How to calculate your sales conversion rate (II), and why speed kills

In last week’s show, we offered 10 steps for calculating sales conversion rate. We also promised to show you why lag is death. In English, why a buyer who has taken longer than normal is unlikely to buy from you at all. So does that mean there is merit in using assertive marketing and sales techniques to speed them up?

We all want to speed our funnel up. In a recession like the GFC, sales cycles typically blow out, meaning buyers are taking longer than normal to buy. This could be so – they might genuinely be taking longer – but it’s just as likely that the problem is we are failing to concede defeat on deals that aren’t progressing making our data look like deals take longer.

In this week’s show, we’ll explore what happens when your funnel goes faster than normal (whether by design or by accident).

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Blog Transcription

In last week’s show we offered ten steps to calculating your sales funnel velocity. We also promised to show you why lag is death or in English, why a prospect is taking longer than normal, probably isn’t going to buy from you at all. Well, if lag is death, does it make sense then to try to speed our funnel up? We all want our funnels to flow faster.

In fact now, a recession like the one that we’re exiting now, the global financial crisis, sales cycles blow out. That is, they take longer. Do they really take longer or is it just that we’re failing to recognize that the buyers who were never going to buy are still feeling our funnel? So it makes it look like they’re taking longer on average, but maybe normal is normal and it’s just that we’ve got a funnel full of buyers who were never going to buy. That’s an argument perhaps for another day.

But let’s take a look at the effect of speeding your funnel up, what actually happens when you try to help buyers go a little faster than normal. We’ll also do what we actually promised in last week’s show which is to show you why lag is death. I just viewed the video and I realized that we failed to do that last week. We got so caught up in showing you the mechanics of how to calculate the sales funnel. We forgot to actually show you why lag is death. So I’ll do that as well in this week’s show.

Funnel Vision is brought to you by align.me, creators of the Funnel Plan. align.me is a source of The 1-2-3 of B2B.

Well, we all want our funnels to flow faster. As I mentioned at the top of the video, in a recession buyers look like they’re going a little more slowly. I argued as well on the top of the video that maybe they’re not really going more slowly, just that we’ve got a funnel full of buyers who were never going to buy and they make our averages look poor. But what about trying to speed them up? That’s what we’re going to talk about this week.

I want to show first what we’re actually asking out buyers to do faster if we do speed them up. So I’m confident that you already know the buyer’s journey, so I’m going to do this fairly quickly because I want to make actually a very simple point. You know that in the end when a buyer makes a decision, they have to first really form preference. Before that, they need to know what the offers are, and before that they need to agree what the need is for anybody. Then before that, there has got to be a problem worth fixing. Before that, they might be interested in the subject, but they don’t really agree there is a problem yet. Before that, they might know who the players are. Before that, they don’t. So that’s the buyer’s journey backwards. Of course, the buyer’s journey really goes forward. Here is my point though.

Which of those stages are you asking the buyer to go through faster? Because really we talk about accelerating the funnel, but we’ve sort of forget the buyer. We think about, well, let us go faster. It takes the buyer as long as it takes to move through each of those stages. Certainly you can do a few things to lighten their load to make it easier for them to progress. But, be really, really careful that you’re thinking about the buyer and not just you, the seller. Are we really of the view that we can make a buyer go faster, or are we just trying to close harder because you know that that is doomed to fail. My advice, work at how long it takes buyers to move through and work off that. Accelerating, in my experience, really works.

So let’s lose the theory and get really practical. Forget about what I’m saying or anybody else argues about how you should measure. The simple thing to do is to take a look at your CRM data, remove all deals that are still alive because you don’t know whether you’re going to win them or lose them, and therefore which bucket to count them in, and look at the average time that its taken buyers to move from stage to stage in the funnel for wins and look at them for losses, and compare the data.

Now, what I forgot to do last week I’m going to do now, which is to show you from a real case study why lag is death. So let’s come over here to our flip chart paper and let me show you very briefly what happens when a buyer takes longer than normal. If you break your funnel up into multiple stages, then I’m going to take an example here from a real client. They had a funnel where it took on average 51 days to get from top to bottom, from the very top of the funnel to the very bottom, a closed sale.

Now, if 51 is normal, the question becomes, how long do you think it would take to lose a deal? It turns out for this company it actually took three times as long. For a remarkable piece of symmetry it actually took 151 days now, just love the mathematical symmetry of that. But putting that aside took three times as long to lose a deal as to win a deal. Now, does it really take longer for a buyer to buy from somebody else than from you? I would think it would take exactly the same length. So what’s going on here? I think it’s pretty simple. 

If you divide your funnel into multiple stages, and let’s for convenience say that it took 10, 10, 10, 10, and 11 days, there is your 51 days. Now that’s what normal looks like. Any one of these stages took on average ten days for a buyer who did buy to move through the funnel. Then a buyer whose been sitting at one of those stages for 30 days, not 10, what do you think the chances are of them ever moving forward? Clearly not great. So all that really means is that a buyer whose taken longer than normal probably has either bought from somebody else or the project is not going to go ahead. It’s not a burning enough platform, a burning enough issue for them to move ahead right now.

Now maybe you can recover it, maybe you can go back and make it an A priority for them, get them troubled again about the problem to get it onto the A-list. The benefit of thinking like this is that if it normally does take, let’s say ten days to get through one of these stages, and a buyer has been stuck there for longer, then we know early enough to go back in and try to fix it at least rather than waiting until the sale has been lost later in the cycle. That’s why lag is death. Now let’s take a look at what happens when you can accelerate the funnel.

This time we’re going to take a look, not at the whole funnel, but at just part of it. Again, I’m going from a midget data experience here rather than a piece of theory. Just like before we’re going to take a look at the funnel, but in this case we’re only really interested in the middle third of the funnel. Now, whatever stage names you attribute to that, I’ll leave to your imagination. My point here is a simple mathematical measurement point.

Okay, so the buyer who chose to move through the early stages of the funnel, that might be some level of awareness. They’ve maybe understood who you were. They’ve shown some interest. Then they move through the middle stages of the funnel. They acknowledge the gap. They agree to need. Then also move through the bottom of the funnel. They understood your offer and they accepted your offer. They move through and they moved through the middle third, and they moved to the bottom third, and they became a customer. I’ve used dollars, maybe I should use a smiley face, but I can’t draw very well. So we’ll go with either of those. 

Let’s compare that to a lost pet, but a particular kind of lost pet, not all losses, but light losses, those horrible ones that you get all the way to the dance and you don’t get a kiss from. They’re the ones I want to talk about now. So in this case, different example. Did go through the funnel top. Did go through the middle, so they’ve got to the need definition stage. Then leaked at some later point in their journey. I want to compare this successful navigation of the middle third to successful navigation middle third, but for losses ultimately to wins.

This journey took 16 days for this particular company. When a buyer moved through the whole funnel, that middle stage took 16 days. For a buyer who moved through almost the whole funnel and then bailed at the last minute took, you’d think it’s going to be more wouldn’t you because of the other example. It wasn’t. It wasn’t. It was four days. The whole point of this particular counter example is that what this company was doing was that they were, I wouldn’t say rushing the middle stage because I know this company very well, they weren’t rushing the middle stage, but neither were the deliberately slowing down. What were they really doing?

Well, it turned out that this middle stage for this particular company was the need definition stage. So they’d meet with the buyer and the buyer would say all sorts of fabulous things about how clear they were about this problem being pressing and they agree to the need, and they said, “I’m so looking forward to getting a proposal from you.” They received the proposal then they said, “Let me just go socialize this idea, but I think we’re good to go.” They went and did the socialization and they came back with a no.

I know this company well because it’s align.me. This is some of our own data from two, three years ago. What we found was that we were recommending, as many trainers are, that you need to get all of the buyers in a room when you present your solution. Turns out that that wasn’t exactly what we should have been doing. What we should have been doing is to get all of the buying influences to agree to the need before we put the proposal on the table and that’s what we now did.

Now as a consequence of that our closure rate was at 57% from lead proposal stage. It is now 69%, better than two from three from time the proposal is put on the table. So by slowing down, we’ve increased the probability of a win. This defeats the whole argument of how to make your funnel flow faster. By the way, if you Google “how to make your funnel flow faster”, at least when I googled it this morning, the top five articles were all from me. So I’m as guilty of this as anybody else. I’m not getting kind of preachy on you. All I’m saying is what the data tells me is that there are occasions when a buyer who has taken longer than normal is not going to buy. There are occasions when a buyer who has taken a shorter than normal is not going to buy. What you need is your data, not my data. Let’s get very specific on the recommendations and draw this to a conclusion.

The first recommendation would be, go and read or listen to last week’s blog, and specifically my ten recommended steps. In fact, let’s get them up here very briefly to show you those ten recommended steps. Out of those ten, please don’t skip any. Don’t forget to rename your CRM using buyer centric stages and don’t forget to exclude life deals. 

Recommendation number two, compare your win pattern to your loss pattern. For us we found that loss deals were taking four days agree to need, whereas one deal was taking 16. Now if like us you have one period where your losses showed faster progression than your wins, then work out why. So your third recommendation would be, work out why your losses are different from your wins.

Recommendation number four, make a change. Now for us that means slowing down at the need to agree stage and getting all stakeholders to agree to the need before we make a proposal. 

Number five, now, this is not a recommendation, but reflect on your own experiences. If you’re a current client of align.me, you’ve probably seen us do this. We only submit proposals once the buying influencers have agreed to the need. So my fifth recommendation would be employ the fix that’s going to address your black hole.

That’s it on the conclusions. I’m recommending not that you take specific steps to mirror what we or other clients have done. Rather, I’m recommending you find where the black holes are and then fix them.

Well, if you’ve enjoyed this blog, then likely you’ll enjoy others. If you haven’t already, can I invite you to subscribe to receive this blog? Go to align.me/blog and either subscribe to the twice a week blog or if you prefer, the once a month which has a recap of all of the key blogs from the month. Frankly what most people do is subscribe to both and you’re welcome to do that. 

Now, if you prefer, you can also subscribe to the YouTube channel here and can consume these blogs in that way. Now, if you have already, but you’ve got a colleague who hasn’t, then now would be a great time to invite them and I’d be so grateful if you do that. Why don’t you do that now, either subscribe or flick along with your friend, come back, and I’ll show you how we do that in funnel plan. 

Now, this is the same funnel math that we used last week, that is we’re allowing 13 weeks to go from top to bottom. Taking down a little more granularly, we’ve got the stage by stage progression adding up to 13 weeks. Now, what if instead of giving three weeks to go from the need to offer stage, what if we took only one week? Now, before we do that, two, one, seven, six, that’s a number to remember. We need 2,176 prospects at the very top of the funnel over three years to get us three years worth of sales. We need 1400 sales to meet our $14 million revenue target or sales target. So we’re going to need 1400 customers from 2,176.

What happens if we were able to find a way to speed the funnel up? Let’s say we only give that, let’s go with one week, so we’ve now got a total sales cycle of only 11 weeks. Let’s generate the velocity and let’s take a look at how many prospects that we need to have at the top of the funnel in order to generate that same number of sales. Now you probably know that with a funnel plan, we work bottom up. That is we start with the number of sales that we need to generate and we work out how much market we need.

Now, 1400 customers is still needed because our objectives have not changed to get $14 million worth of sales, nothing has changed. But instead of two, one, seven, six, we’ve got two, one, three, two. In other words, we’ve need 40 fewer prospects at the top of the funnel. Seriously, that’s a rounding error. So we’ve had almost no benefit by making the funnel flow faster and yet as I’ve proved in the content part of the video, I showed you how damaging it can be if you speed your funnel up. So really its had no positive effect and lots of negative effect. Let’s get that back to three weeks, and let’s take as long as the buyers actually take to generate our velocity.

In next week’s show, I’ll show you how we produce our weekly videos. But for now, may your funnel be full and always flowing.

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