Sales Performance Management:
Despite clever CRM systems, pipeline management software and forecasting models many sales organisations (and their Leaders) still seem to lack confidence in the validity of the pipeline or sales forecast. They have mountains of data at their fingertips yet still schedule ‘pipeline review’ calls to check on the progress of deals, when they will close, how much is going to come in etc. I’ve seen managers surprised when a ‘certainty’ falls out of the pipeline, or a deal unexpectedly comes in.
Senior leaders and shareholders HATE inconsistency in the sales forecast. Unexpected ‘ups’ and ‘downs’ are a sign the business isn’t in control of the sales process…or is unable to accurately monitor or control it. Investment decisions and staffing levels become difficult…’How can we plan effectively if we don’t know the true revenue forecast?’, I hear leader say.
To make matters worse, sales people are often measured on a common set of items;
· Revenue
· Contribution margin
· Cross-selling
· Up-selling
· Retention
etc.
Many of these metrics fail to support the accuracy of the forecast. In fact, in one extreme case recently, a senior (and very experienced) sales person told me they had hit their numbers in the first four months of the year and were ‘holding off on any further sales until the following year’ because they would earn more by doing so (sales commission is another topic entirely!)…so they were manipulating the forecast accordingly.
So is there a better way? Perhaps.
I’m NOT suggesting the ideas below will work for everyone, or every type of sale…but some of these principles can help to bring more clarity to a sales forecast.
Let’s talk about ‘customer commitment’ first.
If the sales person is doing all of the work (sending quotes to customers, setting up trials, sending samples, pushing for meetings etc.) to what extent is the customer DEMONSTRATING their commitment? Are they being asked to provide feedback on the proposal, connect the sales person to other key contacts, set up meetings or provide data and insights? If not they might not be fully committed, and if you ask for these simple commitments and don’t get them…then it tells you all you need to know.
Making a simple adjustment and asking for a ‘customer commitment’ suddenly changes the game…we are no longer being ‘busy fools’ – we are checking the customer still has some ‘skin-in-the-game’. It is the MINIMUM we should do. This is NOT the same as a sales meeting objective!
What if we then look at a typical sale or engagement process with a customer – from first contact to contract - it is highly likely at various stages of this process there are TYPICAL commitments you would need from the customer along the way. Each sales leader will know what these are…they could list the most crucial 6-10 commitments within 10-minutes.
When you obtain these commitments from the customer it is a sure sign you are making progress along the sales / buyer journey. When you don’t obtain these commitments you are stuck, stalled, stagnant – going nowhere.
So it stands to reason if we know there are certain ‘customer commitments’ along the path – these can be objectives for sales people to obtain. You can tie these to the progress of a sale and the more of these you obtain along the way…then the percentage chance of closing the deal increases.
It is also a process that can be refined, by looking at typical cycle-times between commitments…allowing you to see if a sale is ahead or behind of where it should be, or if certain sales people are better at others in obtaining them. This knowledge could help in setting standards or expectations…as another form of sales performance measurement linked directly to pipeline validity and forecasting.
When ‘progressions’ (with a customer…or indeed internally with support functions) are added to sales performance measurements, you suddenly have a new way to look at ‘salesforce effectiveness’.
For more information about salesforce effectiveness, how progressions work, or for examples – please get in touch!
Andy