Utilizing Windshield and Rearview Metrics
February 11, 2019 |
How to build sales metrics that drive future growth.
By Dennis J. Chapman Sr., Founder, CEO and President, The Chapman Group
Measurements of past performance can be very valuable. At The Chapman Group, we call these rearview metrics – measurements that show us what we did in the past as an organization, similar to the way you see the “past” when you look into the rearview mirror of your vehicle. Some examples of these business metrics include turnover, churn, revenue, close ratio and activity metrics. Each of these in isolation gives you a glimpse of what you did in the past as a sales organization and the results (or lack thereof) that you achieved. Rearview metrics are often readily available and how many of us have self-trained ourselves to measure sales performance; i.e. “what have you sold so far this month?” Subsequently these rearview metrics, often referred to as lagging indicators, are often the primary metrics that we use to make business predictions and set goals/objectives for the next year.
Metrics that Present the Whole Picture
The challenge with this methodology and approach is that past performance measurements alone are not always accurate (within an acceptable degree of tolerance) predictors for future performances. Just because you made a million dollars last year and grew 10 percent doesn’t mean that you will automatically grow 10 percent this year and do an additional $100,000 in business. There are other factors at play, and other considerations to be made (and measured) so that we, as business/sales leaders can more accurately predict, even dictate, the future performance of our businesses/organizations; reliable predictability and a reasonable degree of accuracy are important considerations!
Looking back at past performances can provide you valuable insights into future performance; like what our typical miles-per-gallon is valuable to know when we are getting low on gas and trying to determine if we can make it to the next rest area that has fuel. Sticking with the same car metaphor – if we see the flashing lights of an ambulance in our rearview mirror approaching quickly, we can safely assume that our future performance (behavior) will result in us moving over and out of the way of the emergency vehicle so it can get where it needs to go.
Let’s now look at some metrics that our clients use to predict future revenue growth. In some situations, for many businesses, the metrics and measurements are completely new and unique, and in other cases we are utilizing past/previous (rearview) measurements and metrics in unique ways to develop more reliable and accurate (key words) representations (predictors) of future performance.
The first sales metric that our clients use to predict revenue growth is the Customer Commitment Indicator (CCI™). You are likely familiar with a customer satisfaction metric that assesses the attitudinal degree of a customer’s experience with the organization and their products/solutions. Time and experiences have now proven that while satisfaction is an important metric, it is not always an accurate predictor of the future relationship; revenue and profit to be appreciated, as well as other product/service opportunities.
The Chapman Group recommends considering a relationship metric that is a more reliable and accurate predictor of success with a customer; a Customer Commitment Indicator, an indicator of a customer’s degree of loyalty based on a customer’s stated probable behaviors. The key elements of this metric include measuring through direct customer feedback:
- Continuance of doing business
- Willingness to collaborate
- Dependency on a supplier
Through this metric, often integrated with and supported by some historical data (rearview mirror/lagging indicators), an organization greatly improves its ability to predict future success more accurately and reliably with a specific customer as well as group of customers; their market.
The second metric that our clients often use to successfully help predict future revenue growth is what we call an Opportunity Qualifier. An Opportunity Qualifier measures the state of a prospect against well-tested key opportunity facts (need, budget, importance/influence of contact) in combination with conditional statements relative to the relationship, situation and solution (i.e. comparison to options, impact/value of offering, alignment of decision team). By applying values to all these opportunity assessment facts and considerations, an organization can greatly improve the reliability and accuracy of their business forecast. What business leader would not want an accurate revenue forecast or a sales person an accurate prediction of their earnings?
High Value Activity Management
The third, and final metric that our clients have used to successfully predict revenue growth is what we call Hi-VAM™, or high value activity management. Simply stated, there are activities that when effectively executed significantly enhance the probability of an opportunity closing in favor of a supplier; and often sooner than later. A great example of this is an experience we had several years ago when a CEO of a hi-tech company stated that 85 percent of customers who visited their home office and futuristic demonstration center invested more money with them. Our logical question was then how many of your top customers visited this center last year? He didn’t have that answer readily available. He did, however, make that a high value activity target for all large/top customer managers the following year. There is always, based on specific business types/decision drivers, specific high value activities such as; executive-to-executive meetings, conference attendance by a prospect, trial/pilots of a solution and meetings with higher level management within a customer (sometimes referred to as C-Suite) that play a key role in winning and closing business.
Putting the Plan In-Action
In summary, our points on the importance of building/adopting the right metrics to predict future revenue growth are simple. Metrics (facts/data) are the gateways to success in a highly-competitive business world. Keep assessing rearview mirror metrics (lagging indicators) – they are valuable – they provide some great historical insights. Start integrating more predictive/windshield type measurements into your business – they will provide valuable insights to your chances of continued success – and enable you to add important facts to your decision-making processes. Finally, all business leaders need to continue their transition of business leadership and management from mostly based on intuitive practices (experiences) to more data/fact-based leadership and management. We now operate in a world of valuable analytics/metrics that provide valuable insights to ensuring future success!
If you are interested in attending a CEO Round-table discussing Predictive Analytics, please contact Erin Thomson at firstname.lastname@example.org for details. Limited to Presidents, C-Level executives, Managing Directors or Business Unit leaders.
*™ Copyrighted terms of The Chapman Group; 1988 – 2019
The Chapman Group is a sales, account and relationship management effectiveness consulting firm that specializes in optimizing client revenues and relationships. Since starting The Chapman Group in 1988, Dennis has developed sales, sales coaching, customer loyalty and strategic account management methodologies, processes, learning programs and metric-based performance management tools that have produced significant and sustainable revenue results for his clients. Clients have included Baxter Laboratories, Freeman Company, Assurant, General Services Administration (GSA), Allstate, Swiss Re, AIG International, Roche Pharmaceuticals, Pfizer, Allstate, Zoetis, Merial, Dell Computer, Cargill, Snap-on Tools, Bank of NY Mellon, Express Scripts, USPS, Minnesota Safety Council, Hercules Chemical, Ashland Specialty Chemical, GE Healthcare, Abbott Laboratories and GE Water Treatments and many others.