NOTE: Read this ONLY IF your team is having difficulty consistently hitting their quotas.
The number one factor that affects the ability of sales leaders to hit their numbers is high quality sales pipeline. In fact, as the sales pipeline goes, so does revenue growth. Sales leaders that focus on building high quality sales pipelines are far more likely to consistently hit their revenue targets.
Now, most sales leaders know this. However, we keep seeing a far greater focus on the size rather than the quality of the sales pipeline.. Quality matters even more than size for one important reason: A high quality sales pipeline will deliver the same amount of revenue for less cost than a larger, less quality sales pipeline. Which means more profits per sales dollar earned.
Sales leaders must accurately forecast sales for a given period (quarter or year), and hit that forecasted number. This is true for CROs and VPs of Sales, as well as regional sales leaders. And, in all cases, success greatly depends on the availability of a high quality sales pipeline.
Furthermore, the cost of generating revenue is just as important as hitting revenue targets. This is especially true during times of economic uncertainty. Which brings the issue of quality to the forefront, as we shall discuss below.
In this article, we will discuss:
- Why the quality of the sales pipeline matters more than the size of the sales pipeline
- Why effectiveness, and not efficiency, is what builds a high quality sales pipeline, and
- How an intelligent prospecting solution is what’s needed to increase effectiveness and build a high quality sales pipeline. This typically can increase by as much as 30% or more in just 90 days.
Why High Quality Sales Pipeline Matters
Sales is not just a numbers game anymore.
The traditional view of sales is that it’s a numbers game—if you want more sales, do more activities. However, activities are just another way of saying cost. More activities means more money spent on leads generated, more conferences attended, more people hired, and so on.
Since 2011, the cost of acquiring a new customer has increased by an average of 10% per year (CSO Insights). Not only that, most customers no longer remain customers as they once did. An Accenture study showed that 80% of customers change vendors within 24 months (2019).
And, competition is intensifying. Over 100 million companies started each year globally (HBR). Which means that the trend will be further increase in cost of acquiring a new customer.
Companies can no longer just spend their way to growth. The better way, we argue, is to improve sales processes so that sales increase faster than costs. Below are some practical ideas that may help.
What Sales Leaders Can Learn from Manufacturing
The “product” of a sales team (the “deliverable”) is revenue. Manufacturing shop has to forecast how many units will be made and delivered within a targeted cost model. Similarly, sales teams must also forecast and deliver revenue within a targeted cost model.
During the 1970s and 1980s, US manufacturers found themselves at a significant cost disadvantage compared to Japanese manufacturers. As a result, US manufacturers were rapidly losing market share in automobiles, electronics, memory chips, and more. Japanese manufacturers found that they could eliminate a great deal of their manufacturing costs by improving their quality process.
At the time, the prevailing wisdom among American manufacturers was that improving quality meant increasing cost. And, they didn’t think customers wanted to trade off higher quality for higher cost. At the time, the typical “Quality Control” approach of US manufacturers was to estimate the number of defects per million. For example, if they estimated say 4% defect, they would then add that to their forecast. So, if they targeted 1 million units, then they would make 1,040,000. That meant they were prepared to throw out 40,000 units.
However, Edward Demings showed that the further a defective unit moved into the manufacturing process, the greater the cost. More and more labor and additional material would be added to the defective product, which eventually has to be discarded. Therefore, catching a defect very early in the process reduces the overall cost.
American manufacturers learned that improving quality meant reducing cost—which meant increasing the overall value of the product to the customer.
Sales is a Quality Process
Similarly, the sales process should be a quality process. What goes into the sales process determines to a great extent what goes out at the other end.
Improving the quality of the process not only increases the “yield” (total revenue gained), but it reduces the cost per yield (cost per dollar revenue).
We will illustrate this with an example of what we saw with an actual customer. We have modified their industry and some of the numbers to protect their privacy. However, the story is largely true.
Case Story: Costly Errors That Could Have Been Prevented Early
The client sells enterprise Business Intelligence (BI) software. Their Ideal Customer Profile (ICP) is enterprise accounts primarily in high-tech manufacturing. Their target personas are CFOs, Controllers, VPs of Finance.
Pre-COVID, their average closing ratio was about 25% at an average deal size of $100,000. The Board thought that with the COVID lockdown, they actually had greater opportunity. They decided to double the previous year’s incremental revenue target to $20 million.
Therefore, based on their expected close ratio of 25%, they assumed they would need about $80 million in sales pipeline. They expected 60% ($48 million) of that to be generated by the Sales Development (SD) team. At the assumed average deal size of $100,000 they would need about 480 meetings/year set by the SD team. This is about 40 meetings per month.
They thought a team of eight SDRs would be adequate, based on past results. However, there was one crucial change they didn’t factor into their core assumptions. They had promoted out of the SDR team two top SDRs who were incidentally generating most of the meetings). Which meant they had to hire five brand new SDRs to make the team of eight.
That was the plan. What actually happened is a far different story.
We said above that the least expensive place to catch a defect is at the beginning of a process. As you will see below, “defects” were allowed to move further and further, from one step to the next.
- Aggressive numbers drove all other (bad) decisions. They assumed that to double the previous growth rate, all they had to do was double all the numbers downstream. But as we shall see below, the conditions pre and post-COVID were very different.
- Marketing lost its focus. In order to support the suddenly doubled sales pipeline requirements, Marketing had to significantly increase its top of funnel. It had to go after verticals it knew little about. Furthermore, it had to dilute its Persona requirements to get more contacts into the funnel. Before, they were only interested in marketing to the C-suite. Now, they went all the way down to director and manager levels to get the targeted database. Consequently, new “Marketing Qualified Leads” (MQLs) included business analysts and pricing managers who could never make buying decisions.
- Very young SDR team left on their own. Pre-COVID the company had five experienced SDRs who had the benefit of working closely with sales execs. They learned how to qualify and set the right kinds of appointments their reps wanted. This was no longer the case. The five brand new SDRs who had never prospected before, were working from home completely isolated. They made few dials because they felt out of sorts and demoralized. and when they were given inbound leads, they made their pitch and booked a meeting without really qualifying the prospects.
- Meetings were low quality, leading to low quality pipeline. These new SDRs didn’t know how to prospect at a senior decision maker’s level or to properly qualify, quality suffered. They were booking meetings with the wrong people and/or with accounts that were too small to afford the product. As a result, most of the meetings booked led to nowhere.
- Pipeline-starved sales reps started accepting any meeting. The reps had large quotas and no pipeline. Many were assigned verticals they have never sold to before. So, they accepted any meetings, did their discovery calls, and tried to make the best of what they were getting.
- Closing ratios and average deal sizes began to deteriorate. As can be expected, closer rates dramatically dropped as did average deal sizes as reps cut prices to win deals.
- Attrition rates rise. Missed quotas meant no one was making money and sales reps and SDRs alike began to quit. Management began to offer more money to attract new SDRs and sales reps.
- More money spent on hiring with little effect on revenues. The teams missed one quarterly target after another. At first the company tried to spend its way out of the problem. They hired more SDRs and sales reps. Eventually, they saw that costs were growing alarmingly faster than revenues and began layoffs.
A mistake that was made right at the beginning and could have been caught early, just kept snowballing. Millions of dollars were unnecessarily wasted without the desired effect on sales growth. One major point of failure was the SDR team on which rested so much. Too much of the underlying assumptions rested on a very young SDR team. It appears that Senior Management underestimated the challenge in building the quality of pipeline needed to hit the targeted numbers.
We have seen this happen too often. Many companies simply mandate sales numbers, then think they can hire their way into that number. Sure, that can happen—if one throws enough money at it.
However, there is a cheaper and faster way to ramp up, as we shall discuss below.
Quality Sales Pipeline is About Effectiveness, Not Efficiency
Experience and research clearly show that Improving the quality of a sales pipeline is about prospecting effectiveness, not about efficiency. Increasing efficiency may increase the size of your sales pipeline, but it will NOT improve the quality.
Efficiency is about doing things the right way. The focus is on doing more things in the same amount of time or for the same effort. For example, a power dialer may allow your SDRs to easily make 100 dials or more per day. However, it will not change the quality of conversation between the prospect and the SDR once there is a connection.
(By the way, the vast majority of software tools for sales and sales enablement are about improving efficiency.)
Effectiveness is very different. It is about doing the right thing—the activity that produces the most results for the same effort. Effective people first decide what they will do, before figuring out how they will do it. Effectiveness is what we produces the right ROI.
In prospecting, it is knowing what to say to whom, when, and how. Your best reps focus on quality, not busy-work. What they do consistently produces the desired results.
You know that your best people always talk to the prospects that can get them to a “yes” decision quickly. They only want to talk to the most senior people in the largest accounts. They know what results they want and who can get it done for them.
Which means your top 10% are carrying the vast majority of your teams.
Our analysis shows that less than 10% of SDRs/sales reps produce 50% or more of the results. Can you imagine what your numbers would look like if you can close the gap between your top and bottom performers by even 15% or 20%?
So, how do you get your struggling SDRs to be effective? How do you get them to talk to the right decision makers in the right way, thereby building a high quality sales pipeline that closes faster, and at a higher rate?
Intelligent Prospecting = High Quality Sales Pipeline
We started this article by saying that the sales pipeline is king—as the pipeline goes, so does revenue. We also said that it is the quality of the sales pipeline that matters and we showed some illustrative examples.
Assuming we are in agreement so far, the next question is : How do you build a high quality sales pipeline in the size you need, to confidently hit your sales target?
Building a high quality sales pipeline means prospecting intelligently, effectively.
It means talking to a decision maker, and keeping that prospect engaged, curious, and wanting to meet with a sales rep to explore further.
For that to happen, your SDRs must fully understand the space and the persona they are calling. That means they must fully understand what companies in that space do, how they compete, how they make money, what threats they face, where the trends and opportunities are, and more.
Your SDRs must fully understand the role and level of the person they are talking to–what her responsibilities are, her challenges and pains, what she wants to accomplish, what constraints she faces, and so on.
Armed with that background, your SDRs must customize their pitch and value prop to perfectly fit the space and persona they are talking to so they have a compelling opening and have their prospect fully engaged and curious.
And that’s just step 1.
Step 2, and the real job of your SDRs, is to adequately qualify your prospect so that there is at least an 80% chance that this prospect will advance further down the sales funnel once your sales rep has completed a discovery call. If that is NOT the case, your SDRs shouldn’t even be setting a meeting. This is how you keep quality high and your cost of generating revenue low.
Step 3 is to book the meeting.
Finally, step 4 is ensuring that the prospect stays engaged so she attends the meeting.
Clearly, your best SDRs and reps are already doing this, but perhaps the others aren’t.
The SOMAmetrics Intelligent Prospecting Solution
SIP is an Intelligent Prospecting solution that increases prospect connect rates, leading to more qualified appointments, resulting in more discovery calls that convert into sales pipeline.
SDRs and inside sales reps who use SIP can expect to see up to 50% improvement in their sales pipeline within 90 days.
SIP is a complete prospecting solution consisting of Industry and Persona briefs that provides your SDRs with a concise but thorough briefing on their prospect’s background; a Call Navigator that customizes your value prop to each market space/persona to give your SDRs a compelling opening; the qualifying questions they need to ask; objection management; and more.
SIP also comes with a Goals Setting tool called GOSPA GOSPA (Goals, Objectives, Strategies, Plan, and Activities) that help each of your SDRs to prepare their plan on how they will meet and exceed their quotas. These plans give them the target and actual view each time they login. At any given moment, SDRs and their managers can see where they are at in achieving their targets.
Finally, SIP comes with a Campaign Manager that ensures your SDRs follow up on the most recent, high priority campaigns, ensuring high ROI on key marketing spend such as events and ad campaign spends.
SIP can make the difference between your teams missing their numbers and consistently crushing them. Click here to schedule a quick demo.