To Increase Forecast Win Rates, Focus on Customer Relationships
Jun 18 2019
Forecasting sales is hard. Sales leaders spend countless hours discussing the criteria by which opportunities should be evaluated before they’re allowed to hit the forecast. Sales managers spend even more hours reviewing forecasts with salespeople to ensure the deals that get added meet those criteria.
Unfortunately, sales organizations don’t seem to be getting any better at this vital task. In our 2018-2019 Sales Performance Study, win rates of forecasted opportunities remained consistent with 2017 levels at 47.3%. No-decisions decreased a bit, from 21.8% to 20.7%, but only because those opportunities fell into the loss column, which increased from 30.9% to 32.0%.
Why do sales forecasts continue to be wrong more than half the time? (click to tweet)
To answer this question, we first have to understand that when we say the average win rate was 47.3%, that doesn’t mean that every organization in our study closed slightly less than half of their forecasted opportunities. Some had a higher success rate while others fell short. To better understand how to improve sales forecasts, the CSO Insights 2018-2019 Sales Performance Study looked at what the successful companies did differently than their less-successful peers. (click to tweet)
Why the Winners Win
Year after year, sales process and customer relationships are shown to be two primary contributors to sales success. This year, we decided to help our clients prioritize by looking at which of these elements contributed more to sales performance improvements.
When we compared win rates to sales process win rates, we saw a subtle relationship between process rigor and winning more deals, but we found a much more profound impact on sales performance when we looked at the level of relationship a company has with its customers.
Let’s dig into the details for a better understanding.
In the SRP Matrix, we break customer relationships into five levels: Approved Vendor, Preferred Supplier, Solutions Consultant, Strategic Contributor, and Trusted Partner. A plurality of respondents (35.7%) said they were considered Solutions Consultants by their customers. The next highest level was Preferred Supplier (22.6%), followed by Strategic Contributor (16.8%) and Approved Vendor (16.1%). Only 8.8% of our respondents felt they were considered to be Trusted Partners.
When we mapped win rates against relationship levels, the results were startling. There was a spread of more than 20 percentage points as we moved up the hierarchy. When we compared sales process to win rates, the spread was only eight points. So, when it comes to improving sales performance, sales process matters, but relationships matter more. (click to tweet)
Why Relationships Matter
Sales is about trust. The better salespeople are at building trust with their customers, the more likely buyers are to listen to and believe the proposed solutions will address their problem or challenge. It makes sense, then, that improving relationships would help salespeople close more deals. Intuitively, most sales professionals understand this.
But, our study also uncovered another way improving relationships helps drive performance: referral selling. Starting the sales process with a recommendation from another customer gives salespeople an edge. Evidently, that edge follows the lead throughout the sales process. Win rates were dramatically higher in organizations that were skilled at referral selling. (click to tweet)
Being good at referral selling is critical, especially since, according to this year’s study, the percentage of leads generated by salespeople has risen to 52.6%. Skilled referral sellers don’t need to worry as much about filling the top of the funnel and, as attested to by this year’s study data, their conversion rates are higher at every stage.
But, improving customer relationships is more than just being professional and returning calls promptly. (click to tweet)
To Improve Relationships Salespeople Need to Get Better at Providing Perspectives
Only 23% of respondents in our 2018 Buyer Preferences Study told us they would turn to salespeople when they have to solve a business problem simply because they perceive sellers as product-pushing rather than as problem-solving. To be seen as problem solvers, salespeople need to get better at providing buyers with insights and perspectives that will help them see their problems and potential solutions differently so they can make better decisions.
In our 2018-2019 Sales Performance Study, less than half (44.6%) of respondents felt their salespeople met or exceeded expectations when it came to providing customers with insights and perspective. Those that did saw higher than average win rates.
Improving customer relationships can have a significant impact on sales performance, but it is not a task for your salespeople alone. It takes an orchestrated, cross-organizational effort that includes enablement, sales ops, marketing, and more. It also takes top-down leadership to ensure customer relationships remain the focal point of your sales transformation strategy.
Questions to Consider
- What level of relationships do our salespeople have with customers, and what can we do to move up a level?
- How can we better support our salespeople’s ability to provide perspectives?
- How effective are we at referral selling, and what can we do to improve our skills and support our salespeople’s efforts?