How Well Do I Have To Know My Customer?
There are some interesting discussions about the amount of research required to prospect and engage customers. Inevitably, the search is for the right answer—or probably realistically, it’s “give me the answer I want to hear.”
The answer we want to hear is, “What’s the minimal amount of work I need to do to be able to contact and engage a customer?”
The reality is probably something more like:
- It depends, and
- Regardless of the answer, you have to do the work.
- And it probably all evens out in the end, meaning–there are no shortcuts.
That’s it, it keeps going back to doing the work–which is what so many sales people want to avoid.
I think we tend to look at prospecting research time incorrectly. We tend to ask the question, “Is it better to spend 10 minutes, 60 minutes, 2 hours researching a customer before I call?” We don’t focus much on yield, that is interested people at the end of that call, and the total yield for the total time invested.
While not research based, the prospecting effectiveness curve probably looks like the one below.
On the far left is the SPAMMER’s position. They have to send thousands to 100’s of thousands of messages to get one prospect. But clearly it works. There are enough people who want cheap drugs from Canada, who want to help liberate a few thousand dollars from an estate of a long lost relative in a Western African country, or who are looking for companionship from a young lady (or man) in and Eastern European country. These “marketers” don’t need high hit rates, Thousandth’s of a percent hit rate is sufficient to get the return they want.
At the other end of the spectrum, on the right, is Extreme Research. Perhaps the best incarnation of Extreme Research was proposed in Geoffrey Moore’s work on Provocative Selling a number of years ago. In this scenario, teams focused on a specific customer or opportunity. They did deep analysis into the customer, markets, and other areas. They analyzed financial and operational performance, analyzed competition, market trends, emerging disruptors and all sorts of other data. All with an attempt to know so much about the customer, their goals, strategies, and situations, that they were as knowledgeable or more so than the customer.
The challenges with this approach were the time and resource insensitivity. It had a dependency on access to lots of information and data. But the hit rates had the potential of being very high–not only in prospecting, but qualifying and ultimately winning deals. Many large companies leveraged this approach in going after huge deals, but the “overhead” made it impractical for lots of sales people to embrace it. The good news is these produced very high hit and engagement rates.
But there are diminishing returns. There’s a point where more research doesn’t produce that much better return on prospecting.
As sales people, we are looking at positioning ourselves somewhere between these extremes. Ultimately, the trade off is how many people do we have to reach and actually prospect and how much time do we have to/can we afford to invest in research.
There are those that do no research, often they fit into the smile and dial category. They may have a limited amount of knowledge of the customer. Their prospecting is based on a very high quantity of prospecting calls with very low hit rates. But clearly it works for them, otherwise, why would they continue to do it? The concern these folks have is, “Is there the quantity of people we can call that enable us to make our numbers in engaging prospects.” The exposure these people have is their competition doing something different. If their competition is more targeted, better informed, more impactful, then their hit rates and, ultimately, sales effectiveness are much better–they’ll ultimately overwhelm everyone else.
There are those that do lots of research, though not obsessive research, being well informed before they call a customer. Clearly they have to call fewer customers to achieve the same outcomes as their counterparts above.
What’s the right answer? “Do I do some research or a lot of research?” What that becomes, ultimately, is a math problem. Here’s how it might look at a gross level:
- Scenario 1: I spend 10 minutes to research each prospect and get 5% of them willing to talk to me further. So for every 100 calls, I spend 1000 minutes or about 17 hours to get 5 people to bite.
- Scenario 2: I spend 60 minutes researching each prospect and get a 30% hit rate on those. To get 5 people interested, I have to research about 17, spending about 1000 minutes or 17 hours.
In these examples, the number or prospecting “calls” I have to make to produce the same result in the same total amount of research time is very different.
Now here’s where it get’s interesting and magic starts. What if we can dramatically shift that curve in our favor, producing much higher yield per hour of research? What it the “researched” call produces much higher hit/engagement rates? If in case 2, I had a hit rate of 40%, I’d only have to prospect a little less than 13 people, spending 750 minutes or 12.5 hours in research, or a 26% improvement in prospecting productivity.
It gets even more interesting. What if you used those extra 4.5 hours to do more prospecting, you could prospect close to 5 more people, engaging 2 additional.
So for the same amount of time on research, 17 hours, one sales approach gets a yield of 5 people, a research based approach gets a yield of 7 people.
What we learn from this, is that it’s not just a matter of research–knowing as much as we can about the customer, but it’s a matter of targeting and the right research to produce much better results. Finally, it’s figuring the right prospecting strategies to produce the optimal results. Some considerations are:
- Vicious focus on our sweet spot. Too many people don’t know this or don’t focus on it. The further we are from our sweet spot, the lower our yield in prospecting. Our sweet spot requires rich research and understanding–marketing/product management’s job. It’s basically the ability to answer, “What problems are we the best in the world as solving?” “Who has those problems (by market, region, organization, persona)? The further we wander from our sweet spot, the faster our prospecting results plummet.
- What is the information that is most critical to engage the customer? If I’m selling enterprise software, knowing that my customer has red hair, green eyes, and is left handed is probably not very helpful. The “right” information varies based on solution, market, customer, persona, and so forth. So blind research is not useful, targeted research is what’s needed?
- How much information and data can we reasonably get? Deep details on consumers is difficult. It’s easier to get information on pubic than private companies. If we have had some involvement with the customer in the past, it’s easier to get more detailed and specific information. So our approach may be limited by how much in depth knowledge can we reasonably get on how many prospects?
- What’s the optimum amount of research needed to engage a customer? We can’t determine this until we have experimented with some alternatives to try to find the “not too little, not too big, the just right” point. We don’t have to know and share everything, we just have to share enough for the prospect to respond, “I’m interested in learning more.”
- What’s the addressable “prospect” market? This is actually a more of a business problem, and less a sales problem. But it’s important, because often unrealistic prospecting objectives are established, or we choose the wrong prospecting strategy. Do we have markets of millions, thousands, hundreds, or dozens? These set constraints on prospecting volumes and approach. We may not have enough prospects to achieve our numbers, so we have to find ways of driving higher yield for those prospects we can go after. For example, at one point in my career, my prospecting was limited to the 10th and 11th floors of 55 Water Street in NYC. There were probably 50 key people to talk to, so you can bet each prospecting call had very deep research. So, circumstance may force us into certain prospecting strategies.
- How do we prioritize our prospecting time and maximize our effectiveness? The results from the above may produce thousands of prospects, and the right research, but as a sales person, I want to reach those with the highest propensity to buy, so things like trigger events become critical in prioritizing prospecting time.
There are those that don’t want to put in the work or research, saying, “Let ‘er rip, just pick up the phone and call.” But we’ve already seen that can consume a lot of time, providing poor results. Clearly, the leverage is on finding the right mix of these elements that maximize our ability to get the highest yield in the shortest amount of time is critical.
What’s right for your company? Well that depends, but you have to do your homework. Setting an arbitrary number, exhorting sales people to pick up the phone is senseless. The goal is to maximize your engagement rates, so it pays to experiment to understand the appropriate amount of research required to optimize the yield. Once we understand the optimal balance of time/research, we have to provide our sales people the training, tools, systems to execute as effectively as possible.
There’s some good news, allowing us to have higher impact prospecting programs with just the “right” research. Marketing automation tools, improved content, analytics all help us target the right people with the right information. These tools can provide us the right leads, at the right time, with the right information. In a project with a major financial service company, we were able to leverage analytic insights with information in their CRM system to move “platform officer” first call hit rates from less than 20% to 80+%. The research simply was better informing them about what to talk about (e.g. mortgages, loans, credit cards, savings accounts, etc.), based on intelligence about the consumer on that day.
Again, all these tools help us have deeper knowledge and insight about the most relevant prospecting conversations, but significantly reduce the amount of research required to have that knowledge.
What’s this mean for sales people? You’re probably saying, “Dave, you just don’t understand, this takes too much work?” I guess my unsympathetic response is, “You still have to do the work! Do you want to be smart about it or are you willing to waste a hell of a lot of time?”
The final observation is, there is no magic. We have to do our homework, organizationally and individually. We have to understand our customers, we have to understand how to best connect with our customers, leveraging what we have available. Then we have to do the work, whether it’s to 100, 17, or 13… we still have to put in the hours and do the work.
There are a couple of other views on this topic that you should look at. Clearly we agree in some areas and disagree in others, but they are great posts that can add to your own thinking about the issues:
- Mike Kunkle’s: What Are Sales Nuances & Why You Should Care
- Anthony Iannarino’s: The Minimum Effective Amount of Preparation to Prospect
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