Over the past several weeks, I’ve spent a lot of time talking and corresponding with lots of people on forecasts. An article I wrote several years ago, The Most Used, Useless Metric In Sales has been republished in several venues–creating some discussion. With clients, with people in email (Adam, thanks for reminding me), and others, there have been lots of discussions about forecasting.
To be honest, I think we spend way too much time on forecasts. To my way of thinking, the forecasting discussion a manager has with the team shouldn’t last much longer than an hour each month–if that. But toward the end of each month, then again, at the end of the quarter, the intensity increases and person weeks are invested in finalizing the quarterly forecast.
It’s not that forecasts aren’t important, it’s just that we spend way too much time in the forecasting process. A large part of the time drain is simply because we are dealing with poor quality, inconsistent date about deals–which deals do we expect to come in, when, what’s our confidence in these deals, is it a “pinky commit,” a “blood commit,” will we bet our unborn children on the accuracy of the forecast. If we start with bad data, then we produce faulty forecasts, or we have to invest huge amount of time in getting the right data to have an accurate forecast.
Great forecasts start with several things:
- A sales process that each person uses rigorously in executing their deal strategies.
- A high integrity pipeline that accurately reflects where all the deals are in the buying process.
- Some level of buyer verification (ideally the Buyer Verified Forecast).
Let me dive into each in a little more detail.
A Sales Process That Everyone Uses: The sales process is the foundation to our ability to develop and execute winning deal strategies. A great sales process is based on our best practices in winning deals. A great sales process must do 3 things: Maximize our probability of winning, Reduce our sales cycle, Maximize our deal value/margin. If your sales process doesn’t do this, it’s time to go back to the drawing board.
The sales process enables us to align with the customer buying process. It allows us to know the critical next steps we have to take with the customer. It tells us where we’ve come from, where we are in the cycle, and the critical next steps. Without a sales process, we are wandering aimlessly, wasting the customer’s time, not creating value in every exchange, and not maximizing our ability to win. In projecting our ability to win a deal, we’d probably be better off rolling dice or flipping a coin. We are simply clueless, because we have no basis upon which to project when or if a deal will close, and the likelihood of us winning the deal.
High Integrity Pipeline: The pipeline is the collection of all deals a sales person is working on. Rolled up, it is the collection of all deals every sales person in the organization is working on. It summarizes where every deal is in the sales process, it’s projected close date, and the projected value of the deal. A high integrity pipeline shows great alignment between the target close date and where we are in the sales process.
We sales consultants have a deep dark secret. A lot of the so called “magic” we create is just cleaning the garbage out of the pipeline. I don’t know why sales people and managers aren’t paying attention, but it’s so easy to see. I don’t know how many pipelines I see where:
- A large number of deals have projected close dates that have long passed. Recently, I looked at a pipeline that was supposed to have been cleaned. 15% of the deals in the pipeline had close dates in the past, some dates were 6 months in the past. Is the sales person paying attention when they are updating their pipelines? Are the deals real? Have they been forgotten? Why doesn’t management catch it. It’s easy to find. All you have to know is today’s date, everything that has a close date before today’s date is suspect.
- Then there are the deals where the position in the sales cycle versus the target close date don’t make sense. Not long ago, I was looking at a pipeline for deals projected to close in the month–two weeks to go. The client had a 90-120 day sales cycle, and a large number of deals projected to close in the next two weeks were still in the qualifying stage. Sure, every once in a while, you get a deal that goes very quickly, but that’s rare. When, in this case, roughly 20% of the deal projected to close within 2 weeks were still in qualifying or discovery, I thought, “How are they going to compress the remaining 90-120 days and related selling/buying activities into fewer than 10 business days?
- Or you see the deals that died long ago, that no one has bothered to wash out of the pipeline–some that are projected to close any day now. A few years ago, I was reviewing a pipeline. The client had a 180-210 day sales cycle. 5 deals in the pipeline had been in process for over 1000 days. One was projected to close in the next 60 days. But when you looked at the CRM records, the last time a sales person had made a call on the account and decision makers was 700 days ago or more. Yet those 5 deals were still “alive” and cluttering the pipeline. In the review, I questioned the sales person who claimed one of those deals would close in the next 60 days. He claimed it was real and it would close within 60 days (none of his CRM records showed an update on the deal in the past 500 days.). I asked him to leave the meeting, call the customer to verify the project was on target, then come back and report to me. He came back in about 30 minutes later, I could tell what was going to happen by the look on his face. His “customer,” had left the company over a year ago. The deal had died, but no one had taken in out of the pipeline.
There are lots of other things that create integrity problems in the pipeline, but I’ll stop here.
We have no idea about our ability to make our numbers or develop an accurate forecast if we don’t have high integrity pipelines. I haven’t seen a pipeline that doesn’t have at least 20% garbage–some with as much as 70%. It isn’t rocket science to understand, all it takes is skimming the pipeline report that any CRM system provides. But for some reason, sales people and managers don’t pay attention to pipeline integrity. Why pay people like me $10′s of thousands to do something that each sales person and each manager should be doing in the normal course of their jobs?
Buyer Verified Forecast: We spend a lot of time trying to assess the probability of a deal. As I’ve written many times, most of our methods for assigning a probability are tragically flawed. Out of the box, every major CRM system assesses probabilities based on progress through the selling cycle. If the customer is qualified, we have 25% probability of winning, following discovery it goes to 50%, after proposing it goes to 75%, when we are in closing it goes to 85-90%. None of this measures the customer’s propensity to buy! None of this assesses the customer attitudes toward your solution versus the alternatives! None is driven by the customer urgency or ability to justify and get approval for buying! All these probabilities are based on where we are in the selling process.
We need to assess the likelihood of closing at a certain date, for a certain amount, based on the customer, where they are at in their buying process, how they feel about the alternatives, where they are in aligning agendas on their team, and their ability to move forward to a decision. I cover this more deeply in the Buyer Verified Forecast article.
What’s This Mean To Forecasting?
So the reason we waste so much time in forecasting is we aren’t doing the 3 things I’ve outlined above well. The information upon which we base the forecast is bad, inaccurate, or purely wishful thinking. So management in trying to uncover these go back and forth with sale people and with each other trying to second guess what reality is likely to be. Since they are dealing with such poor quality information, they add their guesses, contingency, and hedges in to the final commitments.
All of this is meaningless and a waste of time. It doesn’t improve forecast accuracy or quality.
If we do these fundamentals well, we have a strong base of accurate information upon which to build the forecast. With this, forecasting should not take a lot of time, yet they are likely to be far more accurate.
Finally, we have to be very careful about what the sales forecast is–and what it isn’t. Rather than repeat myself (making this already too long article, much longer), take a look at Sales Forecast Accuracy, Demand Planning, And Other Ramblings.
Additionally, doing these three things well helps us address a huge number of other sales performance/effectiveness issues–but I’ll save those for later.
In my last post, I outlined how buying has changed. I created a case for engaging our customers differently, more effectively. But what’s this mean for what marketing and sales actually do? How do we work, together, to engage our customers more effectively?
Marketing and sales can no longer work separately, but must collaborate in facilitating the customer buying process. Those things we relied on in the past—strong brands, great products, competitive price/value proposition are now table stakes.
Now the differentiator is the customer buying experience—how marketing and sales engages the customer together.
So what does this mean to marketing and sales?
- We have to be ruthlessly focused and selective about whom we chase. We can’t afford to cast a wide net, chasing every customer that fogs a mirror.
- Marketing, with product management, has to point sales in the right direction by answering two fundamental questions: What problems are we the best in the world at solving? Who has those problems and how do we find them?
- Marketing and sales must start engaging those customers in new conversations. The conversations can’t be about our products/solutions, but rather about the problems the customers are might be facing. We have to recognize these problems may be latent—that is the customer may not even be aware of them.
- Marketing facilitates these conversations through creating awareness, and visibility with target customers. Whether it’s content, thought leadership, participation in social channels. Marketing equips sales to have the conversations with customers through use cases, business justification tools, materials/training to help sales people have Insight Based conversations and other things.
- The conversations need be more focused—on role/persona, industry, company. Ultimately, we must move from conversations of one to many (e.g. advertising) to one to one –led by a business knowledgeable sales person.
- Sales must have the skills to engage the customer earlier and differently. They must be able to speak, as business peers, to executives about their markets, industries, competition, and business strategies. They must move beyond understanding needs, to creating awareness and compelling needs to change. They must have the organizational savvy/nimbleness to help the customer organize themselves, deciding they must change, and then helping them figure out how to buy.
- Together, we must ruthlessly focus on those customers and prospects in our sweet spot, not being diverted by others.
- Together, we have to offer leadership and differentiation through the entire customer buying process, including that time before they decide they must enter a buying motion.
The “new world of customer engagement,” has forever changed the roles of marketing and sales. “We catch ‘em, you skin ‘em” no longer works. Our fates and our work efforts are totally intertwined. Collaboration is no longer an option, it’s mandatory for our success. There is no longer the marketing process followed by the sales process. The marketing and sales processes are completely intertwined.
To be successful, we must work together, we have to be nimble and adaptable in handing off to each other, in adapting what we do to engage the customers more effectively.
Today’s marketing and sales teams begin looking a lot like top NBA teams. Each person on the team has their defined role—guards, center, forwards. We have plays and know how to run the plays. We know how to work together, how to get the ball down the court, how to pass the ball from player to player.
Most of all, we know how to be nimble and adaptable in the game. We know how to get the ball to the open player. We know how to get the ball to the person best capable of taking the shot (can we imagine that marketing might actually get the order?). Most of all, we know our success is based on our ability to work as a team!
This post originally appeared in SAP’s The Customer Edge.
We’ve all heard some variation of the same story: Two hunters are in the woods, they’re separated. All of a sudden one hunter runs by the other at top speed screaming his head off. He’s being chased by a bear. As he passes the other hunter he yells, “I caught him, you skin him!”
Sometimes that seems a perfect description of the relationship between marketing and sales. Marketing spends it’s time trying to create demand—any kind of demand. They “caught the leads,” it was sales responsibility to “skin them.”
But in this story, sometimes it seems marketing and sales are oblivious to each other. They’re each hunting bear, crossing paths, sometimes getting in each other’s way, sometimes blaming the other for screwing up the shot.
We sales people think “they” don’t care. We used to think that marketing’s criteria for a hot lead was the prospect had to “fog a mirror.” Later, the more cynical of us, thought, marketing didn’t care if the lead was alive or dead—for them, success was the lead, everything after that was sales responsibility. (We caught ‘em, you skin ‘em.)
Marketing would get upset with us, the sales guys, saying, “They never follow up, they never close the leads, they are missing all the opportunities. They groused at us sales guys for not closing out every lead—because that’s what they were measured on.
Occasionally, almost by accident, a lead would turn into an opportunity, sales would chase it, win it, there was momentary euphoria, the marketing/sales process worked.
But there were some things that marketing did we sales guys liked. They provided endless amounts of brochures, mostly meaningless, but at least in full color with lots of pictures. I used to fill my briefcase with them. It was always great to leave them with customers, sometimes, they were a great excuse to see customers.
Two functions, acting independently, marginally acknowledging each other, but mostly doing their own things.
This was, in too cases still is, the kind of odd co-existence between sales and marketing. We each kind of know we need each other. There were moments of great collaboration interspersed with long periods of ignoring each other.
Fast forward to today—much of the story is the same, but everything around us has changed.
All that stuff we used to do, that really didn’t work well then, isn’t working at all. Neither sales nor marketing is achieving their goals. Executive management is asking tough questions, usually focused on “what are we paying you folks to do?”
What’s changed? Well, it’s pretty simple, but since we are so focused on our products and solutions, we tend to miss it.
It’s the customer that’s changed. Customers have far different expectations, requiring us to engage them differently. Let’s look at some data:
- Research shows buyers are a minimum of 57% of the through their buying process before engaging sales people.[i]
- 46% prefer creating a short list of alternatives before making a decision to reach out to sales people.[ii]
- 77% of B2B buyers indicate they do not talk with a sales person until they have completed independent research.[iii]
- 78% indicate the number of people involved in the buying decision have increased. Average B2B buying group size is 5.4.[iv]
- With larger buying groups, it becomes more difficult to reach a decision, with the likelihood that No Decision Made of greater than 60%.[v]
- 67% of the buyer’s journey is done digitally.[vi]
- Yet 53% of customer purchase decisions are made because of their buying experience.[vii]
Confusing isn’t it!
Buying has changed! To effectively align with the customer through their buying process, both sales and marketing have to change the way customers are engaged. What we did before didn’t work very well, now it’s a recipe for failure—all while spending lots of money.
We have to change the conversations, we have to change how we engage our customers. We can only do this by working together. We can no longer think of marketing and sales as separate processes, but as tightly interleaved.
First, what the customer cares about is different. It’s no longer about us (if it ever was)—our products, services, and how wonderful we are. Instead, the conversations have to be about the customer, their business, opportunities and challenges they face and how we can help them improve.
Customers want to learn, they want to be taught. As popularized in the Challenger Sale, Insight becomes critical. Sales must now engage the customer earlier and differently. It’s no longer just finding a customer with a problem, determining their needs and requirements, presenting a solution. Sales must help the customer understand there may be new ways to do things, opportunities they are missing. We might be engaging the customer long before they even recognize the need to change.
Marketing is different. Relevant content, talking about the customer and their business is critical. Content must be relevant to the customer role/persona. It must be relevant to where they are in their buying process, helping move the customer as they become ready to move to the next phase, complementing or supplementing sales.
So, I’ve laid the groundwork for a new approach to engaging our customers. What’s this mean for how Marketing and Sales work together? Do we continue as we have—Marketing catches them, Sales skins them. Or do we change?
In Part 2, I’ll discuss more about what these changes in customer engagement mean to how Marketing and Sales are most effective.
This post originally appeared in SAP’s The Customer Edge.
[i] CEB Evolution Of Digital Marketing, 2012
[ii] 2013 DemandGen B2B Buyer Behavior Survey http://www.demandgenreport.com/industry-topics/demand-generation-strategies/2456-2013-b2b-buyer-behavior-survey-buyers-happier-but-still-waiting-to-engage-with-sales.html#.U20RfCbn9jt
[iii] 2013 DemandGen Buyer Behavior Survey
[iv] 2013 CEB Study On B2B Decisionmaking
[v] 2013 CEB Study On B2B Decisionmaking
[vi] Sirius Decisions (don’t have specific reference)
[vii] CEB, The Challenger Sale