Does this sound familiar? It’s a week before the end of the third quarter and you’re scrambling to come up with revenue to meet your forecast. “We can’t just tell the Board we fell short!” moans your CEO. Or what about the flipside to that conversation, when the CEO remarks: Wow. We are way over what we thought we’d do for this period. I love these kinds of surprises. In truth, these kinds of surprises shouldn’t happen at all with the right forecasting, says Tom Snyder, vice president of business development at Sterling, Virginia-based Huthwaite, a global sales performance improvement company. In his study, “Rational Forecasting: The Convergence of Skills, Strategy and Pipeline Management,” Snyder points out that inaccurate forecasts, while common, are unnecessary and “a symptom of a more pernicious problem: failing to incorporate the customer’s point of view in the development and implementation of sales strategy.”
In other words, poor forecasting isn’t the problem in and of itself. The real problem is a seller-focused sales strategy. Too often, says Snyder, sellers think activities such as giving presentations or submitting proposals constitute a sales strategy. Sure, these activities are important to making a sale, but they miss customers’ perspectives and thus contribute to poor forecasts. After all, you might be checking off all the boxes in the early stages of your pipeline, but your buyers might be in the latter stages of their buying process. If that disparity isn’t accounted for, your forecast will be off.
“Effective pipeline tools are representations of two aspects of each sale: the events that the seller has conducted or completed arrayed against the buyer’s incremental commitments to make a buying decision,” says Snyder. “Aligning these two points of view allows sellers to quickly develop an event-oriented sales strategy that focuses on the pipeline milestones that most need addressing.”
To determine where buyers are in their decision cycle, consider the results of a 12-year study Huthwaite conducted on buyer behavior. The organization found that buyers in complex sales always move through a set of four predictable stages as they make or reaffirm a purchase decision:
The development of an effective sales strategy, says Snyder, requires sellers to have three skills for this buying cycle: the ability to recognize where buyers are in their decision cycle at any particular time, the ability to execute the specific skills that create value for customers at each stage and the ability to move buyers both forward and backward in their decision cycle. Once you attain these skills and develop an effective strategy, accurate forecasting should follow.
“Accurate forecasting is the natural bedfellow of an effectively executed customer-driven strategy,” Snyder concludes. “With the skills to incorporate the customer’s point of view into the sales strategy, accurate forecasts are the natural byproduct of a good sales pipeline tool.”
For a copy of the study, visit www.huthwaite.com.