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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

It should be no surprise for those who work in sales that increasing outcomes collectively is not always easy. Sales teams and individuals work under pressure to perform at high levels,VRValueIndexLogo selling more than they did in the previous period or more than the person who previously had responsibility for a territory. Today’s economic and competitive environments demand that everyone work not just faster but smarter in their sales efforts. To excel in this environment requires not just wise use of time but prioritization of the activities and tasks that contribute to achieving the quota and forecast. In the past, sales organizations often resisted adopting new technology, but it’s time for them to realize that tools are available to facilitate better sales performance. As I outlined in the overview of our business and technology research agenda for this year, the sales department has a ripe opportunity to get smarter in how it operates. This is the essential point of our research practice in sales applications and technology: Our methodical benchmark research examines applications and technology best practices and benefits for sales organizations, and we assess the vendors and products in this market through our Value Index ratings. We will start 2014 with the latest release of our Value Index on Sales Performance Management, which will help sales management evaluate products to assist in improving performance of the organization.

Technology advances in sales applications and technology in the last several years have given those who use them an advantage. vr_SF12_10_reliance_on_spreadsheets_undermines_efficiencyFor example, mobile technology enables sales organizations to quickly access metrics from sales analytics; these can be shared to help the whole team meet their objectives. But these improvements first require willingness to change, to go beyond the conventional wisdom of using sales force automation (SFA) for more than defining and tracking accounts, contacts and opportunities. Those who continue to use spreadsheets to manage sales performance will be even less efficient and fall further behind those who use more capable tools. Our latest benchmark research in sales forecasting shows that more than half (59%) still use spreadsheets to manage sales forecasts; doing so wastes time and prevents immediate access to critical information. It also finds that the process is not reliable and data is not accurate in more than half of organizations.

The imperative to provide the best possible customer experience, which my colleague Richard Snow outlines in his customer engagement agenda, indirectly impacts sales. Both require high-quality and relevant product information whether it comes from sales interactions, e-commerce or websites. Both customer service and sales can benefit from the organization creating a single repository of all product information managed centrally. Tools for product information management (PIM) utilize master data management methods that enable product teams in businesses to define, administer and publish this critical information to those who need it, including Sales. Our research shows that the use of dedicated PIM technology has helped almost half (47%) of organizations  eliminate errors and mistakes and that 90 percent of those that use a single system gain competitive advantage through faster time to market. This year a significant transformation of where PIM and commerce software will converge further to help provide the information in the shape and form required even as it is required across smartphones and tablets. Our new Value Index on Product Information Management for 2014 will assess progress of vendors and their investments in products to help you determine which ones can best meet your needs.

Just as quality information is critical, so is the ability to use analytics to build metrics that can provide immediate visibility into the progress of sales. Depending on periodic reports and dashboards doesn’t work in the accelerated pace of business today. Mature organizations are using predictive analytics and data mining of big data repositories to extract previously inaccessible insights; this can be critical for large sales organizations that sell large volumes of products. We will assess the advances in sales analytics in a new benchmark to determine how they have facilitated change in sales operations and increased efficiency in their processes. We already found in 2013 through our benchmark research in location analytics are helping provide a competitive edge on the ability to sell effectively in a territory but also how they are designed and optimized to achieve specific quotas. A new generation of sales analytics are advancing and accessible through mobile technology. In addition our 2014 Value Index in Mobile Business Intelligence assessed 16 vendors of business intelligence tools on their ability to provide best in class accessibility through across smartphones and tablets.

These advances and others provide for sales organizations a variety of applications and tools that can be used by sales executives, management, operations managers and account representatives. Sales organizations also need improvement in other areas including learning and coaching, compensation and incentives, forecasting, setting objectives, activity tracking, recognition and rewards. In 2014 we will conduct new research on next-generation technologies such as social collaboration for coaching and improving skills and on mobile devices to track and assess sales efforts. Better use of coaching and playbooks can help everyone in sales find and apply best practices or the right sales assets to use in communicating with prospects. On another front, industry pundits and vendors are buzzing about gamification in motivating sales, this is nothing new, and there are practical ways of having contests and leader boards for the sales team or individual quotas.  

Our new benchmark research coming out in 2014 examines the automation of compensation plans and incentives for sales. New vr_SF12_07_impediments_in_sales_motivate_investmenttools make them readily accessible at any time to help sales reps and managers determine progress toward targets; these offer an automated way to escape the silos of spreadsheets and documents. We will also assess the state of vendors and products in the Value Index for Sales Compensation in 2014. In a related area it is also critical to optimize the effectiveness of sales quotas and align them to territory management, which can help maximize the potential of sales organizations. Also marketing and sales can align their efforts through use of demand generation to ensure the tracking of inbound and outbound marketing feeds into business processes through nurturing of dialogue and interactions. And in 2013 we saw significant improvement to integrate configuration, pricing and quote (CPQ) management into the deal process and the SFA aspects of opportunities.

I’ll say again that all of this change means we cannot depend on conventional wisdom that says you can just use SFA and personal productivity tools to understand and improve sales performance. Our research has found that impediments such as inconsistent execution (53%), scattered information (48%) and limited visibility (42%) are motivating technology investments. Analytics help to develop metrics for performance and planning, and the use of big data to mine and harvest information assets, can help. Moving to applications that automate interaction among sales teams can help achieve a common set of goals.

Our benchmark research in various aspects of sales continues toVentana_Research_Benchmark_Research_Logo find significant opportunities for organizational improvement through better tools. Applications are easier to access and use from the cloud or on mobile technology. Dedicated software can help interconnect sales with the other lines of business. For example, a dedicated approach to sales and operations planning can help ensure that the forecast and planning process connects sales, operations and finance. In the area of talent management that my colleague covers that can enhance the range of key employees activities for sales including recruiting, onboarding to learning, performance and career planning, which can be done more effectively through collaboration between sales and HR. Many providers of sales applications are beginning to advance in this area to directly help sales be as efficient as possible.

Making sales people and processes more efficient and effective in using technology built for its particular purposes is critical to ensure the best outcomes. Sales will need to think beyond conventional wisdom and examine what is needed to be effective from sales management, manager and operations but also down to how help every account manager be as efficient as possible. Sales should also explore building alliances with finance and IT to see where faster investments can accelerate the potential to achieve the sales targets and revenue expectations of the organization. Use our sales-related research and assessments of applications and technology across vendors to learn where your opportunities may lie.

Regards,

Mark Smith

CEO & Chief Research Officer

Mark Smith – Twitter

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