Tag Archives: sales_risks

Revenue Growth: Don’t Let the Funnel Fool Ya!

Sales funnels symbolize a widely-known reality among marketers: s*** happens.

Funnels instantly remind us that interactions between buyers and sellers are fraught with risks – not that we need any reminding. Funnels also represent our fear that we can assiduously attempt to convert a prospect to a customer, but lo, there’s a chance we won’t prevail.

I like funnels because they are easy to understand. Funnels mansplain uncertainty and risk. When you need to justify a pipeline multiplier, or reveal the rationale behind a multi-channel lead generation campaign, simply fire a 2-D trapezoid shape onto the projection screen. Divide the image into equally-spaced horizontal stripes. Use bright colors. Then, dive into funnel taxonomy.  “Raw prospects enter the gauntlet at the top. From there, they undergo a metamorphosis, becoming Leads, then MQL (Marketing Qualified Leads), then SQL (Sales Qualified Leads). Those that emerge will be anointed as Opportunities before moving south, eventually crossing into a hallowed zone marketers call Paying Customers.” My presentation includes a bloated money bag positioned near the funnel’s bottom to drive home the idea. The screen glows even brighter. Warmth envelops the room. This is everyone’s favorite topic.

You already have recognized that my scenario is called The Happy Path. Happy paths, as we know, make people happy. Everything on the slide is linear. Everything is ordinal, with a prominent, single-headed arrow to emphasize the direction of actions, activity, and interest. The partitions between funnel stages are always crisp and distinct. “Questions? . . . No? Great! Let’s move on . . .”

I advance to the next slide to continue my speil when inevitably, someone – often a new hire – lobs a question with the antecedent, “What about . . .” I’m prepared. I press the “back” button, and ask, “Was there a question about the funnel?” Indeed. Many questions, actually. A partial list of ways to complete the interrogative:

. . . Lead qualification and disqualification, changed priorities, low buyer motivation, misaligned or insufficient sales incentives, faulty CRM data, lack of project funding, buyer fear, seller fear, redirected budgets, raised customer expectations, increased ROI hurdles, misunderstood needs, bad assumptions, new assumptions, strategic re-prioritizations, project starts-and-stops, buyer confusion, atrocious sales processes, predatory buying, industrial espionage, new decision hierarchies, flawed business intelligence, process breakdowns, competing internal agendas, technological innovation, tariffs, product recalls, spikes in monetary exchange rates, increases in the cost of capital, mergers and acquisitions, personnel changes, passive aggression, essential conversations that never materialized, relationships gone awry, cruddy demos, software bugs, regulations, external competitive maneuvering, internal competitive maneuvering, and stupid tweets from anyone with access to the company’s “official” Twitter account  . . .”

I don’t consider any of this the Unhappy Path. I call it Life. Here’s the problem: beyond their purpose for symbolizing risk, funnels don’t represent the myriad conditions companies encounter when executing revenue strategy and tactics. These examples obliterate the template funnel’s shape, and shatter that straight North-South arrow into countless, itty-bitty pieces.

For me, the funnel’s most meaningful features are its taper and length. The angle degree at the top should invite concern, interest, and discussion. “Our funnel is wide as a tank container at the top and narrow as a pipette at the bottom, and it takes one year to travel from top to bottom. Perhaps we’ve found the root cause for our cash flow problems.” In practice, few seem interested in dissecting the risks that cause the delta, and how to manage them. A funnel is a funnel. Counter-intuitively, the funnel’s ubiquity as a risk symbol has made us less risk aware.

Time for a fresh look.

Twitter abandoned its egg silhouette in 2017.  Assuming their objective was to render a human-ish image, the replacement – two detached shapes that faintly suggest a human head and shoulders – offers scant improvement. Imagine what we’d be purchasing if design engineers adopted such anonymized forms to use for prototyping. I suppose we’d have a visceral understanding of what daily life was like in the 1700’s. Similarly, how can companies create revenue strategy when using generic funnels as design templates?

Overlooked differences. At best, funnels suggest risk in marketing and sales. But they don’t mirror reality. I love Roadrunner cartoons, but for my safety and that of others, I resist letting them inform my understanding of physics.

Three real-world deviations from the funnel symbol:

  1. Pathway

Prospects enter sales funnels at many different points, not just at the top. Sales funnels are highly porous, and exit points vary, too.

  1. Re-cycling

Not every lead remains permanently outside the funnel. Prospects that have exited the sales or buying process can re-enter.

  1. Effort

Opportunities in sales funnels generally don’t drop from top to bottom on their own. As leads descend through the funnel, effort and costs increase for both sellers and buyers. In fact, if funnels reflected aggregate cost of sales, the model would be exactly flipped – small at the top, and large (or very large) at the bottom.

. . . And two overlooked similarities:

  1. Connectedness

As cash engines, revenue funnels are connected in several ways to the organizations they serve. They are not free-floating in space, as they are often depicted in presentations. Marketers implicitly understand that revenue funnels often receive inbound leads from a messy universe of opportunities, and that revenue flows from the bottom. But marketing funnels are but one component of a large system. They require additional input such as cash, information, talent, and other resources to operate.

  1. Throughput

With physical funnels, smooth material flow from top to bottom signal that the funnel is operating well.  But marketers often defer to a flawed proxy for funnel health: fullness. The problem is, full funnels can also be clogged. Rather than using funnel fullness as portents for cash-flow vitality, marketers should emphasize velocity and throughput as meaningful metrics.

 

General recommendations for funnel management: 

  1. Make sure the funnel opening is as wide as it needs to be, but no wider.
  2. Match the size of the opening at the bottom with the company’s revenue needs. That includes ensuring orders won’t swamp the company’s ability to fill them.
  3. Don’t take the taper for granted! Make sure it aligns with the company’s risk capacity.
  4. For planning purposes, net the funnel’s cash output against the resources required to operate it.
  5. Remember that throughput velocity is as important to consider as overall funnel value.

I’m not declaring funnels dead. Not by a long shot. The marketing and sales profession has long suffered from lack of probabilistic thinking, and funnels offer a symbolically-accurate representation of revenue generation risk.

Put another way, a picture that tells us  s*** happens is worth a thousand words.

Revenue Planning 2016: Don’t Plop All Your Risks on Sales

Four years ago, Martin Winterkorn, now the former CEO of Volkswagen, described an audacious goal to triple the company’s US sales. As he explained it, that achievement would be a milestone for toppling Toyota as the world’s largest automaker. “By 2018, we want to take our group to the very top of the global car industry,” he said.

In October, it was Winterkorn who was toppled as CEO when Volkswagen admitted to circumventing emissions rules. The company confirmed that software designed to fool regulators was installed in over 11 million diesel-powered vehicles. Deceit, too, can be mass produced.

But the idea behind VW’s strategy wasn’t original. It came from an ancient financial fact: transferring risks to others produces revenue and profit. Through clever software coding, VW saved billions of Euros in research and development, time-to-market, and the possibility that they might get bupkis for their effort. Health risks from dirty air? Deaths from emphysema and asthma? Those will be someone else’s problems. The VW Marketing team provided the right message: Clean Diesel. “Let’s face it: VW took advantage of a bunch of hippies with that line,” Dan Neil wrote in an article, VW Lost Its Moral Compass in Quest for Growth.

Winterkorn’s peripeteia reminds me of Yertle the Turtle, by Dr. Suess. King Yertle was a tyrant who conscripted his turtle underlings to place themselves in a stack so he and his throne could be higher than the moon. His project came to an end when the lowest turtle, Mack, burped, causing the pile to crash back to earth.

Then again, from below, in the great heavy stack,
Came a groan from that plain little turtle named Mack.
“Your Majesty, please . . . I don’t like to complain,
But down here below, we are feeling great pain.
I know up on top you are seeing great sights,
But down at the bottom we, too, should have rights.
We turtles can’t stand it. Our shells will all crack!
Besides, we need food. We are starving!” groaned Mack.

Presidential candidate Bernie Sanders can probably recite this dark rhyme in his sleep. It’s all about blind ambition, passion, and arrogance – a recurring, toxic C-suite trifecta, not limited to Volkswagen. “Shouldn’t a business manager care about whether capital is productively deployed to maximize returns, not about generating sales volume for its own sake?” Holman W. Jenkins, Jr. asked in The Wall Street Journal last week.

But many executives view selling risks the same as Winterkorn. They believe that sound financial strategy means dumping risks on others whenever possible. Sales workers toil under this ethos, bearing the brunt of business uncertainty. Employment-at-will. Compensation-at-risk. Flex scheduling. The Uberization of work. Orwellian-sounding terms routinely embedded in commercial parlance. “If this sales game is too much I’ll figure something else out,” a commenter, Mimii, wrote on Indeed.com in a forum titled, Things You Should Know about a Sales Position with AT&T Wireless.

Another commenter, Katie D, wrote “. . . since the last time I posted on here, AT&T changed the commission structure, which they do quite often. So yes, I am now working for peanuts and missing all my son’s football games . . .”

Not everyone in the conversation shared Katie D’s misery. But I couldn’t help thinking about her spirit as she tackles AT&T’s revenue goals. I envision her at the store, clad in a powder blue AT&T polo shirt, feigning a happy demeanor, while she longs to be part of her son’s fleeting childhood. Retail bosses and business bloggers call the Katie D’s of the world Customer-facing personnel, an appropriately tepid and joyless term.

“They have up to 48 hours in advance to change the schedule on you. So make sure you always check your time the night before so you don’t get a point for tardiness,” Katie D opined in another comment. Some would say she’s lucky to have a job. “Oh yeah, I used to be a salesman, it’s a tough racket.” The written rendition doesn’t come close to replicating Alec Baldwin’s mocking sarcasm in Glengarry Glen Ross.

Today, Mack from Yertle wears a tie and carries a mobile phone. And his belching can be heard all over social media:

“Hundreds of people are leaving [Oracle] each quarter,” a salesperson said in 2013, speaking on condition of anonymity. “Oracle has a horrible reputation in the tech sales circles at this point, so yes I see a migration from those who are competent, experienced, and see the writing on the wall,” another said, quoted in an article in Business Insider. “One issue frustrating salespeople is that they have been given quotas to sell Oracle hardware, even though they specialize in software, our sources tell us. That’s problematic because at many enterprises, the IT people who buy software are not the same people as the ones buying [hardware]. It’s an entirely different process.”

A salesperson from IBM shared a similar story:

“I was with IBM for 10 years and was the #1, #2, #1 rep in my software brand in the NATION for years 2009, 2010, 2011 respectively. In 2009 and 2010, I was paid accordingly. At least by IBM standards. In 2011, they screwed us all. 2012 was shaping up to be the same. In 2011, I was paid $40,000 commissions on $12,000,000 in revenue. Why? I was given a $12,000,000 quota. I left in February…and my former region’s best and brightest are peeling off.”

Why do companies shovel risk on employees, and then claw back their remuneration? Because the ka-ching is irresistible. And, because they can. Many employees simply put up with it. “I’ll take my chances with the added pressure of sales and high quotas if it means being able to provide for my daughter a bit better,” Mimii wrote in 2013. I don’t know whether she stuck it out, but the odds aren’t good. The employees “least committed to a company are its salespeople, 38 percent of whom planned to leave within two years.” A finding from a 2001 Hay Group Survey, titled The Retention Dilemma.

Variable compensation for salespeople offers many advantages, including higher pay, and lower risks for employers. But risks must be equitably shared. And they must be managed – not dumped elsewhere, like raw sewage into a river, or carbon into the atmosphere.

In 2016, there are seven imperatives for managing revenue risk:

1. Capturing, preserving, and sharing information. Quality information repositories have become the linchpin of selling. Yet, using a smokescreen called capital preservation, some organizations maintain antiquated systems that heighten selling risks. That’s changing. Companies currently spend approximately $23 billion each year on sales software, according to The Wall Street Journal, in an article, The Data-Driven Rebirth of a Salesman. “Sales offers possibly the biggest opportunity today in adding [artificial] intelligence in the enterprise,” said Mike Dauber, a partner with venture-capital firm Amplify Partners who has invested in the new generation of sales tools.

2. Acquiring, hiring, and retaining business development talent. “Talent acquisition and retention is a huge component of what we [CEO’s] need to think about,” said Christopher H. Franklin, CEO of Aqua America, Inc, a water utility in Bryn Mawr, PA. “That is where you get to set the culture.”

3. Ensuring high workforce productivity. The traditional numbers game mentality involves flogging salespeople for more revenue output. While that approach might provide positive short-term results, it sacrifices equipping salespeople with ways to be more productive. That means giving them proper tools, information, education, and professional development.

4. Continually matching sales resources to customer need. A sales process that doesn’t match buyer need jeopardizes revenue. Yet many companies fail to adapt, insisting that sales teams adhere to ineffective processes, or maintain ones that provide little value to customers.

5. Assigning, monitoring, and enforcing sales goals that create value for the company. Many organizations are short-sighted when developing sales goals, limiting them to revenue objectives. Executives overlook other opportunities for Sales to bring value, including high customer satisfaction, market intelligence, and higher profits.

6. Modeling and preserving high ethical standards. This needs no explanation as Volkswagen’s brand reputation implodes.

7. Increasing revenue opportunities. – A roll-up of all of these. Managing revenue risk requires getting better at growing sales. That includes expanding the number of accounts to call on, increasing win-rates, growing installed customer revenue, and reducing customer churn.

“Everyone knows that quotas will be going up next year . . . ” The predictable preamble to fourth-quarter sales meetings around the world. But will risks increase, too? I challenge anyone to find a Volkswagen salesperson who has been offered quota relief for the risks that Winterkorn shoved into the dealer channel.

Before I stomp on C-Level executives who blithely chuck their risks onto someone else – or in Volkwagen’s case, blast it out their tailpipes – I want to share a thought: transferring risks is as much a part of business as the exchange of goods and services. But management’s goal should be not only ensuring it’s done profitably, but openly, equitably, and legally.

This article originally was originally published on CustomerThink for Navigating Revenue Uncertainty. To view the original article, please click here.