Inside/Telesales. Performance Optimization

Transcription

1 Inside/Telesales Performance Optimization 2008 Survey Analysis Compliments of Jim Dickie Barry Trailer CSO Insights CSO Insights Boulder, CO Corte Madera, CA CSO Insights 1

2 Other Current Research Studies by CSO Insights Lead Life Cycle Optimization Executive Report Demystifying the Sales Effectiveness Challenge Executive Report 2008 Sales Performance Optimization Executive Report Available via the Research Client Portal or the website CSO Insights 2

3 Other Current Insights White Papers by CSO Insights Sales Strategy Insights Sales 2.0 Part 1. - Time to Run Away and Join a New Circus Sales 2.0 Part 2. - Think, Think Differently, Think Again Sales Management Insights Sales Management 2.0: Metrics Not Hunches Optimizing Hiring Effectiveness: Getting the Right Team on the Field Demand Generation Insights Optimizing Lead Generation Building Relationships: Turning Cold Calls into Opportunities Optimizing Sales Messaging Sales Knowledge Management Insights Proactive Sales Intelligence Dynamic Sales Knowledge Sales Knowledge Management: Is Progress Being Made? Sales Process Insights The Impact of CRM and Sales Process on Sales Effectiveness Sales Process Primer Sample Sales Process Template Customer Relationship Management (CRM) Insights On Demand versus On Premise CRM: Are There Performance Differences? Improving Inside Sales Effectiveness Using Technology : Putting Web Collaboration to Work The Impact of CRM and Sales Process on Sales Effectiveness Available via the Research Client Portal or our website, CSO Insights 3

4 CSO Insights 4

5 Inside/Telesales Performance Optimization 2008 Survey Analysis Compliments of Jim Dickie Barry Trailer Sales Mastery Press Mill Valley, California CSO Insights 5

6 Copyright 2008 CSO Insights All Rights Reserved. Terms & 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 except in the cases of brief quotations embodied in critical articles and reviews. For additional information, contact CSO Insights, 4524 Northfield Court, Boulder, CO 80301, 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 6

7 Acknowledgements First, we wish to thank all of the far-sighted industry executives who unselfishly contributed their time and insights to the development of the research knowledge base used in the creation of this publication. Next, we would like to thank the following sales effectiveness solution experts for their underwriting and thought leadership support for this project: FrontRange Solutions Goldmine, Jigsaw, and Cisco/Webex. Finally, we owe a debt of gratitude to many colleagues, mentors, and advisors whose help made this report possible. To list them all would be impossible, but a few deserve special mention: Trish Bertuzzi of the Bridge Group for her outstanding support covering the Eastern U.S.; Sally Duby and PhoneWorks for their support covering the Western U.S.; and Willis Turner, President and CEO of Sales & Marketing Executives International (SMEI). Thanks, too, to Kim Cameron, our new Executive Director of Research, for doubling up and providing her keen-eyed editing. And a special thank you to Denise Quinn, who was involved to an unprecedented level in the creation of this expanded report and we are pleased to have as the most recent edition to the CSO Insights team. Compliments of CSO Insights 7

8 Table of Contents 2008 Sales Performance Optimization Project Overview Introduction Sales Force Demographics Percentage of Inside/Telesales Reps Achieving Quota Percentage of Company Revenues from Inside/Telesales Primary Functions of Inside/Telesales Reps Defining Inside/Telesales Territories The Inside/Telesales Organization (partnered with field/channel) Ratio Between Inside/Telesales field/channel Sales Reps Inside/Telesales Reps Average Quota Overlaying Sales Quotas for Inside/Telesales Reps and Managers Compensating the Inside/Telesales Manager Measuring/Compensating Inside/Telesales Performance Inside/Telesales Rep Total Targeted Compensation Other Types of Recognition/Incentive Programs Average Tenure of Inside/Telesales Reps Current Annual Inside/Telesales Rep Turnover Rates Reasons Inside/Telesales Reps Voluntarily Leave Retention Programs for Inside/Telesales Reps Average New Inside/Telesales Rep Ramp-up Time Inside/Telesales Rep Time Allocation Sell Cycle Analysis Average Deal Size Length of Average Sell Cycle Number of Calls Required to Close a Deal CSO Insights 8

9 Lead Generation Analysis Percentage of Leads that Progress to an Initial Customer Discussion Percentage of Initial Discussions that Progress to a Presentation Percentage of Presentations Resulting in a Sale Percentage of Deals that Close as Forecast Outcome of Forecast Deals Sales Strategy Development Assessment Ability to Prioritize Accounts upon Which to Focus Ability to Develop Strategic Plans for Key Prospects Ability to Thoroughly Research New Prospects Before Calling Them Ability to Generate the Necessary Number of New Leads Ability to Qualify and Prioritize Properly the Opportunities Ability to Incubate Leads Who have Interest, but No Time for Action Sales Cycle Execution Assessment Ability to Understand Clearly the Customer s Buying Process Ability to Differentiate among Competitive Products/Services Ability to Cross-sell and Up-sell Ability to Sell Value/Avoid Excessive Discounting Ability to Close Deals Accurately, in the Timeframe Originally Forecast Top Three Reasons Why Companies Win Competitive Deals Top Three Reasons Why Companies Lose Competitive Deals Account Management Assessment Ability to Effectively Introduce New Products Ability to Farm Additional Revenues from Existing Customers Ability to Effectively Communicate with Customers Ability to Create/Maintain Case Studies/References Sales Management Assessment CSO Insights 9

10 Ability to Hire Sales Reps Who can Succeed at Selling Offerings Ability to Provide Managers Access to Timely/Accurate Sales Metrics Ability to Accurately Forecast Business Ability to Easily and Accurately Calculate Sales Commissions Ability to Regularly Conduct Win/Loss Reviews Ability to Continually Adapt Sales Process to Market Changes Ability to Proactively Identify Which Reps Need Coaching/Mentoring Ability to Share Best Practices Across the Sales Force Sales Process Assessment Annual Investment in Training Per Sales Rep Change in Amount of Sales Skills Training Change in Amount of Product Training Change in Amount of Customer s Marketplace Training Change in Amount of Purchase Justification Training Level of Sales Process Implementation by Inside/Telesales Reps Impact of Sales Methodology on Performance Type of Sales Methodology Used in Sales Process Sales Methodology Adherence Rate Attitudes Toward Recommending Sales Methodology Vendor Customer Relationship Management (CRM) Utilization Organizations that Have Formally Implemented a CRM System Type of CRM System(s) Implemented CRM Adoption Rates Sales Impact Resulting from CRM Usage Performance Improvements Resulting from CRM Usage Satisfaction Rating of Primary CRM Vendor Buy From Again/Recommend Primary CRM Vendor CSO Insights 10

11 Plans for Additional CRM Enhancements/Additions in the Next 12 Months Internet and Sales Knowledge Management Utilization Uses of the Internet to Support Sales and Marketing Efforts Impact of Internet Usage on Sales and Marketing Performance Integrating CRM with VoIP Sales and Marketing Alignment Uses of the Website to Engage Prospects Assessment of Marketing-Generated Sales Collateral Assessment of Marketing-Generated Lead Quality and Quantity Timeframe for Marketing Programs to Start Generating Sales In Closing: Where Do We Go From Here? CSO Insights 11

12 2008 Inside/Telesales Performance Optimization Project Overview This report represents a new level of investigation into Inside/Telesales performance benchmarking. In past years, CSO Insights has conducted surveys of Inside/Telesales and reported on a much smaller question set; the 2008 survey instrument was completely overhauled based on our experience with our annual sales performance optimization survey and three earlier Inside/Telesales polling efforts. The result was a much more comprehensive survey than the report which you are now reading. To solicit sales executive participation for this study, we partnered with FrontRange Solutions, JigSaw and WebEx to extend invitations to inside sales management professionals. We also worked with an Inside/Telesales management on-line community headed by Trish Bertuzzi in the eastern U.S. and the PhoneWorks in the west as well as Sales and Marketing Executive International (SMEI). In all, we invited professionals directly involved in the management of their organizations inside sales teams to give us feedback on 100+ unique sales performance metrics. Nearly 500 firms participated in this study. Looking at the profiles of the firms taking part in this study, it s apparent that we attracted broad participation from Manufacturing firms. Figure 1, profiling industry sector segmentation at the highest level, shows that we also have reasonable representation of Services, and Other (including retail, government, non-profits, education, distribution, etc.). Figure 1 Not surprisingly software was well represented in this year s survey population. The software industry has been a leader in leveraging inside/telesales teams to complement and augment traditional field sales. Geographically, this year s report is heavily weighted to North America representing over 90% of total respondents. Looking at the size of the firms, we focused on two metrics: company revenues and the number of inside/telesales people employed. In Figure 2, you see the breakdown of participants by revenue into what we consider small businesses (under $50M), medium-sized firms ($50M to $1B) and large enterprises (>$1B). CSO Insights 12

13 Figure 2 An initial review of the data has shown key differences in terms of the challenges companies face, and also the types of sales effectiveness initiatives they are able to successfully take on, based on their relative revenue size. Therefore, we will be doing further analysis of the 2008 survey results for small, medium and large businesses. In Figure 3, we see the breakdown of study participation based on the second size metric, number of inside/telesales reps currently employed. Figure 3 CSO Insights 13

14 As in the past, we used a web-based survey approach for this research project to collect the data from participating firms. Prior participants and other candidates invited to take part in this study were initially pre-screened based on their job function. These executives were then ed an invitation to take part in the study. Those who accepted were directed to a website where they could take the online survey. We also provided a direct link to the survey from our website, The survey instrument was designed to take up to 30 minutes to complete. Participants had the option to sign off from the site, return, and continue where they left off if they needed to get more information or had a time constraint. Survey questions focused on sales performance metrics relative to ten key areas: Sales Force Demographics: Metrics on sales force make-up, quotas, compensation, ramp-up times, time allocation, etc. Sell Cycle Analysis: Metrics on sales effectiveness at various stages in the sales process and also forecasting. Sales Force Hiring and Retention Analysis: Metrics on how companies are interviewing, hiring, and keeping sales people. Sales Performance Assessment: Metrics on the performance of specific sales and service tasks, as well as communication between teams and across the enterprise. Change in the Marketplace Assessment: Metrics on what types of changes sales people are being asked to cope with and the ability of their company to support them in doing so. Sales Methodology Assessment: Metrics on the role sales process is playing in helping to improve sales rep effectiveness. CRM Assessment: Metrics on the role CRM technology is playing in helping to improve sales rep effectiveness. Sales Knowledge Management: Metrics on what types of information sales reps need to sell effectively, and if/how that knowledge is being shared across the sales force. Sales and Marketing Alignment: Metrics on how effectively sales and marketing are seeing their organizations working together. The following report summarizes the input we received from participating firms in each of these areas. To help put the data into perspective and increase relevance to your sales organization, we recommend that research clients take the survey either prior to, or after, reviewing this report. (Contact your CSO Insights partner if you need the link to the online survey.) We also urge you to read both the following Introduction and the Closing remarks (see pg. 117), which contains additional considerations for the strategies and tactics you may want to include as part of your sales optimization initiatives closing out 2008 and planning In this study, where applicable, we also refer to other analyses we have completed on topics such as lead generation, sales process, sales management, CRM, sales effectiveness, best practices, etc. These are listed immediately following the front cover. If an area covered in the report is of particular interest to you, you can access the related documents via the research client portal or our website: As you review our report findings, you will be able to compare your company s performance to other sales forces and determine where your team excels, equals, or lags behind your peers. In doing so, you will see where your specific areas for improvement are. Research clients who may then want a more targeted CSO Insights 14

15 look into their performance, based on industry, company size, geography, etc. should contact their CSO Insights partner. We hope the information in this report will help you more effectively chart the course for your own inside/telesales effectiveness efforts for While we believe the issues raised have broad applicability, we encourage you to use this information simply as the basis for brainstorming and 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 fit your specific business needs, not those of other firms. If you have any questions or comments regarding this report, please contact: Jim Dickie Barry Trailer Managing Partner Managing Partner CSO Insights CSO Insights (303) (415) jim.dickie@csoinsights.com barry.trailer@csoinsights.com CSO Insights 15

16 Introduction In the Closing section of our 2007 Sales Performance Optimization (SPO) report, we introduced the concept of the Sales Relationship/Process (SRP) Matrix, seen below in Figure 4. After several years of writing about levels of relationship and levels of process implementation we postulated that crossindexing these two scales might offer interesting insights. In our 2008 SPO report we published that firms that adopted more process rigor and increased the level of relationships with their customers achieved better performance than their lower level counterparts. In this report we make repeated references to this matrix and its levels: Vendor through Partner on the relationship axis and Levels 1-4 on the process axis. Given the liberal use of these terms throughout the report it is worth a moment of your time to familiarize yourself with them. 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 your 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 knowledge or services you offer, your customers see you as not only a vendor, but also 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. Four Levels of Sales Process Level 1 Random Process: Your company may be perceived as being anti-process, though what you really lack is a single standard process. Essentially every sales rep does their own thing their own way. Level 2 Informal Process: Your company exposes your salespeople to a sales process and indicates that they are expected to use it, but that use is neither monitored nor measured. Level 3 Formal Process: Your company regularly enforces the use of a defined sales process (sometimes religiously), and you conduct periodic reviews of the process to see how effective it is, and then make changes based on that analysis. Level 4 Dynamic Process: Your company dynamically monitors and provides continuous feedback on sales reps use of your formal sales process. You also proactively modify the process when you detect key changes in market conditions. With these definitions in mind, consider the chart represented in Figure 4 and what companies in each of the various boxes might look like. A lower left company would be an Approved Vendor/Random Process (R1/P1); how would such a company s sales force operate? How would they manage their CSO Insights 16

17 inside/telesales reps and what competencies and/or personality profiles would they hire? Self-starter, aggressive, maverick, quick learners, trained professionals, and individuals looking for a sales-driven culture might come to mind. At the opposite upper right hand corner would be a Trusted Partner/Dynamic Process (R5/P4) company. What terms would these companies use to describe the inside/telesales reps they re looking for and what characteristics would be typical? Process-oriented, team player, strong communicator and able to establish rapport quickly might be part of the mix. Not entirely different from the R1/P1 description and, no doubt, many terms would overlap. After all, win/win and strong communication skills would likely be espoused as useful at any location on the matrix. We ve hinted that R5/P4 companies generally report better performance figures than their R1/P1 counterparts but does this mean R1/P1 companies are not or cannot be successful? No. There are examples of companies in any of the matrix addresses that have been successful. From our research and the data we ve collected we are prepared to say the key distinguishing feature as companies move from lower left to upper right in the SRP Matrix is they become more predictable. And increased predictability, particularly in times of increased uncertainty is a good thing a very good thing. Trusted Partner Sales Relationship/Process (SRP) Matrix Strategic Contributor Solutions Consultant Preferred Supplier Approved Vendor Random Process Tribal Wisdom Process Formal Process Dynamic Process Figure 4 The data in this report was collected as recently as September 30, 2008, and the report is being released October 22, 2008 with information that is as current as possible. Even so, economic uncertainties and global convulsions greater than ever seen in the past eighty years have made uncertainty a daily reality and predictability seems like a pipe dream. Still, sages far wiser than us have observed, This too shall pass. In no way do we mean to minimize the challenges that lie ahead. At the same time we recognize the critical engine that sales represents in keeping things moving. While conventional wisdom seems to be buckling under at an unprecedented rate, some things stand fast. One is this: Nothing happens until someone sells something. CSO Insights 17

18 We present the SRP Matrix model in the introduction because we feel that it s a useful filter through which to view many of the metrics presented in this report. However, you will also find truth in the saying: The more things change the more they stay the same. The following chart (Figure 5) shows the ongoing imperative to bring in new accounts, increased revenue and doing so by generating new leads. Sound familiar? This is probably not new in the least but, no doubt, you will find new urgency in defining programs and executing against these in the weeks and months ahead. Figure 5 Alvin Toffler said, Technology is the engine that drives change and information is the fuel that feeds it. The following report distills more than 50,000 data points down to the most timely insights and actionable information we can offer. As you scan through the following pages think about your own answer to each question, then consider the distribution of answers plotted on each page, the and our. We hope you will find this high octane fuel at a time when you can use it most. We end this report with some final comments with In Closing, (see pg. 117). We welcome your feedback. If you have any questions or comments regarding this report please contact: Jim Dickie Barry Trailer Managing Partner Managing Partner CSO Insights CSO Insights (303) (415) jim.dickie@csoinsights.com barry.trailer@csoinsights.com CSO Insights 18

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20 Sales Force Demographics Introduction This section looks at a number of metrics related to the inside/telesales force make-up, including quota attainment, business focus, the size of the sales team, how they are organized, their level of experience, where they work, how they spend their time, etc. Percentage of Inside/Telesales Reps Achieving Quota Percentage of Company Revenues from Inside/Telesales Primary Functions of Inside/Telesales Reps Defining Inside/Telesales Territories The Inside/Telesales Organization (partnered with field/channel) Ratio Between Inside/Telesales Field/Channel Sales Reps Inside/Telesales Reps Average Quota Overlaying Sales Quotas for Inside/Telesales Reps and Managers Compensating the Inside/Telesales Manager Measuring/Compensating Inside/Telesales Performance Inside/Telesales Rep Total Targeted Compensation Other Types of Recognition/Incentive Programs Average Tenure of Inside/Telesales Reps Current Annual Inside/Telesales Rep Turnover Rates Reasons Inside/Telesales Reps Voluntarily Leave Retention Programs for Inside/Telesales Reps Average New Inside/Telesales Rep Ramp-up Time Inside/Telesales Rep Time Allocation CSO Insights 20

21 What percentage of your inside/telesales force achieved quota? Over half of inside/telesales reps made quota. The percentage of reps making quota has dropped over the last 3 years. Actual quotas have seen a relatively small increase. In looking at one of the key barometers of sales health, we see that 52% of inside/telesales reps met or beat their revenue targets. This is 10% lower than in What s changed? When reviewing the average telesales quota attainment by quota size, the big winners are those reps at the highest end of the spectrum, greater than $1M. This group had 60% of their reps achieve quota. The largest drop in the number of reps meeting their sales numbers was in the $250K-500K range. In 2005, 68% of reps met their quota compared to 51% in It may be that this group has reached the awkward stage, like an adolescent, of having grown to a significant size but not fully coordinated with all available resources. For example, this mid-range group has invested in CRM (90%) and reports only 70% of reps consistently using these systems. One area that might hold the promise of improved performance is more formal implementation of sales process. The $250K-500K quota group had 83% of its participants in the Random or Tribal Wisdom levels. Those that were Level 1 or 2 had an average of 47% of their reps meet/exceed quota. Those at Level 3 or 4 had 56% of their reps do so. Also worth noting: All companies reporting overall sales quotas have seen a modest increase of 7% over the last three years. CSO Insights 21

22 What percentage of your company s revenue comes from inside/telesales? On average, 38% of total revenue is generated from inside /telesales teams. Telesales numbers continue to increase year over year. Smaller firms are more likely to rely on telesales. When it comes to revenue, size matters. Inside/telesales plays a much more important role in directly impacting revenues in small and midsize companies. Company reliance on telesales revenue decreases as the size of the company increases. Responding firms under $10M in annual sales report more than half (50%) of their revenue is from inside/telesales; companies in the $10M-$50M range 41%; mid size companies $51M-$250M 36%. Not only do smaller companies count on inside/telesales for a larger portion of their revenue, we see an increased focus on using telesales reps to work independently of field sales. For example, companies under $10M realized revenue percentages as high as 63% from those independent sales reps. Again, similar to the overall average, we continue to see a decrease in revenue contribution from independent telesales reps as the size of the organization increases. Companies with $50M or less count on independent sales reps to contribute 55% of overall revenues compared to less than 21% from the high end or firms over $1B. Regardless of size, telesales contribution is increasing. The 38% noted above is a high water mark compared to the 24% reported in our 2008 SPO survey and 22% in our 2007 SPO survey. CSO Insights 22

23 Rate which of the following you consider primary functions for inside/telesales? Lead generation continues to be the primary activity of inside/telesales staff in almost all segments. Outbound cold calls remain the leading method of generating leads. Manufacturing companies lead in leveraging inbound calls to increase existing customer sales. Over the last three years we are seeing a 22% increase of companies listing lead generation as a primary activity of their inside/telesales personnel. A total of 82% companies have lead generation as their top activity. Of these companies, over 80% are doing it with a combination of outbound cold calls and follow up on marketing generated leads. With this level of emphasis of lead generation being placed on the inside sales team the question must be asked: Are we doing everything we can to maximize the return on these efforts? No doubt there are improvements that have been made but the high levels of inside rep turnover suggest that this is still a grind. One example of improving this activity comes to mind. More than half of respondents to this survey feel their web site s ability to engage prospects either needs to improve or is unknown (see pg. 113). One major manufacturer took this issue head on. They developed a profile of highly desirable prospects and employed web technology to alert inside reps when such a prospect was visiting the company s web site. The technology enabled the inside rep to begin a chat session with the prospect. There were several benefits derived from this, but the most significant was the number of leads generated by inside reps increased from 1.5 per day to 7 per day! Manufacturing uses inside/telesales reps to increase existing customer sales via a combination of inbound and outbound calls. Like the other organizations in this study, Manufacturing firms will make outbound cold calls but at a much lower frequency. CSO Insights 23

24 Inside/Telesales Performance Optimization Survey Survey Analysis Analysis How do you define your inside/telesales territories?. Geographic assignment of territories continues to be the most common. Technology is enabling new approaches to gain traction. No territories moved into second position as the most popular territory breakout. Not surprisingly, since territories historically were plotted on maps to maximize coverage, the geographic approach is still the most widely used today. There were other good reasons for arranging territories in this way including being in the same time zone and minimizing expenses. These considerations seem quaint in today s modern communications world where many functions have been outsourced to countries halfway around the world and unlimited calling plans and Internet phones essentially eliminate the concept of long-distance calls. The table below shows the top three territory breakouts across some of the key vertical industries we track. Types of Business Geography No Territory Account Size Software 52% 20% 10% Telecom 50% 20% 10% Manufacturing 46% 12% 12% Professional Services 29% 21% 17% Although just about every business uses geography as a territory breakout, it is most widely used in the Software (52%) and Telecom companies (50%). For the first time, no territory has by-passed account size moving into second position. CSO Insights 24

25 Inside/Telesales Inside/Telesales Performance Optimization Optimization 2008 Survey 2008 Survey Analysis Analysis Does the inside/telesales organization function as an independent or partner with the field sales organization? Independent telesales reps vary based on business size. Professional Services firms lead in percentage of independent inside sales reps. Majority of companies use telesales reps for outbound cold calling. As seen in the chart above, one-half of all companies report their inside sales reps are partnered with field sales reps while less than one-third have completely independent inside reps. However, this percentage changes with the size of the sales force; small (<50 reps) and large firms (>150 reps) reflect the averages above, but mid-size ( reps) have a higher percentage of independents (40%). Professional Services have the highest percentage of inside sales reps (33%). This 10% difference seems to be strictly a question of independent versus partnered with the field. Regardless of size, the 20% average supporting field and partners and/or just partners is relatively constant. Perhaps a more interesting way of viewing this metric is comparing firms with only independent inside reps against those that only partner. The solely independent inside rep organizations contributed 48% of total company revenues versus 34% for the partnered firms. The size of the firms was comparable. Quota attainment was slightly higher for the independent reps (54.2% versus 50%) but total turnover was also higher (43% versus 38%). The biggest difference occurred in average deal size. 65% of independent firms reported average deal size under $10,000, compared with 47% for partnered firms. Over $25,000 average deal size the figures were 19.8% with independent inside reps, 37% for firms with partnered reps. CSO Insights 25

26 What is the ratio of inside/telesales representatives to field/channel sales reps? Minimum changes in ratios between 2007 and Ratio of 1 inside rep to 2-3 outside reps is the most common in the majority of business segments. Ratio between telesales reps and field/channel sales versus quota attainment. A common assumption is that as the average deal size increases, so too does the complexity of the sale. And the logic might follow that more complex sales would require more focused support. However, the ratio of 1:2-3 was as popular in the >$50K deal size range (the highest in this survey) as it was in the $10K-25K and $5K-$10K categories. In fact, 1:2-3 was the most frequently chosen range for number of field/channel sales reps to each inside/telesales rep, followed by 4-6 regardless of deal size, representing a combined 57% as shown in the chart above. This lower but not lowest range also does best in quota attainment. The lowest level of quota attainment 46.4%--occurred with the 1:7-9 ratio. The popular ratio of 1:2-3 tied with 1:1 for second highest quota attainment of 52.5%. The highest quota attainment 53.5%--was registered by the 1:3-4 ratio group. The ratios of 1:10-12 and 1:13+ were too small to report separately but combined they averaged 50.7% of reps meeting or exceeding quota. Regardless of the support ratio, the top tasks all inside/telesales reps perform are outbound cold calls, outbound follow up on marketing generated leads, qualifying leads and building/updating the prospect database. The percentages vary between the groups, but the ranking of these tasks remains at the top in each case. CSO Insights 26

27 What is the size of your average inside/telesales quota? Approximately 78% of inside/telesales reps carry an annual quota. Percentage of telesales reps with over $1M annual quota has dropped slightly. Quotas between $500K-1M has dropped by 11%. What are typical quota ranges? What percentage of inside/telesales reps are attaining quota and how are they being paid? The answer to the first of these questions is shown above. In addition, this year respondents had the ability to answer Not Applicable to this question. A total of 22% of telesales teams do not carry an annual quota. This non-quota carrying group was found primarily in companies with annual revenues of $50M or less. The percentage of this group also varied by industry: Software--30%, Other--17%, and Professional Services-Business--13%. As noted in the prior metric, the primary responsibilities for these telesales reps is prospecting, qualifying leads and building the data base. 61% of them partner with field sales and have a compensation range of $30K to $100K. When comparing the results with 2005, we see a three percent drop in the number of telesales reps with quotas over $1M. The industry most represented in the mega-quota group is Software companies (35%). On average, 60% of telesales reps in this group met or exceeded quota. The big changes are with quotas ranging from $500K-$1M. Three years ago this accounted for 31% compared to the current 19.5%. These telesales reps met or exceeded quota 54% of the time. Telesales reps in this group s salary ranges; $50K-$100K with variable compensation of 41%-60%. CSO Insights 27

28 Are sales quotas for the inside/telesales reps and their managers direct or overlay? Overlay quotas for reps are more the exception than the rule. Even for managers overlay quotas are seen just one-third of the time outside of high-tech. Don t know suggests this concept is not well defined or well understood. One of the challenges with measuring and improving sales effectiveness is the fact that there are no standard definitions or practices. Manufacturing has ISO. Accounting has FASB. Law, engineering and medicine each have certain standard practices and/or definitions. Not so for sales. For the purposes of this survey, this question was to look at whether reps and/or managers were solely responsible for, measured upon, and compensated on the basis of their own production (however this is measured) or in conjunction with or as a part of someone else s quota. Perhaps not surprising, only one in seven reps is compensated on an overlay basis while more than half (56%) are direct. This is the most straightforward measurement/compensation model. The 14% that use an overlay model is consistent with the 17% of firms who have telesales reps supporting channel partners. What is surprising is that two-thirds of managers are either direct or don t know, with only one in three having overlay quotas. Since management by definition is getting things done through others efforts, it is surprising the rewards are not aligned in this same way. In our 2007 Inside Sales Survey of Global High-Tech Firm s survey, the distributions were quite different. 62% of managers were overlay (only 4% did not know) and 42% of reps were also overlay quotas. CSO Insights 28

29 What is your total targeted compensation for an inside/telesales manager? Majority of manager compensation is $125K or less. As compensation increases so does the level of responsibility. There is no direct correlation between size of company and amount of compensation. Over 68% of compensation targets range between two categories: Less than $75K and $75K--$125K. Let s break this down further to identify types of companies, annual revenues, average deal size and ratio between the manager and telesales reps. The table below summarizes a few key metrics associated with various levels of inside/telesales compensation. Shown for each level of manager compensation are the leading component of company size (in annual revenue), leading industry, highest percentage score for any band of average deal size and highest percentage of number of sales reps per manager. Manager Compensation <$75K $75K-125K $125K-150K $150K-$175K Annual Revenues <$10M (43%) $10-$50M (42%) >$1B (25%) $10-$50M (37%) Leading Industry Other (27%) Software (27%) Software (38%) Software (57%) >$175K <$10M (36%) Software (52%) * tie at 33% between 1:4-7 and 1:8-12 Average Deal Size <$5K (40%) $5K-$25K (36%) $10K-$25K (40%) $25K-$50K (36%) >$25K (60%) Span of Reps 1:1-3 (48%) 1:4-12* (33%) 1:8-12 (43%) 1:8-12 (48%) 1:8-12 (48%) CSO Insights 29

30 Which metrics do you use to measure the performance of your reps? Individual quota attainment is the top compensation criteria across all groups. Many activities are measured and inspected even if they are not compensated. Introducing a formal sales methodology improves quota attainment. Regardless of a company s size, type of business or number of telesales reps, there were some very clear consistencies. Approximately 60% of respondents identified individual quota attainment as the primary measure for pay. If there was a second component, it was team quota attainment. One factor that is unique to the telesales environment is the level of structure of day to day activities across all groups i.e., outbound calling, follow up on marketing leads, etc. Almost all firms, regardless of their sales methodology identified leads/opportunities generated and adherence to sales process as a key measure, meaning these practices and activities were reviewed even if not paid for performing. So if everyone is doing fundamentally the same things, why are there such differences in the level quota attainment between organizations? In the Introduction we presented the Sales Relationship Process (SRP) matrix and defined the four levels of process implementation (see pg. 18). When we compare quota attainment between companies with no formal sales process (Level 1) and those that have a formal process (Level 3), the data clearly shows higher performance for the latter. In this example, let s compare Level 1 and Level 3 quota attainment. Companies with no formal sales methodology had a dismal 43% quota attainment, compared with those companies who moved to a formal process at 68%. CSO Insights 30

31 Inside/Telesales Performance Optimization 2008 Survey 2008 Survey Analysis Analysis What percentage of an inside/telesales rep's targeted compensation is variable? pay? 24% of firms pay more than $100K as quota. 38% of firms pay between $50K and $100K when quota is achieved. Over 90% of firms include a variable pay element in their compensation plans. Compensation targets have changed over the last three years, the most significant impact is in the over $100K level. In % of respondents paid over $100K in target compensation, today that has grown to 24%. Compensation between $30K and $100K represented over 70% of total targets in 2005, compared to 66% this year. Almost every firm surveyed includes some amount variable pay as part of their compensation package. The actual percentage of pay seems to be influenced by the type of business. As an example, Manufacturing s average range is between 1-15% compared to software, which averages as low as 26% all the way to the top variable range of 60%. As you approach the high end (>$100K), Software again emerges as the dominant industry. Software companies targeting compensation in the very highest range (>$125K) have nearly half (48%) of their annual revenues generated by inside/telesales. Although inside sales still lags field sales in compensation (among other metrics) it appears that inside sales is steadily catching up to field sales in this important metric. In our 2005 Telesales Effectiveness survey, 17% of inside rep were targeted at >$100,000; this year that figure is nearly one quarter. CSO Insights 31

32 Inside/Telesales Performance Optimization 2008 Survey 2008 Survey Analysis Analysis What other type of recognition/incentive programs do you use? The frequency and type of recognition companies use varies by salary levels. President s Club is more prevalent with higher salaried telesales reps. Stock options are offered primarily by Software companies. A frequently cited method of recognition for telesales reps making less than $30K is personal recognition. In fact, it is used almost twice as often (46%) as contests or spifs (25%). As salaries increase, so does the frequency of recognition events. Contests, spifs and personal recognition are the core or most widely used types of recognition in each group. President s Club and stock options become more widely used once salary levels jump up to $100K or more. Regardless of the type of business, contests, spifs and personal recognition, were the most commonly used types of recognition. It is not until we look at stock options and extra paid days off that we see a trend regarding the type of business. Stock options were primarily used as a motivation tool by Software companies. Extra paid days off, although used less than 20% of the time, were primarily in Software, Manufacturing and Other categories. The table below shows the types of recognition/incentive programs sorted by company position in the marketplace and the order in which various programs are ranked in frequency. Company Position Contest Spifs Pres Club Days Off Personal Recog Stock Options Dominant Lead Player One of Many Start Up CSO Insights 32

33 Inside/Telesales Performance Optimization 2008 Survey 2008 Survey Analysis Analysis What is the average tenure of your inside/telesales reps? Percentage of tenured sales reps has decreased. 40% software companies reported majority of inside sales reps were new. Longer tenure does not translate into better results. The average tenure for inside/telesales reps has shifted over the last three years; approximately 60% of telesales reps represent two years or less in their positions. Compare this with our 2005 Telesales Effectiveness survey in which 56% were in this range. More worrisome is the 4% drop in 2-4 year telesales reps. This group has traditionally demonstrated the highest quota attainment and now represents less than 18% of the average inside/telesales rep population. Software companies reported some of the highest levels of first year telesales reps (82%). This group typically carried an annual quota of less than $500K. Approximately (40%) met or exceed their quotas for the year. Here s another bit of unwelcome news: Inside/telesales reps with the highest tenure demonstrated the lowest percent of quota attainment (53%). Even telesales reps in their first year had outperformed their more tenured peers by 2% (55%). The highest quota attainment came from telesales reps that have been in their roles between one and two years (58%). One company had an innovative and surprising way of challenging all their sales reps. The new CEO determined the company needed to shift from being product-centric to customer-centric. After determining the profile of rep needed to make this shift the question was asked: Would we hire all our same reps today? Approximately 20% of the existing reps did not meet the new hiring criteria. CSO Insights 33

34 What are your current annual inside/telesales rep turnover rates? Total rep turnover is above 40%. Rep ramp up time averages six months. Planned expansions are slowing down compared to previous years. Both voluntary and involuntary inside/telesales rep turnover rates are nearly identical to those in our 2005 survey. With a 40% turnover rate for inside/telesales, there is a new inside sales force every two-and-a-half years. Also unchanged is sales rep ramp up time: the period it takes new hires to become fully productive to attain parity in production with experienced sales personnel. Similar to 2005, average ramp time is six months. This combination suggests two questions for you to consider. First, are your people staying with you because of what you do for them or in spite of what you do to them? If the latter, expect turnover rates to remain high. Second, whether you retain or acquire personnel, getting them up to speed faster than the seven months to a year reported by 24% of respondents (see pg. 38) will be essential to productivity. The focus on increasing team sizes seems to have slowed down over the last three years, In 2005, a quarter of companies surveyed planned on expanding their teams by over 30%. This has dropped to just 16% in In addition, this year s respondents report over one quarter (26%) plan on making no changes to their team size. Few firms (2%) anticipate their teams shrinking. Note: the best managers are recruiting/interviewing all the time regardless of their turnover or staffing plans. They build a file of qualified candidates that can be brought in and up to speed quickly when a vacancy does occur. You do not want to wait for an opening to begin the process. CSO Insights 34

35 What are the top reasons inside/telesales reps give when they voluntarily leave? Not a good job fit continues to be the top reason for leaving. Pay Issues and Lack of Career Opportunity show strong correlation. Telesales reps not meeting quota are more likely to leave. Over 78% of small to mid size companies showed not a good job fit as the top reason telesales reps leave compared with the less than a quarter who leave large companies for the same reason. This suggests the larger companies are doing a better job of setting expectations, have a clearer process/profile for screening new hires, and/or are providing better support to help inside/telesales reps be successful. Pay issues and personal reasons tied for second place. Jackie Freiberg, coauthor of Nuts!, the book profiling Southwest Airlines, quotes Gallup research that a poor relationship with one s immediate supervisor is the primary reason people quit even though they are not always willing to say so. This may be a factor in both the personal reasons and not a good fit numbers. Pay, of course, is another major reason people stay or leave their jobs. Over two-thirds (69%) of companies that sited pay issues as their top reason for telesales reps leaving were in the $30K-$100K. (52% of these reported variable pay component between 26%-60%.) For three-quarters of those companies where pay was the first issue, Lack of Career Opportunities was the second. Lack of individualized coaching may also have contributed; approximately one quarter of these reps worked in teams with a manager to rep ratio of 1:10 or more. This will come as no surprise to anyone who has ever spent any time in the sales environment. There is a direct relationship between voluntary resignation and quota attainment. 65% of those who self selected out of their sales role had an average of 28% meeting/exceeding quota. Even here, Not a good job fit was the number one reason cited for leaving. CSO Insights 35

36 What programs do you have in place to minimize voluntary rep turnover? Retention strategies shift based on types of business. Pay increases rank within the top three retention strategies across all types of business. Small companies are more likely to use pay increase as their top retention strategy. The frequency of using specific retention programs varies based on the type of business, for example, Software and Professional Services companies are more apt to provide career opportunities to their inside sales team. Compare that with Financial and Advertising firms, who opt for training programs over 65% of the time. Telecommunications firms offer pay increases over 80% of the time. Regardless of the type of business there is a common theme, pay increases, career opportunities and/or training opportunities are all within the top three most frequently used retention tools used. Is there a right combination? Probably not but as a matter of interest, the table below shows the frequency firms use the top three programs based on annual revenues for firms with voluntary rep turnover under 15%. Annual Revenues Pay Increase Training Career <$50M 59% 47% 40% $51-250M 61% 47% 61% $250M-$1B 69% 69% 63% >$1B 65% 61% 75% Small companies offer pay increases 59% and career discussions approximately 40% of the time. As the size of the company grows, there is an increase in the frequency of providing more career opportunities; beginning with midsize companies at 61% to the larger companies using it as a retention tool over 75% of the time. As with all groups, training is definitely in the mix as either the second or third most frequently used retention strategy. CSO Insights 36

37 How long does it take for a new inside/telesales rep to be fully productive? The majority of new hires are fully productive within six months. Ramp time decreases as sales methodologies are formalized. There is a correlation between territory breakouts and training timeframes. Over 60% of inside/telesales reps are fully productive within their first six months regardless of average deal size. Their primary role is to generate leads and update the prospect data base to support field/channel sales reps. This is accomplished through outbound cold calling and following up on marketing generated leads. Telesales reps working for companies with no formal sales process (Level 1) had less than 20% of their reps fully productive with in the first three months. Compare that with companies which have implemented a dynamic sales process (Level 4), 30% of their new hires were fully productive within the same time frame. Carrying this comparison one step further, Level 1-2 companies had 20% of their reps fully productive within three months versus 28% for Level 3-4 companies; they had 39% of their reps taking longer than six months, compared to 31% for Level 3-4 companies; and the percentage of reps meeting/exceeding quota was 48% versus 60%, respectively. Total turnover was roughly the same at 40% for either group. Companies with training averaging seven to twelve months showed an increase in the number of independent telesales reps (48%) versus 30% for firms with ramp up times of six months or less. The majority of companies set up sales territories by geography which seems to have little bearing on rep ramp up time. Vertical market territories had the highest percentage of >1 year times 13%. CSO Insights 37

38 On average, how much of your rep s time is spent on the following? Time spent on nonsales activities is increasing. More time spent on sales activities doesn t directly equate to more telesales reps achieving quota. A median of 16% for total admin tasks and meeting time correlates with top performance. How inside/telesales reps spend their time is always of interest and for good reason. We are talking about the revenue generating engine of a business, and any activities that detract from indentifying, contacting and communicating with customers or prospects reduces productivity and total revenue. The table below shows the percentage of reps meeting/exceeding quota and the percentage of time reported for each activity. Meet/Exceed Quota Lead Gen Selling Admin & Meetings Other 80% % % % <50% As can be seen, the least successful group still spent the majority of their day (64%) generating leads and selling, yet they had the lowest percentage of repss meets/beating quota at a dismal 15%. Further review shows they also had the lowest implementation of sales process (80% were Level 1 or 2). It should be noted that admin/meeting time over/under the 16% line divides the survey respondents 50/50. CSO Insights 38

39 CSO Insights 39

40 Sell Cycle Analysis Introduction This section contains sales cycle metrics related to the types of deals inside/telesales reps are pursuing in relationship to opportunity value and effort required to close a deal; and an analysis of the success rates experienced in converting prospects from one stage of the sales process to the next. Average Deal Size Length of Average Sell Cycle Number of Calls Required to Close a Deal Lead Generation Analysis Percentage of Leads that Progress to an Initial Customer Discussion Percentage of Initial Discussions that Progress to a Presentation Percentage of Presentations Resulting in a Sale Percentage of Deals that Close as Forecast Outcome of Forecast Deals CSO Insights 40

41 add What is your average deal size? Distribution of average size deal is changing. Software leads in all but the $5 - $10K deal size category. Excelling at crossselling and upselling will also help maximize deal size. Three years ago, nearly half (48%) of all deals were at the low end of the range; that is, less than $5,000. Today the distribution is much different. Low end deals have dropped to 41% of total telesales deals. During this same period, deals at the high end of the scale, those above $25K, make up 32% of the deals compared to just 13.5% in Lastly, average deal sizes of $5K - $25K increased by 9% for a total of 28%. The $5 - $10K segment was led by Other indicating one industry does not dominate this range. In all other segments, software was the leader. Software has a clear advantage in telesales, particularly with on-line meetings. These technologies support demonstrating software capabilities real time and from anywhere. For example, it s easier to demonstrate an application s usability and features than it is to convince a central purchasing office that buying prescription drugs from you can generate significant savings for them over 18 months. Also, in the software industry there is a culture and acceptance of doing business by phone and over the web; however, other industries are catching up. Companies are adapting to the on-line experience--both phone and Internet--and appear to be leveraging these in innovative ways. An important factor that influences deal size is a rep s ability to cross-sell and up-sell effectively. As we see on page 63, many firms struggle with this aspect of selling. Those who demonstrate the skills and the product knowledge necessary to optimize the value of each opportunity can help increase the order size of each deal. For example, firms that rated their telesales reps at an exceeds expectations for cross-sell and up-sell showed 32% of average deal sizes at over $50K, compared with 16% of firms rating this as needs improvement. CSO Insights 41

42 How long is a typical inside/telesales sell cycle? Sell cycles are taking longer to close. Sell cycle ranges of 4-6 months remains unchanged. Sell cycle length and deal size tend to be directly proportional. Over the last three years, we have seen an increase in the time it takes to close a deal. In 2005, approximately 34% of all deals closed within a month. Today, that number has dropped dramatically to 20%. It is noteworthy that the 1-3 month segment has grown by 9% up to 45% from 34% three years ago. As a result, 65% of deals close within the first quarter, compared to two-thirds closing in the same time frame in Longer sell cycles occur with higher value deals. For example, 55% of deals taking over six months to close were over $50K, with 21% at the $25 - $50K deal size range. Compare that with deals that close within the first three months in which 58% were less than $10K. Still, the data show it s possible to close larger deals in shorter timeframes when seeing that 24% of deals over $25K were closed within the quarter. Since practices and systems employed in high-end sales greater than $25K are often precursors to other segments, it is worth a closer look at shorter sell cycles that are less than three months and longer sell cycles that are greater than six months. The levels of relationship and process adoption were nearly equivalent in all cases. Among the greatest differences were the uses of the Internet. The shorter cycles reported higher percentages of significant impact from on-line demos -- 53% versus 30%, webinars -- 50% versus 32%, and interactive chat sessions with clients -- 46% versus 32%. CSO Insights 42

43 On average how many calls does it take to close a deal? Increase in the number of calls needed to close deals. Quality leads from Marketing reduces average number of calls. Approximately 8% of respondents do not know how many calls it takes to close a deal. A key contributor to the increase in sell cycle length may well be a corresponding increase in the number of calls needed to close each deal. In our 2005 Telesales Effectiveness report we noted that over 50% of the firms surveyed stated that they were able to close deals by making five or fewer calls to a prospect. As can be seen in the chart above, that percentage has dropped to less than 38%. Aiming to surface best sales practices, we analyzed the data to see if there were certain strategies or tactics that could reduce the amount of time needed to close business. For this analysis, we looked at the correlation between the level of satisfaction with marketing's lead generation activities and average number of calls needed to close a deal. Avg. Calls to Close Meets/Exceeds Need Improvement 1-2 calls 9% 7% 3-5 calls 37% 26% 6-9 calls 30% 34% calls 10% 17% >15 calls 9% 11% Do not Know 5% 5% The chart above demonstrates how an effective marketing program allows your telesales reps to spend more time selling versus lead generation. CSO Insights 43

44 How are your sales leads generated? Majority of firms use both marketing and self generated telesales leads. Reliance on marketing generated leads varies by both company and deal size. Win rates also vary by the balance between self generated and other leads Clearly, lead generation is a key input to telesales success. Most companies surveyed (78%) used some combination of marketing and self generated leads. The table below compares lead generation and win rates by company size. As displayed in the table, three of five segments rely more heavily on self generated than marketing generated leads. Win rates appear to increase with company size but not necessarily by lead source. Company Size Marketing Telesales Win/Loss <$10M 34% 39% 43/31 $10-$50M 42% 34% 46/30 $51-$250M 38% 43% 47/28 $251M-$1B 39% 41% 52/31 >$1B 40% 40% 53/27 The answer to the proper balance between marketing generated and self generated leads is not readily apparent, but the 40/40 split shown above is not bad. Compared to lower levels of either marketing or self generated leads, this combination has the highest percentage of reps meeting or exceeding quota and the lowest level of rep turnover. We will continue to explore this balance during the coming year with our research clients. CSO Insights 44

45 What percentage of your leads progresses to an initial customer discussion? Approximately 57% of firms report converting leads to initial discussions less than half the time. There may be a correlation between sales methodology and moving leads to an initial discussion. It is one thing to generate a lead, but quite another to turn it into a legitimate opportunity. Firms that do not have a formal sales methodology showed the lowest performance in lead conversion. 55% of these firms report converting leads to first meetings less than half the time, 20% convert leads to an initial meeting one-half to three-quarters of the time, and greater than three-quarters--5%. To put this into perspective, 1000 leads would likely generate fewer than 450 discussions. The next metric pursues this further through the sale cycle ( pg. 47). As firms implement a more formal sales process, the conversion rates improve. Companies that would describe their sales process as formal--level 3, where sales reps are trained on and expected to use the sales process (see pg.18), showed better results than the companies described above. Less than 50%--45%; 51-75%--17%; and greater than 75%--22%. Effectiveness at converting leads can also be broken down by types of business. Some examples are shown in the following table. Type of Business <50% 51-75% >75% Unknown Financial Services 25% 38% 31% 6% Professional Services 56% 21% 8% 15% Manufacturing 48% 24% 16% 12% Software 59% 14% 19% 8% CSO Insights 45

46 What percentage of your initial discussion leads to a presentation? 65% of all initial discussions fail to progress to a presentation less than half the time. Lead incubation is showing how it can help in cases where prospects have need and interest, but currently do not have time to evaluate. Less than 7% of initial discussions are in the highest percentage. Getting to your prospect is one thing, but getting beyond that point is another, as many telesales reps are finding. Above we see the conversion scores for the percentage of initial discussions that progress in the sell cycle where a telesales rep is given the opportunity to fully present how their product or service would be of use to the buyer. Is this a bad thing? There is a school of thought that suggests that the sin in sales is not to lose, but rather to take a long time to lose. Could a lower conversion rate be a good thing as a result of reps doing a better job of walking away from low potential deals? The data suggests this cheery interpretation is not the case. The ability to properly qualify and prioritize opportunities is still a challenge (see pg 57). Type of Business <50% 51-75% >75% Unknown Financial Services 43% 19% 27% 13% Professional Services 67% 12% 7% 14% Software 63% 22% 7% 8% As you can see, Financial Services conversion rate is higher than most. They also scored their reps at a higher proficiency for lead incubation. The initial discussion the rep has with a prospect surfaces needs and interests. The telesales rep then continues discussions to stay top-of-mind with the client until it is appropriate to progress to a presentation. CSO Insights 46

47 What percentage of your presentations results in a sale? Continue to see opportunities with improving close rates. Inability to present benefits to all stakeholders can impact performance. The ability to differentiate from competitors can make or break a deal. Close rates continue to be less than ideal. The chart above shows only 38.5% of the firms surveyed reported a presentation to sale conversion rate greater than 25%. At the presentation stage of the sell cycle, there are three core objectives: 1) Get prospects to understand the benefits of your solution; 2) Help them to understand why you are different than any other competitive alternatives they may be considering; and 3) Understand how they buy. There is a correlation between the telesales reps level of effectiveness in meeting the three core objectives and close rates. The chart below compares win/loss rates between telesales reps that excel in the three skills with those who need improvement. As you can see by the chart, telesales reps who were rated as exceeds expectations had a much more impressive win rate than those who struggle with these skills. Three Core Objective Skill Level Win Loss Exceeds Expectations 60% 27% Needs Improvement 38% 31% Improve telesales reps skill levels in each of the core objectives and you can expect improvement in close rates. CSO Insights 47

48 What percentage of your deals close as originally forecasted? Telesales reps not doing a good job of predicting what they will win. Relationship Level 3 and 4 firms experience better accuracy than other sales organizations. More companies are turning to sales analytics to help deal with this issue. Looking at deals that are won, we see that the ability of the sales organization to close deals as they were originally forecast (what, by when and for how much) is still very poor. Beyond simply making the number, think about the challenges the sales organization is causing other parts of their company. How can customer service, distribution, or finance effectively plan the allocation of people, resources, and budgets when nearly half (48%) of companies report won deals conform to what was predicted less than half the time? Can you do anything to improve these results? During our review of the data, we found a number of best practices that can positively impact accuracy. At the top of the list is implementing higher levels of sales process up to Level 4: dynamic process. These are firms that reinforce and enforce a continuously tested and reviewed sales process with their reps. The following table provides the percentage of firms that showed a forecast accuracy rating of 50% or more, relative to the level of sales process adoption they have employed. Relationship Level Firms with Forecast Accuracy >50% Dynamic Process Level 4 42% Formal Process Level 3 41% Informal Process Level 2 38% Random Process Level 1 30% CSO Insights 48

49 What are your average win/loss/no decision rates for forecast deals? Firms who developed sales opportunities to the point of forecast accuracy won less than half the time. Dominant players in their market segment report significant advantages. No decision rates also improve dramatically with market position. Consider this: All of the hard work that goes into both guiding a prospect through a sale cycle while also supporting their buy cycle. Consider these results: Forecast deals translate into success less than half the time. We did not ask the outcome of forecast opportunities in our earlier inside/telesales surveys; however, we have seen the percentage of forecast deals won drop below 50% over the past two years and the 47% win rate shown above sets a new low water mark. How do we move the win rate dial up? We drilled into the study data to see what factors increase wins and found an interesting trend. When we compared performance based on firms positions in their respective markets, these companies had major advantages. Companies reported their market position in one of four categories: the dominant player in the market, one of the lead players, one of several established players or new/start-up player. Their respective win rates are shown in the table below. Market Position Win Rate No Decision Dominant player 55% 23% One of the lead players 47% 25% One of several players 43% 30% New firm/start-up 44% 36% As Mel Brooks said, It s good to be the king. If you re not the market leader you should be extra vigilant about qualifying deals throughout the sell cycle to improve win rates and weed out imaginary opportunities. CSO Insights 49

50 CSO Insights 50

51 Sales Strategy Development Assessment Introduction This section looks at metrics reflecting how inside/telesales teams get ready to sell. Specifically, we look at the key tasks that reps need to go through to decide what accounts in their territories to pursue, and what an initial strategy would be for dealing with those prospects. Since few organizations have detailed numbers in all of these areas, survey participants were asked to assess whether they rated their current level of performance as needing improvement, meeting expectations, or exceeding expectations for each. In cases where respondents could not provide an accurate assessment of their performance, or the metric did not apply to their sales performance, they were allowed to select Don t Know or N/A as a valid answer to the questions. Ability to Prioritize Accounts upon Which to Focus Ability to Develop Strategic Plans for Key Prospects Ability to Thoroughly Research New Prospects Before Calling Them Ability to Generate the Necessary Number of New Leads Ability to Qualify and Prioritize Properly the Opportunities Ability to Incubate Leads Who have Interest, but No Time for Action CSO Insights 51

52 Inside/Telesales Performance Optimization Optimization 2008 Survey 2008 Analysis Survey Analysis Rate your ability to prioritize which accounts to focus selling efforts. 45% of firms need to improve on prioritizing who their reps sell to. Defining a firms Perfect Prospect Profile provides a basis for setting priority of lead follow-up. The higher the proficiency in this area, the better the sales conversion rate. The most precious commodity sales reps have to allocate is their time. Spending time pursuing leads that are of poor quality with buyers who may not really have BANT (i.e., Budget, Authority, Need, and Timing) squanders time. And yet we find many sales teams have not rigorously defined their firm s Perfect Prospect Profile and terms for quantifying these criteria. An example is shown below for the question of timing on a scale from 0 (no urgency at all) to 10 (must act within 30 days). This listing is from an equipment manufacturer but the concept can be applied to any firm in scoring and prioritizing leads. Criterion: URGENCY Definition 10 Legislation mandates this, or be shut down in 30 days 8 Viewed by all as strategic; project approved 6 Budget approved and available 4 Current equipment down at least once a quarter 2 Functional specs defined; vendor list assembled 0 Decision Maker sees no strategic value We compared this metric s data to telesales reps sales conversion rate. In doing so we found needing to improve had 10% more of their sales cycles fall into the low-probability band (<25%) and 8% fewer in the high-probability range (>75%) than the group that exceeded expectations in this ability. CSO Insights 52

53 Inside/Telesales Performance Optimization Optimization 2008 Survey 2008 Survey Analysis Analysis Rate your ability to develop strategic plans for key accounts. Over one-half of reporting firms feel they need to improve in planning how to win with key prospects. Firms which are effective in this area also show higher levels of performance in execution of sales skills. Telesales reps that have exceeded in this area see more success in converting leads and attaining quota. As we see in the chart above this is another area of selling where the majority of firms feel they need to improve their performance. The question might reasonably be asked whether there is a solid pay back for firms that are able to develop strategic plans especially for inside sales reps. It appears that at least the indirect answer is, Yes. Those companies that either meet or exceed expectations in this area also had high marks in regards to telesales reps ability to execute on those sales strategies. The chart below provides a comparison of sales strategy execution skills between telesales reps that performed at or above expectations in developing a sales strategy plan and those needing improvement. Meets/ Exceeds Expectations Needs Improvement Execution of Sales Strategy Understand customer's buying process 80% 54% Effectively present features and benefits 93% 38% Differentiate versus competition 81% 52% Telesales reps that effectively develop and execute a sales strategy are more likely to see success. As an example, 43% of those firms that exceed expectations in this area converted over half of the leads to initial discussions. But maybe these companies are just easy scorers; what about results? 62.2% of the exceeds group reps met/exceeded quota compared to 53.3% of the needs improvement groups reps. CSO Insights 53

54 Rate your ability to thoroughly research new accounts before calling. Over one-half of survey participants felt confident in their reps ability in this area. Poor research upfront appears to telegraph performance through the entire sales cycle. As firms improve in their research skills, success rates in other areas of execution are also ranked higher. Firms that are effective at researching prospects enjoy a higher lead conversion rate than those performing poorly at this task. The following table shows the percentages of firms that stated their conversion rate of leads to initial discussions is great than 50%, relative to their ability to research prospects beforehand. Research Effectiveness >50% Lead Conversion Rates Exceeds Expectations 43% Meets Expectations 34% Needs Improvement 32% Here we see improvement in telesales reps ability to get more times at bat when they do effective research. Taking this data one step further, we also see an improvement in win rates for those who either meet or exceed expectations in this area. See the table below. Research Effectiveness Win Rates Exceeds Expectations 52% Meets Expectations 48% Needs Improvement 43% CSO Insights 54

55 Rate your ability to generate the necessary number of new leads. Almost half of the firms see the need for improvement in lead generation. There is a clear disconnect between sales and marketing regarding lead generation efficacy. Time spent generating leads is corrupted selling time according to one definition. Effective lead generation is the bread and butter for any sales organization. When asked to list the top three sales effectiveness initiatives planned for the upcoming year, revising/enhancing our lead generation programs came in at the top of the list. Marketing plays an important role in the generation of leads--42% of total leads come from marketing but 44% are reported as being self generated. There is; however, a second component to this flow of leads from marketing which is their quality. Indeed, over 60% of respondents felt that marketing needed to improve both the quality and quantity of leads (see pg. 115). As the quality and quantity of the leads improves so does the sales team s level of satisfaction with marketing s efforts. As noted in a prior metric (see pg. 55), helping telesales reps find the right prospects to talk with can impact the ability to earn lower no decisions rates and close more business. So the time reps spend identifying, researching, qualifying and pursuing can be improved by focusing this energy like a laser rather than simply a white light. Regardless, much of the time, though not all of it is spent developing leads is by definition not available for contacting and pursuing leads. In a case study we developed on FedEx a few years ago, they defined anything that takes sales reps (inside or field-based) off task as corrupted selling time. This is worth noting since we have found this global industry leader to be a showcase example of dynamic sales process implementation and the benefits that accrue from this. [If you would like a copy of the FedEx case study please info@csoinsights.com with FedEx Case in the subject line.] CSO Insights 55

56 Rate your ability to qualify and prioritize opportunities. Nearly 60% of firms rated their teams ability to qualify and prioritize deals as at or above average. Reps becoming invested in deals can make qualifying a deal out more difficult. Reps that excel in this area are much more likely to win the deal and less likely to pursue deals resulting in no decision. How is this metric different from the earlier question about reps ability to prioritize accounts to pursue? The metrics you re reading are merely following our hypothetical sales process. To get to this stage where an opportunity has been identified, reps have had to (in order presented here) decide which accounts to focus upon, research those accounts, develop a plan of attack, and then generate leads to pursue. Having done all this, this question focuses on their ability to then qualify/prioritize whether to invest more of their individual/field/channel partners time and/or other company resources. Having invested so much energy to get to this point, even if reps know the opportunity may not be a great fit for their products or services, it is not difficult for them to rationalize it s a reasonable fit and not walk away from a deal. But they should. Consider the following win rates reported by the participants in this study, based on how they related their ability to qualify and prioritize. % of Reps Forecast Opps Ability to Qualify and Win Rate Meeting/Exceeding Resulting in Prioritize Opportunities Quota No Decision Exceeds Expectations 55% 59% 21% Needs Improvement 42% 55% 26% And, yes, still make or exceed their assigned quota! CSO Insights 56

57 Rate your ability to incubate leads that have interest, but not time for action. Firms that need improvement in lead incubation out number other categories. Ability to incubate leads recognizes not everyone is ready to buy the moment a sales rep calls them. Maintaining top of mind awareness correlates with higher lead to initial discussion rates (over time). Your telesales team has qualified the leads and pursued these themselves or sent solid opportunities to their field or channel sales partners; those that are not a fit have been dropped. Earlier (see pg. 53) we discussed the issue of timing (the T in BANT). What does your organization do with prospects that clearly have a need for what you offer, but based on priorities they lack the time to evaluate your offerings? The data suggest there s an opportunity for a higher return on investment from lead generation when firms take the time to effectively incubate leads that are good interest fits but have no time for current action. Consider the following table comparing the conversion rates of leads to initial discussions sorted by lead incubation abilities (expressed as two groups that either meet/exceed expectations or need improvement). Conversion Rate Meet/Exceeds Expectations Needs Improvement <25% 9% 26% 25%-50% 38% 40% 51%-75% 27% 20% >75% 16% 4% Staying top-of-mind with prospects until they do have time to start an evaluation means companies incubating leads are first back in the door when buyers are ready. CSO Insights 57

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59 Sales Cycle Execution Assessment Introduction This section looks at metrics reflecting how inside/telesales teams perform specific selling tasks during the sell cycle to educate the prospect, align solutions to needs, and win the business. Again, since few organizations have detailed numbers in all of these areas, survey participants were asked to assess whether they need improvement, meet expectations, or exceed expectations for each. In cases where respondents could not provide an accurate assessment of their performance, or the metric did not apply to their sales performance, they were allowed to select Don t Know or N/A as a valid answer to the questions. Ability to Understand Clearly the Customer s Buying Process Ability to Differentiate among Competitive Products/Services Ability to Cross-sell and Up-sell Ability to Sell Value/Avoid Excessive Discounting Ability to Close Deals Accurately, in the Timeframe Originally Forecast Top Three Reasons Why Companies Win Competitive Deals Top Three Reasons Why Companies Lose Competitive Deals CSO Insights 59

60 add Rate your ability to clearly understand your customer s buying process. More than half of all telesales teams say they understand how customers buy. Exceeding in understanding the buying process correlates with fewer sales calls to close. The real dividend in understanding is significantly higher win rates. The good news is the majority of companies reported meeting or exceeding expectations in understanding their customer s buying cycle. But do firms really know what they are achieving by doing so. Will it help them sell with less effort? Will it help them sell more? Will it help them justify higher margins? In the following table we compare the number of calls required to close a deal (see pg. 44) and win rates for three groups of sales organizations: 1) those which exceed expectations in their ability to understand their customer s buy cycle, 2) those which meet expectations and 3) those which need improvement. Ability to Understand Customer s Buy Cycle 3 to 9 Calls 10 or More Calls Win Rates Exceeds Expectations 69% 15% 60% Meets Expectations 63% 24% 50% Needs Improvement 56% 23% 41% We do see a reduction in calls, but the real payoff is in the higher win rates. This is truly a significant difference. But is it sustainable? The answer is, more than you might think since this ability is fundamental to building relationships -- not just closing a single deal. At the same time, a cautionary warning should be sounded that with tough financial times, customer buying processes can change overnight. Even firms doing well should continue to check in and make certain they know the current buying process. CSO Insights 60

61 Rate your ability to differentiate your offerings from the competition. Inside/telesales performance in this area on par with field sales. This does not mean there isn t room for improvement in this aspect of selling. Money invested improving here may be saved from fewer proposal misfires. Chances are you have to go back a long way or cannot readily think of a time when you were in a non-compete opportunity. Competitive activity has been universally increasing in step with the growth of the Internet and its use as a comparison shopping tool. And while inside/telesales performance is about equal to last year s field sales figures, this ties a four year low in tracking this metric. The ability to differentiate ones company and offerings from the competition is a skill that correlates with higher proposal hit rates. However, it turns out the ability to do this well is not unique to one particular size of organization. The size of companies exceeding expectations in differentiating is not substantially different from those that need to improve in this area. Their results; however, are sufficiently different to suggest investing training this skill and marketing dollars in competitive analysis and knock-offs might be well spent. Differentiate from the Competition Needs Improvement Exceeds Expectations Proposal to Sale <50% 59% 47% Proposal to Sale >75% 6% 13% CSO Insights 61

62 Rate your ability to effectively cross-sell and up-sell. Over four in ten firms surveyed meet or exceed expectations in this area. Needing improvement firms still remains high. Purchase justification and customer marketplace training appear to trump product training in this particular metric. The ability of sales organizations to effectively cross-sell and up-sell meets expectations one-third of the time and exceeds expectations in this regard 8% of the time. Are expectations unreasonably high? Is technology not able to help connect the dots between an initial inquiry of one product/service and complementary offerings to enhance an order? A closer look comparing the 42% of companies needing improvement and the 8% doing exceptionally well sheds a little light on these questions. To the first question, it seems expectations are not the issue. The exceeds group had a weighted average quota of $728,000 versus the needs improvement s quota of $643,000. Technology alone doesn t appear to be the differentiator either. 86% of each group had installed CRM applications and the usage was essentially the same across all groups. ( >75% adoption rate by sales reps.) There were areas of notable difference elsewhere. 44% of the group exceeding expectations reported contributor or partner level relationships with their customers and only 8% as vendors; the needs improvement group s figures were 26% and 30%, respectively. It makes sense that you are more easily able to suggest additional or higher cost offerings if your buyers perceive you having have a consultative relationship with them. Training is another area with notable differences. The exceeds group met expectations in customer marketplace training, justifying the purchase training and sales management training significantly more than the needs improvement group; interestingly they trailed the needs improvement group in product training and training in the use of their CRM system. CSO Insights 62

63 Rate your ability to sell value and avoid excessive discounting. Firms continue to struggle with discounting to get the sale. Higher margins track with higher levels of relationship. Over 58% of firms seen as One of Many Players in their marketplace said they need improvement in this area. Avoiding discounting is an ongoing challenge that has not eased as buyers have come to the table better informed, more demanding, and facing more scrutiny on every purchase when times get tough. Add to that more competition and pressure to close as many deals as possible, reps (inside and field based) are often quick to reach for the discount lever. But discounting directly and negatively impacts the bottom line. Is there a way out of this dilemma? At the risk of repeating the relationship mantra we feel compelled to point out that this is one of the key areas of distinction between groups selling value and those needing improvement at not discounting. The table below compares the 38% of firms which reported needing improvement in selling value versus the 14% exceeding expectations, both tabulated relative to their place on the relationship ladder. Client Relationship Needs Improvement Exceeds Expectations Partner 7% 13% Strategic Contributor 15% 22% Value-add Consultant 19% 23% Preferred Supplier 23% 21% Approved Vendor 37% 22% The trend evidenced above shows that as we develop deeper relationships with our customers we are able to convey, and they are able to appreciate, everything we can bring to the problem we are jointly trying to solve. CSO Insights 63

64 Rate your ability to close deals accurately, in the timeframe originally forecast. Accurately predicting when a deal will close remains a challenge. The forecasting challenge increases in relationship to deal size. Gaining a clear understanding of your customers decision-making process can help improve forecast accuracy. It s clear from the chart above that the ability to identify when a deal will close is a problem. But a legitimate question may be whether this lack of ability is a problem: Does it really matter when a deal closes so long as it closes? One software executive we interviewed did not worry about forecast accuracy about specific opportunities so long as the overall volume of bookings was within acceptable limits. This strategy might work for your firm if the outcome of any particular deal and more particularly the timing of any particular deal is not critical. Deal size, pipeline volume and velocity all must be considered. Ignoring the issue altogether is a throwback to the dialing for dollars boilerroom mentality associated with telesales for so long. Although the impact of losing a deal that is under $5K is less than a much larger opportunity, it is interesting to note that forecast accuracy goes down as deal size goes up. If improving in this area is of interest to you, understanding why you win or lose deals can be especially helpful. Firms that rated themselves as exceeding expectations in conducting win/loss reviews were more than twice as likely to do well at forecasting closing timeframes. Taking the time to look at your past successes and failures will help you more clearly understand the real gestation period of a deal, which will make your CFO s job a lot easier. CSO Insights 64

65 Rate your understanding of the top three reasons why you win deals. Service and relationships are relied on most in order to win deals. Product superiority continues to slip as a primary reason for winning deals. Reputation may be based more on soft brand components rather than simply product related. Based on results from both this survey and our 2008 SPO survey we see a continuing movement toward service and relationships with customers as the key to winning the deal. This shift supports what we have been saying the past few years: It is not what you sell that is your sustainable competitive edge, but rather how you sell. While product superiority holds third place, we expect to see this fall further in the future. Shorter periods of product/feature exclusivity (the revolutionary Apple iphone already has at least three look-a-like competitors), increased competition, and collapsing product life cycles all conspire to ensure this advantage is short lived. Another factor to consider is fourth ranked brand equity/reputation. A solid reputation especially for great service, support and products is still crucial in today s marketplace; however, reputation is primarily the precursor that qualifies your firm to be considered as a candidate in the buyer s preliminary investigation and/or short-list creation. Still, this is only Step 1 albeit a crucially important step in getting into the game; there is more work to be done to win. Central to this ongoing work is developing stronger, high level relationships. This means learning more about buyers markets, and bringing unique and detailed value-added insights on how you can increase their competitive position. CSO Insights 65

66 Rate your understanding of the top three reasons why you lose deals. That most firms lose deals because of price is a concern. Relationship is a sword that cuts both ways: a help or a hindrance, depending on who has them. Sales process execution is ranked low in both winning and losing deals. There s an old sales saying: Why d you win the deal? Good selling! Why d you lose the deal? Bad pricing! This was always meant to be a joke but it seems to have morphed into conventional wisdom. Yes, there are competitors that will and do compete on the basis of price alone, but if you think this is the ONLY reason Wal-Mart or Costco are successful, you re missing the point. Each of these retailers has developed a compelling and dynamic business model that is constantly looking for ways to squeeze costs out of their supply chain. Treacy and Weirsema defined this as Operational Excellence in their classic: The Discipline of Market Leaders. The low prices are what you see; their underlying processes, operating principles and leadership philosophy are what make these possible. Two thoughts strike us at this moment. First, having just said (in the prior metric) that how you sell is increasingly a competitive differentiator, we note that sales process execution is ranked by this year s survey participants as the sixth place reason they win and the seventh place reason they lose. Do these similar rankings reflect a similar cause not knowing? Possibly, since nearly 60% of respondents either need improvement or don t know about conducting regular win/loss reviews. While the 7% of respondents that exceed expectations in conducting win/loss reviews also rank process execution fifth for why they lose, it s ranked second for why they win deals. CSO Insights 66

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68 Account Management Assessment Introduction This section contains sales cycle metrics related to the types of strategies and tactics companies are utilizing to keep more, and generate additional business from, existing customers. Ability to Effectively Introduce New Products Ability to Farm Additional Revenues from Existing Customers Ability to Effectively Communicate with Customers Ability to Create/Maintain Case Studies/References CSO Insights 68

69 Inside/Telesales Inside/Telesales Performance Performance Optimization Optimization Survey Survey Analysis Analysis Cover Rate sheet your 2 ability to effectively introduce new products into the marketplace. Over one-third of firms feel they need to improve in this area. There is direct correlation between level of sales relationship and exceeding in this metric. Still, less than 10% of firms exceed expectations in this vital ability. How important is the ability to not only meet but exceed expectations when introducing new products? It can be the difference between meeting quota or not. Those companies (fewer than one in ten) which excel in this area, on average, had 63% of their inside/telesales reps meeting or exceeding quota. Those companies needing to improve in this ability (more than three in ten) averaged 50% of their reps meeting or beating quota. Does your firm s relationship with clients or prospects matter when introducing new products? The chart below shows the percentages of firms which need improvement or exceed expectations introducing new products at each level of the sales relationship. Sales Relationship Needs Improvement Exceeds Expectations Partner 23% 20% Strategic Contributor 32% 19% Value Added 38% 11% Preferred Supplier 36% 6% One of Many 45% 0% The results suggest that companies who are seen as either a partner or strategic contributor more often exceed expectations and less often need improvement-- introducing new products than firms with a lesser relationship. In short, the stronger the relationship with clients and prospects the more likely they are to be receptive to any new offerings. CSO Insights 69

70 Rate your ability to farm additional revenue from existing customer base. Nearly one-half of firms still need improvement. A higher skill level of sales execution improves ability to maximize each customer. A direct relationship appears to exist between highly effective customer account management and increased quota attainment. Making the most of your existing customers sounds easy enough, yet we continue to see companies struggling. Firms needing improvement in this area also rated lowest in key sales execution skills: 1) understanding the customer s buying process, 2) cross selling and up selling and 3) selling value versus discounting. Ability to Farm Additional Revenues from Customers Needs Improvement Meets Expectations Exceeds Expectations Know How Customer Buys 48% 43% 8% Cross Sell/Up Sell 60% 30% 4% Sell Value versus Discount 52% 31% 11% Not only did the telesales reps who excelled in making the most out of each customer rate at a sales execution skill level of six times that of their peers, they also outperformed both the needs improvement and meets expectations group in overall quota attainment. Compare 66% for those firms who rated their telesales reps at an exceed expectations level with 52% and 51% for meet expectations and needs improvement, respectively. You may be familiar with the expression, 80% of all relationships die of neglect. Farming existing accounts is more than simply calling up and asking whether they re ready to renew or expand their order. It requires staying abreast of their company announcements, bringing solutions that are in line with trends in their industry and adding value by showing interest not indifference. CSO Insights 70

71 Rate your ability to effectively communicate with your customers. Majority of firms feel they meet expectations in their customer communications. Effective communication alone does not increase quota attainment. Getting to know your customer allows you to better position your product or service. Clear and consistent communication with customers is important, but it is not enough to ensure meeting or exceeding sales quotas. The average quota attainment for sales reps that either met or exceeded expectations in this area had quota attainments ranging from 51% to 66%. Based on the data above, it is evident that almost three of four firms are satisfied with the level of interaction between their telesales reps and their clients or prospects. However, one would argue that the real key is not frequency as much as quality of the conversation. As we drill deeper into the data, it becomes clear that the most successful firms are those that allow their telesales reps the time to establish a relationship with the prospect, understand what they need and provide a solution that meets those needs. Firms that rated their telesales reps at an exceeds expectation level for communication also showed an unusually high rating in the ability to create a solution aligned with customer's problem--95%! Ability to Create a Customer- Focused Solution Exceed Expectations Meet Expectations Needs Improvement Outstanding Communication 42% 53% 3% CCCoCommCommunication Poor Communication 12% 36% 50% CSO Insights 71

72 Rate your ability to create and maintain cases studies and references. Difficulty obtaining customer case studies is not unique to inside sales. One factor adversely impacting this is obtaining formal customer release/approval. Controlling access to case studies may be a successful tactic for increasing customer participation. Almost half of the firms surveyed are experiencing difficulty in this area which is on par with our field-based survey. A number of items are contributing to the difficulty of obtaining case studies. Not least among these difficulties is the continuing requirement for formal (i.e., legal) release/approval of the final case study. Many customers that have notable success with a product or service are reluctant to be showcased in a case study, especially where their competitors can access it. These companies do not want to broadcast their success or the underlying key or technology that enabled it. Customers have also begun to ask what s in it for them to be featured in a case study. They often begin negotiating for extras since its clear the service provider will benefit more than the buyer. A couple of strategies have been useful in approaching, if not overcoming, these objections. First, many companies request participation in a case study as a quid pro quo for concessions being negotiated by the buyer. It is important that these up-front discussions include or recognize legal approval and not simply a willingness on the buyer s part to do a case study. Another approach helping gain customer references is establishing private portal access to the case study via password protection. Video references are a variation that is proving especially popular for a variety of reasons including being easier to get approved. These also allow the buyer to be interviewed only once and sellers do not have to worry about their best references being burned out by repeated calls. These can also be utilized earlier in the sales cycle. Whether printed and distributed on hard or soft copy, or made available as a podcast or other format, having case studies available as ready references and early proof cases is still seen as a valuable asset. CSO Insights 72

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74 Sales Management Assessment Introduction This is a new section added to the report this year. Some of the metrics are carryovers from prior years but seem to fit better in this new category (e.g., the ability to accurately forecast business). Other metrics are new this year and are identified as such (e.g., the ability to hire sales reps that can succeed ). In all cases the respondents were asked whether they needed Improvement, met expectations, exceeded expectations, or Don t Know or N/A. The only exception to this was rating the amount of change impacting their sales reps with answers ranging from decreasing to significantly increasing. Don t know or N/A were also a valid response. Ability to Hire Sales Reps Who can Succeed at Selling Offerings Ability to Provide Managers Access to Timely/Accurate Sales Metrics Ability to Accurately Forecast Business Ability to Easily and Accurately Calculate Sales Commissions Ability to Regularly Conduct Win/Loss Reviews Ability to Continually Adapt Sales Process to Market Changes Ability to Proactively Identify Which Reps Need Coaching/Mentoring Ability to Share Best Practices Across the Sales Force CSO Insights 74

75 Rate your ability to hire reps that can succeed at selling your offerings. Hiring right pays dividends in higher quota attainment and lower rep turnover. High turnover still plagues inside sales in general, and some firms in particular. More than onethird of firms approaching 100% turnover still felt they were meeting expectations in this metric. Building a successful sales team is a manager s top responsibility, but often it is a long term goal pushed aside by more near term priorities -- namely making the numbers. If coaching and consistent feedback take a backseat to today s urgencies, systematic recruiting and new rep hiring is also trailing further behind. Yet developing bench strength is crucial, and hiring right is essential. The chart above shows that over half of respondents feel they are doing either an adequate or outstanding job in this area. Overall, the data shows that hiring right supports sales success. In the table below, we compare average quota attainment and rep turnover for those firms that need improvement or exceed expectations in hiring. Quota/Turnover Needs Improvement Exceeds Expectations % Quota Attainment 48% 58% Voluntary Turnover 23% 22% Involuntary Turnover 23% 15% We see a ten percent better performance in percentage of reps hitting their number and nearly ten percent less turnover both good things. However, the turnover rates mean replacing the entire sales force every two-and-a-half years rather than every two years; better, but hardly overwhelming. Inside sales historically has been plagued with high turnover. One large credit card operation we reviewed had found success in this area by offering much more flexible work hours and other enhancements that were specifically targeted to appeal to the younger generation of workers. We will be compiling other best practices to report to our research clients throughout the coming year. CSO Insights 75

76 Rate your ability to provide managers access to timely/accurate sales metrics. Inside sales is ahead of the game in compiling and reporting sales metrics. Many of these metrics are activity driven and may not be quality measures. The metrics your managers receive should meet the five tests for meaningful feedback. It might be debated whether field sales has certain advantages over inside sales but access to timely and accurate metrics would certainly be more advantageous to inside sales. More often the inside sales team is in one location and, with few exceptions, everyone is working with a system that tracks activities and outcomes on an ongoing basis. The question asked is whether managers are provided access to timely and/or accurate sales performance metrics. A better question for inside/telesales is whether the metrics that are routinely gathered and reported are the right metrics. There are a number of metrics some of which are holdovers from call centers (primarily inbound) that are part of the reporting for telesales: peak call times; total number of calls per day; number of demos done on line; number of leads generated, to name just a few. These are all activity indicators, but do they necessarily reflect the quality of the activities being conducted? High numbers of demos done on line may be a good leading indicator, but only if they are correlated with high conversions to proposals that close. Generating loads of leads may look good on one performance axis, but if their quality yields very low close rates, then this only means more resources were expended and expenses incurred to eventually flush these out of the pipeline. New analytic capabilities are available to help managers see what matters. And what matters is providing meaningful feedback and specific coaching to improve individual sales performance. Feedback must meet five tests to be meaningful: 1) timely, 2) accurate, 3) objective, 4) individualized and 5) relevant. Are you getting the metrics you need to provide this level of coaching? CSO Insights 76

77 Rate your ability to accurately forecast business. Roughly one-half of firms are meeting/beating expectations. This leaves the other half needing to improve or simply not knowing their forecast accuracy. In either group, there is still plenty of impetus to do much better. As seen in the chart, forecasting is about a 50/50 proposition. About half the firms feel they need to improve in this area or simply don t know. The other half feels they are meeting or exceeding expectations. The question of forecast accuracy is 50/50 in another regard: Across all the firms reported above, the outcome of deals forecast to be won is 47% won and 53% lost to competition or no decision (see pg. 50). The 7% of firms reporting exceeding expectations in the accuracy of their forecasts averaged a win rate of 59%. This is obviously better than the rest but still leaves plenty of room to improve. Does forecast accuracy really matter? As long as we make our number, isn t that enough? The consulting answer to such a question is: it depends. If you are manufacturing widgets that are uniform and have low variable costs, then getting an individual deal forecast correctly is less important than getting the volume and timing aspects correct: lose one but another one just like it closes in the same period. However, if there are customizations to each order, professional services, long lead times or other variables that can be adversely impacted by replacing one size deal with a similarly-sized but differently configured deal, then costs including cost of sales--will increase. This can impact other functions trying to staff, buy, or cut back accurately. There is an expression (think True/False tests): Given a 50/50 chance, you ll be wrong 90% of the time. The 50/50-50/50 figures above suggest there is still plenty of room for improvement in this metric. CSO Insights 77

78 Rate your ability to easily and accurately calculate sales commissions. Given the complexity of inside/telesales compensation, the results may be overly optimistic. As a result, ease of calculations may need to be separated from accuracy of compensation calculations. Shadow accounting may be siphoning off selling energy and defocusing your inside reps. Just over 60% of this survey s respondents report meeting or exceeding expectations in easily and/or accurately calculating commissions. This is surprisingly high considering: 90% of inside sales reps have some variable pay component; 70% of inside sales reps are partnered with field and or channel reps (or both); more than 50% also have contests and SPIFs; and 40% of firms have or don t know if they an overlay quota assignment for their telesales reps. Add to these complexities that turnover rates are fairly high (see pg. 34) and often result in reassigning accounts and/or territories and associated quotas. In our first Sales Compensation survey conducted in early 2008, we asked what one thing respondents would like to change. Their answers varied enormously but increasing flexibility, rewarding profitability and being more team focused were among the answers received. Since most of our surveys are completed by sales management we suspect the positive assessments reflected above have more to do with accurately computing commissions than the ability to do so easily. If this is the case there is a second cost/effort that may not be being accounted. With increased complexity and lack of real-time transparency, a good deal of individual effort goes into shadow accounting. This is the time and energy each rep expends tracking their own deals and commissions in their own spreadsheets. This is a real and often significant drain on inside sales rep time and focus; you want to be sure you minimize the opportunity for this distraction. We will be doing a follow up compensation survey in If you are interested in participating please contact us at info@csoinsights.com. CSO Insights 78

79 Rate your ability to regularly conduct win/loss reviews. There is a straight line improvement from needs to exceeds in conducting regular win/loss reviews. Firms recognize the value but may be taking a short-cut in polling for win/loss data. 3 rd party firms that conduct win/loss reviews often reveal insights that otherwise would be missed. The chart above shows that firms understand the need to regularly conduct win/loss investigations, but nearly half feel they need to improve their ability to do so. Good idea. The outcomes of forecast deals, one indication of how well reps understand how they re doing in the selling process, shows a straight line improvement associated with this ability. There is a direct correlation to a 10% better win rate and a 6% better no decision rate between the group needing improvement (45%/25%) and the group exceeding expectations (55%/19%). So why don t firms do this regularly? They may think it s too much trouble or they may feel they re already doing it but need to improve. The most common approach to win/loss reviews is asking the reps, as part of entering an order or recording a loss, to select from a drop down list the reasons why the deal was won or lost. This is better than nothing but just slightly. Another popular approach is having someone from your firm call to do a post mortem with the buyer. Like car dealers that call to ask about your recent service, it s good for customer satisfaction but not likely to reveal all but the most serious service problems. Using third-party firms to interview customers about why they bought one solution over another often reveals very different answers than the sales reps thought. There are firms that do this work and provide stunning snapshots and insights to guide your sales managers, marketing and product development teams. We feel this is another of those reliable efforts like exercise that everyone knows is good for them, but find it easy to keep putting it off. CSO Insights 79

80 Rate your ability to continually adapt your sales process to market changes. Q is a time of unprecedented global economic change. Changes will be made that impact sales ability to get contracts signed. Higher levels of customer relationships and process implementation pay huge dividends now. This is another area where inside/telesales has a clear advantage over field sales. With the sheer volume of calls being made each day, inside sales will see telltale signs much quicker that something has shifted. And something has clearly shifted in the fourth quarter of 2008! The global economic crisis means everything is now subject to change. Competitors will be adapting their messaging and tactics just as you will be. Finance will be imposing more stringent credit requirements; and terms and conditions on contracts are bound to tighten. And while you may find some relief, or at least understanding that things have gotten tougher, sales will still be expected to bring in the number. This is the time to double down on process execution and building/reinforcing relationships. The small group (1 in 12) seen above that exceeded expectations in adapting to change were also the highest placed in the SRP matrix (see pg. 18). The exceeds group above saw 27% of their relationships at the Partner level versus 6% for the needs group; 33% were at Level 4 versus 11%, and quota attainment was 67% versus 54%, respectively. There is no silver bullet or magic potion to create/elevate relationships overnight but you can make this a focus of your sales approach. Look at your various programs, sales process questions and offers, promotions and contests and ask whether they are aimed at strengthening relationships or merely attempting to close more business quickly. Ditto for sales process though this is something you can introduce, enforce and reinforce much more quickly. The winds of change are howling; stand fast with a clear plan for process and adding value. CSO Insights 80

81 Rate your ability to proactively identify reps that need coaching/mentoring. The ability to recognize telesales reps that need coaching pays dividend in many ways. Lack of proactive coaching may translate to a need for more active recruiting. Longer rep tenure allows for greater skill development and higher overall performance. Half of our survey respondents indicate they are meeting expectations in this capacity, almost one third sees the need to improve. Several other metrics bear out these rankings, as well. First, according to Kevin and Jackie Freiberg, authors of Nuts! Southwest Airlines Crazy Recipe for Business and Personal Success, the number one reason individuals leave their jobs is their relationship with their immediate supervisor. Considering the chart above, we see that firms needing improvement report 48% total rep turnover, those meeting/exceeding expectations report 39%. By hanging on to reps longer, managers have more time to focus their attention on improving rep performance and not having to replace it. The time that is freed up can go toward honing other skills, both for managers and reps, and the data supports this ideas. Our survey asks respondents to assess their sales teams abilities in twenty different areas. These include abilities to prioritize accounts on which to focus selling efforts, generate new leads, cross-sell, up-sell, etc. Firms that exceed expectations in terms of identifying appropriate reps for coaching reported that the majority of their reps need improvement in just four of the twenty areas. Those who meet expectations highlighted five, while those needing improvement highlighted seventeen of the twenty areas. The results demonstrate the power of proactive coaching as one of the best ways to improve rep performance.. CSO Insights 81

82 Rate your ability to share best practices across the sales force. Sharing best practices is key to unlocking knowledge that already exists within your firm. This ability can pay dividends in multiple areas across the sales function. Establishing a culture of sharing and recognizing contributors is significant to developing this important area. A senior vice president of a very large distributor of electronic components distributor told us, The answer to every single sales challenge we face already exists somewhere in our company. How do we go get it? How do we synthesize it? How do we improve it? How do we get it out to the reps? How do we update it? What he was encapsulating is the challenge of sharing best practices. Nearly 60% of firms reporting feel they re doing an adequate or better job in this area and their results bear this out. When comparing areas that need improvement such as introducing new products, developing accounts to their full potential and creating customer loyalty, the needs improvement group outnumbered the exceeds group 2.5:1. Said another way, the firms that do well at sharing best practices among their reps see the payoff in many different areas of increased skill. So how do you make this happen? First, you want to create a culture and a practice of rewarding sharing. Many reps would share their best ideas if only someone asked them and/or recognized and appreciated them for doing so. Others are willing to share their knowledge and experience but don t want to be so peppered with questions that they are unable to get their own work done. Technologies are now available for capturing and cataloging best practices. Many companies have tried to implement sales knowledge management with a portal or within a library in their CRM system. This is a good starting point if you can get your reps to put information into your system and your reps can successfully get information out. Some applications are better suited to this task than others. If you are interested in exploring this area in greater detail please feel free to contact us at: info@csoinsights.com. CSO Insights 82

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84 Sales Process Assessment Introduction This section focuses on how much companies are investing in training their sales reps, how many companies have adopted a formalized process for selling, how the sales process was developed, and what impact that approach is having on the performance of salespeople. Annual Investment in Training Per Sales Rep Change in Amount of Sales Skills Training Change in Amount of Product Training Change in Amount of Customer s Marketplace Training Change in Amount of Purchase Justification Training Level of Sales Process Implementation by Inside/Telesales Reps Impact of Sales Methodology on Performance Type of Sales Methodology Used in Sales Process Sales Methodology Adherence Rate Attitudes Toward Recommending Sales Methodology Vendor CSO Insights 84

85 How much do you invest annually in training each sales rep? Higher levels of training investment show biggest increase. Conversely, lower levels of training investment show biggest decrease. Not doing any training has also increased. More firms are investing more training dollars to develop their inside sales reps. In 2005, 5.5% of respondents indicated they were investing more than $5,000/year/rep. This year that figure is 11% with more than half of those firms investing more than $7,500/year/rep. And the $1,501-$2,500 has also grown from 20% three years ago to 23% this year. At the same time the lower ranges of investing have shrunk. Firms investing $500-$1,500/year/rep have shrunk from 37.6% in 2005 to 26% this year and those investing <$500 has also decreased from 22% then to 18% now. The only exception to this upward trend is firms doing no training at all. In 2005, almost no firms reported doing any training but this year the figure is 6%. It s possible this significant increase is the beginning of a new trend viewing training as an expense rather than an investment and, therefore, subject to expense reduction/containment actions. While they are clearly bucking the trends, there is at least one metric to support this line of thinking: rep turnover. Firms doing no training experienced 34.1% total rep turnover versus 60.8% for those investing more than $5,000 per rep. It may be that they are saving their money/energy not investing in training and applying these resources elsewhere. Companies spending the most on training (i.e., $5,000+/year/rep) list training opportunities as their number one program for retaining reps, followed by career opportunities and then pay increases. The no training firms number one retention program is pay increases. CSO Insights 85

86 How is your current level of sales skills training changing? One-half of firms see the need to improve sales skills training. Less than one firm in fourteen exceeds expectations in this area. The group meeting expectations may want to improve their team s sales skills. This year we revised this question from earlier surveys. In the past we asked whether the level of training in each area (e.g., sales skills training, product training, etc.) would be increasing, decreasing or remaining the same. Three years ago 50% said they would be increasing and another 19% said increasing significantly. As seen above one-half feel they have to improve (rather than increase) further. It would seem they are on the right track. Rep quota attainment of the needs improvement group averaged the same as the general population at 55.9%, while the exceeds expectations group averaged 64.4%. In addition, the exceeds group was carrying a larger quota with a weighted average of $741,000 versus the needs group s $658,000. The meets expectations group had the highest average quota at $806,000 and the lowest percentage of reps attaining quota at 54.2%. Of course, there are other considerations including average tenure of the inside sales reps (see pg. 34). In this case, the meets expectations group may needs to do more with sales skills training because their percentage of reps with less than one year tenure is 42% versus, compared to 26% for the needs improvement group and 29% for the exceeds group. The need to get new hires up to speed quickly and at full parity with tenured peers is an ongoing challenge for telesales where turnover tends to be fairly high. CSO Insights 86

87 Inside/Telesales Performance Optimization Optimization 2008 Survey 2008 Survey Analysis Analysis How is your current level of product training changing? The majority of firms surveyed feel their current product training needs improvement. Another one-third feels they re meeting expectations. Only a fraction of firms are exceeding expectations in this highly valued area. Always considered to be a sales rep s greatest or primary weapon, product training is typically the first exposure new hires receive. After all, you have to know what you re selling when you connect with prospects and customers. Given both the primacy and basic requirement of product training, how is it that the majority of companies continue to feel the need to increase and improve? There are a number of factors contributing to this feeling of the harder I run the behinder I get. Among these factors are the increasing complexities of many of today s products/services, the increasing breadth of company product lines, entry into new markets and increased competitive activity. Add to this list turnover rates for inside/telesales reps, where we found cases that it exceeded 100% per year and you have a combination sure to keep your product managers busy keeping (or trying to keep) reps up to speed. Still, it is surprising to see less than one firm in twenty reporting they are exceeding expectations in this regard. Other distinctions the exceeds group as a whole reported (by times) over the needs group: 1) Properly qualifying and prioritizing opportunities; 2) Differentiating versus the competition; 3) Cross-selling and up-selling; and 4) Selling value and avoiding discounting. Whether these explain or could form the basis for improving your own product training requires more intense investigation but these certainly seem worthy points to begin that discussion. CSO Insights 87

88 How is your current level of customer marketplace training changing? The need for training on customer markets is being recognized. Less than 1 in 20 firms is exceeding expectations in this area of training. One-half of respondents see the need to improve in this area of training. This is a problem if one is looking to move beyond just being considered one of many vendors. Being knowledgeable about your customers markets and the issues they are facing is essential in moving up the relationship pyramid. At higher levels, beginning with the Consultant level, buyers are looking for sources of information that can not only help them buy ( Yes, we have that ) but help them understand the implications of making or not making a buying decision. Marketplace knowledge enables reps to differentiate themselves in competitive times. While product knowledge is important this graphic shows that it is foundational and that other types of training are required to develop higher level relationships. Inside sales reps are not immune to this dynamic and like field reps can benefit from it. Particularly in competitive situations, the rep that demonstrates an awareness beyond what he/she is trying to sell and can speak to the implications of what the prospect is trying to buy (a solution to a business pain) will come out on top more often. CSO Insights 88