The Unreported World of Sales – Part 3


CRM systems; The answer to our prayers?  

Firstly, to all those that have messaged me, thank you very much for all your comments. And yes, I know this is a little later than I stated but we have had the budget and I do have to do some work from time to time!

Anyway, some thoughts on Customer Relationship Management systems.

As you are already aware, the company CRM is a window on the business. It helps manage client interaction by listing customers and potential customers, logging events and results and predicting the future. From my experience, people either swear by CRM systems or hate them; there seems to be no middle ground. Of those that hate them, sales people form the biggest group; but actually they shouldn’t. In most cases CRM’s mean a reduction in time spent doing admin. Administration tasks can be completed easily on the move meaning an easy end to the working day. Valuable customer information is available from a smartphone or tablet at any time – much better than lugging files around like we used to. If they experienced some of the systems I used to use like Kalamazoo, they would never besmirch CRM’s again. Having said that, often companies adopt CRM’s without the proper consultation of the people involved. Plus, sales people are not IT specialists (apart from IT sales people obviously!!!) and some CRM’s are not intuitive and are difficult to use.

Of course, those that love CRM’s are those pulling off the reports at the click of a mouse; and because the report is generated from up to date data by a system costing many thousands of pounds, developed by highly intelligent individuals and promoted by bona fide  companies, the reports must be accurate – right?

No, wrong! Let me be clear here. I am a strong advocate of robust measuring devices within businesses and combining this with efficient forecasting techniques; the result being predictable revenue and profit growth.  Failure to adopt these measuring devices and procedures will result in poor forecasting leading to disillusioned sales people, management, governing board directors and investors. Unfortunately CRM’s can often be at fault.

I don’t intend to look at every aspect of a CRM system and critique it but I do want to touch on a couple of areas where, in my opinion, it can go terribly wrong.

One area and probably the most important from a forecasting point of view is the monthly sales forecast, or even worse the quarterly forecast. A sale will take place when ‘all the stars align’; as Zig Ziglar stated, for a sale to happen the customer must exhibit Need, Desire, Money, an acceptable Time Frame and most importantly Trust. This constitutes what is now called Opportunity Evaluation and Qualification and is the cornerstone of CRM accuracy. So, a salesperson goes about his/her business ticking off the relevant milestones as the sale progresses, eventually/hopefully reaching a point where the deal is on the table. Now there’s an issue here immediately because a CRM will ask the sales person for a probability of an account being won; these probabilities being based on the phase of the sale life cycle. When the report is called for, let’s say by the sales manager for a report to the Commercial Director, the CRM system will multiply the opportunity value by the probability score and generate the revenue figure that will be achieved. And get this; every CRM system I have seen does this. It is the most useless, dangerous method of forecasting ever imagined. You might as well ask your grandmother for a prediction as the answer will have the same value. (No disrespect intended to Grandmothers).

I can prove this inaccuracy as well. Recently, mentioning no names, I witnessed the adoption of a CRM system by an organisation. It was installed, updated with customer profiles. Metrics were implemented using historic data to ensure the sales profile was accurate for the organisation (a step often missed by companies who accept the in-built probabilities as gospel) and current sales opportunities added. The sales people were trained with a huge emphasis on the fact that this system is good for them and for the company and that every effort should be made to keep it updated with realistic data. Training sessions were introduced and during the first few months account reviews took place where the sales person was ‘quizzed’ on a one to one basis, account by account, on the realism of the forecast. After the system ‘settled in’ I pulled off a month end sales report. I also manually calculated my report using my tried and tested forecasting technique developed over 25 years in sales. Needless to say, the CRM system was totally inaccurate (much to the dismay of the MD).

Why doesn’t it work? The answer is simple. The probability factor used in the revenue calculation is a measure of the progress of the sale not its likelihood to occur. So you will never get an accurate revenue figure this way. Just look at any average win stats published anywhere. They will all state that the average win rate for a company is around 25%-35% - anything above that is excellent! So how can you have a probability stage of say 75%, it will obviously skew all the figures.

Sales vs Revenue monitoring! This is another area where CRM systems struggle in my opinion. There are a great many sales people (and even senior commercial people) that do not recognise the difference between the sale and the revenue. To put it another way, it’s the difference between the booking (sale) and the billing (revenue). An organisation cannot legally account for the revenue if there is a task to complete after the sale. If you are selling a widget for £x and the widget is on the shelf ready for dispatch then no problem. But suppose after sale you have to make an item; in that case you can register the booking (the commitment to buy) but not the revenue. Let’s suppose that a contract is to be called off over 12 months after the sale is won. As a commercial executive you will be focussed on a couple of things. Firstly, whether you can win the business and what needs to be done to achieve that. Secondly, you will be focussed on the Order Book Value (OBV) of the business. This figure is calculated as the difference at any one point in time between the bookings and the billings. It’s a figure that any commercial exec will want to see increasing month on month. Now the problem occurs when the CRM generates the reports. The bookings figure will need to decrement real time against revenue for that account in order the bookings value and the billings value is correct. This must be an automated process as you can’t expect the salesperson to adjust the performance figures. He/she may not even know when the call off is required. To the best of my knowledge CRM systems do not handle this task very well. It gets even worse when the same customer may be calling off against multiple orders on the system. It all gets very messy. The wrong figures are then generated on the reports and the forecast is wrong. All very embarrassing.

Conclusion – I’m not saying don’t use CRM systems. They are excellent pieces of software that perform an excellent role in business especially for account tracking and interaction between departments (although some systems are dreadful at this too – call me for more information). However, in terms of forecasting I would ignore the probability scale/factoring. I have developed a way of successfully using these systems and I would be happy to share that with you. In terms of monitoring OBV, in my last organisation I asked the accounts department upon receipt of the call off to manage the CRM in terms of booking and billings. In the meantime, revert to the old fashioned methods of pipeline/forecast management; or, as I said previously, you can manipulate the CRM to work for you. If you need any help give me a call.

This is last blog on forecasting, I hope you have found them all useful. If you missed any of the other two, just got to my LinkedIn page as well as my posts on this website

Over to you!!! If there is anything you want me to write about or you need some help with then let me know. I’m always happy to give you my opinion.