It’s been a while since I’ve done one of the Performance Metric Friday posts, but a post from Chris Brogan stimulated this. I want to focus Deal Slippage.
We all know about deal slippage. We qualify a customer, we understand their buying process, we align our activities to complement their buying process, we set a Target Close Date in our CRM system. Time goes on, we get diverted, then get re-engaged, but because of that, the deal has slipped a little. We update the CRM. Our customer slows down, maybe they are diverted, maybe it’s just taking them longer than they anticipate, the deal slips again. We update the CRM.
This process repeats itself through the buying/selling cycle. Deals we thought would close this month slip into next month, then next quarter, then the next. The same thing happens, deal after deal.
It’s impossible for us to maintain any kind of pipeline or forecast integrity, if our deals keep slipping. Plus, the more a deal slips, the more it is at risk of just losing steam and disappearing. I see it all the time in pipeline reviews. I think the record was a review I did a few years ago–the client had roughly a 145 day sales cycle, this one deal had been in the pipeline for over 1200 days. The sales person insisted it would come in (later turned out the decision maker had left the company a year earlier–but that was a different problem).
If we are to maintain any pipeline integrity, we have to treat the Target Close Date or the customer’s Target Decision Date as sacred! Anything else can change, but we and the customer have to do all we can to maintain the integrity of those dates.
Project managers understand this really well. They set a Target Completion Date. They identify critical activities, milestones, target dates to that enable them to meet the Target Completion date. Basically, in doing this, they are building the project plan by working backwards from the Target Completion Date. As the project progresses, and things fall behind, they readjust their project plan-not changing the Target Completion date, but adjusting the activities and target dates to meet the original Target Completion Date. They may have to assign more resources, compress the time allotted for certain activities, do things in parallel, combine activities. They do everything possible to maintain the target completion date.
Likewise in selling, if we are going to maintain any kind of pipeline integrity, we have to keep the Target Close/Target Decision Date sacred. As our selling and the customer’s buying activities slip, we need to work with them, to adjust the remaining activities to achieve the Date we’ve both targeted.
But there are some critical things to achieve this. It’s impossible to do this unless we have a well defined selling process that’s aligned with the customer’s well defined buying process! Without these, both the customer and we are wandering aimlessly. We don’t know what’s next until we’ve completed the current activities—this is absolute death to any deal. If the customer doesn’t have a well defined buying process, then we create a lot of value by helping them define it.
Through this, we are essentially creating a collaborative project plan. So as things slip, we can collaboratively adjust the next activities to maintain the integrity of the Target Close/Target Decision Date.
Some of you should be questioning, “Dave, this sounds too seller centric. We’re pushing the customer too hard. Aren’t we supposed to be more customer centric?”
Absolutely! But here’s where the magic is. The customer isn’t buying to be nice to a sales person. The customer is buying to achieve a goal, they need to produce outcomes. It may be meeting their own internal target dates (for example a product launch or system go-live). It may be to meet commitments to customers. Whatever it is, any slippage in their Target Decision Date is deferring and reducing the goals they seek to achieve. As the decision slips, there is an opportunity cost to the customer. (Yeah, I’m sneaking that business value stuff in here too. If we don’t have a quantified business value and a goal they want to achieve by a certain date, then we’re all wandering aimlessly).
We’re interested in getting the order as close to the Target Close Date as we can. But the real issue is we want to help the customer to get the results and outcomes as close to the dates they’ve committed to their management! We want them to maximize the value they achieve from maintaining the integrity of their buying process.
We won’t be able to maintain the Target Close/Target Decision Date all the time. But if we and the customer have aligned our selling/buying processes, if we’ve established a goal, then as things slip we work backwards from the goal in adjusting our selling/buying activities.
Do this, you’ll be meeting more of your target close dates. More importantly, your customers will be achieving the goals they expected on the timeline committed to management!
Dave, in general I agree with you, but I’m less concerned about the target date (and deal value) at the top of the funnel. I think in the early days of a sales cycle it’s important to take a “best guess” on these two important data points that gets refined as the sales process unfolds. At some point, and for sure when the deal hits “qualified” status or the equivalent in the sales process, I agree that the numbers become sacred. One of the difficulties with making the numbers sacred earlier than that is that it often keeps the salesperson from entering the deal at all until they are sure of the outcome, which destroys any reasonable analysis of conversion rates and timing in the top of the funnel.
Great point Andy. I was a little sloppy with my definition of terms. It’s probably not reasonable to establish a target date or value until the deal has been well qualified. But after that, it’s critical to do everything possible to hit the goals. Thanks for helping to sharpen the discussion.
Dave (and Andy), I would add that the target date, especially if it is not clearly attached to a specific client deliverable, is pretty artificial. I guess it boils down to my observation that when most clients are trying to tackle a complex problem, their own deadlines are artificial. They might pick a date out of the air that seems reasonable, but as clarity of the problem being solved develops the date starts moving. In fact, if you are elevating awareness to senior leaders, the date will not be defined until right before the deal actually closes (well beyond the normal qualifying stage).
Would it be fair to say that the idea of pushing on a target date applies more to simpler, frontline and mid-level buying opportunities and not the more complex, senior-level buying opportunities?
Tim: I agree there may be a lot of uncertainty about the target date on the customer’s side, but isn’t our responsibility to try to remove that? Shouldn’t we, very early in the process, help the customer set some deadlines and try to achieve them as much as possible. I can think of dozens to hundreds of examples I’ve been personally involved in where meeting a target date is critical (in very large complex processes). For example, a semiconductor manufacturer introducing a major new product. Often, this involves major new processes, a new fab, new equipment, etc.–typically $5-10B in total investment. Making the projected launch is a complex process with thousands of decisions. Lack of discipline in any component (for instance process tool selection), significant target date slippage, is critical. The consequences of a big miss can be $100’s of millions or more. Think of critical components in a major product launch, a major new software system, a new manufacturing line, etc.
Look at it from another perspective. If we were executives of a company, would we accept our people making decisions on major projects when they got around to it, or would we ask them to commit to a schedule and hold them accountable for it. So in large complex buying opportunities, from a customer executive management point of view, having integrity in the buying process and purposefulness about making decisions is critical.
I recognize there may be some slippage, days even a few weeks. But in major projects, when slippage gets large the impact is very strong. I very current example, is a client working with a customer. Their customer had a major new product launch (consumer product). They needed to make the May-June product selection to be in retail stores for Christmas. That meant they needed to have the manufacturing line in place by a certain date, tested, and assured the line, and started production to meet the May-June decision period. My client had a 7 month lead time to build the machines and get them installed on the line. Despite all warnings and escalations from my client, the customer didn’t have good discipline in their decision making process. They ran out of runway, ordered too late. They missed the launch and missed the Christmas buying season. The got the product on retail shelves in March, but had $10’s of millions in lost revenue from missing their target date.
Too often, customers get lost in this process. It’s critical for us to understand what’s driving them and to create urgency around the purchase, not our urgency for an order, but their urgency for hitting their own goals.