Inside Sales vs. Outside Sales

Business owners and sales managers frequently debate about whether to invest in an inside sales force, an outside sale force, or some combination of the two.  With inside sales, your sales reps visit with customers and prospects via the telephone, email, and internet.  They do not leave the inside of your office, hence the name.  Outside sales is where your sales representatives visit with customers and prospects at their business locations, outside of your office.

Generally, budget drives the inside vs. outside sales force decision.  Since inside sales reps incur no travel and entertainment expenses, companies with small or limited sales budgets often start with an inside sales force.  They view this as a practical trade-off.  However, there are variables to consider which may dictate that an outside sales team is a better investment for your business.

Consider the variables in this table to determine whether your company is better off with an inside sales team, an outside sales team, or a combination of the two.  A combination of inside and outside sales is generally preferred when you have a mix of variables that sometimes lean towards inside sales and sometimes towards outside sales.  We’ll discuss more of that later.

Product or Service Cost

If your product cost is low relative to your customers’ budget, or if your product is a commodity, then an inside sales team may be a very effective channel to sell to your customers.  However, if your product has a high price tag, customers may want the reassurance of face-to-face contact with your company.  In these situations, outside sales may not only be preferred, but necessary.

Customer’s Perception of Product Value

Even when your product cost is low, if the customer’s perception of the product’s risk or value is high, you may be better off employing an outside sales team.   Shear bolts used in turbines are a good example.  The bolts themselves cost only a few dollars apiece.  However, if they fail to perform to specification, they may ultimately cost your customer hundreds of thousands of dollars in downtime and repairs.  The risk/cost ratio is high.  In cases like this, you’re much better off developing a personal, face-to-face relationship with your customer.

Product Complexity

Complex products or new applications for products can be intimidating to customers and prospects.  These situations often require the careful direction and reassurance that an outside sales representative delivers.  Inside sales reps can handle more complicated sales, especially using video demonstrations that are available via the Internet.  However, inside sales calls generally take longer to close than face-to-face sales calls.

Transaction Size

Inside sales teams can be very effective in identifying, qualifying, and closing relatively small transactions – from a few dollars to a few thousand dollars in size.  Dell Computer demonstrated this very clearly in the personal computer market.  However, when transactions are larger in size, whether by dollar amount or number of units that add up to a large dollar amount, customers prefer the relationships and commitment provided by outside sales representatives.

Product Margin

When your product generates a large profit margin for your company, you want to eliminate as many obstacles as possible to making the sale.  In these situations, face-to-face contact and personal relationships can go a long way to closing the sale efficiently.

Target Geography

If your company serves a large geographical area, involving an entire continent, multiple time zones or the world, you may find it necessary to employ an inside sales force.  Sometimes it is not logistically feasible to cover your target market with outside sales representatives.  Inside sales representatives can cover extensive geographies, time zones and cultures from one central location.

Combination Approach

If you need to have outside sales representatives covering a wide geography, consider supplementing them with an inside sales team.  The inside sales reps can generate leads, qualify opportunities and nurture leads.  This allows the outside sales reps to focus on key opportunities and imminent deals.  After deals are closed by the outside sales team, inside sales reps can maintain customer contact to ensure that your operations team quickly identifies and resolves customer satisfaction issues.

Inside sales teams and outside sales teams each have their own niche in which they work well.  However, try not to view the decision as “either/or.”  As your business grows, you will find that a combination of inside and outside sales teams can work well together, complement each other and allow your business to grow faster.

In my experience, I have used inside sales reps to close deals with short sales cycles. These transactions typically involve low cost, commodity-like products.  I complemented my inside sales team with outside reps that develop key account relationships.  I also used inside sales teams to develop opportunities early in the sales cycle with a hand-off to an outside sales rep. During the key decision-making period, when the customer needs personal contact and during the proposal development period, my outside sales teams were closely involved with the sale.  After the sale and product/service delivery, the inside sale rep followed up with the customer.

When you have multiple sales reps working together on the same transactions, make sure you clearly define each rep’s role and how each rep will be compensated for his or her contribution. This helps ensure cooperation across your sales team.

For more information, contact Wallace Management Group at (203) 834-0143 or email David Wallace.

© 2010, David P. Wallace

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