SAP recently published the results of their survey of the top challenges facing teams selling cloud-based services. Straight in at number one was “Accurately Forecast Business”.
Over-inflated sales forecasts have troubled managers and leaders since the dawn of the profession and correcting it is something of a black art. For its own part, SAP offers this tip: “Use personalised and predictive sales analytics to consistently crush your sales quota.”
But is forecast inaccuracy really driven by the lack of analytics? Sales leaders frustrated at deal drift will often look at their team’s closing techniques or qualification process. Our experience with sales teams in a range of sectors is that this is much more to do with the fundamentals of human psychology.
Firstly, we are wired to believe that things will turn out better for us than will ultimately be the case. This is called the optimism bias, something researched by psychologist Tali Sharot. And this is by no means exclusive to sales people. Cost estimates for infrastructure projects are notoriously over-optimistic due to this bias, hence the many examples of civil engineering and IT projects that have failed to meet budget. Research tells us that we under-estimate the likelihood of our own marriage ending in divorce – Sharot’s own research shows that even divorce lawyers do this.
The fact is that even if we think that the world around is going to hell in a handcart, we still are over-optimistic about our own prospects. For this reason, all forecasts require a correction or contingency to account for this.
But what about deal drift? When a deal has been entered on the CRM but seems to drift out to the right, is this because the sales person is struggling to close?
Our observation from many of the sales meetings we’ve attended is that the offer to write a proposal is frequently made too early and without proper qualification. For the prospective customer, it is easy to agree to this as a next step as it brings the meeting to a ready close without any commitment whatsoever. Once the sales person is out of the room, the proposal and its accompanying calls and emails will be ignored. If this sounds familiar, then the reason it happens – often in spite of a robust qualification process – is that we are wired to seek reward.
When we are measured by the scale of our pipeline and the number of proposals we have sent out, our brain’s reward system encourages us to seize each opportunity in front of us. A powerful neurotransmitter called dopamine – also active in all habits and addictions from checking our smartphone to class A drugs – can smother our decision-making process. Having the discipline to delay instant gratification is important in sales success.
In the 1970s, psychologist Walter Mischel conducted an experiment with school-children in which he seated them one at a time in a room and put a marshmallow on the table in front of them. They could eat the marshmallow or wait ten minutes for the facilitator to return to the room; if the marshmallow was untouched, they got a second one. They then tracked the children over the next few decades and found that those that could delay gratification – i.e. wait for the second marshmallow – consistently performed better in all fields of life: higher academic achievement, greater income, lower BMI and lower incidence of crime. We see too many sales people reaching for that single marshmallow.
As to why qualification does not happen in the way that it should, it is not about the complexity of the process. It is not complicated to establish budget, authority and need. But it is hard: Just as we are wired to grasp at instant gratification, we are also wired to avoid negativity. Asking direct questions about budget and authority is not only uncomfortable for some; it also often yields answers that we don’t want to hear.
Accurate forecasts are less about analytics or techniques and more about mental toughness. It requires mental toughness to dampen down our own predictions, remain self-aware in meetings, resist the temptation to agree to fruitless proposal-writing and qualify hard. While some sales people do this instinctively, the good news is that with the right development, all can grow in this area.
By Ian Price, co-founder of Sales-Mind, a business psychologist and author of ‘The Activity Illusion’. Sales-mind is a team development consultancy that is 'all about mindset'. They develop mental toughness in growth-oriented leadership teams, full-time sales teams and professionals that need to sell as part of their role.