The Rating Game
Grade your leads to clear the pipe dreams from your sales pipeline
When Tom Colby arrived at Campbell Software Inc. two years ago as vice-president of sales, he was greeted by a stack of qualified sales leads representing millions of dollars in potential revenues. Campbell, a fast-growing Inc. 500 company in Chicago that sells a workforce-management package used by such big retailers as the Gap, appeared to have unlimited potential. There was just one little hitch: neither Colby nor anyone else at Campbell had any real idea how many of those prospects might turn into sales--or when.
Oh sure, the salespeople had their hopeful predictions, and the prevailing market conditions offered some clues. But the only thing Colby could determine for sure from looking at sales records was that Campbell's sales cycle was long--as long as a year. That was 12 grueling months, he says, of reps playing phone tag with would-be clients. "We'll give you a call back," prospects would say repeatedly. And so it went. Either the prospects eventually signed on--or they remained in lead limbo.
Colby had inherited two problems that are very common to growing companies. First, there wasn't a common sales process: after leads were qualified, everyone sold his or her own way. And second, there was no meaningful way to assess the quality of sales prospects once they were in the pipeline. That, in turn, sometimes led to misleading sales projections.
Now, not everyone views different selling techniques as a problem, especially if salespeople are meeting their quotas, but in Colby's book that diversity was a liability that obstructed accurate sales forecasting. "It's important for all parts of a company to talk a common sales language," he says. "What grade is a prospect, and where is it in the sales cycle? What's the probability it will close? Your methodology is important."
In the absence of an established methodology, Colby recommended that the company adopt the approach described in Solution Selling: Creating Buyers in Different Selling Markets, one of several good books that discuss complex sales that involve a number of decision makers. (See Resources, below.)
"I picked Solution Selling because it has the most basic blocking and tackling," says Colby. "Basically, it's about a due-diligence process between you and the customer, an understanding of what needs to take place--how time and resources will be spent and under what timeline." All of that, he says, is geared toward making your sales more professional and more predictable.
Think of it as the way you sell the thing you sell. While providing a sales process, Solution Selling also presents a method for rating the likelihood that a given prospect will turn into a sale. The book offers ballpark figures for estimating the probabilities that deals at various stages will go through. Those estimates can provide companies with a helpful starting point, but every business must then tweak the system to fit its own circumstances.
At Campbell, the grading system follows the book's fairly closely, focusing on four of Solution Selling's eight grades. At the top of the sales funnel, after a lead is qualified, a grade of "D" designates that a salesperson has met with the would-be client, thinks there's a good match, and has ascertained that a budget exists. At this stage there's a 20% chance for a sale, Colby says. As the funnel narrows, a "C" grade indicates that the salesperson has met with several executives with decision-making power, has conducted a needs analysis, and has discussed a theoretical timetable for the sale. At "C," Colby estimates that Campbell's odds that the process will end in a signed contract increase to about one in three. But, of course, not all sales go through. Sometimes the sales funnel gets, well, clogged up. In Solution Selling's terminology, such sales that go awry are called "B's." "B means we've gone through the whole process and we should get a contract, but for reasons unbeknownst to us, they decide they can't do it now," Colby says. Finally, the "A" level signifies that contract negotiations are under way. At this stage, Colby calculates, there's a 90% or better chance the sale will go through.
B-grade prospects are clearly the most troubling. "B's are bad," agrees Michele Wrzesinski, president of Enterprise Selling International Inc., in Newport Beach, Calif. Wrzesinski, a Solution Selling affiliate who has conducted training for Campbell, cautions clients against expecting too much from B's, and because that category is so unpredictable, Colby simply eliminates it from the immediate forecast. "You'll die if you worry about the B's; it's the price of doing business," he says.
Of course, you can analyze your sales cycle without adopting somebody else's prescribed selling methodology. The important thing is to have some sort of system; otherwise it's hard to improve your record. Once you develop a system for grading prospects, you'll refine it constantly, Colby explains. "The market, as well as your ability to close, changes," he says. "Not only are you looking at the probability's changing, you're actually refining your sales process" along the way. So far Campbell has shaved months from its sales cycle, which now averages six to nine months, by adopting such methods as critiques of selling techniques and making improvements to the company's follow-up letters.
By playing a rating game, you reap several advantages. You can help your salespeople manage their time more wisely. A salesperson with all A's may be a hero the first quarter but in trouble six to nine months down the road.
"You need C's. You want to make your second- and third-quarter numbers, too," says Colby. And as the ratings change, you can shift your resources to those deals that you have the greatest chance of closing. That, in turn, leads to the ultimate payoff: more control of the selling process and more accurate sales forecasts.
How well does the system work? Campbell, at $12 million in sales, has come a long way from the mysterious stacks of prospects that Colby first faced; the company has recently been coming within 10% of its annual sales target. When you're doubling sales each year, that's pretty darn good.
Susan Greco is an articles editor at Inc.
The books listed here tackle complex sales head-on, although each one admittedly promotes its own sales-training courses. Once you get past the plugs for the training classes, however, these books--read together--will help you analyze the buyer's economic and emotional stakes and capitalize on that knowledge.
Solution Selling: Creating Buyers in Different Selling Markets (McGraw-Hill, 800-262-7429, 1995, $27.50), by Michael T. Bosworth, is arguably the most practical of these books. It covers everything from qualifying raw leads to forecasting sales. The book is about turning the way you sell into a competitive advantage. It offers a specific sales methodology and even, on pages 167 to 169, benchmarks for rating a prospect's sales potential. From the first chapter, you're thrown into the middle of some of the most vexing sales scenarios, such as the case of a buyer who wants to slash your price at the last minute. Much of the rest of the book coaches you through these challenges in a satisfying way. It's well suited for people selling conceptual things like technology.
For more background on what makes complex sales so complex, try Strategic Selling (Warner Books, 800-759-0190, 1988, $14.99), by Stephen E. Heiman and Robert B. Miller with Tad Tuleja. This book is well written and organized. The sections on the sales funnel and sales forecasting are more basic than those in Solution Selling, but there's a wealth of good information on the different types of buyers you'll meet. An updated version of the book, The New Strategic Selling (Warner Books, 1998, $14.99), coauthored by Heiman and others, is scheduled for release this month.
Another good primer, SPIN Selling, by Neil Rackham (McGraw-Hill, 800-262-7429, 1988, $24.95), is based on extensive research into why salespeople succeed or fail. Rackham's advice: focus on the "investigating stage" of a call. SPIN, an acronym for "situation, problem, implication, need-payoff," champions the concept that sale-closing techniques are an overrated skill, compared with thorough up-front preparation. This book is good for companies selling high-ticket, tangible products.