According to some of the latest reports from Sirius Decisions, CSO Insights and other leading B2B research organisations, the best-in-class sales and marketing organisations are as much as 5 times more effective than the average in converting inquiries into sales - as well as maintaining significantly faster average annual revenue growth.
How do they achieve this? A large part of the answer lies in how they choose to measure their performance - and how they apply what they learn to achieve continuous improvement. I’m going to be sharing the key principles in a free BrightTALK webinar on “Applying Smarter Metrics to your Sales and Marketing Funnel” on 22nd May at 2pm UK. You can register for the webinar here - but I’d like to share some of the key ideas in advance.
Every Sales Funnel Leaks - so come to terms with it
Wikipedia defines a funnel as “a pipe with a wide, often conical mouth and a narrow stem… used to channel liquid or fine-grained substances into containers with a small opening” - and they go on to note: “without a funnel, spillage would occur…”
So here’s the problem: sales funnels demonstrate a range of behaviours that anyone using the traditional definition of funnel would struggle to come to terms with:
- Spillages happen all the time: the funnel leaks - opportunities can fall out at any stage
- Opportunities defy gravity - many seem to swim upstream (move backwards)
- Opportunities get stuck - eddying round and around rather than flowing from top to bottom
- Opportunities can enter the funnel at any stage - if only because we spot them late
Despite the flawed metaphor, the concept of the funnel remains highly useful - as long as we acknowledge its shortcomings. Perhaps most important of all, if an opportunity is going to leak anyway, we’re far better forcing it to leak early in the process, before we’ve wasted significant energy and resources on it.
First, you must clearly define your funnel
Let’s accept that any opportunity in your funnel needs to pass through a series of stages. In fact, in often helps to think of each stage being separated through a qualifying sieve or filter (let’s call them milestones) through which an opportunity must pass if it is to progress. Oh, and you must manage marketing and sales activities as a single integrated funnel.
Poorly defined sales and marketing stages and milestones lie at the heart of many funnel performance issues. Basing them on sales activity is a really bad - almost unworkable - idea. You must instead define your stages and milestones based on where the prospect is in their buying decision process - and back it with clear evidence.
This is critical. If you don’t carefully define your stages and milestones based on buying behaviour, and insist that everyone in your marketing and sales organisation applies them consistently, it doesn’t matter how carefully you collect your metrics - you will be measuring shifting sand.
Here are some of the metrics that we’ve found most useful in determining the true health of your marketing and sales funnel. Let’s start with the basics. You should be looking at these from every angle: the whole funnel, by sales person, by geography, by product, by campaign, etc:
- Overall volume and value of the opportunities in the funnel
- Volume and value of opportunities by stage
- Conversion rate from top-to-bottom and stage-to-stage
- Funnel shape: visualising the funnel can offer invaluable insights
Some of the most valuable metrics are time-based. If your CRM system is not set up to capture the time each opportunity spends at each stage in the funnel, start capturing this information today. If your CRM system can’t capture this, change your CRM system. It’s that important.
Here’s why: research by the TAS Group showed that winning opportunities passed from stage to stage in the sales funnel an average of more than 150% faster than losing opportunities. You simply have to be able to work where deals get stuck, why, and what to do about it before it’s too late. Key time-based metrics include:
- End-to-end time elapsed
- Average time-to-close by stage
Another invaluable source of quality-based is opportunity scoring. Swayne Hill of DataDrivenSales wrote an excellent article on the subject here. Invest time in working out the 8-10 common characteristics of your idea prospects and opportunities. Weight the attributes, assign scores, and use the information to help assess the quality of the opportunity. If you get this right, the better the quality, the more likely the opportunity is to close - it can help ensure that you’re focusing on the right opportunities.
To learn more, please register for the webinar. Even if you can’t attend on the day, you’ll be able to review an on-demand recording after the event at your leisure. I hope to see you on the 22nd!
One more thing: you might also like to take our latest 10-minute self-assessment - it could help you identify some of the other factors that might be constraining your revenue growth. Simply click here to take the test.