Presales Metrics – What to Measure and Why

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With the appearance of presales-focused tools and products, presales managers and leadership now have the opportunity to track activities and establish metrics.But what should be tracked?What should be the measures?

Contemplate the following:Deming (and perhaps others) said, “Every system is perfectly designed to get the results it gets.”This means you may need to look carefully at system design as well as the corresponding metrics…!

Here are five metrics to pique your interest – we’ll discuss some of these below:

  • Number of Wasted Demos (e.g., Harbor Tours):To understand qualification effectiveness – a terrific point of leverage.
  • Revenue $ per Demo:To measure demo effectiveness (and not just activity).
  • Revenue $ per POC:To measure POC effectiveness.
  • Closed Business without POCs (and corresponding revenue for these opportunities):Enables exploration of why and how!
  • Margin per POC:To understand how best to utilize presales resources.

This article is designed to stimulate your thinking – it is not an exhaustive listing for possible presales metrics.Rather, I hope that you:

  • As presales leadership, use this to evaluate your current measurements, objectives, goals, and vision;
  • As front-line presales managers, contemplate how your metrics could improve your team’s results and reduce friction;
  • As presales practitioners, see this as an opportunity join the discussion and contribute your perspective.

Let’s start with some obvious targets:Productivity and effectiveness.All organizations strive for these attributes – but are they the best measurements for your purposes?

Productivity

“We did 100 demos this week – we are really productive…!”

It is good to know what the team is doing and how it invests its time.How many discovery calls did we do?How many demos?How many POCs? 

Many sales and presales teams equate productivity with success:“More leads!”“More demos!”“More POCs!”But will more of these translate into increased revenues or happy customers? 

In theory, maybe.If you can process more leads, perform more demos, and execute more POCs, you will likely generate more revenues – and you will be more “productive” if your measurements of productivity are “Number of Discovery Calls per Week” or “Number of Demos per Week” or “Number of POCs per Month”. 

But what happens if lead quality gets worse (“More leads!”)?Your percentage of leads converting to sales will drop.In order to achieve the same revenue targets, you’ll need to process even more leads, discovery, demos and POCs.This same outcome also happens when opportunity size diminishes – and it gets even worse when both lead quality and opportunity size decrease. 

You work harder, doing more discovery, demos, and POCs, but you find you don’t have sufficient time to do a good job – quality suffers.Which means your effectiveness drops, so you need to process even more leads.You’ll be turning the crank faster and faster for less and less yield.

Image you have a bucket and are trying to put out a fire.You fill the bucket with water and throw it on the fire, and begin to make headway against the flames.But the water level drops and you can’t fill the bucket before each toss – now only 50% of the bucket volume hits the flames with each cycle.But wait, your bucket develops holes and now only 25% of the volume makes it to the flames.Despairing, you work faster and faster, but the flames advance and… you are out of business…!

In an activity-based assessment of productivity, increasing activity will only yield positive returns when the system output is fundamentally positive.This means high-quality leads, good discovery, great demos, and well-executed POCs, with high overall close rates.

Non-Productivity?

A real-life metric to assess non-productivity is to track the Number of Wasted Demos – demos delivered to prospects who had no intention of moving into an active buying process with you.These often take place as “introductory” or “overview” demos to prospects who survived BDR/SDR qualification (with no real discovery).

In Consensus’ 20201 Sales Engineering Compensation and Workload Report, the 847 organizations responding to “What percent of demos would you classify as unqualified or under-qualified?” reported:

Minimum Less than 10%

Maximum More than 80% [ick]

Median 30%

If 10, 20, or 30% of your team’s demos are truly wasted, a simple exercise is to calculate the hours/days/FTEs consumed and ask the opportunity cost question, “what else could this time have been used for?”

Consider:

  • If you typically need 3 demos per closed deal
  • And your average deal size is $100K
  • And your average overall win rate is 25%,

Then every 3 wasted demos has an opportunity cost of $25K.A presales team doing 10 demos per week amounts to about 500 demos per year.If 10% of those demos are waste, then the overall opportunity cost of those 50 demos is roughly $400K – and 20% is $800K and 30% is $1.2M…

Wow. 

This suggests investing in better qualification upstream…!The concept of a Demo Qualified Lead (below) is one way to address this; teaching presales practitioners how to do Vision Generation Demos to recover at least part of the wasted time is another.

We should contemplate two types of metrics and the data they collect:“Data for Inspection” vs. “Data for learning”.“Data for Inspection” tells you what has happened; “Data for Learning” should tell you what to change to improve…

Effectiveness

“Our demos are really effective – the team is at the top of its game…!”

What does it mean to be effective in presales activities and how can we measure this? 

We just saw that being more productive – doing more of the same – does not necessarily yield the desired results.Being more effective means executing our tasks better, in terms of quality or time or both. 

Note that pathways to better leads have already been defined in many organizations.A Marketing Qualified Lead has a heartbeat; a Sales Qualified Lead may have sufficient BANT attributes; and a Demo Qualified Lead should include the elements of a Great Demo! Situation Slide.This progression increases lead quality for each succeeding sales process step.

But how do you measure better discovery, better demos, better POCs?

Effective Discovery

Discovery is a simultaneous exploration of prospect “fit” on the part of the vendor and initial solution “fit” on the part of the prospect.Good fit for both parties results in less friction for all subsequent steps in their mutual relationship.Discovery should measure fit, accordingly, and is an enormous point of leverage for everything downstream!

Prospects know this, intuitively, and often express it when they terminate a sales cycle – they’ll say, “your product isn’t a good fit for us.”

Some salespeople live in the “Land of Hope” regardless of fit, typified by the statement, “It’s a huge opportunity!”

Presales must determine – and measure – the quality of fit.Most organizations do this qualitatively today.You’ll hear evidence of this at QBRs, when presales folks are asked, “How good is this opportunity…?”

How can we measure fit?Great Demo! Situation Slides offer one simple (and effective) method.For each Specific Capability desired by your prospect, assess your relative ability to deliver on a scale or percent:

  • Workflow Number 1:80%
  • Workflow Number 2:90%
  • Report Number 1:100%
  • Root Cause Identification:60%
  • Etc.

This can be represented, ultimately, as an overall score, either as a simple average or (better) as a weighted average based on relative importance each capability to the prospect:

  • Workflow Number 1:80% fit; Relative Importance 100
  • Workflow Number 2:90% fit; Relative Importance 80
  • Report Number 1:100% fit; Relative Importance 100
  • Root Cause Identification:60% fit; Relative Importance 100
  • Etc.

Incorporating the opportunity size enables you to compare opportunities to determine where to invest your resources.It also solves the traditional challenge of the rep’s claim “It’s a huge opportunity…!” when analyzed in comparison with others. 

A $1M opportunity with a 20% fit metric gives a normalized score of $200K; a $600K opportunity with 80% fit yields a score of $480K.I know where I’d spend my time…!

Effective Solutioning

This is a key part of presales activities, particularly for organizations with multiple or complex offerings.It is the link between doing discovery and proposing a solution, and provides clarity for preparing demos or POCs. 

Solutioning effectiveness may be tougher to measure than other presales activities, but you should be able to apply the ideas from measuring effective discovery to solutioning.These need to map to your sales or solution strategy, of course. 

If you emphasize Land and Expand (or Land then Expand), you may be biased towards smaller initial solutions with faster implementation and rapid ROI.Conversely, vendors of complex ERP systems and similar offerings may pursue initial solutions with the broadest possible footprints.

Effective Demos

Michael Jordan once said, “You can practice eight hours a day, but if your technique is wrong, then all you become is very good at shooting the wrong way.”

The same is true for demos.Many presales practitioners believe they are “at the top of their game” with respect to demonstrating their software.They have a clickstream and talk-track that they’ve done hundreds of times – it’s smooth and polished.And yet, their demos don’t seem to move the business forward any better than their peers’. 

Clearly, simply counting the number of demos delivered is not an indication of quality – what is?Here are a few metrics to contemplate for demo effectiveness:

  • Number of demos required to close the business.If everything else is equal, this could be a good measure – but things aren’t typically equal.(It is still good to track this, however, as it provides insights when combined with other factors such as opportunity size and sales cycle length). 
  • Revenue $ per Demo.This is a terrific metric that gives you insights on an overall team basis, a regional basis, as well as indicators for individual sales and presales people. 

Consider:Salespeople with high Revenue/Demo numbers means that they have well-qualified opportunities with good fit.Presales practitioners with high Revenue/Demo numbers means that they have likely done a good job with discovery, demo prep, and demo delivery.

  • Number of Opportunities where Demos resulted in closed business without POCs (and corresponding Revenue per these Opportunities).Any organization looking to reduce the number of POCs they run – or unnecessary POCs – should cheer for this metric.Tracking and comparing across different markets and segments provides additional insights and can help tune and improve sales and presales playbooks.
  • Speaker-switches per Minute.This helps to identify stunningly awful Harbor Tours (with very few Speaker-switches per Minute) and correspondingly bored, disconnected audiences vs. engaged prospects with high Speaker-switches per Minute.Note that there will be significant regional differences between North America, EMEA, Latin/South America, and various portions of Asia Pacific!Gong, Refract, and similar tools include this metric in their analyses of recorded calls and demos.

Effective POCs

Many sales reps offer POCs in their first conversations with prospects.And while for some vendors POCs offer structured, predicable pathways to closed business, others know that (1) many of their POCs are unnecessary and (2) they could be executed more effectively.

This suggests (at least) two sets of metrics:

  1. Metrics to test whether POCs are necessary or desired;
  2. Metrics to explore POC execution.

For Number 1, a Yes/No response to the question, “Prior to beginning the POC, is the pathway to purchase understood and agreed upon?” provides an excellent test.A corresponding metric explores “How many POCs were executed with a Yes response (and what were the close rates) vs. a No response (and what were those close rates)?”

For Number 2, POC execution, there are a series of metrics that can be examined:

  • % of POCs that yielded closed business (tracked quarter over quarter).
  • % of POCs that were “successful” (e.g., achieved the POC success criteria) but did not result in closed business.(Hint:Go back to Number 1…!)

In some cases, 1 and 2 can be combined…!For example, the simple question, “Do we have clear, measurable success criteria for this POC?” yields tests for both 1 and 2.

Note that both of these above only begin to explore POC effectiveness…We can dig deeper:

  • Linear factors such POC length (in days) and Presales Hours Consumed provide insights into your investment in POCs.
  • Revenue $ per POC gives an indication of POC “margin”; Revenue $ per POC divided by the Presales Hours Consumed would be an excellent indicator of POC effectiveness.Exploring this metric on an overall basis vs. regions vs. sales reps vs. presales practitioners provides opportunities to compare performance.

Overall Presales Effectiveness

One intriguing measure of presales effectiveness is the ability to increase your sales:presales ratio.This means the ability to support more salespeople and opportunities, which should yield additional revenues (without scaling presales headcount commensurately and without sacrificing quality). 

Another common metric is Time in the Middle of the Funnel (MoF) – where the clock starts with the first presales-prospect interaction (e.g., “Demo 1”) and ends the last (e.g., POC completion). 

Two more to consider are Cost of MoF per Prospect (and Prospect Type) and Revenue divided by MoF Cost on an overall basis, per region, per opportunity, etc.

One interesting measure is Revenue $ divided by Time in MoF.One might predict a reasonably constant ratio, assuming that larger opportunities take longer to close.Any anomalies should be investigated!

Paired Metrics

“Every system is perfectly designed to get the results it gets.” 

Most sales organizations focus on revenues – but are we only interested in increasing revenues?If so, we don’t care about the cost of those additional revenues.I’d suggest that we really want to improve margin, by increasing revenues while holding cost-of-sales down or by finding ways to increase revenues and decrease cost-of-sales.The singular objective of “increasing revenues” can lead to some unanticipated outcomes.

A simple example of this is traditional quarterly sales quotas.If quota is the sole or main measure of success for a salesperson, then that salesperson will pursue every piece of business – regardless of fit – to achieve the quarterly numbers.This means that some portion of closed business will likely churn, with unhappy customers spreading word of their poor experiences.

Andy Grove suggested:For every metric, there should another “paired” metric that addresses the adverse consequences of the first metric.

Accordingly, one way reduce churn (and have more happy customers) is to incorporate churn into the overall sales metrics.An example might be phrased as, “Your quarterly quota is $500K; your revenues will be counted as new license revenue minus revenues lost to churn (that you sold).” [Gasp…!I can hear Heads of Sales balking at this but think about it…!]

Certain measurements need to be done in pairs or as ratios.

For presales, metrics like Revenue $ per Demo incorporate this pairing by making it a ratio.Measuring the number of demos alone is insufficient (“Do more demos!”); exploring Revenue $ per Demo creates the pairing.

Interestingly, tracking “Number of Demos resulting in closed business without POCs” provides a very insightful pairing.We want Revenue/Demo or Revenue/POC to increase, and the Cost/Demo and Cost/POC to decrease (preferably both).

Vision, Goals, Objectives and KPIs

How are these similar or different?

Vision is articulating your overarching aspirations.For example, a CRO (Chief Revenue Officer) might express a vision for the organization as, “We want to maximize lifetime customer value for our customers, our partners, and ourselves”. 

Breaking this down, the CRO might say, “We want to enable our customers to enjoy as much value as possible through the use of our offerings over the life of their use; and we want our partners and ourselves to generate as much revenue with the highest possible margins over the same time period.”

[I’m a big fan of this vision…!]

Goals provide the first step of clarifying vision.Another way of articulating goals is to ask, “What are our desired outcomes?”For example, “We want our customers to be truly delighted with our products and services.”

Objectives define the specific strategies for achieving your goals.Aligning to the “delighted customers” goal above, an example objective might be, “We need to onboard our customers as quickly and successfully as possible” or “We need to ensure that customers enjoy the expected value from their investment with us.”Note that a single goal might involve several objectives.

[“SMART” is an acronym often used to clearly define an objective:Specific, Measurable, Achievable, Relevant (or Realistic) and Time-bound.The objectives examples above are incomplete, accordingly, and would need to be more clearly specified!]

Key Performance Indicators (KPIs) express and measure progress towards realizing an objective.For the onboarding objective, “Time-to-Go-Live” is a KPI, as is “Time from Go-Live to achieving a specific Value Realization Event.”Monitoring these enables you to establish baselines and track progress.

A presales vision statement might offer, “We want to be perceived as the best in the industry” or “We add value in every interaction.”A corresponding goal for the presales organization as a whole might state, “Support sales to achieve quarterly quotas while promoting the best interests of prospects and customers.”(Note the pairing.)

The objectives would need to support this goal for the various types of interactions:discovery, solutioning, demos, POCs, interactions with sales, customer success, product, etc.KPIs would enable tracking the team’s performance towards achieving those objectives.

Presales Metrics Revisited

Presales has entered a renaissance, enjoying increased visibility, emerging tools and communities, and cataloging of know-how and best practices.This is the perfect time to rethink your vision for your organization (or your personal vision), set goals, assign objectives and explore KPIs to guide you and your team towards achieving your vision.

And remember:Every system is perfectly designed to get the results it gets.”So choose wisely!

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