market; however, in the business-to-business sales such strategy means to approach lower level management or just directly potential users of the product. When you are selling from the bottom up, you are selling to a larger group of customers. The sales amounts are often smaller. They are also less likely to be implemented company wide.
For a bottom up selling strategy to be successful, it needs to be enthusiastically implemented. By applying bottom up setting strategy you start with some employees in an organisation and if your product is very valuable for them, they will promote it to their colleagues and potentially even convince their managers to implement such product company wide. So for the product to be purchased and kept aboard, you need to ensure that the adoption process happens quickly and is inexpensive.
Sales from business to business used to happen primarily with a top down strategy. However, for some type of technology products and software it becomes not only more user-friendly but easier to market to a wider audience, it has started to succeed with the bottom up strategy as well.
THE PROS AND CONS OF TOP DOWN AND BOTTOM UP STRATEGIES
There are pros and cons related to both strategies. These vary depending up on each strategy’s strengths and weaknesses. The list of pros and cons is not designed to support the idea of a universally successful sales strategy. Instead, you should look at the positives and negatives of each strategy and relate them to your product, sales team and the general selling scenario that you are operating in. When you do this, you will find demonstrable evidence to aid you in making a more strategic decision.
Benefits of Top Down
One of the biggest benefits of the top down strategy is that it almost always results in bigger contracts. These contracts are not just large in terms of sales figures and commission. You will also often end up selling more products and more services. Another benefit of a big sale is that you can negotiate exclusive contracts with your customers. This helps lock out competitors and ensures that you do not need to worry about reselling the product every year.
Following the benefit of big sales, top down strategies often facilitate large product roll outs. The benefit of a large product roll out is that you will be selling more physical product which must be maintained. The larger the roll out, the more training and support the customer will need. If the roll out takes place across an entire corporation, you will end up selling a proportional amount of maintenance, service and training hours in addition to the product. Selling these services isn’t a guarantee – it is important that sales people are trained to sell these services along with the product. However, this must be done in a way that does not imply that the product is difficult or faulty.
Finally, nothing beats the recurring revenue (sure, it depends on the revenue model and pricing of your product) that your company can pull in after you have made a large sale. Because these sales are often expensive to implement, many customers are not interested in changing products after they have fully integrated yours. As long as your product fits their needs and your service is adequate, you can usually count on residual income from many customers.
Disadvantages of Top Down Strategies
No sales system is perfect and there are several disadvantages of a top down strategy. The biggest disadvantage is that it takes a long time for a sale to be finalized. This is primarily due to the expensive nature of these sales. In most cases, customers will not be looking to spend large amounts of money immediately. They may have a drawn out timeline for the purchase. You may also be at the mercy of the customer’s budget. They may want to begin negotiating a sale in one financial year but need to wait until another year to create room in the budget for the purchase.
Another disadvantage is the sheer number of hours that are required for the sale. Sales staff have to remain actively involved in the sale until everything is finalized. Full engagement is often required to work out both large and small issues that come up in any sale. In some cases, sales staff might be required to be dedicated solely to one high-needs client rather than be able to work between customers.
It is important to remember that the top down strategy requires the executives or decision makers to make decisions without input from middle or lower management. While this is not necessarily a disadvantage of the top down system, it is important to understand the way the company operates before choosing this strategy. If the middle or lower management are consulted on the sale and they believe it is not the best option for the business, they may work against the sale.
Another of the primary disadvantages of a top down selling strategy is that losing a contract can be difficult for a company. With such large contracts and so much time devoted to a customer, losing a contract can result in a sharp decline in revenue that may not have been predicted.
Finally, it is important to note that the sale is not over even when the invoice has been paid and the contract has been signed. The first part of the sales consists of the sales team convincing the people at the top to make the decision. Afterwards, they have to go on to convince the people at the bottom to use it. This is usually done through training and consulting packages. However, every interaction with a new client is part of the sales process and this is important to remember when choosing a top down strategy.
Benefits of Bottom Up Strategies
The main benefits of the bottom up strategy lie mostly within the size of the deal. Most contracts sold from the bottom up are significantly smaller than they are at the top down level. When the sale is smaller, it can be processed and adopted faster. This means that you can work to make more sales at a faster pace compared to the top down strategy.
Another benefit of the bottom up strategy is that it is easier to predict sales figures. Predicting sales figures is easier because teams can work with traditional mass sales methods that assume a certain percentage of sales for every pitch. This is because less time is spent courting customers and because teams are able to approach more customers. When companies predict sales figures with great accuracy, they have greater opportunities to adapt to the numbers.
Another benefit of the bottom up sales strategy is that you do not need to worry about being undermined by middle management or staff. Since the sale is directly aimed at employee decision makers and not at executive level decision makers, you will be selling directly to the people who intend to use the product. If the product is in the employees’ interest, they are more likely to get on board and keep the sale recurring. This is different from the top down sales system because you will see more engagement with your product. You may also see a greater amount of up-selling.
If you use the top down method to sell a product that employees are not interested in, you will often still keep the sale. This is because the unhappiness does not reach the executive level, at least not fast usually. It is also because it is often too expensive to switch products. When you achieve engagement and satisfaction at the bottom level, this is better for your brand long-term and it will rule out competition almost as well as a legal agreement.
Disadvantages of Bottom Up Strategies
There are a few disadvantages to the bottom up sales strategy. The disadvantages are primarily financial. One of the biggest disadvantages to the bottom up strategy is that the contracts are smaller. This means that you must rely on a greater number of sales to make ends meet.
Another issue occurs in the event that the upper management is sold a product that it is to be implemented throughout the organization. When another product is being sold through the top down method, it is more likely that you will lose out when using the bottom up strategy.
The bottom up strategy also requires early investment before you have guaranteed revenue. This can be difficult for new startups. It may mean running at a loss for much longer than someone using the top down sales method.
Finally, one of the most difficult disadvantages to overcome is if you offer a free product to the majority of your customers. If you acquire thousands of non-paying customers, you’re not generating revenue and this leads to development issues. Having a product that has a free status is a great way to sell the product from the bottom up, but it not financially sustainable way. As one of the biggest issues that companies have is translating those non-paying customers into paying or subscription customers. Figuring out how to convert sales is essential before you decide to choose this method.
MUTUALLY COMPLIMENTARY OR MUTUALLY EXCLUSIVE?
Now that you understand the major differences, benefits and disadvantages of both sales strategies, it is important to consider which strategy is best for your organization and your product.
The reason that it is important to be familiar with both strategies is not so you can adopt one strategy and disregard another. There are situations where employing only a single strategy will not benefit your company.
The strategies you choose must take into account all of the players in a client’s buying circle as well as their influence. It is very important to be able to assess the client to understand how you may be able to sell to them. To assess the client, you need to understand how decisions are made within the company. As highlighted in the pros and cons lists for each system, encountering a change in decision-making strategy can jeopardize the whole deal. If you sell with a top down approach and the decision makers want to discuss it with the middle management level of their organization, you could see your deal slip away before you.
The strategy you choose will also depend on your product. If you have multiple products, you will need to consider which strategy is best for each product. You may find that the top down strategy is ideal for one product while another benefits from a bottom up approach.
But whatever your research finds, you must choose a strategy before you begin the sales process. Whether you are going to sell from the top down approach or from the bottom out, this should be decided from the outset of the sale. The strategy you choose will affect your approach, your pitch and the way you manage the sale. Having a coherent and clear strategy will ensure that your sales will not only be more successful but that you will close deals faster.
Understanding the benefits of each sales system is key to knowing which system will work best for your company. When you combine your knowledge of the top down and bottom up sales system with the knowledge of your product and your client, you will be able to choose the right system to close more sales.