This article originally appeared at SalesCoachWorld.com
One of the significant benefits of modern sales technology based on things like the cloud, social media, analytics and journey maps, is our ability to widen the sales funnel. Unfortunately, we might not be taking advantage of this.
You know the drill. We start the quarter with a pipeline full of opportunity and over the course of 90 days we winnow it down to a few select deals that we must close if we are going to make the number. The winnowing happens, at least in part, because as the quarter goes on, the amount of data about the pipeline grows exponentially forcing us to make decisions about what to pursue which, in turn, is responsible for nail biting in the last week or two.
The pipeline is a good metaphor for more than one reason. Did you know that if you double the diameter of the pipe, you can halve the flow and still get the same throughput? The application for sales is that the fatter our pipelines, the more ways we have to make quota but we often don’t pay much attention to this.
Widening the pipe requires us to keep more deals active for a longer time before we need to close business. You can only do this if you have good analytics, often based on machine learning, and you stick to a sales process proven to work in your business, which your machine learning system will be happy to document for you.
If this sounds terribly obvious or even old school, keep in mind that according to an annual research study conducted by CSO Insights, only about 20 percent of businesses do this and their results are better, especially in reducing the number of no-decisions. Alarmingly, half of the businesses studied have random processes and free form approaches to technology. Not exactly a recipe for success.
Left to our own devices—a pen, paper, perhaps a spreadsheet, perhaps even contact management software, and a salesperson’s intuition, we get what we have. According to CSO Insights, that means about 60 percent of the sales team makes or exceeds quota. In business, what other process tolerates such low yields?
Upgrading to a process and analytics based approach is tricky business because it tends to ruffle sales reps’ feathers. One company I studied ran a double blind study applying analytics to all deals at the start of a quarter and letting the reps proceed with their conventional approaches. The analytics system was able to predict, even at the start of the quarter, which deals held the most promise and targeted them for close on a prediction list. At the end of the experiment the results were compared with the early forecast and to everyone’s surprise the predictions were on target.
The great learning from the experiment is that sticking with the analytics approach produced less wheel spinning and wasted time and effort leaving more resources for pursuing better (machine selected) opportunities. I am leaving out the end user company’s name because I am not sure it’s widely available but the analytics vendor is Lattice-Engines. Others that support similar strategies include 6Sense, Aviso, and many others.
All this is relevant in the context of my current book, Solve for the Customer. It nicely shows how we can harmonize the roles of people and technology in standard business processes. People, process, and technology is a cliché for many people but it has stuck around because it reveals some essential truths. If you are a student of selling and any of this sounds intriguing, it’s time to reexamine your business in light of those three essentials.
Self-service is generally considered a good thing, especially in CRM where there has been significant investment in empowering people to take on more responsibility for provisioning service or making purchases. But it’s not all great and there is some interesting blowback that is causing vendors to reconsider how their offerings work.
In sales, self-service has resulted in truncated sales cycles and fewer invitations to the dance—you know this problem. Customers do their own research and engage a company and its representatives later when they are looking for pricing for their final decisions. Once vendors could control the information flow and customers would need to engage just to get a basic fact, that’s not true today.
We all know this happened as an inevitable consequence of the Internet and now vendors are struggling to find ways to engage customers earlier in their processes so that they aren’t locked out of deals before they can even find out about them. Also, nobody wants to be engaged at the last minute when all they can do is price, propose, and pray. We’re definitely dealing with unforeseen consequences.
Interestingly, and perhaps ironically, self-service has an equal and opposite effect in customer service. Customers are very happy not to wait in phone queues to ask simple questions and as a result, social media, FAQs, knowledge bases, and communities are supplying solutions for many of the issues that once consumed service reps’ time—another benefit of the Internet. This also means fewer touches, fewer chances to make impressions of try for the additional sale.
This doesn’t mean service is dead. In fact, with the easy questions handled by other means, more or less, the volume of issues might go down but their complexity has risen. As a result, engaging with contact center folk might take longer because even these veterans no longer have answers on the tips of their tongues and they have to do research. I don’t think this is as simple as a training issue. To be a service rep today means juggling more information, harder issues, and more customers.
This argues for a paradigm shift in sales and service, which is being driven by analytics and journey mapping. Previous approaches to sales as well as marketing have been reactive—the customer asks and the vendor responds. That makes a lot of sense because it is the nature of a conversation. But I’d suggest that conversations are not what customers seek. What they want is a relationship based on authentic engagement that is there when you want it but then vanishes.
Certainly, as customers, we seek and expect professionalism in all dimensions from the speed of dealing with us, to the correctness of whatever is provided as a solution to our needs. Too often though, we get wound around the axel of personalization because we erroneously believe we need to develop a personal relationship with customers but I think that’s a misunderstanding of the R in CRM. There are lots of ways to relate and most of them don’t become personal.
Let me suggest that the real goal should be the authenticity that’s born of professionalism and steeped in the understanding that as customers we’re busy and we want to get our issues dealt with so that we can move on to the next thing on our daily bucket lists.
That’s where analytics, especially machine learning, and journey mapping come in and while we’re at it this is the nub of what I am calling Customer Science. Machine learning can analyze your customer data and tell you where the clusters are, where the largest proportion of issues are and what the successful activities will be. With a product, you might discover through machine learning that many people get stuck at the same place or that they have a specific difficulty at the same place in a business process.
Armed with this knowledge, you can become proactive by building journey maps of your processes and thus prepare for the inevitable. Should you also use this knowledge to fix or improve a broken product or process? Absolutely. But that’s another department. In service and sales you have to deal with today’s reality today. So building out your repertoire of solutions for known moments of truth is a great way to build authenticity. It ensures your precision and professionalism and gets your customers back to their lives with minimal fuss.
So what’s better authenticity or personalization? Why must we think we need to choose? A warm greeting is always welcome and demonstrating empathy for a customer issue is not only good business, it is humane. It just shouldn’t be the only trick in our kits because no amount of being nice substitutes for a solution.
It takes prodigious amounts of moola to launch a company these days and that’s especially true when trying to insert a new idea into the collective consciousness. Salesforce spent well over $100 million to convince us that SaaS CRM was real, Zuora has raised nearly 2X that amount defining the subscription economy, and cloud ERP is following suit.
Today FinancialForce, a cloud ERP provider based on the Salesforce1 platform announced a financing round of $110 million from lead investor Technology Crossover Ventures (TCV) and Salesforce Ventures, Salesforce’s corporate investment group. This follows on the heels earlier this quarter of smaller investment announcements by CPQ providers Apttus, and Steel Brick. So what does it all mean?
I think you need to pay attention to the concentration of money and deals in a tight space of ERP and related back office apps. They’re all cloud companies and it strikes me that the investment community is making a decision about ERP granddaddy SAP in the process.
SAP has tried several times to bring forth a suite of front and back office solutions based on modern cloud technology and they’ve been only modestly successful. Microsoft has made greater strides in bringing its multiple ERP products closer to the cloud but progress has been measured. Time’s up and small ERP providers like FinancialForce, IntAcct, and not so small NetSuite have been gathering strength over many years. The economic conditions are right and the market is, I think, making a call that there’s no more runway for legacy ERP vendors to get to the cloud; it’s time to seek out the next generation of solutions.
The succession plan for replacing legacy ERP is well under way with a surround strategy that first positions cloud ERP as a helper application that can consolidate data, process it, and feed it up to the legacy system. This is a meta-stable state and will eventually result in the surrounding solutions supplanting the legacies, achieving over time what a much despised rip and replace would ordinarily accomplish without all the wailing and gnashing of teeth.
Much of this is still in the future but for now, FinancialForce has taken an important step in preparing for a larger role in what is likely to be a big fight. The objective of the fight will be to secure stable cash generating relationships for many years to come.
Finally, more than once Marc Benioff, CEO Salesforce.com, has said he had no interest in building ERP but it looks like ERP is coming to his company regardless via the powerful platform technology, Salesforce1, that his company provides. Apttus, FinancialForce, Steel Brick, and other financial apps all coexist with Salesforce1 and some, like FinancialForce, are completely rooted there. Their success is also great validation for the platform.
I’d really hate to be a legacy ERP provider today.
I was having dinner the other night with friends, telling them about some of the ideas in my book, Solve for the Customer. My friend, we can call him Brian though it’s a pseudonym, was interested in my emphasis on process and my belief that Customer Science has evolved from a general emphasis on process in business, especially in the back office.
Brian’s company does a lot to ensure that its customers are happy and loyal because their business involves long term relationships and agreements that renew for many years at a time. These relationships can last decades and nurturing them can be part of the work of a career. I know this because we’re both in our 50’s and Brian has had the same customers for a very long time.
That’s the kind of relationship that is worthy of the name. Account managers can come and go but Brian, who manages a region with many account managers, still knows many of the customers by name. So I was interested to understand how his company approaches the issues of bonding and retention, satisfaction and loyalty. Not surprisingly, his company’s approach to customers uses direct person-to-person contact and it has built up over time. So it is still a very manual process and while that’s not a bad thing, it can be expensive. Account managers call on their customers frequently and always have a punch list of issues, usually but not exclusively, maintenance issues, to deal with. It’s a high touch business.
In addition to the frequent communications, which happen mostly between maintenance people on one side and operations people on the other, my friend’s company conducts an annual survey of customer executives to gauge account health and they place extra emphasis on customer retention issues, especially when a five-year contract is up for renewal.
I was impressed. Despite only having an annual survey, the personnel involved gathered customer data all the time providing a more real time pulse. Here was a company with its head in the right place and a mere two percent annual attrition rate to prove it. That’s right two, 2, TWO percent. Many people reading this right now would go to extremes to have that kind of number. People in the subscription market tell me that a 90 percent retention rate or better is quite good and many are happy to reach that threshold though few see the likes of 2 percent attrition. So in addition to being impressed, I was also skeptical that very many companies could have similar results in today’s business world if they relied on their existing customer facing processes and systems.
Having full time people managing accounts like this is not cheap and many industries won’t support that overhead nor will their customers accept five or ten year agreements that renew. So if we want similar results in many other businesses, we need to find ways to automate parts of the relationship to both speed up some processes and to reduce costs. At the same time though, we need to be mindful that at some point we might need to insert an expensive employee into the mix to assure a good outcome.
Applying resources is where I believe we fall down too often when dealing with customers. We’ve put a little too much faith in our legacy technologies that were made for simple lookup and retrieval but not necessarily for solving customer issues. For example, in SftC I have this example from an automated system:
“We are sold out of: 32 ct. Tums Ultra Chewy, cherry antacids (245-05-0141). Please substitute: 10-ct. Trojan bare skin condoms (245-03-0387).”
Clearly the automated system is out of its depth but so is the business’ expectation that automation can take care of all customer issues. But ironically, automation can do something even better.
Part of my enthusiasm for Customer Science is my belief that it can solve many customer issues in sales, marketing, and service, if we apply and use analytics and journey mapping to the customer’s journey. There’s nothing wrong with having a customer facing system suggest an alternative for a customer wanting to buy an out of stock item. It’s a good use of analytics and journey mapping unless it all goes wrong as in the example above.
Also, and this is key, no automated process should have as one of its assumptions that the automation is infallible. So Customer Science also suggests that analytics and journey mapping ought to be used to promote self-monitoring. Is this the right substitution? What recourse does the customer have if this is not the right substitution? Is the customer happy with this? How do we know?
If we take approaches to our customer facing processes that include modeling all of the possibilities that we need to provide for, a.k.a. moments of truth, and capturing and analyzing customer feedback, we can approach things like customer bonding which leads to advocacy and loyalty, with the expectation that our automated processes can yield the same kinds of retention rates as a more labor intensive one.
Last point, we spend a lot of thought cycles on personalizing a relationship, at least the part when the vendor and customer are in a moment of truth but I am skeptical that this is the right approach. Personal is nice, but in a business or commercial relationship what’s needed is authenticity not personalization. The business system that suggested condoms instead of antacids won’t get extra points if it addresses the customer by name. But if it suggested a store band of antacid as a legitimate substitute it likely would have preserved the transaction and at the end of the day the authenticity that can drive a transaction is what matters to both the customer and the business.
CRM makes several promises to its users including selling more or faster, resolving service issues faster or at least quickly, and generating more leads. But if you do root cause analysis you can quickly conclude that at least in some cases, you are looking through the wrong end of the telescope.
For instance, the best way to resolve service issues is to avoid them in the first place. Figuring out how to head them off is both highly cost effective and better for raising your profile with your customers. Heading problems off is beyond the scope of CRM though a close second in this derby is deflecting customers to other less expensive channels. Although these things have a passing resemblance, deflecting is worlds away from heading off.
Much the same can be said of selling faster. I am not a fan of faster selling because we’ve reached the point where we are pushing on a string. You need only recall that the customer buying process is in direct competition with traditional sales processes to see this.
This leaves marketing and if you look at the strides made by marketing in the last few years you might come away wondering how they did it. Marketers really are generating more leads and they are better qualified by the time they get to sales people. So how did they do it?
One of the big differences I see between marketing and the rest of CRM is that marketers constantly ask the customer for feedback. They might not launch questionnaires every minute, but the data stream coming back from numerous marketing initiatives provides them with great insight into what’s going on in their respective patches and it tells them what needs to be done next.
This feedback loop is not new; it goes way back to W. Edwards Deming and his regimen of statistical analysis. Deming was all over manufacturing like a cheap suit. He collected data and ran stats on manufacturing so that he could know what worked and what didn’t. He then went the extra mile and tried to weed out what didn’t work and reward or encourage what did. In the process manufacturing got better. There were fewer defects, better tolerances between parts, and manufacturing costs declined because there was less waste.
Japanese manufacturers were, famously, the first big adopters of Deming’s ideas and we all know what that led to. They have a word that’s useful to remember, kaizen, which roughly means continuous improvement.
So how does this apply to CRM? Quite simply, modern marketing has its own kaizen thing happening and I think it’s worth asking how we can apply these principles to sales and service. In service, we have metrics that look at speed like time in queue, time in resolution process, and lots more metrics that measure speed but not necessarily effectiveness of the encounter. It’s great to get customers on their way quickly, but what does this do for handling cross-sell and up-sell opportunities?
But it’s in sales that I am most intrigued by the possibilities of a kaizen strategy. A slim majority of sales people makes or exceeds quota every year. Jim Dickie, Managing Partner of CSO Insights puts the number at 58 percent in most recent years, plus or minus a little. The interesting thing about selling for me is that there’s usually only one evaluation point — did you close the deal? But what if we used a more incremental approach to assess sales like marketers do when they capture customer input throughout the nurturing process?
That might be a scary proposition for a lot of sales people. If there was a natural point in the process when everybody stopped swimming for a moment to look up and determine if they’re still on track, the feedback might be very useful. For example, how was the demo? It’s a very important part of the sales process and good reps will ask during and after if the demo answered the customers questions and concerns or “Was it alright?”
Customers will often play along but saying that the demo answered all questions is not the same as saying that the demo showed me that this solution would work in my shop. A customer running a buying process wants to be able to have alternatives at decision time so it’s not good to eliminate all contenders lest there be no leverage when discussing price. So everybody keeps swimming until most of the sales people are surprised at the end when their solutions aren’t selected. After all, everything in the process went according to plan.
That’s why it might be useful to go up a level of abstraction in the sales process by sponsoring a mid-process questionnaire. But rather than asking about nebulous things like the rep’s professionalism or even if the five major points of the demo were articulated well, ask open ended questions about fit. On a scale of 5 or 10, how would you rate this solution’s suitability for your needs?
There are a lot of questions you could ask and they will give you a better picture of your position in the account than relying on traditional process milestones that are completely vendor oriented — i.e. if we’ve done the demo we must be X percent of the way through the process.
If we take a kaizen approach and don’t simply wait until the process is over to assess our performance we may not be able to impact an ongoing sales process (though we might) but we will do two other useful things. We’ll improve selling over a short time and we’ll be able to safely weed out deals that won’t go anywhere. Eliminating bad deals saves resources and is the ultimate form of sales acceleration.