Is the 80:20 Rule Zapping Your Sales Revenue?
Who’s booking the bulk of your revenue?
If you’re paying attention to your monthly sales reports, you know the answer.
Sales leaders often find a large percentage of new business comes from a small number of salespeople. Each quarter, as you measure your sales team on how they performed against quota, more than likely you face the universal 80:20 rule: 20 percent of your salespeople consistently turn in good results while the remaining 80 percent underperform.
If you could flip the order, the difference in added revenue would be monumental.
While every salesperson has slow months, if sales figures stay low month after month, how long can you afford to carry the underperformers?
The impact of this 80:20 imbalance looms large for small sales teams. If you have 15 sales reps working around the 80:20 rule, 80 percent of your sales come from only three sales reps. Three out of fifteen carry the load. How long do you think they will accept the laggards?
So, you need to kick into action. Ask yourself, is your sales team a true meritocracy? Do you have courage and authority to fire someone? Can you handle the time-consuming process of hiring a replacement? When the numbers stare you in the face, you ought to act quickly.
If you do not, underperformers will continue to bring down your sales numbers.
Don’t allow anyone to settle into a comfort zone. Push (motivate, inspire) them every month to stretch their skills and reach a higher sales quota. Don’t push too hard, but challenge your team. Set up metrics and hold your people accountable.
Is Training the Answer?
Sales managers call on me regularly to help train their teams in lead generation, negotiating skills, how to understand and use a sales process, or closing techniques (which I don’t do). While train-for-skill in these areas, training per se may be premature.
As an example, recently a client said, “We have a large pipeline of new customer opportunities, but my sales reps are not closing the business. We need your help in teaching them how to close more opportunities. It seems like more and more business is ending in no-decision.”
The sales manager overlooked a fundamental: The ability to close a piece of business relies heavily on the entire sales process, not only what the salesperson says to the prospect at the end of the call. If your salespeople are using an ineffective sales process, you cannot expect them to close sales frequently. In my experience, the inability to close results from a breakdown early in the sales process.
That’s why every sales manager must teach his or her salespeople to follow an effective sales process with a sequential path along the buyer’s journey. If you track how the prospect wants to buy, your sales process will guide you directly to the close, at the right time, in the right way.
Another client asked me, “How can we train our salespeople to do better prospecting for new sales opportunities?”
After an in-depth discovery process with the client, I understood the problem didn’t stem from a failure to create new sales opportunities. The team produced great lead flow from inbound marketing. They failed to convert those leads. At the heart of the issue was the age-old problem of selling too fast. They did not invest the time needed to understand what the problem or issue the prospect wanted to fix.
Before All Else
Before you jump into the stage of expensive training sessions or redesign your sales process, evaluate your sales structure. Is the 80:20 rule sapping the life out of revenue growth? Review your people. Review your systems. Do they facilitate or obstruct revenue growth? Are revenue goals based on sound market strategies? You’ve got to find the wounds before you can begin triage. Download this don’t-miss white paper from Objective Management Group, called “The Modern Science Behind Sales Force Excellence.”
Once you gain a thorough understanding of what you’re up against, structure your team properly and work on improving specific skills to produce the greatest results in revenue growth. If someone possesses the DNA of a hunter, work to improve those skills. In basketball, a coach helps his point guard to improve three-point shots; he doesn’t expect his power forward, the best rebounder, to focus on three-point shots. A well-balanced team leads to higher revenue growth.
Because most sales managers (in my experience) do not know the DNA (personality assessment) of their salespeople, they cannot effectively coach them for improvement. Find out. Study the next downloadable paper on salesperson selection. Before all else, begin with an understanding of your sales reps’ skills, motivations, desire, and commitment.
Eight Hurdles to Revenue Growth
Lack of sales results originate from multiples of sensitive areas: putting the wrong people in sales; a poor sales process; no accountability for sales results; poor internal structure; lack of coaching by sales managers; it is a long list.
However, I want to give you a short list to work on. These eight hurdles trip you up every time:
1. The lead was never pre-qualified. If your salespeople cold call and chase leads without pre-qualifying, their closing ratio will plummet sooner than later; the lead was not interested in buying your products or services.
In the salesperson’s defense, he targeted what he thought was an ideal prospect, uncovered what he thought was a need, and jumped right into his selling mode. Of course, prospect quality outperforms prospect quantity in B2B complex sales. Get your teams to develop buyer personas of truly ideal prospects and test your personas with continual measurement. Train your salespeople to uncover hidden or undiscovered needs, a highly prized skill to closing sales.
2. Your salespeople sell before the prospect is ready to buy. Salespeople begin selling before the prospect even commits to solving her problem. More than half of sales opportunities end up in no-decision for this one reason.
To avoid this problem, incorporate the crossing of the chasm strategy, the fix or not fix phase into your sales process. My sales process, MERGE 2.0, embraces this strategy with excellent results.
If your team follows a standard sales process (see chart below) they cross the chasm when they get the prospect to admit to his problem and then commits to fix it. Many prospects know they have issues; they’ve lived with them for a long time. It is the salesperson’s purpose to help them find a solution─only after they commit to making a change from their status quo.
3. Your sales reps fail to explain clearly how their solution helps the buyer’s business.
Modern B2B buyers research information extensively to justify their strategic purchasing decisions. They build reasons and sound arguments to recommend the purchase to senior management and other influencers. Based on Harvard Business School research, they attribute strategic values to the proposed purchase like “increasing revenues, decreasing costs, gaining a competitive advantage, or standardizing operations to reduce risk.” However, buyers say only 54 percent of salespeople with whom they meet can explain how their solution impacts the buyer’s business. They fail to communicate strategic value.
Your sales process needs to open with a research phase where your salespeople gain specialized knowledge on the issues the prospect faces so they can bring a fresh perspective to each interaction.
4. Your salespeople do a poor job of follow-up. Follow-up on sales leads wastes enormous potential for revenue opportunities. Yet it is the easiest and immediate path to revenue. Unfortunately, most managers assume sales leads are followed up on with an automatic response, like breathing in after you breathe out. However, studies show that companies, on average, only follow-up on approximately 50 percent of their sales leads.
An effective sales process builds in “action commitments” that salespeople ask of prospects on every engagement. In this way, sales managers can hold their reps accountable for these actions, also use it as an opportunity to coach.
5. Your sales reps do not earn trust or respect. When a prospect imagines a salesperson, he or she thinks: a) Someone who’s trying to sell me something; b) A vendor with whom I do business; c) A strategic partner who’s important to my business; d) A trusted adviser whose advice I follow. Which is it for your sales reps?
Obviously, the status of trusted adviser commands significant advantages over competing salespeople. However, according to the HBR study, “only 18 percent of all the salespeople buyers met over the past year would be classified as trusted advisers whom they respect.”
Your marketing and sales process needs to imbue your salespeople with credibility before or as they enter every new sales opportunity. This critical quality of credibility can be conferred by referral sources, can be built through knowledge and the perception of expertise, or even earned by how effectively your reps lead sales meetings. In a CEB study, 53 percent of buyers cited the overall sales experience as the reason they bought─over brand and company impact (19%), product or service delivery (19%) and value to price ratio (9%).
6. Your salespeople minimize the risk of buying their solution. B2B buyers fixate on risk mitigation because past interactions with salespeople have conditioned them to be skeptical. That’s one reason why they insist vendors respond to massive RFPs (requests for proposals), extensive spreadsheet evaluations, and documentation on the legitimacy of each product feature. Still, purchases fall through after lengthy evaluations because the salesperson did not reduce the risk of change in the buyer’s mind. Anytime you ask a prospect to buy; you ask them to change the status quo. People do not like change.
7. Your sales reps get too comfortable calling on technical buyers instead of the real decision makers in senior management. Salespeople frequently meet with lower-level and mid-level personnel at a client company. However, it is the rare conversations with C-level decision makers that determine a win or lose on a deal. Learn this cardinal rule about revenue growth: Salespeople must understand how C-level executives think and to communicate with them in their own Alas, buyers report that fewer than one out of three salespeople can hold an effective conversation with senior executives.
This huge gap goes back to understanding the DNA of your salespeople. You can put certain reps before a tough CEO, and they will shine, building rapport and credibility quickly. Capitalize on it. Others will never be comfortable, so adjust your team structure and training to craft another way into the C-suite.
8. Your salespeople do not ask the right questions. To sell effectively, your salespeople must learn how to uncover prospect needs (including need behind the need and undiscovered needs) and make a recommendation tailored to those needs. That does not happen when the salesperson neglects to ask questions and, instead, practices non-stop, one-way communication about his product or service.
Apologies for stating the obvious. Never allow your salespeople to practice the annoying habits of old-guard, all-talk salesmen. Train them on a potent questioning process that leads the buyer to experience them as a trusted advisor who prefers to collaborate to arrive at the right decision for the prospect.
Above all, train your reps to actively listen to the prospect’s answers, where the clues to a beneficial close hide. When you become a world-class questioner and listener, you enable the prospect to form a clearer vision of the best solution. Then, you can lead the prospect to the solution, which you’ve carefully positioned as your offer, all the while doing right by your prospect.
My takeaway message to you today:
- Get your team structured and balanced properly
- Carefully blend hunters with farmers
- Commit to scaling the eight hurdles to faster revenue growth
See you on the upside,Bill
For more information, go to www.pleinairestrategies.com
Or call William L. MacDonald in San Diego at PleinAire Strategies LLC at 760.340.4277 or 213.598.4700