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CRM…or Expensive Junk File?

There has been a rapid commoditization of customer relationship management software, with a wide variety of choices now available and prices falling dramatically. Clearly, CRM has become a part of everyday business life.

And yet, many executives who invest in CRM software continue to be disappointed at their failure to actually increase sales. Many times the system ends up as a repository of large amounts of data, the critical elements of which may be junk.

Their experiences notwithstanding, properly executed CRM implementations can (and do) consistently increase sales results—often in very adverse economies. Thus, it's well worth taking a look at what separates the success stories from the failures.

First of all, we need to identify the key CRM elements with the potential to increase sales. The following major functions are nearly always included with any offering:

• Contact management, to store all of the information needed for the customer and prospect people you deal with.

• Account management, to store all of the information needed about the accounts you deal with, linked (hopefully) to the contacts within each account.

• Opportunity management, to store all of the information needed about sales opportunities being worked on, linked (again, hopefully) to account and contact information. This provides the input needed for…

• A sales forecasting system, the purpose of which is self-evident.

With respect to the third item (opportunity management), most CRMs require salespeople to attach a percentage for the probability of sale to each opportunity, plus the predicted value and timeframe for closing the sale. This information then feeds the forecast. Many also require the attachment of a stage within a defined selling process (prospect, qualified, proposed, etc.).

Thus, when looking at multiple sales opportunities at differing stages of a selling process, each salesperson ends up with a funnel and forecast. Sales managers can aggregate these for their sales team, and view their total funnel and forecast, and so on…up to the VP of sales, who can view the sales opportunities for the whole company and create the company level forecast.

So whereas the first two items above can provide some efficiency to a sales team, the closest, most measurable thing applicable to sales results is the funnel of sales opportunities being worked on by each salesperson. This isn't to denigrate the importance of contact and account data, but if increasing sales is the goal, then attention must be given to the third and fourth items.

Now, let's shift our attention for a moment to the other end of the spectrum. Here are the major culprits responsible for most CRM failures:

• Selection of overly complex or non-sales-friendly software.

• Lack of customization to the real needs of the sales force.

• Lack of training for system administrators, or loading someone up with this role in addition to their already full-time job.

• Lack of training for the sales force on how to use the software.

• Lack of training for the sales force on how they can use the software to be more effective and sell more.

• Ruthless checkpoints and follow-ups to address weak users or other system weaknesses.

Most failures are caused by not addressing the second and fifth items, so let's address those below:

Any implementation plan for increasing sales must start with the second item: lack of customization to the real needs of the sales force. This frequent omission stems from the CRM selection team not knowing the real needs (versus wants) of the sales force.

For instance, one company's selection team consisted of a sales manager, a salesperson, and the ACT administrator looking for an online ACT replacement. There was no input from senior management as to their sales force's performance, or insights into how any CRM could improve their effectiveness.

As a result, a CRM was chosen, the sales force trained to fill in all the screens, and—after paying a large sum for an online version of what they already had—life carried on as before.

On to the fifth item: lack of training for the sales force on how they can use the software to be more effective and sell more. Again, without some kind of critical needs analysis, this is difficult to address.

But since the funnel of sales opportunities (which leads to the forecast) is the closest measurable thing to results, here are some of the areas which can make a huge difference to sales effectiveness, and which can be helped by a software system:

• Implementing repeatable selling processes with defined key milestones (e.g., steps between just a target company name on a list to winning or losing sales opportunities).

• Using a combo of selling process milestone and percentage probability to produce sales forecast scenarios such as worst case, most likely, and optimistic cases.

• Regular, detailed funnel and forecast reviews by sales managers.

• Ensuring managers do not believe the CRM will manage their salespeople for them.

• Training managers on how to conduct these critical funnel and forecast reviews with their salespeople to:

a. "Scrub" their opportunity funnels and produce a valid forecast.

b. Offer value adds back to salespeople with tactics to close deals, time management advice, and coaching around personal weaknesses.

The irony is, the funnel and forecast area is where most companies seem to have junk data. Here's why:

First, there's the inescapable fact a forecast for anything is just that—a forecast, prone to error.

Next is a set of human factors and management tactics that result in the inventory of future business (the sales funnel) being populated with bad data.

This starts with the bottom of the funnel-feeding frenzy, and the pressure from senior management to deliver quarterly and annual results to meet their business plan. Within the sales force, this pressure translates into sales people being "beaten up" by their sales manager to increase their sales forecast. Such conversations go something like this:

a. "HQ needs a larger forecast, so which deals can you bring ahead from next month to close this month?"

b. "Take me on a joint call to prospect X to see what I can do to close the sale [e.g., give a large discount]."

Both a and b scare excellent salespeople off from declaring large opportunities, as this might invite close attention from multiple levels of management.

Also, many sales managers conduct brutal funnel and forecast reviews, in which they focus only on the 30-day or next quarter forecast number, but offer little or no value add back to their salespeople.

To sum up, then, the most valuable set of sales data is often not properly "scrubbed" in a positive way by sales management. Hence the forecasts are unreliable or even misleading.

There is much to be gained by using CRMs, but often the data that can give most impact to the sharp end of the business has a large junk content—and the human factors and lack of management skills outlined above are the culprits.

If increasing sales is a major CRM objective, you had best address these issues as part of your implementation plan and budget.

Peter Michie is the founder of PERFORMAX. Contact him at 561-202-8163.