Moving Sales Out of the Dark Ages
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.
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 is 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. Marketing can never be distilled to numbers only. 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 feel 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.
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 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 the 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 pervious 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 sooner.
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 used. If the metrics are used to help the salesperson improve and make more money, 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 trail 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
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.
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 is 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. Marketing can never be distilled to numbers only. 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 feel 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.
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 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 the 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 pervious 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 sooner.
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 used. If the metrics are used to help the salesperson improve and make more money, 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 trail 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
Tags: analysis, conversions, marketing, ratio, sales
5 Comments
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Comment by Paul McCord on March 16, 2008 at 7:43pm -
Historically salespeople have had an aversion to transparency because it has been used against them, not to improve their performance. Salespeople have been taught by management that detailed information about their activities and performance is gathered to be used as a club, not for coaching and mentoring.
However, if salespeople understand both the value and the purpose of detailed data gathering, their natural suspicion and fear will dissipate. By no means will this be overnight, nor will it be easy.
The burden is on management to institute the process and to communicate clearly--in writing--exactly how the information will be used.
That is, however, academic at this point since so few companies see either the benefit of gathering the data or a viable process with which to make it happen.
The first step is to get management to understand the immense value the data can provide both in terms of decreased costs and increased sales and market share.
I agree that a transparent sales force--from the chief sales executive down is radically uncomfortable for each member of the sales department. It exposes sales to the same scrutiny as other departments.
That being said, the individual benefits actually outweigh the corporate benefits. On a corporate level costs decrease and sales increase, giving more value to shareholders. On a very personal level, salespeople see their incomes increase, their personal job satisfaction increase, and their advancement possibilities increase. In real terms their advantages significantly outweigh those of the company.
The best news is that individual salespeople don't have to have the company institute a program to do this. Each individual salesperson can do this themselves for themselves.
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Comment by Brad Trnavsky on March 21, 2008 at 2:05pm -
Paul, The last sentence in your comment is so very true. I am fortunate that my company has a sophisticated system of tracking a sales pipeline and performing ratio analysis at the individual, team, district, and national level with detail from daily to annual. This gives us the ability to track and coach each salesperson, but also gives us the ability to set benchmarks and quickly recognise organizational trends.
If your organization does not have a system like this you you do not have a manager that is willing to share that data for some reason it can easily be tracked in minutes a day. I have written a post called Start With The End in Mind that demonstrates how you can build a simple model for planning sales success. A few weeks later I followed up on that post with one called Is what you are doing REALLY productive? This post talks about how to ensure you are focusing your sales efforts on the right things, and how you frequently get more sales by focusing on the quality of contacts instead of the more is better attitude most managers take. .
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Comment by Derek Cheng on March 26, 2008 at 5:09pm -
As someone marketing, looking at many companies' sales processes, you won't believe how disheartening it can get sometimes when you work really hard to get salespeople leads and because they don't follow-up or have a process to follow-up or there isn't transparency, leading (no pun intended) to that marketing effort (and dollars) went to waste.
Admittedly, worst case scenarios would indicate that only 10% of leads are every any good and only 10% of those end up to be real opportunities. But how much of that is neglect?
And even with a CRM solution or other lead management facility, it's really the sales manager's call to make it an issue for the rep to use the tool and record their execution. Sales managers and executives need to understand that (a) the tools are available and (b) everyone is accountable.
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Comment by Paul McCord on March 26, 2008 at 6:18pm
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Derek, I think the accountability approach is one of the causes for the low lead follow-up. You've actually brought up to two issues: lead management and sales team management.
Both issues have a common problem attached to them: getting cooperation from the individual members of the sales team.
On the lead management side, the problem partly stems from the perception on the part of the salespeople that they are being dictated to by marketing. What they hear is "here are leads. You WILL follow up on them, you WILL let us know what happens--and be quick about it." My experience has been that if marketing would include sales in defining whom to target and then fully inform them of why the campaign was designed as it was, what the expectations are, how the campaign compares and competes with the competition, and why these leads will produce income for them, you can get the salespeople to buy into the program and once they have some ownership, getting cooperation, follow up and reporting becomes much easier.
On the side of sales management, again, success comes more from gaining buy-in and cooperation than from dictating. There is actually a sales management automation program on the market called "Sales Cop." What a stupid name for a program that is supposed to be designed to help salespeople and the company produce more sales. Salespeople don't want to be and resent being micromanaged. They don't want any reporting--and especially a tech program--that can be used as a club to beat them and threaten them with. They will, however, readily agree to use and work with a program that is designed not to club them but to increase their income.
The approach has to be from a 'whats in it for me' perspective--in both of these instances.
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© 2009 Created by Brad Trnavsky on Ning. Create Your Own Social Network
What I do find interesting is what you say about micromanaging and rebellion in adoption of greater access to information. Adoption of new technology, greater analysis, clarity of information etc. is imperative to greater success, however, a lot of companies business processes are driven from top down. That is to say, the board of directors is pressurised by the shareholders to perform which in turn puts pressure on the CEO who pressurises the sales director etc.
The greatest obstacle to change and success is fear at every level. Transparency in sales personnel means transparency at management level as well and when you are facing pressure from above, having your cards on show isn't a pleasant prospect.
Playing devil's advocate here, but would be interested in further exploring this 'adoption' debate. cheers
nesh