Sales forecasting and the “likelihood to win” - A ‘probability’ score.

To really understand
Sales ‘forecasting’  or Weather ‘forecasting’

you need to understand ‘Game Theory’.

 

In particular the “Game” which is called
“The Largest Number Game”,
sometimes it is called the “Luring Lottery”.

You can look it up on Google.

It starts with a ‘premise’, that every one contesting has an equal chance of winning. Then people can vary their behaviour through the use of Rational and the Irrational behaviours in an attempt to
“Increase the odds” of them winning.

Sales forecasting is a “Game”, in the absolute sense of Game Theory.

1. Some Players believe that their “Activity”, increases the likelihood of winning.
2. Some Players base their ‘Strategy’ on enhanced “Functionality” and hope to win with a better product.
3. Yet other Players trust in their “Relationships” with ‘Key Players’ in the Account,
   who are given name tags like “Coach”, “Fox”, “Ally” or “Enemy” and just plain “Insider”.
4. A large group of Players base their likelihood of winning on the “Financial” offer,
   this can be TCO, ROI, or Discounted Cash Flow (DCF) based.
   A popular way of phrasing this is to make a “Value Proposition” which will be literally:
   

   “Make them an offer that they can’t refuse!”

So, what do we know about Sales forecasting?

Well, surveys and research shows it to be pretty ineffective.
The likelihood of the Sales “forecast” for any individual deal being accurate is about the same as
the weather forecast for rain in the Desert or sunshine in Manchester. Sometimes they get it right!
What about “Collective” or “Aggregate” forecasting? 
Well, even if you do sell aggregates or collectives, they are not much use!

Like the lottery, the more “tickets” that you buy then the more likely you are to win.

Does this apply to Sales?
The more deals you try to close the more likely you are to close ‘some’?

No? Well no, not really.
It doesn’t work that way.

We know this because of the Sales People and their Sales Managers who worry about Activity, Functionality, Financial offers and Relationships. If these are not ‘right’, then your likelihood of success is diminished.
We didn’t even include the Competitors;
if there are THREE Competitors then TWO of the Sales forecasts are going to be wrong by definition!
We live in a Complex world, ‘forecasting’, especially Sales Forecasting could be characterised as:
“Calculated Chaos” or “Controlled Disorder”. In fact, Sales Forecasts are needed to give a semblance of Control; and Control is needed so that Planning can be ‘fulfilled’.

The truth is Forecasting has not progressed much since Greece 2,500 years ago.
Where the Oracles at Delphi, (now known to be intoxicated by the ‘Volcanic’ fumes)
made predictions.
We still believe that prophecy, that is given by “talented seers”, even if removed from the hurly burly can foretell coming events.

 

 

Magic!

 

 

 

 

 

 

What is really produced is ‘pseudo-information’ about relationships, function, finance and activity, which is then processed through ‘intuition’ and ‘calculation’ to generate a number.

The oxymoron springs to mind:

“A long range weather forecast should be obtained before leaving,
  as weather conditions are extremely unpredictable!”

My belief is that Sales Forecasting, especially long range forecasting is a manifestation of anxiety-relieving superstitious behaviours.

 

Sales forecast reviews are no more than “magical rites” to make a chaotic world seem stable. These rites are practiced by the Executive Management Tribe to induce us (sales people) to take action, at least when the ‘Omens’ are favourable.

The use and abuse of sales forecasting simply preserves a Status Quo.

Weather Forecasters talk of unexpected “Turbulence”, and Sales VP’s call it “Downturns”.

I have previously Blogged about the Forecasting method which I use that,
given all the truths above, it is as useful as any, and a lot better than most “systems”.

 

http://brianmaciver.blogspot.com/2010/07/sales-forecasts-its-numb3rs-game.html

 

No doubt,
many people with ‘systems’ and ‘solutions’ will disagree with me.

But, before you buy,

ask them to bet their House and Pension on it,

before you bet your Company on it!

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Who should carry out the Sales Negotiation?

 

I have run Negotiation Skills Training for more than 20 years.

 

BMAC Consulting ExtraOrdinary Negotiation Skills are based upon:
Game Theory Strategies and Verbal Behaviours. These have both been Validated by a wide range of academics and practitioners.

“The proof of the pudding is in the eating”,
   and sometimes I noticed it didn’t work!

People who had attended the training and who had done well in the Classroom ‘failed’ to “transfer” the skills to the Real World.

I have followed up on this quite extensively
and noted the following paradox:

 

 

after training People knew what to do, but didn’t always do it!

It is irrational, but it is also true. They had the tools to create win/win outcomes, but they were often sub-optimizing the outcome. They were too “soft” in some situations, Customers, Family and Friends and too “tough” in other situations Shops, Restaurants or with complete strangers.
On examination, these “Skilled” Negotiators were failing to use their skills appropriately;
in fact their behaviour was ‘unaligned’ to the outcome.

The missing factor was ‘empathy’.

In situations where they had strong empathy,
they were failing to align their behaviours and use appropriate strategy.

In situations where they had little or no empathy,
they were simply going for the single win, a “Bully” strategy.

Neither was particularly effective.

 

What does this mean?

It means that Low to Medium empathy seems to be the right amount to provoke correct strategy and aligned verbal behaviours. This level of empathy is more usual in second line staff, Sales manager, Financial Director or CEO.

When we come to negotiation (not Haggle) then,
the Salesperson is NOT always best.

Check their empathy for the Account
BEFORE you let them negotiate!

 

 

 

 

And, check the Sales Manager, FD or CEO for SKILLS
before you ask them to negotiate, instead of the Salesperson.

 

 

 

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"shortening sales cycles"

The most effective way of shortening the selling cycle is to arrive at the very end of the buying cycle. If your buyer is going to decide tomorrow, you will have a selling cycle of less than 24 hours!

Usually, in fact almost always, you won't get the deal.
But, the upside is you have only lost one day!

Other sales people, who started a year before you,
they will have wasted a whole year!

I once visited the flight deck of a 747 Jumbo Jet.
I was overwhelmed at the number of dials and indicators. The Captain patiently explained to me the purpose behind each one.
Fuel Gauge and Fuel Burn Rate.
Altimeter and Vertical Speed.
Air Speed and Forward Looking Radar. 
Each Indicator or Measure giving critical information for the effectiveness or the security of the airplane and their passengers.

 

 

 

But there was one gauge, not mentioned,

marked from 40% to 100%,
with Green, Amber and Red zones.

Pointing to this colourful gauge, I asked “what is that one for?”

“That’s the External ‘Humidity’ Gauge.” replied the Captain.

"But, what is it for?" I persisted

The Captain smiled widely and then answered
“That’s so we can answer a head office Executive’s question, ‘Is it raining outside?’”

“But, that’s not really relevant, is it?” I asked.

“No, but in Sales you have head office Executives who pour over
the ‘Sales Cycle Time’ figures don’t you!”  He replied.


I have to say that, this is the same Aircraft Captain who caused Kaplan and Norton
to write their book “The Balanced Scorecard”, and create "Dashboards"
in response to the Captain flying from New York to London
using ONLY his Altimeter.

They had however, booked a flight from New York to Chicago!

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