Archive for the ‘sales process’


Battling the 57%: From Sex to Romance – The Ultimate Flank

Don’t be put off by the title. This might not be what you expect.  And sometimes that’s the point.

There is a lot of nuance behind the 57% statistic – the CEB research that says buyers are 57% through their purchase cycle before they contact a supplier – and there are things you should do before, during, and after, the 57% point, if indeed this applies to your business.  (I promise I will get to the romance shortly.)

I think it is important to reflect on what the 57% really means and the limit of its impact. It is getting a little out of control. (I have organized a webinar on March 25 to dispute/clarify/de-bunk/resolve a few of the myths.)  What is obvious is that you want to be in a position where you can educate the customer before they get to the 57% point. But let’s say that your buyer has indeed progressed 57% through their buying process before they contact you.  What do you do?

If the buyer is 57% through the cycle, then they will most likely have a preference for someone. If it is you then you might have a short sales cycle. Perhaps their search has been truly unbiased and you are now part of a short-list. But if their preference is for a competitor, you will need to change the criteria they have used to get this far.  Redefining customers’ purchase criteria is one of the most powerful ways you can wrest leadership from a competitor.  In the TAS methodology we refer to this a Flanking Strategy – and that gets me to a story I read in the December 2013 issue of Harvard Business Review.

From Sex to Romance – The Ultimate Flank.

Pfizer launched Viagra (the erectile dysfunction drug) in April 1998, with a record 600,000 prescriptions in that month alone at a price of $10 per dose. Pfizer created an entirely new market on the basis of one key criterion of purchase: efficacy. The drug got the job done! By 2001 annual sales had reached $1.5 billion.

Not long after that Cialis entered the market. Whereas Viagra was effective for four to five hours, Cialis lasted up to 36 hours, making it potentially much more convenient for customers to use.

At the time, the key criteria that physicians considered when prescribing were efficacy and safety with a combined relative importance of 70%. Duration had a relative importance of 10%.

The marketing team behind Cialis decided to emphasize the benefits of duration—being able to choose a time for intimacy in a 36-hour window, and set the price higher than Viagra to underscore its superiority.  The new criterion of purchase – marketed as romance and intimacy rather than sex – caught on. A BusinessWeek article reporting on an early positioning study stated, “Viagra users who had been informed of the attributes of both drugs were given a stack of objects and asked to sort them into two groups, one for Viagra and the other for Cialis. Red lace teddies, stiletto-heeled shoes, and champagne glasses were assigned to Viagra, while fluffy bathrobes and down pillows belonged to Cialis. In 2012 Cialis passed Viagra’s $1.9 billion in annual sales, with duration supplanting efficacy as the key criterion of purchase.

Flanking – redefining customers’ purchase criteria – is one of the most powerful ways you can wrest leadership from a competitor; you will undoubtedly have a powerful competitor if you truly only enter the deal 57% of the way through the process. To flank successfully you need something to flank to (i.e. your competitive UBV that the customer cares about) and someone to flank with (i.e. a supporter with the buyer’s organization who will help you navigate the last 43%).

I will discuss this and ways to avoid the 57% trap altogether on the webinar. I would love if you can join the conversation.

 

 

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7 Principles for Successful Sales Leadership

One of the perks of my job is the interaction I am privileged to have with so many great sales leaders. During the beta phase for a new solution we just launched (to help sales managers understand the potential vulnerabilities in the sales performance of their teams), I had more intensive interaction than usual with a number of sales leaders.  Going beyond the challenges of the front-line sales manager, which is really the problem that Dealmaker Sales Performance Insight helps with, I was struck by some common principles that seem to be consistently applied by those sales leaders who are at the top of their game.  Here is my synthesis of those conversations.

1.    Lead with Purpose:  Your team cares less about what you are telling them to do, but more about why you are asking them to do it. With a shared understanding of where you are headed together, you can more easily collaborate and communicate.  If you can articulate a higher purpose than just hitting the targets – they know they have to do that without you telling them – they will understand the ‘why’ you are taking the direction you are taking, and that is always more powerful than the ‘what’.  When ‘why’ is understood, the team has a better chance of figuring out the ‘how’.

2.    Set High Standards – Hold Everyone Accountable:  Inspire your team to execute to the best of their ability – every time. Every single internal and external interaction matters.  It reflects on your values if you let poor practices develop without instant intervention. Slow response to a customer, casual email communication, bad manners to internal colleagues, poor quality proposals to customers, or arriving late or unprepared to a meeting, all let you (and the whole team) down.

3.    Write the Plays – and then Play them Right: Sales strategy is relatively easy. Constant execution and sales discipline is harder, and separate the great from the mediocre.  From business development through follow-up after the sale, the overall sales process (or go-to-market strategy) will contain milestones, trigger points, best practices, disciplines, and specific recommended tactics. Writes the plays, and then ensure that they are rigorously adopted, every day.

4.    Be the Role Model: As a sales leader you will undoubtedly have other things on your plate distracting from your core task. De-prioritize these time thieves.  Spend your time on exhibiting to your team how you are holding yourself accountable to the high standards that you have set.  Lead from the front. Execute your plays. Remember, you are in charge.

5.    Be Prepared to Rebuild: If you don’t have the team you need, you must be prepared to re-build. Always be recruiting and building a bench. Just like nurturing prospects for future business, the sales people that you want to hire are probably not immediately available the first time you connect with them. Start the conversation early.

6.    Prepare to Win: Winning doesn’t happen by accident. It usually happens when you are better prepared than your competitor.  Methodology helps, but systematic planning will equip you to deal with situations that arise without warning.  Deal reviews, account plans, sales process refinement, smart sales software, are tools you might use. Once the game starts they are usually on their own and it is then too late to help your team.  You need to prepare them in advance to win.

7.    Embrace Change Methodically:  The business world continues to evolve. Buyers change. New competitors emerge. Economic stability fluctuates.  Responding to change is never easy – particularly when things are already going well. When things are going badly you might feel the need to press the restart button. In either case you must accept two constants; (1) you need to make this quarter’s number working with what you have today and (2) what you have today will need to change just in time to serve your needs tomorrow.

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What to do when “No Decision” is not in the customer’s best interest

I have written before about the only two reasons that you lose a sale;

  1. You should not have been there (chasing this particular opportunity), or
  2. You were outsold.

I know I have fallen at both of those hurdles.  Sometimes being outsold means you lost to the dreaded No Decision.  In fact according a report I read from CSO Insights this is happening 26% of the time. Ouch!

Now in most cases when the customer is making No Decision they are in fact making the right decision. They will have objectively evaluated the project, and decided that this particular project did not reach the required threshold of return, or was not as important as another more pressing initiatives.

But in some cases they are just afraid, and No Decision is taking the easy way out.  This No Decision will often be accompanied by phrases like; “I don’t think we have the right team in place to implement this project now”, “We need to learn to walk before we can run”, “I’m not sure the team is ready to embrace this amount of change.” In truth they are just afraid.

They might be afraid of making an investment for which they will be held accountable. They might be afraid of something that is new. They might be afraid of change. They might be afraid of upsetting the status quo lest it might threaten their own status.

In these cases they are not in fact making No Decision, they are making a decision not to fix a problem that is broken. They are taking cover in the status quo where they are less likely to be seen as the instigator of something that went wrong. Sometimes that is a consequence of organizational culture – and in other cases it is  individual responsibility being abbrogated, denied, or ignored. But, is it your job to tell them?

I’ve written before that ‘A bad buying decision usually has a greater impact on the customer than a lost sale has on the salesperson’.  I believe that to be true, and I further believe that it is the sales person’s responsibility to tell the customer if they think the customer is making a bad buying decision. It is part of delivering on the trust that you’ve tried to earn.

In all of this post I have assumed that there was a real problem that the customer wanted to fix, the issues were identified, you were speaking the people who had the power to make the decision, and you had developed a joint vision of the desired end-state.  Then the customer got cold feet.

But how do you tell the No Decision customer that they have made the wrong decision – without it appearing as mere sour grapes, or that all you care about is selling them your solution?

  • First, be honest to yourself and about yourself. Acknowledge that you have failed to provide enough evidence to the customer to make them comfortable to make a positive decision.
  • Second, restate the problem you think the customer was trying to solve and the impact of No Decision
  • Third, withdraw from the sale, pointing out that this maybe the impetus for the customer to act (and maybe buy from your competitor.)   This is in the best interests of the customer. Maybe you’ve nothing to lose anyway, but that’s not the point. The point is that you must maintain your integrity.Your initial contract with the customer prospect was to help them solve their business problem.  That’s where you started and that’s where you should finish.

You have two other alternatives to this approach. (1) You can do nothing except walk away and lick your wounds. That serves neither party well, or (2) You can seek other (perhaps more senior) people in the organization who will reverse the No Decision made by your contact – but that’s the subject of another post.

I’d love to hear your thoughts. This is not a simple question.

 

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10 Things Every Sales Manager Should Know About Sales Performance (Infographic)

Thanks to our friends over at Work.com for helping us with this infographic.

10 Things Every Sales Manager Should Know

 

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The data in this infographic is based largely on the Dealmaker Index Global Sales Benchmark Study.

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When is your Win Rate not your Win Rate?

It seems pretty simple at first, but calculating your Win Rate is not as straightforward as it might appear. In most cases sellers will think about their Win Rate as the number of wins as a percentage of the number of opportunities that were pursued. But that doesn’t tell the full story.

Let’s say I am working the four deals listed here.

  • Deal A: $20,000
  • Deal B: $10,000
  • Deal C: $40,000
  • Deal D: $30,000

Scenario 1:

In this case the results of the four sales cycles are as follows:

  • Deal A: $20,000 – WIN
  • Deal B: $10,000 – WIN
  • Deal C: $40,000 – LOSS
  • Deal D: $30,000 – LOSS

I win Deal A and Deal B, and lose Deal C and Deal D.  Win two. Lose two.  That may be viewed as a 50% Unit Win Rate.

However, when we add the values of the deals, we get a different result.  The aggregate of A and B is $30,000, where C and D together to a value of $70,000.  On a value basis this translates to Value Win Rate of 30%.

If you look at your pipeline as a predictor of future revenue, using your win rate, as factor of value, then you should consider the difference between Unit Win Rate and Value Win Rate.

 

Scenario 2:

But while deals of a similar profile generally follow a similar sales cycle, it is rarely the case that a group of opportunities will all start and finish at the same time.  Time itself is the added dimension.

In this scenario, only three of the four deals close in the time period we are measuring.

  • Deal A: $20,000 – WIN
  • Deal B: $10,000 – WIN
  • Deal C: $40,000 – OPEN
  • Deal D: $30,000 – LOSS

Once again I win Deal A and Deal B, and lose Deal D, but the sale cycle for Deal C has not yet come to a conclusion – or, as is equally likely, I have actually lost Deal C, but have not recorded it as lost, or I just have not realized that I have lost it.

With two wins and one loss, you could argue that the Unit Win Rate is 66%. Following this logic, the Value Win Rate would be 50%, as the total of A and B is $30,000 and the value of D is $30,000.

But what about Deal C?  Can I ignore the fact that I have been expending resources on this deal that has yet not be completed?  I think not.

Whichever path you take to measure Win Rate, you need to do so with your eyes open, and focus not just on the headline Win Rate number, but what it means to understand the patterns in your business.

At The TAS Group, we have extensively researched how companies measure Win Rate and what this number means to them. Those who use Dealmaker appear to have a much deeper understanding or their win rate and how it plays into their overall sales velocity equation.  In addition we have learned that in addition to the variables that play into the two scenarios outlined above, it is very important to be able to measure win rate from different positions in the pipeline.  We tend to refer to this as Pipeline Conversion Rate; i.e. the conversion to win from stage X in the pipeline.  The value of this approach is a deeper understanding of the value required in each stage of the pipeline to ensure you have adequate coverage to enable you to attain future revenue goals.

As with other sales performance initiatives, the key thing about measuring Win Rate is that by first understanding the questions you want to ask, and applying the appropriate tools to help you uncover the metrics that matter, you can get a clear picture of the problems you have to solve.  That’s always a good place to start.

 

 

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12 Elements of a Great Sales Playbook

The implementation of a sales playbook can be one of the most impactful initiatives for any sales organization. There are two reasons for this tremendous ROI. First, by following some simple guidelines, it can be a remarkably easy initiative to implement, and second, research shows that this results in 33% additional revenue.

We have done hundreds of Sales Playbook deployments with Dealmaker Smart Sales Playbook. Here are the 12 Elements of a great sales playbook that you should use to guide your implementation. 

1. Repeatable Winning Sales Processes

The key word here is ‘repeatable’. When everyone adopts the same sales process, there is a common language that is understood, not just by sales, but by the whole organization.  Recent research shows that while only 60% of sales teams have a sales process that is well defined, and well executed – those who do are 33% more likely to be High Performers*.

2. Customized to the Buying Cycle

Customers buy in lots of different ways; some purchases are guided by a single decision maker, while in other cases there can be a large buying committee. Some issue RFPs (health-warning!), others invite recognized suppliers to discuss their issues,  an increasing number learn in the Social Universe, and just a few remain with the incumbent supplier trading ‘the devil you know’ for potentailly more advanced or competitive solutions. Unless you visualize the journey the customer wants to take, you won’t be with them when they reach their destination.

3. Sales Tools in Context at Each Stage

At each stage of the buying process, salespeople need to employ just the right tools – at the right time to advance the sale to the next stage in the process.  A B2B sale is not a single event. In fact it is a collection of micro-sales events, each crafted to move closer to the eventual goal. Salespeople are busy and often don’t know which tool they need, where to find it or how to use it at the specific point in the micro-sale. Integrating sales tools into the playbook as part of the sales process is the solution.

4. Industry Sales Process Templates

It is widely accepted that tailoring your sales process to the specific needs of an industry will increase your chances for success. Third party industry sales templates are readily available from suppliers who have been tracking and analyzing millions of sales cycles.  That is the catalyst you need to get started.

5. Many Simple and Complex Processes

One playbook or sales process does not fit all.  Sometimes you are pursuing a brand new customer or a very large deal that demands a complex and sophisticated set of ‘plays’ to win the deal.  In other cases, the transaction might be quick,  one that suggests a diffferent rhythm. Your sales playbook should have the requisite intelligence to support that automatically and serve up the right playbook at the right time.

6. Process, Benchmarks and Insight

Benchmarking delivers many advantages for companies looking to improve the performance of their sales organization. Your playbook must capture those benefits, learn from them, and uncover inisghts that help you to drive your sales velocity.  When deploying a playbook, ensure that you have built in a capability that guides you to progress through these stages of evolution for your sales team.

7. Team Visibility for the Sales Manager

Being a front-line sales manager is one of the hardest jobs in sales.  It is also the critical link in sales.  Unless the sales manager has with all the tools he or she needs to easily manage the business, the whole performance of the sales organization suffer.  You need to provide them with the ‘Easy Button’.  Sales playbooks are often designed just with the sales person in mind.  Remember that the sales manager is the critical link.

8. Integrates with CRM System

This one should be a ‘no-brainer’. The playbook must integrate tightly with the CRM system so when the sales person works with an opportunity, the playbook will always be present, just where it needs to be.  That way the playbook (if it is smart enough) can react to the attibutes of the opportunity, like the size of the deal, or the products included in the opportunity record to present the right playbook for that opportunity. Complete integration with your CRM delivers the  optimum experience for the sales person, and provides sales managers with greater flexibility on how they view the data in the context of the rest of the business.  It is important.

9. Informs Sales Forecast Visibility

Salespeople spend about 2.5 hours each week on sales forecasting, and for most companies, the accuracy of sales forecasts leave a lot to be desired. To maximize the impact of your sales playbook on the accuracy of your sales forecast, there are two things to consider. (1) Does the sales playbook incorporate intelligence that objectively monitors the close date of the sale? (2) Does the sales playbook provide the sales manager with insight into deal vulnerabilities and risks in the forecast?

10. Motivational and Visual

There are only two reasons why an individual does not complete a task.  Either they do not have the competence, or they are not motivated enough  to do it.  Think about that – these are the only two reasons.  Your sales playbook should improve competence and increase motivation.  The competence piece is easily understood.

Motivation is a little more challenging. A study on What Motivates Sales People shows that, perhaps surprisingly for some, compensation is not the primary motivator. ‘Making Progress of Winning’ is ranked by sales people as the main reason they get up in the morning. To entice adoption of the sales playbook (rather than force compliance) your sales playbook needs to provide true value for the sales person – resolve that reward/effort equation, so that the salesperson gets more back from the playbook that they put into it.

11. Social and Collaborative

As B2B companies rely more heavily on social collaboration tools, some of the biggest gainers are going to be salespeople. Sales people who are the leaders in their organization are using social tools such as Chatter in Salesfore to improve collaboration in their own sales teams. Leading sales playbooks help by letting everyone ‘follow’ the plays, contributes to the conversation, and collaborate on the deal. The B2B world is constantly becoming more social and collaborative and you should ensure that your sales playbook accommodates this advancement.

12. Mobile and Cloud

Time is precious, and the sales person’s time is incredibly precious, both to them and to the sales organization looking to maximize the performance of their key quota-bearers.  Since so much of a sales person’s time is spent moving between A and B and back again, they should be equipped with the mobility to connect to their sales playbook allowing them to be responsive, productive, collaborative and consistent at any time, wherever they are. In other applications, mobile and cloud capabilities are being leveraged to facilitate access anywhere, anytime.  It must be the same with your sales playbook. Unless mobile and cloud are core elements of your sales playbook plan, the initiative could face severe challenges in a very short term.

 

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Sales Playbooks & CRMs – The Perfect Tango

I was speaking recently at a conference on Sales 2.0 tools.  During the coffee break after my session I ended up in a conversation about sales enablement and sales playbooks. The conversation got derailed for a while as one particularly active participant wanted to debate the role of mobile and cloud technologies in the future of sales professionals. Seriously? I am not sure I understand how anyone would feel the need to ask that question. In my opinion mobile and cloud are as certain a part of our future as death and taxes – but maybe that’s just me.  Anyway, I am getting somewhat off the topic.  I say ‘somewhat’ only because the sales playbook discussion took a turn, and the debate centered on whether it was essential that a sales playbook was integrated with a company’s CRM.  (As you may know, we have spent a lot of time on this because of the work we do with Dealmaker Smart Sales Playbook.)

Wasn’t it ok to have a defined playbook in a PDF could be linked to from a sales opportunity record?

Well, no!

For me that is almost the same as asking if it would be ok to have all of the contacts for an opportunity in a spreadsheet ‘linked’ to the opportunity record in the CRM.   It just doesn’t make any sense.

There are many facets to Sales Playbooks in general and this topic in particular – but I have addressed here the two most important that you should consider as it pertains to making sure that your sales playbook and your CRM system work optimally together.

1. Integration of Sales Playbook with the CRM System

This one should be a ‘no-brainer’.  Let’s say you use Salesforce as your CRM.  If that is the case, you are already asking your sales team to enter their opportunity information into Salesforce. If that is where your opportunity information is held, then that is where your playbook should be.  It must integrate tightly with the CRM system so when the sales person works with an opportunity, the playbook will always be present, just where it needs to be.  That way the playbook (if it is smart enough) can react to the stages of the sale, the attributes of the opportunity, like the size of the deal, or the products included in the opportunity record to present the right playbook for that opportunity.

But not all integrations are created equal. If you are on Salesforce, then the playbook will benefit hugely if it is ‘native’ on the Salesforce Platform.  Unlike other solutions that are linked to Salesforce, or just lightly integrated, this means that your data resides in the Salesforce Cloud, with the same security as Saleforce, the same performance as Salesforce, and all of the data captured within the playbook is inherently accessible to Salesforce reports, dashboards, and other applications. You do not have to worry about the security of a third party Cloud, the data transfer issues that occur with non-native solutions, or the reliability of a third party hosting infrastructure.

Complete integration with your CRM delivers the  optimum experience for the sales person, and provides sales managers with greater flexibility on how they view the data in the context of the rest of the business.  It is important.

2. Informs Sales Forecast Visibility

Salespeople spend about 2.5 hours each week on sales forecasting, and for most companies, the accuracy of sales forecasts leave a lot to be desired. In fact, based on recent research; companies who do not define and effectively execute a sales process have inaccurate sales forecasts 71% of the time! When success or failure is usually measured in margins far less than 25% – these forecasts are truly worthless. The good news though is that there can be a very strong causal connection between sales process and forecast accuracy.  In that same research study, it emerged that companies who did define and execute their sales process well reduced the level of inaccuracy to 33%.  That is a 200% increase in sales forecast accuracy.

To maximize the impact of your sales playbook on the accuracy of your sales forecast, it must be integrated with the CRM and you should consider.

  • Does the sales playbook incorporate intelligence that objectively monitors  or manages the close date of the sale? that is in the CRM? If you have built in the sales best practices, and your sales playbook can learn about the rhythm of your business, then it should be smart enough to help predict the close date of the opportunity, and identify for the sales person the difference between their opinion of when the deal will close, and a projected close date based on past behavior of winning sales cycle.
  • Does the sales playbook provide the sales manager with insight into deal vulnerabilities and risks in the forecast? It should be able to answer these very important questions: What’s in the forecast?  Are any of the reps counting on unusually large deals to make the quarter? Are all deals being worked? What’s closed? What’s projected? Which deals are moving quickly, and where are the opportunities that are stalled?

Your sales playbook when integrated with the CRM should help you to give those 2.5 hours back to the sales person, improve the accuracy of the forecast for each opportunity, and provide the sales manager with insight into the factors that will help her understand what she needs to do to make or exceed the quota for the team.

(Disclosure: My company, The TAS Group, is in the business of helping companies increase sales velocity using Dealmaker Smart Sales Playbook integrated with Salesforce.com.)

 

 

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Gartner: Cool Vendors in CRM Sales

Gartner just released their 2013 Cool Vendors in CRM Sales report and are selling it on their site for $495.  You can get it  here for free.

According to Gartner, the 2013 Cool Vendors in CRM Sales offer new technologies that improve sales performance and effectiveness. They use mobile, social, big data analytics and the cloud to help salespeople improve their selling skills and find new prospects. We are delighted to be included in the list of just three companies that made it through Gartners diligence.

Key Findings

  • Cloud applications combined with mobile devices (smartphones and tablets) are enabling salespeople to be more engaged in the sales cycle in real time at the source of the interaction with the customer, thus making them more effective and efficient in capturing, managing and updating information throughout the sales process.
  • Internal and external social network intelligence applications are emerging to assist salespeople with finding and developing new sources for lead generation and moving these newfound contacts and opportunities to a quicker close and with greater certainty.

Discontinuous, or sporadic, classroom sales training is approaching a fast demise; sales technology applications that help salespeople use sales methodologies and automate sales processes are showing great promise.

Enjoy the read.  You can get the report here.

 

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20 Facts about Sales Performance

At The TAS Group, we just recently completed a global study of sales performance.  The full report will probably be available by late April.  If you want a copy email me ddaly (at) the tasgroup (dot) com.

The statistics are pretty revealing – so I thought I would share them with you now.

  1. 33% of sales people made quota in the last reporting period

  2. Only 52% of sales people say they can access the key players for a sale

  3. 39% of sales professionals say they are not able to effectively uncover customer problems, and

  4. 35% struggle with designing customer focused solutions

  5. 59% of sales close as originally forecasted

  6. Sales forecast accuracy jumps to 76% when sales methodology is applied well

  7. When the Sales function contributes to company strategy, quota attainment is 15% higher than when Sales is not involved

  8. Quota attainment is 25% higher when Sales and Marketing are aligned, and

  9. Win Rate is 15% higher when Sales and Marketing work well together

  10. 59% of sales reps are good at opportunity qualification

  11. 32% of sales professionals do not develop competitive strategies for their opportunities

  12. When competitive positioning is part of a company’s sales strategy, revenue increases by 30%

  13. 44% of reps are able to maximize the value of a sales opportunity

  14. Only 36% can maximize the value of their key accounts

  15. Salesforce.com has the highest % of CRM users with adoption > 50%

  16. TAS has the highest % of methodology users with adoption > 50% (We are very happy about this!)

  17. When methodology is integrated with CRM sales teams are 35% more likely to achieve average quota over 75% (As you know this has been my mantra for a long time!)

  18. The #1 reason why sales methodology is not used is that only some people use it.

  19. 60% of companies use a defined sales process

  20. Companies are 33% more likely to achieve average quota over 75% if they use a sales process.

We have analyzed all the data that we gathered – and it was a lot – and some of the insights are fascinating.  We are looking forward to getting this finished and published to share.

As I mentioned above – If you want a copy email me ddaly (at) the tasgroup (dot) com.

 

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The Four Phases of Customer Evolution

There are only four customer phases, and all customers will be in one of these at all times.  There are many erudite articles written about the interdependence between sales processes and buying processes, but – being primarily focused on new customer acquisition – many miss a critical consideration; The Four Phases of Customer Evolution.

Customers go through three Growing Phases and one Dying Phase.  You should understand the phases and particularly the reason why customers more from the Growth Phases to the Dying Phase.  The critical thing is not just to recognize which phase they are in – that is fairly obvious – but to understand that if they are to become a customer, then they will inevitably morph from phase to phase.  It is only a matter of time.

The four phases are:

  1. Prospect
  2. Customer
  3. Loyal Customer
  4. Former Customer

The fundamental substance of all the management theory, strategic advice and best practice writings about customer management, key account management or account planning any should be to accelerate phase transition through the Growing Phases; phase 1, 2 and 3, and then decelerate the inevitable transition to phase 4, the Dying Phase.

 

Here are some facts to chew over:

  • The cost of new customer acquisition is 500% that of customer retention
  • Increasing customer retention by 2% equates to decreasing costs by 10%
  • Reducing customer defections by 5% can increase profitability by up to 125% (depending on industry).
Source (Leading on the Edge of Chaos – Emmet C. Murphy and Mark A. Murphy)

 

The Road to Customer Defection

Before you read the rest of this section, I want you to consider two different scenarios. Each is real, and I hope you will easily identify with them both.

Scenario A: In the first scenario you (or your company) are selling a product or service to your customer. This scenario should be real and should relate specifically to your existing company.  Stop and think for a minute about why prior customers have stopped doing business with you.

  • Why have they left you or your company?
  • What do you think are the top three reasons?
  • Write them down – now, before you play out the next scenario.

Scenario B: In the second scenario; you are the customer.  We might all be forgiven for thinking that being a customer is easier than being a supplier – but that is not always the case.

In this scenario you need to think about the last time you (or your company) decided to stop doing business with a particular source.

If you take a personal perspective on this, that source might be a restaurant, a clothing store, a hairdresser, an online bookstore, an airline, or an online community.   From the perspective of your company, the source may be your stationery provider, IT services supplier, sales trainer, telecommunication equipment vendor, or any one of the many other options.

Combine the personal and company perspectives (if you have both) and write down the top three reasons why you defected.

If you are like most people, the answer to Scenario A will start with price or product features, and the answer to Scenario B is more likely to be more focused on ‘how I was treated’.

The problem is that in the real world these two scenarios converge and the disconnect between what suppliers think and the opinions of their customers send their relationship hurtling from a Growing Phase straight into the spiral of the Dying Phase.

Why do customers leave?  The reality might be different than you think.

According to Rightnow Technologies (now part of Oracle):

  • 73% of customers leave because they are dissatisfied with customer service, but companies think just 21% leave for this reason.
  • Company thinks that nearly half (48%) leave because of price, when in fact, according to the customer perspective, this happens only 25% of the time.

The U.S. Small Business Administration and the U.S. Chamber of Commerce support these findings. According to their research:

  • 68% leave because they are upset with the treatment they’ve received (Customer Service)
  • 14% are dissatisfied with the product or service

Serenade your customer

You’ve abandoned me. 
Love don’t live here anymore.
Just a vacancy
Love don’t live here anymore

The lyrics here are from the 1978 song Love don’t live here anymore by Rose Royce, an American soul and R&B group who had a number of hit singles in the 1970s.  While the reference to this song might be a little contrived – I’m a sucker for musical references – the sentiment is well expressed and relevant.

If your customers leave you, it is because they don’t love you, and that is usually because they feel unloved.  The reason they don’t love you is usually because they feel you have abandoned them. If there is a vacancy – your competitor will rush to fill it, and your customer will inevitably become a former customer.

It is hard to accept that the reason your customers don’t love you is because you have underserved them. It is much easier if you can point to price or product features as the determinants of defection.  That hurts less because you can convince yourself that there is little you could have done about it.

Ask yourself this.  If you knew that the customer was going to move from a Growing Phase to the Dying Phase, and there was nothing that you could do about price or product features, what actions would you take to serve them better so they would stay?

So what are you waiting for?  Write down your answers – and take action now.

 

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