Predictive analytics are a special class of sales metrics to track because they pinpoint specific sales performance problems today that will prevent achieving objectives tomorrow, unless they are corrected. As the research presented below shows, the number one problem confronting sellers – and therefore one of the most critical challenges confronting sales management – is that they call too low in buyer organizations. I call this pervasive problem, “selling below the power line,” and there is a key metric that identifies and tracks the resolution of this issue, thus making it one of the key sales management tools.
My sales people sell too low into buyer organizations. To us the real buyers look like an amorphous cloud. Eventually the answer comes out of the cloud and it is always “no”.
Lets better define the problem. The power line differentiates two key types of buyers. Buyers who are “above the power line” may be described as those who:
- View what you are selling as an investment in their business
- Have the power to buy or at minimum participate in the decision-making process (a buying committee member)
- Will give a seller access to other key buyers who are above the power line who will also participate in the buying decision
- Have enough power to agree on the steps leading to a buy decision.
On the other hand, buyers who are “below the power line” may be described as those who:
- Do not have the power to buy, nor do they have the power to cause a decision to take place. They are influencers at best.
- Often times shield sellers from the true buyers, who are those above the power line
- May favor the competition or view the seller as their competition.
Now let’s move on to the specific predictive metric designed to help organizations address this problem. We define an opportunity where the seller has gained access to buyers above the power line (and can be verified based on the criteria above) as an “A” opportunity. We define an opportunity where the seller is below the power line as a “B” opportunity. And, therefore, the key predictive metric is the number of “A” opportunities divided by the number of “B” opportunities, or, simply put, the A/B Ratio. It measures an individual seller’s skill to qualify buyers as being above or below the power line and, if below, successfully negotiating access to power. Importantly, as you move up the org chart of a sales operation, it becomes a key predictive metric to measure the effectiveness of the entire sales operation, from sellers, through managers, and right up to the sales executive.
We have researched this problem over the past 20 years with a number of clients around the world, most of whom had medium to large sales organizations. The table below provides a view of the initial state these clients were in along with the results they achieved as they addressed this problem.
Referring to column 2, until managed effectively most sales people start out at a rather deplorable ratio of 1/8. In other words, for every opportunity above the power line, sellers work on 8 below. And here’s a very sobering fact. We found that sales people with an A/B Ratio of 1/8 literally waste 40% of their selling time – two days per week – selling to people who cannot buy. Think of the impact this has not only on individual sales people, but the entire sales organization: Long sales cycles, increased discounting, missed forecasts, imbalanced pipelines, etc.!
However, if sales management follows the plan that I will describe in part 2 of this post they can help their sellers achieve a 1/1 ratio after only one quarter. After two quarters they can achieve a 4/1 ratio. After only three quarters they can achieve an industry “Best in Class” steady state of approximately 6/1 (these numbers vary based on several parameters, such as maturity of product line, market share, etc.)! Note too the significant increase in the effective use of their time.