Sales Performance Optimization Study 2014 Key Trends Analysis

Transcription

1 CSO Insights Sales Performance Optimization Study Measuring N Sales & Marketing Effectiveness Sales Performance Optimization Study

2 Copyright 2014 CSO Insights All Rights Reserved. Terms and Conditions Printed in the United States of America. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be produced or distributed in any form or by any means, or stored in a database or retrieval systems, without the prior written permission of the publisher. For additional information, contact CSO Insights, 3855 Orange Court, Boulder, CO 80304, Phone: (303) , jim.dickie@csoinsights.com. The reader understands that the information and data used in preparation of this report were as accurate as possible at the time of preparation by the publisher. The publisher assumes no responsibility to update the information or publication. The publisher assumes that the readers will use the information contained in this publication for the purpose of informing themselves on the matters which form the subject of this publication. It is sold with the understanding that neither the authors nor those individuals interviewed are engaged in rendering legal, accounting, or other professional service. If legal or other expert advice is required, the services of a competent professional person should be sought. The publisher assumes no responsibility for any use to which the purchaser puts this information. All views expressed in this report are those of the individuals interviewed and do not necessarily reflect those of the companies or organizations they may be affiliated with, CSO Insights, Insight Technology Group, or Sales Mastery. All trademarks are trademarks of their respective companies CSO Insights CSOiCL67112

3 Acknowledgments We would like to thank all of the sales executives who annually share the data related to their previous year s sales performance and the best practices they are leveraging to optimize how they sell. Without their support and insights, the development of the research knowledge base used to create the 2014 Sales Performance Optimization Topical Reports would not be possible. Next, we would like to thank the following sales effectiveness companies for their partnership and thought leadership support for this project: Accenture, Richardson, Velocify, Xactly, and Zilliant. We owe a debt of gratitude to many colleagues, mentors, and advisors whose help made this project possible. To list them all would be impossible, but a few deserve special mention: Anthony Robbins, Co-founder at CloudCoaching International, Walter Rogers, CEO and Co-founder at CloudCoaching International, Tim Sullivan at Sales Performance international, and Jack Hubbard at St. Meyer & Hubbard. Finally, we would like to thank our editing team whose hard work, diligence, and endless hours made this project possible. Thanks to Kim Cameron, Diane Hodges, PhD, and Andy Jesmok CSO Insights CSOiCL67112

4 Table of Contents 2014 Sales Performance Optimization Study Introduction Sales Performance Optimization Study Key Trends Analysis Introduction... 1 Selling 2013 On Average, How Well Did You Do?... 3 Sales Performance Optimization Study: 2012 to 2013 What Has Changed?... 6 The Path to Achieving 2014 Revenue Plans... 7 Sales Performance and the 2014 Sales Relationship/Process Matrix... 9 Beyond the Averages: Attributes of World-Class Sales Organizations Addendum A Sales Relationship/Process Matrix Addendum B 2014 Study Demographics Current Research Studies by CSO Insights About CSO Insights CSO Insights CSOiCL67112

5 2014 Sales Performance Optimization Study Introduction The data used for this analysis were gathered as part of CSO Insights 20th annual Sales Performance Optimization (SPO) study. As part of this research effort we surveyed over 1,200+ companies worldwide, collecting information on over 100 sales effectiveness related metrics. A detailed breakdown of the survey participants can be found in the introduction to the 2014 Sales Performance Optimization Key Trends Analysis Topical Report. The following graphs reflect the aggregated results from the study participants. Advisory Services clients seeking segmented responses based on factors such as industry, company size, country, complexity of sales process virtually every metric in the study may obtain this information by contacting their CSO Insights Analyst Sales Performance Optimization Study Key Trends Analysis Introduction An advantage derived from conducting a longitudinal study (versus a one-time assessment on a topic) is the ability to see trends over time. In our initial Sales Performance Optimization study twenty years ago, we asked the 150 participating firms to identify their sustainable competitive advantages. Number one on the list was the products they sold, and number two was their level of service. Fast forward to today and see how much things have changed. Product life cycles across all industries have collapsed to the point where if a competitor doesn t have a feature or capability that a company needs today, they may well have it tomorrow. The cell/smartphone market is a perfect example of this trend. Whereas hardware architectures once had a lifespan of years; in the smartphone space, real competitive advantages in their product offerings can be measured in mere months or even weeks. And what about service? Today, good customer service is the entry price for consideration. In that, if your company doesn t have it, you will not make it to the initial evaluation list. If you do have it, well then, so does everyone else, and you will be on the short list with strong competitors for the final decision. So, where is sales today? Is it at the point where everything is commoditized, and the final decision to buy anything boils down to price? That was the question we sought to answer this year as we designed our 2014 Sales Performance Optimization study CSO Insights CSOiCL

6 For those who may be new to CSO Insights, for the past twenty years we have conducted primary research to assess the challenges sales teams face, why the problems exist, and how firms can leverage people, process, technology, and knowledge to address those issues. While our initial focus was the U.S.-based technology sales marketplace, we expanded to a major cross-industry, crossgeography based effort with over 5,000 companies taking part in our four major studies in 2013 and into The data used for the following Key Trends Analysis were gathered as part of our 20th annual Sales Performance Optimization study. For this research effort, we surveyed more than 1,200 companies worldwide, collecting information on over 100 sales effectiveness metrics. A breakdown of survey participants by vertical industry demographics can be found in Addendum B of this analysis. For those who are familiar with CSO Insights past Sales Performance Optimization studies, a fundamental change in how the information is presented will be evidenced. In the past, we produced twelve topical reports based on the study data. When we met with our advisory board in mid-2013 to plan the 2014 Sales Performance Optimization study, the sales and marketing executives we turned to for candid advice gave us exactly that. They pointed out that the format of our analysis came from an analyst s perspective, meaning we wanted to put topics into nice compartmentalized buckets. For example, last year two of the topical reports dealt with core CRM and CRM 2.0 technologies, focusing on the functionality of each application. Our advisory board, CSOs, and CMOs reminded us that their executive positions were based on functional areas within their organizations, and as such, they were more interested in how technology could help them achieve gain or remove pain. Reflecting on the fact that CSO Insights roots are tied to managing sales and marketing teams, we asked our advisors to help us explore a new and macro way to deliver our study results in a way that was more meaningful to the C-suite and senior sales and marketing leaders, and thus would deliver more value. After a brainstorming session, we ended up with the following seven words on a white board: Find More, Win More, Keep & Grow More As we discuss further in the 2014 Sales Performance Optimization Going Forward Analysis, over 94% of firms stated that their revenue target for this year is higher than in Putting a goal on the wall is one thing; making it happen is another. To achieve increases in sales performance often means firms have to execute differently than they did the previous year. But what aspects that sales organizations deliver to, market to, sell to, and service their customers best represent their best chances for improvement? To help firms determine these is what compelled us to reorient a major part of our 2014 Sales Performance Optimization study analysis to include a detailed focus on Find More, Win More, and Keep & Grow More CSO Insights CSOiCL

7 But before we dive into optimizing 2014, let s first review 2013 to see which lessons we can learn from, where we have just been, and apply these to where we are going. Selling 2013 On Average, How Well Did You Do? The first metric we look to in order to gauge what is happening in the world of selling is individual rep performance. Specifically, how many reps met or exceeded quota? The chart to the right summarizes the distribution of responses we received from the 2014 Sales Performance Optimization respondents. The average in 2013 was 58.2%, which represented a decline in the percentage of salespeople who met or exceeded quota for the first time in three years. The chart on the next page shows the trend over the past five years. The 2009 number represents an all-time study low and came on the heels of the economy going into a tailspin at the end of * * * 2014 CSO Insights CSOiCL

8 Since that time sales teams made a recovery coming up with ways to hit their goals even in the face of uncertainty over the next couple of years before flattening out in 2012 with 63.0% of reps making goal. It is worth noting that at the end of last year, 92% of firms raised their revenue targets for But this year, looking at sales team performance, more salespeople couldn t meet this challenge, and the percentage of reps making plan dropped noticeably. So next we want to understand if/how this impacted the sales force as a whole. The chart below shows the distribution of responses received when we asked how the company did against their overall revenue target. The average for 2013 across the 1,200+ firms surveyed came in at 83.9%. * * * 2014 CSO Insights CSOiCL

9 Again, to help put this in perspective, on the next page, we see the averages for overall plan attainment for the past five years. This is a similar story to that of the trending of the percentage of salespeople meeting/exceeding quota; an increase in 2010, an increase in 2011, essentially flat in 2012, and a noticeable decrease in performance in In summary, we have two trends and one story; sales teams stepped up their game for the past few years, and in doing so, made a noticeable contribution to increasing revenues. But the impact of that tenacity to sell more through hard effort may well have hit its peak. In comparing sales results in 2012 to 2013, we saw a number of trends that can positively and negatively impact performance. We conduct a deeper analysis into a number of these factors in each of the individual topical reports that comprise this year s Sales Performance Optimization analysis. We have a few significant findings to share now so you can consider the implications as you read each of the study analyses CSO Insights CSOiCL

10 Sales Performance Optimization Study: 2012 to 2013 What Has Changed? Sales Force Demographics Analysis: Sales force turnover hit another all-time study low. With planned 2014 net-new hiring also decreasing, on the plus side, voluntary churn in the sales force should remain low for this year. On the downside, the average deal size decreased meaning reps need to close more deals to hit plan. Sales Process Analysis: While the study analysis continues to show that companies with a formal sales process outperform firms that let their sales reps decide how to engage with customers, we continue to see roughly half of all sales organizations consciously opt to go the random/informal sales process route. Find More Analysis: Much of the burden for surfacing leads continues to fall on salespeople, although some firms are turning to customer support to identify new sales opportunities. Sales is also having more difficultly converting qualifies leads to first conversations. Win More Analysis: Win rates of forecast deals are once again lower on a year-over-year basis. More firms are looking to CRM 2.0 technologies to help increase the effectiveness of sales teams at performing key aspects of the sales process. Keep & Grow More Analysis: While virtually all companies view their existing customer base as an asset that needs to be protected and further developed, less than a third of firms have a formal account management process in place. The biggest Grow More challenge is penetrating other business units within existing customer accounts. Sales Management Analysis: While poor forecast accuracy is seen as a problem sales management needs to address, few firms are opting to use CRM 2.0 solutions to support this task. In addition, while sales coaching is seen as important to sales rep success, only one-in-four firms has formalized that process. Going Forward Analysis: Even though the 2013 sales performance numbers slipped from the percentages achieved in 2012, nearly all companies surveyed stated that they have raised their 2014 revenue targets. The issue they now face is: what will be different this year that will help reps hit those targets? 2014 CSO Insights CSOiCL

11 The Path to Achieving 2014 Revenue Plans To assess how sales executives plan to increase sales performance, we asked study participants to identify their 2014 top objectives. The following chart shows the wide variety of paths that sales organizations are considering to achieve the revenue growth they, and their investors, are expecting this year. The objectives on the chart reinforce conversations we ve had with our advisory board. Considering that Capture New Accounts and Optimize Lead Generation are first and third on the list, Find More and Win More are getting the lion s share of attention for But for many firms, their existing customer base also represents a great potential to assist in achieving this year s growth, if they can improve at Keep & Grow More CSO Insights CSOiCL

12 This list represents the best thinking within firms that need to know what needs to be accomplished to hit higher numbers, but it doesn t say anything about how to do it. So, the next phase of the study analysis looks for the key levers that companies can utilize to achieve these goals. One item to point out: the statements 58.2% of reps made quota and 83.9% of overall firm attained plan are averages. As with any average, these results are comprised of a variety of data inputs that include some figures above and below average. Let us share what we found when we analyzed the study findings in detail. * * * 2014 CSO Insights CSOiCL

13 Sales Performance and the 2014 Sales Relationship/Process Matrix By now, you should be familiar with our contention that how you sell can be a sustainable competitive edge. This finding arose from the trends we saw year-over-year in our Sales Relation/Process (SRP) Matrix analysis of the Sales Performance Optimization study data. The SRP Matrix is based on research we initially published in Harvard Business Review (HBR) in 2006 and then expanded to a paper we published with HBR in Europe in The outcome of those analyses was that the level of sales process rigor you apply to the marketplace in sales, combined with the level of customer relationship developed with your client base, directly effect sales performance. The following is a summary of the breakdown showing levels of customer relationship and sales process adoption rates based on the 2014 Sales Performance Optimization study data. CSO Insights 2014 Sales Relationship/Process Matrix See Addendum A for Levels of Customer Relationship and Sales Process Implementation Definitions CSO Insights CSOiCL

14 Two sections of the SRP Matrix are gray. They illustrate that if companies are totally random in process, while individual salespeople may reach the status of trusted partner with their specific clients, the company as a whole does not get to that level. At the other end of the spectrum, when a company has implemented a Level 4 Dynamic Sales Process, they have normally been able to determine how to reach, at a minimum, the relationship of Level 4 Preferred Supplier with the majority of their customer base. In focusing on the remaining sections of the matrix, companies that are in the red section of the grid tend to perform the same (in terms of key sales metrics) as those firms in the yellow, and those in the green sections. The reasoning behind our choice of the red, yellow, and green colors becomes evident when looking at the chart to the right that compares performance between these three groups. After you review the numbers in the chart, ponder these questions. As a CEO, would you rather have a Level 1, Level 2, or Level 3 sales organization? As an investor, would you rather own stock in a company with a Level 1, Level 2, or Level 3 sales organization? Finally, let s bring it closer to home: as a CSO, which level of sales organization would you want to lead? Let us point out the distinctions that separate these three levels that have been consistent over the past seven years and are becoming wider each year. A case in point is the variance in outcome of forecast deals. When we first published the SRP Matrix in the 2008 Sales Performance Optimization report, Level 2 firms had a five point higher win rate than Level 1 firms; today that spread is nine points. And, the range between Level 2 and Level 3 firms has also increased to seven full points CSO Insights CSOiCL

15 These differences in performance have not been lost on the world of sales. We have been tracking the percentage of firms that fall into each of these categories over the past seven years. As shown in the chart to the right, companies (whether consciously or subconsciously) have made moving up the customer relationship/sales process hierarchy a priority; although, as we see in the 2012 to 2013 comparison, firms gave up some ground this past year. When looking at the performance differences between levels displayed on the previous page, and then reviewing the distribution percentages shown in this chart, you may question why there aren t more Level 3 companies. Having benchmarked hundreds of firms that have started sales transformation projects, sales management often underestimate the amount of change required to make the transition. Going back to the SRP Matrix, let s discuss what might seem to be a reasonable shift for companies: Moving from Level 1 Informal Sales Process and Level 2 Preferred Supplier to Level 4 Dynamic Sales Process and Level 3 Solutions Consultant. What kinds of changes might these entail? Do you think that transition would change the profile of the salespeople you hire to fill open territories? Would revise your compensation programs, or leave them the same? Would adoption of a sales methodology or usage of your CRM system be voluntary? Could you see the profile of the people you move into sales management changing? Would you continue to coach and mentor sales reps the same way? 2014 CSO Insights CSOiCL

16 Again, having profiled these types of transitions, we can tell you the answer to most, if not all of these questions, is no. And, if managed incorrectly, those noes turn into a series of decisions that can create an environment of resistance to change on the part of the sales force. So, yes, moving up the customer relationship/sales process curve can be challenging, but staying where you are especially if you are Level 1 can be fatal to your company s business health. * * * 2014 CSO Insights CSOiCL

17 Beyond the Averages: Attributes of World-Class Sales Organizations In the 2013 Sales Performance Optimization Key Trend Analysis, we identified the attributes of high performing sales forces in The feedback we received was useful; however, today the qualities of world-class organizations go broader and deeper. This year we segmented the data into three categories: the Top 10% of study participants, the Middle 60%, and the Bottom 30%. We then compared fifty-two sales performance metrics. The following are mega-trends that surfaced when analyzing the aggregated study data across all 1,200+ companies surveyed. The Bottom 30% 44.7% of Reps Met/Exceeded Quota and Achieved 50.8% of Full Company Plan 64.2% of firms are Sales Process Level 1 or % of firms have a Sales Process Adoption Rate of >75% The Average Customer Relationship Level Score was 2.76 The Average Spend on Training Per Sales Rep Per Year was $1, % of firms have Implemented a Core CRM System Of firms that have a Core CRM System, 34.5% have an Adoption Rate of >90% The Middle 60% 63% of Reps Met/Exceeded Quota and Achieved 91.6% of Full Company Plan 54.9% of firms are Sales Process Level 1 or % of firms have a Sales Process Adoption Rate of >75% The Average Customer Relationship Level Score was 2.86 The Average Spend on Training Per Rep Per Year was $2, % of firms have Implemented a Core CRM System Of firms that have a Core CRM System, 34.7% have an Adoption Rate of >90% 2014 CSO Insights CSOiCL

18 The Top 10% 71.6% of Reps Met/Exceeded Quota and Achieved 116.6% of Full Company Plan 41.9% of firms are Sales Process Level 1 or % of firms have a Sales Process Adoption Rate of >75% The Average Customer Relationship Level Score was 3.24 The Average Spend on Training Per Rep Per Year was $2, % of firms have Implemented a Core CRM System Of firms that have a Core CRM System, 50.9% have an Adoption Rate of >90% Advisory Services clients should contact their CSO Insights Analyst for an individual sales performance review where we will share the findings specific to your industry, sales force size, geography, sales cycle complexity, and more. These mega-trends show the interplay between customer relationships, sales process implementation, and sales performance. Also of note is not only the difference of investments made in sales training and technology, but also the dissimilarity in adoption levels. Advisory Services clients should contact their CSO Insights Analyst for an individual briefing on user ratings of the various sales methodologies and CRM solution providers that the study participants have chosen. As you review the remaining 2014 Sales Performance Optimization Study topical reports, you will see the depth and breadth of the challenges facing sales teams today and the numerous opportunities for improvement. We encourage you to use this information as the basis for brainstorming, goal planning, and to identify and prioritize your organization s operational challenges. Everyone can benefit from understanding the strategies and tactics of other companies, but in the end, you have to implement solutions that help your teams Find More, Win More, and Keep More & Grow More in your marketplaces. Please feel free to contact us directly at: Jim Dickie Barry Trailer Managing Partner Managing Partner CSO Insights CSO Insights (303) (916) jim.dickie@csoinsights.com barry.trailer@csoinsights.com 2014 CSO Insights CSOiCL

19 Addendum A Sales Relationship/Process Matrix The main premise of the Sales Relationship/Process (SRP) Matrix concept is that in addition to what you sell, there is the matter of how you sell. How you sell has two major components: 1) what value your customer perceives you are bringing to the table your relationship; and 2) how you engage and work with your clients your process. Within these two aspects of selling, companies fall into one of a few categories. For those of you who are new to our SRP Matrix concept, let's explore relationships first. Companies achieve one of five different levels of relationship with customers and prospects in their marketplaces: Five Levels of Sales Relationships Level 1 Approved Vendor: You are seen by the majority of your customers as a legitimate provider of the products or services you offer but are not recognized for having any significant, sustainable competitive edge over alternative offerings. Level 2 Preferred Supplier: Based on your marketplace reputation and past dealings with customers, while competitors may offer alternatives, you are normally seen as the preferred vendor with whom to do business. Level 3 Solutions Consultant: Based on a specific set of product-related, value-added insights or services you offer, your customers see you not only as a vendor, but also as a consulting resource on how to best use your products or services. Level 4 Strategic Contributor: Above and beyond the products and services you offer, your customers view you as a source of strategic planning assistance for dealing with broader-based challenges they are currently facing. Level 5 Trusted Partner: At this highest level, you are seen as a long-term partner whose contributions products, insights, processes, etc. are viewed as key to your client s long-term success CSO Insights CSOiCL

20 In addition, sales organizations fall into one of four levels relative to the processes used to find, create, and expand customer relationships. Four Levels of Sales Process Level 1 Random Process: Your company may be perceived as being anti-process, although what you really lack is a single standard process. Essentially sales reps do their own thing their own way. Level 2 Informal Process: Your company exposes your salespeople to a sales process, indicates that they are expected to use it, but its use is neither monitored nor measured. Level 3 Formal Process: Your company regularly enforces the use of a defined sales process (sometimes religiously). You conduct periodic reviews of the process to see how effective it is and make changes based on that analysis. Level 4 Dynamic Process: Your company dynamically monitors and provides continuous feedback on sales use of your formal sales process. You proactively modify the process when you detect key changes in market conditions new competitors, changes in governmental regulations, shifts in the economy, etc CSO Insights CSOiCL

21 Addendum B 2014 Study Demographics Since 1994, CSO Insights has conducted an annual survey to assess the challenges facing sales teams, determine why those problems exist, and benchmark how companies are leveraging people, process, technology, and knowledge to increase the efficiency and effectiveness of their sales forces. Again this year, the 2014 Sales Performance Optimization study had broad-based participation. The chart provides a breakdown of the industry segments of the firms taking part in the 2014 Sales Performance Optimization study. Based on the expansion of the Sales Performance Optimization study participation base, we are able to produce segmented analyses for the following vertical industries: Advertising/Media/PR/Publishing Banking Distribution Manufacturing Medical Devices Professional Services Business Professional Service Technology Software Telecommunications 2014 CSO Insights CSOiCL

22 Current Research Studies by CSO Insights 4,000 Firms Worldwide Surveyed Annually Sales Performance Optimization Key Trends Analysis Sales Force Demographics Analysis Sales Process Analysis Find More Analysis Win More Analysis Keep & Grow More Analysis Sales Management Analysis Recommendations Going Forward Sales Management Optimization Key Trends Analysis Lead Management Optimization Key Trends Analysis Sales Compensation & Performance Management Key Trends Analysis Custom Surveys Addressing Key Sales and Sales Management Challenges Worldwide About CSO Insights * * * CSO Insights is a sales and marketing effectiveness research firm that specializes in measuring how companies leverage people, process, technology, and knowledge to improve the way they market and sell to customers. For twenty years, CSO Insights surveys of over 15,000 sales effectiveness initiatives have been the standard for tracking the evolution of the role of sales, revealing the challenges that are impacting sales performance, and showing how companies are addressing these issues CSO Insights CSOiCL