Improved sales measurement processes are needed to cope with the increasingly tough sales environment facing Australian businesses, which has got much tougher over the past three years, according to a new report by Ernst & Young.
A survey of 1000 Australian SMEs conducted for the report found that the average rate of sales completed from initial leads is 2.6% on 2007, a 28% decline on 2004.
Life is now harder at each stage of the sales process, with the proportion of leads resulting in meetings, meetings to presentations, and presentations to sales, all falling by around 3% over the past three years.
It also taking longer to make each sale. The number of sales closed in two calls has dropped 30% over the past two years, while those requiring six calls or more to finalise has increased by 35%.
Unsurprisingly, the increasingly competitive environment has left many sales staff struggling to meet their targets – 43% came in under quota in 2006-07, 5% higher than the year before.
The study also suggests that many businesses find it hard to predict just how their sales departments will perform in the future.
More than 70% of business said their six month sales forecasts were out by 30% or more, while just over 40% of businesses failed to meet last year’s revenue targets.
The problem facing many of these businesses, according to Ernst & Young executive director for revenue growth risk services, Craig McKell, is that they do not have the business processes in place to provide them with information on why sales are going up or down.
“Some of the organisations who predicted they would grow last year did grow. The problem is they don’t really know why. Yes they sold and continue to sell more of their products and services. But when we ask them how they’re selling more stuff – beyond employing more sales people and spending some more money on ‘marketing’ – most can’t tell us, because they don’t know themselves. We ask ‘What did you change, and why did it work?’ And the fact is they don’t know,” McKell said at a briefing in Sydney.
Ernst & Young’s report, The Secrets to Sustained Revenue Growth, advocates implementing an end-to-end business development, sales and marketing process based on the sales funnel concept. Capturing the data and setting sales effectiveness benchmarks from first contact, to sales delivery and follow up, can significantly improve performance, according to the report.
This finding is backed by a survey of 1300 US businesses. More than 50% reported an improvement in sales performance after implementing comprehensive sales processes and 36% reported a significant improvement.