This blog post originally appeared on AG Salesworks blog at http://www.agsalesworks.com/Blog-Sales-Prospecting-Perspectives/bid/97058/Should-Your-Company-Invest-More-in-Building-its-Sales-Pipeline#.UWVvFJN19NQ.
Over the first quarter of the year, and in particular the last month, we have heard this question a lot.
For many the question stems from doubt about the ability of Sales to produce replicable results, and for others it stems from a desire not leave anything on the table. In both instances the answer is the same:
Yes, you should always invest more in building your company’s pipeline!
Why? Because the pipeline is the soul of a business’s potential to grow and prosper. Without a strong pipeline, your company’s ability to succeed and meet customer and stakeholder expectations is greatly diminished. Today’s turbulent economic environment requires persistent and frequently incremental investment in one’s pipeline. To maximize your return you must invest in both pipeline quality and quantity.
Investing in Pipeline Quality
Investing in pipeline quality (ideally) comes first. This may seem counter intuitive if your confidence in sales’ ability to deliver is low and you need numbers, but it’s counterproductive to pump a higher volume of opportunities into the pipeline without addressing flaws in sales and pipeline management processes. You might survive another quarter if you crank up pipeline volume, but ultimately the pipeline will slow to a crawl without addressing quality. So, tackle quality first, or at least simultaneously with quantity. Improving pipeline quality requires investment in three areas:
- Aligning the pipeline’s stages and gates with the sales process. The first step in improving the quality of the pipeline is ensuring that its stages align with the sales process; this symmetry ensures that there is “one set of books” for revenue and eliminates misunderstandings between Sales and senior management, particularly Finance. The addition of gating factors for each stage increases managers’ and reps’ ability to pinpoint exactly where opportunities are in each stage and determine what actions must be taken to make progress, increasing their credibility both internally and externally as they manage the sales cycle.
- Calculating sales cycle times and conversion rates by gating factor and stage. Investing in measurement of sales cycle time, intra and inter-stage, enables managers and reps to spot and remediate trouble spots quickly. Measuring cycle time also increases reps’ sensitivity to, and understanding of how they are able to move different kinds of opportunities, building their agility and perceptiveness, and ultimately increasing their pipeline velocity and close rates, and forecast accuracy.
- Implementing a sales management review process focused on results, not activities or volume. Quality is maximized when the above investments are combined with a sales management review process. The best review processes, while led by managers, are two-way problem-solving conversations with sales reps. The focus of these conversations is not on activity or volume, but on the following questions: How fast is each opportunity progressing?, What gating factors have been accomplished and which need to be accomplished? How each gating factor can best be accomplished?, and If stuck, what actions are appropriate, and why, in the context of the account, to regain momentum?
Investing in Pipeline Quantity
Once pipeline quality has been improved, you are ready to invest in quantity. Driving an increase in the quantity of opportunities in the pipeline requires investments in:
- Identifying your target customer(s) and their specific needs, criteria, and behaviors. This may seem trivial, particularly if your company or territories are well established, but it’s not. The goal is to develop veins of prospects with homogenous characteristics that will reference each other, creating greater pipeline volume. To do this, review the accounts that you have won in the last year. Identify commonalities in their: needs/problems, buying criteria, demographic profile, and buying behavior. To develop even deeper insights, segment accounts before beginning this exercise into their groups, accounts that are brand new wins, accounts you are simply retaining, and accounts you are penetrating . Conducting this exercise twice a year will help Sales identify growth themes that enable reps to build their pipeline volume, and enable Marketing to sharpen its messages to clusters of prospects.
- Developing a tightly scripted automated marketing process and tele-prospecting process that scores prospects based on their behavior and characteristics. One of the most underleveraged tools to drive pipeline quantity is an automated marketing and tele-prospecting process. Most Sales organizations lack activity above the funnel, and therefore an adequate flow of quality opportunities. If you have not invested in an automated marketing and tele-prospecting process, it’s time to take the plunge. Fixing this problem has never been easier and more cost effective; an automated marketing and tele-prospecting process is the cheapest insurance you can buy against poor quota attainment and inadequate testing of your relevance in different markets.
- Segmenting your sales force to create Opportunity Development Specialists and Sales/Account Reps. You have heard a lot about how buying has changed; customers complete over 50% of the sales process before meeting your sales rep, customers expect your reps to provide more and deeper insights into your business, and more stakeholders than ever before are involved in the buying process, lengthening the sales cycle and increasing its complexity. Unfortunately, all of the above apply for most of Sales forces, yet many still lurch along expecting their Sales/Account Reps to prospect and cold call consistently and aggressively. It’s time to stop asking your company’s highest priced resource to do low-value, high volume work that is decidedly different than managing the later stages of a sales process. In most cases (except for selling in extremely mature markets, or in processes where the buyer expects a single point of contact) it’s far more efficient and effective to segment the Sales force into Opportunity Development Specialists and Sales/Account Rep roles and narrow Sales/Account Rep prospecting to a narrow set of highly qualified leads (e.g. a short list of 10-15) that have a tight fit with their current account base.
If you have not invested persistently in your pipeline, now is the time to catch up. With three quarters left in the year, there is plenty of time to make incremental investments that will help you exceed plan.
Remember, two investments are required. To achieve Sales efficiency and effectiveness you must invest in both quality and quantity on a regular basis.
Last week, a ran a seminar on Building Revenue Models for the community members at 1871, the Chicagoland Entrepreneurial Center’s (CEC) project that supports entrepreneurs on their path to building high-growth, sustainable businesses that serve as platforms for economic development and civic leadership in Chicago. My partner, Steve Baumgartner, and I have been struck by some 1871 entrepreneurs’ inability to clearly state what problem they solve and, more particularly, how they solve it differently. Instead of being able to clearly articulate the problem they solve, some of these entrepreneurs remain fixated on talking about the features and benefits of their solution and, on a few occasions, the needs that their solutions address.
In both circumstances, these entrepreneurs are off target and wasting the sales opportunities they are generating. Whether it’s true or not, few potential customers want to hear them talk about how elegant their product is, or how it provides features and benefits, that they likely do not even think they need. Instead of being sold a solution, or features and benefits, prospects want help solving a problem, and the bigger the problem the better.
If you find yourself in this situation, It’s time for them to take a step back and develop some hypotheses about what problems your products/solutions solve for customers. Dig deeper past the symptoms of customer’s performance problems into how their businesses operate and how your products/services impact their ability to operate more efficiently or effectively. Confirm what problems your products/solutions address better, faster, and cheaper. Then take a close look at the next best alternatives available for your target customers and compare and contrast them to your products/solutions. Push hard to define how your product/service and business model are truly different. It’s no longer sufficient to just be better, faster, or cheaper, customers want to buy solutions that are different and uniquely create value for them or their businesses. Through iterative conversations with customers you can hone and simplify your message and define what truly makes you different.
You will know you’ve got your fly wheel spinning when the sales cycle speeds up and prospects and customers start noting and referencing what makes your solution different with each other.
If you are working on defining what problems you solve and how you solve problems differently, please comment here, or contact us, we would like to hear from you.
10 Proven Growth Drivers that Get Results!
At Evergreen, we help companies grow more, predictably. To enable greater and more predictable growth, our work with senior leaders, sales mangers, and sales reps focuses on:
- Making informed strategic choices about which growth opportunities to pursue,
- Organizing resources effectively, and
- Equipping sales managers and teams with the right processes and tools to sustain success
Over the last six weeks we have focused on 10 growth drivers we believe senior leaders, sales managers, and sales reps should focus on to drive growth in 2013. We have selected these 10 issues because they are actionable at all levels – the rep, team, and the organization. Moreover, they are proven, based on our experience with over 60 clients, to accelerate growth in a wide variety of industries.
Please follow us via email or RSS feed . And, if you have recently deployed, or plan to deploy, one of our 10 Drivers, please add a comment on the blog or Twitter at @EvergreenGrowth.
Our Top 10 Growth Drivers for 2013 Include:
- Growth Driver #1 – Confirm Your Revenue Model
- Growth Driver #2 – Increase Your Value
- Growth Driver #3 – Sell the Way Customers Buy
- Growth Driver #4 – Pursue a Mix of Revenue Gains and Drains
- Growth Driver #5 – Identify Growth Themes
- Growth Driver #6 – Create a Road Map to Success
- Growth Driver #7 – Tighten Your Focus on Sales Management
- Growth Driver #8 – Assess Your Turnover Risk
- Growth Driver #9 – Focus on Opportunity Creation
- Growth Driver #10 – Define Decisions at Customer Touchpoints Before Investing in BI Tools
Failure to sell consistently the way customers buy risks losing the sale after substantial investment at worst, and at best, significantly lengthens the sales cycle.
Consistent utilization of sales processes has long been a problem for sales forces, and it still is. According to CSO Insights 2012 research 25% of CSOs surveyed indicate that their sellers consistently use their company’s sales process less than 50% of the time, while just 40% of CSOs indicate that their sellers consistently use their sales process 76% or more of the time.
A number of factors contribute to to inconsistent use. However, our experience suggests that the two biggest impediments to consistent use are:
- Whether the Sales Process Mirrors the Customer Buying Process
- How Adequately the Sales Process Addresses the Needs of Stakeholders in the Buying Process
While mirroring the customer’s buying process may seem basic, CSO Insights data show it’s not, in fact 46% of CSOs surveyed in 2012 suggest that a key area for improvement of their sales processes is “clearly understanding customer’s buying processes”.
What should we do if our sales process is out of sync with buyer’s processes?
If you find yourself in this situation, it’s time to pull in your best sales people, who think and work in a disciplined way, and ask a number of questions:
- What are the preferred steps in our customers’ buying process?
- Which steps are of greatest importance to each stakeholder in the customer buying center?
- Where does the customer want us to simplify the sales process?
But, what about our ability to address customer needs?
Once you have answered the above questions for different segments of customers, you are ready to beef up your sales processes, increasing your ability to meet the needs of all stakeholders in the buying process. Doing this, requires answering a second set of questions:
- What must you know about each stakeholder before beginning the sales process?
- What does each stakeholder want to learn at each step?
- Which stakeholders are most important at each step in the buying process?
- What value propositions and messages must you convey to each stakeholder within each step in the buying processes?
- From whom, in our organization, and how, does each stakeholder want to learn at each step?
- What are the indicators of successful completion of each step with each stakeholder?
Now, it’s time to take your show on the rode and test your perspective with samples of your customers. Then, integrate the insights you gather and finalize your process and support systems.
If you are able to create the following kind of examples for each step in the buying process, you are on the right track and ready to start educating the sales force on your revised process.
You’ll know you’ve got it right when sales cycle times (with similar types of customers) start to decrease, close rates and retention increase, and stakeholders in the customer organization actively do things to help you sharpen your process and move the sales process forward. Over the long-term, you will recognize the value of your efforts in increased quota attainment.
If you have recently created a buying process, please comment below or on Twitter @Evergreengrowth.
Increasing your value to customers depends on your ability to Identify, Demonstrate, and Deliver value.
Providing value is important at every stage of the life cycle, but it is especially critical in the growth stage. Early in the growth stage, you must motivate early adopters to buy your product, and later in the stage you must compel new customers to switch to your product. In both cases, you must communicate a compelling reason to buy. To increase your value to your customers, follow these steps.
1. Identify Value
The first step in identifying value is to assess each customer segment’s – if not each customer’s – value chain and identify opportunities to create value. To do this, we like to create a customer value tree that describes how customers grow revenue and make a profit. With this picture in hand, it becomes far easier to begin to identify sources of value from the customer’s perspective, and this step has the added benefit of educating everyone who touches the customer. The second step to identifying value is to sort value creating opportunities into: critical pain points, areas of insecurity or risk, and opportunities for future gain. This sorting exercise typically yields a prioritized road map for value creation, beginning with big pain points, then areas of risk, and concluding with longer term opportunities. To double check this road map, we recommend testing it with customers to determine if your prioritization is accurate and if your performance claims are differentiated versus your competitors. This step will allow you to re-prioritize value creating opportunities and highlight those that require additional investment to improve their performance.
2. Demonstrate Value
Armed with a prioritized road map, you are in a much better position to start demonstrating your value. But you’re not ready to dive int just yet. Before you begin demonstrating your value you must do three things:
- Identify which stakeholders in the customer organization care most about each of your value propositions.
- Determine when in the sales process to communicate your value propositions.
- Select the right person/medium, based on the customer’s expectations, to deliver your value propositions.
In today’s rapidly evolving and increasingly populated selling environment, it is critical to ensure that your value propositions are delivered at the right point in the sales process (frequently, earlier), to the right stakeholders, and by the right member of your team (increasingly not just the sales rep). Doing all three well ensure you have maximum opportunity to differentiate your products and services and share of mind with each stakeholder.
3. Deliver Value
The last step and, frequently, the linchpin of short and long-term success is delivering value. Delivery of value requires confirmation, planning, education, and reporting. Before you are ready to deliver value, you must:
- Reconfirm the value stakeholders are expecting you to create and how it will be measured.
- Develop a plan to deliver with your team, including, sales, operations, and customer service.
- Educate the project team (your team and the client’s) on your implementation plan to deliver value.
- Report value as it’s created for your customer.
Don’t make the mistake so many sales people make and assume that value is delivered at closing.
If you have recently worked to increase your value or enhance your value propositions, please comment below, or shoot us a note.
Your markets are maturing, even declining. Do you know how to evolve your Sales Model?
Lately, the topics of market maturity and decline have been coming up a lot in our discussions with CEO and business owners. There’s a growing sense, as the anemic economic recovery rocks along, that growth for many markets has peaked or is in a steeping decline.
You know the warning signs of maturity and decline:
- Profits are being harvested and paid to investors and management vs. re-invested in product innovation or market expansion.
- Consolidation of competitors is occurring at an increasing rate, and new entrants are innovating from the bottom.
- Price pressure is increasing significantly.
- Customer’s control over the buying process has increased markedly, it’s harder than ever to gain early access to stakeholders.
- Competitors are competing on brand, ancillary services that complement products, and process improvements instead of the products themselves.
Examples of industries in maturity or decline are abundant. One of the most prominent is the plumbing industry which is very mature in the developed world. And, immature in the developing world; it’s products are not well suited because the lack of public infrastructure, water, and energy. A short list of competitors: Sloan Valve, Kohler, Zurn, Toto, and American Standard have dominant market share and market share has been relatively static for long periods of time. Competition is somewhat oriented to products that conserve water, but is substantially oriented around price, and distribution channel control. So what must the plumbing industry, or others facing similar circumstances do to adapt their sales models?
Implications for Sales Models
Maturing and declining markets pose a number of implications of one’s sales model. In maturity, sales efficiency, or the cost of customer acquisition becomes critically important. Where as in decline, one’s ability to capture specific pools of profit becomes paramount. Here are strategies you should pursue:
Sales Process, Sales Process, Sales Process. The first and most underutilized driver of sales efficiency is a sales process that is designed based on the customer’s buying process. Once you have a sales process that fits the customer’s buying process, it is critical to enable this process with a CRM system to measure and track sales cycle times and customer interactions, as well as tools to support quality conversations and information sharing with each customer stakeholder in the sales process.
Focus on Sales Management Processes. Having a sales management process that enables frequent inspection of sales opportunities and coaching of sales personnel around the efficient and effective execution of the sales processes is a critical, and often under-leveraged driver of customer acquisition cost.
Re-align Compensation. In the wake of maturity, it is important to ensure that compensation spending is aligned with the right revenue, profit, and/or product and market outcomes while appropriately rewards levels of performance. Quota setting accuracy, allocation of compensation dollars by product/market, and the shape of payout curves become critical drivers of cost of sales.
Customer Selection. Once decline begins, the identification and selection of profitable customers becomes critical. To do this, sales leaders, with the help of finance, must develop a detailed understanding of individual and customer segment behavior and the drivers of profitability within the customer’s business and their own. These insights form the foundation of where and how to manage decline while sustaining value at the bottom line.
Channel Selection. Within decline, channel selection and, ultimately, consolidation become critically important drivers of sustained profitability. Before demand shrinks precipitously, sales leaders must begin reducing the number of channel partners while improving their ability, through informed selection and strong partnering programs (invested in and created by the channel partner and manufacturer) , to maintain customer access and ensure quality customer experience.
Sales Coverage. Similar to channel selection, the number and types of sales people deployed across markets must be adjusted as markets decline. Not surprisingly, many sales leaders face maturity without having developed much skill at coverage re-design. This is due primarily to the perceived risk of altering customer relationships by changing account assignments and team configurations. However, this risk is mitigated by maintaining a clear understanding of how, and from whom, customers want to buy – which informs the type and number of sellers required – and creates a basis for making regular incremental adjustments.
It’s not only critical to spot the warning signs of maturity and decline, but also develop the ability to adjust one’s sales model dynamically across the market life cycle, ideally in advance of each stage!
Is your market maturing or declining? If it is, how are you adapting your sales model? Comment here or on Twitter. Or contact me at firstname.lastname@example.org.
What’s required to grow on a sustained basis?
We hear this question a lot, so we decided to share a few qualitative and quantitative insights on growth. Before we jump to insights, some context setting is useful.
Sustained Growth is Hard, but Not Impossible
Our research of S&P 500 company performance from 1996 to 2006 shows that just 6% were able to sustain growth for 10 years running, where as 31% sustained it for five years straight during the 10 year period. A closer look at sustained growers vs. non-growers reveals some interesting differences:
- Companies that sustain growth for 5 and 10 years achieve compound annual growth rates of 12.7 and 13.3%, respectively vs. 4% for companies that don’t grow consecutively.
- Sustained growers across 5 and 10 years also grow their sales forces as higher rates, with compound annual growth rates of their sales forces of 1.91 and 3.1%, respectively, compared to a -2.2% compound annual growth in sales by companies that could not grow consecutively.
- As sustained growers across 5 and 10 years grow they decrease the proportion of sellers as a percentage of the overall workforce by- 2 and -3% per year, respectively, where as companies that do not grow consecutively see an average increase of 3% in the proportion of people in sales.
In summary, serial growth companies: realize a flywheel effect where consecutive years of growth begets higher growth overall growth, they grow their sales forces faster than companies that do not grow consecutively and they grow their sales forces at a slower rate than their overall work force.
So What Drives Sustained Growth Companies’ Ability to Achieve High Sales [Capital] Efficiency?
Our experience suggests that sustained growth companies draw on six levers to drive growth:
- Focus narrowly on growing sub-segments within markets. Sustained growers are exceptional at reviewing their growth history and analyzing segments to identify pockets of growth that they can serve efficiently. Become a master at thin slicing your markets to identify pockets of growth, the benefits are significant; 2-4x growth over average is possible in many sub-segments.
- Segment the sales force into specialized groups targeting segments with similar needs and buying processes. Specialization creates efficiency across the sales process and heightens focus on customer experience. Organizations that fail to specialize do so at their own peril. Too often, Sales leaders develop sales investment cases at the margin which contain flawed assumptions driven by historical experience in different markets under different sales processes. For more, visit my previous post on marginal cost justifications for sales force expansion.
- Regularly assess sales force coverage. Having the right number and types of resources covering your target segments is essential to maximizing revenue capture and sales efficiency. Yes, adjusting coverage is unpopular with the field, however, it’s essential to managing productivity and cost of sales, particularly as markets mature. If you are facing maturity or are already there, bite the bullet and create a coverage realignment process.
- Invest in defining, updating, and consistently following a sales process. Surprisingly few sales forces consistently follow a defined sales process, and fewer still regularly revise the process with customer input. This lack of discipline breeds waste, inefficiency, and customer discontent.
- Tightly align sales and marketing. Creating tighter alignment between sales and marketing, particularly in targeting, awareness building, and lead creation reduces inefficiency by preventing the expenditure of sales resources on unqualified opportunities or early, less valuable steps in the sales process. Serial growers know that maximizing quality lead volume is critical to sales efficiency and impossible, with the prominence of the web, for sales to do one its own.
- Invest in a sales management system. Serial growers consistently have strong sales management systems that clearly focus on managing activities to achieve interim goals which lead to business outcomes. Creating this linkage enables managers to utilize predictive metrics and have coaching conversations with reps that lead to skill development and behavioral change. See my previous post for more on this topic.
Now get out there and start working on these levers, you need not approach them in order. There is incremental value in each one, and perfect alignment across all six requires constant tuning.
If you are pursuing serial growth or have achieved it, we’d love to hear from you. Please comment here or @Evergreengrowth on Twitter.