Archive for November, 2012

The Three Critical B2B Sales Pipeline Metrics

Posted by Rick Pranitis in GENERAL DISCUSSION on November 20, 2012

How healthy is your sales pipeline right now? And what steps are you taking to progressively improve its fitness? Just as your own doctor might measure your body temperature, heart rate and blood pressure before putting you on a personal fitness regime, a pipeline doctor would want to understand your qualified pipeline value, average sales velocity and average sales win rate – and how these factors had changed over time – before coming up with their diagnosis.

 

Here’s why these three measures are so important…

 

There are three fundamental things you can do to improve your sales figures: you can generate more qualified sales opportunities, you can shorten your average sales cycles, and you can increase your average sales win rates. Steadily improving all three factors will have a powerful multiplier effect on your sales – and dramatically improve your revenue predictability.

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Bottlenecks and Best Practice

But if you’re not regularly measuring and reviewing all three factors at every level in your sales organization – from each individual sales person through to the whole sales team – you’ll struggle to identify either where your most pressing performance bottlenecks lie or (and this is equally important) to identify pockets of best practice which if adopted more widely would enable you to systematically increase your overall sales performance.

 

Value, Velocity and Win Rate

Proactive pipeline management involves paying particularly close attention to all three factors – value, velocity and win rate. Together they represent what we have come to regard as the essential pipeline success formula.

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And just in case you wonder whether the effort is worthwhile, a series of studies have shown that organizations that take a data-driven approach to proactive pipeline management show significantly accelerated revenue growth compared to their peers.

 

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Qualified Pipeline Value

The key word here is qualified. Measuring pipeline value without imposing a company-wide universally agreed definition of what a qualified sales opportunity ought to look like will simply generate misleading, unhelpful and ultimately useless data. And “leads” or “enquiries” don’t count. As I’ve pointed out before, tracking the number of leads generated in the absence of a consistent quality standard tells you nothing and may even lead you to do more of the wrong thing.

 

You’ll need to craft qualification criteria that address the specifics of your offering and your markets, but at minimum, a qualified sales opportunity must satisfy all of the following:

  • Have they identified a clear need?
  • Are they likely to buy something?
  • Do we have a reasonable chance of winning?
  • Would they make a good customer?

 

Sales Cycle Velocity

Most sales managers would acknowledge that the longer a deal hangs around in the pipeline, stuck at its current stage, the less likely they are to buy. Sales cycle velocity – the amount of time it takes for an opportunity to move from start to finish, and from stage to stage – is therefore an incredibly important predictor of sales success. And if you can shorten your average sales cycles, you have the capacity – without increasing your resources – to sell more.

 

Given all of this, it always surprises me to see CRM systems that are not set up to report on how long each deal has spent at each stage, or to throw up an exception report when opportunities have been stuck for long than the typical time taken for winning deals to progress. If you’re mot measuring or reporting on this, take an initiative today to deal with it. In fact, if your current CRM system can’t provide it, I would seriously think of changing it. It’s that important.

 

Sales Win Rate

This is an obvious metric, but even here not all organizations track it with enough granularity to learn the significant lessons this metric can provide. You need to be tracking all possible outcomes. In most complex B2B sales environments, there are at least four:

  1. You win the deal
  2. A competitor wins the deal
  3. The prospect decides to implement an internally developed solution
  4. The prospect decides to do nothing

 

You’ll miss the opportunity for incredibly valuable learning if you categorize the last three outcomes simply as “lost”. If you’re not evaluating the outcome of every opportunity into at least these four categories, I strongly suggest you start doing so today – and that you retrospectively analyze recent sales outcomes.

 

Measure at Every Level

My final recommendation is that you measure these three metrics at every level within your organization, as well as analyzing outcomes by source of opportunity – including comparing different marketing campaigns. You’ll inevitably find outliers in both directions: poor performance that clearly needs to be corrected, and exceptional success that needs to be replicated.

 

In fact, the latter may provide some of the most valuable learning opportunities: where are you currently being most successful today, what can you learn from this, and how can you enable the rest of the organization to embrace the winning habits you have identified?

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The Four Phases of Customer Evolution

Posted by Rick Pranitis in GENERAL DISCUSSION on November 10, 2012

There are only four customer phases, and all customers will be in one of these at all times. There are many erudite articles written about the interdependence between sales processes and buying processes, but – being primarily focused on new customer acquisition – many miss a critical consideration; The Four Phases of Customer Evolution.

Customers go through three Growing Phases and one Dying Phase. You should understand the phases and particularly the reason why customers more from the Growth Phases to the Dying Phase. The critical thing is not just to recognize which phase they are in – that is fairly obvious – but to understand that if they are to become a customer, then they will inevitably morph from phase to phase. It is only a matter of time.

The four phases are:

  • Prospect
  • Customer
  • Loyal Customer
  • Former Customer

The fundamental substance of all the management theory, strategic advice and best practice writings about customer management, key account management or account planning any should be to accelerate phase transition through the Growing Phases; phase 1, 2 and 3, and then decelerate the inevitable transition to phase 4, the Dying Phase.

Here are some facts to chew over:

  • The cost of new customer acquisition is 500% that of customer retention
  • Increasing customer retention by 2% equates to decreasing costs by 10%
  • Reducing customer defections by 5% can increase profitability by up to 125% (depending on industry).

Source (Leading on the Edge of Chaos – Emmet C. Murphy and Mark A. Murphy)

 The Road to Customer Defection

Before you read the rest of this section, I want you to consider two different scenarios. Each is real, and I hope you will easily identify with them both.

 Scenario A: In the first scenario you (or your company) are selling a product or service to your customer. This scenario should be real and should relate specifically to your existing company. Stop and think for a minute about why prior customers have stopped doing business with you.

  • Why have they left you or your company?
  • What do you think are the top three reasons?
  • Write them down – now, before you play out the next scenario.

 Scenario B: In the second scenario; you are the customer. We might all be forgiven for thinking that being a customer is easier than being a supplier – but that is not always the case. In this scenario you need to think about the last time you (or your company) decided to stop doing business with a particular source.

If you take a personal perspective on this, that source might be a restaurant, a clothing store, a hairdresser, an online bookstore, an airline, or an online community. From the perspective of your company, the source may be your stationery provider, IT services supplier, sales trainer, telecommunication equipment vendor, or any one of the many other options.

Combine the personal and company perspectives (if you have both) and write down the top three reasons why you defected. If you are like most people, the answer to Scenario A will start with price or product features, and the answer to Scenario B is more likely to be more focused on ‘how I was treated’.

The problem is that in the real world these two scenarios converge and the disconnect between what suppliers think and the opinions of their customers send their relationship hurtling from a Growing Phase straight into the spiral of the Dying Phase.

Why do customers leave? The reality might be different than you think. According to Rightnow Technologies (now part of Oracle):

  • 73% of customers leave because they are dissatisfied with customer service, but companies think just 21% leave for this reason.
  • Company thinks that nearly half (48%) leave because of price, when in fact, according to the customer perspective, this happens only 25% of the time.
  • The U.S. Small Business Administration and the U.S. Chamber of Commerce support these findings. According to their research:
  • 68% leave because they are upset with the treatment they’ve received (Customer Service)
  • 14% are dissatisfied with the product or service

 Serenade your customer

You’ve abandoned me.

Love don’t live here anymore.

Just a vacancy

Love don’t live here anymore

 The lyrics here are from the 1978 song Love don’t live here anymore by Rose Royce, an American soul and R&B group who had a number of hit singles in the 1970s. While the reference to this song might be a little contrived – I’m a sucker for musical references – the sentiment is well expressed and relevant.

If your customers leave you, it is because they don’t love you, and that is usually because they feel unloved. The reason they don’t love you is usually because they feel you have abandoned them. If there is a vacancy – your competitor will rush to fill it, and your customer will inevitably become a former customer.

It is hard to accept that the reason your customers don’t love you is because you have underserved them. It is much easier if you can point to price or product features as the determinants of defection. That hurts less because you can convince yourself that there is little you could have done about it.

Ask yourself this. If you knew that the customer was going to move from a Growing Phase to the Dying Phase, and there was nothing that you could do about price or product features, what actions would you take to serve them better so they would stay?  So what are you waiting for? Write down your answers – and take action now.

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This article was originally posted by Donal Daly at DEALMAKER 360® on November 6, 2012

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