Just moments after we passed out our binders, creating an impressive “thud” factor that represented the body of our work, one of the executives turned to me and said, “Paul, I’m sure this report is great. But can you summarize your findings in 25 words or less?” It was one of my first true tests as a consultant. I responded, “I can summarize it for you in three words: focus, alignment and consistency.” I went on to share how these three words captured the essence of what our many weeks of ride-alongs, interviews and sales analytics had found this sales organization needed. Now, fifteen years into my consulting career, I’ve learned how these same three words continue to serve as a guide for sales leaders regardless of industry or company size.
Focus: Focus increases effectiveness. But how can you ensure that your selling effort is focused on the right customers and opportunities? This requires analysis of the market to understand potential within existing accounts and new accounts. Most start-up companies get this. They know that A and B round investors need to hear a clear and logical case for how the company is going to succeed. It’s surprising how many large, well-established companies lose sight of this basic principle. In some cases the core product is doing well and growth relies almost entirely on penetrating the existing customer base. In other cases new customers are fueling the growth while existing customers are dropping like flies.
A simple yet incredibly powerful sales analytic for determining where sales people should focus comes in the form of a cool acronym: CPR, which stands for Conversion, Penetration, and Retention. This analysis breaks down a company’s revenue sources between new and existing customers and new and existing products. The client from 15 years ago was experiencing a 45% churn rate. In other words, they were only retaining 55% of their business from existing customers year over year. To realize growth they had to make up the remaining +45% through a combination of further penetration in the accounts that stayed and new customer acquisition. Our data showed that similar organizations could expect a customer retention rate closer to 75% for the commercial segment and close to 95% for enterprise. The CPR analysis created a rallying cry among the executive team for change. We did CPR analysis by segment, by product, by region, even at the rep level. This revealed a host of issues, which pointed us toward a set of recommendations around customer focus.
Alignment: Once you know which customers and products to focus on, you must align your selling resources and effort up against them. More recently I worked with a mid-size software company that felt paralyzed by their existing deployment model for fear that change would be too disruptive. Never mind that they might have five sales reps covering Florida and only one covering the entire state of Texas. This seems to be a common scenario. Clients struggle to change territory or account assignments for a variety of reasons (or excuses?) including a) fear of losing their top performing reps who have worked hard to earn the privilege of covering those accounts and might stand to lose commissions, b) fear of losing customers, who don’t want to deal with a new rep, even if a new one could serve them better, or c) the VP of Sales fear of change in general. Another simple yet powerful sales analytic is Workload Analysis, which evaluates the workload at the territory level using sales potential, number of accounts and sales time data. Companies that take the time to do this right and have the courage to re-align territories accordingly may have to carefully manage the changes, but can reap huge rewards as a result.
Consistency: Once sellers are focused on the right customers and products, a sales leader needs to lead the sales force to execute consistently. It begins with clear communication of goals and visibility of progress to motivate reps and drive accountability. Many sales leaders underperform and fail simply because they did not clearly communicate the goals or they communicate too many goals (see Focus). It’s also important to have a dashboard of metrics with both leading and lagging indicators to measure success on a frequent basis. The best leading indicators include pipeline quantity, quality and velocity revealed through detailed Pipeline Analysis. The best lagging indicators are sales productivity (revenue per head) and quota attainment, examined with careful Performance Analysis. The Alexander Group recommends that a healthy sales force is one in which 55% to 60% of the sales force is at or above quota. If the number is much lower or much higher there is reason for concern and deeper examination. Either the sales force is not properly focused and aligned, has too many poor performers, or has major issues that are outside of sales’ control or influence.
If your sales organization is struggling, maybe starting with a few simple questions about focus, alignment, and consistency will help point them in the right direction. The Sales Benchmarking and Analytics team can help.
Contact us to learn more about a host of sales analytics here at AGI, as well as an up-coming Sales Analytics Certification Course we will be offering later this Spring.
Stay focused (and aligned, and hopefully consistent too)!
Original author: Paul Vinogradov