Don't Let Your Train Come Off The Tracks
“The world cannot be understood without numbers. But the world cannot be understood with numbers alone.” – Hans Rosling, Factfullness.
The importance of numbers and data supported conclusion is nothing new. Neither is our attraction to the “big” conclusion, the absence of which tempts us to lose interest move on prematurely. We were tasked to look at demand gen and sales activities to identify the gaps and see if there were behaviors that could lead to better outcomes. We came across some “big” (seemingly obvious) conclusions but resisted the temptation to dismiss the entire data set and move on. We kept digging, adopting some skepticism on the numbers, allowing for the vagaries of human behavior and looked for those more obscured correlations and causations.
Let’s state the obvious and get that out of the way! We generally found that the more activities recorded against a contact or account correlated with greater success. In other words, the greater the number of "activities," – the greater the incidence of "wins." So just pause to think about that. It’s intuitively a “duh” moment – right? You’d expect to win more business in accounts where we have been more active, right? Of course, but which one comes first? The obvious question is; “do you become more active with an account BECAUSE you’re winning or vice-versa?” We all think that the more we do, the better chance we have. A classic chicken and egg, and the type of imponderable that drives us all mad! Before you all tune out, those of us in (or who have been in) sales can remember many deals where we were very active…and still lost, AND deals where we didn’t seem to do much and still won! The former type of deal is generally what we recall about ourselves, and the latter is what we recall about our colleagues!
The most interesting part of the discussion and data is more nuanced. The most interesting part looks for real inflection points or the lack of them. Tipping points where conversion and win rates increased “significantly.” Those give us a much stronger indication of their impact.
One other point. As we have said, our intuition tells us; "The more active a seller is in an account, the greater chance they have of winning.” Is it cause or effect, and frankly does it matter? Activity brings results either way. Let's NOT fall into that common trap of extreme thinking, i.e., just because some of these conclusions are obvious and even fatuous, we assume that all the conclusions are obvious and fatuous. They're not.
THE GAPS IN OUR THINKING
Before we jump into some real data (I know you can’t wait), just take a few minutes to examine how we think of these types of numbers (or any numbers). Human beings are notoriously bad at understanding ratios, odds, and chances. And the intuition we mentioned above can lead as astray. Here's an example, which we'll come back to as we talk more about conversion and close rates.
Nobel Prize winners Danny Kahneman and Amos Tversky’s research around a hypothetical scenario sheds light on this subject. “The dilemma offers participants a choice between two public health programs proposed by the authorities to deal with an epidemic purportedly originated in Asia that is threatening the lives of 600 people.” The topicality of this scenario is coincidental, by the way. Subjects are presented with two alternative public health strategies with their associated outcomes.
In this example, the vast majority of people surveyed favor Treatment A, which guarantees to save 200 lives. A so-called "sure thing" positive outcome.
In their next version of the research, the Israeli psychologists changed the wording of Treatment A from saving 200 lives to stating that 400 would die.
This became known as Prospect theory – “in this iteration exactly as Prospect Theory predicted Kahneman and Tversky’s analysis revealed a completely different pattern of results. When presented with this new pair of alternatives [the second example above], barely 20% of the participants went for Treatment A in spite of the observation that out of a cohort of 600 patients, the prognosis 200 lives saved and 400 lives lost amount to precisely the same outcome.” You'll see that in both examples, Treatment B does not change, and Treatment A only changes in the way it is described (save 200 lives Vs. 400 people die). What’s this got to do with conversion rates and win rates? Hold that thought.
DRIVING THE TRAIN OF DEMAND GEN
The first area we looked at was conversion rates, specifically from MQL to SQL. We cannot escape "definitions" here, so let's not try to. MQL definitions are all over the place. I've spent plenty of time talking to companies whose definitions of their MQL sound more like those of a Target Market – right contact, right company – that’s it! Our definition was a contact in a target company that was either an influencer, recommender, or decision-maker, AND they had committed to participating in a "discovery" (getting to know each other or “handshake”) call. The challenge was that only 18% of these were converting after the discovery call. This was deemed to be too low. To be clear…a BDR would speak to the contact, and that contact would agree to a discovery call. 18% of those would then convert to SQL, but the problem was that 82% of these discovery calls would then not proceed any further. Let’s just pause for a second and digress into the importance of how information is contrasted and presented (using Kahneman & Tversky) and how it affects our perceptions and decision-making. It’ll provide you some food for thought the next time you’re presenting information like this!
Let’s use the Prospect Theory model for lead outcomes (using round numbers):
There’s no reason to suspect we all wouldn’t choose Outcome A in the first example. So that was maybe a fun little distraction, but contains lessons for how you present information in the future? But let’s get back to the “why” of it.
TELL ME WHY?
After sitting in on more than a few of these "handshake" calls, we found that the sellers were looking for deals, nothing more. They weren't interested in "having conversations" or "engaging." Not surprising being as sellers are paid to "sell" (meaning they have to find “deals”), and despite all the fashionable hype around "having conversations" and "engaging" (which is all quite correct, by the way), no one had shared this importance with the sellers. The problem here is involving the sellers prematurely. If your go-to-market does not contain early engagement by the sellers as part of the stated process (and compensation plan), this approach will fail. In other words, you need an alternative receiving function for this type of “lead” where they understand that their job is to “engage” and where their compensation plan includes recognition and reward for this type of “early engagement.”
The other common mistake was sellers talking “me, we and us” and not “you and them.” Once we’d re-set expectations and coached on sharing some experiences and insights to prompt the prospect to talk about themselves and their situation, conversion rates to SQL doubled.
Everybody says they have “tipping points” in their process. Thresholds where they expect certain conversion rates to happen once a prospect gets to those “gates” along their journey. Most leaders will also say that there is one significant "tipping point" – which "if we can get the prospect to, we convert 80% of them." It could be a demo or a visit of some type. Strangely enough, everybody says they have one of these, but do they? Or is it really about working the process accepting moderate conversion rates along the way? The “big tipping point” argument smacks of that human attraction for the dramatic as well as no small degree of vanity. To use a baseball metaphor, maybe we should be more interested in “singles and doubles” than looking for the “grand slam, home run.”
In one case, we found the following:
From Prospect to Customers, our client had 8 maximum “activities” that are recorded in Salesforce. There are others, but these were the significant ones that were recorded and managed to. Among other things, we found the following:
Crossing the threshold from 3 (or fewer) Activities to 4-7 Activities increased the win rate by 30%. Put another way, going from 4-7 Activities vs. 1-3 Activities increased the probability by 1/3rd. We could not determine the relative impact of the individual activities 4 through 7 (i.e., if anyone activity of the 4th through the 7th was relatively more impactful than another, and if so, which one had the greatest impact.)
The bigger news was that win rates increased to 80% at the 7+ activity threshold. They would win 1.5 in 4 at the 6th activity threshold but 4 out of the 5 if they pushed through the 7th activity. While we’re not stipulating what these activities were (for competitive reasons), you'll have to take our word that the 7th activity (for example) was nothing as fatuous or obvious as contract signing or something as equally meaningless!
So what are we to conclude from all this?
Like we said at the get-go, it’s easy to argue that the conclusion is self-evident (you win more deals, the more active you are in those deals) and move on. After all, if you only meet with a prospect once, your chances of winning are low. But again, beware of these gaps that open due to thinking in extremes – seeing things as a black or white is a trap that we all fall into. It's an oversimplification to make this obvious statement and then miss the other insights that still exist.
Find the balance. Layout the demand gen and sales process, recognizing the transition points and conversion goals. Manage the team to the number and type of activities that generate the conversion rates you need, recognizing that you'll probably find these will change, and you'll need to change with them. In the example we used, our client defined the “7 Steps to Success” that sellers need to follow. From initial calls and face-to-face meetings, through demos, or discovery and shared solutioning, etc. Nothing too revolutionary here. But what we do see are well-considered processes that people invest time to build and that are either not followed or adopted in a casual, undisciplined manner.
Recognize the type of behavior your go-to-market and compensation plan will drive. Sellers will usually accept "less-qualified" conversations as they recognize the need to show activity and willingness. New business prospecting activity (in any form) fulfills many objectives. Beware, though, that much of this is about political signaling, NOT constructive pipeline building.
In our experience, everybody’s “tipping points” are similar, for example, big demos or physical visits. “If we can just get the buyers to come to visit our office, we convert 80% of them” is a phrase we hear often. As we said earlier, this thinking entertains the notion of the "chicken and egg," which drives one of two outcomes: (i) an increase in insanity as we go mad over-analyzing (ii) we become frustrated and overly dismissive of everything, and anything associated with contemplating these things, concluding that we can learn nothing from this type of analysis. That’s a mistake. All you might care to know is that a corporate visit seems to drive an 80% conversion, so crack on with them, and ask questions later.
When it comes to forecasting, place more confidence in forecasts that satisfy both the quantity (whatever your number is) and the quality of the activities you have identified in your sellers’ process. I know we all got in touch with our feelings back in the '80s, and when it comes to sales forecasts…that's where you should probably leave them.
We always talk about the need to establish balance and acknowledge how difficult this is. This situation is no different. You must strike a balance between being overly prescriptive and too casual. If you get overly prescriptive, you'll create too rigid a set of rules that very few prospects will satisfy and that will stifle nuanced selling. If you set too few rules or are too casual in enforcement, every situation will become "management by exception," with "gut feel" and seller’s intuition ruling the day. Along with coaching, this is the area that demands most of a sales leaders’ time and becoming good at it involves more than stating your confidence in your "ability to read people" (in this case, your sellers).
If you adopt some skepticism to what your sellers tell you it doesn’t mean you’re calling them liars, although they will show indignance and fain insult. They're maybe not overtly lying to you; they're just victims of the same biases and paradoxes that afflict us all. They are also (by the way) simply demonstrating the confidence derived from the “abundance mentality” you insist they project. You can’t have it both ways!
MINDING THE GAPS IN B2B SALES AND MARKETING INVOLVES FINDING THEM FIRST.
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