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2013 Sales Performance Optimization – Sales Execution Analysis

Sales Performance Optimization:

2013 Sales Execution Analysis

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Table of Contents

2013 Sales Performance Optimization Study Introduction ................................................ 1

2013 Sales Performance Optimization Study Analyses ...................................................... 3 Ability to Understand Your Customer’s Buying Process ................................................... 5

Ability to Differentiate Your Offerings from the Competition ............................................. 7

Ability to Align Your Solution to Meet the Customer’s Needs ........................................... 9

Ability to Generate Accurate Configuration/Quote/Proposal ........................................... 11

Ability to Optimize the Size of Each Deal ........................................................................... 13 Ability to Sell Value and Avoid Discounting ...................................................................... 15

Ability to Close a Deal after Verbal Yes from the Customer ............................................ 17


© CSO Insights 1 No portion of this report may be reproduced or distributed in any form or by any means without the prior written permission of the authors.

2013 Sales Performance Optimization Study Introduction The data used for this analysis were gathered as part of CSO Insights’ 19th annual Sales Performance Optimization (SPO) study. As part of this research effort we surveyed over 1,200 companies worldwide, collecting information on over 100 sales effectiveness related metrics. A detailed breakdown of the survey participants can be found in the introduction to the 2013 Sales Performance Optimization Key Trends Analysis Topical Report. The following graphs reflect the aggregated results from the study participants. Advisory Services clients seeking segmented responses based on factors such as industry, company size, country, complexity of sales process—virtually every metric in the study—may obtain this information by contacting their CSO Insights Analyst.

Sales Execution Analysis Introduction

It is one thing to plan the work and another to work the plan. In this topical report we look at how well companies perform as they navigate prospects through the sell cycle. Before diving into this analysis, we want to present an idea that can help you leverage your sales successes and failures to optimize your sales organization’s performance going forward. Let’s talk about expectations. None of us would consider it unreasonable to tell the person in charge of product development to “debug the product!” We expect the company to deliver a product that meets the needs of customers, demonstrates reliability, competes with other offerings, and can be sold at a price point that generates a profit. How many of you make a similar request to the CSO of your company? In this case, we are talking about ensuring that sales teams utilize the right strategies and tactics, engage the right stakeholders, and motivate prospects to make the right purchase decisions, at the right price points, and right now. Best-in-class sales organizations constantly look for ways to optimize the way they sell. For example, they integrate the sales process directly into their CRM systems, which enables managers to actively track the status of each pursued opportunity and determine what’s working and what’s not. We benchmarked a variety of approaches companies use to debug their sales process ranging from simple to complex. If this is a new concept, our recommendation is to crawl, walk, run. Start with a task or process you can easily implement, see what insights and knowledge it generates, and improve upon the process over time. One software firm started their sales process debugging project by asking a group of sales reps to document the existing sales process. They listed the tactics used at each stage in the sell cycle and who they engaged during each task. The lists were then integrated into their CRM pipeline management application. An example is shown in the table below, where the education stage was mapped.



Sell Cycle Tasks: Education Stage

IT Executive

IT Evaluators

End User Executives

End User Evaluators

Deliver Solution’s Presentation to Key Stakeholders

Provide Case Studies of Similar Successes

Conduct Project Scope of Work Analysis

Deliver a Standard Demo to the Evaluation Team

Create and Deliver a Custom Demo with Customer Data

Introduce Prospect Exec to Company Exec

Plan for Headquarter Visit Introduce Contract Terms and Conditions to the CFO

Once this list was created for each step in the sell cycle, the steps were integrated into their CRM pipeline management application. When it was time for a rep to move an opportunity to the next stage in the sell cycle, they were required to check off completed tasks, and document who from the prospect’s company was involved before the CRM system would allow the deal stage to be changed. After a few months of implementing this process, they were able to analyze activity trends to determine what was positively or negatively impacting the sell cycle. For example, their close rate increased by 8% and the sell cycle length decreased by 12% when they presented a custom rather than a standard demo. Their no decision rate increased by 7% when the end user executives were not involved in this step: Solution’s Presentation to Key Stakeholders. They are planning to implement a Sales Management Analytics system in 2013, but even their simple start paid large dividends. We hope you find this report to be a useful guide toward meeting your 2013 goals. We welcome your feedback. If you have any questions or comments please contact: Jim Dickie Barry Trailer Managing Partner Managing Partner CSO Insights CSO Insights (303) 521-4410 (916) 712-9621 [email protected] [email protected]



2013 Sales Performance Optimization Study Analyses

Borrowing a concept from reengineering visionary, Michael Hammer: Sales Optimization is not the result of doing everything a couple of percentage points better, but rather doing a couple of things an order of magnitude better. The analyses and metrics contained in each report are: Key Trends Analysis: Major declines were evidenced in sales performance over the

past year, what contributed to the drop in effectiveness, and insights regarding how and why some firms are outselling their peers through investments made in supporting sales teams, increasing process adoption, and enhancing the relationship the vendors have with their customers.

Sales Rep Hiring/Compensation Analysis: Ability to hire successful reps, planned changes in the size of sales forces for 2012, voluntary and involuntary sales rep turnover, experience profiles of new hires, utilization of competency testing in hiring, average rep ramp-up time, average sales rep and sales manager compensation targets, and the ability to implement compensation programs to drive selling behavior.

Sell Cycle Review Analysis: Average sell cycle length, number of calls required to

close a deal, pipeline conversion rates (number of leads resulting in a discussion, discussions resulting in a presentation, presentations and proposals that result in a sale), average win/loss/no decision rates, and percentage of deals that close as forecast.

Sales Strategy Analysis: Ability to target the right accounts to pursue, develop strategic account plans for key accounts, thoroughly research accounts prior to contacting them, generate enough leads, and properly qualify prospects and incubate leads that have interest but currently no time.

Sales Execution Analysis: Ability to understand the customer’s buy cycle,

effectively present features and benefits, differentiate from the competition, align solution to customer’s needs, generate a proposal/bid/configuration, cross-sell/up-sell, sell value/avoid discounting, close business, and the key reasons why companies win and lose deals.

Account Management Analysis: Ability to introduce new products, farm additional business from existing customers, effectively communicate with customers, renew business, create customer loyalty, and generate/maintain case studies and references.

Sales Management Analysis: Ability to hire reps who will succeed, provide managers with timely and accurate sales metrics, accurately forecast business, calculate commissions, conduct win/loss reviews, adapt the sales process to changes in the marketplace, proactively identify reps who need additional coaching/mentoring, share best practices across the sales force, and manage the rate of change impacting sales reps.



Sales Process Analysis: Types of sales processes being utilized, adherence to that process, analysis of sales organizations developing their own versus licensing a commercially available methodology to support the process, analysis of commercial offerings being used, and the overall impact sales process has on their sales performance.

Core Customer Relationship Management (CRM) Analysis: Percentage of firms

that have evaluated and implemented a CRM system, comparison of licensing a commercially available system versus building the application in-house, analysis of the impact that CRM has on a sales force’s ability to sell, and usage of outside resources to implement CRM systems.

CRM 2.0 Usage Analysis: Percentage of organizations that have gone beyond

implementing a core CRM application by adding capabilities related to Incentive and Compensation Management, Sales Intelligence, Sales Collaboration, Sales Social Networking/Playbooks, Sales Analytics and Forecast Management, Big Data, and Social CRM.

Sales, Marketing, and Support Alignment Analysis: How sales rates the level of support they receive from marketing in terms of the impact of the company's website, availability of sales tools/collateral, an assessment of the quality and quantity of leads generated by marketing, and the amount of time it takes for lead generation programs to start generating sales. In addition, the relationship that sales has with customer support is explored.

2013 Going Forward: This year we took a slightly different approach on our analysis of what the data in each of the Sales Performance Optimization topical reports mean and provide a formula (and a parable) with step-by-step instructions to ensure real progress is made on your sales effectiveness initiatives this year.



0%

10%

20%

30%

40%

50%

NeedsImprovement

MeetsExpectations

ExceedsExpectations

Do Not Know

43.1% 45.4%

9.6%

1.9%

Understand Customer's Buying Process

Key Findings Observations Sales finds it

difficult to track buyer activity when sales reps are not involved.

The better the understanding of the sell cycle, the less selling effort is required.

Win or lose a deal, clients are willing to give feedback.

The customer’s buy cycle is forcing many companies to make changes in their sell cycle. The main driver is information access: prospects can get a wealth of information on your products, competitive alternatives, pricing, user feedback, and more. This can be accomplished by using the Internet without reps knowing that anything is going on. In the chart above, understanding the customer’s buying cycle is a core competency for only a small percentage of companies. There are several advantages to understanding the prospect’s approach to making a buying decision. The Exceeds group closed deals with 33.7% fewer calls than the Needs group. As noted in the 2013 Sales Performance Optimization Sell Cycle Analysis, approximately 39% of reps’ time is dedicated to selling. This means closing deals with fewer calls should be a goal. There are several models used by firms that have a formal process for gathering insights into their customer’s buying process. Some sales organizations outsource this task to consulting firms in an effort to obtain an unbiased view from people not invested in the status quo of selling. Others bring the task in-house. To ensure an unbiased approach, one software company has interviewers from sister divisions do the work for each other. Another company assigns the task to newly hired reps so they can look at things from a fresh perspective and get up to speed quickly.


Rate your ability to clearly understand your customer’s buying process.



Regardless of which approach you use, we recommend that it becomes a standard practice. To give you a starting point for this task, the following is a summary of topics included in buy cycle interviews. Buy Cycle Interview Topics:

• Lead Source Analysis • Objectives Trying to Achieve • Project Goals • Personnel Involved • Main Project Driver • Vendors on Long List • Vendors on Short List • Analysis of Why Certain Vendors Did Not Make Short List • Positioning Statements for Vendors on Short List • Buying Steps Prior to Vendor Contact versus Outcome • Buying Tactics With Vendors (Company and Competitors)

versus Outcome • Decision Criteria versus Outcome • Compelling Event versus Outcome • Primary Decision Maker versus Outcome • Justification Methods • Implementation Experiences • Referenceability of Customer (For You or Competition) • Future Plans • Recommendations on How to Improve the Relationship

Remember, win or lose a deal, clients are willing to give feedback. Notes:



0%

10%

20%

30%

40%

50%

NeedsImprovement

MeetsExpectations

ExceedsExpectations

Do Not Know

33.5%

43.1%

20.9%

2.5%

Differentiate Your Offerings From the Competition

How Would

Key Findings Observations Differentiation is a

core competency for some companies and a weakness for others.

Cost of ineffective differentiation can be significant.

Two sources to turn to for talking points are peers and customers.

The 2013 Sales Performance Optimization Sell Cycle Analysis reveals that the average outcome of forecast deals is 46.5% wins and 27.3% competitive losses. As few deals go uncontested, the ability to effectively differentiate your offerings in the marketplace is a critical success factor. The chart above illustrates varying results of effectiveness in this area. We segmented the study data based on how well sales teams were able to differentiate themselves from the competition. The table below summarizes the results of each groups’ competitive loss rate as related to forecast deals.

Loss Rates as Related to

Differentiation

Differentiation Needs

Improvement

Differentiation Meets

Expectations

Differentiation Exceeds

Expectations

Competitive Loss Rates 32.0% 27.8% 24.0%

Sales organizations that analyze the customer’s buying process uncover a wealth of information to use when talking to prospects. There are several other practices used to understand how to tap into ideas to help clients see your unique advantages including internal sales social networks. One of the main uses for this technology is to facilitate reps’ interaction with each other to share best practices on how to effectively compete in the marketplace.


Rate your ability to differentiate your offerings from the competition.



For example, a business travel planning firm interviews reps who win a competitive deal to identify the factors that led to the prospect choosing their firm’s solution over a competitor’s. The interview is posted on the internal social network for other reps to leverage. An interesting component of the program is that as other reps review the insights, they rate the usefulness of the advice. At the end of the year, the reps who received the highest ratings are given bonuses—an incentive to take the interviews seriously. A manufacturing firm created a customer advisory board. It was different than a user group where feedback is solicited from customers on how they leverage your products or services. The advisory board meets twice a year and members are asked to identify what they would do if they were running the vendor’s company. This is an effective way to gain fresh ideas and insights into tactics that competitors are using. Notes:



Would

Key Findings Observations Alignment

effectiveness ratings do not jive with sales performance.

Inability to align solution to customer needs increases no decision rates.

Right type of sales training impacts alignment effectiveness.

In the chart above, approximately two-thirds of sales organizations rated their performance in effectively aligning their solutions to a customer’s needs as Meets or Exceeds Expectations. Yet, the 2013 Sales Performance Optimization Sell Cycle Analysis findings show that the no decision rate of forecast deals is at an all-time study high. If companies are effectively aligning their solution to the customer’s needs, why are so many forecast deals stalled? We segmented the study data based on the ability of a sales organization to effectively align their solution to help a prospect achieve gain or remove pain against their average no decision rate. The following table summarizes the findings.

No Decision Rate as

Related to Alignment

Alignment: Needs

Improvement

Alignment: Meets

Expectations

Alignment: Exceeds

Expectations

No Decision Rate 30.5% 26.4% 22.9%

At 30.5% no decisions, the Needs group knows it has a problem. With a 22.9% no decision rate, the Exceeds group has some level of bragging rights. However, a decade ago, no decisions averaged 17.6% of all forecast deals, so there is room for improvement for these organizations.


Rate your ability to align your solution to meet the customer’s needs.



Finally, the Meets Expectations group’s average no decision rate of 26.4% is actually higher than the overall study rate of 26.1%. We doubt that the CEOs and CFOs of these firms would consider that performance as meeting expectations. Two factors that can improve alignment are 1) identifying and engaging all of the key stakeholders and 2) training. While many firms do a solid job of providing the right quality and quantity of product training to their sales teams, we found it has minimal impact on solution alignment effectiveness. However, providing sales teams with training on their customer’s marketplace improves solution alignment. Advisory Services clients looking to optimize their sales training investments should contact their CSO Insights Analyst to schedule a briefing on what to look for when evaluating sales messaging and business acumen training offerings. Notes:



0%

10%

20%

30%

40%

50%

60%

NeedsImprovement

MeetsExpectations

ExceedsExpectations

Do Not Know

22.6%

57.9%

14.8%

4.7%

Generate Accurate Configuration/Quote/Proposal

How Would

Key Findings Observations While

performance is generally good, number of firms that excel in this activity is dropping.

Proposals can no longer be viewed as one size fits all.

An uptick seen in utilization of CPQ CRM solutions.

When companies get to the stage in the sales process where they are creating the final configuration of the solution they want to recommend, the accuracy of the bid and proposal is generally high for most firms. But it is worth noting that the Exceeds Expectations group took a hit, dropping from 20% in 2012 to the 14.8% figure shown above. One factor that can impact performance is determining who will review the proposal, and the number of decision makers involved in a deal continues to increase. The following chart summarizes the results.

Multiple decision makers mean more points of view. If individual stakeholders do not see their issues addressed, they are likely to go with an alternative vendor that does address their concerns, or to not support the purchase altogether.


Rate your ability to generate an accurate configuration/quote/proposal.



Sales Knowledge Management solutions are an effective asset to salespeople. Configuration/Quote/Proposal (CPQ) applications ensure that all of the co-requisites and prerequisites are considered when assessing the client’s needs, act as a virtual bid team, and address the needs of the various stakeholders. One shipping company’s CPQ not only lists products and solutions and the pricing model, but the final proposal contains sections on the value proposition and frequently asked questions aimed at the five major stakeholder groups reviewing the proposal. Their close rates increased by 23% since implementing this application. Notes:



0%

10%

20%

30%

40%

50%

60%

NeedsImprovement

MeetsExpectations

ExceedsExpectations

Do Not Know

36.8%

50.9%

8.0%4.3%

Optimize Deal Size

How Would

Key Findings Observations New Metric:

Explores how sales teams maximize the value of each deal that closes.

Cross-selling/up-selling should be of interest to all reps.

Data mining is used to uncover opportunities for reps to increase deal size.

The 2013 Sales Performance Optimization Sell Cycle Analysis revealed that the average deal size increased since 2009. This can, in part, be attributed to buyers feeling comfortable when making larger purchases, but sales organizations are also making a concerted effort to optimize the size of each deal. The chart above shows how well companies are performing at this selling task. We focused on the percentage of the sales forces that meet or exceed their quota to determine the impact that effective cross-selling and up-selling have on sales performance. The table shows that optimizing deal size should be of keen interest to salespeople.

Percent of Reps Making

Quota as Related to Deal

Size

Optimizing Deal Size:

Needs Improvement

Optimizing Deal Size:

Meets Expectations

Optimizing Deal Size: Exceeds

Expectations

Percent of Reps Making Quota 58.9% 61.4% 67.3%

Companies that excel in deal optimization do so because they make it a priority. A technology company conducts a quarterly analysis of its previous incoming orders. It compares those that closed in the last ninety days to those that closed over the last year. They want to know if a prospect that purchases a certain product is likely to buy other related products.


Rate your ability to optimize the size of each deal.



Through this process they developed a list of co-requisites and prerequisites—additional products the customer will need to support the use of their main product purchases. Additionally, they produced a list of likely add-on purchases: items the customer does not have to buy, but often will buy when they are making a purchase. These insights are integrated into the company’s CPQ system. As a rep builds a new prospect bid, the CPQ application suggests cross-sell/up-sell opportunities. The system tracks how frequently the suggestions are incorporated into the proposal. In 18% of the cases, reps added additional items to the configuration that were not part of the initial bid data entry. Notes:



0%

10%

20%

30%

40%

50%

NeedsImprovement

MeetsExpectations

ExceedsExpectations

Do Not Know

40.0%45.2%

12.7%

2.1%

Sell Value and Avoid Discounting

How Would

Key Findings Observations Sales teams

continue to get hit on price and often cave to prospect demands.

Buyer access to pricing information is increasing their edge in the negotiations process.

Sales training and compensation are determining factors in this selling task.

Optimizing deal size by cross/up-selling is one way to increase revenues; decreasing discount levels is another. The chart above shows that four in ten firms struggle with their ability to sell value and, therefore, cut prices to close the deal. Our 2012 Sales Eagles Summit revealed that buyers are more price savvy than ever before. The CSO of a manufacturing firm was involved in negotiations with the head of purchasing who started the conversation by giving the CSO a printout of how much the customer was paying the vendor for products worldwide. This printout was something that the CSO doubted she could get inside her company for the client. The purchasing director also provided the CSO with a printout showing how much other companies were paying for the same products and comparable items from the vendor’s competitors. When asked how the purchasing director obtained these numbers, the response was, “Networking with LinkedIn colleagues.” Managers need to ensure that their sales teams have access to the same information that buyers have so that the negotiation process is not blindsided. Companies also need to train salespeople to fully sell the value of the solutions they are proposing. We reviewed the training investments made by companies and found the following relationship. Only 18% of the sales organizations that had ratings of Meets or Exceeds Expectations with the quality and quantity of the purchase justification training delivered to their sales teams need to improve in selling value. This compares to a 56.5% Needs Improvement


Rate your ability to sell value and avoid excessive discounting.



rating for firms that do an inadequate job of purchase justification training. Another factor to consider is why reps rely on discounting. As part of our 2012 Sales Compensation & Performance Management study, only 34.5% reported that their incentive plans were effective in motivating reps to avoid discounting. It is worth looking at the messages your compensation plans send to your reps. What is the financial impact to the reps if they discount? If the answer is “not much,” then don’t be surprised when reps lower the price to close the deal. Advisory Services clients interested in tactics and strategies that other sales organizations implement in these situations should contact their CSO Insights Analyst for a sales compensation briefing. Notes:



1% -‐ 2% Do Not Close21.8%

3% -‐ 4% Do Not Close15.1%

5% -‐ 7% Do Not Close21.0%

8% -‐ 10% Do Not Close16.3%

>10% Do Not Close14.9%

They all close10.8%

Percentage of Deals That Do Not Close After a Verbal Yes

How Would

Key Findings Observations New Metric:

Investigates why many deals fall apart at the last minute.

Deal closing is a case of trust but needs verification.

CRM 2.0 can help sales identify bottlenecks in closing.

This is a new metric added to this year’s study at the request of our Advisory Board. The intent is to track the percentage of opportunities that fall apart in the eleventh hour even when the sales rep is assured by his/her champions and supporters that the deal will close as forecast. The chart above shows that only 11% of firms do not encounter deal fallout at the end of the sell cycle. At the other end of the spectrum, nearly one-third of companies reported that ≥ 8% of opportunities that were confirmed to close, did not. We interviewed sales organizations that experience consistent bad news when they try to get the final order approved. There are several reasons why this occurs. Based on the current business climate, several CSOs reported their proposals could not pass the ROI test so the prospect postponed the order. Postponed deals open up the possibility for the competition to engage or reengage with the prospect. Situations such as a new product announcement, pricing changes, new stakeholders involved in the decision making process, and more can move a buyer to the competitor’s camp. It’s imperative for the proposal to contain a strong, clear business case so that the client sees no alternative other than to move forward.


Rate your ability to close a deal after receiving a verbal yes from the customer.



Another factor is that the deal wasn’t theirs to begin with. Meaning, the people who had been giving verbal affirmations were not the ones who had final authority to close the deal. The challenge is that the rep sent the proposal to his/her main contact, but visibility into the stakeholder who stalled the deal is unknown. CRM 2.0 is starting to play a key role in helping with the second challenge. Many companies use eSignature applications to streamline and track the order approval process. Reps no longer email a document to be routed throughout the prospect’s firm by their champion. Instead, they customize the contact and approval routing information into an electronic version of the agreement. Once the document is sent, the eSignature application monitors the approval process. If the order gets stalled, the rep knows specifically where in the approval hierarchy the agreement is held up and can proactively determine what is happening and what to do to get that stakeholder’s buy-in. Notes:

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