Why Your CRM Probably Won’t Improve Your Sales or Forecast Accuracy (and Why It’s Not Your CRM Vendor’s Fault!)

A CRM company recently approached me with a clever offer. They would provide a copy of my book to everyone who we could jointly get to view their software.

This sounds like a great way to promote my book and their software at the same time, right? The problem is I am always uneasy when it comes to CRM software, no matter how wonderful the software is.

It’s not that I don’t approve of their product. I do approve of CRM in a big way: You can’t implement sales process improvement without at least some type of CRM system. CRM itself is not the problem. In fact, I liked many of the unique approaches this CRM supplier has taken.

The problem is that everyone wants to believe that CRM is the solution to their sales and forecasting problems.

It isn’t.

There are plenty of examples of CRMs with poor usage rates, unreliable information, and poor ROI. There are also some examples of CRMs with excellent results. If the underlying process is bent, there is no way CRM itself can help.

Improving sales results (and forecast accuracy) is really a problem of managing value added. Once you have that down, it is relatively easy to leverage a CRM. The real point is: How the heck can you tell whether value is being added in a sales process?

This is precisely what needs to be identified before any improvement can take place in any process, especially a sales process.

“Our CRM Can Support Any Sales Process”

The CRM supplier proudly pointed out to me how you could define their sales process any way you wanted to: “If your process requires that you do a demo or visit a customer’s site, then you can capture that in the software. You can show that a deal has a greater probability of closing after you have gone through those steps than before,” they said earnestly.

“How do you know whether doing a demo or visiting a customer’s site increases the probability of closing?” I asked.

“Well, one company found that if their sales reps visited the customer site, they were a lot more likely to close those deals.”

“Really, that’s great” I said. (“Yeah right,” I was thinking.)

If someone actually measured such a thing, I could believe them. I wish more companies were anal about this. Instead, most prefer the “tribal knowledge” approach, thereby perpetuating their ignorance generation after generation.

As baseball great Satchel Paige said, “It is not what you don’t know that will hurt you. It is what you know that isn’t so that will do you in.”

Is It Activities or Results That Matter?

Measurement or not, most companies would agree that a lousy salesperson visiting the customer would not have the desired effect. Of course, they mean to count only visits by competent salespeople. So … it can’t really be the visit itself that creates the value, now can it? What is important is what happens during the visit.

Now, since this competent salesperson is obviously doing value added work, how would you be able to tell the times when value was added from the times when it wasn’t?

Of course, the answer is by the actions the customer takes. Or doesn’t take.

Unfortunately, most companies have not set up their sales processes around actions customers take. Rather, they use assumptions, approximations, and compromises expressed in terms of what they think the salesperson should be doing. They substitute lists of activities, such as conducting demonstrations and making site visits.

This, my friends, is the reason why your CRM will probably never improve your sales or forecast accuracy: It has not been configured to track the facts and data necessary to do so. It’s not just activities or results that matters; it is identifying the right activities and the right results.

Defining the Sales Process Right

So you see, it is not your CRM vendor’s fault, really. Very few people in our culture take a facts- and data-oriented approach to defining their sales process. For example:

• Not all “leads” are created equally

  A software company I worked with assumed everyone who downloaded the free demo of their software should be treated like a “lead” (someone who might want to buy their product). I struggled for months getting them to realize that the way they defined the term “lead” had no basis in fact and that this was holding them back. They dragged their feet, but once they redesigned their approach based on real prospect needs, their revenues went up 24% and their profits grew 42% (see my whitepaper, What Impact Does Your Sales Process Have on Your Financial Statements?”).(hot link-https://salesperformance.com/Financial_Impact.aspx)

• Where’s the sales bottleneck?

  When the sales department is not making its numbers, most companies assume that something must be wrong in the sales department. Often, it is a case of abysmal lead generation practices and not the sales department’s problem at all. If these firms had clear operating definitions of leads and qualified opportunities, if they could measure the quality and quantity of them (as if they were like inventory–-which they are), they would have hard evidence of this bottleneck. Knowing the impending costs, they might come up with tactics to alleviate that bottleneck in time for the next quarter’s final numbers. Whether it takes marketing or selling tactics matters less than achieving the objective more prospects who want to consider your offer in time to do something about it.

• Improving the close ratio: Just focus on the facts, ma’am

  A manufacturer of hydraulic components realized they needed a set of criteria that would enable them to assess the quality of their RFQs. We worked to identify and correlate observable characteristics of their prospects, and not salespeople’s or their manager’s gut feel about their deals. When they allocated their quoting resources according to the scores on the qualification assessments their close ratio shot from the low teens to nearly 50%, cutting their cost of sales nearly in half.

I’ve had other clients whose qualification assessment scores accounted for more than 93% of the outcomes of their deals: That’s astounding forecast accuracy!

Sales process improvement is a means of improving sales results, forecast accuracy, margin, cost of sales, and a whole host of other maladies. The key is helping your people improve their grasp of the facts and evidence around them and in getting them to let go of traditional thought patterns and unwarranted assumptions about how “things” work. Make progress on that front, and CRM systems along with everything else will fall into place much more easily.

Michael J. Webb
September 11, 2007