· Sales Performance Optimization – 2009 Survey Results and Analysis Other Current Research Studies by CSO Insights Lead Lifecycle Optimization – Executive Report Demystifying

Sales Performance Optimization – 2009 Survey Results and Analysis

Sales Performance Optimization

2009 Survey Results and Analysis

Jim Dickie ♦ Barry Trailer CSO Insights CSO Insights Boulder, CO Corte Madera, CA


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Available via the Research Client Portal or the website www.csoinsights.com

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Sales Performance Optimization

2009 Survey Results and Analysis

Jim Dickie ♦ Barry Trailer CSO Insights CSO Insights Boulder, CO Corte Madera, CA

Sales Mastery Press Mill Valley, California



Terms & Conditions

Printed in the United States of America. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be produced or distributed in any form or by any means, or stored in a database or retrieval systems, without the prior written permission of the publisher. For additional information, contact CSO Insights, 4524 Northfield Court, Boulder, CO 80301, Phone: (303) 521-4410, e-mail: [email protected]. The reader understands that the information and data used in preparation of this report were as accurate as possible at the time of preparation by the publisher. The publisher assumes no responsibility to update the information or publication. The publisher assumes that the readers will use the information contained in this publication for the purpose of informing themselves on the matters which form the subject of this publication. It is sold with the understanding that neither the authors nor those individuals interviewed are engaged in rendering legal, accounting, or other professional service. If legal or other expert advice is required, the services of a competent professional person should be sought. The publisher assumes no responsibility for any use to which the purchaser puts this information. All views expressed in this report are those of the individuals interviewed and do not necessarily reflect those of the companies or organizations they may be affiliated with, CSO Insights, Insight Technology Group, or Sales Mastery. All trademarks are trademarks of their respective companies.

Copyright © 2009 CSO Insights

All Rights Reserved.


Acknowledgements

For 15 years we have realized that our ability to develop and present this analysis is dependent on sales executives taking the time to share with us the metrics related to their previous year‘s sales performance, and sharing which best practices they are leveraging to optimize how they sell. So we would again like to sincerely thank all of the far-sighted industry professionals who unselfishly contributed their time and insights to the development of the research knowledge base used in the creation of this publication. Next, we would like to thank the following sales effectiveness companies for their underwriting and thought leadership support for this project: Accenture, Dow Jones, Kadient, Microsoft, and Sales Performance International (SPI). Finally, we owe a debt of gratitude to many colleagues, mentors, and advisors whose help made this report possible. To list them all would be impossible, but a few deserve special mention: Gerhard Gschwandtner, Founder and Publisher of Selling Power magazine; Bob Thompson, Founder and Publisher of CustomerThink; Jack Hubbard, Chief Experience Officer and Chairman, St. Meyer & Hubbard; and John Ely, Vice President of Marketing, Signature Worldwide. Finally, we want to thank our research and editing team headed up by Kim Cameron and Susan Renner.


Table of Contents

2009 Sales Performance Optimization (SPO) Project Overview ................................................ 1 2009 SPO Analysis Introduction ................................................................................................... 5 Sales Force Demographics ......................................................................................................... 11

Percentage of Sales Force Achieving Quota ................................................................ 12

Percentage of Overall 2008 Revenue Target Achieved ............................................... 14

Percentage of Company Revenues by Sales Channel Type ....................................... 16

Percentage of Company Revenues by Customer Type ............................................... 18

Primary Sales Focus ....................................................................................................... 20

Position in the Marketplace ............................................................................................ 22

Level of Relationship with Customers .......................................................................... 24

Sales Rep Total Target Compensation .......................................................................... 26

Size of Average Annual Sales Rep Quota ..................................................................... 28

Sales Rep Variable Compensation Package Breakdown ............................................ 30

Impact of Incentive Plans on Sales Rep Behavior ....................................................... 32

Sales Manager Total Target Compensation .................................................................. 34

Approaches to Calculating and Managing Incentive Plans ........................................ 36

Planned Sales Force Size Changes Over the Next 12 Months ................................... 38

Current Annual Sales Rep Turnover Rates ................................................................... 40

Experience Profile of New Sales Rep Hires .................................................................. 42

Use of Competency Assessments in Hiring New Sales Reps .................................... 44

Impact of Competency Assessments on Hiring Effectiveness .................................. 46

Average New Sales Rep Ramp-up Time ........................................................................ 48

Percentage of Revenues of Generated by Top Reps ................................................... 50

Sales Rep Time Allocation .............................................................................................. 52 Sell Cycle Analysis ....................................................................................................................... 55

Average Deal Size ............................................................................................................ 56


Length of Average Sell Cycle ......................................................................................... 58

Number of Calls Required to Close a Deal ................................................................... 60

Lead Generation Analysis .............................................................................................. 62

Percentage of Leads that Progress to an Initial Customer Discussion ..................... 64

Percentage of Initial Discussions that Progress to a Presentation ........................... 66

Percentage of Presentations Resulting in a Sale ......................................................... 68

Percentage of Proposals Resulting in a Sale ............................................................... 70

Percentage of Deals that Close as Forecast ................................................................. 72

Outcome of Forecast Deals ............................................................................................ 74 Sales Strategy Development Assessment ................................................................................. 77

Ability to Prioritize Accounts upon Which to Focus.................................................... 78

Ability to Develop Strategic Plans for Key Accounts .................................................. 80

Ability to Thoroughly Research New Accounts Before Calling Them ....................... 82

Ability to Generate the Necessary Number of New Leads .......................................... 84

Ability to Qualify and Prioritize Properly the Opportunities ....................................... 86

Ability to Incubate Leads Who Have Interest, but No Time for Action ...................... 88

Sales Cycle Execution Assessment ........................................................................................... 91

Ability to Understand Clearly the Customer’s Buying Process ................................. 92

Ability to Differentiate among Competitive Products/Services .................................. 94

Ability to Align Solution to Customer’s Needs ............................................................. 96

Ability to Generate Accurate Bid/Configuration/Proposal .......................................... 98

Ability to Cross-sell and Up-sell .................................................................................. 100

Ability to Sell Value/Avoid Excessive Discounting .................................................... 102

Ability to Close Deals Accurately, in the Timeframe Originally Forecast ............... 104

Top Three Reasons Why Companies Win Competitive Deals .................................. 106

Top Three Reasons Why Companies Lose Competitive Deals ................................ 108


Account Management Assessment .......................................................................................... 111

Ability to Effectively Introduce New Products ............................................................ 112

Ability to Farm Additional Revenues from Existing Customers ............................... 114

Ability to Effectively Communicate with Customers ................................................ 116

Ability to Generate Repeat or Renewal Business from Existing Customers .......... 118

Ability to Create Customer Loyalty ............................................................................. 120

Ability to Create/Maintain Case Studies/References ................................................. 122 Sales Management Assessment ............................................................................................... 125

Ability to Hire Sales Reps Who Can Succeed at Selling Offerings .......................... 126

Ability to Provide Managers Access to Timely/Accurate Sales Metrics .................. 128

Ability to Accurately Forecast Business ..................................................................... 130

Ability to Easily and Accurately Calculate Sales Commissions ............................... 132

Ability to Regularly Conduct Win/Loss Reviews ........................................................ 134

Ability to Continually Adapt Sales Process to Market Changes .............................. 136

Ability to Proactively Identify Which Reps Need Coaching/Mentoring.................... 138

Ability to Share Best Practices Across the Sales Force ........................................... 140

Amount of Change Impacting Your Sales Reps ......................................................... 142 Sales Process Assessment ....................................................................................................... 145

Annual Investment in Training Per Sales Rep ............................................................ 146

Change in Amount of Sales Skills Training ................................................................ 148

Change in Amount of Product Training ...................................................................... 150

Change in Amount of Customer Marketplace Training ............................................. 152

Change in Amount of Purchase Justification Training ............................................. 154

Change in Amount of Sales Management Training ................................................... 156

Change in Amount of CRM System Usage Training .................................................. 158

Adherence to Use of Sales Process ............................................................................ 160

Impact of Sales Methodology on Performance .......................................................... 162


Type of Sales Methodology Used in Sales Process .................................................. 164

Sales Methodology Adherence Rate ........................................................................... 166

Attitudes Toward Recommending Sales Methodology Vendor ................................ 168 Core Customer Relationship Management (CRM) Utilization ................................................ 171

Organizations that Have Formally Implemented a Core CRM System..................... 172

Type of Core CRM System(s) Implemented ................................................................ 174

Length of Time Core CRM System Installed ............................................................... 176

Core CRM System Adoption Rate ................................................................................ 178

Access to Customer/Sales Data via Mobile Devices ................................................. 180

Benefits Resulting from CRM Usage ........................................................................... 182

Satisfaction Rating of Core CRM Vendor .................................................................... 184

Buy From Again/Recommend Core CRM Vendor ...................................................... 186

Plans to Replace Existing Core CRM Solution in 2009 ............................................. 188

Organizations Planning to Formally Implement a Core CRM System in 2009 ........ 190 Customer Relationship Management (CRM) 2.0 Utilization (New Section) .......................... 193

Additional CRM Technologies Using/Planned for 2009 ............................................ 194

Implementation of Sales Collaboration Solutions ..................................................... 196

Implementation of Lead Generation/Management Solutions ................................... 198

Implementation of Sales Management Analytics Solutions ..................................... 200

Implementation of Sales Knowledge Management Solutions .................................. 202

Implementation of CRM/Sales Process Integration Solutions .................................. 204

Implementation of Incentive Management Solutions ................................................ 206

Implementation of Channel Management Solutions .................................................. 208 Internet and Sales Knowledge Management Utilization ......................................................... 211

Impact of Internet Usages on Sales and Marketing Performance ............................ 212

Ease of Access to Sales Knowledge Management Components ............................. 214

Sales Knowledge Management Improvement Priorities ........................................... 216


Sales and Marketing Alignment ................................................................................................ 219

Assessment of Website’s Effectiveness at Engaging Prospects............................. 220

Assessment of Marketing-Generated Sales Collateral .............................................. 222

Assessment of Marketing-Generated Lead Quality and Quantity ............................ 224

Marketing’s Self-Assessment of Lead Quality and Quantity .................................... 226

Timeframe for Marketing Programs to Start Generating Sales ................................ 228 In Closing: Where Do We Go From Here? ............................................................................... 231


© 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.

2009 Sales Performance Optimization Project Overview

Existing research clients may want to briefly review the project charts in this section to get the highlights of this year‘s survey demographics before moving ahead. For those readers unfamiliar with CSO Insights‘ work, this section will overview and orient you to the findings of our 15th annual sales performance assessment study. Each year, we focus on assessing the specific challenges that today‘s sales teams are facing, and why these problems exist. Perhaps more importantly, though, throughout the year we conduct detailed benchmarking efforts to discover what companies are doing in order to overcome these issues and optimize their sales performance. To solicit sales executive participation for this study, we partnered with Selling Power magazine, CustomerThink, as well as our report sponsors, to invite professionals directly involved in the management of their organizations‘ sales forces to give us feedback on 100+ unique sales performance metrics. More than 1,800 firms participated in this study. Each year, we seek to get a broad representation of companies to take part in the study. Based on the demographics of the firms that participated in the 2009 Sales Performance Optimization (SPO) Report, we achieved this objective. Figure 1 profiles the industry sector segmentation at the highest level: Manufacturing, Services, and Other (including retail, government, non-profits, education, distribution, etc.).

Figure 1 Within these sectors, several industries had significant representation, including financial services, software, hardware/technology, professional services-business, professional services-high tech, travel/hospitality, manufacturing (non-tech), and medical products. In early 2009, we plan do an additional analysis of the study data for these vertical industries to understand more clearly the specific challenges firms are facing and how they are dealing with those issues. Geographically, 69% of participating firms were from North America and 31% from internationally-based companies. We categorize size of firm in two ways: 1) company revenues and 2) number of salespeople employed. In Figure 2, you see the breakdown of participants by revenue into small businesses (under $50M), medium-sized firms ($50M to $1B), and large enterprises (greater than $1B).



Figure 2

As in past years, a review of the data segmented by company size is surfacing key differences in terms of the challenges companies face, and the types of sales effectiveness initiatives they are able to successfully take on. Therefore, we will be doing further analysis of the 2009 survey results for small, medium and large revenue businesses (available after 2/2/2009). In Figure 3, we see the breakdown of study participation based on the second size metric, number of salespeople currently employed.

Figure 3 To gather data from participating firms, we used a web-based survey approach for this research project. Prior participants and other candidates invited to take part in this study were initially pre-



screened based on their job function. These executives were then emailed an invitation to take part in the study. Those who accepted were directed to a website where they could take the online survey. We also provided a direct link to the survey from our website, www.csoinsights.com. The survey instrument was designed to take up to 30 minutes to complete. Participants had the option to exit the survey, return later, and continue where they left off if they needed to get more information or had a time constraint. This year, survey questions focused on sales performance metrics relative to eleven key areas. These areas, as well as typical metrics for each, were: Sales Force Demographics: Number of salespeople, percentage of sales reps making

quota, average tenure of salespeople, percentage of revenues from various sales sources (field sales, telesales, channel, OEM), ratio of sales reps to sales support personnel and sales managers.

Sell Cycle 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, percentage of deals that close as forecast.

Sales Strategy Development Assessment: The 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 who have interest but no current time.

Sales Cycle Execution Assessment: 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, and close business. In addition, we looked at the key reasons why companies win and lose deals.

Account Management Assessment: 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 Assessment: 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 which reps need coaching/mentoring, share best practices across the sales force, and manage the rate of change impacting sales reps.

Sales Process Assessment: Percentage of firms using a formal sales process, their

adherence to that process, analysis of sales organizations that develop their own versus license a commercially available methodology to support the process, analysis of which commercial offerings they used, and the overall impact sales process is having on their sales performance.

Core Customer Relationship Management (CRM) Utilization: Percentage of

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



CRM 2.0 Utilization (New Section): Percentage of organizations that have gone beyond implementing a core CRM application and have added additional capabilities related to sales collaboration, lead management, sales management analytics, sales knowledge management, CRM/sales process integration, incentive management, and channel management.

Internet and Sales Knowledge Management Utilization: Beyond the traditional CRM applications, this section looks at how reps are leveraging the Internet and access to sales knowledge to support their selling efforts.

Sales & Marketing Alignment: How sales rates the level of support they are receiving from marketing in terms of tools/collateral, as well as the quality and quantity of leads.

The following report contains the survey results and our analysis for each of these areas. To help put the data into perspective and increase relevance to your sales organization, we recommend that you take the survey yourself then read this report. (Contact CSO Insights if you need the link to the online survey.) We also urge you to read both the following Introduction and the Closing remarks (see page 231), which contain additional considerations for the strategies and tactics you may want to include as part of your sales optimization initiatives for 2009 and beyond. In this study, where applicable, we also refer to other analyses we have completed on topics such as lead generation, sales process, sales management, CRM, sales effectiveness best practices, etc. These are listed immediately following the front cover. If an area covered in the report is of particular interest to you, you can access the related documents via the research client portal or our website: www.csoinsights.com. As you review our report findings, you will be able to compare your company‘s performance to other sales forces and determine where your team excels, equals, or lags behind the aggregated survey population. In doing so, you will see where your specific areas for improvement are. Individuals who may want a more targeted look into their performance, based on industry, company size, geography, etc. should visit our website and/or speak directly to us about becoming a research client.

We hope the information in this report will help you more effectively chart the course for your own sales effectiveness efforts for 2009. While we believe the issues raised have broad applicability, we encourage you to use this information simply as the basis for brainstorming and goal planning, and to identify and prioritize your organization‘s operational challenges. Everyone can benefit from understanding the strategies and tactics of other companies, but in the end, you have to implement solutions that fit your specific business needs, not those of other firms. If you have any questions or comments regarding this report, please contact: Jim Dickie Barry Trailer Managing Partner Managing Partner CSO Insights CSO Insights (303) 521-4410 (415) 924-3500 [email protected] [email protected]


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2009 SPO Analysis Introduction Humor us for a moment and envision in your mind Space Mountain. For those of you unfamiliar with this, it is a rollercoaster ride at Disney‘s theme parks in Florida, California and elsewhere. Now you may be thinking, I know what a rollercoaster is, but Space Mountain is different: first because it is built inside the ―mountain‖ and second, because the ride is primarily in the dark. You get seated, suitably strapped-in (you hope), and you feel the car you are in start to move and slowly climb into the darkness. You notice yourself being pulled backwards into the seat, the first sign that gravity is at work, but also an indication of a steep accent. But the pace is nice and slow -- no problem. And then it happens. You crest the tip of the arc, and suddenly the car is shooting down at what feels like breakneck speed. You are thrown forward, then left, then right, and then further right again as the car accelerates into a seemingly endless series of twists and turns. It rises and falls, your body and mind trying unsuccessfully to achieve balance, because all of this is happening in a pitch-black environment that gives you zero insight into what is ahead. After what feels like forever, the car slows and seems to be coming to a stop. Now in your mind replace the image of Space Mountain with the thought of the economy during the second half of 2008. Weren‘t we on exactly the same ride? Blasting up, down, sideways, and always with no clue where we were going next? For Chief Sales Officers (CSOs), sales managers and sales reps alike, navigating the sales process last year was a thrill ride. As you will see in the following report, which summarizes the experiences of over 1,800 companies worldwide, the job of sales was very hard and getting harder. As in the past, we will share with you the challenges that sales teams are experiencing and provide insights into what is causing those issues to exist. But this year we want to do one more thing. Go back in your mind to your last thoughts about the ride on Space Mountain. We said the car was starting to slow, but we never said it stopped! At year end 2008, as the intensity of the business climate calmed down a bit for the holiday seasons around the world, there may have been a temporary lull for you and your company. But on January 2

nd the car started to climb

again, and based on history the new ride in 2009 may be much wilder than 2008. Why? In mid-2008, a client asked us to run a special report for them. What was interesting was that they weren‘t focused on the most current study data we had, but rather what we saw in 2002 and 2003—the period of their last economic downturn. We all remember 2002 as being a challenging period for business: recovery from 9/11 a few months before, adjusting to a slow economy, watching the stock market track downward for all of 2003. But then things got better, right? Well, while the stock market turned and started to recover, sales did not. In fact, for 2003 we saw the lowest levels of sales success in the 15 year history of our study, with survey participants that year reporting on average only 48% of the sales reps hitting their numbers. Is history about to repeat itself? Will sales rep results dip further in 2009 even if we start to see signs of a recovery? Our prediction is yes. Even when the economy starts to recover, in the past we have seen the ―them first‖ phenomenon. By this we mean that your prospects will start to write checks out AFTER they start to see more checks start to come in. So your sales teams may well see 2009 as a more challenging year than they experienced in 2008; that is unless you start to do something fundamentally different. What might that be?



In the 2008 SPO report we presented the impact how you sell can have on your sales results in the form of the Sales Relationship/Process (SRP) Matrix, shown here again in Figure 4.

Sales Relationship/Process (SRP) Matrix™

Figure 4 Let‘s review the key tenants of the SRP Matrix concept. In addition to what you sell, there is how you sell. How you sell has two major components: how your customer perceives the value you and your company provide to them—your relationship; and how you engage and work with your clients—your process. Over the years, we have found that within these two aspects of selling, companies fall into one of a few categories. Let‘s explore relationships first. Here we see companies achieving one of five different levels of relationship with customers and prospects in their marketplaces: Five Levels of Sales Relationships Level 1—Approved Vendor: You are seen by the majority of your customers as a

legitimate provider of the products or services you offer, but are not recognized for having any significant sustainable competitive edge over alternative offerings.

Level 2—Preferred Supplier: Based on your marketplace reputation and past dealings

with your customers, while competitors may offer alternatives, you are normally seen as the preferred vendor with whom to do business.

Level 3—Solutions Consultant: Based on a specific set of product-related, value-added

insights or services you offer, your customers see you as not only a vendor, but also a consulting resource on how to best use your products or services.

Level 4—Strategic Contributor: Above and beyond the products and services you offer,

your customers view you as a source of strategic planning assistance for dealing with broader-based challenges they are currently facing.



Level 5—Trusted Partner: At this highest level, you are seen as a long-term partner whose contributions—products, insights, processes, etc.—are viewed as key to your client‘s long-term success.

In addition, we see sales organizations fall into one of the following four levels when it comes to the processes they use to find, create and expand customer relationships. Four Levels of Sales Process Level 1—Random Process: Your company may be perceived as being anti-process,

though what you really lack is a single standard process. Essentially every sales rep does their own thing their own way.

Level 2—Informal Process: Your company exposes your salespeople to a sales

process and indicates that they are expected to use it, but that use is neither monitored nor measured.

Level 3—Formal Process: Your company regularly enforces the use of a defined sales

process (sometimes religiously), and you conduct periodic reviews of the process to see how effective it is, and then make changes based on that analysis.

Level 4—Dynamic Process: Your company dynamically monitors and provides

continuous feedback on sales reps‘ use of your formal sales process. You also proactively modify the process when you detect key changes in market conditions.

Last year we presented that where you are on the Matrix definitely impacts your sales success. We repeated that analysis again this year, and found the results to be very consistent with our observations in the 2008 SPO Report. Let‘s review the latest findings, seen here in Figure 5.

Sales Relationship/Process (SRP) Matrix™ - 2009 SPO Survey Analysis

Figure 5



Before we start the summary of our analysis, we should point out that we again found two quadrants in the Matrix that were virtually empty, reflected in Figure 5 as the grayed areas of the Matrix. Companies consistently functioning randomly do not achieve a trusted partner level of relationship. Similarly, in reviewing sales organizations that have adopted a Dynamic Process, they are nearly always able to figure out a way to be at the preferred supplier level or above in their relationships with customers. While we found individual successes and failures in each segment of the Matrix when we aggregated the performance of all firms in a given cell, clear differences in sales effectiveness surfaced immediately. While slightly different in make-up from last year, the Matrix presented three distinct classes of sales organizations, where process adherence and customer relationships turn how a company sells into an advantage or disadvantage. We termed these categories as Sleepless Nights (29% of the firms surveyed), Challenging Months (47% of the firms surveyed) and Successful Years (the remaining 24% of firms surveyed). A more detailed analysis of some of the key metrics we compared across these categories will provide a better understanding for each of their nicknames (see table 1 below).

Sleepless Nights Category

(29% of firms surveyed)

Challenging Months Category

(47% of firms surveyed)

Successful Years Category (24% of firms

surveyed)

% Reps making quota 53% 61% 65%

% of Company plan 82% 88% 92%

% Forecast - wins 43% 48% 55%

% Forecast - losses 34% 30% 26%

% Forecast - no decisions 23% 22% 19%

% Sales force turnover 31% 30% 26%

Table 1

This one table, more than any other analysis we have done over the past 15 years, presents the premise for how to really optimize the performance of our sales teams. And in the current economic climate, presents a lesson you need to learn and apply more now than ever before. For decades we have stated the need for turning sales into more of a science and less of an art form. Repeatedly, we have heard CSOs say their teams were moving away from being product-driven to being solution or customer-driven. Yet looking back at the Matrix, specifically at the Relationship 5 and Process 4 cell, we find it inhabited by only 2% of all the firms we surveyed. Excuses abound for why other firms have not joined them. They can‘t get to partner status based on what they sell. Their salespeople would revolt if that much structure was placed around how they sold. The margins aren‘t there to support the investment it would take. And on and on. These all may be valid points, but here is another valid point: moving over and/or moving up even one position on either scale will improve your sales results—just one! And if you could do two or more from where you are today, you might easily achieve the types of results that double your team‘s performance—and your company‘s stock price. A review of CSOs‘ top objectives for 2009 (see Figure 6 below) will drive home the importance of these types of shifts in relationships and processes.



Where Next in 2009? One of the key questions we ask survey participants each year is what their top objectives are for the coming year. In Figure 6, we see a summary of the responses from the latest study. It may be no surprise that increasing revenues is at the very top of mind for sales executives for 2009.

Figure 6 We are in total agreement that increasing revenues should be a top priority for this year. But let us also make a case for the number two item on this list: increasing sales effectiveness. We do not believe that success in 2009 will be achieved by making more sales calls. The number of calls—face-to-face meetings or on the phone—has already been increasing over the past few years with minimal impact on sales results. The real objective is going to be how to make great calls: motivating stakeholders to meet with you; creating a sense of urgency that moves evaluating your solutions to the top of their priority list; differentiating yourself from the competition; selling value (so you can avoid discounting); creating a compelling business case to get the project approved now. These will require your salespeople to be more effective at selling than they were in 2008. So what are you going to do to support them in this endeavor? You may think you can cut your way to sales effectiveness: spend less on sales training; get by with fewer sales support personnel; avoid investing in CRM technologies; ask each of your sales managers to take on managing more reps and/or reduce travel budgets. Think again. You may reduce expenses, but you will see revenues and margins fall as well. 2009 needs to be about investing your way to sales effectiveness. If freeing up more money to support sales is not an option, then look at how you are investing the current dollars you have allocated. For example, if your budget calls for adding five salespeople, consider hiring one or two, and investing the rest of the budget in making the people you already have much more productive.



How do you decide where to make the right investments? Let us suggest one question you ought to ask your salespeople immediately: Why can’t we double your quota? Their first reaction may well be blank stares, followed by the comment/question: Because we would quit!?! So follow up with: But why would you feel the need to quit? Eventually they will start telling you what blocks them from becoming more effective: it takes forever to configure a deal; the collateral is always out of date so I have to make my own; contact information for our leads is just plain wrong half of the time, so I need to get the right information before I make a call; I can never get a hold of finance to get a contract term or change approved; etc. This becomes your sales effectiveness improvement list, and these things need to get fixed. Clearly, you are not going to do everything at once; but after you prioritize these challenges, you should start to knock them off the list. Will this take people, time and money? Yes. These issues will not go away without investments of some form. You will not hit your numbers in 2009 unless you are very lucky OR until you improve sales rep effectiveness. The rest of this report will help you understand all the things you could improve, and provide you some initial input into how other firms are tackling these issues. If you then decide you want deeper insights to address the sales effectiveness challenge for your company and your sales teams, give us a call. We hope you find this report a useful guide toward meeting your 2009 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 (415) 924-3500 [email protected] [email protected]

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Sales Force Demographics Introduction

This section looks at a number of metrics related to the sales force make-up, including quota attainment, business focus, the size of the sales team, how they are organized, their level of experience, where they work, how they spend their time, etc. Note: In tables that analyze abilities, the totals may not add up to 100% as some respondents selected ―do not know.‖

Percentage of Sales Force Achieving Quota ................................................................ 12

Percentage of Overall 2008 Revenue Target Achieved ............................................... 14

Percentage of Company Revenues by Sales Channel Type ....................................... 16

Percentage of Company Revenues by Customer Type ............................................... 18

Primary Sales Focus ....................................................................................................... 20

Position in the Marketplace ............................................................................................ 22

Level of Relationship with Customers .......................................................................... 24

Sales Rep Total Target Compensation .......................................................................... 26

Size of Average Annual Sales Rep Quota ..................................................................... 28

Sales Rep Variable Compensation Package Breakdown ............................................ 30

Impact of Incentive Plans on Sales Rep Behavior ....................................................... 32

Sales Manager Total Target Compensation .................................................................. 34

Approaches to Calculating and Managing Incentive Plans ........................................ 36

Planned Sales Force Size Changes Over the Next 12 Months ................................... 38

Current Annual Sales Rep Turnover Rates ................................................................... 40

Experience Profile of New Sales Rep Hires .................................................................. 42

Use of Competency Assessments in Hiring New Sales Reps .................................... 44

Impact of Competency Assessments on Hiring Effectiveness .................................. 46

Average New Sales Rep Ramp-up Time ........................................................................ 48

Percentage of Revenues of Generated by Top Reps ................................................... 50

Sales Rep Time Allocation .............................................................................................. 52



Meeting or Exceeding Quota

58.8%

Under Quota41.2%

Percentage of Reps Making Quota

How Would

Key Findings Observations

The number of

sales reps making quota is headed down again.

Level of sales

relationship is affecting sales quota attainment.

Implementing

sales process also affects quota attainment.

If we could choose only a single, overall measuring stick for our sales organizations, for us it would be this metric: What percentage of salespeople are hitting their sales quota? In looking back at data from 2004 to 2008, quota attainment rose each year, cresting at over 61% last year. This year we dipped back to 58.8% of firms‘ reps meeting or beating quota. As we previously noted on page 5 in the Introduction, this may be an early indicator of tougher times to come. What can sales organizations do to improve their ability to hit their numbers in down markets? There are two areas we would like to explore: Level of Sales Relationship with customers and Sales Process Levels. Again, looking back to the Introduction of this report, we discussed in detail the five levels of sales relationships with customers. A quick recap shows that Level 1 firms are approved vendors, Level 2 are preferred suppliers, Level 3 are solutions consultants, Level 4 are strategic contributors and Level 5 are trusted partners. In drilling into the data, we found that companies which were at a Level 5 sales relationship outperformed salespeople who had lesser relationship levels with their clients. Specifically, the percentage of reps making quota in Level 5 firms was 66.5%. The following chart is a quick illustration of the association between a firm‘s sales relationship with their customers and a rep‘s ability to hit their number.


What percentage of your sales force achieved quota?



Reps Making Quota as related to Sales Relationship


Level 5 – Trusted Partner 67%

Level 4 – Strategic Contributor 64%

Level 3 – Solutions Consultant 58%

Level 2 – Preferred Supplier 57%

Level 1 – Approved Vendor 53%

While on average less than 59% of reps are hitting their numbers, this is not a figure universally true for all sales organizations. Improve the level of relationship you have with your clients and your salespeople very likely will win more business. Sales process can also impact your team‘s sales performance. The more structured you get in how you sell; the more likely your reps are to win deals.

Win, Loss, No Decision Rates as related to Level of Sales Process

Wins Losses No

Decisions

Level 4 – Dynamic Process 57% 24% 19%

Level 3 – Formal Process 50% 28% 22%

Level 2 – Informal Process 46% 32% 22%

Level 1 – Random Process 44% 33% 23%

These numbers reinforce the concept that you can turn how you sell into a strategic competitive advantage. And in today‘s markets, differences like these should not be ignored.

Notes:



50%

60%

70%

80%

90%

2008 Plan Attainment 2007 Plan Attainment

85.9%88.2%

Percentage of 2008 Revenue Target Achieved

How Would


Plan attainment is

down from last year.

Quota setting and

sizing practices may not be enough to affect plan attainment.

Hiring and

retaining good sales reps is vital to plan attainment.

If fewer salespeople are hitting their numbers, how does that impact the odds of the company as a whole hitting its plan? A quick look at the numbers above show that percentage of overall revenue plan attainment is dropping in step with the reduction in salespeople making or exceeding their quota. One technique many of us have relied on to minimize the impact of fewer reps hitting their numbers on overall revenue attainment is over- assigning quota to the sales force. This helps balance out the impact of longer decision cycles, reduced average deal sizes, increased sales rep turnover, the performance of sub-par reps, etc. But over-assignment—taking the revenue goal for the company as a whole, increasing it by some percentage factor and then assigning the higher number across the sales reps as individual quotas—is often more of an art than a science. It is also worth noting that in some cases salespeople get very good at figuring out ways to have multiple reps compensated on the same deal, so that over assignment is negated by double crediting deals. In looking at the above metric, this tactic does not appear to have been effective in cushioning the impact in the decrease in overall revenue attainment. A question we have received from a number of research clients is: If reps aren‘t hitting their numbers, should we get some new players on the field? Our answer is to ―proceed with caution.‖


What percentage of your company’s 2008 overall revenue target was achieved?



Slow economies tend to quickly surface players from pretenders in your sales force. On one end of the spectrum, this is very useful in that it helps you indentify the key reps you want to go out of your way to keep. But the opposite end of the scale needs more thought. Sometimes pretenders are in fact reps who cannot effectively sell, but in other cases they are players who have simply lost their edge. In the second case we want to identify how to get them back on track versus replacing them. Here‘s why. Below we see the timeframes companies have reported over the past three years related to getting a new sales rep fully productive. As you can see, the times are often quite long, and we have seen minimal improvements to suggest that the ramp-up cycle times can be significantly reduced.

Rep Ramp Up Time to Full Productivity

2007 2008 2009

< 3 Months 5% 5% 5%

3 - 6 Months 27% 26% 25%

7 - 9 Months 20% 22% 24%

10 -12 Months 19% 20% 23%

> 1 Year 28% 25% 22%

Looking at maximizing your chances for success in 2009, you may see a much better return by optimizing the performance of the reps you already have versus trying to hire your way to success with a fresh new crop of reps.

Notes:



Direct/Field Sales68.3%

Telesales10.5%

Channel Sales11.9%

Internet Sales5.6%

Other3.7%

Percentage of Revenues by Channel Type

How Would


Reliance on direct

field selling still the key for most firms.

Telesales

revenue contributions slipping to 2007 level.

Channel sales

contributions continue to diminish.

In reviewing revenue sources, we continue to find that the majority of companies are relying on their direct field sales force to generate the bulk of their revenues. In looking back at these numbers reported in our 2005 SPO study, direct and telesales accounted for 73% of a firm‘s total revenues, compared to nearly 79% today. While the allure of online selling and going through channel partners is very attractive, reality shows that counting on efforts of your sales teams is what is really filling the revenue coffers. When asking CSOs why they continue to rely on a direct sales force, several commented that they had more visibility into and control over their direct reps as compared to channel sales. It is far easier to mandate direct sales reps to keep accounts and opportunities updated in their CRM system than it is to get channel partners to provide this information. Access to current data on opportunities is critical to sales managers in deciding where to allocate their time and help, and it is also required if CSOs are going to be able to assess the effectiveness of their sales teams. In looking at telesales‘ revenue contributions, it would appear on the surface that telesales is playing less of a role in selling today. However, in looking at our recently published 2008 Inside/Telesales Sales Performance Optimization Study, we find that 82% of companies reported that lead generation is the primary activity of their inside/telesales organizations. Couple this with study results that show the main function of telesales is to partner with field sales and support channel sales, and we are led to the conclusion that inside/telesales in


What percentage of your company’s revenue comes from the following sources?



many, if not most firms today, do indeed still perform more of a support role to direct and channel sales than as a direct revenue producing entity. Channel sales contributions to overall revenues continue to diminish among this survey‘s respondents. Optimizing the amount of revenues the channel generates requires continually maintaining their mindshare for which there is increasing competition from other vendors. Channel partners will tend to focus their time on products and services that are easiest to sell and generate the most revenue. To increase channel mindshare, firm‘s need to provide the channel with the sales skills, collateral, sales knowledge, etc. they need to succeed. Typically, this involves an investment in sales knowledge management (SKM) technology that enables firms to share pricing, best practices, sales support, training and more. Since channel sales reps often work for many firms, Software-as-a-Service CRM technologies are increasingly being adopted by these sales forces. This means that firms selling though channels need to find ways to link their CRM system to their partners‘ (versus expecting the partner to implement the principal‘s system), if they are going to foster good dataflow between the two firms.

Notes:



Existing Customers

62.9%

New Customers

37.1%

Percentage of Revenues by Customer Type


Revenues from

existing customers down from last year.

Cross-selling and

up-selling to mine existing accounts remains challenging.

Lead incubation

is gaining traction to nurture both new and existing customers.

In the past, established companies have been better able to weather economic downturns by relying on existing customers. The fact that the percentage of sales coming from the customer base dropped year over year suggests CSOs may not want to count this approach as a given in the current business climate. If you are looking to optimize the revenues you get from your customer base, there are a few things to consider. One approach you may use is to get your reps to do a better job of cross-selling/up-selling into the client base. As you will see on page 100, 46% of study respondents reported that their ability to do this selling needs improvement, while approximately a third reported they exceed expectations in this area. Companies continue to explore the hunter/farmer approach to selling by assigning specific reps to work on new business and others to manage existing accounts. The idea is that these require two unique types of selling skills and orientation. A rep that may excel at closing new business may not have the skills to nurture and grow existing accounts. Furthermore, as we will see later on page 114, farming additional deals from existing customers is not a great strength for many sales organizations. One method we have seen companies adopt to overcome both of these challenges is the concept of lead incubation. When prospects are looking to make their initial purchase, reps often keep their eye on the account because the size of the prize—the initial order—is large enough to keep them motivated to stay in touch with their potential customer. But what


What percentage of your revenues comes from the following customers?



about after the big deal is won? Maybe there is a chance to sell a couple of add-ons, maybe a couple more users could be found in another division. While nice, those smaller deals can get lost as reps focus on bigger wins. In our 2008 Lead Life Cycle Optimization report, we found sometimes prospects are not willing to drop what they are currently doing to take up the task of seriously evaluating what a company has to sell. Instead, the sales rep has to wait for the prospect's priorities to shift; and when they are ready to fully focus on the company‘s offerings, the rep can re-engage. Until the prospect is ready, that lead must be nurtured. Again, for big opportunities a rep may be willing to make the effort to stay top of mind, but this may not be the case for smaller deals. As we will discuss in the CRM 2.0 section, there are new tools available to take the responsibility for lead nurturing completely off the shoulders of reps and give them a digital assistant to help with this task. Two key benefits are found when a company starts to automate the lead nurturing process: 1) prospects are continually reminded of the company‘s offerings; and 2) the lead is not dropped and ultimately lost. Lead incubation/nurturing is just as important in expanding business inside existing accounts as with selling into new accounts. In both areas, companies cannot afford to lose any size opportunity simply because the customer does not have the time right now! to evaluate your recommendations.

Notes:



Primarily B2B75.2%

Primarily B2C7.7%

Blended B2B and B2C17.0%

Primary Sales Focus

How Would


The selling focus

continues to be on B2B firms.

B2B‘s goal is

revenues; B2C‘s objective is sales effectiveness.

Sales

effectiveness measurements vary widely between B2C and B2B firms.

As most of our research clients are B2B firms, it is not surprising that the majority of the companies taking part in our surveys are from that space. Still, we do have solid input from pure B2C and blended B2B/B2C companies, as well, and it is worth noting some of the differences among these groups. For example, it is interesting to note that B2C firms cited sales effectiveness as their primary goal over the next 12 months versus increasing revenues, which is top of mind for B2B sales executives. Improving sales effectiveness can mean a lot of things, including reducing the length of the sales cycle, reducing the number of calls to close a deal, reducing sales rep turnover, renewing business from existing clients, effectively introducing new products, etc. To start to surface where and how the sales effectiveness issues might differ between B2B and B2C firms, we did an analysis comparing their performance across several metrics, including:

Sales Cycle Length B2C B2B

< 1 Month 30% 7%

1 - 3 Months 34% 28%

4 - 6 Months 18% 34%

7 - 9 Months 5% 15%

10 -12 Months 2% 7%

> 1 Year 6% 7%


What is the primary selling focus of your sales force?



Optimizing sales cycle length is something that is in degrees of days or weeks for B2C firms, versus months in the B2B world.

Number of Sales Calls to Close a Deal

B2C B2B

1 - 2 Calls 30% 6%

3 - 5 Calls 36% 40%

6 - 9 Calls 17% 32%

10 -15 Calls 7% 12%

> 15 Calls 5% 6%

Similarly, ensuring a deal can be done in one call means more in the B2C space than in B2B.

Sales Reps Fully Productive

B2C B2B

Voluntary (rep leaves) 20% 15%

Involuntary (rep is let go) 12% 14%

Total sales rep turnover 32% 29%

Both B2C and B2B firms should be concerned with the total annual rep turnover, but the B2C firms seem to have a much harder problem keeping productive talent than B2B firms‘ experience.

Average New Ramp-up Time for a New Sales Rep

B2C B2B

< 3 Months 9% 4%

3 - 6 Months 27% 24%

7 - 9 Months 19% 24%

10 -12 Months 25% 24%

> 1 Year 16% 23%

And finally, quick ramp-up times do not exist in either world.

Notes:



Dominant Player 18.3%

One of the Lead Players49.8%

One of Many Players 22.2%

New Player (Start-up firm)

9.6%

Position in the Marketplace

How Would


Where you are in

the food chain in your industry does make a difference.

Dominant players

are more successful in their sales execution.

New players face

the most challenges in sales effectiveness.

How you are seen in your marketplace is something that can be viewed in different ways. One method we have used is assessing how a firm compares to other players in their space. Above you see the input we received in this year‘s survey. Does a firm‘s positioning make a difference in terms of how easy/hard it is to do business in the marketplace? In the words of a former vice presidential candidate: You betcha! When we drilled into the data and looked closely at dominant players, we found they enjoyed higher plan attainment and their reps were more effective at hitting their quota than the other players. So, it‘s still good to be king as the following table confirms.

Position in Marketplace

Revenue Target Attainment

Reps Making or Exceeding Quota

Dominant player 91% 63%

One of lead players 87% 62%

One of many players 83% 53%

New player/start-up 75% 51%

Further analysis showed that dominant players win more than the average share of their deals. In looking to why firms win or lose business, dominant players reported they win primarily on their brand equity and reputations, whereas lead and many players win due to their existing relationships.


How is your company perceived in the marketplace?



New players are challenged in this area because they don‘t have a track record to show prospects they are a viable company, even if they have a superior solution. Start-ups reported they win primarily on their product superiority chronicled by others, which means they appeal to a much smaller segment of the available market (i.e., innovators and early adopters). They also have much higher competitive loss rates and no decisions rates than the other categories. Our research has found that customer testimonials and word of mouth marketing rate highest in terms of influence when a prospect is initially comparing your solution against alternatives. Taking the time to ensure you have your best customers‘ experiences documented can help level the playing field for start-ups. Another area worth reviewing is sales rep turnover, both voluntary and involuntary. Dominant players have an annual turnover rate of 25% compared to start-ups at 32%. The ability to attract and retain people gives dominant firms another edge over other players in their space.

Notes:



Approved Vendor22.0%

Preferred Supplier

21.2%Solutions Consultant

25.0%

Strategic Contributor

21.1%

Trusted Partner10.7%

Relationship with Clients

How Would


While a handful of

firms are trusted partners, the majorities of firms are preferred suppliers and approved vendors.

Higher customer

relationships correlate with better quota attainment.

Lower customer

relationships are challenged to hit their numbers.

In addition to a firm‘s position in its marketplace (see prior metric), another aspect to consider is how much value-add you bring to your customers. Consistent with last year‘s findings, roughly one in three firms have a strategic contributor or partner level relationship with their clients; one in four are seen as consultants; and the rest are seen as vendors (either preferred or one of many who made the approved supplier list). Detailed definitions of each level are provided in the Introduction (see page 6). However, in brief, approved vendors understand their offerings; reps at this level talk about features and benefits of their products. Preferred suppliers have some track record, and also understand how customers use their products/services to attain better results. At the solutions consultant level, reps understand their customers‘ business issues and their customers‘ customers. These reps talk about how their products help them to compete more effectively. Strategic contributors not only understand and are able to convey how their offerings will help their customers compete more effectively in their industry, but they also foster significant peer-to-peer communications between their respective companies. At the trusted partner level, reps are discussing issues on a more distant planning horizon, within a longer timeframe. Thirty-day trial offers are not the topic, but rather, proof of concept projects that may affect the customer‘s product line in the coming year(s). These discussions involve mutual resource commitment and risk sharing.


What is the level of relationship that you have with the majority of your customers?



The definitions are easily understood, particularly when we consider the levels of relationships in the context of the pyramid illustration below: Levels of Relationship

In reviewing the definitions of each of these relationship levels, the million dollar question is: Is there a significant enough ROI in attaining these levels? In drilling into the data, the answer is yes! 62.4% of study participants stated that increasing revenues was their top priority over the next 12 months. Since sales rep quota attainment is the number one contributor to this objective, we compared those figures based on a company‘s level of relationship. The following chart illustrates this comparison.

Rep Quota Attainment as related to Levels of Relationship

Sales Rep Quota Attainment

Level 5 – Trusted Partner 66%

Level 4 – Strategic Contributor 64%

Level 3 – Solutions Consultant 58%

Level 2 – Preferred Supplier 57%

Level 1 – Approved Vendor 53%

There appears to be a direct and positive relationship between higher level customer relationships (as perceived by your customers) and rep quota attainment.

Notes:



<$50,00011.9%

$50,000 -$75,00019.0%

$75,000 -$100,000

22.2%

$100,000 -$150,000

26.5%

$150,000 -$200,000

12.2% >$200,0008.3%

Targeted Compensation for Sales Reps

How Would


New Metric:

Wide range reported for how much reps make.

Higher pay does

not translate to higher quota attainment.

Higher pay

packages for sales reps have a high variable component.

New to this year‘s study is this metric regarding how much companies are paying their salespeople. The total compensation dollars/packages range from the low end of less than $50,000 per year, up to the high end of greater than $200,000. It‘s interesting to note that 46% of the firms we surveyed are targeting rep compensation at >$100,000. We often see that the higher the pay package, the higher the quota target. Since many firms are paying their sales reps six figures, we wanted to see if the money companies are investing in their salespeople correlates with substantial returns. Drilling into the data, we found that higher pay is not translating into higher performance. As the following table shows, merely holding out a bigger carrot doesn‘t mean that salespeople will be able to hit their numbers.

Quota Attainment relative to Compensation Dollars/Package for Sales Reps

Sales Rep Quota Attainment

< $50,000 62%

$50,000 - $75,000 58%

$75,000 - $100,000 58%

$100,000 - $150,000 59%

$150,000 - $200,000 58%

> $200,000 58%


What is your total target compensation for a typical sales rep?



To better understand the impact on compensation; let‘s look a little closer at the make-up of these packages.

Variable Compensation relative to Compensation Dollars/ Package

Firms with Variable Pay Component >40%

< $50,000 23%

$50,000 - $75,000 29%

$75,000 - $100,000 37%

$100,000 - $150,000 51%

$150,000 - $200,000 73%

> $200,000 87%

Here we see that all that glitters is not gold. Publishing a $200,000+ package often means that at least 40% of that amount is at risk, and the rep needs to make it via commissions and or bonuses if they are ultimately going to see it in their pay check.

Notes:



Less than $500,000

28.1%

$500K - $1M24.5%

$1M - $1.5M14.3%

$1.5M - $2.5M12.6%

$2.5M - $4M9.9%

Greater than $4M10.7%

Size of Average Annual Quota

How Would


Quota

assignments once again vary widely, but are generally trending up.

Firms with higher

quotas often look to existing customers for more revenues.

Quote size does

not appear linked to win rate attainment in any meaningful way.

While there is no consistent view on how big a rep‘s quota should be, we continue to see the universal attitude that whatever it was last year, even if they didn‘t meet that goal, next year‘s number should be higher. And as you will see on page 232, over 86% of the firms we surveyed for this study stated they were planning to increase their revenue targets for 2009 over 2008. In looking at where revenues come from—existing or new customers, there is a relationship between the size of the quota and what class of customers firms look to in order to generate revenues. The higher the quota, the more those firms rely on existing customers to hit their number. The following chart shows the relationship between quota size and selling to existing or new customers.

Revenue Source relative to Quota Size

Revenues from Existing Customers

Revenues from New Customers

< $500K 58% 45%

$500K - $1M 63% 38%

$1M - $1.5M 64% 36%

$1.5M - $2.5M 68% 33%

$2.5M - $4M 69% 31%

> $4M 74% 27%

Selling to existing customers means that firms need to focus on retaining customers and ensuring a high degree of satisfaction and loyalty. It is worth noting that customer satisfaction and loyalty are different. Take for


What is the size of your average annual sales rep quota?



example a customer buying gas from a service station. This customer is satisfied with the convenience of the mini-mart, clean bathrooms and more. However, if gas prices are cheaper across the street this customer may not be loyal and purchase gas from the cheaper source. Several research clients were looking to see if there was a link between the size of quota and a reps ability to close deals. We segmented the data based on quota size and then drilled into factors such as win rates. In comparing win/loss/no decision rates, firms with quotas greater than $4M have 49% wins, 33% losses and 18% no decisions, versus firms with quotas of $1M or less having 48% wins, 30% losses and 22% no decisions.

Notes:



0 - 15% 15.4%

16 - 25%

18.4%

26 - 40% 20.5%

41 - 60%

26.0%

>60%19.7%

Sales Rep Variable Compensation Breakdown

How Would


Almost no pay

packages are fully guaranteed.

Nearly half of all

pay packages have variable components in excess of 40%.

Variable pay can

impact voluntary rep turnover.

Ask a group of CSOs how much of a sales person‘s total pay package should be base pay and how much should be variable pay (bonuses, commissions, SPIFs, etc.) and you will likely spark a lively debate. Everyone will have an opinion on what should be done. Above we see that the camp for high base and low variable comp is 15%, while nearly 20% favor the opposite end of the spectrum (low base and high variable). So should we be listening to one camp more than another? At one level the answer could be no. We compared the quota attainment for reps depending on how much of their compensation was base versus variable. Did the reps with high guarantees outperform other reps because the pressure of commission was off their backs and they could concentrate on doing the right types of deals? Or did the reps that stood to make a killing by scoring large commission checks figure out a way to get more deals done? The answer was neither. We did not find a statistically significant difference between rep performance and the percentage variable compensation. But, does the chance to score big have an impact on what firms a sales person goes to or stays with? To investigate that concept, we segmented the data by percentage of pay that was variable and looked at the voluntary turnover rates (a productive rep leaves the firm by their own choice).


What percentage of your sales rep compensation package is variable pay?



Voluntary Turnover as related to Variable Pay Percentages

Voluntary Turnover

0 -15% 19%

16% - 40% 16%

>40% 14%

Here we found something we will be investigating in more detail in our 2009 compensation management survey. As the percentage of variable pay increases, the instances of reps leaving their current employer to seek other opportunities decreases. If in fact salespeople are motivated by the chance to make more money, then structuring programs that allows you to feed eagles while starving pigeons, may be something worth considering as you design this year‘s compensation and incentive programs to motivate you sales teams.

Notes:



Consistently drives behavior

11.7%

Normally drives behavior

48.2%

Occasionally drives behavior

21.6%

Minimal/no impact on behavior

11.3% Do not know

7.2%

Impact of Incentive Plans on Sales Rep Behavior

How Would


Ability to

consistently drive sales behavior is the exception versus the rule.

Firms that

consistently drive behavior do a better job in all sales performance areas.

Companies that

reported minimal ability to drive behavior have poor sales performance.

The concept of having a variable pay component integrated into sales rep compensation plans is most often linked to the desire to direct their selling behavior. Focusing on the participants who had a variable percentage of greater than 15%, we next asked them to assess the impact their incentive plans were having on driving rep behavior. As can be seen above, very few firms say their plans consistently get their reps to focus on what they want them to do. In looking at several sales performance metrics, as firms move from minimally driving desired behavior, to occasionally, to normally and finally to consistently, improved sales performances does result as seen in the following table.

Impact of Incentive Plans as related to Sales Performance

Quota Attainment

Cross-Sell/ Up Sell

Meets/Exceeds Win Rates

Consistently drives behavior

64% 75% 55%

Normally drives behavior

62% 54% 50%

Occasionally drives behavior

55% 42% 43%

Minimally drives behavior

48% 35% 42%


What impact does your compensation plan have on your sales reps’ behavior?



Above we see that when companies are able to direct the behavior of reps, they perform better at tasks such as cross-selling, they win more deals, and ultimately more of them make their numbers. In drilling into the data further, we also looked at a company‘s sales rep turnover rate, both voluntary and involuntary. Firms that have developed and implemented a sales compensation package that consistently drives their sales reps‘ behavior have a lower percentage of voluntary rep turnover (14%) and involuntary turnover (16%) than those firms whose plans minimally drive the desired behaviors. Companies in the latter group have a voluntary sales rep turnover of 19% and involuntary rep turnover comes in at 17%. In looking at sales performance metrics associated with specific sales tasks, such as account planning, qualifying opportunities and nurturing leads, we once again found that companies with incentive packages that consistently drive behavior outperform those in the minimal group. The following chart shows the degree to which these two groups vary.

Impact of Incentive Plans as related to:

Consistently Drives Behavior

Minimally Drives Behavior

Develop sales strategy plans meet/exceed

66% 22%

Qualify opportunities meet/exceed

71% 32%

Incubate leads meet/exceed

58% 28%

These trends lend support to the idea that we can use compensation to drive reps to perform beyond just hitting their numbers, and motivate them to focus on a number of key aspects of selling to and servicing accounts. The key enabler for this is having sophisticated enough incentive management systems in place to support the implementation of these plans, which we explore further on page 206.

Notes:



Less than $75,00016.5%

$75,001 -$100,000

19.3%

$100,001 -

$150,00027.8%

$151,001 -$200,000

20.5%

$200,001 -$250,000

9.9%

Greater than $250,000

6.0%

Targeted Compensation First Line Sales Managers

How Would


New Metric: Pay for first line sales managers vary considerably.

Lowest paid managers experience highest turnovers.

Higher paid managers perform more effectively.

In addition to tracking sales rep compensation packages, we have added sales manager pay to the survey. Above we see that targeted compensation packages for managers range widely. Does high pay generate high performance and, if so, where and how? In segmenting the survey responses by total pay targets, we first looked at turnover. Here we were considering two factors: 1) Does higher pay incentivize more sales managers to stay with their companies (reducing voluntary management turnover)? 2) Are these managers more effective at developing and keeping solidly performing reps on their teams? Let‘s consider the findings in the following table.

Turnover as related to Annual Manager Compensation

Sales Manager Voluntary Turnover

Sales Rep Voluntary Turnover

<$100K 12% 20%

$100K - $200K 8% 13%

>$200K 8% 12%

Here we see that lower paid managers (those making less than $100,000 annually) turnover more frequently than those working for firms that offer higher compensation packages. In addition, voluntary sales rep turnover is higher at companies with lower compensated sales managers. We then looked to see if there was a difference in sales manager performance. In the following table we looked at four key tasks in which


What is your total target compensation for sales managers?



we expect managers to do well: 1) hire reps who can and do succeed at selling for your firm; 2) forecast business accurately; 3) adapt the sales process based on changes in the marketplace; and 4) proactively determine which reps need additional coaching/mentoring.

Manager Compensation as related to Meets/Exceeds Expectations for:

Manager Pay <$100K

Manager Pay $100K - $200K

Manager Pay

>$200K

Hiring reps 39% 54% 51%

Forecasting 39% 46% 43%

Adapt process 45% 52% 55%

Coach 55% 66% 65%

Here again we see that the lower paid managers underperform when compared to their higher paid peers. We hear a lot of talk about Sales 2.0, and find it interesting that what is said is often focused on how reps need to step up their game: qualify better, differentiate themselves from alternatives, sell the full value of their products, get customers motivated to do something now versus later, etc. These are all key abilities, but we need sales managers to perform at a higher level, as well. Underpaying firms may start off with the wrong talent to begin with, and may be at further competitive disadvantage by not providing reps the best leaders to help them be successful.

Notes:



Manually calculate

9.6%

Use spreadsheets40.3%

Use internally developed application

33.9%

Use commercial application

7.9%

Do not know5.3%

Other

3.0%

Methods Used to Calculate/Manage Commissions

How Would


New Metric:

One-half of all sales teams using no-tech or low-tech.

Use of more sophisticated systems linked to better sales performance.

CRM 2.0 tools help drive rep behavior to new levels.

On page 30, we see that 85% of the firms we surveyed have sales rep compensation plans where at least 16% of the total compensation packaging is variable pay. A new question in this year‘s survey assesses how these incentive plans are being managed. The initial results are somewhat surprising. Above we see that 50% of the sales organizations we surveyed rely on what we consider ―low-tech‖ methods for incentive plans management: manual calculations or using spreadsheets. We have written in the past about how these two approaches are often subject to errors and time consuming ―shadow accounting.‖ But another issue surfaced during our analysis that is worth noting. In the following table, we compare the sales performance of teams according to method of incentive plan management.

Commission Management Method as related to:

Manually Calculate to Manage

Incentive Plan

Use Spreadsheets

to Manage Incentive Plan

Use Internal/ Commercial Application to Manage

Incentive Plan

Overall revenue plan attainment

81%

86%

88%

Reps meeting or exceeding quota

52%

57%

61%


What method do you use to calculate/manage sales commissions?



One quickly sees that those firms using more robust incentive management applications are seeing a higher percentage of reps making their numbers, resulting in a higher percentage of the overall company revenue target being achieved. Let‘s step back for a moment and discuss why companies implement variable compensation pay programs. The key reason we most often hear is to influence sales reps to do specific things: focusing on new accounts; increasing the average deal size; improving margins; farming more business from additional accounts; etc. These tasks can involve the need to look at a variety of factors, above and beyond the rep‘s revenue to date number. How well do low-tech methods for managing the process work? As we show on page 32—where we compare the impact of sales behavior based on the approach that firms use to manage commission and incentive plans—the answer is: not very well. If CSOs really want to ensure that their variable compensation funds are invested wisely, they need to ensure that the management of those programs is administered in a more sophisticated manner. Many of the new breed of CRM 2.0 solutions are commercially available applications designed to allow sales management to design, model, and execute extremely targeted compensation plans. Further, these applications also have the analytic capabilities to review past selling behavior to optimize commission programs going forward.

Notes:



Decrease in size6.7%

Remain the same

42.7%Increase by 10% or

less27.9%

Increase by 11-20%12.7%

Increase by 21-30%

3.6%

Increase by 30%+6.4%

Planned Sales Force Size Change Over Next 12 Months

How Would


Number of firms

planning no increase in sales force size is way up.

‗ Different sizes of

companies have varying sales force change plans.

Should we add

more people or invest more in existing people?

In the 2008 SPO report we reported that 36% of the firms we surveyed were planning no increase or a decrease in their sales force size for the coming year. Above we see that number has now increased to nearly 50%. Another item worth noting is even those firms looking to add salespeople are trimming back on the size of that increase. For example, last year 15% of the study participants reported planned rep increases of greater than 20% and above we see that number has dropped to10%. There are differences in hiring plans among classes of companies. When looking at companies based on the size of their current sales force, we see that 51% of the firms with fewer than 50 reps plan to increase the size of their sales force. This compares to 60% of firms with 50-250 sales reps, 55% for companies with 250-750 sales reps and 40% for sales organizations with more than 750 reps. Several of our research clients shared they are going through this debate: Is it better to invest money to hire more people or take those same funds and invest in the people they already have? The answer is that it depends. If your focus is primarily on 2009, then you need to factor in how long it takes those new reps to become fully productive. As seen on page 48, this can be a significant amount of time. When you factor in recruiting fees, training costs, the amount of sales manager time that will be needed to support these new hirers, guaranteed draws during the first


How will the size of your sales force change over the next 12 months?



few months, etc. you see a lot of expenses will be hitting your bottom line. And one thing we often don‘t add to this equation is some of the new people won‘t make it. What is the additional impact of starting all over again with yet another new rep? Putting pen to paper and running the numbers, you may well see that the net revenue contribution net-new salespeople will give you in the coming year is minimal. You need to then consider what you could generate by investing those dollars in your existing people (e.g., upgrading their selling skills, added support) and/or giving them additional tools/programs to sell more effectively (e.g., cross-sell/up-sell opportunities, campaigns generating more leads, etc.). Again, if your focus is 2009, we think you will quickly see that the ROI will be better in the short term by optimizing the performance of the existing sales force. Of course, this should be balanced with a longer term view. You can survive 2009, but you will not necessarily be positioned to grow in 2010, if you haven‘t increased the core group of experienced reps.

Notes:



0%

5%

10%

15%

20%

% Voluntary Turnover (rep leaves) % Involuntary Turnover (rep is let go)

15.3%

13.1%

Annual Sales Rep Turnover Rates

How Would


Rep turnover

continues to decline for a fifth year in a row.

Down economies

can increase turnover (both voluntary and involuntary).

Reps tend to

remain in place as predictability increases.

Overall turnover in the sales force dropped slightly this past year, representing five straight years of decline. However, we do not expect that trend to continue. Here‘s why. Sales force turnover has two aspects. First, you have involuntary turnover: cases where a sales person is let go for non-performance. Often during an economic downturn, we see this number increase as sales management is forced to really consider the performance of their salespeople. In good times, poor numbers may be forgiven, but this is rarely the case in bad times. As the overall unemployment figures are expected to go into double digits in 2009, we expect to see an increase in involuntary turnover as companies jettison poor performers. The second aspect of turnover is when a productive rep chooses to leave their current company to take a job with another firm. In economic downturns, the number of open sales positions to be filled drops, so one might think that voluntary turnover would go down. There are fewer jobs for experienced reps to go to; therefore, reps will stay put. However, during the last downturn, we actually saw an increase in voluntary turnover. What happened? The accompanying shift we saw was when firms had an opening they focused heavily on hiring seasoned sales reps that had experience selling in their industry. That meant poaching good reps from a competitor. Because of this, voluntary turnover went up instead of down, as successful reps were hired away.


What are your current annual sales rep turnover rates?



In times like the present, we encourage you to optimize your involuntary turnover by releasing reps that are not going to be successful selling for your firm. But at the same time, you need to also focus on decreasing voluntary turnover as much as possible. One factor to be aware of surfaced by our benchmarking efforts is as predictability increases, voluntary turnover decreases. That is, when a company has a predictable sales process, successful reps stay put. Indicators of such stability are that products come to market when promised, lead flow is consistent, reps are asked to follow a structured process (while it may be adapted from time to time, there are rarely knee-jerk reactions that cause them to make wild shifts in what they are doing), forecast accuracy is high, etc. In this type of environment reps know what to expect. If an offer comes along from another firm, even for more money, the unknowns of the new move placed against their understanding of the job they have, can keep them from moving on. As we have noted before, one way to increase predictability is to increase structure. Firms achieving a Level 4 in sales process implementation (see page 7) are rated as far more predictable by sales reps and sales managers alike.

Notes:



Non-Selling

Professionals11.3%

Selling Other Industry

27.0%

Selling Within Industry

61.7%

Experience Profile of New Sales Rep Hires

How Would


Hiring reps with

sales and industry experience is up from previous years.

Many costs

associated with developing new hires with little or no experience.

Improved

performance with experienced reps with industry expertise.

Firms that are looking to hire salespeople who have previous selling and industry experience has increased over six full points from last year! Last year, 55.6% of companies hired experienced reps with industry expertise. This year the number has jumped to 61.7%. An interesting change from last year‘s profile of new rep hires is that last year we saw a dramatic increase in the percentage of companies hiring recent college graduates without sales or industry experience. In fact, last year we were impressed with the spike in this number from previous years. However, this year we have seen the practice of hiring inexperienced sales reps drop nearly four percentage points. The reason for this change can likely be attributed to the cost of getting new reps up to speed. There are many costs associated with getting new reps fully productive; the two most expensive are ramp-up time (to full parity with other reps) and training costs. In looking at the actual time it takes to get a new hire ―fully productive,‖ we see this has been increasing over the last five years. This contributes to other cost considerations including sales managers having to spend more time with new hires (at the expense of not working with experienced salespeople) on the deals they are trying to close. And the cost to train new salespeople is significant. Consider the many areas in which a new sales rep needs to be trained to be both competent and confident in what and how you sell. First, new sales reps need to know what you sell so they are experts in the eyes of your customers.


What are the experience levels you are looking for in new sales rep hires?



Depending on the complexity of your offerings, the cost could be significant. Next, new hires need to know how you sell. They need training on your sales process and methodology so they sell consistently with the rest of your sales team and with the company‘s sales strategy. New hires need to know how to use the many technologies your company employs to help salespeople be successful such as your CRM system, your sales knowledge management system, etc. When firms think about hiring new salespeople, there is a lot to consider. Another reason firms are looking to experienced salespeople is the improved performance found with tenured reps. Specifically, when drilling into the numbers we found that the win rate of forecast deals was higher for experienced sales forces than for those who have less or no experience. This same performance improvement can also be found in the number of forecast opportunities that result in no decision.

Win Rates as related to Sales Rep Experience

Win Rates of Forecast Deals

Experience selling within industry 49%

Experience selling in other industry 46%

Non-selling professionals 45%

Notes:



Yes41.4%

No52.3%

Do Not Know6.3%

Sales Aptitude/Competencies Assessment Testing

How Would


New Metric:

Competency testing is an emerging practice.

Internally developed tools are the most common choice.

Literally dozens of commercial testing tools available.

Take a moment to refer to the Sales Relationship/Process (SRP) Matrix we profiled on page 7. Let‘s consider the case of two reps: one that is successful at an Approved Vendor Relationship/ Random Process (R1/P1) company, and another that is successful at a Trusted Partner Relationship/ Dynamic Process (R5/P4) firm. What are the odds that if you had them switch places, they could be as successful working at the other firm? The answer is: very low. Think about it. Great R1/P1 reps are going to be people who work really well when they get to make their own decisions, focus on getting the deal done, unencumbered by process and structure—the ultimate lone wolves or individual contributors. In contrast, their R5/P4 counterparts would tend to be strategic thinkers, people who work well in a team selling environment, who would avoid hurting a long-term relationship with a client in exchange for a quick, short-term deal, etc. When we think about what we are asking reps to do in their jobs from this perspective, we realize all salespeople are not created equal. There are certain competencies and attributes that make reps successful based on the environment in which they operate. So how often do we take this into consideration during the hiring process? Above we see that four in ten firms include some form of competency testing in their sales rep hiring process. To understand what this might entail, we asked a follow-up question to determine what type of tool they used to do this proficiency profiling of sales candidates.


Do you use competencies assessment testing when hiring new reps?



The number one choice was internally developed skills assessment tools. In benchmarking some of these initiatives, we found that the company looked at characteristics common to their ―best reps.‖ These firms then typically developed a written survey or set of questions that were verbally presented to the person applying for the job to attempt to determine how many of those attributes the candidate possessed. While some of these assessments were very sophisticated, others are often not robust enough to provide a comprehensive analysis; increasingly, hiring managers can benefit from a full competency assessment of a given candidate. Stepping in to fill this void—without requiring the firm to hire a PhD—is a variety of commercial assessment tools. In all, 76 different options were named by study participants who said they were using a commercial offering. In reviewing these tools, we found some that were very general purpose, providing a profile that did not take into account the type of job one was being considered for (sales, marketing, financial, support, etc.). Others were very sales focused (assessing the candidate‘s abilities to perform well as a telesales rep, versus a field-based rep, versus a channel-based rep, etc.). The following metric delves deeper into the impact competency assessments are having on hiring efficacy.

Notes:



Significantly improves hiring

success rates33.0%

Somewhat improves hiring

success rates51.7%

No impact

5.6%Do not know

9.6%

Competency Testing Impact on Hiring Success

How Would


New Metric:

Most firms using testing during hiring say the effort is worth it.

Performance data support this assessment.

Seeing a wide variety of differences in ability to manage sales rep turnover based on the assessment tool used.

Following up on the previous question regarding whether profile testing is taking place, we then asked what impact competency assessments were having on hiring efficacy. As seen on page 126, nearly as many companies feel they need improvement in this area as those who rate themselves as adequate or better at this aspect of sales management. We filtered the current year‘s study data based on whether firms were conducting competency testing as part of their hiring process. We then reviewed a key factor that should equate to successful hiring: percentage of reps making quota. We found an interesting performance difference between these two groups, profiled in the following table.

Testing as related to Sales Rep Performance

Conducting Competency

Testing

No Competency Testing


62% 56%

Clearly, sales managers would like to hire reps who can hit their numbers, so this difference would suggest a firm should consider competency assessments as part of their hiring process. But the case may be stronger than first appears. Remember, in addition to internally developed assessment methods, we identified 76 commercially available options. In looking at the commercial vendors individually, we found results varied from as low as 50% of reps making quota to an excess of 70%. Depending on your sales approach,


What impact does sales competency testing have on hiring success?



the right commercial offering may be able to significantly help you target the right reps to hire. In further analysis, we did not find that there are any differences in ramp-up time for new reps between the testing and non-testing groups. But we did note a difference in involuntary turnover rates where the rep is let go for non-performance. For the non-testing group, the average involuntary turnover rate was 14%. In looking at some of the commercial testing system users, we found figures as low as 8%. We have talked before about the cost of making a bad hire. If testing can help you reduce the number or reps you have to let go because they couldn‘t cut it at your firm, the ROI can be significant in terms of steady revenue flow from the territory, reduced recruiting and training costs, freeing up manager time, etc.

Notes:



Less than 3 Months4.8%

3 - 6 Months24.7%

7 - 9 Months23.5%

10 - 12 Months23.3%

More than 1 Year22.2%

Do Not Know1.5%

Average New Sales Rep Ramp-up Time

How Would


Short ramp-up

times are becoming even rarer.

Start-up times impacted by complexity, not process or training.

Competency

testing can help you pick quick starters.

There is often a debate about how long it should take a new sales person to become fully productive. First, there is the CFO‘s view—the one we see built into many revenue modeling tools—which is to hire an experienced sales person who can be fully productive in less than three months. The chart above shows this is a myth. Then there is the CSO view, which hopes they can get up to speed in less than six months. Again, the data suggests this is the exception rather than the rule. And if you then ask the manager working with the new rep, the manager may wonder if the new hire will ever be able to sell on their own. The reality is somewhere in between these disparate views and it is easier to calculate than you might think. Open a new spreadsheet and put the names of the reps you have hired over the past two years in column A. Then put their revenue contributions by month into columns B through Z. Add the total of each column and divide by the number of reps who were selling during that period. You will now have your true ramp-up curve; and chances are you will not like it. Looking back to 2003, 59% of the firms surveyed reported ramp-up times of six months or less. Today the figure is less than 30%. What happened? Things got a lot more complicated. Product line complexity (both depth and breadth), competitive activity, customer expectations, etc. all have increased. This translates to a new rep, even one with experience in your industry, having a much steeper learning curve than previously.


What is the average ramp-up time for a new sales rep?



Can we train our way around this problem? Apparently not. When we segmented the survey data based on investments in sales training, we did not see any significant reductions in ramp-up time for companies that invest heavily in educating new hires. And sales process, while having an impact on the ultimate success of new reps, does not help them get fully productive faster. One trend we did see was the potential to hire fast starters. Experience in a given industry alone didn‘t seem to help generate faster sales, but competency testing did. When we looked at companies which were successfully using testing of sales rep competency and aptitudes during their hiring process, we found that nearly 40% of those firms reported six months or less ramp-up time for new reps. Another trend is access to sales knowledge. Sales reps working for firms that give reps easy access to the information they need to effectively sell were also seeing shorter periods to full productivity.

Notes:



Generated by Top 20% of Reps

61.5%

Generated by Rest of Reps38.5%

Percentage of Revenues Generated by Top Reps

How Would


Figure held

steady to the first time we analyzed this metric last year.

Concern during hard times is, what are you doing to keep rainmakers?

Companies are starting to harness the power of rainmakers to help other reps.

Sometimes things get said so often that eventually they are viewed as truth. One of those beliefs is that 80% of a company‘s revenues come from the top 20% of their reps. Last year, in our own version of Myth Busters, we started asking the survey participants to share the realities of this based on the performance of their sales organizations. In doing so, we found that the 80% estimate was too high, and that the figure was much closer to 60%. In repeating the question in this year‘s survey, we found that results were very consistent with the findings last year, seen at just over 61% of the firm‘s revenues generated by what we call the rainmakers. In light of the challenges sales organizations face today, let‘s explore the importance of these players. In reviewing the previous metric, we assessed how long it takes a new hire to get fully productive. What we were really looking at was how long it takes the average new hire to get as productive as the average rep—not a rainmaker. If you lose one of your highest performing salespeople and replace them with an average sales rep, then even when they get fully productive, they will still be performing at a level substantially lower than the rainmaker they were brought in to replace. In today‘s business climate, you want to reduce all voluntary rep turnovers, but it is even more critical that you keep your best and brightest. So what are you doing to ensure they stay?


What percentage of your total revenues was generated by top 20% of your reps?



A publishing firm shared with us their strategy for keeping the cream of their crop. Each year, the top ten percent of their 200-person sales force achieved Platinum Rep status. This was not just something for which you got a plaque. Platinum reps were told that they could go out and hire an administrative assistant and the company paid for that person‘s salary. The cost ended up being about $34K per admin, which may initially sound like a lot to spend. But consider two other factors. First, in the past five years the firm has lost zero Platinum sales reps to voluntary turnover. Second, in tracking first-year Platinum reps, they found that their performance the year after getting an assistant was 11% more than the year before, so improved selling ability (and freed up selling time) more than covered the cost of the admin. Another idea to consider is how to tap into the capabilities that rainmakers have to raise the performance of the entire sales force. A software company we benchmarked created a new position in sales where rainmakers had the option to become consulting reps. Instead of having a territory of their own they became a resource that other reps could leverage on big deals. Reps could bring the rainmaker in to be part of the team to pursue major opportunities. This was not a management position, something that many of the rainmakers would shy away from. They were still individual contributors, but they also got a chance to lend their selling expertise to their peers. After two years of having the program in place, this software firm reported a 16% increase in win rates for major deals.

Notes:



% Generating

Leads/Researching Accounts

19.9%

% Selling: Face-to-face Meetings or Over the Phone

37.1%

% Administrative Tasks/Meetings

17.2%

% Account Service Calls

14.8%

% Other (travel, training, etc.)

11.0%

Sales Rep Time Allocation

How Would


Essentially no

change in how salespeople are spending their time since last year.

More time to sell and more sales appear linked.

Use of technology to give reps a digital assistant can help give them more time.

At its peak back in 1998, we found that salespeople were able to dedicate 47% of their time to the task we wanted them to focus on when they were hired: selling. Over the past decade that number has eroded as administrative tasks, account servicing, lead generation requirements, etc. have chipped away at the rep‘s work week. Above we see the number is now down to 37%, essentially unchanged from the past year, but noticeably down from the all-time high. Is this loss of selling time a cause for alarm? We segmented the survey data based on how much time reps could dedicate to selling: less than 40%, 30% to 40%, and greater than 30%. In the table below, we present the findings as the percentage of reps making or exceeding plan for these three groups of sales organizations.

Selling Time as related to Sales Results

Selling Time >40%

Selling Time 30% - 40%

Selling Time <30%


64%

59%

54%

The data above supports the conventional wisdom that more time spent selling to customers does in fact translate into more revenues per rep. So how do we help reps get more time to sell?


How do your sales reps spend their time?



Last year we published a number of case studies on how companies are leveraging technology to provide reps with a ―digital assistant‖ to automate many tasks for them. One technology firm gave reps access to a sales intelligence system that scanned external news sources and proactively notified them about events they could reference when making calls for new leads. Another approach we found was reps being given access to tools that would automate appointment scheduling by giving prospects and customers direct access to the rep‘s online calendar via email. Using this approach, prospects/customers could pick a time that worked for both parties, versus playing email tag to determine a time that worked. But what if at the end of the day we are already doing all that we can to free up selling time? If we can‘t help reps make more calls, can we help them make great calls? An example we found was an office design firm‘s optimization of the needs analysis process. This firm did very sophisticated designs of office space which took into account the furniture, lighting, computer networking needs, etc. To develop their proposals, on average, sales reps needed to make over three calls gathering all the data the design engineers needed. The firm redesigned the process so that the reps started to use a tablet PC-based needs analysis tool that understood all of the co-requisites and prerequisites involved in correctly configuring their offerings. By using the tool, the vast majority of the needs analysis work could be completed in a single call, and in doing so reps could dedicate the additional free time incurred to other selling tasks.

Notes:





Sell Cycle Analysis Introduction

This section contains sales cycle metrics related to the types of deals sales reps are pursuing in relationship to opportunity value and effort required to close a deal; and an analysis of the success rates experienced in converting prospects from one stage of the sales process to the next. Note: In tables that analyze abilities, the totals may not add up to 100% as some respondents selected ―do not know.‖

Average Deal Size ............................................................................................................ 56

Length of Average Sell Cycle ......................................................................................... 58

Number of Calls Required to Close a Deal ................................................................... 60

Lead Generation Analysis .............................................................................................. 62

Percentage of Leads that Progress to an Initial Customer Discussion ..................... 64

Percentage of Initial Discussions that Progress to a Presentation ........................... 66

Percentage of Presentations Resulting in a Sale ......................................................... 68

Percentage of Proposals Resulting in a Sale ............................................................... 70

Percentage of Deals that Close as Forecast ................................................................. 72

Outcome of Forecast Deals ............................................................................................ 74



<$10,00020.4%

$10,000 - $25,00015.9%

$25,001 - 50,00014.9%

$50,001 - $100,00018.4%

$100,001 - $250,00013.0%

$250,001 -$500,000

7.0% >$500,000

8.2%

Average Deal Size

How Would


Average deal size

held steady for 2008, but historical data suggests this will deteriorate in 2009.

Neither forecast accuracy nor no decision rates seem to be significantly influenced by deal size.

Effort, in terms of number of calls, increases in direct relationship to deal size.

In 2007, we saw the reversal of a three year growth trend in average deal size. While we may have hoped that was just a onetime occurrence, this year‘s study data does not show any significant improvements year over year. In fact, looking at the trends we surfaced during the last economical downturn, we will very likely see deal sizes shrink this coming year. While the market clearly took a hit in the second half of 2008, the fact that this didn‘t noticeably impact deal sizes immediately does not mean we should assume it won‘t do so in 2009. Remember, the deals we were closing as we ended 2008 were the result of sell cycles that we started, in many cases, many months earlier. While we are seeing cases where current budgets were cut to some degree, we are finding more examples where future budgets are being taken off the table—in some cases completely—and investments in anything will be reviewed and approved on a case by case basis. When this has happened in the past, average deal sizes fell noticeably when purchases did get made. Based on input from research clients, we looked too see what impact deal size might have on two aspects of selling: deals closing as originally forecast and deals ending in no decision. Some CSOs feel that as deal size increases, their ability to predict what will close, when it will close, and for how much decreases. In segmenting


What is your average deal size?



deals based on the ranges <$25K, $25K - $100K, $100K - $500K, and then >$500K, we did not find any significant differences in forecast accuracy (or inaccuracy). Also, regarding no decision rates, some clients felt that as the average deal size increased so too did the potential of an opportunity ending in no decision. This theory was not supported by the data; we noted only tenths of a percentage point different between the four deal size groups. One trend we did see, however, was the number of calls required to close a deal increased as the deal size increased. This is shown in the following table:

Calls Required to Close based on Deal Size

≤5 Calls 6 - 9 Calls ≥10 Calls

<$25K per deal 70% 20% 9%

$25K - $100K 48% 37% 13%

$100K - $500K 30% 39% 26%

>$500K per deal 24% 25% 44%

This is another aspect to consider when looking at performance assumptions for 2009. During the last downturn, we saw the number of calls required to close deals increase significantly as the burden fell on salespeople to get approval from more stakeholders in getting a purchase approved. Firms with higher ticket offerings should determine if they are building in factors for the proper level of effort reps will need to invest in order to get deals done.

Notes:



<1 Month

10.6%

1 - 3 Months29.7%

4 - 6 Months31.2%

7 - 9 Months14.3%

10 - 12 Months6.7% > 1 Year

6.3%

Do Not Know1.2%

Average Sales Cycle Length

How Would


Time required to

close deals continues to increase year to year.

Doing a better job of prioritizing which deals to pursue can help reduce sell cycle time.

Also, formalizing how you sell can help reduce time to close business.

For the fourth year in a row, the time required to execute all the steps in the sell cycle and get to a ―yes‖ has increased. Looking back to 2003, we found that 19.8% of all sell cycles were taking seven or more months to close. Above we see that number has increased to 27.3%. Conversely, on the low end, sell cycle lengths of three months or less were reported by 51.2% of the survey respondents in 2003. This is now down to 40.3%. With the economy showing no signs of improving quickly, how can firms keep their selling efforts from eroding further in 2009? Delving into the data surfaced two areas worth considering. The first is doing a better job of prioritizing which opportunities to pursue initially. We analyzed sell cycle lengths by how well a company is able to do opportunity qualification and prioritization; we then segmented firms that need improvement, meet expectations and exceed expectations at this aspect of selling. Here are the results.

Ability to Qualify and Prioritize as related to Sell Cycle Length

Qualify and Prioritize

Needs Improvement

Qualify and Prioritize

Meets Expectations

Qualify and Prioritize Exceeds

Expectations

≤ 3 Months 40% 42% 43%

4 - 6 Months 29% 32% 37%

≥ 7 Months 30% 26% 20%


What is the average length of your sell cycle?



We need to remember that not all prospects are created equal. Some may buy relatively quickly, others may take more effort (or more discounting) in order to close, and some may never be able to translate their interest into a buying decision. (See the no decision numbers on page 74.) In order to ensure that reps are spending their selling time as effectively as possible, they and their managers should invest effort to really look at each deal they go after. Is it one they can win and want to win? For example, one medical products firm we benchmarked shared that if purchasing was the key decision maker then sell cycles took longer, had lower win rates and, if they did close, did so at lower margins. If nursing teams were the key recommenders, these measures would be much higher. Based on this, sales managers ensured that reps either got nursing involved from the beginning, or they didn‘t pursue the deal. After prioritizing which accounts to pursue, you may also be able to impact the sell cycle length based on how you sell. We compared the sell cycle lengths based on the level of companies‘ sales process implementation (see page 7). And we found that as firms move from informal to more formal processes, sell cycle lengths decrease, as seen below.

Sales Process as related to Sell Cycle Length

Level 1 Random Process

Level 2 Informal Process

Level 3 Formal Process

≤ 3 Months 36% 41% 42%

4 – 6 Months 28% 31% 32%

≥ 7 Months 34% 27% 24%

Again we see that as you get more structured in how you sell, you may be able to surface strategies and sales tactics that allow you to move through the sales process in less time.

Notes:



1 - 2 Calls8.5%

3 - 5 Calls40.9%

6 - 9 Calls29.9%

10 - 15 Calls11.4%

More than 15 Calls5.7%

Do Not Know3.4%

Average Number of Calls to Close a Deal

How Would


Number of calls

required to close a deal trending back up.

Sales managers can reduce the number of calls by proactively helping reps who are struggling.

Web-based meetings can be effective at reducing the cost of sales calls.

In the above chart, we see one of the factors contributing to increases in the length of the sell cycle: salespeople have to make more calls to get a prospect to make a buying decision. As we have pointed out in past years‘ reports, this is a trend we‘ve seen during every business downturn, as all purchases are put under more scrutiny. So can we do anything to curb this trend in 2009? One approach you may want to explore is optimizing the performance of your sales managers. This insight surfaced when we looked at the number of calls required to close business based on a firm‘s ability to help managers proactively identify which reps need help on which deals, as shown in the table below.

Ability to Coach Reps as related to Calls to Close Business

Coach Reps

Needs Improvement

Coach Reps

Meets Expectations

Coach Reps

Exceeds Expectations

≤ 5 Calls 46% 50% 58%

6 – 9 Calls 29% 34% 27%

≥ 10 Calls 21% 16% 13%

The figures suggest the potential for sales managers to keep their team members on track when they can proactively identify which reps to mentor, and how. So what can you do to make this happen?


On average, how many calls does it take to close a deal?



As we profiled on page 200, part of the new generation of CRM tools coming to market are sales analytics solutions. These applications continually monitor the company‘s pipeline looking for what has changed (e.g., a deal value was cut, the probability to close was reduced, a new competitor has shown up, etc.) and what hasn‘t changed but should have (e.g., no next steps are scheduled for a deal scheduled to close this month). These rules-based tools track these kinds of events, and then notify the appropriate sales manager what is/isn‘t going on with each opportunity. The real time notification allows a sales manager to immediately identify which reps to reach out to and why. These proactive alerts keep the pipeline flowing and help avoid a flurry of last minute calls and scrambling to get a deal done. Another item to consider is this: if you can‘t reduce the number of calls needed to close a deal, can you reduce the cost of those calls? Web-based conferencing tools have become a mainstay for marketing in conducting virtual seminars over the Internet. On page 196, we see that sales forces are also starting to use this technology. Do you always have to invest the time and incur the cost of flying a rep to do a presentation or a demo face-to-face? Some sales organizations are finding the answer is no; they can just as effectively manage that task via a web-based meeting. Think you need to get everyone in the same room to negotiate a contract? Again, web-based meetings may be an effective alternative. If you are not using these systems, it could be worthwhile to see if they can supplement your face-to-face selling.

Notes:



% Generated by

Marketing 24.0%

% Self Generated by Sales Reps

52.3%

% Other (partners, press, referrals, etc.)

23.7%

Lead Generation Analysis

How Would


Lead generation increasingly falling on the backs of sales reps.

Marketing can help sales by optimizing their website.

Reps may well be missing out on low hanging fruit for leads.

In 2005, the percentage of total leads that salespeople were personally generating was 41%, and that slipped to 40% the year after. The chart above shows this metric is tracking in the wrong direction. ―Wrong direction,‖ meaning what you really want is your reps to optimize the amount of time they spend selling—not generating leads. This year‘s survey respondents report their reps are now generating more than half of the leads they pursue.

We will be conducting our third Lead Generation Optimization study in early 2009. The focus will be how marketing is responding (or not responding) to the needs of their customer—sales—by helping them find more deals to pursue. For now, though, one key insight that sales can share with marketing immediately is turbo-charge the website! What brings us to this conclusion? We compared the percentage of leads generated by marketing across companies based on how effectively sales rated their website at engaging customers and prospects (see page 220). We think the following numbers send a compelling message.

Leads Source Analysis based on Website Effectiveness

Website Needs

Improvement

Website Meets

Expectations

Website Exceeds

Expectations

Marketing 21% 27% 43%

Sales 54% 49% 36%

Other 24% 24% 21%


How are your sales leads generated?



In other reports we published over the last 12 months, we have focused on the fact that the first step in the ―buy cycle‖ for many prospects is to visit websites to get educated on alternatives that are available. When they find something that appears to meet their requirements, they will register to get even more information. From this a lead is generated for follow-up. Above we see how important it is for your company‘s website to be engaging and informative. When it attracts buyers, marketing can begin to take over more of the lead generation tasks. At the same time, marketing will never generate all the leads that sales needs, so reps will most likely have to resort to their own efforts to fill their lead funnel. One of the areas many firms need to get better at is farming the low hanging fruit of leads already available. Where are these leads? In your customer base! Just look at the performance ratings on page 114 and you‘ll see the dilemma. Firms invest lots of time, energy, and resources to close a new client. You would then expect that sales would maximize the value out of that relationship. But you would be wrong. Well over half of the companies we surveyed this year stated they need improvement in farming additional opportunities from existing accounts. This should be something that sales managers work with each rep to improve in 2009.

Notes:



0%

5%

10%

15%

20%

25%

30%

35%

<25% 26 - 50% 51 - 75% >75% Do Not Know

19.9%

34.2%

19.9%18.8%

7.1%

Leads Resulting in an Initial Discussion

How Would


Leads turning into

opportunities continue downward slide.

Thorough pre-contact research can help improve lead conversion rates.

Lead incubation success translates into lead conversion success.

Your company invests in obtaining contact information on potential new clients. Marketing devotes resources to developing messages to motivate interest from these individuals. Some percentage raises their hand in some way (attends an event, visits your website, calls an 800 number, etc.) expressing interest. Marketing then qualifies them as a prospect and the lead is passed on to the right sales rep. Now what? Well, far too often—nothing! Above we see the majority of the firms we surveyed (54%) reported that their salespeople are able to turn a lead into an initial sales discussion (face-to-face meeting or phone call) less than half the time. This is up nine full points from 45% in 2004. So can you improve lead conversion rates? First, reps need to do a better job of researching leads before they contact them. Prospects are often doing a lot of homework online before they contact a vendor. What do your reps know about the prospect before contacting them? They should know if you‘ve done business with them in the past, including other business units/divisions of their company. If so, do you have an idea of what their needs might be? Do you know who the other stakeholders are that need to be contacted? Do you know what they‘ve purchased in the past? When looking at the study data, firms that excel in researching prospects versus those that are average or poor, have a noticeably higher conversion rate than their peers.


What percentage of your leads progresses to an initial customer discussion?



This is great when the prospect is ready to have an initial discussion right now. However, timing is typically not immediate for all qualified prospects; an important addition to help with lead conversion is to get great at lead incubation. One of the factors that is needed to turn interest into action is time. Does the prospect have the time available right now to start a buy cycle? For many prospects the answer is, ―Not right now.‖ What happens to these leads? In many cases they are forgotten, as salespeople move on to work with the prospects that are—or appear to be—ready to buy now. Assuming that because a prospect can‘t meet with you now means they won‘t meet with you later is a mistake; here is the data to back up this claim. We segmented the study data based on how well a company handled the task of lead incubation, and then compared the percentage of cases when companies reported a conversion rate of 51% - 75% or >75%. Here are the findings.

Lead Conversion based on Ability to Incubate Leads

Conversion Rate 51% - 75%

Conversion Rate >75%

Exceeds expectations 22% 26%

Meets expectations 23% 22%

Needs improvement 18% 16%

Simply stated, we need to invest the time to stay in contact with leads that have an interest but no time. This clearly pays off. Our 2008 Lead Life Cycle study found that lead incubation or lead nurturing is left to sales 49% of the time. Because of this, sales organizations should explore the types of tools they can provide reps to help them accomplish the lead incubating task. CRM 2.0 systems for lead generation/management are stepping in to fill this need. They can automate the nurturing of leads, keeping track of all non-active prospects until they start to show they are ready to talk, and then immediately let the rep know when it is time to get back in contact with them. Our benchmarking efforts have shown that this can be a much more cost effective method for getting reps more deals to pursue than spending more money to generate more net-new contacts.

Notes:



0%

5%

10%

15%

20%

25%

30%

35%

40%

<25% 25 - 50% 51 - 75% >75% Do Not Know

13.6%

39.6%

29.2%

11.4%

6.3%

Initial Discussions Progressing to a Presentation

How Would


Ability to get

prospects to learn about your solution is again declining.

Showing others‘ successes can help motivate prospects to the next step.

Virtual presentations and demos are proving very effective and less expensive.

Not only are fewer leads converting to first conversations (see prior metric), but fewer of these initial discussions are generating enough interest on the part of the prospect to move on to a presentation, a demo, etc. Let‘s explore a couple approaches you may want to explore to improve your conversion rates in this area. The first is to leverage the experiences of your existing clients to motivate potential new customers. For example, we did an analysis of CSOs to see what incented them to start an evaluation of various sales effectiveness solutions. Number one on their list was personal experience with that solution, followed by a friend‘s experience or hearing about a peer‘s experience. With this in mind we segmented the study data based on how effective a firm was at creating/maintaining current case studies and references for the reps to leverage. Below we see the first call to presentation conversion rates for companies based on these criteria.

Opportunity Conversion based on Ability to Create Case Studies/References

1st

Call to Presentation

Conversion Rate 51% - 75%

1st

Call to Presentation

Conversion Rate >75%





What percentage of your initial customer discussions progresses to a presentation?



Here we see that 52% of companies that exceed expectations report an initial discussion conversion rate of more than half the time compared to 42% and 38% respectively for firms who merely meet expectations or need improvement. One approach that a network manufacturing company shared with us for optimizing reference management was to record interviews with their best clients. They had a firm do video interviews with their key references and then meta tagged the footage. This allowed viewers to easily identify and jump to the two minute segment where the client talked about the problem they were trying to address, the alternatives they considered, and the ninety seconds on the ROI they achieved, etc. These interviews were then made available to other prospects via a password protected link from the seller‘s website. Recording the interviews meant that the customer was not overused with dozens of reference call requests; they simply did the one interview taping session to share their experiences. Having the interviews easily available online allowed reps to leverage references much earlier in the sell cycle. A second approach to explore is how to increase the effectiveness of presentations/demos when you can‘t meet with the client face-to-face. In this tight economy, travel budgets are being reined in. As opposed to emailing out a PowerPoint deck and trying to do a demo via a conference call, many firms are finding that giving sales reps access to Web conferencing capabilities can significantly improve the impact of virtual presentations. (See the analysis on page 196).

Notes:



0%

5%

10%

15%

20%

25%

30%

35%

40%

<25% 25 - 50% 51 - 75% >75% Do Not Know

13.6%

39.6%

29.2%

11.4%

6.3%

Initial Discussions Progressing to a Presentation

How Would


Results post-

presentation are a mixed bag.

Presentations that align needs to solutions are motivating prospects to buy.

Aligning needs/solutions helps reduce competitive losses and no decisions.

Even when a sales person can get a prospect to the presentation stage, we see mixed results in the ability to then move on to a final sale; these results are mostly not impressive. Five years ago, 35% of the firms we surveyed reported a conversion rate of presentations to sales of 25% or less. Above we see that number has now grown to nearly 41%. One trend that is worth exploring is: What exactly are we trying to accomplish during a presentation or demonstration? In the 90‘s we saw a lot of emphasis on making sure salespeople clearly articulated the capabilities/features of their offerings and also the benefits the prospect could expect to achieve. Today however, with the vast amount of product information already in the hands of potential clients via the Internet, the focus of the presentation/demonstration needs to go beyond features and benefits. We are seeing more demand from clients for a clear understanding of their problems and potential solutions. And when a sales team is able to effectively present how their solution matches a prospect‘s need, the rewards are significant, as seen below.

Presentation Conversion based on Ability to Align Solution to Needs

Presentation Conversion Rate

25% - 50%

Presentation Conversion Rate

>50%





What percentage of your presentations results in a sale?



In the above table, we compared the conversion rates achieved by how well a company rated their ability to do problem/solution alignment. We see that nearly two-thirds (65%) of firms that excel at this go on to close the deal more than 25% of the time, versus only 46% for firms who need improvement in this area. Where do those improvements come from? We next compared the win/loss/no decision rates of forecast deals using the same ability to align solutions to customer needs. Below we see that this can impact your ability to beat the competition and could also have a sell cycle end in a no decision.

Close Rates based on Ability to Align Solution to Needs

% Forecast Resulting in

Wins


Losses


No Decisions

Exceeds expectations

53% 27% 20%

Meets expectations

48% 30% 22%

Needs improvement

44% 32% 24%

This insight may make it worth the time and effort to review exactly what your sales teams are trying to accomplish in a presentation. Is the sales messaging they are using product-centric or customer/solution-centric? At the end of a meeting, can your prospects repeat back how they could work with you to achieve gain or remove pain? Are your reps not only helping prospects see what can be accomplished, but also providing a clear path as to how this improvement can be achieved? Above we see the power of messaging. If your competition excels at it and you are poor, they will have a significant edge over you in winning business.

Notes:



0%

5%

10%

15%

20%

25%

30%

35%

40%

<25% 25 - 50% 51 - 75% > 75% Do Not Know

20.3%

35.7%

29.2%

11.9%

7.6%

Proposals Resulting in a Sale

How Would


At the end of the

sell cycle, closing performance is again up slightly.

Getting the prospect to ―yes‖ require sales to build a compelling business case.

Training in this area can have big paybacks.

We have progressed all the way through the sell cycle to the point where the prospect has agreed to consider a proposal from your firm. How effective are you at delivering a compelling business case to get them to go the final step and give a ―yes‖ decision? In 2003, only 31% of the firms we surveyed reported a proposal to sale conversion rate of greater than 50%. Today that number is up to 41%. This is an aspect of selling where we are seeing improvement. But, can we do more? And, and do we need to do more? Let‘s explore the second question first. During the last business downturn, we saw the disappearance of the economic decision maker—the single person who could say yes to the proposed solution. In tight times this individual was often replaced by ―decision-by-committee;‖ that is, multiple stakeholders—some of whom you/your rep may have never met—had to reach consensus to approve a purchase. Based on the current business climate, we have every reason to believe that in 2009 we will again see more scrutiny of deals. The question you need to ask is, are your reps ready to meet this challenge? A new area we‘ve begun to explore in this year‘s survey is how effectively firms are delivering specific types of training to their salespeople. One of these areas relates to how effectively salespeople are being trained to build a business case to justify their proposed solution.


What percentage of your proposals results in a sale?



As you will see on page 154, the training we are providing salespeople is falling short in a number of areas, and business case justification is one of them. This is a time when all firms are looking to cut back on expenses. As a result, many sales leaders (or their CFOs) are asking, ―Is this is an area we can avoid investing in for a while?‖ The survey data suggests that the cost of doing nothing/delaying is much more expensive than the cost of giving reps the skills they need to excel at this aspect of selling. Below we compare the proposal to sale conversion rates for firms against their ability to train their salespeople on how to justify the solutions they are proposing.

Proposal Conversion based on Ability to Provide Justification Training

Proposal to Sale Conversion Rate

51% - 75%

Proposal to Sale Conversion Rate

>75%




The findings build a business case of their own, which says that the improvements one could achieve from investing in training for salespeople would far surpass the cost of the training itself.

Notes:



0%

5%

10%

15%

20%

25%

30%

35%

40%

<25% 25-50% 51-75% 75%+ Do Not Know

18.4%

35.5%

27.3%

11.0%

7.8%

Deals Closing as Originally Forecast

How Would


Deals that do

close are getting a bit closer to what was promised.

But forecast mistakes still abound.

Research data shows that ―inspecting‖ can improve ―expecting.‖

There are two aspects of forecast accuracy that we have been tracking over the past decade. The first of these is that when a deal closes, is it for the amount, timeframe, product mix, etc., that was originally forecast, or not? In addition to predicting the flow of revenue for management, the sales forecast should be a tool that other functional areas of the enterprise can turn to for resource utilization planning. Manufacturing needs to know what products to make; distribution needs to know when and where products are to be shipped; customer service needs to know what accounts their people need to work with and in what capacity; marketing needs to know what is selling and what is not; etc. Looking at the figures above, we see that for many companies the value of the forecast as an accurate planning tool is, at best, suspect. As organizations try to make maximum use of scare resources in 2009, is there a way that forecast accuracy can be improved? The data suggests that deal accuracy can increase significantly. We compared the forecasting abilities of firms based on their ability to have sales managers do two things: 1) identify which reps needed coaching on which deals; and 2) get actively involved in those sales situations to make sure the initial assessment of the opportunity was realistic, and stayed on track. As seen below, 53% of the firms who excel at this aspect of sales management have deal accuracy rates of better than 50%.


What percentage of your deals close as originally forecast?



Deals Closing as Forecast Based on Manager’s Ability to Proactively Coach

Deal Accuracy Rate 51% - 75%

Deal Accuracy

Rate >75%




So, how can forecast accuracy be achieved? We benchmarked an insurance firm that was able to increase their forecast accuracy to above 90%. They started by defining the specific steps (strategies and tactics) in the sales process a rep and a prospect needed to go through in order to properly assess the potential of an opportunity. With this common template of performance in place—which all sales reps and sales managers were trained on—they integrated the process into their CRM system. As deals moved through the pipeline, the system was tracking to make sure all the proper activities had been completed. Included in the system was a sales analytics engine that looked for exceptions to the rules. When it found a rep not adhering to the process, it notified the appropriate sales manager, telling them with whom to work and on what aspect of the sales process. The ability to consistently ―inspect‖ the health of the opportunity flow significantly increased the ability of sales managers to do their jobs, and the firm to rely upon their forecast‘s accuracy.

Notes:



% Wins

47.8%

% Loses30.4%

% No Decisions21.9%

Outcome of Forecast Deals

How Would


Number of deals

that end in wins declines again.

No decisions are the biggest single competitor for many firms.

2009 should NOT be the year for reps to decide what to do.

Making sure the deals you close adhere to what was forecast is one thing; making sure you are closing the opportunities in the forecast is another. Above we see that for forecast deals across all firms surveyed, less than 48% of these result in a win for the vendor. Note: This does not consider the whole pipeline, but rather, the deals reps gave a high level of assurance would close. To put this in perspective: based on all the sophistication that may be used to assess the likelihood of winning business, for most companies their accuracy is worse than the odds they would get from flipping a coin to make their decision. However, our benchmarking efforts found examples of companies that have win rates of greater than 75%. What do these firms do differently? A key finding is that they do the homework necessary to determine the right deals to pursue in the first place, and then employ the right methods to engage those prospects. Let‘s go back to the concept of the levels of sales process presented on pages 6-7 to explore what this means.

Forecast Outcome based on Sales Process Level


Wins


Losses


No Decisions

Level 4 – Dynamic 57% 24% 19%

Level 3 – Formal 50% 28% 22%

Level 2 – Informal 46% 32% 22%

Level 1 – Random 44% 33% 23%


What are your average win/loss/no decision rates for forecast deals?



Above you see the win, loss, and no decision rates for sales organizations based on their level of sales process implementation. These range from Level 1 – Random Process, where each sales rep does their own thing their own way; to Level 4 - Dynamic Process, where all reps are trained on a single way to sell and the checks and balances are in place to ensure adherence to that process, or changes are made as needed. The data clearly show a trend that as process adherence gets more rigorous, win rates improve. Since all indications are that 2009 will be a challenging year, let‘s take a moment to quantify what this improvement could mean. Assume you are the CSO of a Level 1 sales organization with 100 sales reps. Each rep has a $1M quota, and your average deal size is $50K. In order to hit their revenue target, an average rep would need to close 20 deals at $50K each. To do that with a 44% win rate, they would need approximately 45 forecast deals. Now assume that you could get to Level 4 in your process adherence. Your reps are closing 57% of their forecast opportunities. You are not closing more opportunities, but rather winning more of the ones originally forecast. Now, as opposed to closing 20 deals you would close 25 deals. At $50K per deal, times 100 reps, this is a $25M increase in gross revenues. Does getting to Level 4 take effort? Yes. But achieving such a significant revenue boost is well worth the investment.

Notes:





Sales Strategy Development Assessment Introduction

This section looks at metrics reflecting how sales forces get ready to sell. Specifically, we look at the key tasks that reps need to go through to decide which accounts in their territories to pursue, and what an initial strategy would be for dealing with those prospects. Since few organizations have detailed numbers in all of these areas, survey participants were asked to assess whether they rated their current level of performance as needing improvement, meeting expectations, or exceeding expectations for each. Note: In tables that analyze abilities, the totals may not add up to 100% as some respondents selected ―do not know.‖

Ability to Prioritize Accounts upon Which to Focus.................................................... 78

Ability to Develop Strategic Plans for Key Accounts .................................................. 80

Ability to Thoroughly Research New Accounts Before Calling Them ....................... 82

Ability to Generate the Necessary Number of New Leads .......................................... 84

Ability to Qualify and Prioritize Properly the Opportunities ....................................... 86

Ability to Incubate Leads Who Have Interest, but No Time for Action ...................... 88



0%

10%

20%

30%

40%

50%

60%

Needs Improvement Meets Expectations Exceeds Expectations Don't Know or N/A

50.6%

38.8%

9.1%

1.5%

Prioritize Which Accounts to Focus Selling Efforts


Majority of sales

organizations reporting challenges figuring which accounts to focus on.

Effective prospect prioritization can reduce competitive losses and no decisions.

Investing in understanding the client‘s buying process makes prioritization easier.

This is a metric we started tracking last year based on input from several research clients wondering how good a job their sales teams were doing with regard to determining which prospects in their territories they should focus on, and if that could have an impact on their overall sales performance. Comparing the above numbers to those from last year, we see that a majority of sales organizations are still encountering challenges in appropriately identifying who their perfect prospects are. To see if we could quantify what, if any, impact this was having, we segmented this year‘s study data based on how well the sales teams handled territory prioritization, and then looked at the win/loss/no decision rates each of these three groups achieved.

Ability to Prioritize as related to Forecast Deal Outcome

Prioritization Exceeds

Expectations

Prioritization Meets

Expectations

Prioritization Needs

Improvement

Win/loss/ no decision

54%/ 27%/ 19%

51%/ 28%/ 21%

44%/ 33%/ 23%

As seen in the table above, when sales reps are effective at analyzing the prospects in their territories, and assessing how likely they may or may not be to buy from them, they outperform their peers in two ways. First, they lose fewer deals to competitors. Second, they can decrease the number of ―no decision‖ deals they chase after. So how can you make improvements in this area? A concept we


Rate your ability to prioritize the accounts upon which to focus.



presented a couple years ago was investing the time to determine your Perfect Prospect Profile. To complete this task, take your 30-60-90 day forecast from three to six months ago and determine what your win/loss/no decision ratio was for that period. (We strongly recommend that you include ―no decision‖ in this analysis, since for many firms this can be the biggest problem area they need to address.) Next, randomly select 100 accounts from the forecast consistent with your performance ratio (e.g., a company with a 50/30/20 performance rate would select 50 wins, 30 losses, and 20 no decision accounts). Then review each of these deals from the buyer‘s perspective: What problem were they trying to solve? Who was assigned to the team? How did they plan on justifying the initiative? What other alternatives did they consider? A software firm shared with us that when they went through this exercise they started to see attributes that made prospects more likely to buy from them. For instance, they were very effective at selling to CFOs of multinational companies looking to do budget consolidation in multiple currencies. Based on these insights, they directed their sales teams to analyze the companies in their territories to determine which ones best fit the new perfect prospect profile. By ensuring that those opportunities were targeted first, they raised their win rates by nearly 20%.

Notes:



0%

10%

20%

30%

40%

50%

60%


55.2%

34.4%

8.4%

2.0%

Develop Sales Strategy Plans for Key Prospects


Slippage in

performance regarding creation of strategic account plans.

Account planning key to more reps hitting their numbers.

Planning contributes to better execution at competitive differentiation, selling value and building relationships.

Identification of high probability prospects can be further supplemented by developing strategic account plans for those key accounts: Who are the primary stakeholders you need to engage? How do you plan to differentiate yourself form the competition? How will you sell value to avoid discounting? And in today‘s economy, how will you build a compelling business case that motivates the prospect to act now versus waiting for the business climate to improve? Intuitively we all see the benefits of having salespeople invest time in creating these account plans, reviewing them with their sales management teams, fine-tuning the strategies and tactics, and then adjusting them as needed during the sell cycle. Yet, above we see that proficiency here is the exception rather than the rule, as less than 9% of the firms we surveyed excel in this area. Let‘s take a moment to review why getting really good at this aspect of account management should be a priority. We segmented this year‘s survey data based on how well a company performed at strategic sales plan development, and then looked at a variety of sales performance metrics to see what differences we could surface. The comparisons shown in the table below reinforce an observation by Dr. Eugene Jennings in the 70‘s when he expounded the 7 P‘s on effective management: Proper prior planning prevents piss-poor performance.


Rate your ability to develop strategic plans for key accounts.



Ability to Create Plans as related to:

Strategic Plans


Strategic Plans Meets

Expectations

Strategic Plans Needs

Improvement

Adequate or better at competitive differentiation

96%

75%

53%

Adequate or better at selling value/avoid discounting

88%

68%

66%

Relationship Level 3 or higher

78%

66%

51%

The analysis did show a significant difference in the percentage of salespeople making their quota, and the above numbers suggest why. First, we see that great strategic planners are much more effective at demonstrating to the prospect why their solution sets are a better fit than those of the competition. In addition, they not only win more opportunities, but these deals are typically higher profit deals as they are more effective at justifying their pricing versus relying on discounting to close the deal. And these sales teams also position themselves for more future success. As we presented on page 8, when you can get beyond being perceived as merely a vendor in your prospect‘s eyes, you set the stage for not only continuing to do business with a customer, but expanding your business relationship as well.

Notes:



0%

10%

20%

30%

40%

50%

60%


50.3%

36.4%

10.9%

2.4%

Thoroughly Research Prospects Prior to Call


Seeing a

decrease in the percentage of firms doing thorough research.

Doing your homework is time consuming, but it can open more doors.

Research tools are being made available to reps, but they are generating mixed results.

Another metric we added to the annual survey last year was to assess how well salespeople were able to research prospects prior to contacting them. The numbers we received were disturbing in that only 50% of the participating firms met or exceeded expectations at this task (40% meets expectations; 10% exceeds expectations). Above we see that these numbers have dipped further to only 47%. As we noted on page 64, sales reps are finding it increasingly difficult to convert qualified leads into opportunities. If you are experiencing subpar results in this area, you may want to review if and how your reps are researching prospects before they call them. The reasoning behind this suggestion can be seen in the following table. When we segmented the current year‘s data based on ability to research, we found that the lead conversation rates varied significantly.

Ability to Research as related to Lead Conversion

Thoroughly Research Exceeds

Expectations

Thoroughly Research

Meets Expectations

Thoroughly Research

Needs Improvement

Firms converting >50% of leads to discussions

52%

41%

35%


Rate your ability to thoroughly research new accounts before calling on them.



To help salespeople do research on potential clients we have seen the emergence of a number of companies offering what we refer to as sales intelligence (SI) services. SI vendors offer a wide range of information on prospects, from simple contact information (name, title, company, address, email, and phone), to detailed analysis of prospect account financials, current newsfeeds on their business, insights into their industry, performance benchmarks against their peers, business networking relationships, etc. Initially these services were provided on an annual subscription basis. But recently, newer pricing models are emerging that allow reps to acquire and pay for intelligence on an as needed basis. We asked study participants to tell us which service(s) they were using. We found that 92% of the firms had a relationship with at least one SI vendor, 59% had at least two contracts in place and 38% utilized three or more services. Further analysis of sales organizations show that the success rates of lead conversion can vary widely based upon which SI services salespeople use. Sales executives looking to provide their sales teams with more help in researching their prospects should make sure they look at a number of SI providers. You will want to test them to ensure that the breadth of data they provide is what your sales reps need, and also that the accuracy of the data is high. Research clients looking for insights into the various options available, and what current users think of those services, should contact their CSO Insights analyst for a briefing.

Notes:



0%

10%

20%

30%

40%

50%

60%

70%


63.6%

26.7%

7.0% 2.7%

Generate New Leads

How Would


Poor performance

in generating leads continues to plague sales.

When reps have to close the lead gap, it takes time away from selling.

Lead generation especially hard for non-market leaders.

Number one on the list of sales effectiveness improvement initiatives in our 2008 SPO report was ―enhancing lead generation programs.‖ While we are sure many firms had great intentions in this area, when we look at the performance ratings a year later we see that the reality is that essentially zero progress has been made in this area. As you will see on page 231, optimizing lead generation is still top-of-mind for sales executives this year. And an analysis of the current year‘s data suggests that in 2009 we need to not just talk about improving performance in this area, but actually do something about it. In the table below we compared the amount of time salespeople have to actually sell (see page 52 to review rep time allocation figures), based on how effective their companies were at lead generation. The findings show that when sales is not receiving an adequate lead flow, their selling time drops as the reps have to invest more of their workday in finding and developing their own leads.

Ability to Generate Leads as related to Selling Time

Generate Leads


Generate Leads Meets

Expectations

Generate Leads Needs

Improvement

Amount of time reps spend selling

43%

39%

36%


Rate your ability to generate the necessary number of new leads.



We further segmented the study data based on the position a firm holds in their marketplace (see 22). Companies that are seen as the dominant or one of the lead players in their industry fare better at lead generation than those firms that are viewed as one of many players or a new player/start-up. While this is good news for the key players in a marketplace segment, it points to an even bigger challenge for less established vendors. To remedy this problem, marketing needs to improve their lead generation results. This will likely come from process improvements and better targeting since significantly higher marketing communications budgets do not seem likely for the coming year. In addition, sales need to increase their own effectiveness in this area. On page 198, we discuss the emergence of CRM 2.0 technologies designed to help marketing and sales teams in this ability. These are tools that can be used by salespeople and marketers alike. A networking equipment firm we benchmarked shared with us that after they gave their salespeople access to these tools, reps started doing their own mini online newsletter campaigns to stay top-of-mind with prospects. The system helps automate the email-based newsletter campaign, and automatically tracks which prospects open the email, what topics they looked at, how long they reviewed the material, etc. By giving reps a virtual assistant to help them with their own lead generation efforts, they were able to start closing business within days of launching the initiative.

Notes:



0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%


46.2%

42.3%

9.8%

1.7%

Properly Qualify and Prioritize Opportunities

How Would


Improvements

are being made in the ability of sales teams to properly qualify prospects.

Going after high probability deals helps more reps hit their numbers.

Forecast accuracy also linked to ability to accurately qualify opportunities.

When a lead converts to an opportunity, we are seeing improvement in the ability of salespeople to qualify/prioritize which of these deals to pursue and which to walk away from. In 2006, 45% of the firms achieved a meets or exceeds expectations rating, and above we see the number has risen to over 52%. Part of this improvement appears to be linked to the increased adoption of more formal sales processes across sales forces. These more structured approaches to selling are forcing salespeople and sales managers to ask the hard questions early in the process, and this is helping both groups decide if a deal is winnable or not. The payback for allocating time and resources to the right opportunities became clear when we assessed sales performance related to how well sales teams can determine where to invest their selling efforts.

Ability to Properly Qualify and Prioritize as related to:

Qualification Exceeds

Expectations

Qualification Meets

Expectations

Qualification Needs

Improvement

Reps meeting quota

70% 61% 55%

Forecasting - meets/exceeds expectations

75%

55%

29%


Rate your ability to qualify and prioritize properly the opportunities.



In this table we see that the percentage of salespeople hitting their revenue targets increases noticeably when a sales organization moves from ―needs improvement‖ to ―meets expectations,‖ and then jumps again if the firm can excel at this task. Looking at sales performance during the last economic downturn, we witnessed an increase in the number of sales cycles ending in no decisions. Ensuring that sales teams are accurately assessing not just should a prospect be interested in buying what they have to offer, but will they actually be able to get approval to go forward with the purchase, can have a big impact on how effectively firms allocate company resources in 2009. Another factor to consider is how sales forecast accuracy positively or negatively impacts other functional areas within the company. If manufacturing is relying on these projections to decide what products to manufacture and when; if finance is using these numbers when making decisions about leveraging or not leveraging credit lines; if the forecast is what support uses to allocate personnel resources, etc.--then accurate forecasts help them and inaccurate forecasts hurt them. Therefore, starting at the beginning of the sales cycle, thoroughly qualifying opportunities all the way through the process becomes the cornerstone for optimizing forecast accuracy.

Notes:



0%

10%

20%

30%

40%

50%

60%


53.5%

34.5%

8.7%

3.3%

Effectively Incubate Leads With Interest, But No Time

How Would


Lead life cycle

study shows sales owns lead incubation in half the cases.

This year‘s study data shows they are not handling the task well.

CRM 2.0 tools are available to help reps automate the lead incubation process.

The final new metric we added to the sales strategy assessment last year was tracking how effectively companies were incubating or nurturing leads where the prospect had real interest in what the vendor had to offer--but no available time to evaluate their offerings. To set the stage for discussing this topic, let us first share with you a finding from our 2008 Lead Life Cycle Optimization study. When asked who is in charge of lead nurturing, we received the following responses: sales 48% of the time, and marketing 42% (informally or formally).


Rate your ability to incubate leads that have interest, but no time for action.



It is interesting to note that in 10% of the companies surveyed, no one owns this task. So, if sales is left to manage this task half of the time, are they doing a good job of it? In the main chart above, we see that nearly 54% of the firms we surveyed need improvement in this area. This is up from 50% last year. This is another area where we would encourage clients to look at leveraging technology to assist sales reps. One category of products we have been following over the past two years is the use of customer sales portals. The way these systems work is that instead of salespeople emailing collateral, pricing information, presentations, customer testimonials, etc. to prospects, they create a unique online portal for each prospect that allows them to access information via the Internet. The advantage this provides is that when you have a lead that is being incubated, as soon as a prospect starts to show they are ready to look again at your offerings (as demonstrated by them starting to access their portal and re-read your materials), the salesperson is immediately notified who did the looking and what they reviewed. The portal concept also allows you to update the materials in real time, so that when a prospect does get around to looking at what you sent them, they are always seeing the latest version of the information. A Japanese computer manufacturer reported a 16% increase in overall lead conversion rates after implementing a structured way for sales to stay in touch with prospects, and not just move on to other deals exclusively if the prospect wasn‘t ready to buy today.

Notes:





Sales Cycle Execution Assessment Introduction

This section looks at metrics reflecting how sales forces perform specific selling tasks during the sell cycle to educate the prospect, align solutions to needs, and win the business. Again, since few organizations have detailed numbers in all of these areas, survey participants were asked to assess whether they need improvement, meet expectations, or exceed expectations for each. Note: In tables that analyze abilities, the totals may not add up to 100% as some respondents selected ―do not know.‖

Ability to Understand Clearly the Customer’s Buying Process ................................. 92

Ability to Differentiate among Competitive Products/Services .................................. 94

Ability to Align Solution to Customer’s Needs ............................................................. 96

Ability to Generate Accurate Bid/Configuration/Proposal .......................................... 98

Ability to Cross-sell and Up-sell .................................................................................. 100

Ability to Sell Value/Avoid Excessive Discounting .................................................... 102

Ability to Close Deals Accurately, in the Timeframe Originally Forecast ............... 104

Top Three Reasons Why Companies Win Competitive Deals .................................. 106

Top Three Reasons Why Companies Lose Competitive Deals ................................ 108



0%

10%

20%

30%

40%

50%


40.6%

46.5%

11.9%

1.1%

Understand Customer's Buying Process


Performance

holding steady after two years of gains.

Some

improvement in exceeds expectations group.

Improvements in

sales effectiveness can occur when you sell to support how customers buy.

After two years of improvement in the ability to understand the process that customers are using to buy from us, performance held steady this past year; in fact, we did see a minor increase in the exceeds expectations group. Compared to 2006, what accounts for this improvement in sales execution, and what are the benefits? We have been stressing the importance of understanding the buying process for years and increasingly we are hearing this message from other quarters, as well. The reason is that while sellers focus upon (and derive benefit from) defining and executing their selling process, the fact remains, as a rep you can do everything by yourself except close the deal. If the buyer is not tracking right along, executing their own process and connecting the dots, deals can become stuck, stall out or simply result in no decision when it‘s closing time. Given the very high and persistent percentage (22%) of forecast opportunities that still result in no decision, this is an ability that warrants and rewards improvement. Which brings us to the second question, is improvement in this area paying off?

Understanding Customer’s Process relative to Opp Outcome

Needs Improvement

Meets Expectations



44%/ 32%/ 24%

49%/ 30%/ 21%

55%/ 26%/ 19%

Close as forecast >75%

6% 12% 20%


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



The table above suggests – Yes! The eleven point swing in close rates between the needs and exceeds groups is comprised of 6% fewer competitive losses and 5% fewer no decisions. This is a significant difference if you monetize these figures. And the differences are even more compelling when you begin swimming back up stream through the sales pipeline to consider the time and effort saved by sales reps not going through a wild goose chase, converting leads to first calls, conducting presentations, developing proposals, etc. for deals that are not a good fit from the start. While everyone wants to maximize and optimize performance, when it comes to streamlining your sales efforts and, by extension, your entire organization‘s delivery model, what you really want to do is synchronize your selling with your buyers‘ buying. This may seem like pure semantics, but the tangible return to firms that truly do understand their customer‘s buying process and align their selling with it reap huge benefits. Review your sales process and see whether it aligns with your idealized version of your buyer‘s process. Haven‘t done so already? Then this is clearly a first step in improving things for the coming year. Here‘s a quick example to get you started.

Buying Cycle Process Selling Cycle Process

Feels Pain Interest Development

Envisions Problem Needs Analysis

Defines Problem Education

Defines Solution Demonstration

Determines ROI Justification

Selects Vendor Proposal

Negotiates Purchase Close

Implements Solution Installation

Expands on Solution Account Management

Notes:



0%

5%

10%

15%

20%

25%

30%

35%

40%

45%


34.7%

42.4%

21.9%

1.1%

Differentiate versus the Competition

How Would


Responses

remain unchanged from last year and at low historic levels.

The inability to differentiate opens the door to competitors when you can least afford it.

Past surveys

show 2009 will demand higher competence in this ability and punish those firms that don‘t improve.

While the numbers above may not look that bad, they are essentially the same as last year tying the lowest ratings since we introduced this metric in 2005. What are the underpinnings of solution differentiation and what measures reflect a sales reps‘ competence (or lack of it) in representing their offerings and distinguishing these from competitors? While product knowledge and the ability to demonstrate your offerings‘ features have been foundational to product selling, for the past several years CSOs have been telling us they are interested in shifting their organizations to do more solution or consultative selling. That is, less pitching of product and more exploring of needs and business pains. This reorientation is also fundamental to moving up the levels of relationship (vertical axis) of the SRP Matrix (see page 7). The table below compares those firms above that exceed expectations in differentiating from their competitors with those that need to improve.

Differentiating as related to: Needs

Improvement Exceeds

Expectations

Presentations that close: >50% 14% 26%

Forecast deals that are won 44% 52%

Reps meeting/exceeding quota 55% 63%

Total rep turnover 35% 23%

Vendor level relationship 31% 10%

Partner level relationship 8% 16%


Rate your ability to differentiate your offerings from the competition.



It‘s interesting to see that the first four metrics show that firms who are very effective at competitive differentiation outperform their less-adept peers, and have fewer cases of employee turnover in sales. Also, as you move higher on the relationship scale, buyers want to know less about your products/services and more about what you can do for them; specifically, how you can solve their business issues. Implicit in this discussion is demonstrating that you understand and can address these issues better than anyone else—namely, your competition. Consequently, the firms that need to improve at differentiating also find themselves in the highly competitive, highly price sensitive vendor level three times as often as firms that do well at differentiating, and at the trusted partner level half as often (see the bottom two rows of the table above). To say the least, this is an unenviable position to be in. The results telegraph to other key metrics: lower close probabilities on presentations—again, nearly half the exceeds expectations group‘s figure; an 8% lower win rate on deals forecast to close and a 4% higher competitive loss rate; and a lower percentage of reps meeting or exceeding their assigned quota. Is it any surprise that the group doing poorly at differentiating is setting the pace with 50% higher rep turnover? If it hasn‘t already registered, know that our past studies suggest that 2009‘s buyers will demand even higher levels of understanding of their business problems, and sharper differentiation than price cutting. Firms that do not pick up their ability in this area will find themselves bleeding profits from the thousand cuts inflicted by discounts as a last-ditch and, ultimately, losing maneuver.

Notes:



0%

10%

20%

30%

40%

50%


26.8%

48.6%

23.4%

1.1%

Align Solution with Customer's Needs

How Would


Majority of firms

feel confident at solution/needs alignment.

Sales teams seem more certain of this measure of consultative selling than prior metric.

Changing times

can have an immediate and dramatic impact on buyer‘s needs.

To an even greater extent than the prior metric, this ability is tied to sales reps divining what the buyer‘s needs are and then presenting a solution that speaks directly to those issues. Since reps really have no control over a competitor‘s actions, it may be they sense a firmer grasp of their own buy-sell process and, perhaps as a result, a slightly higher level of confidence in this ability as reported above. The exceeds expectations group represented in this chart had 65% of their reps meeting/exceeding quota versus 55% for the needs improvement group. Their win rate of forecast deals was 53% versus 44%, respectively. So doing well in this ability appears to pay dividends in overall performance. Still, the advent of increasingly informed and demanding buyers has made it essential that reps get up to speed quickly on what pain buyers feel, what solutions they have considered—and possibly unilaterally dismissed—and how they envision their needs being addressed. The needs in question here may be the business pain or opportunity but can also encompass how the buyer wants to buy (i.e., how they want to be sold), individual preferences or styles and much more. In one recent opportunity with a global high-tech company, the seller already had established credibility (as reported by the buyer) and was recognized as being a leader in the space. A key prospect stakeholder had a personal buying style that required only a general outline of a solution—not something to be developed jointly from scratch but also not a single option or even a choice among three options that were fully


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



baked. With this guidance, a high level solution was presented and broad ranging fees discussed; the buy-sell process continued moving forward into questions of delivery and final negotiations. Then two things happened. The financial crisis hit high-tech after pounding the financial sector and internally at this company budgets were either frozen or cut. In response to questions from above, the discussion became much more detailed, protracted, and scrutinized. What had been areas of general agreement needed written specifications. No discount was requested or given but payment terms tied to specific deliverables were also more closely defined. In the end, the agreement was still done and the sale still made but the customer‘s needs (and need for specific assurances) had escalated dramatically. This cautionary tale is not only for the one-in-four firms that need to improve in this ability, but also for the one-in-four that report exceeding expectations here. Times are changing and customers‘ needs will change with the times—rapidly.

Notes:



0%

10%

20%

30%

40%

50%

60%


20.8%

55.8%

19.9%

3.5%

Generate Accurate Bid/Configuration/Proposal

How Would


Continuing to see

this as a strong aspect of selling effectiveness.

This is the

highest rated of all sales abilities this year.

Sales reps‘

access to sales knowledge appears to also benefit from these systems.

This metric has inched steadily upward each of the past five years and in 2009 has the lowest percentage of firms that report still needing to improve in generating accurate bids, configurations and/or proposals. We have reported on improvements using tablet PCs to reduce the number of calls to create proposal for deals involving complex opportunities. We have also seen CRM systems increasingly incorporate or integrate back office or other repositories of information to help tailor more client-focused proposals. And this year, we see continued gain in the number of firms exceeding expectations in this area. The numbers also support this positive outlook with noticeable sales performance improvements accruing to those companies exceeding expectations at this aspect of selling, as seen in the table below.

Ability to Generate Accurate Bid/Configuration/Proposal

Proposals Converting to Sales >75%

Reps Meeting/Beating

Quota




Bid, configuration and proposal technologies appear to be contributing to improved results in another important way: giving sales reps access to sales knowledge. Since these systems typically index content according to some taxonomy and schema to allow them to readily prepare user-relevant documents (e.g., referenced specifically for a CFO of a mid-tier non-high-tech manufacturing company) in real time, they can and often


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



do provide sales reps increased access, as well. The table below shows the level of effort (i.e., hunting) required to access certain types of sales knowledge in firms that exceed expectations in preparing accurate bid/configuration/proposal documents and those that need improvement in this area.

Ability to Access Types of Sales Knowledge Components as related to Bid/Config/ Proposal Accuracy

Easy to Access

Some Hunting Required

Significant Effort

Required

Bid/Configuration/Proposal Accuracy EE - Exceeds Expectations NI - Needs Improvement

EE NI EE NI EE NI

Details on past marketing selling efforts

46% 21% 36% 53% 18% 26%

Details on customer‘s marketplace/industry

41% 27% 43% 50% 16% 23%

Proposal templates and business case samples

63% 35% 26% 41% 11% 24%

Customer references and case studies

47% 25% 35% 48% 18% 27%

Best practices used by sales force

41% 20% 39% 45% 20% 35%

You can see the additional benefit firms are enjoying from their investments in these systems. These figures also provide a window into the correlation between quota attainment and the use of bid/configuration/proposal technologies. As the use of these technologies increase, the percentage of reps meeting/exceeding quota increases.

Notes:



0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%


45.8%

38.5%

11.0%

4.7%

Effectively Cross-sell/Up-sell

How Would


Despite year-to-

year gains, this remains the second-lowest rated sales execution ability.

Need to do better in this specific skill will be tested further in 2009.

Lack of consistent

reinforcement in all four sales success pillars translates to sub-par performance in multiple areas.

After a three point uptick in the left hand column last year, those firms feeling the need to improve in their cross-sell/up-sell ability improved somewhat this year (retreating nearly 3 points). Adding gains in meeting and exceeding expectations, we‘re about where we were in 2007. Given the importance of retaining and expanding existing customer relationships, why does this problem remain stubbornly one that dramatically needs to improve? In the past we‘ve considered the fact that product lines have increased dramatically as has the complexity of the products themselves. But the ―rate of change‖ increase is not remarkable between those firms exceeding in this ability and those needing to improve. We‘ve also suggested that investing in CRM could play a role in keeping reps abreast of these changes, and here we do see a widening gap between the haves and have-nots. Three-quarters (76%) of the exceeding firms have CRM systems in place, versus two-thirds (68%) of the needing firms. However, perhaps more telling is that 43% of the exceeding firms have had their system in place more than three years (versus 23% of the needing group) and the percentage of reps consistently using the CRM system—greater than 90% of the time—is 55% (versus 33%). We suspect that having enabling technology available and consistently using it to improve sales performance can explain some of the differences we noted between these two groups in related metrics. For example, the ability to create loyal customers—a key to expanding and repeating sales--is dramatically rated lower by needs improvement firms.


Rate your ability to effectively cross-sell and up-sell.



Unfortunately for this substantial segment, this is not the only area where significantly lower ratings rule, as seen in the following table.

Ability to Cross-sell and Up-sell as related to Other Abilities

Needs Improvement


EE - Exceeds Expectations NI - Needs Improvement

EE NI EE NI

Create loyal customers 14% 44% 51% 11%

Prioritize accounts to focus selling efforts

30% 66% 30% 3%

Properly qualify and prioritize opportunities

17% 65% 31% 4%

Effectively incubate leads 27% 68% 18% 4%

Sell value and avoid discounting

14% 62% 50% 6%

As can be seen in this table, the nearly one-half of all respondents falling short of expectations in cross-selling and up-selling also trail the one in nine firms doing well at cross-selling and up-selling in many other regards. An entire area where this is especially true is sales knowledge management. In this area the needs improvement group is at least twice as likely (and often more) to also suffer in their ability to access account information, selling histories, etc. Finally, there appears to be a systemic failure underpinning all of these needs. Eight percent (8%) of the exceeds group are at a Level 1 process implementation (Random) versus 23% for the needs group. Conversely, 26% are at Level 4 (Dynamic) compared to just 9% of the needs improvement group. A clear picture emerges supporting the four pillars of sales success: people, process, technology and knowledge. Combine these and the synergy that results reflects throughout these metrics. Firms that ignore one or more of these pillars do so at their peril. This is a risk that will be greater in 2009 when customer retention will be more competitive than ever.

Notes:



0%

10%

20%

30%

40%

50%


44.7%

38.5%

15.4%

1.5%

Sell Value/Avoid Discounting

How Would


Many sales

teams continue to look for improvement in this area.

Incentive and compensation plans should be reviewed to determine their efficacy in guiding rep behavior.

The impact of

discounting on both the top and bottom lines is immediate and direct.

In tight economies, in addition to looking for ways to sell more products or services, we also need to explore ways of optimizing the margins on what we do sell. As seen above, creating a business case to justify the prices we would like our clients to pay is an issue for nearly close to half the firms we surveyed. Position in the marketplace has some impact on offering or avoiding discounting. As you might expect, new players (start-ups) comprised 9% of the exceeds expectations group and 13% of needs improvement—a nearly 50% increase. All other categories, (i.e., dominant, one of lead players, one of many) remained essentially unchanged as a percentage of each group. Much clearer is the connection between level of relationship as perceived by the buyer and the level of discounting. The needs improvement group found themselves in the most crowded and price sensitive vendor category 29% of the time and the valued contributor and partner levels 25%. The exceeds expectations group reported a mere 8% in the vendor level and 45% in the upper two levels! The number one objective for the coming year for both groups—as well as all others—is to increase revenues. But doing so while maintaining margins is also a consideration. So how can we make both happen? Compensation and incentive plans can be fundamental to motivating rep behavior. The table below compares the needs improvement and exceeds expectations groups above when it comes to this important motivator.


Rate your ability to sell value and avoid excessive discounting.



P&L Sales

Expense

-5%

Sales

Volume

+5%

Price

+5%

Sales 100.0 100.0 105.0 105.0

Cost of Goods 60.0 60.0 63.0 60.0

Gross Profit 40.0 40.0 42.0 45.0

Mfg. Fixed 13.0 13.0 13.0 13.0

General &

Admin.

11.0 11.0 11.0 11.0

Sales

Expenses

6.0 5.7 6.0 6.0

Profit Before

Tax

10.0 10.3 12.0 15.0

Profit Increase 3.0% 20.0% 50.0%

Ability to Sell Value as related to Impact of Compensation Plans on Rep Behavior

Sell Value Needs

Improvement

Sell Value Exceeds

Expectations

Consistently drives precise selling 7% 26%

Normally drives desired behavior 46% 46%

Occasionally drives desired behavior 25% 17%

Minimal/no impact on rep behavior 15% 7%

Do not know 8% 4%

About half (46%) of each group feels their incentive and compensation plans normally drive the desired rep behaviors, but outside this band the numbers are completely inverted between the two groups. Forty eight percent (48%) of the needs group comp plans have occasional, minimal or unknown impact on behavior. The impact on bottom line figures is dramatic when discounting comes into the picture. The following table is repeated from our 2007 report. The table below shows the impact of discounting—or not. Shown for a hypothetical company‘s P&L are the effects of a 5% reduction in sales expense, a 5% increase in sales volume, and a 5% increase in price. Note the results (at the bottom of each column): for this company, a 5% expense reduction yields a 3% bottom line improvement, which is a .6 multiplier. A 5% volume increase is a 4X multiplier to the bottom line, while a 5% price increase is a 10X multiplier.

Harvard Business School Publication # 9-192-098 rev 7/9/92

A normal reaction is to balk at a price increase when downward price pressure is so pervasive. Think of it this way: How can you increase price without a price increase? Answer: Don‘t discount.

Notes:



0%

10%

20%

30%

40%

50%

60%


54.7%

38.7%

4.4% 2.2%

Close Deals in Timeframe Originally Forecast

How Would


Accurate

forecasts, even for deals that close, remain elusive.

Percentage of firms excelling in this ability is at all-time low.

Higher levels of

process and technology implementation yield higher levels of forecast accuracy.

Like ―jumbo shrimp‖ and ―professional wrestling,‖ sales ―forecast accuracy‖ is often an oxymoron. That is, the conjunction of two contradictory terms. Above we see that nearly 55% of the firms surveyed see challenges here. Not good for a metric that was bad to start with. At some point you have to ask yourself, ―Do you not understand what we‘re trying to do here or do are you just incompetent?‖ This metric is concerned with when deals will close, not whether. The latter is addressed separately (see page 74). An attitude might be, if it closes and it is revenue, that‘s good, right? Well, yes, if all that‘s being measured and rewarded is revenue—but, as noted in the prior metric, there can be more than merely bookings. Timing of deals is critical to resource allocation, purchasing, manufacturing and other functional areas. Deals coming in a quarter later than originally forecast can adversely affect quarterly earnings and even the profitability of the deals. For example, if personnel are required to deliver a specific job beginning in the middle of February, then having these people freed up and ready to go is a problem if the contract isn‘t signed until the end of March. Sure, they could do other work, filler projects and/or get reassigned to another project assuming one is readily available. Still, shifting assignments around like this creates extra work for someone even if the deal closes and is eventually won. Not being concerned about these ramifications, or even if concerned, continuing to miss forecast timing is one reason sales is often unpopular with other functional areas.


Rate your ability to close deals accurately, in the timeframe originally forecast.



And at a time when companies need to run leaner, squeeze out/preserve what profitability is built into contracts and compete more effectively, sales needs to be more accountable regarding its forecasts. How? It will come as no surprise when we point back to the SRP Matrix once again for possible clues. The one in twenty-five firms that exceed in bringing in deals in the forecast timeframe are consistently higher implementers of sales process and have consistently higher user adoption of their CRM technology, as seen below.

Ability to Close Deals as Forecast as related to Process Levels and CRM Usage

Close as Forecast

Needs Improvement

Close as Forecast Exceeds

Expectations

Level 1 - Random Process 19% 6%

Level 2 - Informal Process 46% 38%

Level 3 - Formal Process 25% 29%

Level 4 - Dynamic Process 10% 27%

Reps using methodology >75% 25% 60%

Reps using CRM >90% of the time 37% 50%

Even if you‘re not trying to win the company‘s popularity or profitability prize, it just makes sense to do what works. Double down on the things that do work and stop the things that don‘t. And along these same lines, 65% of the companies needing to improve their ability to close deals within the forecast timeframe also need to improve in regularly conducting win/loss reviews. This compares with 29% for the exceeds group. It‘s no wonder this group outnumbers the exceeds group thirteen to one; the wonder is why so few firms year after year see the value of addressing this challenge.

Notes:



0% 10% 20% 30% 40% 50% 60%

Other (please specify)

Market Messaging

Account Coverage

Availability of Product / Solution

ROI Business Case

References

Sales Process Execution

Price & Terms

Brand Equity / Reputation

Product Superiority

Level of Service / Support

Existing Relationships

3.0%

6.8%

7.7%

13.8%

18.9%

20.9%

22.2%

26.3%

36.9%

41.8%

48.2%

54.8%

Reasons Why You Win Deals

How Would


Existing relationships lead the list once again this year.

Less common reasons for winning still hold up in certain areas of performance.

It would appear

most firms really are not that clear on the reasons they win.

We started asking this question in 2007 and existing relationships have topped the list each year since. As a three-peat winner we thought it was time to test how high the payoff is from existing relationships. To do so, we looked at a few responses to this metric – existing relationships (first place), price and terms (second place), and account coverage (tenth place) – and related them to several other metrics. Representative results are shown below.

Reasons Deals are Won as related to:

Existing Relations

Price & Terms

Account Coverage

Vendor level relationships

15% 35% 23%

Partner level relationships

10% 12% 12%

Overall revenue attained

86% 85% 81%

Reps who meet/ exceed quota

60% 57% 58%

Won deals as forecast >75%

10% 4% 12%


49%/ 29%/ 22%

44%/ 32%/ 24%

45%/ 34%/ 21%

Level 1 - Random Process

19% 20% 8%

Level 4 - Dynamic Process

12% 5% 8%


Rate your understanding of the top three reasons why you win deals.



It should be noted that these three reasons needn‘t be mutually exclusive since, theoretically, a company could pick each of these as their top three reasons for winning. However, the three reasons shown are sufficiently different and for the purposes of this discussion they were sorted such that they are mutually exclusive. Firms stating existing relationships as one of their top three reasons but not price & terms or account coverage are shown in the left column; price & terms but not existing relations or account coverage in the middle column; and account coverage but not existing relations or price & terms in the right column. Even though these reasons are very different, the results obtained are not so different. Firms crediting existing relationships enjoy the lowest percentage of partner level relationships. Firms crediting their price & terms for winning have the lowest rating of forecast accuracy and the ability to predict what will ultimately be bought. And firms with enough reps to claim account coverage as a top reason for winning attained the lowest percentage of overall plan and nearly the lowest percentage of reps meeting or exceeding quota. And with so many reps it appears these firms have recognized the value of not having everyone doing their own thing (Level 1 – Random Process) but show little progress in getting to the highest levels of process implementation (Level 4 – Dynamic Process). It warrants further investigation, but it seems clear none of these reasons are so compelling that those firms are outdistancing all others. In fact, the results suggest that firms may not be that clear about why they are winning. A relatively small percentage (7%) of the overall survey population reports exceeding expectations in regularly conducting win/loss reviews. We believe firms would benefit from getting a much firmer grasp on why their customers are buying from them and how they can more effectively leverage these reasons going forward.

Notes:



0% 10% 20% 30% 40% 50% 60% 70%

Competitor's ROI Business Case


Competitor's Product Superiority

Competitor's Level of Service / Support

Competitor's References

Competitor's Sales Process Execution

Competitor's Availability of Product / Solution

Competitor's Market Messaging

Competitor's Account Coverage

Competitor's Brand Equity / Reputation

Competitor's Existing Relationships

Competitor's Price & Terms

5.4%

7.0%

11.0%

11.8%

12.2%

14.8%

19.1%

19.4%

24.5%

34.7%

59.0%

68.7%

Reasons Why You Lose Deals

How Would


Top reasons firms

lose deals are price and the competitor‘s relationships.

Firms may be clearer on why they lose deals than why they win.

Process

execution appears to be an antidote to price competitors.

Along with the prior metric, we asked this companion question two years ago. And to an even greater extent, the pattern of responses and the percentages have remained essentially fixed over the past three years. There is nothing you can do about a competitor competing on the basis of price; that is, you can‘t force a competitor to charge more than they do. But it is interesting to look at results for companies that pit what they can control against price competitors. The following table shows results for companies when one of the top three reasons they lose is the competitor‘s price & terms combined with one of three variables for why they win: 1) their own existing relationships; 2) their own service/support; or 3) their own process execution.

Competitor’s Price & Terms/ Reasons Deals are Won as related to:

Our Existing

Relations

Our Service/ Support

Our Process

Execution

Vendor level relationships 21% 21% 15%

Partner level relationships 8% 12% 13%

Overall revenue attained 87% 86% 91%

Reps meeting/beating quota

59% 59% 61%

Won deals as forecast >75%

10% 9% 14%


48%/ 32%/ 21%

47%/ 32%/ 21%

52%/ 27%/ 21%

Level 1 - Random Process 20% 17% 9%

Level 4 - Dynamic Process 11% 11% 34%


Rate your understanding of the top three reasons why you lose deals.



It appears focusing on your own sales process execution will, to a certain extent, help blunt the impact of a competitor that focuses on lower prices and/or more generous terms. Levels of relationship, overall plan attainment (as well as percentage of reps meeting/exceeding quota) and forecast ability are all higher for the firms identifying their sales process execution as one of the top three reasons they win deals. It‘s interesting to see that our existing relationships and our service/support are almost an exact tie across many of these measures. This may be, in large part, because our current relationships often are mostly sustained by service and support rather than sales. For sales to actively offset a competitor‘s low-price appeal, it appears a real advantage can be gained in excellently executing a well articulated sales process. The companies that do this are in the most price sensitive vendor level less often, the least price sensitive partner level most often, and have fewer competitive losses. These same firms operate in an ad hoc (Level 1 – Random Process) way half as often as the others (shown in the table above) and in a dynamic (Level 4 – Dynamic Process) way three times as often. With 2009‘s emphasis on cost-cutting and pricing sure to be increased, it appears that focusing on the one thing your sales team can control—sales process execution—would be a timely response.

Notes:





Account Management Assessment Introduction

This section contains sales cycle metrics related to the types of strategies and tactics companies are utilizing to keep more, and generate additional business from, existing customers. Note: In tables that analyze abilities, the totals may not add up to 100% as some respondents selected ―do not know.‖

.

Ability to Effectively Introduce New Products ............................................................ 112

Ability to Farm Additional Revenues from Existing Customers ............................... 114

Ability to Effectively Communicate with Customers ................................................ 116

Ability to Generate Repeat or Renewal Business from Existing Customers .......... 118

Ability to Create Customer Loyalty ............................................................................. 120

Ability to Create/Maintain Case Studies/References ................................................. 122



0%

10%

20%

30%

40%

50%


46.2%

41.0%

8.5%

4.3%

Effectively Introduce New Products


Essentially, no

movement in this metric over last year.

Nearly one-half of firms still report a need to improve in this ability.

Effective

introduction of new products linked to better sales performance.

The needles have barely moved for this metric over the past year, though the percentage of firms exceeding expectations has improved fractionally (up from 7.3% in 2008). However, The need to develop skills in introducing new products—and the payoff for doing so—is evident. Firms needing improvement in this area were lowest in overall plan attainment (85.8%), worse in win/loss/no decision forecasting rates (47%/30%/23%), highest in rep turnover (32%), and required significant effort in accessing references (27%) and/or best practices (34%). By contrast, though outnumbered by the needs improvement group, those firms that exceeded expectations in this metric also saw higher plan attainment (92%), better win/loss/no decision rates (51%/29%/20%) and lower overall rep turnover (24%). It is improbable that the ability to effectively introduce new products results in all these other successes. But our benchmarking efforts have shown that firms who effectively rollout new offerings do see higher revenues per deal, higher revenues per existing account, and higher customer retention. So why do some organizations excel at this while other do not? One factor may be the attitude that reps have for servicing accounts. Looking at the level of relationship a rep has with their customer, only 29% of the firms who stated they needed improvement at effectively introducing new products viewed their relationship with their customers as being a strategic contributor or trusted partner (see page 6), compared to 48% of the firms who said they excelled at this aspect of selling.


Rate your ability to effectively introduce new products into the market.



Another factor that seems to be related to how effective salespeople are at introducing new products is their ability to access the information they need in order to sell. We have written before about the comfort zone dilemma. Salespeople tend to sell things they are comfortable with; where they have a firm grasp of the offering‘s features and benefits, understand how it compares to alternatives from other vendors, and are able to handle objections and questions. Conversely, they tend to shy away from things they are unsure of. Every time you introduce a new product, you are creating a new learning experience for the sales force. So how easy are you making it for them to get comfortable with products or services they have never sold before? Below we did a comparison of how much hunting is required for firms that need improvement at introducing new products, versus those who exceed expectations. We see that much more hunting for information is required from sales forces that are underperforming at this task.

Ability to Introduce New Products as related to Access to Sales Knowledge

Introducing New Products

Needs Improvement

Introducing New Products Exceeds

Expectations Customer references/case studies: hunting/significant hunting required

70% 51%

Best practices of sales force: hunting/significant hunting required

79% 59%

This is simply another reflection that companies are not leveraging the knowledge and assets they‘ve developed, or they haven‘t developed the right resources to begin with. The numbers clearly reflect the cost of doing nothing to address this problem.

Notes:



0%

10%

20%

30%

40%

50%

60%


56.5%

34.0%

6.1%3.5%

Farm Additional Revenues from Existing Customers

How Would


Needs

improvement is still the number one selection.

Several areas of account management rise or fall along with this metric.

Exceeding in this

ability correlates with tangible payoffs in other areas, as well.

Farming additional revenues from existing accounts sounds like a logical priority and these customers should be among the most fertile fields for sales reps to work. And yet, for the third year in a row, essentially no progress has been seen in the percentage of revenues generated from existing accounts or improvements in this specific ability. So what is standing in the way of progress? The answer may lie with a reps‘ ability to execute the core sales planning tactics necessary for maximizing the true revenue potential of an account. In the following table we look at how well a company farms additional business compared to their ability to meet or exceed expectations at four key selling skills.

Ability to Farm as related to Meeting or Exceeding Expectations

Farm Additional Deals Needs

Improvement

Farm Additional Deals


Prioritizing accounts

36% 79%

Developing strategic plans

31% 83%

Generating new leads

26% 57%

Qualifying opportunities

41% 76%


Rate your ability to farm additional revenues from existing customers.



Above we see that the group that exceeds expectations at farming additional business fares very well at several of the tactics that help them identify and prepare to engage prospects. This ability to identify and focus on the right opportunities appears to be a prerequisite for successfully leveraging existing clients to their fullest potential. Translating this to overall sales performance, we see that the percentage of sales reps meeting/beating quota in the needs improvement group for farming was 57%, versus 68% in the exceeds expectations group. Achievement of overall revenue plan was also much higher for the second group than the first. So if a company is underperforming in this area, they may well want to look at the skill levels of their people in executing the tasks needed at the beginning of the sales cycle to get opportunities started in the first place. But there is also another point to consider: Are your reps motivated to want to farm? As we explored on page 30, many companies have highly leveraged compensation plans. Salespeople are normally very good at figuring out what to do depending on where they can make the most money. Are they being incented to farm business? If not, then don‘t be surprised to see them go after other deals, versus trying to get add-on business (which can often be smaller contracts) from existing clients.

Notes:



0%

10%

20%

30%

40%

50%


37.7%

48.1%

12.7%

1.6%

Regularly and Effectively Communicate with Customers

How Would


Slight

deterioration in this ability from past years.

Majority of firms feel they are meeting expec-tations in their communications.

Technology

enablement is helping more firms effectively communicate with customers virtually.

―Hang together or hang separately,‖ the words of Benjamin Franklin seem to apply to account management abilities, as well. As seen in the prior metric, firms doing well at one of the several skills in this category also tend to do better in others; those that do poorly in one seem to suffer in the others. This may suggest that a general orientation of communicating with and continuing support of accounts is either a part of the culture or it isn‘t. Regularly and effectively communicating with the customer base is something that most of the sales organizations we surveyed said they do adequately or better. Less than 38% of firms see the need for improvement in this area. We will be interested in seeing what the numbers look like for the 2010 survey. The reason is that during the last business downturn, the firms that most successfully weathered the storm were the sales organizations that leveraged their customer base: cross-selling/up-selling, farming additional business, adding on new products, etc. To open the doors for those discussions, having a continual dialogue with the customer base is a great first step. The realities of how well customers think you are communicating with them, versus what you think, should come into play in early 2009, as firms reach out to their existing clients. So what can you do to optimize customer communications? Personal calls to customers get high grades for impact, but they are expensive


Rate your ability to effectively communicate with your customers.



and time consuming. Regular email/snail mail campaigns are cost effective, but the impact can be spotty as your massages can get lost in the mass of other items being sent to clients. Blending the cost effectiveness of high tech, online communications with the impact of high touch seems to be a successful and integral part of the mix. The use of the Internet to conduct webinars has become an increasingly accepted and effective tool for marketing. As customers have responded positively to learning/interacting via this communications approach, sales have also started to adopt these techniques. The uses of collaboration technologies to conduct online meetings, train customers, deliver demonstrations/presentations, etc. has increased significantly over the past two years. And those firms using this approach have reported that it has a noticeable impact on their sales effectiveness. Another area that has increased is the use of the Web to support customer self-service. Customers and vendors can communicate virtually via posting information to customer-specific micro-sites/portals, or giving clients access to tools to do some of their own needs analysis and future requirements planning. These and other techniques will make customer communications easier to manage, which will be key if companies are going to be effective at executing the next two account management tasks.

Notes:



0%

10%

20%

30%

40%

50%

60%


29.5%

51.2%

16.8%

2.5%

Renew Business with Existing Customers

How Would


Majority of firms

feel they are doing an acceptable job of renewing existing customers.

In downturns, all deals are reviewed more closely, including renewals.

The task of re-

justification should not be left to your customer.

There are a variety of reasons for doing well in this area, not the least of which is that you are the entrenched supplier. Your firm is one of the competitors others are trying to displace—or at least take your share, if you are not a sole source provider. And, the scores above are better than average when compared against other skills/abilities. Still, for 51% of the sales organizations surveyed, is meeting expectations sufficient? Our prediction of the answer for 2009 is no. There are a variety of forces converging to suggest that if this is not a top priority for your entire organization in the coming months and years, you could find yourself in an upcoming management meeting having to explain some very bad news: why you lost some favorite and long-standing accounts. Here‘s why. It‘s tempting to say ―It‘s the economy, Stupid,‖ but that‘s actually our second reason. First in line is continued and heightened competitive activity. All segments are reporting increasing to significantly increasing competitive activity. And the top sales knowledge management initiative across all groups above is competitive analysis information. This concern/focus is well placed in our opinion because of the second factor: economic downturn. As with prior business slowdowns, the current financial crisis is causing heightened scrutiny on every purchase including, and perhaps especially, renewals. ―Can you live six months without this?‖ ―Why are we renewing with this provider for a third straight year?‖ ―When was the last time this contract was up for competitive bid?‖ All these and more will be fair and frequent questions from budget/purchase approvers.


Rate your ability to generate repeat or renewal business with customers.



This is not to say contracts will not be renewed, but it is to say you best not become complacent in your current customer relationships—this applies equally to sales, service, support and all other customer touch points. Ensuring your salespeople are adequately trained to deal with purchase renewal justification can have positive paybacks. We analyzed the survey data comparing firms based on how they rated the quality and quantity of their training related to creating a business plan for justifying a purchase.

Justification Training as related to Renewal Ability

Justification Training Exceeds

Expectations

Justification Training Meets

Expectations

Justification Training Needs

Improvement

Renewal ability exceeds expectations

46% 23% 10%

In the above table we see that the percentage of firms that exceed expectations in their renewal abilities makes a strong case for investing in the sales force to ensure optimal performance in 2009.

Notes:



0%

10%

20%

30%

40%

50%


29.5%

46.9%

21.8%

1.9%

Create Customer Loyalty

How Would


Second highest

rated of all abilities this year.

Still, this metric is off slightly from the prior year.

Ability to create

customer loyalty and levels of relationship are linked.

The ability to create customer loyalty is an area where many sales organizations continue to see themselves as performing adequately or better. And in drilling into the data we see that it is also an aspect of selling that generates rewards. In the introduction to this report we referred to the Sales Relationship/Process Matrix (see page 6). The levels of sales relationship comprising the vertical axis of this matrix are an especially useful lens through which to view the notion of customer loyalty. Let‘s state the blindingly obvious up front: Having loyal customers is a good thing. Renewal rates are higher, sales costs are lower, business is more readily and accurately forecast, etc. These benefits accrue to the firms that successfully establish and elevate relationships over time. The table below shows the distribution of responses for each level of sales relationship as related to a firm‘s ability to create customer loyalty.

Relationship Level as related to Ability to Create Customer Loyalty

Create Loyalty Needs

Improvement

Create Loyalty Exceeds

Expectations

Level 1 – Approved Vendor 30% 10%

Level 2 – Preferred Supplier 22% 21%

Level 3 – Solutions Consultant 22% 28%

Level 4 – Strategic Contributor 17% 26%

Level 5 – Trusted Partner 9% 15%


Rate your ability to create customer loyalty.



Companies needing to improve their ability to create loyal customers find themselves in the super competitive, price sensitive, crowded vendor field three times as often as firms exceeding in this ability. Similarly, they find themselves in the favored and value-added levels of strategic contributor and trusted partner about one-half as often as their more successful peers. These numbers telegraph their impact throughout the success measures. Quota achievement, close rates, calls to close, and many more all favor the favored. Said another way, if you struggle to create loyal customers you are facing an uphill battle. It‘s also interesting to look at key objectives and initiatives for the needs and exceeds groups going into 2009. If you believe building relationships is key to building loyalty and are looking for a way to begin (or to make the argument at your firm), contact [email protected] and request a copy of our Anatomy Of a World-Class Sales Organization paper.

Notes:




0%

10%

20%

30%

40%

50%

60%


59.6%

28.1%

7.7%4.7%

Create/Maintain Case Studies/References

How Would


Continue to see

this as one of the most requested/ least delivered aspects of sales.

Customer references and case studies continue to have broad appeal and influence with new buyers.

High tech helping

to optimize the delivery of customer experiences to others.

Ending the key aspects of selling related to sales rep effectiveness, we see that providing sales teams with case studies and references still remains one of the hardest tasks companies encounter. So we have the case where reps keep asking and companies keep under delivering, but to what end? Let us share that with you. Comparing the performance of firms that excel at reference management to those who do not, we found that conversion rates of initial discussions and conversion of presentations are significantly higher for the first group than the second. We repeatedly hear that obtaining case studies and references continues to be increasingly difficult. First there is the matter of getting legal approval from customers as sign-offs have become more formal. Many firms are unwilling to be quoted or referenced at all, while others may only allow a general reference to be made to their operations. The anonymous reference is better than nothing, but ―a global high tech leader‖ packs less punch than being able to say, ―IBM.‖ A vehicle for beginning to address this privacy/confidentiality issue is private sales portals or micro-sites. For example, an IBM may be willing to be a quoted client to a very limited audience so long as direct competitors are not able to access the case study and learn how a certain service or technology has become a winning competitive weapon. Publishing online references via micro-sites can provide access to a video and/or audio testimonial (or protected documents) that require both


Rate your ability to create and maintain case studies and references.



a specific user identifier (i.e., company email) and password. This provides specific and limited access and prevents the link from being shared with others. Another feature of these micro-sites is the ability to see when or whether a prospect or customer has visited the site and reviewed the reference materials. Many companies now tie the progress of sales opportunities to buyer actions. It is not enough for the sales rep to post the reference and record that it has been sent. The prospect must open and review it to demonstrate interest in advancing the sale. A key benefit of these recorded references is that they can be used earlier in the sales cycle and there is no fear of ―burning out‖ a good reference. If every reference has to be a live, direct, 1:1 conversation, it‘s not unreasonable for the existing (satisfied) client to balk at taking more than a handful of calls. As a result, these high-value references and precious (i.e., limited) calls are reserved for really solid opportunities and usually later in the sales cycle. Recorded testimonials face neither of these obstacles. Record once, review many times without further involvement or commitment. In addition, these recordings can be meta-tagged to allow a longer recording to be parsed into 1-2 minute segments about specific topics. And, of course, they‘re available 24/7/365.

Notes:





Sales Management Assessment Introduction

This section focuses on a variety of sales management topics including management‘s ability to forecast accurately, hire the right reps; manage reps to an effective sales process, and more. Note: In tables that analyze abilities, the totals may not add up to 100% as some respondents selected ―do not know.‖ .

Ability to Hire Sales Reps Who Can Succeed at Selling Offerings .......................... 126

Ability to Provide Managers Access to Timely/Accurate Sales Metrics .................. 128

Ability to Accurately Forecast Business ..................................................................... 130

Ability to Easily and Accurately Calculate Sales Commissions ............................... 132

Ability to Regularly Conduct Win/Loss Reviews ........................................................ 134

Ability to Continually Adapt Sales Process to Market Changes .............................. 136

Ability to Proactively Identify Which Reps Need Coaching/Mentoring.................... 138

Ability to Share Best Practices Across the Sales Force ........................................... 140

Amount of Change Impacting Your Sales Reps ......................................................... 142



0%

10%

20%

30%

40%

50%


45.3%43.3%

6.6%4.8%

Consistently Hire Reps Who Succeed at Selling

How Would


Some

improvement this year over prior year‘s figures.

Ability to hire impacts need to fire.

Consistent performers employ a consistent approach and/or framework to hiring.

This was a new metric last year. This year the needs improvement column gave up over three percentage points and the meets expectations column grew by this same amount. As we pointed out in the Introduction on page 7, the environment a salesperson will be performing in has a significant impact on their ability to succeed. But what is the cost of a bad hire? We segmented the study data based on how well companies hired reps that would be successful selling for their firm: not any firm or their last firm, but rather, the one they were coming to work for. In the following table we compare firms‘ ratings of involuntary turnover—when a rep is let go for non-performance.

Ability to Hire as related to Involuntary Turnover

Hiring Needs

Improvement

Hiring Meets

Expectations

Hiring Exceeds

Expectations

% Involuntary turnover

19% 12% 8%

Above we see a clear relationship: hire well/fire less, hire poorly/fire more. We have previously discussed the challenges companies face in getting new reps up to full productivity. If you have a mis-step in your hiring, you are looking at starting that ramp-up period all over again with yet another new rep.


Rate your ability to hire sales reps that can succeed at selling your offerings.



Building a successful sales organization is not an overnight assignment but it is one that requires constant vigilance. An old management saying is, ―You hire your problems.‖ Too true. If you have team members that are not productive, whose production has declined over time or who have developed an attitude problem, you—or if you inherited them, your predecessor—hired them. The question becomes how to do better at this and avoid the misfires, false starts and resulting drag on individual and team performance. Although sales managers generally have a good (i.e., warm, fuzzy) feeling around the notion of teams, they often do not have a highly functioning team. Instead they have a collection of individuals who may be wearing the same uniform but are clearly not acting as a coordinated team. How do you get them to fully function together? There are five steps to team evolution. The first is simple: are you on or off the team? This is the most basic and the meat of this particular metric. How do you identify, recruit, and invite team members to join? Too often it is through gut feel or past affiliation, rather than alignment with the current organization‘s vision, mission and objectives. For years, there have been programs and books offering more structured interviewing questions and techniques to do a better job of zeroing in on desired traits and competencies. Now there are a number of firms that also offer aptitude testing services. Not everyone uses these services, but they are better represented in the exceeds expectations group above—half of these firms use aptitude testing and half don‘t. The needs improvement group uses assessment testing less often, coming in at 37%. Step two is clarifying roles and responsibilities; step three is defining and following processes. Step four is where a team begins to coalesce and starts functioning more than just a collection of individuals. You‘ll often hear managers at this stage say, ―The team is beginning to gel, to come together.‖ The work at this stage is to surface and resolve basic issues, but these are grounded in the mission and values, held up to the defined roles, responsibilities and processes to see how/why the issues occur. And finally, step five, synergy. When the real work of these steps is completed, teams enjoy the benefit of these efforts and value the relationships they have with their teammates. This is the desired end-state of forming teams. It does not occur as a result of fuzzy feelings; rather, it is the result of hiring the right people to be on the team.

Notes:



0%

10%

20%

30%

40%

50%


38.6%

45.9%

12.3%

3.2%

Sales Managers' Access to Timely/Accurate Metrics

How Would


Access to data to

help manage is on the rise.

Metrics should be

a natural/powerful extension of CRM usage.

Sales managers also need metrics for compensation management.

When the topic of Sales 2.0 comes up, the conversation often focuses on what information do reps need access to in order to sell more effectively. But there is another part of this equation: what insights/ knowledge do managers need access to? Sales analytics and/or metrics have become an increasingly more important part of the sales management conversation over the past several years. Manager dashboards, pipeline/forecast volume and velocity tracking, and other key performance indicators have become regular, if not routine, mentions in CRM presentations. It appears this year that these metrics are moving from conversation to implementation, and managers are more frequently getting access to these performance metrics. This can and should be one of the biggest benefits of CRM adoption. If salespeople are consistently putting data into the CRM, the CSO and sales operations will have a chance to mine gold out of the system. An example of this was shared with us by a manufacturing firm. Nine months after the sales force started to regularly use their CRM system to manage all major opportunities, sales operations began doing trend analysis. The findings were very revealing, as it became clear which classes of stakeholders were predisposed to their solutions, which types of problems gave them a functionality edge over the competition, which key sales tactics increased the odds of winning the deal, what value propositions resulted in the highest margins on deals that closed, etc.


Rate your ability to provide managers access to timely/accurate sales metrics.



In addition, the team was also able to surface attributes of an opportunity, and specific selling steps that contributed to competitive loses and no decisions. Once these metrics started to be shared regularly with sales managers, they were able to start to apply the lessons learned to more effectively assess the strengths and weaknesses of the opportunities that were in the current pipeline and 90 day forecast. This enabled sales managers to be more effective at managing the business. Another area where metrics can play a helpful role is in optimizing the motivation/direction provided by an appropriately targeted and reinforcing mechanism—namely, compensation plans. The firms exceeding at providing managers metrics reported their compensation plans helped drive rep behavior 77% of the time; on the other hand, the needs improvement group‘s figure is 47%. If you are going to design incentive plans to motivate salespeople to do specific things, then you need to give managers the metrics they need to reinforce and enforce those plans. The delivery of timely/accurate metrics is the fuel that can ensure this powerful engine is functioning as designed.

Notes:



0%

10%

20%

30%

40%

50%

60%


55.0%

35.9%

6.7%2.5%

Accurately Forecast Business

How Would


Creating accurate

sales forecasts continues to be a challenge for the majority of sales teams.

However, sales organizations achieving forecast accuracy are seeing more wins.

If goals and

rewards are not aligned, it is unlikely desired improvements will be realized.

Ok, this is not good. Here we see that less than 43% of the firms we surveyed are meeting or exceeding expectations with regards to the accuracy of their forecasts. We have observed in the past that if the VP of manufacturing took over the management of sales, s/he would shutdown the organization in a few weeks. Why? Because the lack of predictable performance is enough to drive one crazy. What is the impact of poor forecasting on sales results? We segmented the study data based on ability to accurately forecast, and then compared win, loss, and no decision rates. Let‘s be honest, no segment is hitting it out of the park in this metric. The table below shows the outcomes for the three groups above.

Accurately Forecast Business as related to:

Forecasting Needs

Improvement

Forecasting Meets

Expectations

Forecasting Exceeds

Expectations

Win/loss/no decision %s of forecast deals

45%/ 31%/ 24%

51%/ 30%/ 19%

58%/ 24%/ 18%

Deals close as forecast >75%

6% 15% 24%

Granted, the exceeds expectations group is doing better, seeing 22% more of the opportunities they forecast actually end up as wins, as compared to the needs improvement group. But would we let manufacturing, customer support, finance, etc. get by with such a report card for their operations?


Rate your ability to accurately forecast business.



For many sales organizations the problem is actually worse than it first appears. The second figure in the table above reflects what percentage of the deals you win actually close as forecast. Here we see that even the forecasts for those deals that are won often are unreliable regarding the size, make-up, and date. So what is standing in the way of getting better? A guiding maxim was noted in our 2008 Incentive/Compensation report: An organization elicits the behavior it rewards. Until and unless companies recognize the value of increasingly accurate sales forecasts and reward higher levels of forecast accuracy, they are essentially saying the level of accuracy currently being realized is sufficient, and operations can simply make up for or adjust accordingly. There is nothing wrong with this as a business approach as long as everyone is on the same page and accepts it. But if visibility into the sales pipeline, increased forecast accuracy, and streamlined operations resulting from greater clarity peering into future business are desirable, then aligning expectations, feedback (i.e., performance metrics), systems and training, and rewards and consequences for delivering these all matter. For an insight into both how higher forecast accuracy can be achieved and the benefits to the entire organization for doing so—including individual sales reps—send an email to [email protected] to receive a copy of the Aon Corporation case study.

Notes:



0%

10%

20%

30%

40%

50%

60%


25.7%

55.6%

12.7%

6.1%

Easily /Accurately Calculate Commissions


Highest rated

metric doesn‘t mean most successful.

Firms with more highly leveraged plans tend to also report higher abilities in this metric.

Overall plan

achievement is tied and below target across all groups.

Above we see that over two-thirds of the firms surveyed stated that they are meeting or exceeding expectations with regards to easily/accurately determining how much to pay reps who are part of a variable pay compensation package. So that‘s a good number, right? Before offering observations on this question, it is important to ask another: What is the purpose of commissions? A few answers come to mind, including: 1) incenting/motivating desired selling behavior; 2) rewarding achievement by tying performance to results; 3) managing cash out (salary/commissions) with cash in (sales/receivables). Another way of looking at compensation is as a form of feedback. Good sales performance, good feedback. Bad sales performance, no donut. For feedback to be meaningful, it needs to meet five basic tests: 1) timely; 2) accurate; 3) consistent/objective; 4) relevant; and 5) individualized. With respect to commissions, this last point is largely a given unless your firm doesn‘t pay commissions (which contributes to the 6.5% not applicable or don‘t know column) or only pay team rewards. Relevance is an interesting element: does your commission plan drive the behavior desired? Among the exceeds expectations group representing one in eight firms above, 23% say their programs consistently drive rep behavior, versus 11% and 9% for the meets expectations and needs improvements groups respectively.


Rate your ability to easily and accurately calculate sales commissions.



Unless you arbitrarily issue bonuses or continually modify commission plans/schedules throughout the year, let‘s assume the plans are consistent. What about accurate? In our 2008 Sales Compensation survey, error rates were reported to be relatively low with less than 1% reporting an error rate of greater than 20%, and 3.5% reporting an error rate of 11% to 20%. Perhaps the biggest concern and area for improvement in this regard was the 19% who did not know what their error rate might be. Setting this group aside, it appears the other eighty percent of firms are being reasonably accurate. So accuracy in and of itself may be an issue most organizations have a handle on. But again, if you are generating checks for the right commission amount, yet rep behavior is not being impacted, then is sales management really doing their job? There is another factor to consider here: the tools you are using for incentive management. Referring to page 36 in this report, we did a comparison of the specific approach companies used for this task. As you will see, the process and tools you use for commissions management can go beyond just generating correct payment statements, and influence rep behavior as well.

Notes:



0%

10%

20%

30%

40%

50%

60%


56.2%

32.8%

6.9%4.1%

Regularly Conduct Win/Loss Reviews

How Would


Slight

improvement over last year‘s figures for this metric.

Majority of firms could still learn from their own experiences.

Customers‘

critiques are lessons worth learning.

―Those who don‘t know history are destined to repeat it,‖ (British statesman Edmund Burke, 1729-1797). When it comes to deals surfaced, pursued, proposed and, uh—lost, who wants to repeat that? If Sir Edmund is to be believed and in looking at the chart above, a great number of firms do. This metric is modestly improved from last year. Still, the needs group remains the solid majority. How come? Do we already know all there is to be learned from recent sales cycles? Or, do we believe there is nothing to be learned from them? Well to paraphrase Henry Ford, whichever way you think about this, you‘re probably wrong. There is a great deal to be learned from your recent sales cycles, and these lessons can be captured in a variety of ways. If you‘ve defined a sales process with both buyer and seller actions that advance the sale at each step, and if your rep consistently adheres to and records each opportunity‘s progress in a CRM or other system, then an analytic‘s engine will be able to report and highlight areas of difference (good and bad), emerging trends (e.g., new competitive threats/tactics), and much more. But there are two big IFs in this statement. A second approach is to regularly schedule and formally conduct win and loss reviews—not with the sales reps involved, but with the buyer(s). These interviews can be performed by internal resources, such as


Rate your ability to regularly conduct win/loss reviews.



someone from your marketing team, or by external resources. The latter may obtain slightly more objective and/or thorough insights since this is often their primary function and they have both structured formats and extensive experience gathering such data. But either can be effective and both almost always bring eye-opening findings. So why don‘t more firms do these? Some may see it simply as throwing good money (and energy) after bad. ―They lied to us throughout the entire sales cycle, what makes you think they‘ll tell us the truth now?‖ While this may be true in rare cases, more often than not, being on the losing end of a competitive deal means someone did, understood, or offered something better than you did. Wouldn‘t this be good to find out before they beat you with it many more times? Conversely, if one of your reps did, understood, or offered something better that won a deal wouldn‘t you want to capture, share and repeat this as often and early as possible? Another reason, or excuse, is lack of resources. It costs time and money to do these reviews and there are only so many hours in the day, and/or dollars in the budget. But here is another factor to consider. We segmented the study data based on firms‘ ability to conduct win/loss analysis, and then reviewed their performance at understanding a customer‘s buying process.

Win/Loss Analysis as related to:

Win/Loss Needs

Improvement

Win/Loss Meets

Expectations

Win/Loss Exceeds

Expectations

Understand buying process meets/exceeds expectations

50%

67%

82%

If you go into a selling opportunity without a clear understanding of what the buyer is going to go through to make their decision, and your competitor does have that insight, you are at a significant disadvantage.

Notes:



0%

10%

20%

30%

40%

50%


46.0%

43.3%

8.0%

2.7%

Continually Adapt Sales Process to Market Changes

How Would


Even with access

to more analytics, no progress being seen here.

Rapid shifts in market conditions surfacing need for timely metrics access.

Whether in

complex or simple buying situations, the underlying principle of capturing and adapting is the same.

After seeing some improvement last year, there was no significant shift to the right in this year‘s figures. In stable markets and more static times this might be less of a concern, but that hardly describes today‘s business environment. The Dow Jones Industrial Average is gaining or losing several hundred points a day and companies are laying off and/or pulling back from areas of investment in record numbers and at record rates. If you lack the vision to anticipate and proactively act or, worse, are slow to react in addressing changes in your market, you will surely be punished—by your more nimble competitors, your cautious shareholders, and/or your paycheck. Level 4 firms, those with a Dynamic Process implementation, are constantly monitoring, comparing and testing performance figures among products, types of buyers, regional and even individual sales metrics. These firms have built webs of metrics that can transmit the smallest vibrations from distant shifts to warn of possible changes. And these advance transmissions from over the immediate horizon provide an early warning system and time to make adjustments. Or is this just a good theory? Other metrics throughout this report tabulate the performance differences in various ways between firms that have implemented higher levels of process and those that have not. Of the needs improvement column above, 8% report being at a Level 4 in sales process implementation. Conversely, when looking at Level 1 firms (Random


Rate your ability to continually adapt your sales process to market changes.



Process), two-thirds (66%) feel they need to improve in adapting their processes to changing market conditions and only 3% feel they exceed in this ability. (The figures for Level 4 firms are 26% and 24%, respectively.) Rather than implementing sales process, one offsetting tactic of the past was to simply throw more bodies at the revenue challenge. This will hardly be an option in 2009 as funding for net-new hires has been reduced. An alternative, and one that we highly recommend, is that you get on board the sales process improvement movement. If you are in a highly competitive, complex sales environment (i.e., multiple levels of buying influences, multiple players, complex buying processes, etc.) with protracted high-value sales cycles, the data are crystal clear that ―winging it‖ is a losing strategy. And even the most instinctual sales animals can be faked out by the whipsaw and massive changes that are currently roiling global markets. If you are in a highly transactional sales environment (i.e., short sales cycles, limited buying influences, rapid/impulsive buying processes, etc.) you should look to leverage your online capabilities to reduce your overall cost of sales. You will still need to carefully monitor Web metrics and be prepared to adapt quickly. Either way, the underlying philosophy to successfully adapting is the same: define a relevant and accurate basis (i.e., process) as a standard against which to measure. To the extent you can identify leading indicators as opposed to lagging results, you will also be able to use the increased lead time to your advantage. Get in and buckle up! The ride ahead is certain to be fast, furious and full of fast turns.

Notes:



0%

10%

20%

30%

40%

50%


36.2%

49.2%

10.6%

3.9%

Proactively Identify Which Sales Reps Need Coaching

How Would


Little change from

last year‘s figures, but all positive.

As sales rep/manager ratios increase, manager time will be at a premium.

Timely metrics to

managers help boost overall rep performance with detailed coaching.

Comparing the numbers above to last year when we first added this question to the sales management portion of the survey, we see that the numbers are essentially the same: 60% of the firms see themselves as adequate or better, 36% see the need to improve, and a few others do not know. Coaching is the number one key to sales mastery and, therefore, we submit is Job One for sales managers. Too many managers under invest in this critically important task of growing their people, for more urgent items that include helping to close deals. The problem with ―player-coaches‖ that rush in at the eleventh-hour to save the day is that they are deepening a dependency and not lessening it. The managers become (or believe they have become) super sales jocks, while the reps shrink (or feel they have) in their ability to close significant and important opportunities. This is not a business model that scales well and, and here is why. One metric we track is the ratio of sales reps to a sales manager. For 25% of the firms, where the ratio was 3:1 or less, you could make the case that managers have enough bandwidth to give each rep the support and attention they need. There is an issue to consider in the cases where the manager is working with rep A, when rep B really needs the help that day, but we will leave that debate for another time. But what about the cases where managers are asked to take on an additional three reps? Now the hours available to allocate per rep are cut


Rate your ability to proactively identify which reps need coaching/mentoring.



in half. If we then realize that 42% of the firms taking part in the survey this year told us that their managers were actually managing seven or more reps, we see the problem is further compounded. And remember, these are 2008 numbers. During the last protracted down cycle in business, which was far less impactful than the one we are in, we witnessed the ratio of reps to managers increase, as underperforming managers were let go, and the remaining managers were asked to pick up the work load. If this happens again, which we predict it will, then everyone loses. In the CRM 2.0 section we discuss advances in sales analytics that are used to support the task of proactive mentoring/coaching. Yes, these systems involve an investment, but here is the counter issue to consider. When comparing the total sales force turnover rates for firms based on their ability to proactively identify which reps to work with, we see a major difference.

Proactively Coach Reps as related to Turnover

Coaching Needs

Improvement

Coaching Meets

Expectations

Coaching Exceeds

Expectations

Sales force total turnover

35% 28% 25%

During challenging times, we want to keep as many productive reps as possible and turn over underperformers whenever it is possible. The alternative of having to hire a replacement can significantly impact your current year‘s revenue attainment. The firms who excel at coaching have a 40% lower turnover rate than those who need improvement in this aspect of sales management. Having reviewed dozens of sales analytics initiatives, we can tell you that the cost of those projects can be orders of magnitude less than the cost of dealing with higher than necessary turnover.

Notes:



0%

10%

20%

30%

40%

50%


46.7%

39.5%

11.1%

2.8%

Effectively Share Best Practices Across the Salesforce

How Would


First decline in

this metric in the past three years.

Disappointing to see so little being shared by so few.

Ease of access

translates into higher use and better overall performance.

As we look at each metric, each year it is easy to think, ―If only we were able to get this one right it would make such a difference.‖ Nothing strikes this chord more resolutely than the ability of firms to share what they know across their sales force. After all, these are insights they already know and for which they often paid dearly to learn on competitive battlefields. Two factors combine forces to keep the needs improvement column high: First, it is not enough to do a one-time project to catalog what is considered to be relevant sales knowledge and then make it available somehow to the broader sales audience. A major challenge in sales knowledge management systems is keeping the body of knowledge current, up to date and readily/easily accessible. Compounding this considerable challenge—made all the more difficult in a rapidly changing environment (see next metric)—is the fact that the appetite for, and the volume of, detailed and relevant information is increasing dramatically. As buyers become more technically savvy and conduct ever more extensive Internet research, they also expect ever more detailed, timely and relevant insights from reps they consider reliable sources of information. For smaller firms with just a few reps co-located in a single facility, this challenge is less formidable but, even in this setting, you can‘t have reps interrupting one another or all sitting in regularly scheduled meetings talking about the latest news, knowledge or winning tactics. As the sales force grows in size, becomes increasingly dispersed geographically and


Rate your ability to share best practices across the sales force.



specialized, it is clear technology is needed to fill the growing sales information gap. Firms needing to improve in sharing best practices seem equally clear as those exceeding expectations that CRM and added solutions are vital to addressing this gap. Their levels of CRM implementation are nearly the same (69% needs versus 72% exceeds), though the exceeds group got an earlier start with nearly twice as many implementations in full production more than three years (24% versus 46%). Consistent user adoption is also different (49% using regularly as part of their daily work flow in the needs improvement group, versus 68% for the exceeds group), but this may also be a reflection of finding what they need in the system, rather than resistance to using the system. But where these two groups significantly seem to part company is seen in the table below.

Ability to Share Best Practices Across the Sales Force as related to Specific Information Access

Best Practices Sharing Needs

Improvement

Best Practices Sharing Exceeds

Expectations

Easily access best practices 14% 60%

Easily access objection handling insights

16% 48%

Easily access competitive analysis

19% 39%

The above figures show it‘s two to four times easier to access relevant sales knowledge in the exceeds firms. This ability to readily serve up what reps need when they need it becomes a self-stoking cycle. Reps are more likely to input their own updates and share information (some SKM systems provide incentives and recognition rewards for doing so), and the information is de facto more current when more reps are accessing it more often. Inaccurate information will be flagged more quickly as more users tap into it. This lesson has not gone unnoticed by the needs improvement group, and should not be lost on you regardless of the group your organization is currently in. The top SKM area for improvement among these firms is improving access to best practices. This recognition will be one more pressure—in addition to maintaining current and comprehensive information on best practices—for all groups to invest in and continuously improve their systems in this area.

Notes:



0% 20% 40% 60% 80% 100%

Rate of New Product Introductions

Customer's Marketplace

Complexity of Product Line

Breadth of Product Line

Competitive Activity

Customer's Expectations

49.7%

52.6%

51.0%

58.3%

58.0%

55.6%

8.5%

14.0%

15.7%

12.1%

17.4%

26.5%

Rate of Change Impacting Sales Teams

Increasing

Increasing

Significantly

How Would


Significant rate of

change in every area has increased enormously.

Rampant change will ―freeze‖ many companies and sales cycles resulting in even more no decisions.

Increased focus

on sales and buying processes will offer the most reliable course in coming months.

―The more things change, the more they stay the same,‖ or so the old adage goes. But in the world of sales, especially in 2009, the more things change the more you better be ready to get moving and change with them. The chart above shows an amazing level of change our sales teams need to deal with. And the chart below provides further insights into the issue by comparing significant changes reported in the 2008 SPO report compared to this year.

First we see that customers‘ expectations are up significantly. They have started, and will continue, to demand more from the vendors they


Rate the amount of change impacting your sales reps in the following areas.



work with. Customers are expecting their vendors to share in the pain they are feeling and want them to get even more involved in solving the problems they are facing. And that is just the beginning; all the other areas are up noticeably as well. What does this mean to you and to your sales organization? Uncertainty for sure, but also opportunity. Uncertainty means that anyone bringing clarity that can be substantiated will be welcome as adding value. How do you do this? For the past few years we‘ve been suggesting that how you sell is as important as a differentiator (if not more) than what you sell. We believe this will be doubly true in the environment depicted above. With competitive activity at unprecedented levels, products becoming increasingly more complex, etc., your sales reps‘ ability to sift through the noise and present the most relevant and actionable information will be a winning formula. Key to determining what‘s relevant for these increasingly demanding customers will be thorough but speedy needs analysis, and pointedly prescriptive solutions with compelling business case justifications. With so much change (i.e., uncertainty) in the air we expect more deals to die of analysis paralysis and, as a result, an even higher level of forecast opportunities ending in no decision. You may not be able to overcome these ―do nothing‖ sales outcomes but you can identify them earlier. Your reps should continue to qualify opportunities throughout the sales process, immediately flag any buying influences that are unwilling to identify and introduce you to all the players in a buying situation, and confirm throughout that their buyers are completing their actions to move deals forward, not just watching as sellers try to urge them along. Focusing your energies on executing and dialing in your sales (and your buyer‘s buying) processes will be the most reliable compass during the coming year‘s up and down cycles. We are not suggesting you become rigid or fixed in your pursuit of sales process, but thorough and dynamic in being sensitive to changes that may throw opportunities off course. Many people will become frozen in these massively changing times and others will simply become spectators. Forget about the adage of things staying the same and remember another tried and true maxim instead: ―Nothing happens until someone sells something.‖

Notes:





Sales Process Assessment Introduction

This section focuses on how much companies are investing in training their sales reps, how many companies have adopted a formalized process for selling, how the sales process was developed, and what impact that approach is having on the performance of salespeople. Note: In tables that analyze abilities, the totals may not add up to 100% as some respondents selected ―do not know.‖

Annual Investment in Training Per Sales Rep ............................................................ 146

Change in Amount of Sales Skills Training ................................................................ 148

Change in Amount of Product Training ...................................................................... 150

Change in Amount of Customer Marketplace Training ............................................. 152

Change in Amount of Purchase Justification Training ............................................. 154

Change in Amount of Sales Management Training ................................................... 156

Change in Amount of CRM System Usage Training .................................................. 158

Adherence to Use of Sales Process ............................................................................ 160

Impact of Sales Methodology on Performance .......................................................... 162

Type of Sales Methodology Used in Sales Process .................................................. 164

Sales Methodology Adherence Rate ........................................................................... 166

Attitudes Toward Recommending Sales Methodology Vendor ................................ 168



<$50016.9%

$500 - $1,500

28.0%

$1,501 - $2,50022.6%

$2501 - $5,00015.9%

$5,001 - $7,5005.3%

$7,500+

5.4%

No Training

5.9%

Annual Investment in Training Per Sales Rep


Upward trend on

training investment was reversed this year.

Positive correlations of training investments do not support spending less.

Investment in

training still appears to pay dividends with higher/better performance results.

Since 2004 we have seen investments in sales training rise, but that trend ended this year. Firms spending over $5,000 a year per rep dropped from 15% a year ago to less than 11%; those spending $1,500 - $5,000 dropped from 41% to less than 38%, and firms offering no training jumped from 2% to nearly 6%. So, are companies cutting back on training adversely affecting their sales reps‘ performance or are they saving money and freeing up selling time? We compared the overall revenue attainment of the top two tiers ($5001 - $7500 and > $7500) against the bottom two (<$500 and no training). A quick review of the numbers shows a marked difference in sales performance.

Training Investment/Rep/Year as related to:

Training Dollars $0 to <$500

Training Dollars >$5000

Overall revenue attainment

81% 91%

Further analysis surfaced some trends contributing to the fact that firms investing more in training are seeing more revenues come in the door. First, the percentage of reps making quota was 8% higher for the firms investing more in training. Second, the turnover rate was 14% less for that group as well. A debate for the need for training might take into account that if you hire experienced talent, they shouldn‘t need a lot of training. Referring back to page 42, we noted that the vast majority of firms are hiring reps that not only have sales experience, but that experience is in the company‘s industry as well.


How much do you invest annually in training per sales rep?



And yet, even with this being the case, the ramp-up time for even these experienced reps is very long, as 48% of the firms focusing on hiring them report that in takes 10 months or more to get them fully productive. So clearly there is a need to train even experienced professionals. Another factor surfaced in our analysis is that it is one thing to train reps, and yet a second thing to get them to use the training. We compared the adoption rates of sales process for firms based on how much they invested and across a number of key sales performance factors: reps making plan, companies making revenue targets, win rates, etc. Firms with greater than 90% process adoption fared consistently better than firms who invested the same amount in training, but had adoption rates of less than 75%. This presents another challenge for sales management. If you are going to invest in training your salespeople, then the follow-up processes need to be in place for their managers to ensure that the training is being applied consistently and effectively by the reps in their daily workflow, so that it becomes ingrained into how they sell. Failing to do so will minimize the ROI your company sees from your training investments.

Notes:



0%

10%

20%

30%

40%

50%

Needs Improvement

Meets Expectations


Do Not Know or N/A

46.9%

40.9%

9.6%

2.7%

Amount of Sales Skills Training

How Would


Revised Metric:

One-half of companies feel their sales skills programs are sufficient or better.

Nearly as many

feel their sales skills programs need to improve.

In prior years, we have asked about the level of training and how it was expected to change (i.e., decrease, no change, increase, increase significantly). However, we saw over time that companies that were investing heavily but planned to do so at the same rate would be listed as no change and, similarly, firms that invested nothing and planned to continue in this fashion would fall into the same category. Or a company that had invested little but was planning to increase this somewhat might view their stepped up investment as increasing significantly. So we modified the question and answer choices to parallel our other metrics. Now, a firm that invests heavily might still feel their program needs to improve—but this seems less likely. And a firm stepping up their investment may feel it is now meeting expectations but is unlikely to say a modest training program exceeds their expectations. Time will tell if this is a more accurate barometer. For certain, this year‘s chart is skewed more heavily to the left than most sales executives would like to see. Regardless of investment level, one-half of all firms rate their sales skills training as adequate, while nearly the same number feel a need to improve in this important—and some might argue most basic—skills area. For the record, companies investing the least amount expressed a need to improve at nearly twice the rate of firms that were investing at the highest two tiers on a per rep annual basis (66% versus 36%). What are firms getting for their current sales skills training? We segmented the study data based on how firms rated the sales skills


How is your current level of sales skills training changing?



training they were providing their sales teams, and then looked at some key aspects of sales process execution to see how they performed. The following table summarizes the sales performance results for the education (conducting presentations and demonstrations) and the solution development (creating configurations and proposals) stages of the sales process. In addition, we reviewed the figures for closing deals as originally forecast.

Sales Skills Training Ratings as related to Sales Process Execution

Skills Training Needs

Improvement

Skills Training Exceeds

Expectations

Presentations that close >25% 47% 66%

Proposals that close >50% 36% 53%

Deals close as forecast >75% 7% 23%

Using the target goals of ultimately closing more than 25% of the opportunities where we invest the time and effort to do a formal presentation, and closing more than 50% of the prospects we present a proposal to, we see that the firms providing exceptional sales skills training noticeably outperform those reps who are receiving inadequate levels of skills training. We also see that the better trained group is more effective at being able to accurately assess and forecast the opportunities they ultimately win (what will close, for how much, by when). However, there is clearly still room here for performance improvements for all sales organizations.

Notes:



0%

10%

20%

30%

40%

50%

60%

Needs Improvement

Meets Expectations


Do Not Know or N/A

31.6%

54.7%

11.6%

2.1%

Amount of Product Training

How Would


Revised Metric:

Product is still the top focus when it comes to training.

Getting reps fully versed on products can reduce selling effort.

Sales

collaboration technologies are helping reduce cost of training.

For the past five years, product training has been the king of all training with highest priority and planned increases over all others. As with the prior metric (and all others in this section this year), we revised the question and asked not whether the various areas of training were increasing or not, but how the training investments that had already been made were paying off. The answer is adequately or better for the majority of firms. What is the payback for solid product training? We compared the ratings firms reported in this aspect of training to how they sold. In the table below we present two key findings. First, sales reps that are well versed in what their products can and cannot do are able to navigate a prospect through the sales cycle/buy cycle in less time than their less educated peers.

Amount of Product Training as related to:

Training Needs Improvement

Training Exceeds Expectations

Typical sales cycle – weighted average

5.6 months 4.6 months

Ability to meet/exceed expectations aligning solution to problems

57% 83%

One key contributor to this difference appears to be related to how effective salespeople are at linking what they sell to the challenges their prospect is facing. Reps with a thorough understanding of their products


How is your current level of product training changing?



are able to do effective problem/solution alignment much more often than the needs improvement group. Other areas of selling execution also showed marked differences. For example, in sales planning and execution the differences between these two groups were anywhere from 50% to 100%. Conventional wisdom holds that when financial conditions tighten, training and travel are the first to be cut. Entering 2009, it would be hard to imagine finances being any tighter than they are at present. Still, in our view, companies that have minimized or put off training (i.e., the needs improvement group) until now would be ill advised to do so any longer. And likewise, those firms who have been doing well in this area would be ill advised to cut back. Here is one key factor to support our recommendation. During the previous down economic cycles, reps have turned to getting more revenues from existing customers. Two key aspects of this are cross-selling/up-selling and introducing new products into the customer base. For these objectives to be achieved, even experienced sales reps are going to need more product training in the areas of the product lines that are new to them. Product training will not be a nice-to-do, but a must-do this year. So, are there ways to more cost effectively conduct this training? The answer is yes and CRM 2.0 will play an important role here. In reviewing over a dozen CRM 2.0 sales collaboration initiatives, we are seeing these tools (see page 196) being effectively leveraged by not just marketing to educate prospects via webinars, but also by sales to educate reps on their products, as well. Conducting and recording Internet-based classes that can be attended live by the reps, or viewed at a later date by watching the recorded version, can significantly reduce the cost of taking reps out of the office, or sending experts in to the field. The ratings these classes get in terms of effectiveness are also very high, so you are not sacrificing quality for cost.

Notes:



0%

10%

20%

30%

40%

50%

60%

Needs Improvement

Meets Expectations


Do Not Know or N/A

56.6%

33.5%

5.4% 4.6%

Amount of Customer Marketplace Training

How Would


Revised Metric:

Less than 40% of firms feel they meet/exceed expectations (lowest of all training areas).

Rise in

customer‘s expectations and changes in marketplace show problems here.

Providing access to relevant marketplace information is needed to support training.

Of all training areas, this ranks highest in needing to improve; absolute lowest in number exceeding expectations; and also lowest even for those meeting expectations. This is surprising given that for the past four years firms reported they would be increasing their customer marketplace training by 33% and significantly increasing it by 5%. The revised questioning this year around performance results suggests either these planned investments were never fully made or the training that was conducted missed the mark. We suspect it is some combination of both of these factors. But if your suspicion is that excelling in this area doesn‘t matter—and therefore this area of training is a ―nice to have‖—then you are sadly mistaken. Let‘s explore both sides of this coin: not doing enough training or doing training without achieving desired expectations. Referring back to page 142 in the previous sales management section, we noted that 82% of the firms surveyed stated customer expectations were increasing and two-thirds reported that their customers‘ marketplaces were changing. If your customers are changing (adjusting to changes in their marketplace and also changing what they expect from their vendors) while your sales teams are standing still, you are setting yourself up for a rude awakening. And here is why. We reviewed how well companies said they were able to clearly understand their prospect‘s buying process based on how they rated the effectiveness of the training they provided their sales reps on the


How is your current level of customer marketplace training changing?



markets they were selling into. The following table shows the disconnect that occurs.

Amount of Product Training as related to:

Training Needs

Improvement

Training Meets

Expectations

Training Exceeds

Expectations

Meets/exceeds expectations understanding buying process

47%

75%

83%

So the lack of training in this area can put your salespeople at a disadvantage in trying to sell into a marketplace that has changed from what they are use to. But the high percentage of companies that have reported investing in this type of training—or are planning to—suggests recognition of the importance of speaking to the customer‘s business issues/pains. Assuming some of these investments were, in fact, made, what makes moving up in this ability so intractable? One factor to consider is we may be focusing well on telling reps what to do, but under supporting them on how to do it.

Marketplace Training as related to Level of Effort to Access:

Training Needs

Improvement

Training Exceeds

Expectations

Strategic account plans: hunting required

75% 40%

Details on customer/prospect's marketplace/industry: hunting required

76% 31%

Competitive analysis information: hunting required

79% 41%

These figures show that even if sales reps have been trained and are willing to take the time to research accounts and apply what they‘ve been taught (to speak about a customer‘s industry), we may be failing to give them access to the knowledge to do so.

Notes:



0%

10%

20%

30%

40%

50%

60%

Needs Improvement

Meets Expectations


Do Not Know or N/A

53.6%

35.1%

5.9% 5.4%

Amount of Training on Justifying the Purchase

How Would


Revised Metric: Low percentage of firms ready to fight the ―why now‖ war.

Level of scrutiny any/all purchases will likely receive in 2009 will exceed any seen in over a decade.

Higher levels of

relationship and higher levels of this ability run hand in hand.

The reality of today‘s market is that there‘s a serious crunch in areas of finance, available credit, cash flow, and spending for both businesses and consumers. Many indicators are the worst since the Great Depression. If attendees at a sales leadership conference we presented to in late 2008 are any indicator, many CSOs are suffering their own great depression: little or no relief from their 2008 number and, in all likelihood, a somewhat larger number for 2009.

Like the prior metric, but to a slightly lesser extent, firms responding to past years‘ surveys have indicated an intention to invest training dollars in purchase justification training. With the global financial crisis still not fully defined but seeming to grow each week, clearly this topic will be getting a lot more attention now.

Two areas strike us as immediately relevant and important about the ability to justify pending purchases. In addition to the other benefits of higher levels of relationship mentioned elsewhere in this report, one thing that decreases as level of relationship increases is price sensitivity.

Amount Invested in Training to Justify Purchases as related to Level of Relationship

Training Needs

Improvement

Training Exceeds

Expectations

Level 5 – Trusted Partner 8% 21%

Level 4 – Strategic Contributor 18% 35%

Level 3 – Solutions Consultant 26% 18%

Level 2 – Preferred Supplier 23% 20%

Level 1 – Approved Vendor 25% 6%


How is your current level of purchase justification training changing?



Whether the firms exceeding expectations in justifying the purchase for their prospects/customers were then perceived as contributors or partners, or because they were perceived this way enables them to exceed at justifying, either way is good news. Conversely, the firms needing improvement in justifying purchases find themselves in the unenviable, highly competitive and price sensitive vendor level four times as frequently. These differences are eye opening when you consider them alone, but are all the more so when we look into the second area: top three reasons each group wins deals against the competition. The exceeds group lists their ability to build an ROI business case as one of the top three 31% of the time; the needs improvement group, 16%. Remembering the levels of relationship figures above, the needs improvement group lists their number one reason for winning business from competitors as existing relationships (61%)! You might expect the same to be true for the exceeds expectations group. You would be wrong. Their number one reason for beating the competition and winning deals: sales process execution (48%). This is followed by product superiority and level of service support (tied for second); existing relationships, at which they excel, was listed as the fourth reason for winning. The only intersection where these two groups agree is the number one reason why they lose to the competition: competitor‘s price and terms. So excelling at this ability does not make you bullet proof—but it sure puts you in worthy body armor. It‘s time to add this ability to your team‘s arsenal.

Notes:



0%

10%

20%

30%

40%

50%

60%

Needs Improvement

Meets Expectations


Do Not Know or N/A

51.5%

37.0%

5.6% 5.9%

Amount of Sales Management Training

How Would


Revised Metric:

Majority of firms feel the need to improve sales manager training.

Needs improvement group again out numbers exceeds group by 10:1.

Even the group

meeting expectations will find plenty of room for improvement.

―The road to hell is paved with good intentions,‖ or so we are told. This specific area of training may be a regular traveler on that road. In the past three years, roughly one-half of firms have anticipated no change in the amount of sales management training and one-third have planned to increase or significantly increase this training. Did it happen? Obviously specific companies have made the investment, but the general impression, supported by the graph above, suggests most companies never quite got around to it. The fact that the majority of firms this year see the need to improve the amount of sales management training is further supported by how poorly the super-majority of firms assessed their sales management capabilities (see pages. 126 - 144). We combined the meets/exceeds expectations groups above to see how their managers fared on several important metrics. This group is comprised of the 43% of firms we surveyed who reported that their sales management training was adequate or better. The following lists the percentage of these sales managers that are meeting or exceeding expectations in relationship to:

Regularly conduct win/loss reviews: 58%

Accurately forecast business: 57%

Consistently hire reps who can succeed: 67%

Continually adapt sales process to market changes: 71%

Effectively share best practices across sales force: 84%

Easily/accurately calculate commissions: 82%


How is your current level of sales management training changing?



Each of the above ratings is above the averages reported in the sales management assessment section of the report. As we have previously discussed, hitting numbers for 2009 will not just be about optimizing sales rep performance, but that of sales managers as well. But even these figures show a lot of room for improvement as more than 40% of the firms still see the need to improve win/loss analysis and forecasting, and approximately 30% feel they need help hiring or adapting their sales processes. Another area where management training can increase effectiveness is the ability of managers to minimize turnover, if they get the right level of support. In the table below, we compare sales management training ratings relative to the organization‘s turnover rates.

Management Training as related to:

Management Training Needs

Improvement

Management Training Meets

Expectations

Management Training Exceeds

Expectations

% voluntary turnover

17% 14% 8%

% involuntary turnover

15% 14% 9%

The revenue performance for firms experiencing only 17% turnover across the sales organization will be much higher than firms with 28% or 32% turnover, as the lost revenue impact to bring on new reps will be experienced far less often. The point being is that even firms that feel they‘re doing an adequate job with their sales managers (i.e., sales management training meets/exceeds expectations) they have plenty of room for improvement. Given the high leverage nature of these positions, we feel this area of training warrants further and increased consideration.

Notes:



0%

10%

20%

30%

40%

50%

Needs Improvement

Meets Expectations


Do Not Know or N/A

43.4%

37.1%

7.9%

11.5%

Amount of CRM Application Usage Training

How Would


Revised Metric:

Even split between those needing to improve and those meeting or exceeding expectations.

Consistent CRM usage is still seen at only a minority of organizations.

Major differences

in reported CRM benefits between each group based on CRM training.

Customer Relationship Management (CRM) tools are now a part of the sales landscape. The percentage of firms that have formally implemented a CRM system has continued to increase each year from 54% five years ago to 71% this year (see page 172). Still, as we see on 178, consistent integration of these systems into a rep‘s daily workflow is still elusive. Is this a training problem or a system problem? Initially, CRM budgets were heavy on purchase and implementation and light on training. The result was limited utilization and little realization of the potential that CRM promised. In recent years, as systems have become more elegant and intuitive—and implementations more straightforward—budgets have increased for CRM training. So how is this training paying off? The table below shows the adoption rates we observed when we segmented this year‘s study data based on CRM training ratings.

CRM Training Ratings as related to CRM Adoption

CRM Training Needs

Improvement

CRM Training Meets

Expectations

CRM Training Exceeds

Expectations

CRM adoption >90%

16% 47% 65%

CRM adoption 75% - 90%

23% 24% 18%


How is your current level of CRM system usage training changing?



Above we see that without training the likelihood of regular adoption of CRM is fairly low, with less than 40% of the companies in this category reporting regular CRM usage by 75% or more of their sales reps. Get up to meeting expectations and the number increases to 71%. Get exceptional at this type of training and you see the number again rise to 83%, with the vast majority of those being firms with adoption rates of 90%. The other difference we noted was the differences in ratings firms gave for the impact that CRM was having on sales performance. Offer minimal training and reps will tap into only the base capabilities. While this can help increase their efficiency, it will do little to impact their effectiveness. However, invest in showing reps the real power of these systems and you will see the percentage of reps reporting that CRM is helping them close more deals, increase average deal sizes, improve margins, etc. For more on CRM usage and benefits see the CRM section of this report on pages 182. One other thing to consider about why to ensure you have effective CRM training is that CRM 2.0 is coming, and with it many more benefits in terms of optimizing revenue performance. But CRM 2.0 has a prerequisite: CRM 1.0 adoption. Unless sales reps are fully using their core CRM system, many of the add-ons you can install to enhance sales performance will fail to deliver on their promise, as the value of add-ons is dependent on sales reps using the existing system.

Notes:



Level 1 - Random Process17.7%

Level 2 - Informal Process45.1%

Level 3 - Formal Process23.6%

Level 4 - Dynamic

Process13.6%

Adherence to Use of Sales Process

How Would


Fewer firms

operating at Level 3 and Level 4 than last year.

More firms than ever seen as Level 2 - Informal Process.

2009 will demand

and reward more hard work and punish even further those taking the easy road.

Having documented the impressive results year over year for those companies operating at higher levels of process implementation, it is disappointing to see these are the segments reporting the biggest drops this year. Level 4 – Dynamic Process segment dropped below 14% and Level 3 – Formal Process slid as well. And all of this loss was converted to increases in Level 2 – Informal Process. We will be doing a supplemental detailed analysis of the impact of process and relationship on sales performance. But for now, let us share some observations on the most commonly cited level of sales process from the chart above.

Informal Process—an oxymoron of sorts—leads the pack with a full 45% of firms reporting they operate in this way. What‘s the attraction of Level 2 that it persists as the most popular of all process levels when it correlates with some of the lowest performance results? In a word, it‘s easy. But first the numbers. Firms that have implemented process at a Level 2 can point to the fact that they have documented their sales processes and exposed their reps to them. They, in large part, have invested in CRM (74%) and spend money training their reps ($2,200/rep/year). And the percentage of reps meeting/beating quota is respectable at 61%. But virtually all other measures are sub-par. Their conversion rates through the sell cycle, presentations to sales and proposals to sales, are lower than Level 3 and Level 4 firms. Their predictability is also lower in


How would you describe your adherence to the use of a sales process?



terms of forecast win rate percentages. And their ability to adapt to changes in the marketplace is significantly lower than Level 4 companies. What‘s lacking in Level 2 companies is not investment, but commitment. What‘s lacking is rigor. The lesson to be learned by Level 2 companies and from them is that throwing money at the significant challenges today‘s sales forces face isn‘t enough. Reinforcement, enforcement, process inspection and reflection are all needed to achieve higher levels of process implementation—and performance. Nobody cares about process in and of itself, but everyone is interested in improved results—which come from detailing, then improving your process and process execution over time. So why don‘t more firms follow this proven path to sales success? Because, in a word, it‘s hard. Or it takes too long. Or, ―My people will quit if I try to micromanage them.‖ (Ahem, take a look at both the rep and manager turnover figures regarding this last point.) Or some other reason, excuse or misperception that keeps senior and sales management from applying solid principles and practice to sales. And, because when the revenue numbers are good, many managers tend to not look too closely at what underlies them. ―Revenue growth numbers can hide a lot of sins,‖ as one CSO told us. Well, revenue growth in 2009 is not going to be automatic or come easily. We can show you the numbers, year after year, that clearly document the fact that process does matter, and getting to Level 4 can create a significant competitive advantage for you (especially in turbulent times). So take heart, while there is plenty of work to do, the rewards are significant and can start to be realized immediately. Research clients looking for details on how to optimize their sales process should contact CSO Insights.

Notes:



Significantly

Improves35.1%

Modestly Improves

53.7%

No Impact

6.2%

Negative Impact0.8% Do Not Know

4.2%

Sales Methodology Impact on Sales Performance

How Would


Area of highest

impact has decreased from past few years.

Still, nearly 90% of firms reporting show some positive impact from their sales methodology.

Incremental

differences between significant and modest can add up to very impressive sums.

With all the talk about sales process and methodologies, at some point one has to ask: Does it make any difference? We‘ve been asking this question for five years now and after peaking at 39% significant improvement last year; this segment has dropped back to 2005 levels of just over 35%. With 89% of respondents feeling their sales methodology is having some positive impact, it seems appropriate to ask: How much impact and could it be more? To answer the first of these questions, we looked at differences between the two largest (and positive) groups, and compared a variety of metrics. The one that struck us the most was the top three reasons that companies win deals (see page 106). Seen below in the following table, when this metric is matched with the win rate of forecast deals, we see that sales process can become a significant competitive differentiator.

Sales Methodology Impact as related to:

Sales Methodology Significantly

Improves

Sales Methodology

Modestly Improves

Sales process execution - one of top three win reasons

44% 17%

Win/loss/no decision rates 53%/ 27%/ 20% 48%/ 31%/ 21%

Can these variances in performance be monetized? Values could be computed for many of the differences noted but looking at just one, winning 5% more deals than not, is very easy for each reader to quantify individually.


If you are using a sales methodology, what’s the impact on performance?



Assume you have 20 reps, each with a $1M quota, selling deals that average $25K each. For a rep to meet quota they need to close 40 deals. With a 48% win rate, each rep would need then 84 forecast deals in order to hit their revenue plan. Now assume we could move the win rate to 53%. Each rep would then close 44.5 of those 84 deals. Multiply these 4.5 extra deals times 20 sales reps and you would have 90 more deals close; and at $25K each, you would generate $2.25M in additional gross revenue.

Our analysis has shown that two keys to increasing impact are increasing frequency and competency in execution. When these are optimized, the sales performance numbers add up to a very significant difference—and impact. And here is another factor to consider: the ability to adapt. Firms in the significant impact group above reported abilities to adapt to change in the marketplace (of meets expectations/exceeds expectations) 22% higher than the modestly improves group.

Notes:



Internally Developed59.2%

Commercial Offering

40.8%

Type of Sales Methodology Used in Sales Process

How Would


New high for

internally developed sales training programs.

Sales programs have not gone through the same market forces as other mature sales solutions.

Consistent use of

methodology has greater impact than commercial versus internally developed content.

Buy or build is always a question, but one that has tended toward buying as various industries matures. CRM is a classic example where many early programs were home grown. However, as commercial applications became more robust, offering capabilities not easily or even reasonably developed for one-off development (e.g., localization, multiple currencies, encryption, intrusion and other security measures, etc.) and competition caused downward price pressure, developing programs internally became less viable. Having watched this migration in other areas, it is interesting to see a reverse movement in the sales training arena. For the third year in a row, internally developed programs have the majority vote, more than any year since we started this question five years ago, and by the greatest margin. What‘s happening? There may be a few factors contributing to this shifting ratio. Sticking with CRM as an industry of comparison, innovation and heavy R&D investments are part of the price to be a player, and new releases with significant innovative features are regular (annual or more frequent) events. The same could hardly be said about some of the best recognized names in the sales training space. Some program materials and content are decades old and many new entries simply offer a reheated version of concepts that have been around forever. Conversely, many new ideas are not readily embraced because they are unproven (and difficult to prove) in the area of human interactions. As a simple (though not really new) example, does NLP (neuro-linguistic


What type of methodology do you use within your sales process?



programming) really work and can it be effectively and predictably applied by relative novices to a sales situation? A second major difference is that while the CRM industry has seen massive consolidation, the sales training industry remains hugely fragmented. We have more than fifty named programs or customizations of programs listed in this year‘s survey responses. This notion of incorporating and/or modifying components from various programs is also unique to training. Mapping the power base, identifying the compelling event, recruiting a coach, and writing a plan letter detailing one‘s unique value is good form; but it also is made up of concepts from five different programs! How to reconcile or simply identify what works while shoving aside the forms or ideas that seem to guild the lily, but add no tactical or strategic value, is what sales reps unconsciously do. They often shed rigor (as we‘ve seen elsewhere in this report) along with many of these concepts, and that can lead to poor implementation and performance. So buy or build? Are there significant performance differences among the groups? Globally, no. The percentage of reps meeting/exceeding quota was essentially the same. The much larger difference is associated with adherence to whatever methodology is in place (see next metric). When the percentage of reps consistently using the adopted methodology is greater than 75%, the percentage of reps meeting/exceeding quota is much higher than the averages reported in this report. When the percentage of reps consistently using the methodology is less than 75%, then sales performance results are lower. Like any tool, whether you build, buy or borrow—that is, take concepts from different programs—the key is using the tool and developing skill in its use. Used occasionally or infrequently, the leverage gained is minimal. Used consistently, the leverage gained will measurably improve your team‘s performance.

Notes:



<25% of Reps12.1%

25 - 50% of Reps31.2%

51 - 75% of Reps26.5%

76 - 90% of Reps18.3%

>90% of Reps11.9%

Sales Methodology Adoption Rates

How Would


Consistent use of

sales methodology is down this year.

Inconsistent usage correlates with consistently lower performance.

Internally

developed programs enjoy a performance edge over commercial programs among consistent users.

This past year has seen a reversal in the rising tide of consistent use of adopted sales methodologies. The biggest change was in the percentage of firms reporting an adoption rate of 50% or less, which increased from 40% last year, to over 45% this year. As noted earlier in this report, rising revenue numbers can hide a multitude of sins: not adhering to the sales process/methodology, not using the CRM system, inaccurate forecasting, etc. You may be in a recession-proof industry where this laissez-faire approach to conducting, reporting and managing sales efforts does not present a problem. One CSO we recently spoke to said, ―You know, I just do not see us feeling the pain internally.‖ If so, lucky him and maybe lucky you. Now, for everyone else reading this report, this is the time to get with the program—literally. It has been interesting to watch consistent usage seesaw with economic shifts. Up in 2006 from 2005, down in 2007 from 2006, then up gain last year. The pattern follows business conditions with the time lag of our surveying cycle. In 2005, firms were climbing out of the tech-bubble‘s crater and process was being enforced that year. 2006 was a decent year and consistent use was down when surveyed in Q4 and reported in our 2007 report and so on. With 2009 on the horizon, we‘re predicting much higher usage figures in next year‘s report!


What percentage of your sales force consistently uses your sales methodology?



We will be doing a very detailed analysis of the impact of sales process on sales performance in Q1 2009, and part of that will be drilling into the impact adoption rates have on the ROI a firm generates from their sales process/sales training investments. But let us share here a preliminary review of the data that surfaced significant differences in the percentage of reps making quota, companies making their revenue plans, win rates, and also sales rep turnover. Sufficient to say for now, if you have implemented a sales process and you are doing nothing to assure it is adopted into reps‘ everyday workflow, you are missing out on leveraging a key asset for optimizing sales performance. With that in mind, let us share with you a figure from our 2008 Sales Compensation Survey: 25%. That is the percentage of firms who stated that their compensation plans were motivating/measuring the use of sales process by the sales force. If your adoption is low, take a look at what, if anything, your compensation plan is doing to promote process usage. Companies achieving high adoption rates often use the carrot and the stick. The carrot will be evident over time, as reps see their performance execution and predictably increase as they use a well designed process more and more often. But to jump start usage, a stick, in the form of a percentage of their paycheck being tied to adoption, can help get reps started down the right path. Get on it and stay on it!

Notes:



Absolutely 38.5%

Very Likely27.0%

Somewhat Likely24.4%

Unlikely6.9%

Never

3.2%

Recommend Sales Methodology Vendor to Others

How Would


Never/unlikely to

recommend is up more than any other segment.

Multiple modes of

delivering course content may improve initial learning, ongoing use of concepts and building a body of knowledge.

Somewhat likely continues to be a less than exciting endorsement.

For sales methodology vendors there is good news and bad news. The good news is those that would absolutely recommend their vendor is up a bit; the bad news is those that would never recommend their vendor is trending in the opposite direction. The ―halo‖ effect we‘ve spoken of in years past appears to be continuing. That is, only 30% of companies consistently use their sales methodology (as just seen in the prior metric) but it is clear end-users with low adoption rates do not hold their methodology providers accountable for this. It‘s almost as if the unwritten agreement is, ―Hey, we don‘t use it, but we know that if we did we would do a better job. So, of course, we would be pleased to recommend you.‖ And to be fair, if a sales methodology provider delivers solid content, is it their fault if sales reps don‘t use it and/or sales management doesn‘t reinforce it? While it might be tempting to let the providers off the accountability hook here if a program fails to be heavily/consistently utilized by a large segment of clients, might that suggest an improvement area to some providers? The answer is yes and, in fact, a number of leading sales training companies are expanding their offerings in an effort to uphold their end of the bargain. While some companies continue to rely upon front-and-center instructor-led sessions as their sole vehicle, others are innovating by offering online wikis enabling participants (i.e., sales reps, product marketing managers, etc.) to share ideas, best practices and favorite winning tactics.


If using a commercial methodology, would you recommend the vendor?



Other approaches include online refresher sessions and much abbreviated reviews/examples on specific topics. Leveraging technology enables reps to readily access what they need when they need it. In fact, some companies have gone a step further and only train their reps on how/where to find training and leave all the content to the reps. The philosophy here is that too much time is spent in classes and too much content is forgotten following these classes. Instead, content is set up online and individual development programs and periodic reviews/reports to their managers ensure reps make adequate progress. Such systems allow pre- and post- testing to determine what learning has taken place (or appears to have done so) and have the further advantage of being scheduled and, if necessary, repeated at each person‘s convenience. There has not yet proven to be one approach commanding an overwhelming advantage over all others and our suspicion is that, over time, programs that incorporate—and integrate—several of these components will win the day. CSO Insights did a Solution in Action on distance learning delivered at Century 21 Real Estate. Please send an email to [email protected] if you would like to receive a copy of this paper. One last message to sales teams looking to implement or change their sales methodology: ―somewhat likely‖ is not a ringing endorsement. If you would like to get more details on the specific vendors you are considering, give CSO Insights a call, and we can run the numbers for you on a vendor-by-vendor basis.

Notes:






Core Customer Relationship Management (CRM) Utilization Introduction

This section examines the number of companies utilizing core CRM systems (Microsoft, Oracle, Salesforce.com, SAP, etc., or internally developed) as part of their sales effectiveness initiatives. It focuses on the types of CRM applications they have implemented, the usage of the tools, the benefits they are seeing as a result of making the applications available to their sales teams, and their attitudes toward the CRM vendor community. Note: In tables that analyze abilities, the totals may not add up to 100% as some respondents selected ―do not know.‖

Organizations that Have Formally Implemented a Core CRM System..................... 172

Type of Core CRM System(s) Implemented ................................................................ 174

Length of Time Core CRM System Installed ............................................................... 176

Core CRM System Adoption Rate ................................................................................ 178

Access to Customer/Sales Data via Mobile Devices ................................................. 180

Benefits Resulting from CRM Usage ........................................................................... 182

Satisfaction Rating of Core CRM Vendor .................................................................... 184

Buy From Again/Recommend Core CRM Vendor ...................................................... 186

Plans to Replace Existing Core CRM Solution in 2009 ............................................. 188

Organizations Planning to Formally Implement a Core CRM System in 2009 ........ 190

Performance Op



Yes

71.4%

No

28.6%

Formally Implemented a CRM System for Sales


Implementation of

CRM systems continues to rise.

Largest increase in new CRM usage coming from smaller firms.

Now seeing sales

performance differences between firms using/not using CRM.

Our first exposure to the precursor of CRM (sales force automation, or SFA), was in 1984 when we installed a package called La Main (French for The Hand). This was essentially a simple contact manager and calendaring system for salespeople that ran on IBM XTs -- for those of you who are old enough to remember PCs that only came with floppy drives. We know, what the heck is a floppy drive? Now 25 years later, we see the systems have greatly evolved in terms of functionality, stability, communications capabilities, extensibility, etc. And with the increase in sophistication has been a steady increase in implementation of these solutions in sales organizations. Here we are defining core CRM as systems such as Microsoft, Oracle, Salesforce.com, SAP, etc., or internally developed applications that minimally offer capabilities such as territory management, pipeline management, opportunity management, and forecasting. We will talk about the CRM 2.0 tools in the next section. As we see above, over 71% of the firms we surveyed this year have formally implemented a core CRM system. This represents a significant increase from the 53% usage level reported in 2003. Note: For research clients who are selling heavily or exclusively via telesales, you should also refer to our Inside/Telesales Sales Performance Optimization study (released October 2008) regarding CRM usage for that group, versus sales organizations as a whole. For example 85.9% of telesales teams are using CRM. The major growth area for new CRM usage has come from smaller firms.


Have you formally implemented a core CRM system within your sales organization?



Five years ago we found that only 42.4% of companies with 50 reps or less had implemented a CRM system, compared with 53.2% of companies with more than 50 reps. Today the gap has closed to 68.5% and 74.5%, respectively. Two key factors are contributing to the increased adoption of CRM in smaller firms. First, the ease of getting these applications up and running has significantly improved over the past several years. This includes the ability to more easily customize these systems to fit the way your firm sells. The second is the Software-as-a-Service (SaaS) model has lowered the cost for getting started with CRM, offering pay-as-you-go pricing versus buying a perpetual license. In addition, the need to have system administrators to update releases, manage security, ensure system uptime, etc. is greatly reduced in the SaaS world. But the real question is: Does it really make a difference if I use CRM, or not? Comparing the sales performance of firms using CRM to those who still do not, we see 61.0% of the reps with CRM tools installed make their quota versus 57.6% at firms that do not.

Notes:



Internally developed13.9%

Commercial CRM

application70.5%

Combination

commercial and internal programs

15.6%

Types of CRM System(s) Implemented

How Would


Reliance on

commercially developed systems continues to increase.

Still, a number of choices for companies to select from.

Need to link systems to other internally developed systems is decreasing.

Glancing back to the figures from the SPO survey conducted in 2003, we found that one in four firms that implemented CRM were installing an internally developed application. This year that number has dropped to an all time low of roughly one in seven, as more companies are opting to implement a commercially developed solution. Several factors are making build-your-own less attractive. The first is that the commercial applications continue to become more robust and are more customizable. This has resulted in sales organizations being able to get the functionality they need, and modify the tools to fit how they sell, much more easily than ever before. Second, SaaS-based solutions offer a more attractive total cost of ownership model than building and maintaining internally developed applications. You can get started quickly, with a minimal upfront investment, and the ongoing system administration and program maintenance costs are also much lower. Third, we are seeing more vendors designing their applications to meet the needs of specific industries, such as commercial banking, professional services, pharmaceuticals and medical products. We even found one application designed to support the CRM needs of athletic clubs and yoga studios. This leads us to play ―myth buster‖ with the following observation. If you read articles about the major players in the CRM space, you may come to believe you have relatively few providers from which to choose. Yet


Was your core CRM system(s) purchased, internally developed, or both?



looking at the vendors that this year‘s survey participants chose to install, we see that there are still a number of options to choose from. Forty-eight different CRM vendors were mentioned! So if you are looking to jump on the CRM bandwagon in 2009, or replace your existing system, don‘t assume that you only need to look at the applications with the most brand awareness. Investing the time to learn about all the options you have may result in finding a solution from a smaller, lesser known player that better fits the needs of your sales team. We are also seeing a continued decrease in the number of cases where companies select a commercial application, then invest in integrating it with other internally developed tools. One reason for this is the significant increase in the number complementary applications that are also coming into the market. As you will see in the next section on emerging CRM solutions, the number of commercially available applications for sales analytics, sales knowledge management, incentive management, etc., is exploding. These new sales effectiveness vendors are looking at the capabilities that core CRM systems do not provide, and building solutions to address these needs. In addition, in most cases they are then doing the heavy lifting of integrating their applications with the most popular CRM tools, so that reps see these functions as extensions of their core CRM platform.

Notes:



Less than 6 Months12.2%

6 - 12 Months16.1%

1 - 2 Years25.4%

2 - 3 Years17.1%

More than 3 Years29.1%

Length of Time CRM System Has Been Deployed

How Would


Average tenure of

CRM systems implementation is not increasing significantly.

The older group (> three years) has high percentage of On Premise CRM.

Newer CRM implementations trending toward more SaaS and less On Premise.

Often, some of the surprises we encounter in this annual study are not the result of what has changed, but rather what didn‘t change (but we thought would). This is the case when we looked at the length of time CRM systems have been installed. Comparing the numbers from the 2008 report to those above, there is not a meaningful difference in the length of deployments. On the surface one could ask, ―How could that be?‖ We only had a modest increase in the percentage of firms utilizing CRM from last year to this year; wouldn‘t one expect that tenure ranges would increase as the systems that were installed were in place for another year? Drilling into the data in more depth, we found that this logic assumes that everyone who had a CRM system kept it and that is not the case. In the 2008 report we published a new metric related to plans of firms that already had a CRM system in place to replace their current system. We found that 13.3% of those surveyed said they were intending to do just that, and in the study data this year we found that many followed through on these plans. We note a number of companies listed a new CRM vendor as their core technology provider this year compared to last year. In looking at the 29.1% of systems installed for more than three years, we found that the majority of these are On Premise CRM solutions. By and large, these firms have higher rep technology adoption rates than firms using CRM for shorter time periods.


How long has your current core CRM system been installed?



But we also found that the loyalty ratings of users to their CRM vendor were lower than companies who had been using their current system for less than three years. Looking at the implementation trends for sales organizations that have had their current CRM application in use for one year or less, we see that more companies are opting for SaaS-based systems than for On Premise applications. As you will see on 189, we are still seeing a number of firms stating that they plan to replace their existing CRM system during 2009. If this is the case, we may again see that the average implementation time will not increase, as more experienced users reset the clock to zero when they rollout a new solution to their sales force. We will be tracking the ―replacement‖ trend in more depth next year to see if this is the case.

Notes:



Less than 25 %

7.8%

25 - 50%16.2%

51 - 75%18.3%

76 - 90%18.8%

Greater than 90%38.8%

CRM System End User Adoption Rate

How Would


Adoption rates

are essentially unchanged from 2008 report.

Seeing two distinct classes of CRM users: data retrievers and process/workflow users.

Very different CRM adoption profiles when one considers the level of sales process.

In the mid 90‘s we saw CRM advocates touting that technology would be the cornerstone for selling in the next decade. Looking at the chart above and comparing it to the same findings in the 2007 and 2008 SPO reports, we see minimal shifts in CRM application adoption by salespeople. For 38.8% of sales forces working at companies with CRM systems in place, these tools are a ―must have‖ (greater than 90% adoption). And at the other end of the spectrum we see almost one in four firms have much more informal usage (50% or less adoption rates). One question we have been asked is whether adoption varies noticeably based on the specific vendor a company chooses. Here we did see some differences when we filtered the data based on the core CRM vendor installed. For example, looking at the percentage of firms with adoption rates of >90%, on the low end was a vendor with only 28% of the clients reporting that level of adoption, versus another vendor on the high end coming in at 53%. So, part of the difference in usage may well be due to the tool you choose, but another factor also comes into play: the level of sales process a firm has adopted. On page 7 we profiled the four levels of sales process that we see companies implement, ranging from Informal to Dynamic Process. In the following table we compare the adoption rates based on these four levels of process.


What is the adoption rate for your core CRM system?



Sales Process Level as related to CRM Adoption

Sales Process Level 1




>90% 29% 34% 37% 59%

76% - 90% 9% 21% 26% 18%

51% - 75% 21% 19% 15% 17%

50% or less 41% 26% 23% 6%

The CSO of a professional services firm we recently interviewed helped clarify why these differences in CRM adoption exist based on process adherence. When he took over the sales leadership function at his firm, the sales force was definitely functioning as a Level 1 organization; each rep sold their own way. Since there was no single way of selling across the sales force, it was next to impossible to leverage any of the workflow improvements CRM can deliver. The value of CRM to his team had been reduced to almost nil; the CRM system was a place reps went occasionally to get customer and/or sales data. Over the course of the next few months this CSO migrated the sales teams to what he described as better than Level 3 sales process, but not quite Level 4. In doing so, he saw the adoption rate of CRM increase from 40% to 95%. Why the difference? This executive told us, ―As we got to the point where all reps were essentially working the same, the CRM team was able to get the reps up and running on how to use CRM to do territory analysis, execute some of their own lead incubation campaigns, manage forecasts, etc. In doing so, the reps saw their personal productivity increase—and with that, the value they associated with regularly using the tools.‖

Notes:



Yes36.7%

No63.3%

Provide Reps Access to Customer and Sales Information from Mobile Devices

How Would


New Metric:

Less than 37% of firms are leveraging mobile device access to CRM data.

Giving reps

access to this data has minor impact on CRM system adoption.

Ease of data access seems to improve vendor ratings.

The one technology in sales that has the best chance at 100% adoption ratings is the cell phone/smart phone. We can‘t even begin to think how salespeople would function without it as their primary way of getting in touch with customers and colleagues via voice or instant messaging. But are they using these devices for more expanded uses? Over the last several years, the CRM vendors have made a lot of noise about the ability for sales reps to access customer and sales information via mobile devices. We decided to add a new question to our survey to see if this capability was being utilized by many firms and if it was living up to all the hype. Above we see that roughly one-third of the firms who have implemented CRM systems are providing their reps with real time access to customer and sales information through their cell/smart phone. Note: This is separate from synching your mobile device to your contact manager so that you have names, addresses, phone numbers etc., of your prospects and customers. We then compared the survey results of those who did give reps access to sales data to those who did not, to see what differences we could find. The first factor we looked at, CRM system adoption rates by salespeople saw a slight increase of CRM usage in firms that gave reps mobile access, compared to their non-mobile connected peers. We did note a correlation between mobile data access and CRM customer satisfaction ratings. Ninety percent of the companies that did


Do you provide reps with access to customer/sales data via mobile devices?



provide mobile access to sales data gave their CRM vendor a positive overall satisfaction rating, compared to a 81% rating from sales organizations not using this capability. The response from one survey taker prompted us to make a follow-up call. He sent us an email saying that we were asking the wrong question. We were limiting access to data via cell/smart phones. His company, a medical products vendor is providing wireless access via tablet PCs. The CSO pointed out that the form factor of the tablet PC was much more user friendly that the tiny screens on the typical mobile device. Because of this, reps not only had mobile access to sales data, but marketing collateral as well: videos of customer testimonials and product demos, needs analysis templates, data sheets, price lists, etc. His experience was that this was the game changer for his firm. Prior to rolling out the tablet PCs, reps had access to data and knowledge to plan for a call and follow up on a call using their PC back in the office. Now with the tablet PC they have access to all the sales knowledge on the call. The impact on sales is that activities such as cross-selling and up-selling have increased dramatically. Now that reps can get real time access to all the information they need to sell when they are in front of the customer, versus having to say those dreaded words, ―Let me get back to you on that.‖

Notes:



0% 10% 20% 30% 40% 50% 60%

Increased Margins

Other

Improved Support of Channels

Improved Order Processing Accuracy

Increased Revenues

Shortened Sell Cycles

Reduced New Sales Rep Ramp-up Time

Improved Win Rates

Improved Best Practices Sharing

Reduced Administrative Burden on Sales

Improved Forecast Accuracy

Improved Sales Rep/Manager Communications

6.0%

9.7%

12.5%

15.0%

15.8%

16.1%

16.9%

20.2%

25.0%

36.5%

42.9%

53.8%

Benefits Resulting from CRM Usage

How Would


Usage of core

CRM systems continues to have a positive impact on the efficiency of salespeople.

But the ability of CRM to really impact top line and bottom line performance is not being achieved by many firms.

The key to improving revenues looks to be the combination of CRM and sales process.

The top three benefits that are being achieved by users of CRM technology are consistent with last year‘s numbers. Improving communications, streamlining forecasting, reducing the administrative burden on reps are all positive things to accomplish. But what is the net gain from all of this? These three benefits are all about improving the efficiency of our salespeople. Now sales reps will theoretically have more time to make more calls. But what if the issue is not making more calls, but fundamentally better calls? Does core CRM help with this? If we go far enough down the list, we see that increasing revenues is being achieved by a small percentage of those firms that have implemented a core CRM system. Yet if we reflect back to the top three objectives sales executives have for 2009 presented on page 9, increasing revenues is at the top of the list. We also note that helping to increase margins is even further down the list, cited by only 6% of the firms we surveyed. As 2009 is looking to continue to be a tough sales environment, CSOs are going to want to know where the hard dollar ROI is for their investments in technology to support their sales teams. In analyzing the new study data in more detail, we have two observations we would like to share. First is setting the right level of expectations for the role CRM should play in improving sales performance. In her book Infotrends, Jessica Keyes shares what we have always thought was a great perspective when she noted that ―technology does


What measurable improvements have resulted from your core CRM system usage?



not beget a competitive advantage any more than paint and canvas beget a Van Gogh.‖ CRM are tools, like paint and canvas, but they do not automatically come with the brilliance to create a work of art. That comes with skills that are developed and honed over time. And in the world of sales we call that ―process.‖ With that in mind, we ran the performance numbers for firms with CRM installed and segmented the data again based on their level of sales process adherence (see page 7). Below we see a comparison of the percentage of reps that made quota across the four levels of process.

CRM & Sales Process Adherence relative to:

CRM & Sales

Process Level 1

CRM & Sales

Process Level 2

CRM & Sales

Process Level 3

CRM & Sales

Process Level 4

Percent of reps making quota

54% 61% 60% 65%

Here we see that the combination of skills and technology has an impact on the success of sales reps. A second observation that we will explore in depth in the next section, is that core CRM is not the entire CRM story. For those of you who have been exposed to Maslow‘s Hierarchy of Needs, you will remember that Dr. Maslow presented the concept of a five level pyramid for people to build on to achieve their full potential. The base of the pyramid was called Survival. Here your focus is on finding food, water and shelter. This is the requisite starting point, but you still have to complete four more levels of the pyramid in order to be fully actualized. We are finding that CRM is a similar evolutionary path. Core CRM gives you the foundation, but other capabilities need to be added to reach your organization‘s full sales performance potential. The emerging CRM extensions are showing great promise in helping you achieve the sales effectiveness improvements needed to really impact top and bottom line revenues.

Notes:



Very Satisfied19.5%

Satisfied48.3%

Neutral22.7%

Dissatisfied9.5%

Satisfaction Rating of Core CRM Vendor

How Would


Overall, we see

satisfaction levels of CRM users continue to rise.

Very satisfied ratings increase with the length of time the applications are in place.

Satisfaction levels with individual vendors vary widely.

For the second year in a row, user satisfaction ratings of their CRM vendors improved. Last year, 61.4% of the firms who had implemented a commercial CRM application reported that they were satisfied or very satisfied with their core CRM vendor. Above we see that number has now risen to 67.5%. While an improvement, we still feel the need to point out that roughly a third of the firms‘ surveyed do not give their vendor high marks. Considering that CRM is all about optimizing relationships with your customers, it is clear that some of the CRM solution providers are failing to practice what they preach. In attempting to better understand what influences user satisfaction, we segmented this year‘s survey data based on a variety of factors and found two interesting trends worth sharing. First, it appears that the real value of CRM may not be immediately obvious when a company implements a CRM system. Consider the following table where we compare the satisfied or very satisfied ratings based on the length of time a CRM system has been in place.

Satisfaction Ratings based on Length of System Usage

Satisfied with CRM Vendor

Very Satisfied with CRM Vendor

<1 Year 54% 13%

1 - 3 Years 50% 19%

>3 Years 40% 27%


How would you rate your level of satisfaction with your core CRM vendor?



Here we see that the overall level of satisfaction remains about the same, but over time the percentage of CRM users reporting that they are very satisfied increases. The second insight that surfaced was that in this case, averages can hide problems. Remember, we had 48 different solution providers identified this year. Are they all viewed the same? Is CRM after all these years just CRM? Apparently not! When comparing the dissatisfaction ratings by individual vendors, we found figures that ranged from a low of 0.9% to a high of 35.3%.

Notes:



Absolutely19.3%

Very Likely

33.4%

Somewhat Likely

31.8%

Unlikely15.5%

Recommend CRM Vendor to Others

How Would


Likelihood of

recommending/ buying again is increasing.

Still these figures are lower than pure satisfaction scores.

SaaS users more likely to be advocates in the market versus users of On Premise systems.

Several years ago, when benchmarking a jet manufacturer‘s sales operations, we were educated on the difference between satisfaction, loyalty and advocacy. Their CSO pointed out that satisfaction alone is not a good measure of the relationship a vendor has with their customers. His example was that he was satisfied with the station where he bought gas for his cars, but that wouldn‘t stop him from making an illegal u-turn in rush hour traffic if gas was a dime cheaper a gallon across the street. He then went on to add that loyalty is great. You would like for your customers to stay with you, but what you really would like is customer advocacy; customers recommending you to others. Based on that, we asked this follow-up question to CRM satisfaction. Compared to the figures last year, the percentage of firms who would absolutely or very likely buy from/recommend their CRM vendor is now 52%, versus 47.8% in 2008. While this is trending in the right way, these figures are noticeably lower than the satisfaction ratings on the previous pages. So what‘s happening here? In the following table we segmented the responses based on the type of CRM system a firm was using; SaaS-based or On Premise.

Loyalty/Advocacy as related to CRM System Type

Very Likely to Buy From/Recommend

Absolutely Buy From/Recommend

SaaS-based CRM 36% 29%

On Premise CRM 35% 8%


Would you buy from again/recommend your core CRM vendor to others?



Here we find a huge disparity with 71.9% of SaaS application users stating that they are loyal advocates for their CRM solution provider, compared to 37.5% of the sales organizations that have an On Premise CRM system installed. Again, we drilled into the data further based on the specific vendor a firm had implemented. The unlikely to buy from/recommend ratings for this metric ranged from a low of 2.1% to a high of 38.9%. With this wide range of results, it is clear that some CRM solution providers are outperforming their peers in the marketplace. It also suggests that if you are getting less than what you expected to achieve from your CRM investments, then you should not assume that this is the norm. You may well be using a product and/or working with a vendor that does not support the way you sell.

Notes:



Yes13.0%

No87.0%

Plans to Replace Existing CRM Solution in 2009

How Would


This year‘s

figures for replacing one CRM system with another are identical to last year.

Disparity in results mirror loyalty and advocacy findings based on type of system used.

Length of time is also a factor.

For those of us who were in the CRM space in the early 90‘s, we remember the horror stories some companies went through trying to implement a CRM system. First there was the issue of data rationalization (loading the system with accurate and current information). Then you had to deal with customizing the application to meet the requirements of how you were selling. This often cost two or three times more than the software itself. If you got those two right, then you still had to deal with response time and load balancing, data synchronization, system security, management, etc.

And once you did get the system implemented, if the results were far lower than expected, the thought of shelving the current project and starting all over again with a different vendor was pretty much unthinkable to anyone on the project team. Well today, switching from one CRM system to another is much easier and less expensive. Data quality is unfortunately still an issue, but other aspects of shifting platforms are much more manageable. That being said, the figures reported this year for planning to replace an existing CRM system are nearly identical to last year. Again, we see differing results based on the type of system installed, as shown below.

2009 CRM Plans as related to System Type

Plan to Keep Existing CRM System

Plan to Replace CRM System

SaaS-based CRM 93% 7%

On Premise CRM 82% 18%


Are you looking to replace your existing core CRM solution in 2009?



We also found that the length of time a system has been deployed plays a role in determining whether to replace CRM. Looking at systems that have been in place for more than three years, we found that 17% of those users were looking to replace their CRM application in 2009. In interviews with some of these users, we found issues such as reducing their total cost of ownership, migrating to a system better suited to the way they sell, and the desire to be able to leverage other CRM technologies (which we will profile in more depth in the next section). These were key considerations for these sales executives and their CRM project teams, motivating them to change out their current systems. Research clients contemplating a move like this in the coming year can contact their CSO Insights Analyst to set up a briefing to understand the user ratings for the specific vendors that have made your short list.

Notes:



Yes13.0%

No87.0%

Plans to Replace Existing CRM Solution in 2009

How Would


Of the firms that

have yet to implement a CRM solution, four in ten say they plan to do so in 2009.

CRM requirements should be based on analysis of current pain points.

Wide variety of partners available to help deal with sales challenges.

On page 172 we noted there are still a number of companies that have chosen not to implement CRM. Our question for them was, will that change in 2009? Here we see that for four in ten of these sales organizations, the answer is yes. If you are one of those firms, let us share some lessons we have surfaced from benchmarking hundreds of CRM implementations over the years. The first of these is, as you plan your project do not start by looking at technology. Instead, start with a clear understanding of your business and/or selling problems. One of the best questions that we have ever heard asked by a sales effectiveness project team leader, when he first assembled his sales rep advisory board was, ―Why can‘t I double your quota?‖ Initially, that question prompted blank stares from the meeting participants, but eventually they started having serious discussions around what problems they were encountering in terms of generating leads, accessing valid data on prospects and customers, getting up to speed on new products, conducting effective presentations, generating accurate proposals, etc. Based on these responses, the CRM project team now had a clear understanding of the challenges the salespeople were facing on a daily basis. These insights became a major part of the functional specification for the CRM system.


If not using a core CRM system, are you planning to install one in 2009?



While this may sound like an obvious starting point, we have seen far too many projects start with the team selecting a CRM vendor, and then going in search of a problem for the application to solve. Another best practice is to make sure you take at least a brief look at all the options that are available to you. Clearly, a few vendors have done a really great job of creating brand awareness for their solutions. But because they are well known in the marketplace doesn‘t mean they offer the best fit for your sales team. How do you find out which solution provider is the best fit for your organization? First off, feel free to call your CSO Insight Analyst. Based on identified problems, size of your company, geography, industry, sales force structure and more, we can review with you the information we have on many of the CRM vendors. Second, call your colleagues at other companies to see what they are using, and what they think are the strengths and weaknesses of that vendor and solution. Third, surf the Web for product reviews. Some great resources we have found are sites including: www.customerthink.com, www.ismguide.com, www.sellmorenow.com, www.sellingpower.com, and www.destinationcrm.com.

Notes:

http://www.customerthink.com/

http://www.ismguide.com/

http://www.sellmorenow.com/

http://www.sellingpower.com/

../../Local%20Settings/Temp/Local%20Settings/Temp/wzec40/www.destinationcrm.com





Customer Relationship Management (CRM) 2.0 Utilization Introduction

This section examines the additional capabilities that companies are adding to their core CRM platform to deal with sales effectiveness challenges such as enhancing prospect research, optimizing access to sales knowledge, facilitating sales collaboration, improving sales management, and more. Note: In tables that analyze abilities, the totals may not add up to 100% as some respondents selected ―do not know.‖

Additional CRM Technologies Using/Planned for 2009 ............................................ 194

Implementation of Sales Collaboration Solutions ..................................................... 196

Implementation of Lead Generation/Management Solutions ................................... 198

Implementation of Sales Management Analytics Solutions ..................................... 200

Implementation of Sales Knowledge Management Solutions .................................. 202

Implementation of CRM/Sales Process Integration Solutions .................................. 204

Implementation of Incentive Management Solutions ................................................ 206

Implementation of Channel Management Solutions .................................................. 208

Perform



0% 10% 20% 30% 40% 50% 60% 70%

Channel Management

Incentive Management

CRM/Sales Process Integration

Sales Knowledge Management

Sales Analytics/Forecasting

Lead Generation/Management

Sales Force Collaboration

12.0%

17.1%

19.1%

20.3%

27.7%

27.7%

59.8%

Additional CRM Applications Using/Planned

How Would


Core CRM is the

beginning of technology- enabling sales, but not the end.

Majority of firms are adding additional capabilities to their core CRM platform.

New CRM 2.0 solutions coming to market to address specific sales and marketing challenges that companies face.

So you have your core CRM system up and running. Are you done implementing technology to support your sales and marketing efforts? We asked the firms that had done this if they had then implemented, or were planning to implement, any other sales tools. Their answers in the chart above show there is still much more to consider. Let‘s take a look at why this is the case. To facilitate this discussion, we borrow a concept Abraham Maslow introduced decades ago in talking about the human hierarchy of needs, and present our version of the sales performance hierarchy.

.

Sales Performance Optimization Pyramid™


What additional CRM technologies are you using/planning to add in 2009?



If we are going to optimize the performance of our sales teams, we need to build on success. We need to first get end user buy-in by implementing solutions that increase their personal efficiency and effectiveness. If they see value in using the applications they will start to consistently put data ―into‖ the systems at which time sales management can start getting insights ―out of‖ the system to help improve sales team effectiveness. If all of sales is now leveraging these tools, we can start to integrate them with the systems used by other functional areas (finance, support, development, customer service, etc.), so we increase the effectiveness of the entire enterprise. When this is accomplished, we can then go beyond the walls of our own company and link to systems used by our suppliers, channel partners and customers to optimize extraprise effectiveness. So how far down this path are we? Let‘s reflect back to the benefits currently being achieved by firms who have implemented a core CRM application that we shared on page 182. What we see here are some good efficiency gains, but what about true effectiveness improvements? As an example, how many firms are really seeing revenues and margins improve? The answer is precious few. So while core CRM is a good start—just like the category of food, water, and shelter was in Maslow‘s original hierarchy—it is only a start. In recognition of this we are adding this new section to the SPO report, and will be doing more research into the implementation of what we are calling CRM 2.0 solutions: added functions that help take sales teams further up the sales performance optimization pyramid. In the following pages, we introduce you to some of the newer CRM technologies you may want to evaluate in 2009 to take your sales performance to the next level.

Notes:



0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Currently Using Planned 2009

50.7%

12.3%

Sales Force Collaboration


Usage of

collaboration tools continues to rise in sales.

Usage of sales collaboration is helping to support sales training.

Conducting business meetings beyond the company walls is also increasing.

The most popular additional solution that companies are adding to their CRM platform is sales collaboration systems. Above we see that over half the companies that have implemented a core CRM system also have invested in sales collaboration capabilities, and that number should increase into the 60% range during the coming year when looking at the ―planned‖ figures. As part of our sales best practices benchmarking efforts in 2008, we interviewed sales management and sales operations personnel to see how sales collaboration systems were helping salespeople sell. What we often found was that the genesis for adoption of these solutions first started in marketing. Marketers found that this was a cost effective way to host what are now referred to as webinars as part of their lead generation activities. But then sales started coming up with specific uses of their own. A very common way that these systems are leveraged is to conduct or reinforce sales and product training courses. Salespeople sign into a web-based class at a prescheduled time and the instructor walks them through the training materials. Embedded in the applications are tools that allow students to ask questions, while instructors can drop in mini tests to see if the students comprehend the materials; and instructors can walk reps through the usage of other applications such as a needs analysis template or a proposal generator. There are several advantages to this approach to training. The first is


To what extent are you currently or planning to use sales collaboration solutions?



cost and time savings. You don‘t need to fly reps in or fly instructors out in order to hold a training event. Another key advantage is that you can record these sessions so that reps who miss the class can easily make-up the session. In addition, the material is easily archived so that reps can refer back to the class any time they need a refresher. Another growing use of these solutions is in helping conduct specific sales tactics. In the current down economy, many sales organizations are cutting back on travel expenses. This can relegate the rep to having to conduct more and more of their sales activities over the phone. Sales collaboration can optimize that time. In addition to calling the customer or prospect, the rep can easily launch a web-based meeting. Using this approach, they can do a demonstration or presentation for a client while talking on the phone. Reps can also invite subject matter experts to join them virtually for the meeting. For example, a sales rep in New York could have a web-based contract negotiation session with a prospect in Texas, involving the rep‘s CFO who is based in San Francisco and his or her sales manager who is in Michigan. In this case, the customer could be given control of the web-based meeting and share the contract from his PC for all the others to see. Using this approach, they could make real time changes to the pricing, terms and conditions, delivery schedules, etc., and get the deal done versus emailing different versions of the document around to each other. We see this becoming a standard part of selling and anticipate that in a couple more years the use of these tools will be ubiquitous.

Notes:



0%

5%

10%

15%

20%


16.1%

12.3%

Lead Generation/Management


Enhancing lead generation efforts is top of mind for many CSOs.

Firms implementing lead life cycle solutions are seeing marketing‘s ability to generate high quality leads increasing.

Sales reps are adopting these tools to support their own lead generation and incubation efforts.

As highlighted in the closing section of this report on page 232, when we explored the top sales effectiveness initiatives planned for 2009, enhancing lead generation programs was number one on the list for many sales organizations. However, we find three camps; those who think the solution is more leads, those who think it is better leads, and those who are looking to blend these two together. Based on the insights surfaced during the course of our lead generation optimization research studies and benchmarking efforts, we see much more value in generating better leads than in purely churning out more leads. Those firms who have high lead quality achieve higher lead conversation rates and see fewer opportunities ending in no decision, versus those companies whose main focus is on making ―more calls.‖ In order to support these efforts, we are seeing more firms adding lead generation/management (LGM) solutions to their CRM 2.0 arsenal. We compared the impact these systems were having on performance and surfaced an interesting trend. The table below shows the percentage of deals that closed for leads provided by marketing (versus other sources) for firms utilizing lead generation/management solutions versus those that were not.

Marketing’s Support of Sales in Lead Generation as related to:

% of Leads Generated by Marketing that Ultimately Close

Using LGM solutions 35%

Not using LGM solutions 23%


To what extent are you currently or planning to use lead generation/management?



Leveraging LGM systems helps a company do three key things. First, they are able to segment prospects more effectively. As opposed to one-size-fits-all marketing, messaging can be targeted toward specific sets of stakeholders with value propositions that are designed to motivate them to act. A medical products company we benchmarked serves as an example. Through their LGM system, they were able to identify hospitals within 50 miles of a coalmine, and then send out targeted marketing announcements to pulmonary and respiratory specialists regarding their new respiratory product offering. Second, LGM applications help firms track who is interested and who is not. With email campaigns, for instance, they track who has opened the correspondence, what they looked at, if they forwarded the material on to others, etc. Another aspect of tracking is that most LGM systems can be linked directly to the core CRM system a rep is using so that the final disposition of that lead is able to be easily determined. The third key benefit of using LGMs is the ability to leverage past response rates to make better future lead generation investments. Over time, the LGM‘s knowledge base will surface which stakeholders are more likely to be interested/responsive, which messages are most effective in generating action, which marketing approaches (email, paid search, direct mail, etc.) are more effective, etc. All of this can be invaluable in optimizing the investment of precious lead generation dollars. One other trend we are seeing is giving sales reps access to LGM systems to do their own campaigns. This is especially effective in helping reps incubate leads where the prospect has genuine interest, but the current timing is not good. Reps can set up a regular stream of automated communications with prospects to stay top of mind for when the prospect is ready to come to the table and consider the vendor‘s product offerings.

Notes:



0%

5%

10%

15%

20%


15.2%

12.6%

Sales Management Analytics

How Would


Timely access to

accurate metrics is increased when using analytics.

Analytics starting to take ―hope‖ out of the pipeline management process, increasing win rates.

Analytics are also helping sales surface ―best practices‖ to improve future sales results.

A great deal of what we have been talking about in this report has been focused on what salespeople are doing and how they could be more effective. Another key consideration is what sales management is doing: are they making the right decisions on how to manage the performance of their teams? And are they making these choices based on metrics or hunches? 2008 was a banner year for innovative CRM 2.0 sales management solutions hitting their stride in the marketplace. We are now seeing a noticeable improvement in sales performance as managers begin getting timely access to the accurate metrics they need to optimize pipeline management. Consider the following: We segmented the survey data based on firms who had already implemented a sales analytics application and those who had not, and then looked to see how the two groups fared in terms of win, loss, and no decision rates.

Use of Analytics as related to Outcome of Forecast Deals

Using Analytics

Not Using Analytics

Wins 51% 47%

Losses 27% 31%

No decisions 22% 22%

Especially in tight economic times, anything you can do to ensure you win your fair share of the business is welcome. Above we see a


To what extent are you currently or planning to use sales management analytics?



difference in performance, but let‘s take a moment to monetize this. Assume you are the CSO of a 100-person sales force. You have a $100M revenue target and your average deal size is $50,000. In order to hit plan you would need the sales force to close 2,000 deals. Therefore, with a close rate of 47%, you as the CSO would need to have a pool of 4,255 opportunities to hit your target. Now assume you were able to keep the number of opportunities (4,255) but you increased your win rate to 51%. Now, instead of closing 2,000 of those deals, your sales team closes 2,170 deals. The extra 170 deals at $50,000 each represents a new gross revenue increase of $8.5M. Here is how analytics support this improvement. Traditionally, the forecast management capabilities in core CRM systems allow a manager to see what the value of the forecast is. So let‘s say you started the quarter with $100M in the forecast, and you are now 2 months into the quarter and the value is still $100M. Is that a good thing or a bad thing? The answer is you don’t know. What if I told you that $90M of the original forecast had dropped out over the last 60 days, replaced by a bunch of new deals that were in much earlier stages in the sales cycle than the deals that were dropped? Would you start to get a bit nervous now? That is one of the key roles analytics plays. It sits on top of your core CRM system and monitors deal by deal what has changed: value of the deal, confidence level, margins, main competitors, etc. And here is the value of these systems: when they detect a change, they proactively let the appropriate manager know about it so they can take the right action with the right rep to ensure the integrity of the forecast. Consider analytics as a virtual sales ops analyst tracking all deals 24 hours a day. And the longer these systems are in place, the more value they provide. Over time they can give you a knowledge base to mine to see what your best practices are in selling, including which industries to focus on, which stakeholders in those firms to target, which competitors to avoid, which value propositions to emphasize, etc. With 2009, and most likely parts of 2010 looking challenging, sales management is going to have to step up their game if the company is going to succeed. Fortunately, the emergence of analytics tools to support improvements in performance should make that a much easier task than in the past.

Notes:



0%

5%

10%

15%

20%


9.2%

11.7%

Sales Knowledge Management

How Would


More firms seeing

that the ―how‖ of selling needs to be combined with the ―what‖ of selling.

Sales Knowledge Management is helping increase impact of training.

Structured and unstructured knowledge can be handled by these solutions.

Earlier we discussed the need for, and the value of, sales intelligence as a means of helping reps convert leads to first discussions more often (see page 64). As the commentary in this report has shown, getting in the door does not mean you will get in the game, and getting in the game doesn‘t mean you will win the game. In the past, a rep‘s knowledge of their product was a means of accomplishing these latter two tasks. But today, with product information being ubiquitously available via the Internet (from your own website, competitor‘s sites, blogs, etc.), customers are looking for something else from salespeople—knowledge. So how do we get that knowledge into the minds of reps? For some, the answer may appear to be delivering more training; but as you saw in the previous section of this report on sales process, companies‘ ratings of their ability to execute effective training are often poor. A key contributor to this is that training too often focuses on the ―what‖ of selling: what you need to do is get to the right stakeholder; then what you need to do is fully assess their needs; then what you need to do is differentiate yourself from the competition; and so on. But once reps have the basics of ―what‖ clearly defined in their minds they quickly move on to the question of ―how‖ do they accomplish all the ―what‘s.‖ This year we published a number of case studies on how firms are dealing with giving reps access to the knowledge they need to effectively sell. The ROI of each of these sales effectiveness initiatives was


To what extent are you currently or planning to use sales knowledge management?



impressive in terms of generating hard dollar benefits such as increasing win rates, improving margins, shortening sales cycles, decreasing sales rep turnover, etc. So how do these improvements occur? There are two aspects of Sales Knowledge Management (SKM) to consider. The first is optimizing access to customizable structured content. Here we are talking about datasheets, presentation materials, proposals, needs analysis templates, etc. A software firm we benchmarked rolled out a CRM 2.0 SKM application to their sales teams that serves up the best content for the reps to use based on the deal they are working on. Based on criteria such as the industry they are selling into, the challenge the prospect is focusing upon, the criteria they will be using to make their purchase decision, etc., the SKM system tells the rep about the best available content to use at the appropriate step in the sales cycle. But what about all the unstructured knowledge? The insights that aren‘t in a presentation, brochure, or datasheet; like answers to specific objections, innovative sales tactics, competitive knockoffs, etc. These are the knowledge gems that are kept and not easily accessed in the heads of your reps somewhere in the company. This is the challenge that the new generation of SKM systems are focusing on collecting, synthesizing and sharing across the sales team. A travel firm with 1,000 reps worldwide showed us the SKM system they put in place to handle this task. As reps find out details on various vacation properties, they can ―contribute‖ that knowledge to the SKM system. Due to this best practices sharing, the insights database has grown to tens of thousands of knowledge nuggets that are all easily searchable by reps. In fact, this system has the highest user adoption of any application the company has ever implemented in sales. The cost effectiveness of implementing these solutions, versus relying on more and more standard training, will encourage more sales organizations to evaluate the potential that SKM holds for improving sales performance. This, in turn, should help SKM adoption improve significantly in 2009.

Notes:



0%

5%

10%

15%

20%


8.9%9.5%

CRM/Sales Process Integration


Impact of process

and technology increases when they are combined.

New generation

of tools are taking individual stakeholders into account.

Improvements seen as reps are coached beyond their comfort zone.

Over the years, as we have assessed the impact that technology or process can have on sales performance, we have consistently seen situations where either can help. However, when the two are implemented together, that is when real performance improvements start to occur. Consider the following. We segmented the data based on firms that had both a CRM installed and a formal sales process, and those which did not have both. Below we see the differences in results that these two groups are achieving.

CRM and Formal Process as related to Sales Performance

Overall Plan Attainment


Formal process and CRM

94% 68%

No formal process and/or no CRM

85% 58%

We are now seeing another emerging area of CRM 2.0: technology and process integration. These solutions are coming in two flavors. The first is sales process reinforcement. Conceptually, this is how it works. Assume you have invested in training your sales force on a sales methodology: Solution Selling, Complex Sale, something you have developed in-house, etc. How do you make sure that reps employ this new knowledge into their daily workflow?


To what extent are you currently or planning to integrate CRM/sales process?



CRM/sales process integration solutions now allow firms to embed their sales methodology directly into their core CRM application framework. With this done, as a rep creates a new opportunity, the CRM system encourages (or forces) the rep to actually do the strategic account planning and call planning work the methodology promotes. In addition, it helps facilitate sales reps‘ understanding of all the relationships they need to establish with various stakeholders to close the deal. The system tracks how well they are building consensus—a critical selling task when trying to close business in a tight economy. These capabilities ensure that reps start applying what they have learned to maximize the return on the company‘s training investment. Some of the newer CRM/sales process integration tools are going a step further. As the rep describes the opportunity in the system (i.e., the industry they are selling into, the stakeholders involved in the decision, the issues the prospect is looking to deal with, the competitors involved, the buying criteria, etc.), the system compares that opportunity to others the sales force has encountered. The system then further customizes the suggested sales process, taking into account the best practices and lessons learned to further increase the chances of success. Our sales benchmarking has shown that this situational-coaching capability is very useful in helping reps sell out of their comfort zone; selling to new stakeholders or presenting new products they haven‘t sold before. The CRM/sales process system helps them tap into the experiences that other reps have used to achieve success.

Notes:



0%

5%

10%

15%

20%


7.0%

9.4%

Incentive Management

How Would


Issue is not

generating checks correctly, but rather, motivating the desired behavior.

As sophistication of what we want reps to do increases, so does the need for more robust incentive tools.

Software-as-a-Service (SaaS) model is making these solutions available to all size firms.

On pages 100, 112, and 114 we explored the issues companies are having with cross-selling/up-selling, effectively introducing new products, and farming additional business from existing customers. In a tight economy, reps‘ success at these aspects of selling can make or break a firm‘s overall sales performance. And, as we have seen, many companies are underperforming in these areas. One factor to consider if your performance is sub-par is to see if you are incenting your people to do what you really want them to do. On page 36 we reviewed the types of approaches that companies are using to handle the task of incentive management. Now using any of these approaches you may be able to correctly calculate the amount due a rep for commissions, bonuses, SPIFs, etc. But does the approach you choose make a difference in terms of motivating your reps to do what you need them to do? Our data shows that yes, it does. Below, we segmented the study data based on the method of managing incentive plans in terms of a company‘s ability to ―normally‖ or ―consistently‖ drive the type of selling behavior they want from their sales teams.

Ability to Impact Sales Behavior as related to Incentive Systems

Normally or Consistently Drive Right Behavior

Commercial incentive system 82%

Internal incentive system 66%

Spreadsheets 60%

Managing manually 48%


To what extent are you currently or planning to use incentive management?



Let‘s review what we may want our reps to do in tight economic times. We want them to pursue higher margin deals; we want them to have fewer no decisions or competitive losses; we want them to maximize the order size by cross-selling and up-selling; we want them to close business in the timeframe they originally forecast it to close; we want them to sell things we know we can successfully deliver; and on and on and on. Well, how well can you administer that type of incentive management plan if you are doing manual calculations? The above data suggests not very well at all. It‘s a problem that increases exponentially as the size of your sales force and size of your overall pipeline increase. You can improve your odds somewhat by using spreadsheets, and even more by developing a more robust system internally. But the survey responses show that the real ability to impact behavior of salespeople across multiple dimensions of selling will require a more sophisticated approach. This is the need that CRM 2.0 incentive management systems are addressing. Firms implementing these solutions are quickly finding that they talk to the reps loudly and clearly through the megaphone of their wallets. These firms get their reps to focus on the precise selling behaviors that management feels need to be accomplished to achieve success. And the availability of these applications via the Software-as-a-Service (SaaS) model makes these solutions cost effectively available to any sized firm. If you are going to allocate a portion of your company‘s revenues to fund variable compensation programs for your sales reps, it makes sense for you to have the systems in place to ensure those dollars are most effectively invested. Evaluating how you are handling incentive management should be an area you take a hard look at in 2009.

Notes:



0%

5%

10%

15%

20%


3.7%

8.2%

Channel Management

How Would


Slowest area of

adoption, but still a need.

One limiting factor is how much vendors and partners want to share.

Base functions, like deal registrations, are now being handled by core CRM or other options.

The last area of CRM 2.0 to explore is leveraging technology to support channel partners versus inside/direct reps. This has been a thorny topic over the years. In our 1994 analysis, Towards Sales2000, we optimistically predicted that once sales force automation technology was embraced by our own sales force, the opportunity to then leverage the same types of platforms to support distribution reps would be a logical evolution. Well, here we are 15 years later: CRM adoption rates are over 70%, but those companies that have then gone on to implement channel management solutions are the rare exception—not the rule. As we saw on page 16, channel sales account for over 12% of all sales across firms participating in this year‘s study, which is more than the percentage of revenues that inside telesales is contributing. So why the low adoption rate of channel support systems? From our project benchmarking activities we have surfaced two trends that may help explain what is transpiring here. The first is that we still see a resistance between vendors and channel partners to share what they each consider key client information. An employee benefits insurance firm shared with us that they offered to provide a wealth of support services to help brokers market to their customers and prospects, if the broker would share their contact information. Less than a quarter of their channel partners took them up on the offer, citing information privacy as the main reason for not wanting the support marketing offered.


To what extent are you currently or planning to use channel management?



Other aspects in play are that the business processes in place between vendors and partners are often not all that complex. They may simply involve sharing leads, handling deal registration, managing the distribution and updating of marketing collateral, etc. Here, the capabilities offered by a core CRM application or the implementation of an internally developed application may meet the need. We did, however, see examples of what might change this dynamic down the road. A property and casualty insurance firm showed us a channel partnering support system they developed for their partners that fundamentally changed the way their brokers sold. The system was a needs analysis/proposal generation application that guided the partner through all the right questions to ask when doing a needs analysis with a CFO. This included points to make to differentiate them from other competitors, and a risk modeling tool to ensure the client was properly insured (versus paying for coverage they didn‘t need and not being offered coverage types that they did). The system enabled the brokers using it to be much more knowledgeable than their competitors. In addition, the system recorded all the interactions the broker had with a customer during the course of the call, so the insurance firm started to get key insights into what happened during the sales cycle. As more examples like this start to surface, we may see more vendors and channel partners loosening their hold on some information and opting to leverage an expanded information/knowledge base with CRM 2.0 technology in a win/win manner.

Notes:





Internet and Sales Knowledge Management Utilization Introduction

This section examines how sales organizations are leveraging the Internet to support their sales and marketing efforts, and how easy it is for salespeople to get access to the sales knowledge management elements, and where improvements in that area will be focused during the coming year. Note: In tables that analyze abilities, the totals may not add up to 100% as some respondents selected ―do not know.‖

Impact of Internet Usages on Sales and Marketing Performance ............................ 212

Ease of Access to Sales Knowledge Management Components ............................. 214

Sales Knowledge Management Improvement Priorities ........................................... 216



0% 10% 20% 30% 40% 50% 60% 70%

Conduct interactive chat sessions with clients

Provide prospects information via individual sales portals

Provide customer self-service

Conduct customer training

Process seminar/webinar registration

Conduct web-based meetings with clients

Conduct online demos

Conduct webinars

Conduct account research

11.9%

18.7%

22.1%

26.0%

23.3%

28.0%

32.4%

33.1%

37.4%

23.0%

24.0%

29.2%

27.2%

31.7%

28.8%

25.2%

26.9%

32.0%

Impact of Internet Usage on Sales Performance

Significant Impact

Impact

How Would


Researching

accounts remains the top Internet sales use.

Webinars and online demos continue to gain ground as other front-runners.

More interactive Internet uses are growing rapidly and freeing up selling time.

Conducting account research remains the top vote getter for Internet use/impact for a third straight year but other uses are quickly catching up, or more accurately, this leader may be catching them. Account research was the only category to decrease in impact from 2008 (86.6% down to 69.4%) while all other categories increased, yet again. We would not be surprised to see one of these surpass research in 2009. Clearly, both buyers and sellers have become more comfortable and more skilled in conducting routine business via the Internet. Webinars are back in second place by two-and-a-half points over conducting online demos which was in fifth place just two years ago. With a tightening of the economy trumping all other news, we expect travel expenses to be reduced/scrutinized even further and, as a result, online demos and webinars proving even more popular and passing research. Other Internet uses have grown even more. Conducting Internet chat sessions with clients has increased five full points from 30% in 2007 to 35% this year. Also gaining in impact and usage by more than six full points is providing information via portals. Conducting web-based meetings and providing customer training and self-service have all increased over the past two years. However, these increases portend a deeper change. Account research is something sales reps can do without the buyer‘s involvement. Webinars and online demos are also relatively passive on the part of the buyer; they register, log-in and then for the most part follow along.


What impact are the following uses of the Internet having on performance?



But portals, live chat, interactive meetings and the like all require active buyer participation. Did they click on the link, open the documents and spend time reviewing the materials? Answers to these questions along with a multitude of analysis and metrics are now available through Web analytics. Sellers needn‘t wonder whether their brochure, case study or proposal was opened—they can be alerted the moment the buyer clicks to open it. Sellers can learn a great deal from buyers‘ ―virtual body language‖ if they take the time to access these tools and reports. They now have this opportunity thanks to many of the information aggregation and lead completion services being adopted. These services/solutions scour information sources with web-crawling technologies and present the results in a variety of ways (e.g., triggers, alerts, ROI bubble charts, etc.) automatically. This automatic serving up of vital research is reflected in the drop (87% to 69%) noted in the opening paragraph of this section. As a CSO you must answer two critical questions: 1. Do your reps have these same research and Internet access tools? 2. How are your reps leveraging these tools to increase not just their

efficiency but their effectiveness as well? Your answers to these two questions will likely be reflected in their 2009 results.

Notes:



0% 10% 20% 30% 40% 50% 60% 70% 80%

Customer/Prospect Contact Information

Proposal Templates/Business Case Samples

Details of Past Customer Purchases

Customer References/Case Studies

Strategic Account Plans

Details on Past/Current Marketing/Selling …

Details on Customer/Prospect's Executives

Details on Customer/Prospect's …

Customer Objection Handling Information

Best Practices used by the Sales Force

Competitive Analysis Information

30.9%

37.6%

37.0%

43.2%

43.3%

43.7%

48.4%

48.8%

45.8%

43.8%

45.9%

7.7%

15.2%

14.4%

21.8%

24.8%

21.4%

19.1%

18.5%

26.5%

27.2%

28.6%

Effort Required to Access Sales Knowledge

Hunting Required

Significant Effort Required

How Would


Revised Metric:

General improvement across all areas of SKM.

―How to‖ knowledge now represents the top four categories of SKM difficulty.

Ease of access to both ―how‖ and ―what‖ SKM insights rely upon CRM as sales force size increases.

With increased emphasis and generally improving numbers being reported the past couple years, we eliminated the ―can rarely find‖ option as an answer in this year‘s survey. The knowledge/information sought was easy to access, required some hunting or required significant hunting to find. And the knowledge that is now most difficult to access is around ―how to‖ questions: How do I create advantage over our competition? What is the best way to gain access to the C-suite? How do I respond when the customer says our price is too high? These represent knowledge-driven content that is harder to capture, categorize and deliver in a relevant and timely manner. But there is payoff for those companies that have effectively addressed this challenge. For companies reporting easy access in the top three categories above versus those reporting significant effort required, there are several performance differences as seen in the table below.

Competitive Analysis, Customer’s Executives and Past Marketing/Sales Information

Easy to Access

Significant Effort

Overall revenue plan attainment 87% 79%


1-2 calls to close 8% 6%



Win/loss/no decision 52%/ 28%/

20% 44%/ 33%/

23%


How easily can your sales reps access the following sales knowledge?



In general, a higher percentage of reps meet or exceed their quota, fewer calls are required to close deals and a higher percentage of forecast opportunities are actually won. All good things. Progress has also been made in the data-driven or ―what‖ questions (e.g., what size is the company, what have they purchased in the past, what have we offered in earlier campaigns) which are still a challenge and should not be taken for granted. Similar performance advantages are reported by those companies where reps enjoy easy access.

Customer’s Market/Industry, Best Practices and Objection Handling Information

Easy to Access

Significant Effort

Overall revenue plan attainment 90% 81%





Win/loss/no decision 52%/ 29%/

19% 44%/ 33%/

23%

When reps have easy access to key information fewer calls end in ―I‘ll have to get back to you on that.‖ Firms with easy access lead in the low ranges of calls to close and trail when there are more calls to close—exactly what you want. They also report more accurate deal forecast ability, lose fewer deals to competitors and have fewer cycles end in no decision. Sales reps are the epitome of today‘s knowledge workers and, therefore, require information and knowledge to do their jobs. When this is readily available they get more done in less time (fewer calls) and achieve better results. Because they are able to bring more relevant, specific and value-added information to their discussions, reps with easy access are perceived at higher levels of the Sales Relationship (see page 7). They attain Contributor level 33% of the time, and Partner 15%, versus 10% and 11%, respectively, for reps expending significant effort to get this information. A core CRM system provides a foundation for implementing SKM tools. 82% of the easy access firms had implemented such a system versus 54% for the effortful firms. Size is also an issue; as the number of reps increases and their locations become more dispersed, providing SKM depends increasingly on technology. There only a few firms providing easy access without CRM and of these we found half had fewer than ten sales reps.

Notes:



0% 10% 20% 30% 40% 50%


Details of Past Customer Purchases

Customer/Prospect Contact Information

Details on Past/Current Marketing/Selling Efforts

Details on Customer/Prospect's Executive

Proposal Templates/Business Case Samples

Details on Customer/Prospect's …

Customer References/Case Studies

Customer Objection Handling Information

Strategic Account Plans

Best Practices used by the Sales Force

Competitive Analysis Information

1.9%

12.3%

16.0%

16.4%

17.3%

20.0%

28.6%

29.6%

32.9%

37.1%

39.1%

42.4%

Sales Knowledge Management Improvement Priorities

How Would


The components

of the three SKM improvement ―buckets‖ remain the same.

Progress is being made but the pace seems glacial.

SKM initiatives

require good actions, not just good intentions.

Look at the chart above and you‘ll see three bucketed groups emerging: 1) the top three items comprise ―how‖ insight-driven information as discussed in the prior metric; 2) the second three items all represent ―what‖ data-driven insights; and 3) the final four are principally ―who‖ issues (also data-driven). While identifying and sharing best practices across the sales force was the number one improvement priority last year, it has shrunk by two percent as a result. Providing access to strategic account plans was first priority two years ago and it is now down by three points. And providing competitive analysis information has grown by almost three points to take up the lead this year. But the SKM components making up the first bucket are still the same three. Is progress is being made or not? It seems the answer is a qualified yes. The percentage of firms reporting easier access to all SKM components has increased slightly over the past couple years but not dramatically. For example, it‘s not as though the battle to share best practices has been won and is now a top priority for, say, 18% of firms. This would drop it down into the third category bucket. The improvements have been 3%-8% and the make-up and size/magnitude of each bucket remain fairly constant. So it seems some improvement is being realized, but the initiatives that are being identified for improvement are, so far, intractable. It is also possible that the intention to improve in these areas has been in place


What would you rate as your top three priorities for SKM improvement?



but the will, budget and authority to implement them has, in the majority of cases, not been. This would allow for modest improvements overall, show some movement but keep most of the pieces essentially in place. We suspect this is the case. The reality is that we have interviewed some firms in the past year that have identified, implemented and reinforced the consistent use of some form of SKM system—with dramatic results. However, most companies have not seen their SKM improvement intentions funded, implemented and acted upon so they remain—good intentions. Knowledge is power and uncertainty paralyzes. To say the least, in 2009 we live in uncertain times. It will not be easy to get funding for your SKM initiative in the face of tighter credit, shrinking growth rates and generally pessimistic forecasts. But this is exactly the time your reps will be asked the toughest questions about how your solution is different, why they should buy now versus waiting six to nine months, what the compelling business case is for doing so, and providing names of satisfied and successful customers that have already done so. Will your reps be ready? If not, it will be a tough uphill slog. More cycles will likely end stalling out in no decision and the frustration will echo in the unfinished thought, ―If only I would have told them…‖ Stop intending, start acting. Figure out the lowest effort (and cost), highest payoff (and return) improvements to make in this area and get on it. It would be great to see entirely new components in the first bucket next year!

Notes:





Sales and Marketing Alignment Introduction

This section examines sales‘ view of how well marketing is working to support their selling efforts, to what extent marketing is providing sales with the right support materials and the proper level of leads required to achieve their revenue targets. Note: In tables that analyze abilities, the totals may not add up to 100% as some respondents selected ―do not know.‖

Assessment of Website’s Effectiveness at Engaging Prospects............................. 220

Assessment of Marketing-Generated Sales Collateral .............................................. 222

Assessment of Marketing-Generated Lead Quality and Quantity ............................ 224

Marketing’s Self-Assessment of Lead Quality and Quantity .................................... 226

Timeframe for Marketing Programs to Start Generating Sales ................................ 228



Needs Improvement57.2%

Meets Expectations31.4%


5.6%NA

5.8%

Effectiveness of the Website at Engaging Prospects


New Metric:

Sales is not very impressed with their firm‘s website marketing.

Those who excel at website marketing are reaping huge benefits.

Ability to mine insights from Web visits is key to improving effectiveness.

Our 2008 Lead Life Cycle Optimization Analysis study showed that marketing is increasing investments in programs designed to drive traffic to their firm‘s website. To assess the impact sales sees this having; we added a new question to this year‘s SPO survey to see how sales rated the ability of the website to effectively engage prospects. Above we see that the majority of companies feel that marketing‘s efforts in this area are falling short. In Buy Cycle Analysis surveys we have conducted, we have found that ―going to a vendor‘s website‖ is one of the first steps in the process that most prospects elect to go through when they are proactively looking for solutions to meet their needs. So a vendor‘s website is becoming a critical first impression in educating and influencing potential buyers. We segmented the study data based on how effective sales organizations rated their companies‘ websites and then looked at the following two metrics: what percentage of leads is generated by marketing, and what percentage of a sales rep‘s time is spent actually selling. As we see in the following table, an effective website can play an important role in increasing sales effectiveness. First, it can help marketing generate more leads for sales. Our past Target Marketing studies have found that website generated leads end up taking less time to close than other lead sources.


How would you rate your website’s effectiveness at engaging prospects?



Website Assessment as related to:

Website Effectiveness



Meets Expectations


Needs Improvement

% of leads generated by marketing

43%

27%

` 21%

% of rep time spent selling

43% 38% 35%

We also see a relationship between the number of leads marketing contributes to sales and the amount of time reps have to dedicate to selling when they don‘t have to spend as much time surfacing their own prospects to call on. In benchmarking firms who have designed great websites, we see a number of common factors. First, the design of the site is ‗buyer-centric‖ versus ―customer-centric.‖ The themes and messages are oriented toward the prospect and their needs, and the navigation is designed to get them to the specific information they need to see with the least amount of effort. Second, the use of rich media is almost always involved. Flash presentations provide mini-demonstrations of the product; videos show existing customers sharing their experience with the products and the vendor; voice-overs verbally reinforce the text messaging; etc. A third factor we see more and more often is website integration with a lead management system (LMS). When a prospect comes to the website, their buying behaviors, such as what they have looked at and how long, are tracked. If they register at the site, the prospect‘s buying behavior information is passed along to the appropriate rep along with the contact details. In addition, marketing campaigns are designed to be integrated with the website. Individual landing pages can be created so that when a prospect responds to an email, direct mail, or advertizing campaign, the LMS is able to identify who they are and again notify the appropriate sales person. We see the role of the website becoming even more important in the next few years, and view this as an area companies should over-invest in if they want to improve sales performance.

Notes:




Meets Expectations42%

Exceeds Expectations8%

NA

3%

Quality/Quantity of Sales Support Materials


Major drop in

sales‘ satisfaction with collateral to help them sell.

Easy access to data continues to be one issue that still needs to be overcome.

Going beyond collateral to insights can play a major role in improvement in this area.

Sales‘ view of the quality and quantity of support material they are getting from marketing took a major nose dive; ratings for materials which meet or exceed expectation is down from 67% a year ago. Let‘s explore some key factors that we see contributing to an increase in sales‘ frustration with marketing‘s support in this year. First, there is the inability of salespeople to find the information needed to support their selling efforts. As we presented on page 214, hunting is still required in the vast majority of companies in order for sales reps to find what they are looking for. Key sales support materials such as competitive analysis, customer objection handling insights, strategic account plans, details on the customer‘s marketplace, details on current/past selling efforts, etc. may exist. But if it is hard for the sales person to access this knowledge, then the job is only half done. Whether providing this access is marketing‘s role or resides elsewhere (e.g., IT, sales ops, other), the dissatisfaction associated with the hunting effort winds up attributed to marketing. With the emergence of CRM 2.0 Sales Knowledge Management (SKM) applications, helping reps quickly access the product, marketplace, and competitive information they need to effectively advance prospects through the sales cycle can be easily managed. And the payback for doing this is clear. We benchmarked a medical products distributor that implemented a tablet PC-based SKM system that provided two key capabilities for reps.


How would you rate the quality/effectiveness of your sales collateral?



First, it analyzed the products that a given doctor was buying and compared that list to the products that other comparable doctors purchased to see if there were any cross-sell/up-sell opportunities for the rep. When the system found that a given doctor was not using a product that most of his or her peers were, it prompted the rep to bring that item up during the call and then helped access specific information about that product. This information included features, benefits, case study examples, demo videos, etc.—all the information the sales rep needed to effectively sell. The distributor saw cross/up-selling increase by more than 75% after the system was rolled out to the entire sales force. A second point to consider is that much of the information salespeople need to sell is often not written down anywhere. These best practices— tips on how to dislodge a competitor, insights into how to get around gate keepers, ideas on unique uses of your products or services, etc.—are created by one rep, but not systematically shared with other reps. We are seeing SKM systems evolving to help manage this less structured knowledge, as well as the management of data sheets, presentation materials, proposal templates, and much more. This ―best practices‖ collecting, synthesizing, and sharing can have a huge impact on sales‘ view of marketing support. As seen in the table below, sales‘ rating of marketing collateral correlates with how well the sharing of best practices is managed.

Best Practices Sharing related to View of Collateral

Best Practices Exceeds

Expectations

Best Practices Meets

Expectations

Best Practices Needs

Improvement

Collateral rating

74%

55%

40%

Notes:




Meets Expectations

25.1%


5.6%

NA

6.3%

Quality/Quantity of Leads Generated by Marketing


Sales‘ view of

marketing‘s lead generation efforts at an all time low.

Part of the problem can be related to no clear view of whom to target.

Sales‘ satisfaction with marketing‘s lead generation seems related to higher conversion rates.

The third aspect of sales and marketing alignment we have been tracking is sales‘ rating of the lead generation job that marketing is doing to support them. The 63% ―needs improvement‖ rating represents the worst score sales has given marketing since we started asking this question. When you consider that sales listed ―revising/enhancing our lead generation programs‖ as their top sales effectiveness initiative for 2009 (see page 231), it is clear that work needs to be done in this area to have marketing do a better job of supporting sales. Part of the solution may lie in improving sales‘ ability to tell marketing what types of prospect accounts to target. Borrowing from Lewis Caroll, If you don’t know who you are looking for, you will probably end up with someone else. In reviewing the ability of sales teams to prioritize which types of accounts to focus their sales efforts on, see page 78, we found that this is a challenge for many companies. If sales can‘t decide this for themselves, how are they going to give marketing the clear direction they need in order to implement lead generation programs to surface good prospects? To assess the impact that this miscommunication problem could have on sales‘ view of marketing‘s lead generation efforts, we segmented the study data based on how well sales teams were able to prioritize prospects.


How would you rate the quality/quantity of the leads generated by marketing?



Below we see that when sales excels at account prioritization, their ratings of marketing‘s lead generation efforts are higher than in the case where sales is poor at prioritization.

Prospect Prioritization as related to Sales’ View of Marketing

Sales’ Ability to Prioritize


Sales’ Ability to Prioritize

Meets Expectations

Sale’s Ability to Prioritize

Needs Improvement

Marketing‘s rating

68%

59%

43%

This suggests that both sales and marketing could benefit from investing the time to define what the attributes are for a great prospect. Another trend worth noting when we segmented the study data based on sales‘ rating of marketing‘s lead generation efforts: As the ratings increased in satisfaction, the conversion rate of leads to first discussions (see page 64) also increased. This may point to how sales really views marketing: Get me in the door and I think you are doing your job; give me leads that go nowhere from the start and I think you are letting me down.

Notes:



0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Very Poor Poor Average Good Excellent

5%

14%

47%

29%

6%7%

23%

44%

21%

5%

Quality and Quantity of Leads, if Sales were Asked

Quality of leads

Quantity of leads


Marketing‘s self

assessment of their lead generation prowess is lower than last year.

Numbers are still noticeably higher than how sales actually grades marketing.

Lead generation management integrated with CRM will be needed to give the real answer.

A clear demonstration of how far apart some sales and marketing teams are regarding how effectively they work together can be seen by reviewing the above chart from our 2008 Lead Life Cycle Optimization Analysis study. The above chart shows the responses we received when we asked marketing to tell us what type of marks they thought sales would give them related to the quality and quantity of leads they were generating. Only 30% of the marketing professionals surveyed felt that sales had issues related to the quantity of the leads they were giving them, and only 19% felt there were issues related to the quality of those leads. When referring back to the previous page, we see that over 63% of the sales executives we surveyed stated that they have issues related to lead quality and quantity, and felt that marketing needed to make improvement in one or both of these areas. So, who is right? Based on our project benchmarking efforts, far too often we arrived at the answer: do not know. The problem is that in many firms there is no way to track what really happens to the leads marketing gives to sales. We need the ability to answer basic questions such as: What percentage of leads sent to sales were actually followed up on? What was the average response time from getting a lead to reaching out to that prospect? What percentage of those leads ultimately turned into opportunities? What happens if a lead did not result in a sale? When this


What is marketing’s self-assessment of the quality/quantity of their leads for sales?



happens where in the sales cycle did it die and why? Without the ability to answer these and other questions, one is left wondering who is responsible for any lead generation challenges a company is experiencing. Is it sales, is it marketing, or is it both? This is a problem that can be remedied. The advancements we are seeing in lead generation management (LGM) systems, and their integration with CRM systems, can provide the feedback loop to bring clear visibility into what is working and not working in lead generation. We benchmarked an Atlanta-based software firm and they showed us the processes and system they used to assess lead generation effectiveness. Through their LGM system, they were able to track how many leads they generated from each marketing program: events, direct mail, web-based marketing, etc. These leads were further scored by the LGM system based on a predefined set of rules that sales and marketing had co-developed. This allowed the gross number of leads to be further classified as A – immediate need, interest, time; B – immediate need, interest, no current time; C – need, but no current interest or time; D – unqualified. Leads were forwarded to the appropriate sales rep where their selling actions were tracked through the sales cycle to provide a clear view of the disposition of every lead. B and C leads were placed into a lead nurturing program whereby marketing worked to cultivate them over the next 90 days to raise their level of interest, or helped them shift priorities so they made time to talk with the rep. With this full life cycle view of their leads, both problems and opportunities were quickly identified, allowing them to be handled appropriately.

Notes:



Less than 1 Month9.5%

1 - 2 Months27.4%

2 - 5 Months

31.0%

More than 5 Months15.3%

Do Not Know16.7%

Timeframe for Marketing Programs to Generate Sales


Time for

marketing programs to impact sales decreasing slightly.

Better segmenting accounts can have an impact in this area.

―Do not knows‖ continue to decrease, but in reality should be much closer to zero.

Comparing the numbers above to past years‘ results, we continue to see reductions in the amount of time it takes for marketing programs to create opportunities that ultimately turn into sales. However, there is still plenty of room for improvement. One factor that surfaced that can shorten the time to sales is more effective segmentation of prospects and delivery of more targeted messaging. A concept we presented in last year‘s report was that of the perfect prospect profile. If you take a look at any given sales territory you see that all prospects are not created equal. There are certain ones that are more likely to buy from you than others.


How long does it take for marketing programs to begin generating sales?



Improved analytics tools are allowing marketers to do a more effective job of filtering through contact lists to ferret out those prospects who fit a profile of likely or very likely to buy, and avoid those seen as unlikely to buy. An example of this was shared with us by an equipment leasing firm. Their marketing team created a rules-based analysis application that ran an analysis of their prospects‘ financials to determine which companies could achieve a significant impact on their profitably based on selling their existing equipment to the firm and then leasing it back. With this smaller, but more qualified list in hand, marketing was able to craft extremely targeted messaging to these prospects. The firm saw their response rates to these campaigns nearly double; and the sales cycle lengths were reduced by nearly 24%. One other observation worth mentioning is that while the percentage of ―do not knows‖ has decreased from 23% in 2006 to under 17% this year, the reality is this should be next to zero. Advances in lead management systems and CRM applications can easily support the tracking of leads so that companies can calculate the time to sales very easily.

Notes:





0% 10% 20% 30% 40%


Revising our sales rep hiring strategy

Revising our compensation program

Evaluating/implementing add'l CRM tools

Revising sales tools to match buyer needs

Revising our channel strategy

Revising our sales team structure

Analyzing our customer's buying process

Enhancing sales team communications

Revising our sales process

More closely aligning sales and marketing

Improving rep access to SKM to sell effectively

Enhancing our lead generation programs

2.8%

11.9%

16.0%

19.6%

20.0%

22.2%

23.0%

27.0%

28.7%

29.8%

30.8%

31.8%

36.3%

Top Sales Effectivess Iniatitives for 2009

In Closing: Where Do We Go From Here?

As you started 2009, in all likelihood, you received your revenue target for the year; massaged, worried and accepted the number; and divvied it up among your business lines, regions, managers and reps. Then the work began—making it happen! Quoting from this same section in last year‘s report: 2008 lies before us. As much as any year before and perhaps more than ever before, stepping up to this year‘s sales challenges will require more of you and your team. Economic concerns fill the news; competitive activity is up along with customer expectations; mergers and acquisitions are reshaping many marketplaces; new competitors are emerging after a few relatively quiet years in the venture capital community; and globalization continues to change how the game is played. Sound familiar? The same could be said for 2009, only more so. Here‘s another quote, made popular during baseball‘s Roger Clemens‘ steroid hearings: ―It is what it is.‖ Whatever is happening, with the economy, conflict on the world stage, oil prices and/or unemployment figures, etc., if you are a CSO you have a job to do. Be grateful. Many others don‘t. Okay, time to get to work. What comes first? Looking at the input from the sales executives surveyed, we surfaced the top initiatives for improving sales effectiveness for 2009, shown in Figure 1 below.

Figure 1 Improving lead generation retains its first place ranking. The prevailing belief being that sure we have challenges, but if we could just get enough times at bat we could make our numbers. But as this has been the top objective for the past four years, this line of thinking is not going to get you unstuck. What we need are not simply more leads, but better quality leads and better qualified leads. Increasing, even dramatically increasing, lead volume with no attention paid to lead quality means that much more chaff to grind through—and that much more siphoned off selling time. Leads should be held to the higher standard of a Perfect Prospect Profile (see page 80). This is not



Less than or same as 200814.2%

1 - 5% More16.0%

6 - 10% More23.5%

11 - 15% More13.9%

16 - 25% More14.6%

>25% More17.6%

2009 Revenue Targets Compared to 2008

solely marketing‘s responsibility; providing feedback and a closed loop on the eventual disposition of each lead accepted into the pipeline is sales‘ responsibility and is reflected, at least in part, in the third ranking initiative—more closely aligning sales and marketing. Between these two initiatives is for a second year straight running, improving sales rep access to information they need to sell successfully—what we have been terming as sales knowledge management (SKM). It is notable that the percentages and the ranking of these first two initiatives are almost identical to last year, and the third and fourth highest ranking initiatives have simply flip-flopped. This raises the question of whether these are initiatives that are being implemented or simply intentions. We have interviewed several firms the past year that delivered on their commitment to embark upon real change, and implemented initiatives that have paid handsome returns. But these appear to be exceptions, not the norm. The data presented in this report suggest that plans which were good ideas last year remain the same this year: good goals, good intentions—but not implementations. 2009 will be a year where those ―thinking about‖ improving sales effectiveness lose more ground to those acting upon it. Companies that hunker down and cut investments in their sales teams‘ effectiveness will watch the tail lights shrink in the distance of those competitors continuing to invest and improve. There are three ways to increase profits: 1) increase revenue; 2) improve margins; and 3) decrease expenses. Some companies will opt for the third, and try to cut their way to success (or survival) in 2009-2010. Our perspective is this will be a losing strategy. Surely, companies will need to control expenses and wring out excesses (if any remain); but the answer, as with all aspects of a successful life, is balance. Initiating programs to increase your sales teams‘ productivity and effectiveness is still needed—more than ever. The reason is shown in Figures 2 and 3. First we see that 14.2% of companies expect this year‘s revenue targets to be the same or lower than 2008; this is nearly double last year‘s 7.4%. But in Figure 3, the number of respondents concerned about meeting their revenue targets has also doubled: 35.5% this year, versus 17.9% last year.

Figure 2



Easily meet/exceed revenue goal

7.9%

With effort, should meet revenue goal

50.0%

Concerns about meeting revenue

goal

35.5%

Will not meet revenue goal

6.6%

Perspectives on Meeting 2009 Revenue Targets

Figure 3 So, how do you grow revenue when it appears that it will be more difficult to do so and resources will be scarcer than ever? Go back to the introduction of this report and revisit the SRP Matrix. Critically assess the cell quadrant in which your sales team currently resides and determine where (up and/or to the right) you want to find them this time next year. Note: even the upper right hand corner of Sleepless Nights is a better situation than the lower left location. Now, look at the initiatives chart above. These aren‘t the only possibilities and the list is not exhaustive, but it is suggestive of where you might turn for ideas. Research clients can also call us to arrange an assessment quantifying your situation and a one-hour follow-up phone briefing to review your priorities and game plan. However, here are some general suggestions to wrap up this year‘s findings. Right behind lead generation, SKM and closer alignment with marketing, is revising your sales process. If you haven‘t documented both your selling process and your customers‘ buying processes, then this should be your first order of business. The benefits for doing so are overwhelming and you can‘t continue to stonewall against doing it. Even if you have only one rep selling for your company, you should have a framework that you‘re assessing and continuously improving. If you have implemented a CRM application, get your people using it (and find out what‘s been in the way of them doing so up to now). As seen on page 178, 60% of firms are not consistently using their existing CRM system. If you don‘t have CRM or other sales enabling technology, what are you waiting for? Get with the program; unless you are in a completely isolated or protected niche you really cannot afford to delay implementing some sort of technology. If you‘ve recently evaluated/updated your process and have implemented CRM that is being consistently used, then you‘re ahead of the game. But there is still plenty of opportunity for improvement ahead. SKM is one area that is begging for attention, and for some companies has paid back big returns for responding to this plea. Also, take another look at your compensation and incentive plans—and their supporting systems—to see whether the financial rewards you



have in place are really motivating and driving your reps‘ behavior (only 12% of firms report their plans consistently do so). Above all, recognize that whatever you‘ve done until now has been enough to get you to here, but likely will not be enough to get you to there: where you want/need to be in twelve months. Too few are challenging the status quo and too much is at stake to wait. Communicating with your team, throughout your company, and with your customers is the order of this new day. ―More with less‖ and ―better than ever‖ are mantras that are thrumming in the marketplace. You will be advised to keep one ear attuned to this constant beat. In the Introduction we compared 2008 and, more especially 2009, to Disney‘s Space Mountain ride. There will be twists and turns in the months ahead. Breathtaking drops and exhilarating rushes and, yes, slow periods where it seems it is all just an uphill slog. Like Space Mountain, for much of the time you‘ll be operating in the dark. This report, and the data slices we provide research clients, is intended to shine light on the tracks ahead. While dimly lit at first, even a little brightness is an advantage over others operating in total darkness. There will be plenty of excitement and more than a few surprises. While others will bemoan the uncertainty, sales executives and their teams need to climb aboard, and embrace the opportunity to take what will surely be a wild ride. Adventure awaits and like the old bumper sticker suggests: Get in. Sit down. Hang on! As always, we wish to thank all the sales executives who shared their time and experiences, and contributed to this extensive look into the continuing sales effectiveness challenge. In return, we hope to have contributed to your own insights, and to have the opportunity of connecting with each of you personally, so that we may delve even deeper into the issues raised. Until then, we wish you every success in 2009! Sell well,

Jim Dickie Barry Trailer [email protected] [email protected] (303) 521 4410 (415) 924-3500


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Documents

· Sales Performance Optimization – 2009 Survey Results and Analysis Other Current Research Studies by CSO Insights Lead Lifecycle Optimization – Executive Report Demystifying