Making Sales happen, not happened.

In a recent blog post I pointed out some appropriate metrics to secure overall performance on a strategic level; the KPI’s (Key Performance Indicators).

These numbers are often followed up monthly or quarterly. However, to control you are on track in Sales this is not sufficient. Obviously, the KPI’s are mostly measured as history since the process stage “Order” often is involved in these figures.

While KPI’s are controlling what has happened, you also need to secure that it really will happen. That means you have to check earlier in the process and find numbers to follow that mean something if they are above or below than expected.

These numbers are called OPI’s – Operational Performance Indicators. Apart from a KPI, which would be connected to a strategic goal, an OPI is on operational level and connected to behavior. Since a certain behavior is performed all the time, all days in the week, you need to manage people’s predestinated habits. If the habits are not in line with your business targets you also need to manage change. A well-defined OPI would include change management as well as the metrics, since the deviation from the desired metrics may be used to perform change management, in purpose to achieve the KPI’s and the strategic goals.

So, to secure that your sales goals will happen, you have to state the metrics on a day-to-day or week-to-week level. An OPI is mostly coached from a sales manager to a sales representative (sales rep).

The OPI’s we see as appropriate to measure from a sales perspective are:

  • Weighted hitrate
  • Order value per sales meeting
  • Number of sales meetings per week and sales rep

Weighted hitate

In a previous blog post I discussed to use the Hitrate as a KPI. Definitely this is one of the most critical metrics in your entire sales organization, since it tells a lot about the efficiency in a sales organization or sales individual. With that in your hand, you are able to dimension the size and set the structure that is needed to achieve your long term goals.

But can you trust the figure? If not, it has no value at all.

Let us explore if we can find a way to an indicator you can lean on – in bad and good days.

The complexity starts when a sales rep often submits more than one quotation for the same opportunity. It can be a variant such as a low budget alternative along with the recommended proposition or another alternative, such as first stage and second stage of a project sale. Therefore it may be difficult to determine an exact value on this metric. However, a more real “weighted hitrate” may be derived. Usage of a sort of “cap” to which different quotes are belonging to – often named “Opportunity” – may be a solution. However, you then need to determine which quote sum to put into the opportunity; the recommended or the budget alternative (to be safe). The problem persists.

My recommendation is instead to establish a more accurate value – a weighted hitrate – which also can be used as a change driver, because it affects the entire sales process and the behavior of the sales reps driving that process.

You may say that it is not necessary to know exactly what the hitrate is – just measuring the same way over time. Indeed, this is a correct statement, but if you do not know the behavior in this stage in more detail, it’s harder to change to a more efficient way of working.

There are basically two ways to produce the weighted hitrate;

  • Method A: by investigating how many quotes that are linked to a specific customer
  • Method B: by measuring something else in relation to the number of orders a sales rep lands

Method A is easy to obtain from the “back-end systems” like CRM systems, by asking a simple question to the database: How many quotes are connected on average to the same customer in the expected time interval – the sales lead time? Divide the number with the total accounts that has one or more quotes connected and you get an average factor of how many quotes are submitted per active account. Use the factor to calculate the real total quote revenue, which you may use to calculate the weighted hitrate.

You may rely on the value calculated in Method A, if you ignore the “stage” complexity described above. If you sell for example windows, a first stage could be the ground floor and the second the first floor. Both stages are potential orders and therefore should be registered in the quotation log as separate quotation values, whereas variants – such as the budget variant together with the recommended one would not be sold both of them. Both variants are aimed to the same purpose (“the same hole in the wall”) and therefore should be handled as an average.

If the latter case occurs very rarely, you can of course ignore the problem and rely on the average value you get from method A.

But if you don’t know or have the above complexity (which most organizations do), you need to think differently.

My “Method B” takes a different point of view instead of looking at the conversion factor quote to order. Method B is also focusing on getting some change management in place.

Let me explain how it can be done.

Earlier in this blog post I stated that it is often desirable to measure earlier in the sales process, particularly in respect to that calendar time is often too short between quotation and order, providing a limited scope to coach sales reps in a proactive behavior. To achieve follow up reporting on earlier steps in the process, the sales reps have to register some kind of activity earlier in the chain.

If we go backwards in the process, the next task in the sales process that comes before Quotation may be “Sales meeting”. Today many companies don’t state it is obliged to register a sales meeting, as it may not be considered to be of great value, at least not from the sales rep’s perspective.

But it would be of great interest to know how many sales meetings a sales rep has to do to get one order. This is really steering towards using your time available in an efficient way, isn’t it?

There are many positive aspects to this, and thereby opportunities. Sales meetings are something that is measurable in time, not just in numbers. Let’s say a sales rep meets several times with a customer – first sales visit, then second visit, the quote submission meeting and finally negotiation. It counts to four (4!) meetings that consume valuable sales time!

Of course this has an impact on the hitrate.

The described behavior your company certainly don’t want to support, but has also critical impact on how many sales reps you need to hire to reach your strategic goals. Of course, it would be better if fewer heads were doing more sales – it will improve your bottom line.

Since a sales meeting may take a few hours of time, controlling the number of sales meeting that can be made in a week would be crucial for your profits. While a “sales meeting” may be of any type, you need to train the sales organization how a meeting should be performed and what the outcome should be. Best is if the sales rep can get the order at the first meeting, even if that’s not always possible.

All other types of meetings than pure sales visits “consume” thus available sales time that should have been used to meet other new customer prospects.

We can conclude that the more time spent on other than sales work, the worse hitrate.
If you use a weighted hitrate based on the number of orders divided by number of sales meetings, you will have a genuine power to control time usage spent on sales.

But beware!

If you only use the “Number of sales meetings per order” explored above to produce a weighted hitrate, you increase the risk that the sales rep only sells “simple”, easy sold or cheap products. The hitrate is actually also showing a better (faked) figure if you book fewer sales meetings, which is crazy, really. This makes the ratio rather “dangerous” to use and may not be communicated to the sales reps level.

But used correctly, it’s an extremely good tool to gain visibility into how sales reps use their time, in order to provide the right coaching them to use their time for the right things.
However, we recommend not using this figure alone, but in combination with the following ratio “Order value per sales meeting”.

Order value per sales meeting

The key figure “Order value per sales meeting” is directly based on the strategic objective “Total order value per sales rep”. This OPI steers towards each sales meeting would be both sales focused and contain value. In the long term this also steers to a higher average order value.

The OPI “Order value per sales meeting” can be used by itself or together with “Number of sales meetings per order”, discussed above.

Number of sales meetings per week

If we’re about to measure the activity type “sales meeting” to create the metric “weighted hitrate”, you might as well also measure the number of sales meetings per week. In addition, there is a clear correlation between the number of sales meetings and number of orders, making the ratio very educational for use in coaching sales reps.

The reason to follow the number of sales meetings is also to win a few days extra room to maneuver. Looking at the number of visits going down, it is necessary to focus some efforts. Generally, sales meetings are booked in the near future, with perhaps a few days or at most a couple of weeks ahead, but it may be worth booking in the longer term, especially in some difficult times when it may be easier to get the meeting booked 6-8 weeks ahead when the decision maker’s calendar has more room.

//Take care,

Stefan

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2 Replies to “Making Sales happen, not happened.”

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