Thursday, October 30, 2008

Customer Communication is King -- Sales and Marketing Team Work

It is critical at whatever stage the economy is in, good times or bad times, for your customer messaging to ring true with your target market. If the potential customers you are talking to do not understand what you are trying to convey, then your company is in big trouble. And that is spelled with a capital T. If your salespeople send more than a few percent of their time trying to explain what it is you as a company are trying to convey, you are then not in an optimum sales situation.

I have just a brief example of shaping the message to the target audience. When my son was very young his favorite fast food was a cheeseburger from McDonalds with ketchup and pickles only. He would go with me and tell me he wanted a cheeseburger, but please only ketchup and pickles on it. When I ordered it the way he wanted it ordered the McDonalds clerk would repeat it back multiple times, and with a high degree of certitude my son’s cheeseburger would have either mustard or onions or both on it. This would cause me to trek to the counter to exchange the cheeseburger for one that would meet my son’s standards.

This disconnect in communications got old very fast. McDonalds would always be gracious enough to make another to my son’s specifications, but the hassle quotient was off of the scales.

I started thinking about the issue at night once and determined for a product that contained only a bun, hamburger, cheese, onion, mustard, ketchup and pickle there had to be a better way to communicate my son’s requirements and make the process easier to digest.

I determined that I would order my son’s cheeseburger by what he did not want on it. “One cheeseburger with no onion and no mustard, please.” The clerk would repeat back, “Cheeseburger, no onion and no mustard.” Bingo, the rate of successful ordering for my son’s cheeseburger shot through the roof.
But there was still one small problem. When my son heard me order in the new fashion he would say to me, “But I want pickles and ketchup only on my cheeseburger.” With my son it was very easy to communicate to him that because of the finite number of ingredients only ketchup and pickle on a cheeseburger was exactly the same as no onions and no mustard on a cheeseburger.

My Son was happy, I was happy, the clerk was happy and somewhere Ronald McDonald and the shareholders of McDonalds were happy because the cost of preparing my son’s food had been reduced.

I use the above only as an example of customer communications and how critical it is. Lack of clear communications could be why you lost an account, why your close rate is not as good as your competition, or why you often leave your customers with a dazed and confused look on their face. Talk to your key salespeople and find out if messaging might be getting in the way of representing and selling your company. If it is, then fix it.

Sunday, October 5, 2008

Forecast, Pipeline and Revenue Target

Sometimes the above three items are used interchangeability when talking about sales, but they are three very different items. A company’s revenue target is found in the budget, and is a revenue number that all expenses and profits are based on. The revenue target is not the sales forecast; it is the target on that is agreed by management as an amount that has a high probability of being achieved for the year. The Revenue Target is projected for the year and is then segmented into Quarterly Revenue Targets, and Monthly Revenue Targets. Of course it is important that this number be as accurate as possible, because the organizations spend side of the budget hangs off of this number.


The Pipeline is 100% of the available business that is seen by the sales force. Anything that is in the pipeline is potential; anything that is in the pipeline is vulnerable to competitors, economic factors, and changes to business priorities. Over time an organization understands what size pipeline is necessary to meet the revenue commitment. Time is an important factor when looking at pipeline potential. What is the available pipeline for the next month, for the quarter, the year? Time is an important factor in any pipeline size determination. Many sales managers develop a rule of thumb for evaluating the pipeline. I have heard 2x revenue, 3x revenue, 4x revenue, etc. Over time an organization can develop a multiplier that looks like it predicts current revenue requirements. It is really not possible to do this because of short term changes that can occur in any sales model. It works most of the time, but sales management should really segment the pipeline or sales funnel to see what the potential deal flow is. Another item that factors into pipeline calculations is the sales cycle. Sales has always the clearest view of revenue potential in the current sales cycle, it gets fuzzier in the next sales cycle period, and by the time you reach the third sales cycle period it becomes a guesstimate. Say the average sales cycle is 3 weeks. That means that looking out 3 weeks should be fairly clear to sales management. There is still a good idea of 6 weeks out, after two sales cycles it then becomes an educated guess.

Pipeline management is so important; there must be a clear understanding of what can be added and what can be subtracted to the pipeline. In some organizations sales managers will demand that sales potential be added to the pipeline, to support revenue targets. This is destructive behavior because it does not give a realistic view of what potential there is. Also, sometimes sales reps will take items off to cover mistakes. Both the addition and subtraction of sales potential to the pipeline should be well understood and there should be at least a minimum amount of checks and balances to make sure the pipeline is a valid number. If your pipeline is garbage then the rest of the sales process will be garbage.


A sales forecast is not a presentation of the pipeline, backed with a statement such as “The pipeline is 3x our revenue requirements so we are good for the next month”. A forecast is prepared by sales management with the pipeline being only one element. A forecast is made by sales management taking into consideration all of the variables in the sales process and then informing management of the expected outcome compared to the revenue requirement. The revenue requirement might be 1 million, but that is far from a forecast. The forecast is what sales management feels it can deliver. The forecast number could be 2 million or .5 million, the number is what the number is. I myself do not like to give a single number, but most of the time 2 and if there is a big swing deal that may come in.

An example of a forecast could be that you be report 90% probability for 10 million, 95% probability for 9.76 million and 25% probability for 11.13 million. The 25% probability is tied to a potential big deal coming in. This method of forecasting when used on each individual in the sales team is a great way to normalize a sales department; and this helps sales management have a better view of what is going on.


All three, forecast, pipeline and revenue target are important to a sales department, and the understanding of the sales dynamics in your organization. As you approach the extremes of the bell shaped curve on things such as sales cycle length, you need to really pay attention to the impact on sales performance. The moral of the story is to know why you are doing something, as opposed to doing it because that is what you learned.