The old adage is: “Nothing happens until someone sells something.” The flip side of this coin, of course, is: “Nobody sells something until someone buys something.” Early identification of buyers—lead generation—is a primary and ongoing responsibility of inside sales teams. This activity takes the form of outbound cold calls, lead follow-up from trade shows, direct mail and other targeted marketing campaigns, building and updating the prospect database and qualifying leads. Three-quarters of firms have implemented a CRM system to support and track these and other activities, but, somewhat surprisingly, fully one-quarter have not. Is there a difference?
This time last year, CSO Insights conducted our first inside sales/telesales sales effectiveness study. More than 400 firms completed our survey, and from it we published two separate papers. In the first we looked primarily at demographic data including: numbers of inside sales reps, average quota size, percentage of quota attainment, compensation and performance metrics that are measured and/or compensated. This served as a complement to our ongoing sales performance optimization studies (more on this later); however, being our first foray into this area, the report lacked historic or trend information.
Still, we learned a few things worth mentioning. There was good participation from inside sales groups of all sizes. The report is available as a free download from our web site, so I won’t rehash all the numbers here.
But it is notable that the average quota attainment for the overall survey was 58 percent. For those teams that had implemented a CRM system, their quota attainment was just slightly better, at 60 percent. However, the non-CRM implementing companies averaged only a 48 percent quota attainment. This is not to say that CRM accounts for a 25 percent performance improvement, but the results do suggest that companies that are not staying current with technology are probably falling behind in other areas, as well, and this contributes to substantially weaker performance.
The ability of companies to hand off leads, share best practices and monitor ongoing performance metrics is enhanced by enabling technology that can translate into enabled performance. In our recent Harvard Business Review article, my partner, Jim Dickie, and I discussed the fact that buying cycles are increasingly starting earlier than, and have in many cases become disconnected from, sales cycles. The principle driver in this disconnect is the Internet, as it affords potential buyers an information-rich environment in which to do research.
But, as we noted in Call Center/Telesales Effectiveness Summary Report, Fall 2005, available to those who register at www.csoinsights.com, buyers are not the only ones doing research on the web. Sellers are conducting their own research and spending approximately an hour a day doing it. Online demos; web collaboration among team members or between buyers and sellers; lead enrichment; and webinars are just a few of the uses routinely employed by companies. Quota attainment was 66 percent for teams that performed online demos and webinars versus 54 percent for those that didn’t. With collaborative client meetings factored in, the quota attainment number reached 70 percent, but the sampling size was too small to rely upon.
Just as compelling, maybe more so, were the turnover numbers (see Figure 1). For the companies with deal sizes of $25,000 or more that utilized online collaboration, turnover figures were 8 percent voluntary and 10 percent involuntary. For their non-online collaboration counterparts, the figures were 26 percent voluntary and 24 percent involuntary. This is a truly significant difference: less than one-third the rate of voluntary departures/defections and less than half (42 percent) the involuntary. This means fewer people firing themselves because they know they can’t make their number and fewer people you have to fire because they didn’t
How sales reps spend their time is always of interest—and for good reason. We are talking about the revenue-generating engine of a business, and any activities that detract from identifying, contacting and communicating with customers or prospects reduces productivity and total revenue. It may not be reasonable to target 100 percent selling/prospecting time, but it is reasonable to determine, for instance, what an hour a day on research or an hour-and-a-quarter spent on administrative tasks is worth.
Here is a formula you can employ:
Number of reps x Average hours/wk/rep x 50 weeks/yr x % of selling time = Sales Capacity
This formula yields total sales hours applied or available per year to generate revenue. Dividing the revenue contribution per sales group yields the value of each selling hour.
For example, if a company has 10 sales reps working 40 hours per week and 50 weeks a year, and 55 percent of their time is “selling time,” they have a total sales capacity of:
10 reps x 40 hours/week/rep x 50 weeks/year x 55% = 11,000 hours
If the annual revenue is $20 million and the inside team generates 30 percent of this amount ($6 million), it is possible to calculate the worth of an inside sales hour:
$6,000,000/11,000 hours = $545.45/hr
This is not a place for blame, but when you do the math, you can see that there may be a new urgency in addressing items that “corrupt” selling time. One of those places is how sales reps are being managed or coached, and it provides new ammunition for the argument that it’s more important to apply technology to track activities rather than concentrate on face-to-face meetings.
Consider the common sales rep (inside or otherwise) lament, “If my manager would just leave me alone and let me do my job … .” There is data to support the idea that a sales rep can get more done with less interference from the top. Quota attainment and span of control were directly proportional! Note that the 13-plus category had relatively fewer responses than the other groups and that overall average quota attainment was 58.2 percent. These are the quota attainment figures by number of direct reports:
|Number of reps per manager||Those who made quota (%)|
Any time taken from selling is reducing sales capacity. Coaching meetings, research and other value-added activities are valuable and important contributors to overall success. But standing meetings (e.g., every Monday morning at 8:30 am) are often holdovers from an earlier way of doing things. CRM reporting tools and dashboards can provide a basis for both managers and reps to communicate routine matters and to gain performance improvement insights. Just as early CRM applications were resisted by reps and many features not fully exploited, today many managers are the ones not fully leveraging tools now available.
When it comes to meetings, less is definitely more. And when it comes to improving performance, more is definitely better!