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Opinions Pretending to be Data: The Benefits of Tracking Activity in your CRM

Despite their benefits, there are serious problems with modern CRM systems – from the hours of data entry required to the shockingly low compliance rates. These are well known from everyone who uses or builds CRMs. But one aspect of CRM shortcomings hasn’t been well addressed. – Although CRMs act as the database for their companies, much of what resides in them isn’t really data. The solution is clear, but not simple – we have to move from reporting opinions to tracking activity. At the end of this article, I suggest three ways to move in that direction.

Some of the information in CRMs – customer contact points, employee lists, and historical sales numbers are data. They might be out of date or incorrectly entered, but they are facts that can be verified. But most of the other information, most importantly the information surrounding new revenue opportunities, isn’t data – they are just a salesperson’s opinion. For example, CRM entries like the projected close date of a deal; the roles of the various contacts, and the ultimate decision-maker; the expected amount of the projected contract and the probability of getting the contract signed are all just the opinions of the person who entered them in. All these characteristics (and many more) of an opportunity are inevitably biased by the people reporting them.

This might not be such a big problem if the unreliability of these fields in the CRM database were clear. But the real problem arises once this information is entered. Because these opinions are surrounded by real data (contact numbers etc.), because they aren’t marked as unreliable opinions in the user interface, and because organizations rely on these opinions as data when making business decisions, it’s easy for managers to forget that these numbers have no basis in fact..

The clearest example of this is in the “bottoms-up” revenue forecast. To arrive at next quarter’s revenue, thousands of sales managers multiply the deals in the pipeline by their probability to close. And the result is familiar – while organizations are raising quotas, the number of people meeting their quotas has fallen 25%, and only 50% of reps make quota on average.

So what is a sales-driven organization to do?  To start with, we have to stop mixing opinions and facts together. We have to start tracking employee and especially prospect activities in ways that give us data to learn from instead of opinions by which to be misled.

Metrics driven, high-velocity, sales-focused companies like HubSpot are pointing the way. They have spent thousands of hours customizing their CRM to measure and report on the activities of their salespeople instead of their opinions. HubSpot tracks every single time a sales rep calls or emails a prospect, how many of each kind of touch it takes to make a sale (segmented by customer size!), velocity through the pipeline, and many other data points. Having discovered and then built up a historical record of their key sales activities, HubSpot managers know every morning how sales activities that day will affect their quarterly goals.

 Unfortunately, because of the investment required to customize and maintain HubSpot’s CRM, its solution isn’t available to most companies. And predicting the future is hard – estimates will always have their place. But to really understand how a company’s efforts is affecting its results, we need a new approach. We need tools and services that track sales activities automatically, without requiring additional “data” entry from salespeople. And we need systems that actually help salespeople perform better, without imposing another technology on them. The companies that build those kind of products will lead the next generation of CRM.

In the meantime, here are three ways to move your company away from opinions and towards real, verifiable data:

  1. Switch your pipeline events to be verifiable – A sales person believing a deal has a 50% shot of closing is not a verifiable event.  Emailing a recap of the prospect’s problems to them, and receiving an email confirming the accuracy of the summary is verifiable. While verifying evidence can mean additional work for managers, it’s a sure way to improve forecast accuracy.
  2. Base pipeline progress on prospect activity, not salesperson activity – The fact that a salesperson sent a proposal is necessary, but not sufficient to close the deal. The really important facts about the proposal are – Did the prospect read the proposal? Did they forward it to other people? Did they reply? How quickly? By using prospect activity as the threshold through which the deal must pass, the power of opinions are greatly decreased.
  3.  Look for tools and services based on data – Ask every technology vendor and service provider how data is entered into their system (the less work, the better), how it is reported (the fewer interfaces the better) and how data and opinions are differentiated (the clearer, the better).

Not all of these critiques apply to every CRM or every company. Implementing these suggestions will be, or will seem to be, impossible for some companies. But for every company, moving away from opinion and towards real data will definitely improve your sales projections and revenue visibility.

 

This article originally appeared in the November 2011 issue of CRM Magazine