May 4, 2008
Why are Sales Metrics not understood?
Posted by alan timothy under Sales Force Automation, Sales Metrics Technology, Sales Performance Management, crm, sales management | Tags: sales management, sales metrics, sales models |The writers on the site and many enlightened practitioners see the gold in sales activity/outcome data and sales metrics, yet there use isn’t widely adopted in the field. I wonder if part of the problem is a lack of overall sales management models to provide a framework? If we contrast the situation with our friends in marketing, they have plenty of frameworks and models: The 4P’s, 6P’s, SWOT, Product Lifecycle, and PEST to name a few; and these frameworks often act as the basis for the development of performance metrics.
When I became interested in sales management, I started by reading a number of books with Sales Management in their titles, and became aware that they had plenty of content on the softer issues; recruitment, training, sales meetings, but I have not come across any references to sales management models or the quantative side of sales management. The problem goes as far as an agreed standard definition for sales management. If you visit the sites of the various vendors for CRM and SFA, they all claim to offer ‘Sales Management’ and freely list what they include; yet in my opinion, very few or any of the things listed are part of sales management. We should also consider the use of other widely used words in sales management such as quantity and quality, often used to describe mutual independent events, which in one context they can be but in others they are linked. Why would sales be the only profession where more practice (quantity) would not lead to better outcomes (quality), unless of course you are selling something that addresses only one?
Why are the model/frameworks important? Without the development of such models and frameworks, I believe we will struggle with both technology for sales and metrics. As the old adage says, if you do not know where you are going any road, or should I say any new tool or idea, will get you there!!!
I am not sure what comes first - the model or the data? Do we need to start as with our friends in marketing with models and then collect the data to prove the models and from there a set of meaningful metrics? I suggest that it does not make a difference, rather the important thing is to start.
May 7, 2008 at 5:24 pm
Alan,
That’s an interesting point of view. Those marketing frameworks always appeared to me as being very academic in nature and as having little applicability in real life aside from bringing some common sense in people. Yes marketing depends on the product, price, place and promotion; yes it is important to know strengths, weaknesses, opportunities and threats… but does it really take a formal framework to define this? Does it take an MBA to realize this? At least they look neat in a report.
In my opinion, frameworks and models have no impact on technology for sales or on metrics.
I agree with you that most organizations are only starting to leverage available technologies to assist with their sales; this is because those technologies are just emerging, the on-demand model allows smaller companies to consider such technologies, technology solutions are maturing and sales data is becoming more available. I also think that as we see a movement of companies adopting technologies and having positive tangible results, others are getting on board.
With respect to sales metrics, I think we are not seeing consistent frameworks because every situation and every goal is different across organizations. It becomes even more complex when metrics are not measurable (quality of service, utilization, etc).
When researchers and authors start giving names to sales management models, I may start using them when it makes sense. But I am skeptical it will revolutionize how sales management is done, and even less on sales performance solutions.
May 7, 2008 at 6:47 pm
Alan:
You are on track, but I think the metrics are more widely used that you realize. Sales management is often too proud to admit that they do have defined metrics and Frame Works for managing their business. We don’t always publish the obvious, for instance:
1. Every product has sales stages that must be reached before the sale is consummated. These are measurable.
2. We know that to increase sales, every organization must increase sales activity. Exactly what the activity is depends on the product and the customer.
3. We know that there are closing ratios for every product. This allows sales managers to adjust sales activities and predict the future results.
4. We know that 45% of all sales inquiries will turn into a sale for someone.
5. We know that for every hour of calling activity we will talk to 2-3 people per hour.
6. Every sales organization is aware that there is a direct correlation between pipeline size and sales results.
7. Every sales manager is aware of how many hours it takes to sell a product. Increase the available sales hours and you increase sales.
Each day, every sales manager is hedging his sales bets by using tried and true metrics for conversion. Hire so many reps, who sell so many hours, give them x number of sales leads, and build their pipeline to X dollars and sales will increase. Reduce non-selling hours and increase sales by X%. The formulas are there, you just have to think about it and sure enough, the metrics are being used. The writers you speak of have made a living out of identifying and using the metrics. It takes time for new sales managers to learn how it is done, or they simply give up and seek a mentor or a sales consultant to show them the way. We have many articles on the Sales Lead Management Assocation site and in my own recent book on Managing Sales Leads, which all speak to the mertic side of sales.