Guarding against exuberance: Deal scoring in CRM

The role of deal scoring in CRM

All salesmen are optimistic- it’s their nature; that is why they are in sales.

They honestly believe till the last hour that their deal will close. Even when the evidence piles up against them. This creates problems for the manager and of course the company.

Okay, so what deals are valuable?

Having talked with hundreds of customers across industries – my only answer is that it depends. It varies from industry to industry and even within the same industry, it varies from company to company. And, I am talking of companies who have actually invested the time to define the threshold of information and interest and how they measure both before passing it on to a sales guy.

All deals are not the same. All customers are not the same. Purchase procedures differ. Even different salesmen have different judgments about the same deal.

Deal scoring in CRM helps everyone evaluate deals using the same parameters.

How do you evaluate your win chances in a deal? How optimistic are you about your funnel?

How do you know the person committing to close a deal this month, is right about his optimism? Or the other salesperson, who equally vehemently argues against including his deal in the monthly forecast, is right?

Multiply the problem with 10- the number of your reportees. And another 10, for your reportees have reportees too. It’s a huge problem. Sales forecasting is a big problem.

Interest in the next step

Interest shown by the contact in being contacted it seems is a big factor behind the deal being taken seriosuly. Also, the nature of interest matters too. Some would simply want more information to be mailed, while the others might want a visit from a sales person. I know at least one company where professed interest in meeting a sales person is ruthlessly scrutinized because the sales people are so senior and their time, expensive.

Where telecallers inevitably falter

Almost all companies have a script for the their telecallers. But I have seen most falter in sifting through the tyre-kickers and the door-keepers. Sales does not like information gatherers- though in some B2B enterprise sales processes, information sharing is mandatory as part of a long sales process. Sales also wants to talk to decision makers- and most leads tend to be from folks who are merely gathering data for their bosses. You do not want to be at the mercy of people who are not able to represent your case in from of decision makers- though sometimes you may not have a choice.

Action, level and logical fit

Sales love leads where there is clear action plan and it is obviously set up at an appropriate decision making level at the customer place. If the lead is from a customer or industry segment which is a logical fit- that obviously helps. If it is not, the telecaller should try and establish the need or the pain-point of the lead.

To summarize, valuable sales leads are where meeting is set up at a decision making level where a logical product fit can be established. After this is done, the lead can transition to the sales person and who will have a lot more confidence in accepting it.

We can now legitinately call it a sales deal.

Qualifying a sales deal through the sales funnel

Sales deals have been subjected to “qualification” for a long time. The most popular and long tested method is BANT. 

B- Budget, A-Authority, N-Need, T-Timeframe: are key parameters that are used to quickly sum up the chances of the deal progressing in the right way.

Now, every organization probably looks at BANT a little differently and that is okay. With Deal scoring in CRM, what they get is a method for standardization of the parameters. So, all deals get a standard score. That makes forecasting easier because that takes individual subjectivity out of the equation.

This totally makes sense especially when the team size is large. And the experience levels are vastly different. And that brings us to the next point.

Focus on key opportunities

Another key area where deal scoring in CRM helps is helping the salesman focus.

When you are new to sales, it can be hard to know what to focus on. The bigger one or the one down the road or the customer who always picks your phone or agrees to a meeting?

A CRM deal score helps achieve the objective- your rookie team member has his priorities set for him.

What do you think?

Do you think it makes sense to demand that your CRM gives you some feedback on the funnel which you can look at objectively.

The 5 Sales deal stages that you need to track

What are the sales deal stages?

The sales cycle and the buying cycle

A sales cycle mirrors the purchase cycle- or it should.

The customer moves from initial awareness to interested and gets more involved in the decision making. He evaluates the solution and compares features, price and so on. Finally, he is ready with a decision.

Similarly, a sales cycle proceeds from initial sketchy understanding to deeper understanding- we learn more about the customer and his objectives, needs, how much he is prepared to spend and by when. The customer learns more about our solution as well. While this is a continuum, it is useful to create milestones to really understand how much work is still left to convert the opportunity/ deal into a purchase order. These milestones are the sales deal stages.

What makes it interesting is that, in almost all cases, you will have lesser quantity of deals in advanced stages of sales progression than at the beginning. What you lose in quantity, you make up for in quality- in being able to convert a far higher percentage of the advanced deals into orders.

Lots of names are used for the sales deal stages. Here’s what we use:

sales deal stagesYou will see many, different names being used- depending on industries, even companies- they all use their own. Here’s how Hubspot describes the lead progression stages. Let us at least tell you what ours stand for.

Illustrating sales deal stages on the deal details screen

The 5 sales deal stages

Prospecting:

You have just enough information about a potential sale. Some approximate idea of the budget and initial idea of the product/ solution fit to his needs.

Budget known, At least one Decision maker identified, Budget not identified, Budget Stage not identified.

Opportunity:

Now you are sizing out the opportunity. Enough to schedule a visit/ call- some task to progress the deal with the decision makers. To early to forecast the time-frame or indeed the chance of closure.

At least one decision maker identified, Budget value OR stage identified, not yet met with or discussed the solution with the decision makers, some task scheduled.

Investigation:

A lot more information and interaction under your belt. You have met with the decision maker (s), discussed the solution enough to report their reaction to it, have a better grip on the budget size and approval cycle. And, you can commit yourself to a forecast date (howsoever tentative) or even a chance of win (howsoever low!).

Presentation:

The final stage before you reach the stage of closure. At this stage, you are in possession of all the information related to the deal. You have also submitted a firm priced proposal.

This stage is called Presentation because it is here that you are making the final solution presentation to the clients to swing the deal your way.

Closure:

Closure is often mistaken as a Win. While that may be the desirable outcome 🙂 , we take a deal closure as the stage where the deal is awarded to one of the competitors, including you!

It is close enough after the Presentation stage; so, think of this as the Presentation stage done and waiting for the result- handling last minute objections, ensuring your messages have sunk in and definitely a sales deal stage which can be forecasted to close in the next month or so.

 

A meaningful sales forecast

Forecasting sales with confidence

Is forecasting sales a matter of guesswork? Or is it scientific, based on rules and mathematically modeled?
The answer is that it is somewhere in between. Let me take a shot at sharing some simple yet effective funnel management best practices. When you are a small business, you need to forecast sales and collections, to be able to keep on top of cash flow, deliveries and other commitments.

How does Saleswah help you forecast?
Let me first bring in the concept of a “weighted funnel”.
Let us say you had a few deals you were working on. And they looked like this:

Deals List

How much should you forecast for the next month?
The value of the forecast for next month (that is January 2013), seeing that it is December 2012 when I am writing this, will be $41,000.
However, we all know that we rarerly, if ever, win 100% of deals- there is competition, fickle minded customers, economic uncertainty etc. Some cause deals to “drop” out of the funnel – read cancelled/ lost- and some cause them to be moved to the next month.

Let us get the salesman to apply his mind and commit a win probability number to all the deals.

Applying chance to funnel management

As you can see, the picture does not look quite so good any more :), though it is probably more realistic. Specifically, if you go by this measure, the Dec’12 numbers have dropped to 32,000 from 46,000 and January ’13 numbers have dropped to 21,000 from 41,000.

“Oh, but, this is all subjective: based on an individual salesman’s assessment”

Agreed. That is why, we also track the stage of qualification on every deal. Like this:

What does Saleswah capture?
1. Has the solution been presented? (Choices: No; Yes it was and was found- better than/ same as/ worse than competition).

2. Budget Stage: No status/ Planning/ Applied For/ Obtained. Also, Budget value

3. If a quote has been sent (Incidentally, you can configure and send a quote directly from Saleswah and have the quote “attached” to the deal), then:

– is the customer’s budget less than or more than what you have quoted?

Why do we not include the deal stage in the “weighted funnel” calculations as above?

Couple of reasons. Firstly, as with the chance of win, these stages are also captured by individual sales executives and can have their share of biases and buffers. Secondly, we provide these fields for exectives to do a reality check before committing the forecast numbers. And, for their managers to review as well. After all, a deal where you have not yet met the decision makers to discuss the solution, is unlikely to close early and forecasting a 80% confidence level in a win is foolhardy.

Should we include these in forecasting as well? What do you think? Tell us in comments below.