In order to get the most out of your sales initiatives, everyone involved with sales must have a solid understanding of how opportunities are managed. This process starts with answering a few questions.
When Does a Lead Become an Opportunity?
On average, you need a large number of leads in order to acquire enough good customers to sufficiently grow your business. If you go by the 80/20 rule, every 100 leads you get will provide you with only 20 quality leads. Out of those 20, on average only four will be hot leads that can be quickly converted, meaning the customer is ready, willing and able to buy from you. How much time and money is spent wading through the 96 “deadbeat” leads before striking gold with the “fruitful four”?
Referrals are the best (and least expensive) way to bring in new customers; but do you get enough referrals to sustain your business? Typically, the answer to this question is “no.” The first step in setting up a good lead-generation process is to create a profile for each customer segment your company targets. This will allow you to establish which pieces of information are critical in determining whether an individual is a suspect or a prospect; the best vehicles to reach your intended audience; the criteria necessary for determining the state of the lead (hot, warm, cold); and the appropriate actions to take (rep phone call, e-mail with product literature, nothing).
With these pieces in place you’ll be able to quickly and uniformly answer the big question for every lead coming in: Is it worth your time and money to pursue this? If it’s not, you’ve stopped the process as efficiently as possible; but if you’ve determined it’s worth the investment, the lead should now be converted into an opportunity.
How Are Opportunities Valued?
On the surface this seems obvious: $$$$. However, opportunities can be measured in dollars, units, price-per-unit and expected net revenues. If your company’s goal is to increase the percentage of sales coming from new customers, opportunities to do so may rank higher. If the goal is to sell more products and services to current customers, those opportunities may be more important. It’s imperative that everyone in the sales organization understands how opportunities are valued. If sales management has a different idea from sales reps of how opportunities are valued, then confusion will reign supreme.
For example, in the course of the sales cycle, additional resources are required during the customized product demo stage. The sales manager must determine the appropriate amount of resources to be used for each opportunity based on the information each rep provides. It’s safe to assume that reps feel their opportunities are always highly valuable and want the best available resources to close their deals. If there is no standard way to measure the value of an opportunity, the allocation of resources is done subjectively. Reps who are highly persuasive may end up “selling” their management on opportunities that add less to the bottom line than other deals.
From the sales reps’ perspective, knowing how to value opportunities will give them a better handle on what deals to concentrate on to maximize the value of their pipelines and increase their bonus potential.
How Are Opportunities Pursued?
The lead has been qualified and you’re ready to engage the prospect. What happens next? What are the milestones in your sales cycle that allow you to estimate your chances of winning the deal? What tasks do you need to perform in order to reach milestones? What are the resources you require to complete tasks? How long do you expect it to take to determine the outcome of the opportunity? By answering these questions an organization can begin using its customer relationship management application to automate time-consuming tasks repeated for every opportunity.
If your organization offers multiple products and services, chances are that milestones, tasks and probabilities may not equate across the board. Selling software requires a different approach from selling financial services. Selling services to a small company is different from selling consulting services to a Fortune 500, or to the public sector. A good exercise to perform is to write a definition of what each milestone means to your organization. This will enable each member of the sales organization to know exactly what it means when an opportunity reaches this particular stage in the sales process and what tasks are under way to reach the next milestone.
Opening the Door and Closing the Deal
Implementing a formal methodology to increase the effectiveness of sales efforts can be time consuming and costly. However, by answering some of the above questions you can lessen the ambiguity inherent in the selling process, creating more effective and efficient communication. Forecasting becomes more reliable when there is a better understanding of how stages, probabilities and tasks correlate with each other. This should result in less administrative time talking about opportunities and more quality time working them. Ultimately, getting all parties involved with selling on the same page should allow for more time to close deals and less time to ask questions.