The always-excellent CSO Insights are soon to release the results of their annual 2011 sales performance optimisation report. The full report is due to be published in February, but CSO Insights have started to share some of their initial findings as a teaser in their recent email newsletter.
One of the findings really caught my eye, and reinforced what I’ve been observing in all our recent client assignments - that companies whose sales and marketing teams have jointly defined, agreed and documented their “ideal customer profile” do dramatically better than their peers.
Differentiating Sales Performance
You’ll need to get hold of the final report when it’s published to see the full detail - you can learn how to do this at the bottom of this article - but I thought it was worth summarising their initial findings, and offering some immediate recommendations.
CSO Insights sought to compare average sales performance between companies that had a clearly defined and mutually agreed “perfect prospect profile” and those that did not. According to CSO Insights, at the start of the sales cycle, it’s hard to tell the difference between the two groups.
Dramatic Impact on Win Rates
But as the sales cycle progresses, the difference becomes more profound, until when it comes to the outcome of forecast deals, the organisations with a formal prospect definition win 51% of forecasted deals, versus 42% for those who do not. That 9% headline difference is equal to 20% more wins.
In other words, organisations with a defined and documented “ideal customer profile” have a sales success rate more than 20% higher than those who do not. If you haven’t already got an “ideal customer profile”, or have a poorly defined one, imagine the difference that could make to your top line.
Developing Ideal Customer Profiles
So - if developing an ideal customer profile has such obvious advantages, why isn’t the practice universal? Well, firstly, it depends on a having a degree of cooperation between sales and marketing - so poorly aligned organisations are at a real disadvantage.
Second, you’ve got to actually put the effort in to create the profiles. That’s not to say that this is particularly challenging work, but you’ve got to be prepared to do your research and get involved in pattern recognition. What are the common characteristics behind winning deals? What do your most successful salespeople look for when they are qualifying?
Demographics Aren’t Enough
The classic demographic considerations (like industry, size or location) are rarely enough. We’ve found that structural, environmental and behavioural considerations are usually much more useful ways of identifying your ideal customer profiles. You can learn more here.
For example, is the organisation centralised or decentralised? What’s their management style? Are their IT organisations empire builders or outsourcers? Are they market leaders or followers? Early adopters or laggards? If you’re a SaaS vendor, what’s their history of buying cloud-based solutions?
Applying Ideal Customer Profiles
Many of these factors turn out to have tremendous predictive value when it comes to your chances of winning an order from them. Once you’ve completed your ideal customer profiles, you can use them to guide your marketing focus (there’s little point marketing to organisations who are never likely to buy), and to establish consistent sales qualification criteria.
But one word of warning - this is an exercise that needs to be reviewed at intervals. Make sure - through structured win-loss analyses - that you’re keeping on top of any changes in the pattern. Your ideal customer profiles will inevitably evolve over time.
Could Ideal Customer Profiles Boost Your Sales Success Rate?
If you’re not already using the concept, the answer is almost certainly yes - and potentially by as much as 20%. And even if you have bought into the concept, how consistently is it being applied across your organisation - and when was the last time you reviewed and updated them?
By the way, if you are prepared to share some of your company's current performance statistics, there's still time to participate in CSO Insight's survey - by following the link here. The nice folks at CSO Insights will even let you have a copy of the final report in return for your contribution.