Week 50 – Leadership – Chapter 13
People are poor intuitive statisticians. That is why you shouldn’t simply allow the respective salesperson to estimate the probability of success for their sale. This is a widespread practice, but fails to deliver realistic results. Do it better! Here are a few ideas on the matter.
Do you want plan your successes better? Then draw up an ironclad evaluation model. This should include two important elements:
1. The Milestone Principle
Premise: Every sales opportunity reaches certain milestones before it either succeeds, or – what is more likely – fails.
In explanation, a concrete image is often employed: the so-called “sales funnel.” In theory, whatever you put into a funnel will sooner or later come out the other end. Unfortunately, in sales the situation is different. Imagine a funnel that has bigger holes at the top and smaller holes at the bottom.
Let’s say this holey funnel gets filled with liquid. What happens? A part of the liquid passes through the lower portion of the funnel and into an appropriate container. These are all the successful deals that have made it to the end. The presumably larger portion of liquid goes through the holes and is lost. These are the initiated, but not successfully completed sales activities.
If you now divide the funnel into cross-sections, you can picture the milestone model. The liquid found in the upper sections has more possibilities of escaping through the funnel holes. The farther the liquid travels toward the bottom, however, the greater the likelihood that it will reach its goal. The lower sections thus have a higher probability of success.
In the funnel, the passage between the sections is fluid. In sales, you can establish clear criteria that define the threshold to the next milestone. Let’s take an example of a milestone model.
I will begin with the topmost section in the funnel and designate this as milestone “E.” This milestone is assigned a sales opportunity. Now we have to check if the customer fits the target group. During a discussion with the customer the general benefit concept is presented and a written document is sent out. Only then can the next milestone be reached. If in a subsequent conversation with the customer she has expressed the pressure she is under to act, the status of the sales opportunity switches to milestone “D.” And so on.
|E||Prospect||• Client fits our target group|
• Vision was conveyed in discussion
• First letter sent
|D||Qualified contact||• Contact has exhibited pressure to act|
• Contact has elaborated on vision
• Contact has declared himself willing to proceed with purchasing process and has the necessary means
• Access to decision maker was agreed upon
• Above points were agreed to in writing
|C||Qualified access to decision maker||• Access to decision maker obtained|
• Decision maker has displayed pressure to act
• Decision maker has expounded vision
• Decision maker has declared herself willing to proceed with purchasing process and is in a position to decide on investment
• Received verbal consent from the decision maker concerning detailed approach discussed
|B||Decision pending||• Held preliminary talks about proposal|
• Investment discussed in detail
• Proposal drawn up and sent
|A||Deal within reach|| Verbal agreement to proposal reached|
• In-depth negotiations with purchasing department
With the aid of this principle, you can empirically determine how high the likelihood in a given milestone is that the sales opportunity will subsequently yield revenue.
2. The Assessment Principle
The second method of classifying sales opportunities in terms of their quality is not based on a step-by-step procedure, but judges their value by means of several questions. These are answered simultaneously at a given point in time and together result in a qualitative judgment.
Let’s assume it concerns a project business. In this case there are three crucial questions: Does the customer intend to invest? Can you provide a suitable solution? Is the project profitable for you as a supplier?
If the answer to all three of these is yes, you can expect a good chance of success. If the answer is no for all three, then get rid of it! And if you cannot yet answer one or another of the questions, then you know what it is you have to work on.
These questions can be broken down further:
Is there a project to begin with?
Were the customer’s concrete intentions set down in writing?
Do the financial means match the project volume?
Is it worth it for the customer in light of the ROI?
Is there time pressure? Or a fixed date?
Can we compete?
Do we meet the specified demands?
What is our relationship to the decision maker like?
How strong is the presence of our competitors?
What is our unique selling proposition?
Is it worth it?
Is there a direct return on the project?
What does this mean long-term?
How high are the estimated sales costs?
What are the risks involved?
With a mere twelve questions you can determine the quality of a sales project. Instead of a probability, every sales opportunity will be assigned an abstract index indicating its value. Alternatively you can use color schemes: red for no, green for yes, and yellow for unknown.