Course 7.  Sales Tracking

Much of the benefit of sales funnel management comes from tracking the sales process using sales stages.  Software is required to manage the tracking process. 

In this course, you'll learn about:

1.  Why Measure Sales Cycles?

2.  The Discipline of Tracking

3.  Sales Funnel Movement

Why Measure Sales Cycles?

Sales forecasting is a challenging exercise.  Most small and mid-size companies struggle to accurately forecast sales.  The forecast processes most often used by companies today usually result in higher inventories, longer customer order lead times, and poor customer delivery performance. The end result of these problems is an increase in overhead costs, and lower revenue due to poor customer satisfaction. In order to properly run the business, it is very important to generate and maintain an accurate sales forecast. 

Sales cycles can be measured and tracked.  Metrics are standard measurements.  Metrics are important because of the functions that they provide, namely:

1. Greater Control: Metrics enable superiors to control and evaluate the performance of the people working under them. They also enable employees to control their own equipment and their own performance.

2.  Standardized Reporting: This is the most commonly identified function of metrics. We use metrics to report performance to ourselves, our superiors, and external groups.

3.  Improved Communication: This is a critical but over-looked function of a metric. We use metrics to tell people both internally and externally what constitutes value and what the key success factors are. As pointed out previously, people don’t understand value, but they understand metrics. As a result, value as implemented at the firm should influence the type of metrics developed.

A Constrained Sales Funnel

Measuring sales cycles in a sales funnel is a very important aspect of growing a business.  By tracking a sales funnel and sales cycle movements, accurate forecasts are possible.  It's possible because the sales funnel numbers identify constraints in the funnel.  An important part of creating accurate sales forecasts, knows your constraints.  Sales departments are typically optimistic in projections.  Without knowing the constraints, optimism can cause great errors in cash flow management.

Here are some examples of funnels that identify where constraints exist.  Any sales funnel that is being tracked and managed can identify sales constraints.

Weak Lead Generation and Value Proposition

This sales funnel shows a doubling in size in a four-month period.  Each category of the funnel is carrying sales cycles.  However, there are constraints in the funnel that is keeping it from growing.

1.  Not enough sales cycles.  There simply aren't enough new sales cycles entering the funnel to grow the business significantly.  When Cold Leads represent only 17% of the total sales cycles there's a problem.  Cold Leads should be at least 40% of a sales funnel. 

2.  Lack of Value.  There are 54 Prequalified Prospects.  These are companies that are interested but won't be meeting for six months or longer.  The company lacks a strong value proposition with a sense of urgency.  There's no reason to act now so the prospects don't.

Lack of Cultivation and Product Variety

This sales funnel shows terrific growth. The funnel has grown over 300% in about four months.  However, the sales funnel has serious constraints. 

1.  Market Cultivation.  Cold, warm and hot leads represent 86% of the sales funnel.  This is high.  The company needs more market cultivation activities to move prospects up the funnel.  It should also prequalify harder and be more diligent about putting quality sales cycles into the funnel. 

2.  Product Variety.  Another aspect of the constraint at the lead stage is product variety. The company only sells one product.  A variety of products would broaden the appeal to the prospect and give them an opportunity to purchase.

 
Not Closing the Deal

This funnel shows good growth over a nine-week period.  However, it's not producing revenue.  The sales funnel is carrying 14 Preparing Buyers and 15 Hot QP's.  There's been no First Time Buyers.  Nothing has closed.  This typically means the company lacks competitive advantages and is losing business to competitors.  The company isn't closing because there's no compelling reason to buy.  The competitors have a better price, service, reputation, etc.

The Discipline of Tracking

Tracking sales cycles in an organized program is a valuable asset to any company, however,  it’s difficult for people to do.  If you ask most sales people to track their sales funnels they won’t do it.  They particularly don’t like to be held accountable for results.  It’s a good discipline to develop though.  Here are some of the traits of people who are good at tracking their sales cycles.

1.  Value Information.  Trackers value information and knowledge.  They appreciate what the information shows them and they know how to act on it.  They understand that not having the information or knowledge that tracking provides leads them to having to assume things.

2.  Take Instruction Well.  Trackers learn how to track.  They take instruction well and want to learn new things to improve their performance.

3.  Operates with Integrity.  Trackers know that a database is only as good as the information put into it.  They operate with integrity and ensure the right information is being kept.

4.  Attention to Detail.  Trackers pay attention to details.  They know the details provide the information they need to see.  They keep track of details and store valuable information.

5.  Build Processes.  Trackers build processes.  The processes become routines over time and help them stay consistent in their tracking efforts.  Using a sales cycle system becomes a process of thinking. 

Tracking Movements

A significant part of sales cycle management is the tracking and management of movements within sales cycles.  A movement is an increase or decrease in a sales stage total from one week to the next. Movements show progress or lack of progress in creating transactions.

In the following table, you can see how sales cycle movements are being tracked.  The difference in a category is created from week to week.  In this example, there are 22 cold leads in Week 32, 27 in Week 33, and 33 in Week 34.  This shows the quantity of lead generation activity by the sales person.

 
Quantity and Quality. 

Achieve a daily balance between the quality and quantity movements to produce the desired results.  Sales Funnel Steps identify two movement types – quality and quantity.  The Quantity Movements are Lead through Warm Qualified Prospect.  The Quality Movements are Hot Qualified Prospects.  Too much time spent in one or the other creates an imbalance that impedes results.

Quality Movement and Quantity Movement

Think about the relationship between quantity and quality.  Typically when you have high quality you have low quantity.  When you have high quantity you have low quality.  This is a typical relationship but not always true.  McDonalds, for example, spent millions of dollars to produce a reproducible, high, quality French fry.  The machine that cuts up the chicken for Chicken McNuggets is built in Woodinville and costs $800,000, but it produces hundreds and hundreds of pounds of sliced chicken every day.  These innovations have overcome the Quantity / Quality paradox. 

So it is with your sales funnel.  When you leave your house and move your body around to appointments you automatically cut your volume of productivity.  You are entering the "Quality World."  The appointments you attend need to produce a high quality result in order to be profitable from the perspective of your inventory of time.  Your inventory of time is a fixed asset.  There's only so much of it available.  The stakes are high in the Quality World.  You are chewing up valuable inventory.  No mistakes or profitability immediately drops.  However, when you succeed the rewards are very high. 

When you work the phones you are in the "Quantity World".  You are dialing and talking on the phone and sending emails, you are using the digital innovation.  Quantity is now possible. 

Summary

First we discussed the reasons to measure sales cycles.  Sales forecasting is a challenging exercise.  Sales cycles can be measured and tracked.  Metrics are standard measurements.  Metrics are important because of the functions that they provide:

1. Greater Control

2.  Standardized Reporting

3.  Improved Communication

Next, we looked at some examples of constrained sales funnels. An important part of creating accurate sales, forecasts knows your constraints.  Sales departments are typically optimistic in projections.  Without knowing the constraints, optimism can cause great errors in cash flow management.

We looked at sales funnels with the following constraints: weak lead generation and value proposition, lack of cultivation and product variety and not closing the deal. 

Lastly, we discussed sales movements.  A significant part of sales cycle management is the tracking and management of movements within sales cycles.  A movement is an increase or decrease in a sales stage total from one week to the next. Movements show progress or lack of progress in creating transactions.