July 20, 2004

The Revenue Pit: How you're losing sales and what you can do about it

by Kristin Zhivago, Zhivago Marketing Partners

Your marketing people generate leads, using all the normal methods, then hand the leads over to the sales force. Your salespeople are focused on closing as many sales as they can each month, so they concentrate on the leads that they consider "hot"—and they don't pay much attention to the rest.

Jay Habegger, CEO of Bitpipe, the top whitepaper site, estimates that a full 95 percent of all the leads brought in by software company marketers are ignored by the sales force. That's the Revenue Pit.

What's the revenue potential, if all those leads were optimized? Mac McIntosh, sales lead guru, has been studying sales lead follow-up for more than 20 years, and has conducted a variety of wide-ranging inquiry audit studies for companies in the tech space.

Regardless of the type of product, McIntosh has found that 45 percent of all buyers who originally inquire about a product or service purchase that product or service from someone within six months.

Mac's studies revealed that during the last economic downturn, salespeople were only following up on about 30 percent of the leads. "In better economic times, the number is even worse, averaging 15 percent," he says.

Obviously, estimates of lack of follow-up can vary. But the point is the same: Without spending an additional dollar on marketing, you could be making a lot more money right now—if you could just keep those leads from falling into the Revenue Pit.

How did things get this bad? A quick glance at what is happening in marketing and sales tells the story.

Marketers are primarily responsible for awareness, lead generation, and sales tools. It's a full-time job. They are doing all they can do to crank out online and offline ads, website content, press releases, white papers, brochures and datasheets, price sheets, media schedules, tradeshow materials, research, reports, budgets, and plans.

Lately they are also being asked to keep raising the bar on search engine results, and to work closely with IT on back-end e-commerce systems and report generation.

More than ever, marketers are being told to measure the results of their efforts. But progress in this area has been slow. A recent survey conducted by the CMO Council and Business Week among tech CMOs (chief marketing officers) and CEOs showed that marketing performance measurement (MPM) is a priority for 78 percent of those surveyed—but 64 percent have not adopted a formal MPM system.

Salespeople are being pushed to make their numbers. Nothing new there. Between e-mail, client calls, phone calls, and internal meetings, they are doing all they can to close the "hot" sales. They never seem to get around to calling those long-range prospects; the hot call is always the best next call to make.

Minute by minute, that's the choice. Minutes turn into days, days into weeks, weeks into months—and pretty soon a whole year has gone by. During that year, 60 to 95 percent of the people who came to your company—people trying to buy—have been ignored. At least half of them are now the proud owners of a competitor's product.

The wrong perspective
It's important to know that the problem resides within your marketing and sales activities. But just trying to "fix" those problems without the proper approach will just waste more precious effort, time, and resources.

The place to start is not "inside," with your selling process, but "outside," with your customer's buying process.

Internally focused marketing and sales always includes wasteful activity. Salespeople come back from a meeting with an important customer and plead, "I know I can make this sale—I just need a competitive comparison. When can you get that done?"

Marketing people fall in love with the latest marketing method and plead, "I know that we can increase our leads if we use this method. We have to pull money from X and put it into this new vehicle."

It all sounds reasonable, and it could all be wrong. Your salesperson might be right about that one customer needing a competitive comparison. But do all of your customers need it? Could you make many more sales if you had it, or just one?

Your marketing person might be right about the new method being effective with a certain type of customer. But all customers? And when will you find out if the marketing person was right or wrong? Only after you've spent the money, and you have more sales—or fewer sales—to show for your investment.

The customer's buying process starts long before your sales and marketing people get involved. It starts with a need.

"At this stage, you're not even talking about products; you're talking about weighing different approaches," Bitpipe's Hebegger says. "You need to know what the customer's problem is, and the options that the customer might be considering to solve that problem."

A customer who contacts your company has taken time out of his frantic day to inquire about your product or service because he has a problem that he thinks you might be able to solve. He's not just contacting companies because he has nothing else to do.

He's in the middle of an active buying process—and yet your salespeople treat him as if he doesn't matter! He has probably already spent some time on your website, and is actually open to the idea of giving you his money. But you won't make the sale unless you successfully address his concerns and support his entire buying process.

This is the part of the sale that people like Jay and Mac call a "dialog" or "nurturing." Whatever you call it, as far as the customer is concerned, it's the most important part of the sale.

If you answer the buyer's questions successfully, you'll make the sale. If you don't, you won't. It's really that simple.

What this means, of course, is that it is also the most important part of the sale from a revenue point of view. Too bad no one in your company is focusing on it.

There are several things you will need to do to rescue revenues from that Revenue Pit. Here's the list.

Rescue tip #1: Put someone in charge of the Pit.
Lou Gerstner has been quoted as saying, "People don't do what you expect, but what you inspect." Business projects without accountability are destined to fail.

Of course, the only way to achieve accountability is to make someone accountable. You must put someone in charge of the Pit. You can't call them the Pit Manager, but you could call them the Buying Process Support Manager. Or the Pre-Sale Support Manager.

Whatever you call this person, he or she must enjoy working on systems and processes. Don't put a creative type or a "talker" in charge of this. This is operations, pure and simple—but it involves people, so don't just plug a numbers person in this slot. Someone with a customer support background would work well here.

They should report directly to you, the CEO, so they don't get bogged down in political battles. Nothing is more important than supporting the customer's buying process, so it's appropriate that the person report to you. This person will also act as a bridge between sales and marketing groups, who are always waging a civil war inside the company.

The person's job will be to map out the typical buying process for each type of customer. (For more about this, take a look at my new book, "Rivers of Revenue: What to do when the money stops flowing," which includes Buying Process Map templates).

Each map should show the steps that the customer goes through as he considers your product, who's involved in those steps, the questions they ask, the answers that will satisfy them, and the marketing and sales tools that will help them get those answers.

Marketing and sales will be involved in filling in the Map, and will then produce and use the materials.

Rescue tip #2: Face the fact that different customers need different levels of support.
Unica, a profitable marketing automation company whose revenues have grown an average of 56 percent a year since 2000, makes a clear distinction between customers who are ready for their solution and who already have a data strategy in place, and those customers who have no data strategy and must be hand-held from day one.

Carol Meyers, VP of marketing for Unica, makes a clear distinction between customers who are ready to buy and those who are "percolating." "Someone may be thinking, 'I need a solution like this someday'—that's percolating," she says. "My job is to make sure, when they get serious, they say, 'We should be looking at Unica. They do this type of thing. They are well thought of.'"

But she also puts a lot of emphasis on training the sales force to use different selling methods when they're dealing with customers at different stages in their buying process.

Carol thinks more in terms of systems than many marketing people because she started out in finance, in the GE financial management program. She has also run a sales organization.

Rescue tip #3: Build measurement systems for all aspects of the customer's buying process.
Customers aren't machines that respond a certain way when you push a specific button. They react to your behavior with behaviors of their own.

You need to know what they're thinking, before you approach them. You need to know how to approach them. And you need to know what they need from you before they will respond in a way that will make you both happy (because they got their problem solved, and you made a sale).

It's quite common to look at measurement from an "outward" point of view—i.e., here's what marketing did, and here were the leads we got from it. It's a bit more difficult (but not impossible) to track those leads through to sales.

Your Pit Manager should set up systems to make this happen. But, as I say in my book, knowing why the person bought is actually more important than knowing which ad she responded to. Why did she respond to that ad? Was it something you said, or had she heard about you elsewhere and the ad just triggered her action?

If it was something you said in the ad, why did it appeal to her? What is her problem, and what was she hoping you would say when she contacted you? Was she disappointed in your response, or pleasantly surprised? Why? What could you do to improve her reaction?

You won't get the answers to these questions with campaign measurement or online surveys. There's only one way to obtain this revenue-generating information: You must get on the phone and ask customers open-ended questions. This isn't as simple as it sounds, which is why we devote an entire section in "Rivers of Revenue" to the interviewing process.

At the very least, your people will find all sorts of excuses for not making these calls. When they finally do make them, they have to do it properly to avoid antagonizing customers and causing them to clam up. Thousands of interviews have proven what works and what doesn't; we spell it out in the book.

As you listen to customers and interview them properly, you will be starting with a successful sale and working backwards, re-tracing the customer's train of thought through their buying process.

You will learn what you did to help the customer buy, and what you did to discourage the buying process. You will often discover that the customer managed to complete the sale in spite of the barriers your sales and marketing people placed in front of her.

You need to know what those barriers were and why she felt it worthwhile to go through the trouble of overcoming them.

You may be thinking, "We're not putting up any barriers!" Ha. When was the last time you called your phone company—on that special, "call this number to order new services" line—and you were still subjected to voice-mail routing hell?

When was the last time you went looking for something in an office supply store and were insulted by, rather than helped by, the salesperson? When was the last time you went to a website and didn't find the answer to that make-or-break question, the one question they had to answer before you could proceed?

Don't kid yourself. As you are reading this article, one of your salespeople has just made an offhand comment that has convinced a prospect that he would never want to do business with your company.

Your website is missing critical information, and something about your website navigation is confusing. Your marketing people are sending messages about important aspects of your product to people who really need to know about a different aspect of your product„an aspect that was not mentioned.

Barriers pop up all the time. You must know what they are, and systematically eliminate them.

Your Pit Manager should set up customer contact systems, which include calling schedules (marketing people should talk to two customers every week, you should be calling one every two weeks, etc.); reports should be generated; meetings should be held where the reports are discussed and solutions are devised, set in motion, and then tracked.

Your Pit Manager should also set up an advisory board consisting of a small group of carefully chosen customers. Concepts and strategies should be shown to this group. Reward the customers with some kind of discount, and recruit new members every year.

On the quantitative side, make sure it's easy for salespeople to correctly and consistently record the source of each sale. Have the Pit Manager call customers at random to verify that data, and report back to the salespeople so they know they will be called to task if the information is incorrect.

Build simple spreadsheets for tracking sales to leads, broken down by customer segment and product.

Rescue tip #4: Make it easy for your salespeople to follow up on "cool" leads.
Whenever your marketing group provides leads to your salespeople, the salespeople cherry-pick the leads and call the ones they like the best.

Perhaps they've been chasing a particular customer, and so a new inquiry from that company sends them to the phone. Perhaps they simply believe that glamorous or well-known companies will make better customers.

Maybe they think all marketing leads are worthless, and only call the first five they get, so they can say they called someone. If you simply expect them to follow up on the leads they're given, you'll be throwing money away.

There are several ways to make sure that salespeople follow up on all leads:

Follow-up insurance policy 1: Education. Take several "cold" leads and call them. The person you call will be flattered to hear from the CEO. He will tell you where he is in his buying process.

After making a few of these calls, you will know, personally, how much revenue your salespeople have thrown out the window. You will probably uncover some great revenue opportunities, too. Then, you will be able to take that information back to your salespeople and embarrass them.

Why do you want to do this? Because people will do anything to avoid embarrassment. It's the most effective tool at your disposal. They won't be able to moan about the quality of the leads anymore.

Follow-up insurance policy 2: Time and environment management. It can help to put time aside—such as an hour a day—when salespeople are expected to focus on "cold" or "cool" leads.

You must require reports on these calls, so they know you're watching, and you should be aggressive about publicly recognizing and congratulating the salespeople who make sales from these leads.

Follow-up insurance policy 3: Pre-qualify the leads. Your Pit Manager can set up a system where minutes after a customer registers on your website for a white paper or case study, he is called by a specially trained rep.

The rep can ask a few questions to determine where the buyer is in his buying process. If appropriate, an appointment can be made for your field sales representative. Your salespeople will know that the lead is pre-qualified, and that their handling of this lead will be tracked.

Mac McIntosh's work has proven that the companies doing this are increasing their revenues. One trained pre-sales rep can easily pay for herself in a very short time.

Follow-up insurance policy 4: System improvement. Many companies are now cleaning up their database messes, because they have realized that they simply can't compete until they do. But too many salespeople are still struggling with out-dated, difficult-to-use systems.

Many expensive CRM projects ended up being completely worthless because the salespeople continued to rely on their own more usable home-grown contact systems. As painful as it is to start fresh, it's often the best answer.

Take a hard look at your own systems and ask yourself, "How much more could we make if my salespeople spent 20 percent less time fussing with systems?" It's pretty easy to do the math.

Follow-up insurance policy 5: Sales assistance. Tighter budgets and a PC on every desk did away with sales clerks. But, one sales clerk doing a lot of boring-but-necessary tasks for salespeople can free those salespeople to make more calls. The clerk should report to the Pit Manager.

Rescue tip #5: Change your own way of thinking.
Revenue only comes from one place: customers. They have the money. They may want your solution, but they won't exchange their money for your solution until you have convinced them—on their terms and in their preferred manner—that you will not disappoint them.

Very few people can be convinced to buy something against their will (in spite of what manipulative marketers will tell you). You won't make the sale if you don't support their buying process.

You can spend thousands, millions, or even billions of dollars on marketing and selling efforts that fail, simply because you were focused on what your marketing and salespeople thought would work, rather than on what you know will work because you've talked to customers.

If you personally interview customers, you will know what they want from you. You will know how they want to buy (in other words, they will tell you how to sell to them). You will know what stops the sale, and you will be able to systematically eliminate those barriers.

If you follow these steps, you can eliminate the Revenue Pit at your company, and start making the sales you've already paid for.

Editor's note: Kristin's "Rivers of Revenue" book is in our Buyers' Club at a 10 percent discount to our Site Members.