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In today’s highly competitive sales environment, where success depends on meeting the specific needs of buyers, an accurate and timely sales forecast is a critical tool for optimizing business outcomes. VentanaResearchBenchmark_SalesForecastingI discussed this as part of our 2014 research agenda for sales, noting that linking the forecast to commissions, quotas and territories is a requirement for success. We recently completed new benchmark research on sales forecasting to ascertain the state of the processes and technology sales organizations use. This research continues to find less than adequate efforts by organizations to improve their sales forecasting process and insufficient information about the full revenue potential from accounts and customers.

Each of our benchmark research studies generates a Performance Index that assesses organizations’ performance in a specific process and how well people use information and technology. Our latest sales forecasting research places fewer than one in five (18%) organizations at the highest Innovative level of the four by which we measure sales forecast performance and increasingly larger percentages at each of the succeeding lower levels; more than one-third (35%) rank at the lowest Tactical level. The largest organizations by both number of employees and annual revenue perform better than smaller ones. We find that organizations do see the importance of sales forecasting: More than half (55%) said that it is very important, and another one-third (34%) said it is important. But execution is another matter: More than half (53%) are not satisfied with their current sales forecasting process, and two-thirds (64%) of those that said forecasting is very important also said they are not satisfied with the process.

Why are people most dissatisfied? The most common complaints about how sales forecasting works are that the process is not vr_SF12_09_complaints_with_sales_forecastingreliable (for 57%), data is not accurate (50%) and the process is too slow (50%). But those seeking to address these complaints encounter barriers that obstruct improvement; those most commonly cited by organizations not satisfied with the current process of creating forecasts are lack of resources (84%), no executive support (79%), no suitable software (77%) and lack of awareness (75%). All of these findings indicate room for improvement across the people, process, information and technology dimensions of performance.

Dissatisfaction correlates with low confidence in the sales forecast and the information in it; 44 percent lack confidence, which is even more disturbing when we remember that the information from the forecast is essential for managing not just the process but all of sales operations. Similarly issues with accuracy of information also correspond to lower levels of confidence: Fewer than one-third (29%) of participants said that their forecasts are more than 80 percent accurate; that is a lower number than in our previous research. One way to improve accuracy is to tie performance rewards to it, but we find that not many (29%) organizations reward sales forecast accuracy. However, those that do this are more confident by a large margin in the quality of the information than those that don’t (61% vs. 37%). Thus we recommend the use of rewards as a way to improve the accuracy of sales forecasts. A related element is timeliness, and the research finds that often the sales forecast takes too long to generate: One-third (35%) of organizations take three weeks or longer to generate a sales forecast, more than one-fourth (27%) take a week or two, and the fewest (24%) take less than a week. The time spent to process a forecast can impact the frequency of sales forecasting and hence its usefulness. This sluggishness often is related to inadequate technology to process and generate information for review and metrics to guide improvement. Almost half (44%) of sales organizations acknowledged that they have impediments that motivate management to contemplate further investment in sales technology.

Speaking of technology, only two in five (40%) of the organizations participating in this research use dedicated tools for sales forecasting. Most that do are new to the technology; three in 10 have been using it for more than a year, and 10 percent more began in the last year. Those that use dedicated sales forecasting technology told us it is helpful: More than one-fifth (22%) said it has improved significantly the outcomes of sales activities and processes, vr_SF12_10_reliance_on_spreadsheets_undermines_efficiencyand half (51%) indicated it has improved them slightly. The largest organizations have been using dedicated software longest among company sizes. Less than one-fifth of participants said they have no plans to deploy dedicated software. Asked why, most (58%) said they do not know, which indicates a lack of awareness of the technology and its advantages. One-fourth more (24%) said deploying it would not have a positive impact on business, which indicates a lack of understanding of its benefits. We found similar uncertainty elsewhere. Fewer organizations are confident in their ability to select and use sales forecasting technology (35%) than are only somewhat confident (40%); at the extremes, slightly more are not confident (14%) than are very confident (12%). Organizations that reward forecast accuracy also are more often satisfied with their sales forecasting technology (79% vs. 44%), which indicates maturity in understanding the full potential of technology investments. Yet many organizations use spreadsheets for sales forecasting even though more than half (59%) admitted that reliance on them undermines efficiency and only 24 percent said they are accurate and timely.

This research also finds much indecision about making changes to improve the process or the technology for sales forecasting. A larger percentage of sales organizations said they are not planning to change their process (41%) than said they will change it (32%); more than one-quarter (27%) do not know whether they will change the process. The most common drivers for changing the forecasting process are a business improvement initiative (for 65%) and a drive to improve the quality of business processes (60%), followed by increased operational efficiency and cost savings (48%) and improved sales and revenue generation (47%). All of these are good reasons, but we think that commitment to sales excellence and maximizing the number and value of sales should be enough to justify investments and efforts at continuous improvement. Dedicated applications can contribute to more accurate vr_SF12_07_impediments_in_sales_motivate_investmentsales forecasts, but we find that many organizations aren’t prepared to implement them or do not understand why they should. For organizations that are planning to change vendors for technology, the most common reason is to speed up the forecasting process (54%); fully half of this group is not satisfied with the current product’s functionality. The current research found organizations are dissatisfied with their tools because data gets outdated quickly, which indicates lack of integration of data and tardy processing of forecasts.

We conclude that many organizations should make a deeper commitment to sales forecasting; the research shows that those that do invest and improve are reaping the rewards in increased sales. We add that improving accuracy and participation should be rewarded and that up-to-date sales pipeline information should be processed into a periodic sales forecast that should be readily available. The whole point of a sales forecast is to measure performance of sales activities, and that should be aligned to the quotas assigned to the sales force across territories. Also important is the capability to examine the forecast by customer, product and geography to determine where more management is required and where coaching and instrumental changes to the sales methods used to drive the best execution through improvement to the efficiency and results. The sales forecast also impacts other key process, such as the financial plan, the demand plan for operations including customer service and field service, and manufacturing and distribution. It is critical for streamlining the overall business plan. Sales forecasting should be a well-managed, collaborative process with capable technology to support it, and not just running a report from the SFA that summarizes the current state of activities and lacks the analytics and collaboration required to operate the process. Having a commitment to improve the process and information requires technology that is designed to support it and finding ways for gaining more participation and interaction through collaboration and mobile technology.

I urge every organization that has issues in its sales forecast to conduct a self-examination with an eye on how to improve it.

Regards,

Mark Smith

CEO & Chief Research Officer

Most organizations see improving the effectiveness of sales as a way to increase productivity. Those organizations that take advantage of the latest sales applications and technology are finding themselves with a competitive advantage, but many organizations lack the time and resources to assess and deploy appropriate platforms. That’s a shame, since most sales organizations have plenty to improve in their selling, forecasting, incentives and planning according to our latest research on sales performance management. We found a high demand even for many of the basics; for instance, many organizations still use personal spreadsheets or outdated applications that are costly to manage. At the same time, marketing organizations are investing heavily to be more revenue- and sales-focused to ensure they maintain relevance and contribute to their organizations’ performance and profitability. Both sales and marketing have fixated on specific processes and how they can work better together.

Our research agenda for 2013 calls for us to examine how organizations can maximize results through new business technology, adopt dedicated applications designed for sales effectiveness and marketing, and use best practices to be faster, smarter, better and more cost-effective in operating sales.

The top three technology trends in sales are analytics, collaboration and mobility. Together with advancing technologies such as business and social collaboration, they are helping increase the flow of information to help Sales Technology Trendsmanagers coach and increase employees’ learning potential. Mobile technologies such as smartphones and tablets are becoming more common, tied to dedicated sales applications and tools that now become more accessible at any time or any place. We will conduct more research in 2013 on the growth in social and mobile sales to see how early adopters are doing and where the industry is improving with these new technologies. At the same time a lot of new software is available through cloud computing; you can rent and configure the software for your organization, reducing the need for IT resources to implement, deploy and maintain it. Advancements in dedicated sales analytics can help organizations understand performance, and help plan and predict sales, providing a path for increasing optimization and letting users more readily share information with finance and operations. We plan to conduct more research into the next generation of sales analytics and build upon our existing research, making sure that the metrics and plans adapt to the existing economic and industry environment.

Value Index on Sales Performance ManagementMany sales organizations realize that traditional sales force automation is mostly for tracking accounts, contacts and opportunities. In 2012 many SFA providers started to expand to a broader sales performance management platform, with integrated forecasting, collaboration, document management, quotas and territory management. This new focus, along with a rapidly expanding set of dedicated applications that have evolved from sales compensation, can bring better incentives, quotas, territories and analytics. This evolution of sales application suites was evident in our 2012 Value Index for Sales Performance Management.

My personal perspective is that 2013 will be even more competitive. While sales compensation management software has been evolving over the last 15 years, it is still finding its place in increasing numbers of sales organizations. In 2013 we will assess how and where sales should be managing compensation and incentives. Many sales organizations that are still wedded to the use of spreadsheets will come to realize that the use of such outdated software impedes their ability to manage sales effectively. It’s not easy to manage forecasts and pipelines that have specific time series and change level analytics in a spreadsheet; a better approach is to use applications designed for the task, and designed not just for sales operations but for the entire sales team. Our recent research in sales forecasting finds areas of improvement that could have dramatic impact on course-correcting sales activities and moving beyond the probability of sales to the confidence of the forecast, which is probably why forecasting was the top application priority in sales according to 65 percent of sales organizations. Sales is also starting to realize the advantages of using marketing in demand generation processes, which nurtures leads into opportunities and can provide a wealth of information to help sales organizations better engage with prospects.

Sales organizations with limited resources and time need to use best practices and not waste time on technology that’s not ready for deployment or that fails to match up with the competencies of their teams. Interactive social collaboration across sales teams is a better and more effective practice than a myriad of emails. In addition, the use of product information management through all channels of sales and marketing is essential, but our product information management benchmark found significant room for improvement as organizations work to ensure proper representation and highest customer satisfaction. Our assessment of PIM vendors finds many addressing these needs and delivering benefits for sales.Benefits of Dedicated PIM

As the configuration, pricing and quote (CPQ) process gets more automated, sales organizations find better consistency in their business processes, including in the fundamentals of contract management. Sales organizations have significant room to improve in supporting non-direct channels and ensuring that data and processes are aligned to the overall sales target. As marketing gets its act together on demand generation, the scoring and qualification of contacts for their true interest through a lead nurturing processes that include behavior, demographic and relevance will help identify the right opportunities for sales to act upon. Sales organizations need to address technology best practices and use analytics and metrics that can be harvested from modeling and planning methods in order to increase the quality of their results. I expect that big data and predictive analytics also will make inroads with innovative sales teams in 2013.

What’s old is still new with sales, and improving upon forecasting, compensation, coaching, collaboration and learning will be job one for those that really want to drive excellence. Applying talent management process with adapting the existing sales team and hiring the right team members, and help ensure that everyone contributes to the business of sales. The rapid increase in the use of smartphones and tablets in sales is leading to a new generation of applications and technology that can better meet sales teams’ needs. I expect to see more reengineering of marketing and sales processes, improving leads and materials and using automation to enhance the quality of leads and move beyond just the process of passing a quantity of useless leads. Finance organizations can also demonstrate their commitment to improvement in sales processes by offering to help argue the business case that delivers the benefits they care most about, which is profitability.

Being more timely and proactive in sales is the mantra for 2013. Those organizations that are prepared to use technology to those ends will be the ones that maximize their potential and retain sales teams that can contribute to financial profitability and customer satisfaction.

Come read and download the full research agenda.

Regards,

Mark Smith

CEO & Chief Research Officer

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