FORECASTING: A Sales person’s fray
The year is over, quotas/targets are met, sales team is euphoric and management is content. The next year begins and fresh forecasts are presented and in a ritualistic convention called annual sales meeting these forecast numbers are vehemently challenged by all the product teams, sales managers, VP’s in the firm who in the name of a consolidation exercise, encourage the sales person to view the firm’s ambition charts, aggressive stance and vision. The sales targets are ratcheted upwards, reconstituted and the sales person is entrusted to make the future happen for the firm in return for glory, accolades, incentives and the right to live. Fresh quotas are pepper sprayed, territory allocated/ expanded, multiple strategy meetings held, the bell rings and the sales person goes out to jostle again in the arena for round one ‘1st quarter’.
This is the prevalent practice in most sales departments in most firms and with the advent of salesforce.com and other equivalent CRM systems the process is more organized and deal information better catalogued. One touch of a key and management knows the precise monthly figures achieved as well as sales expected in the next quarter. A couple of more clicks and deal by deal, person by person, account by account, and prospect by prospect details appear on the screen yet the forecasting system offers inordinate surprises quarter on quarter to management.
Why is sales forecasting sacrosanct in some firms whilst others are hell-bent on learning it the hard way and content to expend energy and bandwidth in micromanaging and supervising the sales force to get a better grip on the forecasting numbers ? Generally the 1st quarter forecast is the one, which eventuate after intense deliberations hence ideally must be the one that should be most accurate. Corporate world is replete with sales forecast that went overcast and here are a few examples.
- Google’s 2014 1st quarter earnings growth faltered. Downturn in advertising prices, spending money to hire employees and invest in daring ideas.
- Wal-Mart 1st quarter 2014 was bad due to bad winter and financial struggles that kept customers from spending
- Apple shares traded low due to bad 1st Quarter sales of iPhone.
- Philip Morris 1st quarter sales in 2014 slumps due to failing tobacco sales.
- GM posts sharply lower 1st quarter earnings
- IBM in 2014 reported its lowest quarterly revenue in 5 years. They have had 8 revenue declines in a row.
There are innumerable examples and the above firms haven’t been singled out for any specific purpose other than highlighting that even the most robust companies with strong fundamentals, when it comes to forecasting, aren’t above reproach. Sales Forecasting is not an art, craft or skill; it is the manifestation of certain exemplary practices, which the organization has adopted over the years. Here are a few sales forecasting augmenters:
8 ASPECTS TO FOCUS TO SECURE A BETTER SALES FORECAST:
- AMBITION AND SALES VORACITY OF THE FIRM
- THE SALES STRATEGY
- COMMAND OVER THE BUYING CYCLE
- PRESSURE SENSING
- USING A ROBUST CRM SYSTEM
- SOCIAL MEDIA CONNECT
- SALES COACHING
- TACKLING BARRIERS TO SALES CLOSURE
- AMBITION AND SALES VORACITY OF THE FIRM:
Some companies the likes of LinkedIn, IBM, 3M, Oracle, Cisco, Johnson Controls, Google, Microsoft, FedEx etc. are very sales focused and excel on parameters such as customer growth and retention as well as sales training and enablement and feature amongst ‘50 Best companies to sell for’. The unified developing theme amidst these firms is their overbalancing thrust towards growth. Sales is an outcome of excellent customer centricity and the whole organization must resonate with this objective. Every department’s inclination and consciousness to augment the sales team must be potent, orderly and consistent. When it comes to augmenting the sales department, there mustn’t be any scorn or incoherence from non-sales teams as the larger vision is to sedulously work towards growth by genuinely facilitating and servicing the customer. This combination of customer centricity and sales ambition of the firm makes a difference in the attention they give to sales forecasting.
- THE SALES STRATEGY:
Effective sales strategy seeks its own clients such is the power in its configuration. Selling has an organisation principle and sales strategy encompasses well-documented and constantly updated information about the following:
- Market knowledge
- Customer knowledge
- Prevailing trends
- Competitive products
- Statistics of past success & failures
- Positioning mechanics
- Win-loss analysis
- Demographic insights
- Product demonstration ability and insistence
- Comprehensive data on all available ongoing deals
- Referral and testimonial generation engine
- Product movement analysis
- Pricing dynamics
- Monitoring systems
- Optimizing channel partners
and many other considerations. This forms the sales backbone and the firm’s strength in each of these areas contribute towards accumulating cues about customer’s interest and state of buying acquiescence thereby ensuring better accuracy in forecasting.
- COMMAND OVER THE BUYING CYCLE:
- How often does the client buy
- Who are responsible for buying concurrence
- What is the deal flow cycle
- Understanding of AIDA (when the buyer is in attention, interest, desire, action cycle of buying)
- How lead nurturing is done
- Intuitively knowing buying signals
- Understanding of buying triggers, why customers buy
- At what stage of a deal flow has one entered in the game
and hordes of other cognitive aspects enveloping buying behaviour play a significant role in accurate sales forecasting. Sales forecasting is not the brilliance of the sales person alone but the collective sales inventiveness of the organization as a whole, which upon its achievement rejoice as a team. Individual strength, tenacity and brilliance indubitably is a key in sales but from a leadership perspective it is always good to bring about attitudinal changes in the firm to understand the buying cycle of all its key prospects that will result in definable forecasts.
- PRESSURE SENSING:
Different sales people are under varying stages of sales pressure and overheating. Optimistic forecasting is done by sales people under severe pressure and is the predominant cause of forecasting miscalculations. Well seasoned sales persons have the acumen and instinct to sense which RFP’s and deals are winnable and which aren’t yet during their bad times, under pressure they assiduously chase unwinnable deals in order to keep their pipeline fertile but this is colossal management bandwidth consumption. Sales managers must be wary of this, must own the prospect list, be dauntless in discarding unyielding prospects after diligent attempts are made and redirect the energies of their sales team in pursuing fructiferous deals. This preserves energy and avoids a burnout.
‘Lead versus Opportunity sensing’ is the key in accurate forecasting and transitioning lead into an opportunity and an opportunity into a deal must constitute top priority for the sales teams. Management apart from receiving proper inputs from respective sales person and sales manager must also create an information stream from the market, channel partners and the ecosystem that must apprise them about large deal progress and relative merits of competing players. Collectivism in forecasting is better than being reliant on individuals even if the individuals are the firm’s most trusted sales lieutenants. Customer contact and relationship establishment must be done at various levels by the selling organization. Forecasting precision must be made a KPI and good sales performance will eventuate from this.
- USING A ROBUST CRM SYSTEM:
Information bombardment today is incessant. Buyers transact from behind knowledge systems and have tremendous data about various sellers, vendors and partners in the ecosystem. Building an effective CRM system and conscientiously entering data of each customer interaction and associated inputs into the system is mandatory. There must be a reward and appreciation mechanism for the top CRM contributor and the firm must create such a culture of sales automation. Forecasting anomalies can be quickly detected with regular monitoring of the CRM system and this method saves precious physical meeting time to elicit the same information.
- SOCIAL MEDIA CONNECT
It need not be emphasized that without sales people establishing a digital presence and personal brand their longevity is seriously threatened. LinkedIn, Twitter, Facebook (business page), Google+ and innumerable social networking sites exist and buyers are interested in reading pertinent blogs that apprise them of what is happening in the industry and trending changes. Firms seeking to establish themselves in the arena must encourage their sales force to adopt blogging and express their firm’s business thoughts through social media. Connecting with prospects with value added thoughts and specific expertise pertinent to customer’s field of interest adds a layer of credibility even before the sales person meets the prospect. One’s own personal brand (in the professional realm) considerably helps in customer intimacy and through these social media sites, buyer’s preferences as well as their company’s present stance could be understood. This is useful information in sales forecasting.
- SALES COACHING
A culture of continuous professional development of the sales force has to be instituted by management as well as undertaken by the individual. Sales training and mentoring are terrific tools in creating and sustaining a monolithic sales operation however the merits of a coaching approach leaps over other methods. From a transactional selling attitude to a consultative and relational selling behaviour, needs a more organized and nurturing approach and sales managers have to be coached and roused to become excellent coaches to their teams. When a sales person loves the whole fibre of the sales process and is in it for the intrinsic thrill of business development, forecasting becomes a breeze and as stated earlier, sales forecasting is merely the resultant of the strength of each reference leg that scaffolds the buying cycle. It is statistically proven that sales coaching improves deal winnability, creation of a better pipeline and forecasting accuracy.
- TACKLING BARRIERS TO SALES CLOSURE:
Cumulate the number of times sales managers have heard from the sales person the following line “By this month-end the deal will materialize” yet at the month end the reality is in stark contrast. Why does this happen? The deal is neither read well at the ground level nor analysed by the sales manager outside the realm of the description and explanation given by the sales person. Sales people may have resolved the apparent explicit objections of the customer but implicit objections aren’t tackled and hence the deal hasn’t moved to desire and action stages. Here are a few probable reasons:
8 REASONS WHY A SALE IS NOT CLOSED
- The differentiators explained are not compelling and sounds like a ‘me too’.
- Keenness in the seller to close the sale as against offering value. Seller not working at a relationship level.
- The deal has been pitched and weaved through people who are influencers and not decision makers.
- The customer is not in ample pain to shift from his present circumstances. Ability to sense this early in the deal construct stage is crucial for forecasting.
- Pricing is too high. This is a standard response but pricing is merely a resistance card played by the buyer for improper value permeation.
- Improper assessment of needs vs. wants of the customer.
- Attempting to sell products instead of a packaged solution. Seller lacking customer services & solutions orientation.
- Reticence to ask challenging questions due to fear of deal break.
It is incumbent upon the sales manager along with the sales person to tackle each of these barriers and get a hang of where precisely the deal is stuck. This is essential for forecasting accuracy.
If forecasting of a firm is consistently faltering, it is definitely not a ‘sales person’ level problem alone, the sales hierarchy has been indolent and not taken prompt action. To get a firm to consistently forecast with precision or low probability of negative variance needs more grit and intent from management. CEO’s can play the ‘analyst assuage game’ for two quarters perhaps three but the shareholders eventually will get him/her. Selling is just one amongst innumerable aspects that boost revenues. Marketing, branding, innovation, leadership, people orientation and other aspects need examination too. As John Naisbitt, author of Megatrends put it “ The most reliable way to forecast the future is to try to understand the present.” Revisit the firm’s sales process and ensure that its muscles are built.