Cost Per Opportunity
As the old saying goes, management gets what management measures. What would happen if you put some focus on tracking your average cost per sales call? Not average cost per appointment, but think about once it becomes an opportunity that you're tracking in your CRM, what might change if you started to track that data a little bit more carefully? Most companies don't. Objective Management Group tracks this as part of their sales effectiveness and improvement analysis, and their data shows that only 6% of companies actually track the cost per sales call.
There's a lot of different factors that go into that. There are the hard costs, time, energy, and effort of your sales team, and maybe any technical resources that they pull into it. There's also the cost of producing materials, samples, proposals, etc. One of the costs that maybe isn't as easy to track is the opportunity cost. What happens if you have salespeople focusing on lower value opportunities or the wrong opportunities, therefore not focusing on the right opportunities? That's a little bit more subjective, and a little harder to measure. The big dollars are going to be in the opportunity cost by having an unfocused sales team.
If you started to ask, "what's our cost per opportunity or cost per sales call?" how would your focus change? How would your sales team’s focus change? Would standards for overall meeting quality go up or down? What would you do different differently from a marketing perspective? Would you change who you're targeting? Would you engage people differently? Would you prepare different materials? Would you do more trade shows? Would you do trade shows differently? How would you get more value from the trade shows you're already investing in?
Really hold your managers accountable to putting some focus on this and trying to understand why their salespeople are investing so much time with low value targets. What are the underlying reasons for that? Usually when we look at a salesperson who is spending too much time in or an inordinate amount of time with a less than stellar opportunity, there's an underlying issue, often tied back to a sales DNA competency. Maybe, for example, their need for approval won't let them call higher up in an organization, and they call where they're comfortable. If they need to get to the CFO or the CEO, but they're not comfortable calling that person, they call who answers the phone. It's a lot harder to build a case for an investment with your company's product or service starting at the bottom and working your way up. Sometimes that's appropriate, but often it's a shortcut to or it's more effective to start at the top and be referred down.
What other reasons might be causing salespeople to spend time with the wrong prospects or spend time with low value opportunities? It may be that nobody's ever told them what the right kind of opportunity is, and that's on your manager. Are they spending the right amount of time coaching and debriefing salespeople on the quality of the conversations they're having, or the quality of the appointments they're setting?
Sales is a numbers game, so it's easy for your manager to rationalize, "Well, you know, we don't know which percentage of the deals are going to close, so we want to have as many deals in the pipeline as possible." While that logic is understandable, it's a bit of an excuse. While it's true that more deals in the pipeline make sense, it isn't always true that more low-quality deals will yield the results you're looking for. I always use this rule of thumb: If I have a salesperson who's going to go on an in person call and they're booking appointments, maybe three weeks out, they're planning a trip, and they book a couple of anchor calls, make sure to justify the trip. For example, if they're going on a two-day trip and it involves an airplane, make sure they have at least three or four quality right target, right level in the organization, conversations scheduled. If around those calls, they fill in some lower quality opportunities because they're there anyway, I'm okay with that. It's okay if they have a couple of less than stellar opportunities in there while they're focusing on those high-quality opportunities. It's not that we want to ignore every call, but really put some focus on what the cost per opportunity is. What is the cost per sales call, if you will.
By putting a little bit of focus on that, you may find that the quality of meetings will go up, and your salespeople will be more discerning about where they invest their time. One of the challenges you can give to your sales manager is to look closer at reviewing the pipeline, looking at the cost per opportunity in the pipeline, and if they’re the right opportunities. Again, management gets what management measures.
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