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What Prevents Sales Forecasts from Being Accurate as They Could Be?

by Michael Webb | Comments (0)
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An incredible variety of reasons prevent sales forecasts from being accurate. Consider this partial list (there are many more):

Factors involving the prospect

  • Companies make decisions for wildly different reasons, making them hard to predict.
  • Competitive activity varies in different parts of the country.
  • When several people are involved, they may not decide until the last minute.
  • They may not want you to know what they are going to do.

Factors involving the seller

  • Seller has not precisely defined characteristics of a qualified prospect.
  • Sales opportunities are not consistent with the definition of qualified opportunities.
  • Salespeople do their jobs differently and have different skill levels
  • The forecasting process is not well designed.
  • Market channels or direct salespeople have reasons to withhold information.
  • Your company has not studied the factors affecting deals that are won or lost.
  • You rely on salespeople’s opinions (rather than facts and data) for the sales forecast.

If more than a few of these things are true in your organization, can it be any wonder why sales forecasts are not accurate?

The Cause of Forecast Accuracy Problems
On the face of it, improving forecast accuracy appears to be a classic opportunity to apply process improvement. After all, manufacturers also have trouble with forecasts, and process approaches work there. “Bad processes create bad data” say Tom Wallace and Robert Stahl, authors of “Sales Forecasting, a New Approach” and “Sales and Operations Planning.” Both books were written to help manufacturers improve their decision making around forecasts. “Improve the process, and the data improves as well.”

Unfortunately, it doesn’t work well at all in sales and marketing. For example, a technical services firm in Minneapolis decided to apply a process approach to their forecasting. They even installed a $1.2 million Siebel CRM to assist. When finished, their forecast was indeed much more accurate than before. Trouble is the forecast was for 50% of what the business plan called for.

This sort of problem happens a lot in sales and marketing. When companies try to create what should be reasonable improvements, such as increasing forecast accuracy, transitioning to “solution” selling, generating more “leads,” implementing a CRM system, or any of dozens of
other well-intentioned goals, a frustrating scenario plays out.

They go through the steps, they “define the process” as it currently is, implement their improvements, and … not much else happens.

When is the last time you heard of a company that actually achieved objectively measurable and sustainable improvements in the yield of their sales and marketing processes? Chances are it has been a long time.

Tom Wallace and Robert Stahl were talking about the forecasting process. For them, the production process itself is well understood–a given. Unfortunately, in most companies, very few people have any idea how to get customers to buy.

The sales process is how you get customers to buy. It is the sequence of interactions that generate interest, interaction, information, trust, and ultimately, trade. Ignorance of how it works is the root cause of forecast problems and everything else that is wrong with sales and marketing as well.

Process Approach Makes Creating Waste Easier
Obviously, the purpose of sales and marketing is to get customers to do things they probably would not do without our help. Buyers and sellers are inherently not aligned.

For example, your company wants higher prices, your customers want lower prices, and more features in the bargain. Or, the company wants revenue this quarter, yet customers would prefer to delay their purchases. Or, perhaps some of the customer’s managers are interested in
your new product launch, yet it is not even on their decision-maker’s radar. Worse, most prospects might be indifferent to your important product.

Customers only serve their own selfish interests. Successful sellers try to figure out who in the market is going to make a purchase decision, get to know them well enough to learn what their interests are, and look for common ground (sometimes by getting their own company to bend). Although it is unintentional, from the sales person’s (and the customer’s) vantage point, your company is likely to be doing stupid, shortsighted things (price too high, not enough features, pushing too hard, etc.).

Salespeople are asked to sell products customers don’t want to buy. They observe “branding exercises” and so-called “lead generation” that doesn’t produce qualified opportunities. They suffer with product literature that doesn’t help customers buy, because the people who wrote it
had no idea how to do that. They deal with cumbersome reporting and paperwork that takes time away from helping customers.

From the sales department’s perspective this is life. The rest of the company just isn’t paying attention.

Now, add the process improvement do-gooder drawing lines and boxes on PowerPoint slides. (I can say that, because I’ve been one of those for years.) When the process mapping is finished, what good is it if nothing in the sales person’s life changes for the better?  Worse yet, what if the only thing that changes is a requirement for salespeople to enter more data and go through more procedures which add no value to them or the customer?

Process initiatives that do not make it easier for salespeople to sell (or for customers to buy) create waste. Pure and simple.

How do you make it easier for salespeople to sell?

The Right Way to Apply Process Improvement
If you design a sales process that attracts and engages the customer every step of the way, customers will follow it. And, if customers follow it, salespeople will too.

Applying process improvement to sales and marketing should be easy. After all, the purpose of both activities is the same: to create value for customers. In sales and marketing, value is created when you get prospects and customers to take the actions you want them to take. There are three stages of production: Find, Win, Keep.

  • Find more qualified, sales-ready prospects. The means of identifying (VOC), attracting, and qualifying them (lead generation) is well known. (Check out John Fox’s www.marketing-playbook.com, for examples.) Leaving this crucial work up to the ad-hoc best efforts of salespeople is foolish. Successful companies do it in a deliberate, planned, professional, and aggressive way. The inputs are known, and you can measure the outputs. What’s stopping you?
  • Win more of the right customers. Skills such as developing relationships with the right people, reaching decision makers, and selling based on value may not be easy, but they are not rocket science either. If your sales team needs training, the process will help you define what gaps need filling and measure the results in the bargain. Selling is personal, of course, so most people need some coaching, especially in complex environments.
  • Keep your customers by proactively making sure they get what they expected to get. Document these examples so you can tell others in the market. It’s called getting testimonials, and most companies don’t do it nearly as well as they should.

Any and all of these things and many more are well-known ways of making sales easier. They actually improve the sales process.

Next time you hear a senior executive complain that forecasts aren’t accurate, that salespeople aren’t complying with the process, the data entry policy, or for that matter that sales order levels aren’t high enough, remember the following words:

“Your process is perfectly designed to create the results
you are currently getting.”

Harsh, but true. Always has been, always will be.

 

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