Some time ago, I was doing a deal review with a great sales team. They were preparing for an important call on the key decision makers of a customer. They deal, if they won, would have been huge–$10′s of millions. More importantly, it would have displaced their biggest competitor–the current incumbent in the account.
The customer was undergoing a huge expansion of their business–building new sites, all of which required massive investments in new solutions. The sales team had been invited by the customer to discuss what they could do. The customer was considering a potential shift from their current solutions to a different approach. In preparing for the meeting, they knew all the advantages they had over the competitor’s solutions. They could present a lot of data, they had a sound business case and value proposition. They had some insight into areas of dissatisfaction the customer had with their current supplier.
But they were struggling with figuring out what their real edge might be.
As we worked through ideas, I posed a question to the team, “If you were in your customer’s shoes, and could put aside all your passion and enthusiasm for your current solutions, what decision would you make?”
After a moment of silence and reflection, they stated, “We’d stay with the current supplier!” They went on to describe the risks of change, their familiarity with the current solution/vendor, some capabilities of the current solution, and cited, “The devil you know is better than the devil you don’t,” and a few other well thought out ideas.
Then I asked, “If the right answer is not to change, then why are they interested in talking to you?”
They paused, looked at each other, then said, “We don’t know.”
To be fair, they had some ideas, the customer had expressed some issues and problems they were having with their current solutions. They’d expressed real interest in some of the new capabilities my client’s solution could offer. They knew the customer wasn’t totally happy with what they were currently doing. But, given all that knowledge–and the knowledge they had of their own solution, the team still thought the best business decision was for the customer to stay with the incumbent.
And, despite all the meetings they had and information they’d gleaned, they didn’t know why the customer was interested in talking to them.
So the team screwed up their courage, and went into the meeting with one key question:
“If we were in your shoes, knowing what we know of your current situation and investment in the competition’s systems, we probably would continue to use those systems in your new locations. So why are you interested in talking to us about our solutions?”
Then they went silent.
The customer could have said, “You know, upon reflection, you’re right, it probably doesn’t make sense to change. Thank you for your help.”
But they didn’t.
In fact, it was as if the flood gates opened. Framing the question in that context caused the customer to open up in a way they’d never done before. They talked for over an hour about problems they were having with their current systems, challenges in the relationship with the current vendor, things they wanted to do, but couldn’t do easily with the current tools. They went on and on about the competition.
The team took notes, but largely stayed silent. They asked a few questions to probe and clarify, but mostly listened.
When the customer finished talking about the problems with the current vendor, They went on to talk about their perceptions of my client’s solutions. They discussed the things the really liked, things they had learned in researching my client and their solutions. A few concerns they had.
But most of all they described why they wanted to buy. They discussed what they needed to know, and what they needed to overcome to make a switch from their current solution to my client’s solution. They laid out, without really saying so, all the things the sales team needed to address to win the business.
As sales people, often we are confused about why a customer might change. We may be blinded by our passion for our own solutions (or making our quotas), so we focus on convincing the customer of our own superiority. But we may not be addressing the customer’s real issues or our opportunity to differentiate ourselves.
Every once in a while, it’s very powerful to put ourselves in our customers shoes and answer the question, honestly, “If I were the customer, what choice would I make?” If the answer isn’t your solution, then the most powerful thing you can do is pose the issue to the customer.
The worst possible thing that can happen is they can say, “You know you are right.” But that’s probably what we would have discovered at the end of a long and painful sales cycle, anyway.
More likely, particularly if they have invited you to participate, there are a whole number of issues they are struggling with, just waiting to tell you, if you just give them the chance.
If your solution doesn’t make sense to you, it will never make sense to the customer. But if they are asking you to compete, then there is something that’s causing them to be interested—find out what that is!
As for my client, the customer told them exactly what they needed to do to win the business. They won all the expansion business and are on the path to displace the competitor in the existing locations. So far, they’ve collected $159 Million and expect to do a lot more.
Before my non-US followers get in an uproar, I’m not talking about the revenue type of turnover. I wanted to spend some time discussing sales rep turnover. I worry too many sales executives spend too little time understanding turnover and it’s impact on the organization. Even worse, are those leaders who tend to think of people as commodities, churning through people continuously (but those folks are probably not reading blogs like mine).
Depending on the size of the organization and the level of turnover, it can be costing the organization $100′s of millions to billions each year. Several years ago, I met with the executives of a very large organization. They had notices 72% voluntary turnover of sales people in their first 12 months on the job. I went to the whiteboard, we made some quick calculations and discovered the minimum impact on their sales was $700 million each year—we actually felt the impact may have been over a billion. They were shocked seeing the number, fortunately, they decided to understand why and reduce it.
But I’m getting ahead of myself. Turnover–voluntary and involuntary—is largely a management, perhaps a mis-management issue.
Let’s dive into the issues. First, clarifying terms: Voluntary turnover is when our people choose to leave and go somewhere else. Voluntary turnover is particularly bad. People sometimes leave for better opportunities. More often, people leave because they don’t like where they currently are. They leave because of bad management, being poorly treated, they can’t be effective doing their jobs, they are underappreciated, they see no opportunity for growth or improvement, or simply because they are unhappy. Sometimes it’s our best performers, sometimes it’s not. Most of the time it’s because management has created an environment that people no longer want to be a part of.
Involuntary turnover, is where management takes action to terminate someone’s employment. Someone just isn’t performing as we expect. There are people that just don’t perform to our standards, despite everything we’ve done. We are doing the best for them and our company by firing them. But too often, it’s a management problem, we’ve hired the wrong person in the first place: we’ve not properly set expectations, coached or developed the person. High involuntary turnover is more a statement about management problems than it is a statement about bad individual performance.
Whatever the case for turnover, high turnover, voluntary or involuntary, is a huge problem for the organization. Most people don’t understand the true costs of turnover, thinking it’s really the recruiting and onboarding costs for the replacements. But those are most often the smallest part of the costs. The biggest parts come from lost opportunities, customer dissatisfaction, and morale issues within the organization.
When we have turnover, we have open territories. Customers don’t stop buying, they just aren’t buying from you because no one is calling on them. So all that money is going to your competition, and your competition is building deep relationships, growing their revenue from these customers over time. Customer dissatisfaction–either because they can’t get a sales person calling on them, or because they have bad sales people calling on them, or because they are unhappy with the revolving door of sales people calling on them is another source of huge losses in revenue. Even when you have a new sales person onboard, they aren’t fully productive, it takes time to ramp to full effectiveness–in the mean time customers are buying somewhere else.
This can be exacerbated by increasing morale issues in the sales organization. People being stretched thing to cover vacant territories. High involuntary turnover doesn’t mean those who are left are happy and productive–it just means they haven’t left–yet.
Overlay this with all the management time spent trying to deal with these issues.
Collectively, these costs accumulate, in large organizations they can be $100′s of millions or more. In every organization, high turnover—voluntary or involuntary is devastating.
Turnover is expected in any organization. There will be involuntary turnover, conduct exit interviews, understand why a person is leaving, honestly assess yourself and the organization to see if there are things you have to address to reduce involuntary turnover. There will also be voluntary turnover. Sometimes people just don’t fit–regardless how carefully we were in screening them. Maybe the business has changed and they haven’t.
Carefully examine voluntary and involuntary turnover–watch the levels of turnover, understand the reasons, be paranoid about the lost business/revenue opportunities from high turnover. Most of all recognize, a large part of the turnover problem has more to do with management than it does the individuals.
It probably sounds like heresy to talk about “Good Revenue” and “Bad Revenue,” particularly when you’re struggling to make your numbers and everything seems good. But that’s just the point, understanding what “Good Revenue” is, focusing on finding it, minimizing our time chasing “Bad Revenue” makes achieving the numbers much easier!
Now that I’ve thoroughly confused you, let me try to drive some clarity into the idea.
Good revenue not only provides you the cash you get from the specific deal, but position you to build upon that base, creating more revenue, more easily. That may come through follow on sales in the account, because we’ve created a very happy customer, but the more important impact is what it does for us in building our credibility, visibility, knowledge, and experience base in a new segment.
Let’s imagine we’re a brand new company launching new product. Our initial sales are very difficult. We struggle to create visibility, awareness and interest. Once we’ve found a customer, we have a challenging and long sales cycle. We have to demonstrate our knowledge and experience in the market and in solving similar problems—kind of tough when you are brand new. Additionally, regardless how well we have researched, we’re really learning on that first sale. We’re trying to understand the customer problems and how we really address those problems, we’re trying to figure out the sales process–who needs to be involved, key activities, triggers, competition, the buying cycle, all the things critical to closing a deal. So those first deals are tough, they take a long time, and demand a lot of attention from everyone in the organization. But we’ve been successful and closed the deal—we may have had to discount a little to get it, but we’ve closed it.
Now let’s think about the next sale into that segment. We already have the experience of that first sale under our belt. We understand a little more about what the sales process should be–thought it’s not perfect. We know a little more about the things we need to do to win, based on our experience with the first sale. We have “experience” in the segment–so we may be more conversant on issues, we may even be able to reference the first customer to add greater credibility. So the second sale is a little easier–it may take a little less time and resource, we may have not have to discount as much because we understand our value and can defend it better.
Then as we get our third, fourth, tenth, hundredth sales into that segment, our ability, our experience, grows. Through our increased experience, we are much more credible when we engage customers in the segment. We know how to best align our sales process with their buying process, our win rates increase, our sales cycles decrease, our margins, perhaps our average deal value increases. We start to develop a reputation in the segment, when we prospect, customers have heard of us, they know we are credible and can produce results, they are more willing to consider us as a solution provider. Customers are even approaching us, we aren’t having to find them, they know what we’ve done for others in the industry/segment, so they come to us.
By focusing our efforts within our sweet spot, we actually accelerate our ability to grow. Each deal enables us to more effectively and efficiently pursue other deals. This is “Good Revenue.” We not only get the income from the deal, but it builds our capabilities and experience to go after more, more easily/effectively.
By contrast, “Bad Revenue” is like reliving that first sale for every deal. Each deal is new, we have no experience—they are tough because our competitors are more established, they know how to get deals done, plus the customers know them. Each deal is so different, so it’s very difficult to build our experience base. Our win rates are, naturally, much lower. Our sales cycles are much longer. We have to invest more resource to win each deal, so the cost of selling (customer acquisition) is high–higher than our competition. Then to win these deals, we proably have to do all sorts of unnatural acts–particularly around pricing.
Imagine every deal being like this! It’s impossible to grow, we’re constantly starting from scratch.
Here’s the most counterintuitive part of all this. As sales people struggle to make their numbers, they tend to cast a wider net—reducing qualification criteria, chasing opportunities further outside our sweet spots. The more the sales person struggles, the further they look. What’s happening is they are actually doing the wrong thing, they are reducing their ability to win and make their numbers. Their win rates plummet, sales cycles increase, they struggle—so then they cast yet wider net—and the death spiral continues.
There are times when we choose to chase “Bad Revenue.” For example, if we are trying to expand our sweet spot, penetrate a new segment, we purposely go after customers far out side our sweet spot. But we do so knowing we will have to build our experience, credibility, and so forth–so we can get our first success, then start building on that, chasing Good Revenue in the new segment (the smart way is Geoffrey Moore’s bowling alley approach).
Individually and organizationally, if we want to maximize our growth and success, it’s critical to understand the difference between Good Revenue and Bad Revenue. We have to identify and focus on our sweet spots–consciously focusing on Good Revenue opportunities and not getting diverted by Bad Revenue opportunities. When times get tough and we are struggling, we have to narrow our focus and increase the intensity of chasing Good Revenue. We have to resist the tendency to chase every deal.
Do you understand the characteristics of your Good Revenue deals?
I get a lot of calls and notes from people genuinely interested in performance improvement. Often, it’s managers saying, “My team isn’t doing what they need to be doing,” or “This one person isn’t really cutting it.” Sometimes, it’s from sales people saying, “I know I could do better, but my [insert company, manager, CRM, tools, lack of training, even customers] are holding me back.”
It’s human nature to look at the barriers to performance improvement as external. We tend to think, “If only these weren’t in my way, I could do fantastic.” I’m not talking about the chronic whiners or those who don’t take personal responsibility — frankly, those people are a waste of my time. I’m talking about people who sincerely want to do better, yet somehow, doing better is based on external factors.
It’s always easier for us to see the problems, difficulties, challenges that impact us and our performance. It’s easy to think, if those weren’t there, we could do better.
But too often, the problem starts us. We’re not doing things the way we should. We’re not paying attention, we’ve got bad habits, we’ve fallen behind on our own learning, we’re not as disciplined or focused as we should be, we aren’t putting in the effort. We aren’t asking for and accepting help in changing what we do.
As we look to maximizing our performance, we need to start with examining ourselves and what we are doing.
As individual contributors: Do you have strong personal performance goals that you monitor to keep yourself on track? Do you know your personal “Healthy Pipeline Numbers,” is your pipeline healthy? Are you using your company’s sales process? Are you constantly looking to improve your win rates, reduce sales cycles, improve average deal values? Do you have strong deal strategies aligned with your customers’ buying processes? Do you have strong call plans that you execute? Do you create and agree on agendas’ for each major meeting with the customer beforehand? Do you create value in each interaction with the customer? Do you focus on the things most important and relevant to the customer? Are you helping the customer learn and improve their business, achieve their business and personal goals? Are you aggressively looking for new opportunities—within your accounts, within your territories? Do you set aside adequate prospecting time? Do you have a structured approach to planning how you use your time each week? Are you conversant in the key issues your customers face–as individuals, businesses, in their markets? Are you constantly learning and building your skills? Are you helping your peers and colleagues improve? Are you proactively involving your management and actively seeking coaching? Do you take personal responsibility for the results you produce, seeking to constantly improve?
As managers and leaders: Do you set a strong personal example for the work ethic and behaviors you expect of everyone in your organization? Are you spending time coaching and developing your people, helping them develop not only for their current role, but achieve their full career potential? Are you working collaboratively with them to help them put in place strong deal and territory strategies? Are you out visiting customers, helping your sales people move the deals forward? Are you leveraging the sales process and helping your team leverage it? Are you identifying and removing barriers that impact the effectiveness of your team? Are you recognizing and rewarding great performance among your people? Are you constantly looking for the best in all your people? Are you maintaining a strong list of qualified candidates to back fill potential open positions? Are you addressing performance and other problems head on–not avoiding them? Are you fighting for your people and customers within the organization? Are you developing your own capabilities as leader and manager? Are you looking for opportunities to constantly improve and develop—both your team and yourself? Are you actively engaging your own manager in your development?
These aren’t exhaustive, but they represent starting points for each of us, regardless of our role or level in the organization to constantly improve our own performance.
There are legitimate external factors that impact our performance, but top performers don’t let those slow them down. They find ways to deal with them and perform at the top of their profession.
They make no excuses and assign no blame, they just execute and perform!