Tuesday, September 05, 2006

Tell me where the opportunity is

In yesterday’s entry, I mentioned that assigning win probabilities coupled with a sales process is counterintuitive at the individual salesperson’s level of responsibility. You can look at it as a very abstract, somewhat awkward way for the sales person to declare where the deal is.

Today, I will show you an alternative way on how to declare where an opportunity is. Not only is this alternative intuitive, but it is also is the foundation of much better reasoned and more reasonable forecasts. We follow thus the recommendation Thomas F. Wallace and Robert A. Stahl make in their book Sales Forecasting – A New Approach. Insisting on reasoned and reasonable forecasts allow you to hone the forecast process and reducing forecast error. They consider this a much better objective than just blindly strive for higher forecast accuracy. Tom Wallace actually tries not to use the terms Accuracy and Sales Forecast in the same sentence.

We also have seen yesterday that determining where a deal is, based on the activities a sales person has already carried out, has a high likelihood to induce bias into a forecast. You have probably heard and read it a thousand times. The sales process should match your customers buying process.

I would like to get a step further by proposing to segment the Leaking Sales Funnel - I introduced a few days ago - with milestones of the customer buying process. A possible sequence of customer buying milestones could be: 1, Customer has assigned a contact person who will help us to better understand the customers problem, 2 Customer has secured the necessary funds for a solution to the problem we try help to solve or we are directly connected to the person who has the authority and is willing to make funds available, 3. Customer has expressed that we have presented a viable approach to solve his/her problem. 4. Customer agrees that the value we provide outweighs the total cost of our solution, 5. Customer has declared that our Terms and Conditions are acceptable. 6. Customer has signed contract.

You probably agree with me that there are always opportunities that do not make it to next stage in the funnel. The milestones are thus also showing us the points where our funnel leaks.

You have your people now declare the funnel stage instead of the percentage probability we have seen yesterday. This is much more intuitive for them. All the sales teams I have taken through this transition have confirmed this. If you enforce the rule that your people can only move an opportunity to the next stage in the sales funnel if the conditions for the immediately preceding milestone have been met, you now have a much more robust base to derive your forecast.

With this Sales Funnel segmentation you, as a manager can also hold more meaningful discussions with your sales people. You start asking questions such as: “What is the most inhibiting factor for the opportunity to reach the next mile stone, and how can I help?” Instead of arguing why the deal has not been closed as forecasted. Managers have expressed that a Sales Funnel segmented by customer milestones turns out to be a good help for coaching their people. Is this not spending time more productive, than in some of stories I told you over the past few days?

By well using a sales methodology encompassing the dimension of milestones in the customer buying prrocess, you need not to be convinced about these benefits. If you have introduced such a methodology, keep the milestones prescribed there. Most of these methodologies also give you recommendations on how to probe for the evidence that a funnel milestone has been reached. For my taste some of those recommendations look a bit too bureaucratic and might tend to a Command and Control culture.

If you are thinking about introducing a Sales Methodology, have the potential vendors explain to you how it will fit with a Sales Funnel segmented by milestones of the customer buying cycle.

In the next entry I will show you to express leakage of the funnel in mathematical terms and then building a rudimentary Leaking Sales Funnel based Forecast

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