Managing the sales funnel. How to ensure that sales do not forget about customers
Mikhail Haskelberg talks about the problem of balancing process and target indicators in relation to sales work: how to organize the work of sales managers so that the sales funnel is not suddenly empty
In the modern world, managers are used to the fact that sales people need to be motivated for the final result. Other positions may have a fixed salary, but this approach does not apply to sales. It is believed that if they do not receive bonuses as a percentage of completed transactions, they will not sell well. Usually bonuses are awarded after receiving payment from the client.
This technique works in the material business, that is, when material objects are sold — in this case, the moment of the transaction and the moment of closing the contact with the client are not separated in time. The motivation is well tracked and correctly perceived by sale from the point of view of self-analysis: I tried, signed a contract and received a reward for it. The “effort-result” chain is obvious. However, this linear motivation does not work everywhere and not always. In some cases, it leads to side effects, up to a complete stop of sales.
About a year ago, we saw a telling story in a consulting company. At the time, they followed a well-trodden path, linking the sales motivation to the amount paid by the client after the project was completed. And after some time, the company faced a serious crisis of under-sales. Despite the fact that the services were in demand by the market, and there were enough resources to provide services, the company ran out of orders, and qualified highly paid consultants began to stand idle.
Perception gap and its consequences
Consulting is a knowledge-intensive business. Consulting services are complex, projects last for several months. Accordingly, the sales cycle is also complex and long. If sale found a lead at the beginning of the year, the project started around the middle of the year, and bonuses were paid towards the end. As a result, sales stopped feeling the connection between finding leads and receiving rewards, and the “effort — result” chain was broken.
What consequences did this lead to? Sales began to look for faster projects, rather than more money, for which they will get bonuses faster. For the same reason, sales preferred to spend their efforts not on finding new leads, but on servicing existing projects in order to speed up their completion. The sales funnel gradually emptied, and when the buffer of accumulated contracts was exhausted, there was a crisis. How should sales be motivated to seek benefits for the company, not just for themselves?
Two sets of indicators
There are two types of KPIs for sales: target KPIs, which characterize the achievement of global goals, and process KPIs, which reflect the correctness of the employee’s work in terms of the company’s regulations and methods. In our example, the indicator that sales initially focused on-the amount of completed contracts – is a typical target. A typical process indicator, which is also often used, is the number of “cold” calls that the sale should make to potential customers.
Process and target indicators cannot replace each other. When only targets are set, then over time, due to natural human laziness and cunning, sales begin to look for simple and easy ways that will lead them to these indicators. And these ways, which sales do not always advertise, are profitable for them personally, but destructive for the company.
On the other hand, if you put only process indicators, this leads to the opposite effect: people start working for the sake of a tick. For example, there is a standard for the number of calls made, but there is no standard for the number of contracts signed. In this case, sales will call the first organizations they come across, without thinking about how much this brings the company closer to its market goals.
Competent sales motivation should consist of two sets of indicators: target indicators that correspond to the company’s goals, and process indicators that should correct the course of managers.
Returning to our example, here is what was done to correct the situation.
First of all, two main goals of the company in terms of sales were formulated: to load the work of consultants and expand the market. Goals depend on the current stage of business development, so they should be reviewed from time to time.
Based on the goals, three priorities were identified: maximum customers, minimum time to prepare a contract, and maximum sales efficiency. Key indicators were designed to ensure that goals were met and that priorities were met.
The main target has been changed. If earlier it was the sum of completed projects, now it is the sum of concluded contracts. After all, sale has little effect on the implementation of the already concluded contract, its task is to bring this contract to the company. Of course, the company loses a little money on the fact that it pays the sale fee even before the payment is received from the client. Instead, sales began to focus on the right tasks-finding new leads.
The sales funnel has also been revised: the stages of the process where the company’s employees influence the decisions made by a potential customer and promote customers through the funnel have been highlighted.
For each stage of the funnel, three process indicators were assigned that clearly correspond to the priorities:
the number of clients at this stage – so that sales are trying to increase the number of clients;
the duration of the client’s stay at this stage – to spend a minimum of time preparing contracts;
the conversion rate, that is, the percentage of successful transitions from the current stage to the next-as an indicator of the effectiveness of the sale.
The indicators were partly calculated based on past statistics, and partly based on expert estimates, and are reviewed once a quarter.
Based on these standards, an automated system was set up to calculate sales deviations from these indicators. For each indicator, a limit deviation of 10-20% was set. For example, if the funnel stage is to be completed in 10 days, but completed in 11 days, this is not considered a problem. But exceeding the limit deviation is a violation and affects the sale’s revenue: the more violations, the more the bonus is cut off.
The result of the implementation of the indicator system was that with fewer sales (and the sales Department had to be partially reduced), the company’s sales figures for the period increased by almost 1.5 times.
What should the Manager take on Board
Summing up, we will highlight three key points.
First, we must clearly understand that the motivation of sales only for the amount of completed transactions is applicable only in the simplest cases of material turnover and simple services.
Second, the most important factor in filling the funnel is to clearly and clearly formulate the company’s goals, preferably in SMART technology, so that you can work with these goals and translate them into numbers.
Third, the greatest effect is achieved by a combination of target and process indicators in the sales motivation system. Target indicators set the benchmark that the sale is aiming for in the desire to earn a bonus, and process indicators make sure that in this quest, the sale does not do outright stupid things that will harm the company.