This is the second in a two-part series. Read Part I here.
Sales pipelines bloated with low quality leads can throw off organization sales forecasts, inflate rep quotas, and lead to missed expectations. Poor lead qualification can also rob the organization of valuable sales headcount by misdirecting thousands of hours of sales time a year toward no-win opportunities. To improve lead qualification and enhance sales force effectiveness, high-performing sales organizations use some of these best practices.
Sell to the right location. Many sellers find out too late that they’re pursuing a lead from a non-buying location. For companies selling to major accounts with multiple buying points, one key is to correctly identify the roles each location plays in the decision. There are essentially three models that most strategic accounts use to make buying decisions that can be matched against each lead. First, headquarters makes a company-wide buying decision that is mandated to all locations, which suggests that most quality leads will reside at that level. Second, headquarters selects preferred vendors the local locations may use. Under this “hunting license” model, the successful sales organization may find a quality lead at both the headquarters and local levels. Third, headquarters allows local locations to make the full buying decision. In this case, the quality lead will reside with each location. Matching the lead location with the decision model identifies potential dead end leads.
Manage to the metrics. Most sales organizations have a wealth of information on past sales processes that can provide them with metrics to manage leads. Two key statistics, expected value and lead age, can act as effective lead management metrics to churn out low quality funnel fodder. Expected value is the product of the budgeted sale and the probably of the close, which, over a large number of accounts provides an accurate sales estimate. Lead age is the total number of days the lead has existed in the funnel. While these metrics are not new, their value is in using historical data on actual probabilities and actual average days to close by customer segment, to force out low quality leads. As a rule of thumb, leads that are one standard deviation older than the average days-to-close for that segment are subject to automatic review and those that are older than two standard deviations are removed from the funnel and forecast.
Build the business case for better lead management.Organizations that are effective at lead qualification and lead management typically drive the change by understanding the cost of their current practices. Sales leads are typically used as a basis for sales forecasts, especially monthly or quarterly forecast adjustments that are within the timeframe of a typical sales cycle. Poor lead qualification can directly affect company sales forecasts and result in visible gaps that create costly market and investor reactions. Just as costly are the direct SG&A dollars spent on low quality leads. For a typical sales force that spends 50% of its time selling with 10% of that spent on no-win leads, recapturing that low quality lead time through better qualification can add the equivalent of one new rep for every four currently employed. This equates to a 25% increase in sales capacity without adding headcount. This is a compelling case for making a systematic improvement to the organization’s lead management capability.
|For each sales person:||For the sales organization:|
|2,000 hours worked per year||Recapturing 10% time or 200
hours per year per rep
|x 50% selling time (10%
|x 4 reps|
|1,000 hours selling time||800 hours or the equivalent
of one new rep’s sales capacity
|800 hours quality leads|
|200 hours poor leads|
Make lead busting a team practice. Critically managing leads as an individual seller can be a challenging process. Many companies find it more effective to instill a process of team lead busting in which sales teams share funnels on a regular basis and rigorously question top opportunities using basic qualification metrics. In addition to helping each rep objectively evaluate his funnel, the lead busting process often produces team ideas for moving key opportunities ahead.
Create a systemic process for managing leads throughout the organization and aggressively audit lead flow and lead quality. Making lead management an organization discipline can convert sales funnels and sales forecasts from works of fiction to reliable planning tools. Effective lead management can directly increase forecast accuracy, highlight weak points and redirect sales resource time toward productive high probability opportunities.
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