Listen to this podcast of a previous show on the Dirks On Strategy Radio show.

Tom Searcy, author or “RFPs Suck!” and co-author of “Whale Hunting,” is a national speaker, trusted authority on large account sales and founder of Hunt Big Sales, a fast growth sales consultancy and thought leadership organization. Searcy’s primary expertise is working directly with companies and sales teams throughout their big sales “hunts,” helping them to compete and win disproportionately large sales in highly competitive markets. His philosophy and process have resulted in over $3 billion in new sales for his company and its clients.

Before entering the national stage, Searcy headed four corporations, each of which he was able to take from annual revenues of less than $15 million to over $100 million–all before the age of 40. Since then, Searcy has helped more than 100 companies grow exponentially with his proven process for fast growth and company-wide transformation.

In his newest book RFPs Suck!, Searcy shares his rich understanding of the RFP process with companies across the board to help them conquer the RFP system once and for all to win corporate and government contracts.

Searcy’s first book with co-author Barbara Weaver Smith, “Whale Hunting: How to Land Big Deals and Transform Your Company,” was published by Wiley in 2008.

Contact him at: www.huntbigsales.com

Years ago when I was just moving out of sales training and into a sales management role, we brought in a sales program geared to the major account team—a more sophisticated biz dev/account management process. In theory it was great and in practice, it should have been great. The domino effect of creating a discipline for the process rendered it ineffective. We began reporting and measuring things that were ancillary to our true goals. It is easier than you may think to adopt the wrong metrics or as in our case, we unwittingly fell into it. The effectiveness of your sales team comes down to what you manage and measure and HOW you measure it.

In the above example, we were obligated to update our account management paperwork (5-8 pages per account) on a monthly basis. In reality, we were accountable to the deadline, and content changes. Ironically, the content was not really important when in fact it could have helped identify key performance metrics.

The paper trail included four layers with the final layer being someone who may or may not have reviewed the updates. After several months of this, you’re almost too tired to care. In simple math:

• Reps: 4-6 account updates per month. Total time=1-2 hours/month
• Me: 6 reps X 5 updates to review (average)=30 account updates per month; Total time=3-4 hours/month
• My Boss: 5 subordinates X 25 (average)=125 account updates. I would bet he followed the 80/20 Rule=25 actual account reviews per month. Total time=1-2 hours/month
• My Boss’ Boss: 7 subordinates x 125 account updates (average)=875 account reviews sitting in his in-basket every month…Total time=??  I can’t tell you if this was reading material for the bathroom, but we got the rubberstamp for completing it. Given the effort, you kinda wish it was…

Lost productivity: 12 hours (reps) + my 4 hours=2 full days of work (minimum)

This is an extreme case and to be fair, there were compelling reasons—initially—for the administrative efforts. Unfortunately, it exemplifies what should have been a brief indoctrination period becoming a full time activity. We lost sight of the desired results—increased sales effectiveness.

So the fairy tail ends when we got a new King and restructured–so the first thing I did was to eliminate the task. So what’s the point? Behind the deluge of paper work was my direct involvement in the sales process, and measuring what needed to be measured. But my reps had to regurgitate all that account information each month. And I had to read it. I have paper cuts that won’t heal as a result…but I digress.

When it comes to performance metrics and things to measure, here are some things to consider:

• Measure against the things you’re accountable to such as profit and revenue
• Performance metrics should be predictive
• You can have too many metrics or too few; focus on key metrics
• You can measure the wrong things.
• Activity does not equal effectiveness. You can tell a rep that he needs to meet with five customer contacts per day, but if he is not calling on the right people, you won’t grow or retain the business. In his defense, he is doing what you asked…
• Reporting productivity can be unproductive.  If so, how can you streamline the process without sacrificing critical data? (Note: There are a lot of great systems in the market but the real point here is that sometimes we can overcomplicate things).
• Dashboards are a management tool and should be used as such
• If your scorecard requires a scorecard, it is probably too complicated
• Use benchmarks. Sales people are more likely to adopt the practice if the key metrics did not include a heads/tails scenario
• If you have more than one sales division, the metrics will likely vary
• New sales initiatives and programs can take on a life of their own and may be included as key metrics, which increases the administrative time for reporting and managing.

The challenge with performance metrics is that they can give companies a false sense of control; and they can disappoint when the results don’t improve. Measurement tools are about gauging the future, not history. They should be leading you to stronger results. The balance is in finding the key metrics you need to drive results without driving your sales team crazy…

I read the blog this morning by Rosabeth Moss Kanter at the Harvard Business School.  She was discussing accountability and the many challenges that organizations have with accountability and providing feedback. One line in particular caught my attention:

“In contrast, high-performing organizations use information to help people improve, by giving people abundant, timely, and helpful data about their performance on a regular basis, individually and as a group.”

How often does this perspective get lost when working with sales organizations.  Is it any wonder that the sales teams grows to hate a CRM system that has been implemented to capture met. Metrics that are used to find blame. And there is no engagement with the team, no understanding of how to use the metrics to support the sales team to do a better job.

I couldn’t agree with Rosabeth Moss Kanter’s comments more.  Metrics are fabulous and essential to improving performance but managers need to be trained on how to use them, how to coach their teams with the metrics. How to help engage the team and use the metrics to gain insight to improve and not to simply blame.

Read her full article:  Four Tips for Building Accountability

As regular Lunch Pail readers have no doubt determined by now, we’ve ramped up our coverage of mobile marketing. We did this, and will continue to do it, because of a few basic truths about direct digital marketing. Most notable among these truths is the fact that more executives in the C-Suite are demanding their marketing departments "do mobile." But, for anyone who is starting to explore mobile marketing as a business objective for the first time the term "mobile marketing" can be confusing and misleading.

With that in mind, Bryce Marshall contributed some excellent pieces on “Making Sense of Mobile” covering everything from the overall landscape to the varied audiences within each mobile tactic. We’re even in the process of conducting a really slick mobile marketing experiment where you can access Monday’s Lunch Pail post only by following one of four mobile calls-to-action. If you haven’t done that yet, check it out and vote in the poll.

In addition to our coverage of mobile on the Lunch Pail, our CEO Brian Deagan was published by Online Strategies Magazine with a breakdown of some specific mobile marketing tactics that e-retailers and eCommerce folks can begin implementing right now. It’s worth a read.

Mobile is rightfully garnering a lot of press these days, but there are other emerging technologies and channel strategies within direct digital marketing that everyone should be aware of. The biggest technology trend right now is onsite targeting, from both a Software-as-a-Service development perspective and a tactical marketing campaign execution standpoint. If you’re unfamiliar with the term “onsite targeting” you can get a good definition and some context from this E-Commerce Times article.

Brian also contributed his insights on the subject of onsite targeting through the publication Retail Solutions Online. As tools for improving personalization and message relevance within eCommerce platforms develop more slowly than consumer shopping acumen, e-retailers face a difficult challenge: “Should we re-platform our site to make dramatic improvements to sales?” It’s a real question and a real dilemma. Brian makes the case for avoiding the headaches and inconvenience of re-platforming an entire site and turning to onsite targeting solutions to upgrade the message relevance and sales metrics onsite – without “re-platforming the wheel!”

Remember, if you have a topic of interest you’d like to see our writers tackle, leave us a comment!

Are your tele-sales scripts working?  Is cold-calling effective?  Are you spending too much to acquire customers?  Are your customers satisfied and happy?  Are they happy enough to expand their relationship with you?  Should you direct prospects to your website? Or away from it? Did the last project at your prospect go well?  Do they pay their bills?  Are they referenceable?

All of these questions are difficult to answer without facts.  Those facts fall under the category of sales intelligence.  Sales Intelligence is an aggregation and analysis of all of the sales related information possessed by your company.  For many companies, the problem regarding sales intelligence begins with data capture.  For them, the answer to most of the questions that I posed was “I don’t know”.  You have to find a way to capture the information you need to make good decisions.  There are many systems available today that can capture most of the data that you will need.  For smaller companies, you can get much of the data from a basic CRM system, provided that you are using it properly and in a disciplined manner, which is really where sales intelligence begins.  I blogged recently about sales training and sales processes.  Before you start collecting data, you have to have processes in place that are being followed by your entire team.  If everyone is on the same page, you will be able to tweak or change your processes and methods based on a clear picture of what has occurred and what needs to be done. 

As an example, at Stratascope, we had a feeling that cold calling was not working, but we did not have any metrics to prove it, nor were we following a single set of processes to attack the problem.  After deciding on how the process would work, we enabled our team with the appropriate scripts and e-mail templates.  We acquired the appropriate contact lists and loaded them into our CRM system.  After about 2-3 months it became crystal clear that cold calling into sales organizations would be an uphill battle.  It is very difficult to get the attention of any sales organization under the pressure of this economy in with an unsolicited approach.  Our sales intelligence numbers proved this to be true.  We also developed some pretty good metrics on the companies that were able to get the attention of.  We now have a good feeling for how long it takes to close a deal after a trial and how many demos result in trials and eventually close as new customers.  The “cold-calling” results prompted us to research “social media” and “viral marketing” techniques such as this blog entry that you are reading.  So, while most of you are reading this and hopefully plucking a tidbit or two that you can use in your own businesses, a few of you will also check out my website (www.stratascope.com) and then fill out the contact form for us to get in touch with you.  We have generated more leads with our new methods than we could by doubling the size of our sales team.  We know this because of sales intelligence.

I know that was a long example, but I wanted to give you my firsthand insight as to how sales intelligence can be used by management to make good decisions.  Management needs to capture and analyze data at the metric level, so that processes can be appropriately adjusted and resources can be effectively allocated to the best possible outcome.  I have mentioned the top level metrics before and they are close ratios, deal sizes, and cycle times.  We can expand each of these to find additional metrics.  Look at close ratio.  We normally look at the close ratio as the percentage of pipeline deals that close.  That’s great for the back-end of the sales cycle.  What about the percentage of deals that dies at each step of your sales process so that you can reverse engineer the number of leads that must be generated to meet your revenue goals.  Deal sizes can be broken down by product line, geography, discount levels etc… to help you determine territories, pricing policies, and solution bundles.  Cycle times tell us how long it takes to move from one point to another and can be used for any two points in the sales cycle.  From this we can understand the bandwidth required for each resource type that is needed to support the sales process.

Sales Intelligence is not just for management.  Sales executives need this information too.  The difference is that sales people will find that transactional data is more valuable for them.  Project plans and implementation notes, purchasing and discount history, call center logs, lead follow-up notes, and marketing touches are all valuable pieces of information to have reviewed before meeting with a prospect or customer.  How can you take credit for the value that you have already delivered to a customer if you do not know what was done?  All of this data is typically available but often it is hidden in complex and varied systems.  You need to find a way to consolidate this information and make it easy to consume by your sales teams.

In summary, sales intelligence can be used to support both management decisions and sales effectiveness.  You need to have processes in place and follow them.  You need to identify the metrics that are important to you.  You need to capture all of the appropriate data and make it available to your sales decision makers.  Good luck tackling this often over-looked area of a business.

More tomorrow on the sweet spot for Stratascope, Market Intelligence.

-Bruce A. Brien, CEO, Stratascope Inc.

SER – Sales Efficiency Rating.

Question:  Is it better to have A) a few sales reps closing a high % of deals each day, or  B) dozens of sales of reps closing a low % of deals every day? 

The answer is  A)  a few reps closing a high % of deals.   As obvious as that may be, I have seen far too many small businesses who thought that their ticket to the big time was to hire a bunch of sales reps and get mediocre production from each one.   It’s the outdated mindset of  ”lower the targets and hire more people”.  Put another way, let’s “do less with more”.   This type of approach rarely works in business these days. 

When it comes to sales staffing, the only thing that overhiring does is add to a company’s “headcount” and “headaches”.  On the other hand, the far better approach is go lean and “do more with less”.  By this I mean that companies should strive to recruit, hire, train, and motivate  a select group of superior sales performers.  OK, so superior sales reps will cost you more in individual comissions, but consider this – they will pay you back many times over by reducing marketing costs, overhead, benefits, turnover, etc.  Top producers will also contribute more profitable deals that lead to healthier earnings.  What’s more, they will represent your firm’s brand with integrity and professionalism, while squeezing the most out of each and every opportunity.

How do you distinguish between superior sales performers and mediocre ones?  You have to devote management time and focus to evaluating each producer against an objective set of criteria.  In my consulting practice, I recommend a sales performance methodology called SER (an abbreviation for Sales Efficiency Ratio).  SER looks at the pound-for pound performance of every sales rep in a company compared to the market potential, sales quotas, and to each other.  SER actually measures the hard dollar ROI that is being delivered from each rep based on 6 critical success factors: 

    1. Marketing/Ad Spend per rep

    2. Contract/Gross Sales generated per rep

    3. Units Sold per rep

    4. Closing % per rep

    5. Contribution Margin (ie – profitability) per rep

    6. Customer survey scores

 All of these factors are weighted and factored into a proprietary equation that determines the net Sales Efficiency Ratio (SER) for each producer.  A company can then use that data to make educated decisions about which reps to keep, which ones require more training, and which ones are bleeding the company dry and need to be fired.  At the end of the day, I would rather have 5 reps who can really sell than 15 who can’t!

If you would like to learn more about the SER process, or would like to conduct an on-site SER assessment of your sales team, please feel free to call me at 1-877-341-GROW.

Next blog topic:  All sales people are students of their compensation plan … so structure your comp plan wisely!

I wish I could just tell my clients what to measure. It would make life easier for me and certainly for them, but companies are not cookie cutter images of each other and therefore the critical metrics they need to measure are necessarily different too.

My first question after seeing one company’s proposed metrics was to wonder what their strategic goal was. As a company what are they trying to achieve and how will they measure success? Jim Collins in his book “Good To Great” discusses the importance of distilling down to a single metric what a company does and what has the most significant impact on the company’s performance. Agreement on one or maybe a few key metrics should then be able to be cascaded down to each division and department to their own metrics that support the overall goal. Hopefully the metrics for sales and marketing are aligned with the corporate strategy and then the metrics for the sales process and the sales reps will align to these overall strategic goals as well.

Regarding metrics for the sales team, I would keep it simple. It never ceases to amaze me, the ability of sales reps to game a system and get into a mode of ‘checking the box’ to get management off their back. You want to try and avoid creating that culture of ‘checking the box’.

“You cannot manage what you cannot measure.” Find some basic way to define the ‘business development’ (from marketing all the way through closing a sale) process so that the company can start measuring and find out where the choke points are in the process. Start building the closed loop management system so you can do continuous improvement. Define the process, measure what is going on, build hypothesis for improvement, test improvement, deploy to rest of organization. There will be a limit to how much you can change at one time based on the capacity of the organization for change. Remember, this is a journey; the most important thing is to keep moving forward whatever the pace.

Are reps following up on leads quickly enough? Do you know how quickly is quick enough? Case study: individual applies for insurance from 2 companies, both companies indicate they will follow-up within 1 week but company A follows up within 24 hours and company B follows up after 4 days. Even though Company B ‘exceeds’ what they promised, they underperform the competition. Calculate your metrics with an understanding of what customers expect and what the competition is doing. Measure the results of different activities to figure out what the best practice is. Then instead of just handing sales reps an arbitrary requirement, you can explain and show them how it helps them be more successful.

Where in the process are deals being lost? Can reps get first meetings but not second meetings? What is the close rate on written proposals? Case study: Ohio manufacturing company stopped responding to blind RFPs, when they discovered that the close percentage increased 5x if they mandated a meeting prior to submitting a proposal.

No company has ever gotten everything right on the first go around. Even if you were the first to do so, the world changes and you need to be ready to change and adapt. Many companies’ under performance is due to breakdowns between strategy and operations. A critical step is to capture performance metrics on your sales process.  These metrics enable you to learn from your own experiences, to test new approaches and adapt so that you are continuously improving. These metrics will enable you monitor progress and see where there are challenges that need to be addressed.

Developing discipline around measuring and adapting your sales process provides a foundation for identifying and capture best practices. Develop the habit of investigating ‘why’ things are happening. Monitor your sale funnel. Where are opportunities dropping out of the process? Who is able to shorten the sales process?  Talk to the sales team about what they are doing and what is working for them. With your sales process in place and a closed-loop management system you can test your theories and measure the results.  If the results justify it, you can adapt your sales process to spread new ‘leading practices’ across your team, improving everybody’s performance.

Creating discipline for seeking out and documenting best practices enables you to retain lessons learned within the company instead of having the insights walk out the door with the latest sales rep that leaves for the competition.

Do you track your prospecting and sales numbers?  Whether your company has an automated tracking program or you do it by hand, you must have a tracking system that will help guide you in how you spend your time, energy, and marketing/prospecting investment.

However, knowing you should be tracking numbers doesn’t answer the question of what numbers you should be tracking.  The numbers you decide to track will have a direct influence on the activities you engage in.  Track the wrong numbers and you’ll very likely concentrate on the wrong activities.

For example, one company has set up their tracking system to track the number of contacts with prospects each of their salespeople have.  Every day, each salesperson must complete a form that indicates how many contacts they had that day, where the contact came from, and how many sales they made.  Although the form lists a number of ways the salesperson may have contacted prospects-phone, internet, in person, etc., it makes no distinction between a new prospect and an existing prospect.  Rather than identifying new prospect contacts and follow-up with existing prospects, the company’s system only identifies the number of contacts.  Each salesperson has a daily contact quota.  At the end of the month each salesperson’s sales to contact ratio is calculated and rewards-or corrective action-are based on that ratio.

The problems associated with this system should be obvious:

• The system treats each contact as a separate and unique sales opportunity, so the system doesn’t give the salesperson or management an accurate picture of the number of true potential sales the salesperson had during the month
• The system encourages contacts, but not a particular type of contact, so neither the salesperson nor management have an idea of whether prospects are being followed-up or new prospects being contacted
• The system lends itself to easy manipulation by salespeople
• Management has no idea where their sales force is spending its time and energy or what the real sales cycle for their products and services are
• It creates resentment on the part of salespeople who believe their ratios are being kept artificially low since if they had 15 sales opportunities during the month and closed 10–a 66% closing ratio, but it required 60 contacts to make the 10 sales, the system calculates a 17% percent closing ratio (10 sales divided by 60 contacts).

This company has the right concept-track numbers; they just have the wrong format.  In actuality, they haven’t thought through the why and what of tracking numbers.  Their object was to keep their tracking simple, which they did; but even simple tracking must be well thought-out since what is tracked determines which activities are engaged in.  This company tracks contacts, which encourages their salespeople to make contacts.  But since the system doesn’t care what type contact is made, the salespeople don’t care either, and consequently they go after the easiest contacts to make-follow-up contacts whenever possible.  In addition, since their ratios are based on sales vs. contacts, not sales vs. unique sales opportunities, the system encourages salespeople to make the minimum number of acceptable contacts.

Whether you are looking to track your personal numbers or those of your sales team members, before settling on what numbers to track, think through what activities those numbers will encourage.  If the numbers you are thinking of tracking don’t encourage the right activities, they’re not the right numbers to be tracking.

Making the Number. How to Use Sales Benchmarking to Drive Performance. By Greg Alexander, Arron Batels &  Mike Drapeau; Portfolio, 2008

Greg Alexander, Aaron Batels, and Mike Drapeau have written a very serious book for very serious sales leaders.  The authors have tackled one of sales great issues-tracking ROI on sales investment, and packed a great deal of wisdom and challenge in a relatively modest 288 pages.

Although many still view sales as far more art than science, leaving little room for serious number crunching of performance and production factors, Making the Number sets out a detailed process for establishing and analyzing sales metrics-and more importantly, the real world impact and change such a process can bring to a company and a sales team.

One of the few but growing number of sources that seeks to address the process of benchmarking sales in depth, Making the Number should be required reading for any sales leader who is seriously interested in full accountability for and development of the sales department.

The authors try to bring their theory down to the real world by illustrating their concepts through case studies of Discover Financial Services and FranklinCovey, as well as several other companies.  This is a theory book-but also a very practical application book.

By far the most irritating aspect of the book for me (although one that has become the norm in the business sector of publishing) is the repeated reference to–and by inference promoting of–the author’s company, Sales Benchmark Index.

No matter what level of sales leader you are, I would encourage you to get a copy and work your way through it.  It isn’t a weekend read by any means.  As I said, it’s a serious book for serious sales leaders with serious results for those who implement what they learn.

Today I listened to a talk from the founder of a business analytics company and the discussion centered around the development of a value proposition that worked and that he could sell.  The process of creating a simple and compelling value proposition was interesting to hear about, but what was most interesting was what he revealed on key metrics for starting a SaaS business, particularly enterprise SAAS.

Here they are:

1.  Average length of sales cycle:  in a saas business, your capital intensity is naturally higher because your development costs are front-loaded and your sales and marketing costs are front-loaded and they are NOT offset by a large up front licensing fee.  Instead, you accrue higher subscription revenues over the life of the customer which are higher than maintenance fees in perpetual license models. Thus, the longer your sales cycle, the more uneconomic your business becomes.  Particularly if you are venture-backed, this is a problem because you’re living on borrrowed time.  SAAS businesses should target a sales cycle of less than 60 days from lead to close.  If they don’t close that soon, then you might want to consider dismissing the lead for the time being.

2.  ASP: Knowing how your ASP (average selling price) is trending over time gives you an indication as to whether or not you are conveying real value to the customer up front or increasing value with additional features and consummables over the life of the subscription.

3.  Win-rate: Of those leads that you receive that you get into a sales process with, what % are you actually closing?  This is a measure of sales efficiency that indicates your level of differentiation, the quality of your leads from marketing, and the effectiveness of your sales force.

While there are many metrics that organizations and CEOs should look at to determine business performance, keeping it simple is incredibly valuable when determining how to motivate a sales team.  If there are more than 3 metrics that they are judged on, it becomes too confusing for them to keep their behavior optimized and your sales organization will likely lose traction.

What’s missing from this?  CHURN. Subscription models live and die based largely on the amount of churn that they experience.  Ideally, enterprise saas companies should seek renewal rates in excess of 90% annually.  Some will inevitably cancel the service, and others will go out of business, so it’s very important that you distinguish between “churn” and “effective churn”.  Effective churn focuses on businesses where your product value proposition didn’t deliver or measure up and the saas model allowed them to cancel on you.

If you unitize the economics of the SaaS business, you’ll see why churn is the most important measure for the CEO in many cases.  Assume you sell a product with an ASP of $5000 annually.  Now, assume that you spend 1000 bucks to acquire the lead (fully loaded costs) and another 1000 bucks on the sales closure of the lead.  That leaves $3000 for the remaining aspects of running a business: development costs, support costs, and general overhead (rent, benefits, utilities, travel).  If the customer stays with you for one year, you do NOT have an economic business model.  If, however, the customer stays with you for several years, your economic model improves rapidly.

As tons of others have written about before, in the saas world, capital efficiency is key, and the best places to create are in marketing and general business overhead.  If your marketing teams creates and qualifies super hot leads, your sales force is constantly productive.  If your engineers are banging out great product and updating the quality and performance of the site several times a year, then you can minimize churn.  The model works, but it takes great management and constant focus on execution.

I am just getting started with my blog, but a great site for those of you interested in sales and enterprise saas is “build a sales machine“.

I’ve been writing about measuring the impact of sales training for a while.  ESR published a report on the subject.  We know from our research that there is little to no measurement taking place—not by most sales trainers and not by their clients and customers.  This is one of the factors that is preventing the degree of sales performance improvement we should be seeing, based on the $6 billion or so a year that is being invested in sales training in the U.S. 

Opinions differ on the subject of measuring the impact of sales training.  For example, Charlie Green (Trusted Advisor Associates) is a sales expert whose work I respect and appreciate.  He wrote a post with a strong opinion that we should stop measuring ROI on soft skills training.  Although I agree with some of his points in the post, there are others with which I don’t agree.  Charlie writes:

“But what if I take one course in trust, and another in listening. Suppose my sales go up next year by 50%. Which course did it? Or did my company’s 70% growth have something to do with it? Or my happy new marriage? Too many variables.”

With the right measurement system in place—simple, few metrics, easily implemented and managed—one can, with considerable accuracy, determine the impact of both the program in trust and the other in listening. 

Enter Making the Number: How to Use Sales Benchmarking to Drive Performance by Greg Alexander, Aaron Bartels and Mike Drapeau, of Sales Benchmark Index.

Although we have different business models, ESR and SBI are quite aligned in our philosophies.  We both know that sales managers, as a whole, think of sales more as an art than a science.  And that gut instinct has no place in decision-making.  On the positive side, we both know that collecting, analyzing, and using the right data about sales team performance, in the right way, can make a substantial difference in sales effectiveness.

If you’re a sales manager who has decided that now is the time you are going to start running your sales operation more like a business, Making the Number is a terrific place to start.  But let me warn you.  It’s not a silver-bullet-of-the-week book.  Not by a long-shot.  This is serious, but powerful stuff. 

Greg, Mike and Aaron take the reader (presumably a sales manager or someone whose success in their job is based upon sales productivity, like a Sales Ops director) through pretty much all you need to know about sales benchmarking with a detailed and logical step-by-step process. 

The authors provide an insightful list of common objections to sales benchmarking, including “sales benchmarking is a fad,” “it isn’t worth the emotional cost,” “and it won’t really work.”  In fact the best counter to the “it won’t really work” objection is their case studies: Netsuite, Discover Financial Services, FranklinCovey, Covad Communications and Smart Modular Technologies.  If you’re skeptical, you might want to start reading the book there, and when you’re convinced that this is all real and doable, skip to the beginning.

I like this book.  I like what it represents—taking sales management more seriously, and what it can deliver—a proven path to measurable and ongoing sales performance improvement.

Disclosure:   SBI and ESR have an informal business relationship whereby we have each referred business to the other.

I’m very pleased that traffic on this blog has grown significantly since I created it last April.  With that in mind, I suspect some of you who are new to this blog may have missed some of the earlier posts. 

Here are the most popular, based upon this blog’s Top Posts stats:

1. Observing a Sales Training Program (Part 1)
2. Sales Training Company Revenue Models
3. Come On, Dave. Which Is The Best Sales Training Company?
4. The Fragmented Sales Training Industry
5. Sales Training Companies from a Unique Perspective (Part 1)
6. Sales Kick-off Meetings: Are Results on the Agenda?
7. What’s Wrong With Articles Containing Sales Tips?
8. Your Customer Is Learning How to Kick Your Butt
9. Selling Through the Customer’s Organization (Chart)
10. Sales Performance Measurement
11. We Live in a World That Requires Revenue (Humorous Bonus!)

Enjoy.

There are different ways to measure the value that one has towards its organization.  If you are in sales, how much revenue you bring in, how much over plan you are, how happy your customers are usually the values by which one measure himself.  Those are very tangible metrics.  Hard numbers.

One measure that eludes many and for which I always kept a real log, is what I called the Emotional Bank Account(EBA).  I referred to this concept a few posts ago.  The notion has been around for a while and depending on the context, the value of the deposits vary.  Think about it for a minute.  You have 2 salespersons.  One over plan or quota after having received a single but very large order.  The other, at a low percentage of plan, but working hard every day, having high face time with clients and generating a high number of new cycles, building the pipeline.  One leads in true Sales Metrics and one has a huge balance in the Emotional Bank Account.  My patience would be very different with both individuals, and so would be my coaching.

If one individual requests a personal favor, or in my terms, requests to make a withdrawal on the Emotional Bank Account, then the balance of the account better be positive.

As an example, today, I met with someone that I used to work with while at my last employer.  The relationship with the individual was left with a huge positive balance in the EBA.  I was really happy to take all the time needed to go sit down and have a chat.  Last nite, I received a request from another ex co-worker which wanted to introduce me to someone.  This one also has a very positive EBA balance.  So he made a withdrawal, asked me to meet someone for whom he was acting as a broker for the meeting, and I agreed.  Depending on the meeting, and its results, the withdrawal could be larger or nil.  It could even end up as a deposit for this person.

This concept works at home too.  Some people like to wing this, or just don’t think about it in this fashion.  Everything is about checks and balances and in the personal relationship, this keeps you in check and understanding that you can only go to the human emotion well so many times before your “overdrawn” and will have to cover the last account activity.  This is not rocket science but close to human relationship science.

Keeping that notion and rolling tally of the accounts always up to date doesn’t require accounting software.  You will know instinctively who has had which level of activity and whether or not it is worth your while to continue a business relationship or not.  People that know me well know also how I work and what I value.  To that effect, most people with negative EBAs have not engaged with me since the last time we worked together.  Either they know they are in overdraft mode, or just don’t care.  As a lending institution of emotions, I am fine with both.  All people I work with are in the black and I plan to leave it that way so the relationship is profitable for everyone involved.

This Wednesday (July 9) I’ll be presenting a webinar about how sales (in general) is not presently getting the job done and what needs to be done about it going into the future.   I’ll share relevant research and strong recommendations based upon what we’ve learned through ESR’s research and direct work with our clients. (The webinar is hosted by The TAS Group.)

This is a topic I’ve spoken about before.  I presented a similar webinar a few months ago for ISBM.  Last September I delivered a keynote on the subject in Dublin for a group of CEOs. 

This is serious business. I’ve said it many times before: Sales lags all other departments within corporations with respect to process, measurement and productivity.

Here are the five areas that we believe need immediate and long-term focus:

1. More discipline and process
2. New approaches to training
3. Sales and marketing alignment
4. Technology-enabled selling and Sales 2.0
5. Sales performance measurement

I’ll delve into each of these on Wednesday.

When we ask sales executives how they measure sales performance, 60% of them tell us that they don’t measure it at all.  Of the remaining 40%, a majority depend solely on a single trailing indicator-performance against quota.  If other metrics are even mentioned, they are typically the size/trending of their pipeline or the number of proposals they submit resulting in a win. 

When you consider a typical enterprise, you’ll find that almost every department has a set of processes or procedures and metrics by which performance is measured:  finance (GAAP), manufacturing (ISO 9000 and/or Six Sigma), customer service (customer satisfaction surveys), HR (employee retention, 360 degree surveys), logistics (throughput, on-time delivery), IT (TCO: Total Cost of Ownership), and even marketing (direct marketing campaign conversion rates, for example).  In most companies, the last bastion to institutionalize formal processes and comprehensive and accurate measurement is sales.  (Some sales training companies are leaders in the area of helping their clients measure sales performance.)

Why is Sales Last When It Comes to Measurement and Process?

The root cause of the sales function being last in line is related to the personalities, traits and established behavior patterns of many typically right-brained sales executives who came up through the ranks of sales themselves. Back when they were salesreps, process and measurement was uncommon in sales. It was much less of a critical component for success than it is today.  At that same time, the engineers, accountants and factory workers in that same company were driven by process-the output of their work carefully monitored, measured and adjusted along the way by typically left-brained management.

Today those former sales reps, who are now sales leaders, are behind the curve when it comes to process and especially measurement.  They didn’t “grow up” with it, and now they are too busy to embrace it. Instead, they are regularly involved with helping the bottom third of their team drive business while hoping to somehow make their numbers, depending on forecasts aggregated from uncalibrated individual pipelines from their reps.

What’s the answer? 

As an integral component of your sales methodology, monitor five to eight carefully selected leading and lagging indicators to measure ongoing productivity-not activity-of every member of your sales team.  Based upon those behavioral and performance indicators, you can make adjustments to your processes when necessary, redeploying resources, responding quickly to new competitive threats and providing the field with the right messages, tools, strategies and tactics before its too late. 

Here are two of the metrics companies employing performance measurement best-practices are using to gain transparency into what is really coming down the pipeline:

• Accuracy of reps’ date forecasts for opportunities moving from one phase of the sales cycle to the next. 
• Average opportunity attrition rate from one phase of the sales cycle to the next. 

The Bottom Line

Installing, then monitoring leading and lagging sales performance indicators and making appropriate real time adjustments in approach, process and behaviors is a critical component of stellar sales performance.  As Peter Drucker said, “You can’t improve what you don’t measure.”

I delivered a webinar sponsored by ISBM (Institute for the Study of Business and Markets at the Smeal College of Business at Penn State).  It was moderated by Mary Donato, who is the Associate Director of ISBM and writes a column for Sales and Marketing Management magazine, as I do. (Mary is by far the best webinar moderator I’ve ever worked with.)

I sat in on a webinar last January presented by Dr. Ralph A. Oliva, ISBM Executive Director.  The subject was B-to-B marketing trends leading up to 2010.  It was a valuable webinar, with plenty of things to think about for sales leaders.  It was especially relevant for me since I’m very focused on sales effectiveness trends.  In fact, I had delivered a speech on the subject of sales effectiveness in 2010 to a group of CEOs last September.

The recorded webinar provided an assessment of the current situation with respect to B-to-B sales effectiveness. (Hint: the research shows things aren’t great.)  I took the participants through two imperatives for sales effectiveness going forward: technology-enabled selling (and training) and sales performance measurement.  I also tied ISBM’s marketing trends and my view of sales trends together—perhaps a metaphor for the sales and marketing alignment that has been the subject of discussion for at least 15 years.

Just send me an email (with your business email address) if you’d like a copy of the slides.

Whether you’re a salesperson, manager or executive, the most basic question that must be answered when dealing with sales metrics is, ‘What should be measured?’ You really can’t get to the how to measure until you know what should be measured and why.

That question will to a large extent determine the success or failure of the system you employ. But the very question itself creates conflicting answers. Senior management’s desires may be very different from those of the sales team members. The information most useful to management is not going to be the same information most useful to individual salespeople.

There is a natural dichotomy between what concerns management and what concerns salespeople. Management wants to know the big picture and improve gross performance; salespeople want to know how to improve their performance.

Jessica Royer Ocken discusses how to select the most critical Key Performance Indicators for your organization in Synygy Magazine. Although the article concentrates on the metrics most important to management, she does give some guidance in how to construct a system that will also help meet the needs of individual salespeople.

The writers on the site and many enlightened practitioners see the gold in sales activity/outcome data and sales metrics, yet there use isn’t widely adopted in the field. I wonder if part of the problem is a lack of overall sales management models to provide a framework? If we contrast the situation with our friends in marketing, they have plenty of frameworks and models: The 4P’s, 6P’s, SWOT, Product Lifecycle, and PEST to name a few; and these frameworks often act as the basis for the development of performance metrics.

When I became interested in sales management, I started by reading a number of books with Sales Management in their titles, and became aware that they had plenty of content on the softer issues; recruitment, training, sales meetings, but I have not come across any references to sales management models or the quantative side of sales management. The problem goes as far as an agreed standard definition for sales management. If you visit the sites of the various vendors for CRM and SFA, they all claim to offer ‘Sales Management’ and freely list what they include; yet in my opinion, very few or any of the things listed are part of sales management. We should also consider the use of other widely used words in sales management such as quantity and quality, often used to describe mutual independent events, which in one context they can be but in others they are linked.  Why would sales be the only profession where more practice (quantity) would not lead to better outcomes (quality), unless of course you are selling something that addresses only one?

Why are the model/frameworks important? Without the development of such models and frameworks, I believe we will struggle with both technology for sales and metrics. As the old adage says, if you do not know where you are going any road, or should I say any new tool or idea, will get you there!!!

I am not sure what comes first -  the model or the data? Do we need to start as with our friends in marketing with models and then collect the data to prove the models and from there a set of meaningful metrics? I suggest that it does not make a difference, rather the important thing is to start.

Sales metrics, those pesky sales and activity numbers—hated and loathed by salespeople, and often for good reason.

In many companies (most?), the bit of metrics data the sales manager and company get on their sales team members is used only for the purpose of harassing, browbeating, and threatening the salespeople.

Call reports turn into demands for the salesperson to make more calls. Commission reports are used to highlight weak sales and demand more calls. Pipeline reports are used to demonstrate a lack of activity and to demand more calls.

So what happens to the call and pipeline reports? They get padded. Salespeople have learned that if you’re just going to use it as a bat to beat them with, they’re not going to cut the tree down for you.

With the ‘metrics’ available to managers from the traditional call, pipeline, customer status, and commission reports it is very difficult to isolate the root issues a salesperson has. It can be done. It takes study, practice and well developed analytical skills and real knowledge of the salesperson involved.

Unfortunately, that’s a lot of work. So, many managers take the easy way out—take a quick look, determine the root cause is not enough calls and demand more. It makes no difference if call quantity is an issue or not. It makes little difference if the salesperson has been properly trained in prospecting and personal marketing strategies. It makes no difference if the real issue is their interpersonal skills, their communication skills, their presentation skills, or their ability to probe, identify and solve prospect issues. The answer is usually the same—make more calls.

Since the salesperson sees no benefit from developing accurate reports—but certainly sees a very real determent, is it any wonder the reports are fanciful?

Now, what happens when the company institutes an automated system and demands compliance to faithfully use the system? Resistance, of course. From the salesperson’s point of view, all the automated system is going to do is give the manager and the company a bigger bat to beat them with.

Yet, salespeople can be taught to relish sales metrics. Certainly not by using the data the way it’s been used in the past, but by using it to proactively help the salesperson make more money.

The information gathered by an automated system—in fact, even that puff of information generated by traditional reports—can literally change a salesperson’s career if used properly. Even a reasonable handful of accurate data can pinpoint real issues and real root problems that hinder a salesperson’s performance. The data in the hands of someone who has been properly trained to analyze the information can be used to create an individualized training and coaching program for each team member.

If salespeople understand the information makes them money through pinpoint training and coaching, improving their skills, getting them to comply with using the system and producing accurate data—even a handwritten or very basic spreadsheet system—isn’t an issue. Most salespeople want to sell more. They want to earn more. They want to excel. But those same salespeople have no desire to be consistently beaten over the head.

If you want accurate reports from your salespeople, think seriously about why you want them and exactly what you’re going to do with them. If can’t or won’t use them to help your salespeople become better salespeople, don’t even bother to ask for them because what you get will be designed to keep you off their back as long as possible.

On the other hand, if you’re goal is to help your team become the best salespeople they can be and to grow your team’s sales, communicate to your team in no uncertain terms what the purpose of the reports is and then stick to it—use them as training and mentoring tools, not bats. It will take some time to get the response you desire because salespeople have been taught—either at your company or by a previous manager—that metrics aren’t to be trusted.

If you or your managers need help in learning how to thoroughly analyze and use the reports as training and coaching tools, hire a company such as McCord Training or any of the other consulting and coaching companies that specialize in the area. But whether you need outside help or not, you can have salespeople who welcome sales metrics—and the side benefit is the reports you have in your hand will actually have some relationship to reality.

Would you like to learn more about how the new sales technology is going to impact salespeople, managers and companies? Visit The Management Curve where I’ve gathered a group of sales management and tech consultants, sales performance researchers, and CRM, Sales Performance Management and Sales Force Automation developers to discuss the real world impact of technology on the sales force.

Sales metrics—hated and loathed by salespeople, and often for good reason.

In many companies (most?), the bit of metrics data the sales manager and company get on their sales team members is used only for the purpose of harassing, browbeating, and threatening the salespeople.

Call reports turn into demands for the salesperson to make more calls.  Commission reports are used to highlight weak sales and demand more calls.  Pipeline reports are used to demonstrate a lack of activity and to demand more calls.

So what happens to the call and pipeline reports?  They get padded.  Salespeople have learned that if you’re just going to use it as a bat to beat them with, they’re not going to cut the tree down for you.

With the ‘metrics’ available to managers from the traditional call, pipeline, customer status, and commission reports it is very difficult to isolate the root issues a salesperson has.  It can be done.  It takes study, practice and well developed analytical skills and real knowledge of the salesperson involved.

Unfortunately, that’s a lot of work.  So, many managers take the easy way out—take a quick look, determine the root cause is not enough calls and demand more.  It makes no difference if call quantity is an issue or not.  It makes little difference if the salesperson has been properly trained in prospecting and personal marketing strategies.  It makes no difference if the real issue is their interpersonal skills, their communication skills, their presentation skills, or their ability to probe, identify and solve prospect issues.  The answer is usually the same—make more calls.

Since the salesperson sees no benefit from developing accurate reports—but certainly sees a very real determent, is it any wonder the reports are fanciful?

Now, what happens when the company institutes an automated system and demands compliance to faithfully use the system?  Resistance, of course.  From the salesperson’s point of view, all the automated system is going to do is give the manager and the company a bigger bat to beat them with.

Yet, salespeople can be taught to relish sales metrics.  Certainly not by using the data the way it’s been used in the past, but by using it to proactively help the salesperson make more money.

The information gathered by an automated system—in fact, even that puff of information generated by traditional reports—can literally change a salesperson’s career if used properly.  Even a reasonable handful of accurate data can pinpoint real issues and real root problems that hinder a salesperson’s performance.  The data in the hands of someone who has been properly trained to analyze the information can be used to create an individualized training and coaching program for each team member.

If salespeople understand the information makes them money through pinpoint training and coaching, improving their skills, getting them to comply with using the system and producing accurate data—even a handwritten or very basic spreadsheet system—isn’t an issue.  Most salespeople want to sell more.  They want to earn more.  They want to excel.  But those same salespeople have no desire to be consistently beaten over the head.

If you want accurate reports from your salespeople, think seriously about why you want them and exactly what you’re going to do with them.  If can’t or won’t use them to help your salespeople become better salespeople, don’t even bother to ask for them because what you get will be designed to keep you off their back as long as possible.

On the other hand, if you’re goal is to help your team become the best salespeople they can be and to grow your team’s sales, communicate to your team in no uncertain terms what the purpose of the reports is and then stick to it—use them as training and mentoring tools, not bats.  It will take some time to get the response you desire because salespeople have been taught—either at your company or by a previous manager—that metrics aren’t to be trusted.

If you or your managers need help in learning how to thoroughly analyze and use the reports as training and coaching tools, hire a company such as McCord Training or any of the other consulting and coaching companies that specialize in the area.  But whether you need outside help or not, you can have salespeople who welcome sales metrics—and the side benefit is the reports you have in your hand will actually have some relationship to reality.

Carmen Sandford, a sales manager from New Jersey, sent me an email in response to my post “Can Your Managers Manage the Sales Department,” challenging my assertion that the way the sales function is managed is and will continue to change. Carmen’s contention is that nothing has changed or will change in her company and they’ve been using a CRM program for going on two years. She believes that if my claim that this technology is changing the role of sales management her company would have begun experiencing such change by now.

She is, of course, hardly the only one who challenges my belief that technology will bring about a fundamental change in how managers manage and even what a manager is. In fact, I’ve been challenged by salespeople, sales managers, corporate executives, sales trainers, consultants, and even–to my surprise–by some product developers.

Yet, to me it is more than obvious that sales management and the way the sales function is managed MUST change due to the introduction of CRM, and in particular Sales Performance Management (SPM) and Sales Force Automation (SFA) programs.

Until the introduction of computer technology, sales managers had little in terms of real metrics from which to manage their assets—both human and non-human. Of course they had call, pipeline and commission reports. They had the final sales numbers for their team and their individual salespeople—they made quota or they didn’t.

But a great deal of what a manager bases decisions on is illusion. Call reports and pipeline reports are inflated with false data. Even with fully accurate reports, the amount of information from which to make decisions is limited. This set of data even when combined doesn’t give much of an overall perspective of what is happening within the sales team and gives even less perspective on what is happening with an individual salesperson.

Metrics technology is beginning to change that. I do emphasize beginning.

Sales force metrics technology in many respects is in its infancy. Although there are dozens upon dozens of product choices on the market, those products go off in many different directions. Some products, such CRM are salesperson data entry based. The salesperson must enter a great deal of data to follow a lead, and the product typically doesn’t follow the lead from initial contact throughout its life including details of sales, products, commissions, and the other sales related information a manager needs to be able to identify the needs and issues of a salesperson or the specific training and coaching issues an of a salesperson.

Other products are more automation based and do capture sales and product related data, but there isn’t uniformity within these products. Some are designed to control compensation management, which can be complicated in some instances, not to uncover individual salesperson or sales team activities and behaviors. Still other programs concentrate on building an overall customer or sales team profile for sales and marketing purposes. And, naturally, there are programs that focus on the metrics of individual salespeople.

To complicate the product mix, some products are standalone, such as CRM products; others must be integrated with a CRM program.

The array of products available creates a difficult decision for companies contemplating the purchase of a system:
• What needs to be monitored?
• Why?
• What will the information be used for?
• Is it possible to accomplish the company’s objectives completely or do they have to sacrifice? If they do, what?
• Are their managers prepared to utilize the information gathered? If not, how, when and by whom will they be trained?

As the industry matures, the functions and spread of data will increase. As they become more uniform in their objective (not necessarily in exactly what data they capture, but in objective), managers will be faced with more and more data they must use to help them manage their teams and the department’s other assets.

In addition to having the issues above, systems are not immune to false data, of course. Salespeople must work within their CRM system. They can enter real data, false data, or no data. The program’s usefulness and the reports it generates are only as valid as the data entered by the sales team. The more automated systems also rely on the data the salesperson enters into the CRM program. Consequently, the reports generated have the same potential deficiencies as the current reports a manager is getting in the form of call, pipeline and commission reports.

Nevertheless, since these programs are gathering a great deal more information, patterns, problems and new opportunities will emerge from the data. As the programs become better at picking up real data and eliminating the opportunities to skew reports with false data, the information gathered and the reports generated will become increasingly accurate.

One of the first roles of a sales manager is going to be monitoring the data entered. Working with their sales team members to insure the data is as accurate as possible will be on the front-line manager’s back. He or she is going to be key to the performance of the program. Needless to say, data will never be 100% accurate—humans involved in the process, you know.

Yet, even with minimal monitoring, today’s programs are capable of generating a great deal of information that is more than accurate enough to make radical changes in a sales team and how the team is managed.

The current programs that generate metrics for individual salespeople payback the salesperson, the manager and company many fold if used correctly for coaching, mentoring and training. If analyzed correctly, the data generated can help identify not just general areas of activity and skill that need improvement, but can identify very specific activities, behaviors and skills that if addressed properly can have immediate and dramatic impact on an individual’s sales. Likewise, these programs can identify hidden markets, uncover new prospect profiles, competitor tendencies, and gaps and voids in the sales team’s penetration and the company’s marketing.

As this data becomes available, managers will increasingly become coaches and trainers. Their role will change from herder of the group to front-line training department. Yes, I know, that is supposed to be within the job description for most managers now. For the vast majority, that role is either ignored or only given token attention, not because they don’t want to address it, but because they don’t know how to address it. Metrics technology will change that, leaving them with the issue of not what are the problems that need to be fixed, but how to fix the issues uncovered. That ‘how’ is going to be a tremendous challenge for most managers.

Likewise, as the technology mines more information about the local market, prospects vs. customers, and competitors, the traditional role of manager as front-line market analyzer will also come to the forefront. Market and competitor analysis is another area many managers have been charged with in their job description that they have ignored, given only token attention to, or in many cases have not had sufficient information to perform. The vast amount of new, detailed information they are about to face will force them to take this aspect of their job seriously, and analyzing the data and making well-reasoned recommendations will become another major issue for them. Again, like coaching and training, it will be a significant challenge for the majority.

Finally, the financial management of the assets under their control will also become a major area of concern. Just as with coaching their team and analyzing their markets, controlling assets has likely been one of their responsibilities–but one whose ultimate outcome has often been left to chance. No longer. New technology will make asset allocation and return on investment far more transparent. Managers will have more responsibility and liability than ever before in this area. Managing dollars and assets by gut feeling or covering up misspent dollars and misallocated assets will become increasingly more difficult.

Metrics technology may not change the job description of sales managers, but it will change the role and function of managers. Their activities and decisions will become far more transparent to themselves, their sales team, and their managers. No longer will the final bottom-line of whether numbers were met or not be their only concern. They will increasingly have to become full-fledged managers, managing rather than simply herding.

A corollary outcome will be a change in the way sales managers are compensated. As they move from being herders of the flock to being full managers, their compensation will become more broad based. Bonuses and commissions will no longer be based solely on the final sales numbers, but will be tied to other aspects of their responsibilities.

And as these changes take place, companies will have to rethink who managers are and who they promote into management. The traditional practice of promoting top salespeople into management roles as a reward for sales performance will go the way of the dinosaur in successful companies. Management potential, analytical and problem solving abilities, the ability to coach and train will become overriding factors in the selection of sales managers, not whether their personal production numbers were high.

These changes won’t be overnight and will vary from company to company, but change—radical change—is coming. Frankly, many managers won’t make it. Many companies will struggle as they work through the process of change through trial and error (probably more error than success). It isn’t likely to be comfortable for the sales team, the management staff, or in the boardroom. But it is coming.

================================================================================================================================

Tomorrow—why salespeople hate metrics technology and why CRM, SPM and SFA companies are selling the wrong people.

There was a time when marketing and advertising were viewed as seat of the pants processes, based on gut feeling, hope, and simply looking at the overall results to determine whether they were ‘working.’

Instead of trying to understand marketing as a quantifiable activity, the marketing department would simply generate a number of targeted activities such as direct mail pieces, radio, TV and print ads, and other such promotional pieces, then sit back to see what happened. If sales increased, the marketing was working. Which particular pieces of the campaign were generating the inquiries and ultimately the sales wasn’t known, but the overall outcome was known.

As marketing became more disciplined and as the marketing department was put under increasing pressure from upper management to justify expenditures, marketers had to develop ways to quantify and analyze the results of each marketing activity they engaged in. Marketing metrics was born. Over the years, the ability of marketing to track and quantify each and every dollar spent increased. Not only did the marketing department become more accountable for their activity, their results increased. By analyzing the results of their activity they became better capable of determining which activities would work, what return they could reasonably expect from any particular activity, and how to very quickly spot activities that were not producing sufficient returns—and equally important, spot new opportunities.

This isn’t to say that marketing has become a science. There is a tremendous amount of art and creativity in marketing. And certainly not every company has instituted sufficient monitoring systems to be able to adequately manage their marketing efforts.

Furthermore, the ‘science’ part of marketing is still evolving, as it always will. Managing the marketing function can never be distilled to numbers only. Nevertheless, marketers work in a fast-paced, evolving marketplace. They must be prepared to change as quickly as the marketplace changes, which can be almost overnight. Without real data, needed change to keep up with the marketplace cannot happen in a timely manner. Any marketing department that operates off gut feeling and instinct is going to be left in the dust by their competitors.

This combining of hard data with the art and creativity of marketing has yet to be transferred to sales. Despite the similarities and the interconnection between the two disciplines, sales has been left far behind marketing when it comes to understanding what is really working and what isn’t.

Certainly, sales has a basic set of numbers. Managers may get reports that show the number of sales, sometimes by product, of each of their salespeople. They get commission reports. Possibly call reports. They get reports that show how sales have increased or decreased over a period of time—a quarter or maybe a year.

Individual salespeople are expected to know some of their basic numbers, their closing ratio for instance—maybe even how many cold calls they’ve made. They may even know their appointment-setting ratio from their cold calls.

For most this really isn’t data because most of these ‘ratios’ are based on a guess, not on real numbers. Ask most any salesperson what their close ratio is and you’ll get an answer such as “45%.” Ask how many sales that is and they’ll say, “About 30.” Ask how many presentations they made and they’ll say, “Somewhere around 75 to 80.” Ask how many contacts they made to get those 75 to 80 appointments and they’ll say, “I don’t know, maybe 400.” Ask how many attempts at contacts to reach those 400 prospects and they’ll say, “Gee, I really don’t know. Maybe 900.”

Their ‘ratios’ are nothing but guesses and those guesses often have nothing to do with reality. In fact those ‘ratios’ are often purposely skewed up or down by the salesperson to match what they think you want to hear.

Without having a solid database of reliable information, salespeople and their company are left to guess. More importantly, their production, their development as salespeople and their future is left completely to luck and chance.

The consequences of not knowing the actual sales and production data of salespeople are costing companies billions of dollars a year:

• Sales forecasts are grossly inflated because salespeople base their forecasts on hope, not reality
• Sales training dollars are wasted because individual salespeople are not getting the specific training that will help them increase their production
• Sales leads generated by marketing are not converted into sales because they are not being closed by salespeople
• Sales opportunities are being lost because salespeople are engaging in ineffective marketing activities and pursing unproductive market segments
• Sales managers are wasting thousands of hours a year trying to nurture salespeople in the wrong methods and the wrong activities
• Turnover is unnecessarily high because salespeople don’t know what to do to become successful in their sales efforts

On an individual level, salespeople are suffering more than their company. Without real data about their sales and marketing activity, salespeople don’t know where to make changes that will positively affect their efforts. They can only guess and work by trial and error, often washing out of sales before they accidentally hit on the right things to do.

Yet, all of this wasted time, money and effort are needless. Sales production is predictable. A salesperson and manager can know exactly what changes to make to a salesperson’s activity and skill set that will have a positive impact on their sales efforts.

Although sales is an activity whose results are dependent upon a number of factors such as the individual’s skills, the amount of time and energy they invest, and their ability to find and connect with prospects, those items can be monitored, measured, and improved. However, without knowing what is happing in a salesperson’s business, effective time management change cannot be made, effective skill improvement cannot be made, and increasing their ability to find and connect with the right prospects cannot be made. At least not in a systematic, disciplined, rational manner. Without knowing what the root problem is and why it exists, you’re left with guessing, with costly and time consuming trial and error.

With proper and full data, a salesperson can know exactly what their production will be in the future; they can know exactly where and how to make real, results changing improvements in their business; they can know not only which prospects they connect with, they can know exactly where and how to find them and exactly how to approach them.

The typical data companies and salespeople keep are not only inadequate, they are almost worthless for making real change in a salesperson’s or the company’s future. A completely new set of metrics must be kept. Each salesperson must have a complete numerical overview of their business including:

• Complete prospecting data including:
  • how many prospects they attempt to contact
  • how many were contacted, how many appointments were set
  • how many of the appointments were with qualified prospects
  • the demographic data on those prospects
  • how they found and contacted each prospect
  • how many prospects bought
  • exactly what each prospect bought
• Complete marketing activity data including:
  
  • what market segments they marketed to
  • what marketing activities they engaged in for each segment
  • what the results were for each activity, not only which activities generated prospects but which generated sales,
    
  • what each prospect within each segment bought
• Complete sales data including:
  
  • who bought
  • what they bought
  • why they bought
  • why those who didn’t buy didn’t buy

A lot of numbers? Yes. Will this take a good deal of time and effort? At first, yes. However, with a well-developed system in place, maintaining these numbers need not be overly burdensome for either the salesperson or the company.

Yet, despite the initial trouble of setting the system up on either an individual or a company basis, the rewards can be tremendous. With several months accurate data in hand the salesperson or company can accurately predict exactly:

• what a salesperson’s production will be over a period of time
• exactly what changes to the salesperson’s prospecting, marketing and sales process will increase production
• exactly which market segments, marketing methods and sales process will generate the greatest returns for the salesperson.

Although it is important to institute a metrics system on an individual or company basis, a much quicker and equally effective process is to have each salesperson reconstruct their previous year’s (or at least 6 months) sales and marketing history. Whereas with instituting a system going forward you can generate highly accurate data in a matter of months, by simultaneously reconstructing a past history the analysis and changes can begin much immediately.

For millennia, salespeople and companies have treated sales as part art, part luck, part hard work, with little or no expectation that it can be a predictable and controllable process. Companies spend hundreds of millions of dollars every year using assessment tools to try to identify quality salespeople, then leave to chance the result of their hiring process. However, just as marketing has discovered that their efforts need not be left to chance, accident or instinct, sales need not leave their discipline to chance or instinct either.

Will salespeople rebel and feel they are being micromanaged with such a system? That depends upon how the system is instituted and used. If the metrics are used to help the salesperson improve and make more money, then no, they won’t feel micromanaged. If on the other hand, the system is used to beat and berate the salesperson, to spy on and ‘keep them in line,’ yes, rebellion will take place. Like any other system within the company, a full sales metrics system can be an asset or a liability, depending upon how it is introduced and how the information generated is used.

The marketplace is changing more rapidly than ever and change will continue at an increasingly rapid pace. Today it is crucial for salespeople and companies to know exactly what is working and what isn’t.

No longer can a salesperson or a company hope to operate successfully based on instinct. Competition is too fierce, prospects have too many options, and it is too costly to continue to work from trial and error. Combining sales, technology, mathematics, and astute analysis can and eventually will change sales. The question isn’t will it happen, the question is will you or your company benefit from it or be a victim of it?

Paul McCord is a leading authority on prospecting, referral selling, and personal marketing. He is president of McCord and Associates, a Houston, Texas based sales training, coaching, and consulting company. His first book, Creating a Million Dollar a Year Sales Income: Sales Success through Client Referrals (John Wiley and Sons, 2007), is an Amazon and Barnes and Noble best-seller and is quickly becoming recognized as the authoritative work on referral selling. His second book, SuperStar Selling: 12 Keys to Becoming a Sales SuperStar will be released in February, 2008. He may be reached at pmccord@mccordandassociates.com or visit his sales training website at www.powerreferralselling.com or his highly popular Sales and Sales Management Blog at http://salesandmanagementblog.com

Copyright 2008, Paul McCord. May be reproduced without change, with proper attribution and brief bio. Notice of when and where article is to appear to pmccord@mccordandassociates.com

Business metrics are designed to do two things: to help you ask questions and then point you in the direction for the answers. By themselves, business metrics do nothing more than monitor your business performance in a specific area of your business. Like the computerized dashboards found in most cars today, your business metrics can help you to identify both strengths and weaknesses in your business. When your oil indicator light comes on, it just points to a potential problem; it doesn’t do anything to fix the problem.

Whether you have a retail, B2B, or service-based business of any size, business metrics are your friend.

In previous blog posts, (see under “Sales Metrics), we discussed sales metrics related to your square-footage and your employees. Now let’s look at your customer.

What is your average sale per customer? This is a basic sales metric that can tell quite a story if you keep track of it over time. Seasonal fluctuations are easy to pick out when you look at this sales metric on a monthly basis. Over time, average sales per customer can help you determine:

-Is my share of their wallet getting larger or smaller? If your average sale per customer year-over-year goes from $550 to $375, you’re already in deep. Why is your average sale per customer on a slide? What can you do to reverse the trend? If your average sale per customer is going up, then you need to understand exactly why it’s going up. Is it because of specific sales or marketing activities you are undertaking?

You’d be surprised at the number of businesses that have a few successful years and then plummet out of business. Chief reason: they were too lazy to really understand the dynamics of their own success. When those dynamics no longer had any positive affect, they had no clue what to do to stem the losses. They were ‘too busy’ to spend time looking at business metrics.

-What can I do to reduce seasonal fluctuations in average sales per customer? Years ago, one local ski shop in the Hudson Valley decided that the seasonal fluctuation in their ski business could be offset by expanding their business to sell patio furniture in the off season. It turned out to be a great counterattack against their traditional business.

What is your net profit per customer? The best way I think you can look at this metric is on a customer-by-customer basis. If you have good financial controls, you should be able to determine how much profit each customer generates (monthly/quarterly/annually) based on the goods or services they have purchased from you. If you can’t, then you’d better find a good accounting firm before even considering this metric.

-Why are some customers more profitable than others? Is it because of the mix of goods or services they buy? Is your pricing varying from customer to customer? Are the repeat business discounts you’re providing too deep? Is your pricing built on solid financials or some educated guesses? What can you do to encourage customers to purchase better-margined goods or services?

Good business metrics can help you drive your business results by identifying areas of strength and weakness. The key is to understand the ‘who, what, when, where, and how’ of each metric so that you can work towards creating better performance in the areas that count, like overall profitability. The worst thing you can do is to ignore them.

Here are a few phrases you NEVER want to hear from your customer:

“I haven’t seen or heard from my account executive in over a month”
“I’m not sure who handles my account there”
“The other company seems very interested in helping us”

And a few you never want to find yourself saying:

“I haven’t heard from them in a while”
“Oh, that account…it’s dead”
“When I have time, I’ll give them a call”

It never ceases to amaze (and disappoint) me how often businesses fail to maintain even an adequate level of contact with sales accounts vital to their business. Some wait until the phone rings. For others, it might only be an infrequent level of contact. Either way, it’s more hit or miss, than purposeful contact management.

The Big Dogz have made a science out of superior contact management. They don’t leave anything to chance and just wing it. The good news for you is that most businesses fall on their face when it comes to maintaining the right level of contact with a customer.

That should spell o-p-p-o-r-t-u-n-i-t-y to you.

How often should you follow up on any sales account you have? Many books have been written on this subject alone. In my opinion, there are two key considerations:

1. How frequently does the customer want to be contacted? Ask your customer directly. I’ve always made it a habit to ask that question and in almost all instances, the customer is very clear about how often they want me to contact them. If they want you to touch base with them once a month, then you’d better be sure and do it. Don’t ask this question if you don’t plan on following the answer.

2. What is the value of this account and how does it perform? If you’re a small business owner, you can’t be everywhere. You can’t visit all your customers with exactly the same frequency. So, you need to prioritize your customers in a way that allows you to maintain a level of contact that fits those customers needs.

There is no ‘formula’ for evaluating the performance of an account. But there are some things to think about.

First, you need to determine how you are going to measure ‘account performance’ in the first place. Account performance is defined as how a particular sales account provides inputs that meet your set business goals. Inputs are those things that contribute to the measurable success of your business. For example, some common inputs are sales volume, profitability, longevity, frequency of sales, and new business referrals. Let’s break these inputs down a little further.

Every customer that buys your products or services contributes to your sales goals. Some customers contribute more than others. What percentage of your business is from this sales account? How do they stack up against your other customers? However, sales volume alone is not a good way to prioritize customers. Which leads me to the next input.

Everybody loves large accounts. Big accounts naturally seem to demand more of your time. But are those large accounts profitable? It’s entirely possible (and often happens) that a large account provides great sales but contributes poorly to your profitability, or in the worse case, makes you lose money. I do NOT advocate dropping an account just because it’s marginally profitable. The right thing to do would be to figure out why it’s marginally profitable and fix it. I am saying that you need to understand what level of profitability (or loss) that account brings to the table.

Longevity is an interesting input. Are they a long time customer? What value do you place on a customer who stays with you rather than jump to the next competitor who offers to save them 5cents more? Or what about the new account that is buying a lot of product or services? You’re always going to have a range of customers with some new, some old. My point here is that longevity does count for something.

Frequency of sale is a measurement of how often they buy your goods or services. Once per year? Every other month? Every day? When you look at frequency of sale, you have to look at sales volume at the same time. Your customer may order only once per year but it might be the biggest order you get all year long. Keep frequency of sale in perspective with sales volume contribution.

New business referrals are another key metric. How many new customers have been referred directly from this customer? If you don’t expect your customers to refer new customers to you, you’d better think again. If your business is exceeding the expectations of your customers, you have every right to expect that they can and will help you find more customers. So, you might have a customer who doesn’t contribute as much to your sales volume but they refer a lot of business to you. They are worth their weight in gold. Even if they are unprofitable.

How much contact time should you spend on a customer? The answer is not easy as you can see. However, by asking the customer what frequency of contact they want and understanding their performance contribution to your business, you’ll be in a better position to prioritize them.