Tomicide Solutions, October 2011

Sales Lead Mismanagement In IT Companies And How To Remedy It

By Tom "Bald Dog" Varjan

Synopsis

Ask most IT managers about sales leads, and most of them tell you they need a lot more leads than what they have.

Then you look at their operations and see that they generate all the leads they need, but as much as 80% of all sales leads mysteriously disappear, and the a large percentage of what's left is not properly qualified.

So, what can IT companies do to improve their practices of generating and nurturing sales leads without losing the best of them?

Do you know that in Sweden prostitution is perfectly legal, but it's absolutely and positively illegal to hire a prostitute? I mention this hair-raising fact because while sales lead generation is legal, many IT companies believe it's illegal to use automated and systematic approaches to do sales lead generation.

IT companies want to have more and better clients and sell their solutions at higher fees and prices, but, for some reason, most of them refuse to consistently perform the very business function whose job is to bring in new clients.

It reminds me of a phrase from James Allen's book, As a Man Thinketh...

"Men are anxious to improve their circumstances, but are unwilling to improve themselves. They therefore remain bound."

They think marketing is a basically dirty function, so they don1t want to spend money on it. So, in order to get some clients, they resort to bone-jarring, filthy, ugly cold prospecting grunt work of pavement-pounding and telephone dialling pad-banging achieving only two things: Wearing out their shoes and numbing out fingers.

There is a third thing: Regarding them as dreaded peddlers, prospects are now running from them faster and farther than ever.

And the poor bastards are trying to run even faster to catch up with the desperately fleeing prospects.

To say that it's not a pretty sight is as much of an understatement as describing an atomic explosion as being "a tiny bit noisy".

Yes, sometimes you can hire fast enough peddlers to catch some prospects, wrestle them to the ground and bludgeon them into submission of handing over their money for some stuff they neither want nor need, but that can be a pretty hard way of earning a living.

The sad thing that I've heard from some sales managers is that it's easier to chase after the reluctant and apathetic masses than using their brains to select a target market, define a perfect client profile within that market and have them come to them to b buy what they need and want whenever they need or want it.

I guess many sales managers are obsessed with empty, useless efforting, Of course they are. After all, it's not them who have to do it. They just demand it from others.

But as markets and buyers become more and more suspicious and sceptical, this high-octane chasing becomes more and more futile.

At the end of the day, the prospects can out-run and out-hide the peddlers. And the race is lost forever.

And here we have to distinguish between...

Wealth By Accumulation Vs. By Selection

If you base the wealth-creation capability of your business on the accumulation more clients, then you can do the above described mindless chasing game. The point is to grab more clients, and any client does the job.

There is no differentiation between cream of the crop and crap of the crop clients. Anyone with a pulse beat and a wallet is good enough.

This way you can build a business with impressive gross revenue. Just look at Sun Microsystems at the diagram below.

Revenue per employee is a respectable $413,637, but only 2.9% of the revenue, a mere $12,010, becomes profit.

By contrast, let's look at Baidu, a Chinese Internet company. 32.8% of the $499,961 revenue per employee becomes profit. That's 13.4% better than Google and 3.5% better than Microsoft. It's both a lean and a profitable company.

And I bet, although don't know for sure, it employs quality people, not minimum wage kids, union thugs or other non-performers.

Now here is a company that does wealth-creation by selection. Specific target market, specific client profile and the whole nine yards. You can't achieve these results by indiscriminately serving the masses of the universe.

Now that we know that wealth-creation by selection is a helluva lot more effective than wealth-creation by accumulation, we'd better find...

A Smarter Way Of Generating Sales Leads

If selling is the proverbial engine of any business, then it is only fair to say that qualified sales leads are the fuel of this engine. Yes, you can fill up your engine with oil, the equivalent of fancy, eye candy type websites, colourful brochures and cold-prospecting drudgery until you're ankle-deep in oil, but it is no more useful than a cat flap on the elephant house. You haven't made sale yet. You haven't even generated a healthy sales lead.

And even if you have a truckload of award-winning ads and a legion of super-aggressive go-getter salespeople, you may still be heading for disaster.

All because your prospects don't care about the awards and don't trust salespeople on steroid with zeal.

And this is where the problem lies.

Companies all over the world spend an inordinate amount of money on generating qualified leads for their sales forces, but a large percentage of these leads fall through the cracks and never get followed up on. And the sad fact is that simply having a CRM (customer relationship Management) software installed on computers doesn't make a dickybird of a difference either.

The truth is that acquiring qualified leads, incubating them and converting them into perfect clients is much more than having a fancy software programme or a hyper-aggressive sales force. In a way it is a mindset. A mindset of valuing these leads, and being committed to following through on them in a respectful manner. That is respecting prospects' wishes of how they want to be dealt with.

Not losing sales leads through the cracks is a major challenge for organisations worldwide. According to the Yankee Group's 2002 study the average total lead loss is between 40% and 80%.

And this is where business development automation can come into the equation. Business development is basically the seamless integration of marketing and sales. One recommendation I always make to my clients is to integrate their marketing and sales departments into a business development department, under the leadership of the Vice president of Business Development.

Depending on the size of the company, there can be a sales and marketing team within the Business Development Department, but the key is that they work under united leadership.

Why Is This Important?

Contrary to conventional wisdom, prospecting for leads is not a job for the sales team. Lead generation is a marketing function. Sales people must be provided a steady stream of qualified leads that they can "follow up" on. This is the lead conversion process.

It is the marketing team's job to guide prospects through the sales funnel to the point when they are ready to buy.

No, not even to buy. When they are ready and willing to talk to salespeople.

No, not even to see salespeople. That was about 10-15 years ago.

When they are ready and willing to talk to subject matter experts. Prospects desperately try to avoid contacts with salespeople.

Just imagine as you go to your family doctor, and the clinic's salesman tries to diagnose your situation. How would you feel?

Hell... How far and how fast would you run away from the clinic without ever looking back.

How promptly would you report the clinic to the National College of Physicians?

And here is the paradox. Following many sales gurus' advice, IT companies try to make more money by hiring more salespeople... the very people buyers try to

avoid like the plague.

I've recently read an article from one of these gurus, who advises that when IT companies see dips in their sales figures, they should hire more salespeople as the most effective remedy.

He believes in doing business by accumulating as many clients, regardless of quality, as possible.

Yes, in most IT businesses salespeople are chasing reluctant and apathetic prospects and suspects in most cases, who are running from salespeople as fast as a turbocharged cheetah on steroids with a booster rocket in his arse for good measure.

And in the mist of this mindless pursuit, we are getting back to losing sales leads through the cracks.

The results are devastating. Here are only nine of the major devastations, but there are many more.

  1. 10% of leads are lost due to ill-defined processes
  2. 10% of leads are lost due to inadequate technology, that is, email, fax, web, etc.
  3. 20% of leads are lost due to lack of processes and system for handling "not ready" prospects
  4. 20% of leads are lost due to poor lead follow-up
  5. 10% of leads are lost due to lack of tracking marketing efforts
  6. 5% of leads are lost due to the wrong territory
  7. 15% of leads are lost due to antagonism between sales and marketing departments
  8. 8% of leads are lost due to poor lead distribution
  9. 20% of leads are lost due to poor qualification

Let's Just Look A Few of These Problems


Lack of Tracking Marketing Efforts

At the age and speed of the Internet, when it is so easy to track business development results, far too many IT companies use nothing for tracking besides hope and pray.

All right, some use HITS. That is, How Idiots Track Success. Nuff said.

It is the same as putting the strongest engine into a car and making it the fastest, but not putting in a feedback loop to check such crucial data as speed, revolution, engine temperature and fuel and oil levels.

So, lots of marketing tactics efforts can be summarised like this: Print brochures and stuff them into a big bag. Now get on a plane and fly high. Empty bag into the void. Land plane. Get down on your knees and hope and pray.

Yes, it takes some technology to develop a tracking system, but with the arrival of the Internet it is a lot easier than it used to be.

Antagonism Between Sales and Marketing Departments

This is huge. It mainly stems from the difference in compensation. You can't expect salaried "professionals" and commissioned "grunts" (this is how so many marketing people at many companies regard their own sales staff) work together in harmony. It just doesn't work.

Sales people are trying to make a living by bringing in business, while the marketing folks try to maintain their positions with as little work as humanly possible. And I am not even cynical here, merely realistic. It is not sales folks who gather around the water cooler and the coffee maker.

In most IT companies marketing folks live like kings, designing logos, creating brands, slogans and fancy graphics, while utterly failing to make a single penny for the company. And at the end of each month sales folks get beaten up for underperformance. And they are beating the pavement and pounding on their phone's dialling pads because the few leads the company has generated are stuck and gone missing at the marketing department. After all, who has ever heard about a marketing department generating leads for the sales folks?

Poor Qualification

Once upon a time I was selling high-end ($2,000 plus) vacuum cleaners. I would go to the office and get my leads every day. Then I would go out and convert these leads. More exactly, I would try to convert them.

There was one problem: The leads were generated through cheap bingo cards. So, let me ask you this first: Predominantly what kind of people play bingo? Yes, usually the poorest layer of society. The toothless, hapless, jobless and hopeless. I would go out and do a demonstration for loser families most of whose members were...

I could clearly see they would never spend $20 on a vacuum cleaner (I saw some of the filthiest homes in my whole life), not $2,000. Managers at marketing couldn't see it. They loved the cheap promotion opportunity the bingo company offered. They failed to recognise the "cheap prospects" the effort created.

And what was the result? The annual turnover in the sales department was some 240%. Salespeople would come in and then quickly realise it was hopeless to earn even a semi-decent living, and leave. You can't run a company on this kind of attrition figure. Well, the company soon died in screaming agony.

Summary

If signing the contract and getting paid is the omega of the sales process, then lead generation is its alpha.

And how much we get paid when hired is a function of how we generate sales leads and how we nurture them.

Sales leads can be managed successfully. However, you can't rely solely on people. Regardless, of how great your people are professionally, they are fallible humans. This is where we all need systems that free us from the stressful need to memorise our calendars, projects and other commitments.

This is why you have to offer them some kind of easy-to-follow systems, so your people don't have to re-invent the wheel every single time they need one. You have to create systems for generating sales leads and converting them into paying clients.

I'm also pretty certain that the "Sales and Marketing Department" is a relic from the past.

Thanks to the internet, today's buyers don't wait for salespeople to call them anymore. They get most of their education on the Web, and they don't even want to talk to salespeople.

Buyers start researching their future purchases months or even years before the purchase. So, the sooner you can get on buyers' radar screens, the better chance you have to receive the contract.

But to win these contracts what you need is not superstar salespeople who join the sales process in the last section just before the purchase, but experts who can create quality content, so buyers can sell themselves on your expertise through the content.

The key is not to convince buyers how good you are in your area, but to use quality content, so buyers can convince themselves that you're the bee's knees of yout industry.

You don't need aggressive salespeople with faked enthusiasm to ask for the sale. You need committed, self-persuaded buyers to ask for the purchase.

You don't need salespeople to beg, plead and grovel for the next contract as a vendor or supplicant. You need self-qualified buyers to ask for acceptance into your client roster, which they perceive as an exclusive constellation of winners.

In his book, The Ultimate Sales Machine, sales wizard Chet Holmes reports that...

The traditional approach is to chase after the 3% of buyers and ignore the other 97%. Yes, the 3% already has signed and approved purchase orders, but this quick purchase comes at the bloody high price of low fees and prices.

These buyers are looking for pairs of hands to implement ready-made solutions. And they are looking for the cheapest pairs of hands, since the work is regarded as a commodity.

But out of the 93%, 67% that can be considered as future clients.

Only the bottom 30% (prospects who know for sure they are not interested at all. Not now, not ever) is a lost cause. But they can be screened out pretty easily, so you can make sure you generate the kind of sales leads that have a fighting chance to become paying clients.

So, look at your lead generation and pay attention two main issues.

Look at your timing, that is, how soon you join your buyers' buying processes. The sooner the better.

The second issue is what you use to draw the market's attention. Instead of talking about your company's IT capabilities and how many square feet of credentials your people have, talk about your market's business problems. Note: Not technical problems.

Your marketing has to catch the attention of the suits not the geeks. You can easily differentiate your offers on a business level but not on a technical level.

When you offer business solutions, not technical solutions, your company will stand out from the mass of the competition like a nun in a brothel.

Could you pull it off?

Come and let's discuss this newsletter issue on my blog...

Attribution: "This article was written by Tom "Bald Dog" Varjan who helps privately held information technology companies to develop high leverage client acquisition systems and business development teams in order to sell their products and services to premium clients at premium fees and prices. Visit Tom's website at http://www.varjan.com.