article | August 22, 2011
Sales Process Metrics Exceed World-Class. What Went Wrong?
How can exceptional sales process metrics be a cause for concern? Actually, there are at least 3 ways:
1. Diminishing Returns
The key to successful forecasting is precision – it’s essential to have clear visibility to the order dates and dollar values for the deals in the pipeline. Forecast Accuracy for world-class B2B sales organizations generally ranges between 70 to 75%.
How can it be bad to exceed World-Class? 80% accuracy should enable leaders to make better and bolder decisions. That is true. But there is a cost associated with exactness. The source of forecast information is the sales force, and their primary job is to persuade prospects to make purchase commitments. If they are distracted with frequent requests for forecast updates – especially if the requests come with a separate spreadsheet, the accuracy may be high, but fewer deals will close.
The zeal for accuracy can also negatively impact managers who aggregate the data, spending time on update calls, leaving less time coaching their reps and interacting with customers. Rely on a central data source and prohibit ad hoc reporting. This increases pressure on CRM data integrity but ultimately allows the sales force to concentrate their energy on closing business.
2. Going Too Fast?
How many days should it take from the first sales call until an order is entered into the system? Certainly it varies by factors like industry and market, but sooner is always better, right? Well, it turns out not to always be the case. One of our recent benchmark studies identified two B2B sales regions with cycle times that were 25% to 35% slower than the other regions in their sales organization. Interestingly, the two laggard regions performed very close to “World-Class” averages. What was holding them back compared with their peers?
Surprisingly, the revenue and margin numbers of the two “slow” regions were equal or better than their faster peers. Deeper investigation uncovered a difference in the way they approached their market. Operating in less mature markets, the two regions could not rely on established channel partners to initiate sales opportunities. They had to take more leadership in generating opportunities directly. By engaging directly with customers, their cycle time metrics appeared to be slower.
The top-performing regions were completing sales cycles in 37 to 40 days compared with a World-Class average of 117 days. A realistic look at the buying process confirms that most customers need more than 40 days to complete a purchase transaction. The cycle time was short because the deals were already under way by the time they were input into the CRM system. Instead of encouraging the slower regions to speed up, the actual recommendation is for the “faster” regions to replicate the best practices of the slower regions and begin to engage more directly with customers ahead of the channel partners, which is important since many of the partners also represent competitive product lines.
3. Better or Just Different?
If more is better, then Average Deal Size is a good benchmark for improving product line performance. Or is it? A benchmark study that compared Average Deal Size found that revenue from one product line was equal to the other three product lines combined. A deeper dive into the details yielded two conflicting recommendations. Either replicate the best practices of the dominant product line to cross-sell and up-sell the other products. Or recognize that the four product lines are so different that each needs its own sales process and strategy to be successful against unique competitive and industry pressures. More research will soon determine the truth and set the appropriate solutions in place.
A frequent look at the dashboard is essential to maintain and improve performance. But be sure not to accept metrics at face value. Every gauge should have an upper and lower limit. Even with high gas prices today, wouldn’t you be alarmed if your gas gauge pointed beyond Full? Something is wrong. Benchmark analysis is the quickest way to generate more revenue and profit from high performance sales process.
© 2017 Sales Benchmark Index (SBI)
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© 2018 Sales Benchmark Index (SBI), B.V.
A Business Strategy Consulting Company
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Amsterdam, The Netherlands