Showing posts with label Forecasting. Show all posts
Showing posts with label Forecasting. Show all posts

Customer cycles or sales funnels?

"The top salesperson in the organization probably missed more sales than 90% of the sales people on the team, but they also made more calls than the others made."
                                                                                    ~Zig Ziglar

The difference between a customer journey and a sales funnel - is your perception of either.  Inexperienced sales rookies are coached to label what phase their customer is at in their buying cycle by their management and/or organization.  The most definitive one you tend to see is divided into thirds .... commonly referred to as "the sales funnel".

The top third and widest with the most numbers is "Suspects".   Otherwise referenced as leads.  You are at the beginning, likely haven't met with a decision maker, or even understand why or how they buy.  They  have been identified as a potential customer by:

  1. Cold calls
  2. Lead generation
  3. Referrals

The second tier is "Prospects" or called opportunities.   Are a mid-volume of numbers.  Prospects have moved from being a "Suspect" to a "Prospect" because they have been qualified.  The sales professional has identified them as a potential customer from a number of avenues: 

  1. Web contact inquiry contact 
  2. Inbound telephone call asking questions 
  3. Internal leads:  referrals, heads up or personal recommendations
  4. That first meeting, cold call
  5. They've been identified as having a need that your company can fill
  6. Follow up from cold call, or investigative meeting
  7. Someone has read or shared information that shows where growth may be
  8. Knowledge of key players are:  decision maker, influencer, user, authority, payment
  9. They have the ability to pay for your service or product
  10. Who you are speaking to has  the authority to make a decision to move forward or will simply be making a recommendation or gathering prices
  11. What internal endorsement is required to proceed with providing a solution, quote or proposal or be established as a vendor, provider or partner
  12. A decision will or can be made based on the need you can fill

The final third tier is "Customers".   These are the fewest numbers.  They have traveled through the funnel to arrive at a transaction, contract or agreement to buy.  They have satisfied your organizations criteria to do business or you have met their's:

  1. Set up an account: met credit requirements:  credit check, references
  2. Have the ability to pay:  financial resources, how or when and authorized by someone
  3. You have identified that your prospect wants or is willing to pay for your service or product
  4. You understand their buying frequency:  one time, annual, intermittent, monthly, daily, etc.
  5. You understand how they work and how to work them within your own system or processes ... sometimes customized
  6. You know their structure and where they may buy from:  global, national, or local 
  7. They have issued a purchase order (PO#), requisition or cheque to buy
  8. You have broken them down by value to your organization:  major account, corporate, enterprise, business, entrepreneur, consumer
  9. You have systems or structure to match their buying:  an account executive, major account representative, territory manager, sales representative, customer service
  10. You have adapted your structure to mirror your customer's behavior:  single point of contact on major accounts or enterprise sales, business to business local or global points of contact, order forms, web order systems, incoming telephone orders, fax'd orders (forms), catalogue, directories

The most successful sales professionals or sales oriented organizations match their behavior or identity system to that of the potential customer.  They understand where their customer is in the buying cycle:

  1. Research
  2. Information gathering
  3. Price shopping
  4. Vendor qualification
  5. Who can provide the desired product or service to match what they think they want
  6. Criteria outlined on how they will decide to act (make a purchase)
  7. Established approved list of vendors or providers authorized to be purchased from
  8. Budget accounted for
  9. Approval process (by transaction or by location or by authority)
  10. Payment structure
  11. Review structure 
  12. Service structure
  13. Support to maintain orders
  14. Ability to meet needs
  15. Reputation to meet requirements or identify unknown needs and proactively fix gaps
  16. Established trust

How you identify where you are at is important to create a language among your team as to where you are at in a sale:  are you on a fishing expedition or are you assembling your team of resources to put all heads together to put together a win-win proposal?

"If eighty percent of your sales come from twenty percent of all your items, just carry those twenty percent."
                                                         ~Henry A. Kissinger

Customer relationship management (CRM) systems have these areas identified and can populate into graphs or graphic funnels to help those:

  1. Forecasting potential revenue, profit margins, marketing efforts
  2. Budget resources:  people, equipment, processes, tools, systems, 
  3. Have all the systems and resources in place or easily activated responses
  4. Policies and procedures in place for escalations or when things go wrong or extra assistance required for customer are in place
  5. People resources match customer orders:  equated to response time, hours of operation, scheduling

It is the footprint of your sales efforts success:  as both an organization and the customer facing personnel status in the customer's buying cycle.  I recommend that you break it down into bite size chunks so that they can be addressed.  If you are writing a business plan, a key component is answering:  "where and how will you get or retain customers?".  This should be long before you are looking for investors or financing to launch or continue operations.  I liked this diagram via Google by Andrea Callahan:

Ironically, most start ups and entrepreneurs gear up on marketing, outbound campaigns, telemarketing, sales coverage long before they have answered any of the above.  It can easily foreshadow failure over success.  Yes, you need to walk before you run.  However, assembling and identifying who are suspects, prospects and customers and where they are in the funnel, and the numbers associated with those numbers, clearly outlines the road map to monitor and manage growth.

It takes patience, practice and precision to be able to do this automatically.  The more adaptive or fluid you are in meeting demands are going to allow you to pinpoint the when, who and how to focus on your grow and ability to flourish.  If you recognize how you will move and keep pace with your customers at their speed, not your own, will signal a mature organization with a clear understanding on who is their customer and how great the relationship can be.

"Pretend that every single person you meet has a sign around his or her neck that says: 'Make me feel important.' Not only will you succeed in sales, you will succeed in life."
~Mary Kay Ash


We are all getting busier, with less resources or personnel support while expectations are sky rocketing, attention fleeting while the need to generate more revenue is critical.

Like many of my Blogposts, there is a common theme evolving -- how organizations and sales professionals should collaborate to achieve BOTH of their objectives  while striving to gain  RESULTS.

A challenge is typically asserted on which accountability metrics are important to operations and sales.  Typically, for operations it is profitability and for sales it is revenue.  In order to drive revenue, sales professionals should have realistic activity mandated.  All top sales organizations have various activity metrics to ensure that even entry level sales reps can achieve some success.  There are a few factors that could be taken into consideration to establish perameters :
  1. Sales Cycle
  2. Geographic territory
  3. Vertical targets
  4. Cost of product or service
  5. Level of decision maker required
  6. Seasonal variables
  7. Competition
  8. Pre-Sales support
  9. Marketing program
  10. Lead time between sale and delivery
  11. Budget, plan, quota or target
I will get into the 11 points above in future blogs.  However, before you ask sales to meet the minimum activity metrics, after examing the parameters, your organization should next ask itself what tools or considerations are being taken into account to boost productivity or demand results.  For example:
  1. Training (Company provided or endorsed)
  2. Skill Level (Experience in sales or industry)
  3. Compensation (Commission versus salary plus bonus)
  4. Marketing Program (sales material, advertising or leads)
  5. Sales Timeline  (from sale, to implementation, to commission or bonus payment)
  6. Tracking Tools (CRM system, manual, activity reporting)
  7. Sales Management (Coaching, mentoring, meetings)
  8. Support (proposal template, clerical, analysts, diagnostics)
  9. Territory (geographical or verticle/by industry)
  10. Sales Budget
  11. Communication (customer service, computer, e-mail, wireless, cell phone or iPhone/Blackberry)
It is easy for organizations to hire and plunk sales reps in territory and cross their fingers that they've found a superstar.  Yet, without analysis of factors that could impact success or inability to provide the necessary tools it shouldn't be surprising there may be a  lack of results.

So, before you kick your rep out the door and ask him/her to sink or swim, examine what you are doing to facilitate their success?  After all, time is money!

Forecast, project or dart board?

There is much to be said about the debate amongst operations, service and sales regarding forecasts.  All have viable arguments or points of view.   Operations and service  need accurate forecasts to ensure they have the right amount of personnel, inventory and resources to support the sales efforts.   Yet, sales hedges on putting their name on a number.  All points of view need to create a balance  to manage success between the organization and its customers.

I have spoken to numerous entrepreneurs, executives, operations personnel, managers, sales reps and been on both sides of the table.  Even though I have been on the sales side longer, I favor accurate forecasting.   The reason is logically because I care more about delivering on promises to my clients than not getting it right or avoiding accountability.  I "get it" that operations is not a never-ending money train either.  The compromise is to come up with a forecast that balance everyone's needs.  It is also important to note that  it takes significantly more expense, resources and time to generate one new customer (something like 75%) than it does to keep existing customers happy.  Yet, most organizations spend a great deal of effort on winning new customers, especially during uncertain times. 

Forecasting is particularly critical if you are focussed on gaining new customers or when economic conditions are unpredictable.  Organizations are caught between laying off employees prematurely or out of panic, leaving themselves short when a customer does need the added resources or services available.  We know that scientists have confirmed that the chicken did come before the egg.  Forecasting is the chicken and needs to be in place before anything else can be established.  Every organization, with one employee or one thousand, needs to establish where their revenue will come from.  "Forecasting" is just that.   Very few organizations have the cash flow or can survive by what I call "Field of Dreams" mentality:  build it and they will come.

Even without sales professionals on staff, setting realistic goals on attracting and retaining revenue can determine the success or health of your business. 

Unless you are in a large corporate sales environment, the culture for forecasting tends to be less of a requirement.   Yet, from formulating or guesstimating best estimate on each sales professionals predicted revenue by year, by month or even by week will help operations and support their efforts.  It is sometimes called "accountability".  Many sales professionals are uncomfortable with this as they consider it will reflect badly on them if they are off the mark.  However, not assessing their own performance will likely restrict their success anyhow.  Here are a few suggestions I would offer:

  • Understand the full annual territory revenue value, then break down by customer, by month
  • Record the projected new customers by annual value, by month, considering purchase date
  • Assess percentage or ratio of revenue between existing customers and new customers
  • You can take last three months, projected next month that includes new customers, and same month from previous year.  Total all 5 months, divide by 5 to get a forecast amount.
  • Organizations should post results by week, by month or provide access by reps for cross-checking.
The above is a simplified formula to start with.  It is just as important to go back and track your success, boost or modify against actuals.  What I love about doing something like this is, it is just like golf -- you really are competing against your OWN score.  When YOU set the goal, YOU have more of a tendency to make it happen.  If you take it more seriously, you will assess your close ratio.  How accurate are you at predicting your own success rate?  Does it mean you have to make more calls to increase your success rate?  It can also prove to be one of the single most motivating tools you can have.  If your personal goals are aligned with your forecast, you will increase your chances of meeting/exceeding your forecasts.  (Remember that new car, a trip, house, marriage, baby, early retirement ..... etc.)

I won't dwell on it too long because I want to emphasise all the many advantages to forecasting, however, organizations can be their own worst enemy.  For example, they may project what the forecast has to be and then divide it amongst the sales team.  That projection could be based on operational expenses, factoring in commissions, and then profitability.   I can put forth my theory that many private organizations don't share the numbers on projections or post actuals because they don't want everyone to know those numbers ... in other words how much money the owners make.   Some share only lump sums or maybe only larger corporations emphasise profitability to leverage forecast requirements under a budget, target or plan.

What this all comes down to is accountability.  If you are a sales professional, you should have a handle on where your revenue will come from.  Sales reps should up the ante through increased activity if a customer or prospect doesn't come through.  Where the true value comes from is when you, after practice, become  more accurate with time, like golf.    Organizations would win by recognizing accurate forecasting.  Both sides benefit when there are real numbers to work from.  The customer wins the most by having the high level of service and product they envisioned. 

Accurate forecasting eliminates mistrust from sales who spin tales to save face or ease pressure of unachievable projections.  Organizations reduce buffering or stretching numbers.  If an organization feels they have to set the budget higher to stretch their sales team, then they may have a completely different issue to consider.  One might be to buy a dart board.

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