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Apr 25 18

We Get Sales Math Wrong! The Magic Is In The Numerator!

by David Brock

My apologies, I’m  doing a series of rants that are something akin to David Letterman’s Stupid Pet Tricks.  Instead these posts are about Stupid Sales Management/Marketing/Sales Tricks.

Sales and marketing are among the most measured functions around.  But having these metrics, knowing what they mean, developing and executing plans to improve performance and knowing what to do about them are not well understood.

Too often, we leap to the stupid answer, not to the answers that really turn the dials on performance.

Here are some examples, while they may seem laughable, they are real.  I’m not smart enough to make this stuff up.

  • The sales manager declaring to everyone on the team, “You need to have three time coverage in your pipelines!”  He does this because people always seem to use 3X as the coverage model.  It doesn’t make any difference that at least 50% of the team have win rates of 20-25%!
  • The manager then wonders why the team isn’t making their numbers.
  • Or the marketing/sales manager who declares, “We only got 15K opens on that last 150K email campaign!  We need 30K to get the volume of leads to feed sales.”  And then what they do is send out twice as many emails.
  • Or the outbound sales manager saying, “It takes 15 K dials to generate 150 good conversations.  We need 450 good conversations, so we need to ramp our dialer to make 45K dials!

So now I get twice as many emails and three times as many phone calls to ignore.

And I know when these marketing and sales managers see the upped volumes aren’t producing results, they’ll up them more.

See, math shows relationships, for example the relationship for between a numerator and a denominator.  But math often doesn’t give insight about the number that is produced.

For those of you who are mathematically challenged, the numerator is on top, the denominator is on the bottom (no, I’m not trying to get kinky). Here’s a little picture:

For example, if we win 33 out of 100 deals, the way the math works for our win rate is 33/100=  33%  (OK I snuck an extra step in on you, and converted the 0.33 to a percentage.  If you need a math tutorial, call me.)  If our win rate is 33% and we need to close 100 deals, we need 300 in our pipeline.  That’s where those coverage models come from.

Extending the same math to the phone example above, our conversation rate is 1% and the conversion rate on our email campaign is 10%.

Somehow, as we look at the volumes necessary to make our numbers, we treat those conversion rates or percentages as fundamental laws of nature  (kind of like the freezing point of water is 32 degrees F, 0 C, or 273.15 K).

I suppose we never challenge those ratios, because it’s hard work!  We have to really think about what drives those numbers.  It’s just easier to scale rather than change the ratio.

But the magic to productivity and performance is all in the numerator.  Changing the numerator for a given denominator really starts tilting all the numbers in our favor.

It’s hard work, it takes deep understanding of what drives success.  For example, outbound phone calls are very important to our business.  We continually refine who we are calling, how we engage, when we call…..  Rather than a 1% answer rate, we have 50%.  So, if like the previous example, we need to have 450 conversations, we only have to make 900 dials, not 45K!  Our win rates are in the 82-90% range.  So we only have to have 1.2 time pipeline coverage.  (You might be curious about how we achieve those win rates, we are vicious in disqualifying opportunities, focusing only on real deals in the dead center of our sweet spot with highly motivated buyers).

Ironically, when we don’t tear apart those ratios, understanding what really drives the result–when we just scale those same ratios to achieve the numbers we need, we have to work much harder to achieve the same results(45K dials versus 900!)

It isn’t too hard to understand how to tilt the ratios and numbers in our favor.  It takes a little thoughtfulness, analysis, and critical thinking.  It takes really understanding what works and what doesn’t work, focusing more time on the things that work.

Unfortunately, as simple as it is, too few take this time, so they are always struggling for results.

 

Afterword:  I’m sorry that I’m venting my frustration on you.  I’m just getting tired of simplistic math and thinking from too many “experts” on volume/velocity scaling.

Another afterword or intriguing fact:  Water actually doesn’t always freeze at 32 F, 0 C.  Here’s a fascinating explanation:  https://www.smithsonianmag.com/science-nature/at-what-temperature-does-water-freeze-1120813/  Think of it as a fun conversation starter at those networking events—“Hey, did you know water doesn’t always freeze……”

 

 

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Apr 25 18

Driving “Volume,” Are We Letting Form Triumph Over Substance?

by David Brock

John Gardner’s outstanding book, “EXCELLENCE,” published in 1961 has one line that has stuck with me since I read the book in college, “Do not let form triumph over substance.”

I think it’s important to reflect on this as we think about our customer engagement and our scaling strategies.

If we consider what customers are saying, customers want, in fact are hungry for substance.  They need help achieving their goals.  They want sales people who understand them, their businesses, their markets, their competition.  They want sales people who can teach them how to improve, who can challenge their thinking, who can help them figure out how to grow and achieve.

Countless surveys show customers want/expect that in sales people.  Customers search for answers, leveraging digital channels, peers, other sources.  Part of this is because of the increased availability of information resources and the ability to leverage them on demand, part of this is to fill the vacuum created by sales people not fulfilling this need.

Ironically, the majority of sales and marketing strategies are going in the opposite direction, particularly those who drink the SaaS kool aid, are are devotees of the mechanization of sales.

The mantra in too many sales and marketing organizations is about scaling and volume.

To some degree, I get it, to grow, we have to scale our efforts–we have to reach more customers, engage in more buying motions, and win more business.  That’s what businesses have been about ever since Eve set up an apple stand.

But in today’s world, volume and scale has taken a whole new dimension.

For example, not long ago, I was talking to some “experts” on Power Dialing.  They were citing statistics, “To get a couple of hundred conversations, you have to make 15,000 dials.”  The implication of this is figure out how many conversations you want and multiply the dials by 100.  (using 1% as the connect rate).

I suppose I was being impolite, but I asked, “5 years ago, what was the number of dials you had to make to get the same number of conversations?”  I noticed a lot of fidgeting, shifting eye contact, and nervousness.  I couldn’t get a specific answer, but I sensed it was significantly lower.

We see the same with emails.  Years ago, open rates and response rates were far higher than they are today, Email was an effective engagement strategy.  Today, volumes have skyrocketed, my in-box is overflowing.  Fortunately, I have filters that delete the majority of emails without me seeing them (and by the way, screw up marketing’s data because they show the email as opened–even though I’ve never seen it.)

This morning, I was astonished by a discussion thread in Modern Sales Pros.  The question was, “How do we scale handwritten notes?”  The discussion went to all sorts of technologies and solutions about how to multiply the volume by 100’s or 1000’s, all while having a “reasonable amount of personalization.”

Isn’t that exactly the opposite of the intent and power of handwritten notes?  The issue isn’t handwriting, it’s the deep personalization and the ability to connect with someone at a deeper level then we currently do.

Our marketing automation systems give us the power to segment and target our customers, delivering more relevant messages to each segment.  Yet, we don’t use that capability, even though we are paying for it.  Instead our marketing automation systems enable us to send ever increasing amounts of messages through increasing numbers of channels, to everyone.  And we buy more lists, to enable us to expand that volume even further.

We have research tools that enable us to have deep understanding of companies and individuals. yet sales people randomly dialing (or letting the power dialer connect them with someone), don’t take the time to research and think about who they are connecting with and how to best engage them.

We make it worse, by scripting everything they say, so we eliminate the necessity of having sales people that can think and figure things out.

The way we reach our numbers–our conversation objectives, our email opens, our click throughs, is simply by doing the math.  If we want to double the number of conversations, we double the number of dials.

And as we see the ratios plummet, we adjust the math, maybe we have to triple, quadruple, quintuple the number of calls, emails, messages, to double the connect/engagement rates.

The solution to every problem seems to be increasing volume, because that’s the way the math works.

But, few look at the numerator!  How do we increase the percentage of people responding to our out reach, regardless the channel?  Rather than 1% response rate on dials, how do we get 5, 10, 50 (In our company the response rate is often over 50%–so it means we have to do far fewer dials and emails to hit our numbers)?

The customers are telling us how to do this, they are crying out telling us how to do it.  Their actions and lack of response, shout volumes about how we are failing.

The answer is simple, they want substance.  They want knowledge, they want leadership, they want to be heard and to listen and learn.

Isn’t about time we paid attention to them?

Isn’t about time that we started to respond?

Some will say, we can’t afford to do this, the cost of selling is too high.  But we aren’t producing the results, and our costs are skyrocketing.  And every analysis we’ve done show that we actually have much better performance whether measured on a CPOD or CAC basis.

When are we going to start thinking about “substance” rather than form/velocity?

 

Afterword:  John Gardner’s book is a classic.  It’s very short, only about 162 pages.  It’s out of print, but you can find used copies at reasonable prices (I have an autographed copy of the first edition–unfortunately it’s “To Phil….”  😉  It has recently become available on Kindle.  It’s a foundational book on our society and culture, but has lessons for everything we do:  EXCELLENCE

 

 

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Apr 24 18

How Do We Broaden Our Thinking About Our Deal Strategies?

by David Brock

This morning, I was conducting a deal review with a very experienced sales person.  It was like many other reviews and the sales person was falling into the same trap that I see replicated too many times with too many sales people.

This trap is deceptive, seemingly it narrows our focus on what the customer is trying to achieve and how we respond, but too often, it limits our ability to compete and differentiate ourselves.

In this review, the sales person said, “there are two driving issues, all we have to do is address those and we win the deal.”  He went on to say, “The two driving issues are price (where have I heard that before) and our ability to do this [this changes for each of us].  I know we can achieve their goals with each of those areas….”

I see this pattern in too many deals.  Sales people are usually happy that they’ve identified these, and focus intensely on how they help the customer achieve them.

But in narrowing their and the customer’s focus too quickly, they fall into a trap…..

The competition is doing exactly the same thing!

For example, in this particular situation, there was an incumbent supplier.  I asked the sales person, “You know they already have the capability that meets the second requirement for the customer–they are already the supplier.  So what are you going to do if the supplier drops their price to meet yours?  Of the customer is also looking to other suppliers, what will cause the customer to choose you if any of the others match their needs, as well?”

In complex B2B buying, the critical issues for the customer will seldom come down to 1 or 2 issues.  Yet too often, that’s all we identify, and we err in our sales strategies in focusing on just those.

Perhaps we’ve asked the wrong questions, and inadvertently narrowed the customer scope.  For example, we always ask/obsess about the price question and tend to make that the most important thing the customer is considering, when it’s just one of many.

We may not have asked enough of the right questions to explore everything they are considering.

We may be focusing on one or two people in the buying group, assuming everyone in the buying group has the same needs/requirements/priorities.

The customer may not be able articulate their needs, they know them, but they don’t know how to or forget to express them.

Or the customer may be neglecting things that should be important to their decision and we need to educate them on those issues.

We improve our ability to serve the customer and create great differentiated value when we look at their needs and requirements in the broadest possible way.  There are things they haven’t articulated, or things they haven’t thought of that will/should impact their decisions.

We improve our ability to compete, when we have more areas in which to differentiate ourselves.  If the only criteria is price, then the only way we can win is on price.  But if they have half a dozen things they are trying to achieve, we have a greater basis to differentiate ourselves and win.

Too often, while it seems as though we have identified THE issue and we focus on that, we are doing our customers a disservice and we are seriously limiting our ability to compete and create value.

It’s always critical to engage our customers in helping them understand the variety of issues that should be important to their decision.

 

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Apr 23 18

Time, Our Scarcest Resource

by David Brock

We all know the single thing we cannot recover is time.  Once it’s passed, we can never recover it.  Most everything else, we do, we can recover from.  We can change our strategy if things aren’t going right, we can find new customers if we don’t have enough deals to make our number, we can change our proposal if customers don’t like what we’ve proposed, we can change our jobs, if we accepted a role we end up not being well suited for.

However, I’m always amazed with the casualness with which we treat our time.  There are all sorts of ways we demonstrate this.

For example, we never seem to find the time to plan and do things correctly, but we always have the time to do things over. or to recover from the errors we make.

Related to the previous point, we don’t prepare for meetings, failing to accomplish what we should.  This forces us to schedule another meeting to accomplish what we might have done in the first.

We waste time chasing bad opportunities, prospecting customers that aren’t in our sweet spot.

We waste endless amounts of time on social media, email, or anything that we might use as an excuse to avoid doing the things we should be doing.

We are constantly distracted, whether by our devices, or other things.

There’s no end to the examples of how we waste seconds, minutes, hours doing things that don’t contribute to our business, professional, and personal goals.

All the while, knowing that time we spend doing something ineffectively is wasted and can never be recovered–in fact the activities we try to take rob us of more time.

Time is our scarcest resource, yet we treat it so casually.

Sometimes, it takes an extraordinary event to catch our attention, to refocus us on how precious time is, and how casual we are about it’s value.

I was recently reminded of this in a very vivid fashion.  A friend was diagnosed with a very advanced cancer.  He had been through all the treatments and therapies.  None were successful.

He knows his time is limited–weeks, perhaps a couple of months, but nothing more.

Prior to this diagnosis, he was no different with the way he treated his time.  He wasted huge amounts of his time.  He would now say, he spent the majority of his time doing things that were a waste, rather than maximizing his impact or the quality of the time he spent on doing things.

His approach to time is very different.  He’s not trying to pack a lot of things in, doing more stuff in the time he has left.  In fact, from a pure activity level, he’s doing significantly less.

But his focus is on how he spends whatever time he has.  He’s more focused on the quality of each moment, the impact he can have on others and the impact others have on him.

He knows he doesn’t have much time, so he viciously focuses on how he spends the time he does have.

It’s a shame that it’s only in these moments, that we realize that time is our most important commodity.  It’s terrible that when it’s too late, we discover how much time we waste.  It’s tragic, when we choose not to do anything about it.

We waste hours of time every day.   We will never eliminate all the waste, but perhaps if we started doing a few things right, if we stopped being distracted, if we started being more protective of how other use our time and how we use it; we would achieve much more and we would be much more satisfied with what we do spend time on.

 

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