Sales Management

Sales cycle compression, and how it can help you to significantly increase order intake

OLYMPUS DIGITAL CAMERAThe theory behind sales-cycle compression is simple. Assume two conditions: i) the effort required to pursue any given deal is the same; ii) there is a large pool of new opportunities available, letting the sales person backfill the pipeline. Given these conditions, if a salesperson uses half the time to either close a deal or qualify out, they could work on twice as many deals per year, and double the number of deals won.

But what about in the real world? One view is that compressing sales cycles looks great on paper, but that deals (and bonuses) come to those who use enough time to comply to the customer’s processes.

I will argue the exact opposite: Slow sales organizations cannot outcompete fast ones because they:

  1. Work on fewer deals per unit time;
  2. Have a lower win-probability per deal.

The second part of this double whammy is counter-intuitive, but in my experience, most customers like to do business with enthusiastic, next-step-oriented vendors, which gives the advantage to a faster sales person working in an up-tempo organization.

Let me give you an example of the impact of sales cycle compression (and this is based on real research in a medium-sized software company selling technically complex software):  I once plotted monthly sales per sales person against the aggregate of product knowledge and industry knowledge.  The pattern was clear: less knowledge, more sales, and the least knowledgeable sales person sold more than twice as much as the most knowledgeable. Closer analysis revealed that the most knowledgeable sales people used too much calendar time and effort per opportunity, rather than qualifying out and moving on.

Could there be situations in which sales cycle compression is not really feasible? Of course, highly structured RFP processes come to mind, and generally any process which is fundamentally a purchasing processes, not a sales processes.  In my early years in sales, I worked in the defence industry, where the motto was ‘winners never quit, and quitters never win’: quite the opposite of sales cycle compression. The challenge in such situations is to convert a customer-driven purchasing procedure into a real sales process. (Note by the way that the defence industry is generally opportunity-limited, so the theory does not really work anyway.)

Then the practicality: How do you actually implement the strategy of sales cycle compression? Here is the short answer:

  • Instill a culture oriented toward partial acceptance and next steps;
  • Measure your sales cycle and report on it;
  • Qualify out early, especially stale opportunities;
  • Establish control by converting what looks like a customer-driven purchasing process into a real sales process.

Sales-cycle compression is an intriguing example of a quantitative, micro-scale approach to sales management. For this reason, and because it is deemed difficult to operationalize, it is disliked by some sales professionals. But the strategy’s evident benefits, and its amenity to measurement, should be enough to overcome this resistance.

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