I recently read a great report from Miller Heiman's research arm, CSO Insights. They are a twenty year old organization who study and provide research on the sales profession. In the report, which surveyed 1,300 selling organizations globally across many industries, they shared some powerful insights. The one that was the most concerning has to do with quota performance. Their research shows the percentage of salespeople achieving quota dropping from 63% to 53% over the last five years. It also shows this trend accelerating, which is alarming.
So there are two main questions. The first is "why" and the second is "what should sales organizations do to reverse the trend." I will address the "why" in this post and and the "what" in a future post.
So why is this happening? In my professional opinion there are a number of reasons but it boils down to three major issues;
1. The Buyer's Increased Sophistication
2. Hyper Competition Among Vendors Competing for Wallet Share
3. Scarcity of Sales Talent
1. Today's buyers, especially when evaluating technology (SaaS, Hardware, Networking, SI's, etc.), have greater access to information than ever. As a result, they do not engage with "sales" as early and often as they have traditionally. When these buyers or prospects do engage, they come to the table much more informed and with higher expectations of sellers. Additionally, according to CSO's research, the average number of decision makers involved in a transaction is up to 6.49, a sharp increase in recent years, which brings additional risk to sellers.
2. The barrier to market entry, especially for SaaS companies, is 90% less than what it was just a decade ago and getting less expensive by the year. In other words, if it cost $10M to start a real company ten years ago that bar is only $1M today. That is great news for entrepreneur's in some ways, and bad news in others. For sellers, it makes the hill to climb much steeper when trying to acquire new customers or expand existing one's. The buyer's use "hyper competition" to their advantage in marginalizing the seller and attempting to commoditize the buyer's value proposition. It is also increasingly difficult for the seller to capture the buyer's attention, with so many competing solutions competing for mind share. As a result, the cost of lead generation is increasing, thus putting pressure on CAC (customer acquisition costs) ratios for marketing and sales organizations.
3. In 2018 the unemployment rate for sales roles within the SaaS industry is 0% (negative unemployment). This means there are more jobs than qualified people to fill them. Traditionally, to scale a SaaS company's revenues, the recipe was pretty simple - hire more quota carrying AE's. Today, given the razor thin talent pool and vendor competition for those people resources, a growth strategy based primarily upon putting more quota carrying reps on the street is challenging and a high risk strategy for sales and executive leadership. In addition, the cost of unwanted attrition is extremely high when you factor in the financial burden of "recruiting" and "on-boarding" replacements as well a "time to productivity for new hires." In fact, depending on the product and market segment, "ramp time to target productivity" can take 6-12 months. The opportunity costs can be very high while you are busy recruiting and ramping the new hires.
Although the challenges of sales organizations today are much tougher than just a few short years ago, there are strategies world class selling organizations are deploying today and having great success. I will share those in a future post in the not too distant future. Until then, good luck and god speed.
Comments