Intuition and optimism are valuable traits among sales professionals. It allows them to read subtle nuances during client interactions and to keep the sales moving forward despite objections. At the same time, those traits often limit their ability to make consistent and unbiased decisions about what sales opportunities to pursue. As a result, sales leaders must implement a mechanism to secure sales reps focus on the right opportunities at the right time. One solution is to adopt a data-driven approach. An approach that allows sales teams to proactively identify which opportunities are more likely to close, which are at risk and which ones to ignore.
This article introduces a trend in sales opportunity management that every sales leader must be aware of: data-driven opportunity management.
Over half of sales opportunities fail to close
To close business deals, sales reps need to build trust, challenge customers and deliver insights. Right? That is what two of the latest sales methodologies – Challenger Sales and Insight Selling – claim. While certainly essential to win opportunities and close deals, additional variables also play an important role. If not, why is it that 51% of forecasted deals do not close.
Losing 5 out of 10 deals suggest that sales teams need to be better at knowing which opportunities to go after and when to move on. It is no coincidence that 23% of companies ranked “Increase Win Rates of Forecasted Deals” as one of their top objectives during 2014, according to CSO Insights’ Sales Performance Optimization study.
But, why do so many business opportunities fail to close? Is it due to sales reps' over optimism and confidence? Perhaps, it is a lack of understanding about how customers make buying decisions. Although valid reasons, I personally believe the issue is a more fundamental one. Sales organizations rely on sales reps’ gut feeling.
Intuition and emotions are double edge swords
Let’s be honest for a moment, sales reps are intuitive, driven, optimist and perseverant people. As such, they are prone to trust and follow the inner voice that tells them they can win any deal if they try hard enough. Intuitive skills allow sales reps to read body language and to quickly overcome objections but they can be a liability if overused or used inappropriately. More often than not, their feelings and thoughts lead them to make inconsistent and illogical decisions about which opportunities to chase.
For instance, if your sales team is having a great week, they are likely to be over optimistic and confident about opportunities that don’t have a chance of closing. Similarly, the team may over invest their time on opportunities that are already on track. In general, the problem is not that sales professionals are intuitive and emotional. The issue is that in today’s highly competitive and resource-constrained B2B selling environment, intuition is not a reliable measure to inform critical decisions about prioritization of sales resources. Instead, a more analytical and objective approach towards opportunity management is needed.
Analytics changes the way to manage sales opportunities
The good news is that over the past decade, the amount of data and information produced by organizations has increased to the point that we now called it big data. This availability of data enables sales managers to adopt a data-driven approach to opportunity management. Today, advanced software and sales analytic tools empower sales teams with information about which deals are more likely to close, which are at risk and which ones to avoid. According to Aberdeen research published in “Big Data for Sales: Are we ready?”, adopters of sales analytics solutions achieved their quotas and grew their revenue and profits faster than other firms.
It is important to note that not all sales organizations need to apply a sophisticated approach to manage business opportunities through the pipeline. It is counterproductive to apply such a method within transactional and traditional sales organizations that sell a limited range of standardized products and services with low purchasing risks. In this case, to hunt every opportunity that comes along is probably the best approach. So, what motivates sales organizations to use a data-driven approach to opportunity management?
Complex sales call for data-driven approach to opportunity management
The length and the amount of resources required to close a deal determine whether it is a good idea to adopt it or not. Long and resource intensive sales cycles –complex sales– call for an objective and consistent way to efficiently prioritize sales activities to the right opportunities. In complex B2B sales, chasing every opportunity that comes along is no longer a choice. Complex sales organizations need to chose their battles wisely. However, to remove intuition and optimism from the pipeline is a challenge. Therefore, the first step for many companies is to identify the best metrics to put in place to objectively manage opportunities. How do you know what to measure? What factors should you take into account?
3 metrics to kick start your data-driven journey
I recently came across an article “3 critical sales pipeline metrics” in which the author argues that organizations that take a data-driven approach to opportunity management should regularly measure and review the following 3 metrics: value, velocity and win-rate. Let us take a look at each metric.
1. Qualified Pipeline Value. The first metric to keep a constant eye on is the combined value of all qualified opportunities in the pipeline. The author argues that opportunities should be added to the pipeline only if sales reps can answer "yes" to the following questions: do customers have a clear need? Are they likely to buy? Do we have a chance to win? Are they a good fit for us?
2. Sales Cycle Velocity. The second metric to monitor is the time it takes for a rep to close an opportunity. It is important to measure the total time as well as the time is takes for an opportunity to move from one stage to the next one. According to the author, this metric is one of the best predictors of sales success. The shorter the cycle, the better it is.
3. Sales Win Rate. The third and last metric recommended to measure constantly is the win/loss ratio. Beyond the number of opportunities won and lost, the author highlights the importance to find out why you won or lost the deal. This is in line with ProSales research about the importance of a systematic win/loss analysis in order to achieve revenue growth.
Have you implemented a data-driven approach to opportunity management? If so, what key metrics would you recommend to use? Are there any other factors worth considering? Share your comments and your experiences with us.
Ph.D. Markus Ejenäs, ProSales Institute