By Debbie Depp
As executives plunged into first quarter, I heard a common concern - anemic sales execution. For many companies in 2002 there was a performance gap between plan and actual. And many predict that their first quarter is also expected to be below target. Sales seems to be having trouble articulating a differentiated value proposition and can't convert enough opportunities into revenue. Sure, you can blame it on your salespeople but it's probably not your salespeople, it's your sales process…or lack of one.
You can start by interviewing your sales reps, reviewing your sales process and sales tools, and benchmarking successful salespeople to determine what worked well and why to build on those strengths. Identify areas of potential improvement and areas of opportunity that can be exploited. Then, answer three questions:
- Why do we do this?
- Do we need to do it at all?
- If so, how can we do it better?
Priorities drive performance. Without the right priorities a company will quickly lose its direction. Top performers distinguish themselves by focusing on priorities that exceed corporate goals, while satisfying the customer. To stay on track corporate priorities need to be constantly and clearly communicated, so that everyone is driving in the right direction.
Performance drives progress. Monitoring your organization's improvement over time is the key to sustaining sales productivity. Measurable performance processes promote the goals of improved customer satisfaction and referrals, long-term relationships, and increased repeat business. As a result, cost savings and increased profitability can be expected.
Progress drives payback. Every company needs to convert its investment in sales and marketing into revenue and profits. For instance, a 5% improvement in customer retention increases revenue by 17%.
Other forms of payback that may result include a stronger company image, better morale, faster decision-making, more incremental business from existing accounts, and lower operating costs.
As you solve problems and establish new priorities you will continue to create new opportunities. And so the sales process continues in a closed-loop system…from the top of the sales funnel to the bottom.
Chip Stofer, President of Strategic Partners, a private venture investment firm, says, "One of the major reasons for company failures is poor sales execution. Surprises in business are rarely pleasant. Managers need to connect the dots between sales activities and revenue. That means building a repeatable sales model for consistent, predictable, and most importantly, measurable results." No surprises!
So let's take a look at a simple four-step model:
During this stage make sure the prospect meets your target profile, including timeframe and budget. Identify the business problem and decision making roles. And be sure you understand the decision-making process. Often, this is where we get those unpleasant surprises.
Diagnose problems and needs to the full extent of their impact on the prospect's organization and their customers. Understand all decision-making criteria, then create the vision of your solution. It's so tempting to prematurely give the right answers - features, functions. Instead, ask the right questions!
Jointly develop a road map of accountability by defining a sequence of events. Define milestones with dates and the people responsible for their execution. Schedule activities such as demos, evaluations, presentations, proof-of-concept, proposals and coordinate resources.
Ask for the order. Send a thank you note. Ask for a reference, as well as referrals. Stay on their radar screen for updates and new opportunities for repeat business.
At each step of the sales funnel…measure progress. For example, if Marketing provides 50,000 names with a 2% response rate, then 1,000 names are target prospects. A telemarketing effort qualifies 20%, so 200 names are passed on to Sales to execute the activities in Step 1.
Sales reps may further qualify these leads, such that only 50% or 100 names may qualify for Step 2. Asking the right questions in the Needs Analysis stage may result in only 40 companies remaining in the sales funnel at Step 3. In Step 4 salespeople may close 20 customers.
Since 200 names were originally put into the funnel, you have a close rate of 10% - 20 out of 200. As you measure each sales rep at each step, you'll quickly determine where the congestion is.
Maybe they're not working enough deals or having trouble penetrating the account. Or maybe you should expand your list of qualifying questions. Can your sales reps articulate a differentiated value proposition? Typically, sales reps rely too heavily on too few accounts. There may also be congestion is at the top end of the funnel in advancing accounts through the process . You need to know specifics. What are the activities that are the roadblocks?
Sound simple. Well don't get comfortable quite yet. There's a big difference between total pipeline (what's in the funnel) and forecastable pipeline (what is forecasted to management and the Board within a defined timeframe). Refining your target marketing in terms of both the number of leads and size of deal is important because the number of accounts times average deal size equals the percentage of total revenue requirements.
Then there's the dimension of time. How long is your sales cycle? As soon as you add the dimension of time your close ratio of 10:1 could decrease to 4:1. If your forecast is $1M, then you need $4M of high probability accounts to close within the defined timeframe. Otherwise you'll fall woefully short of your goal.
A probability of closing should be applied at each step in the funnel. So when you forecast you may only want 70% probability accounts or higher in your forecast. In our example the forecastable pipeline is 200, while the total pipeline is 1,000. Often lots of accounts in the pipeline create a false sense of security.
So there you have it. You'll likely to never be blessed with the best or lowest price product. Few of us are. But you can be a winner. What it takes is a plan; a repeatable sales process that will enable your company to be smarter, quicker, and better prepared than the competition.
And your salespeople will love you for it. Because it will provide them with the structure they need to achieve their numbers in the most efficient and effective manner.
The first quarter is nearly over. Do you know what your sales process is?
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