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Introducing the Most Important Metric in Sales: Sales Velocity

Posted by Doug Davidoff on Sep 27, 2019 11:00:00 AM

sales-velocityOn February 1, 2015, in Super Bowl 49, Seattle Seahawks head coach Peter Carroll made a fateful decision that has been recorded by just about everyone (who’s not a Patriots fan) who has a comment on it as not only a bad decision, but possibly the worst decision in the history of sport, or even in the history of decisions. But, was it actually a bad decision.

The Seahawks were trailing the New England Patriots 28-24 with 24 seconds left in the game. The Seahawks had the ball on the Patriots one-yard line on second down, with one of the league’s top rushers, Marshawn Lynch, in the backfield. 

Carroll called a pass, and the rest is history. Patriots cornerback Malcolm Butler intercepted the pass, and the Patriots won the Super Bowl, preventing the Seahawks from repeating as champions. Carroll has been lambasted for the decision, often referred to as the worst decision ever made in the history of sports. Yet, the reality is the decision was quite good given the context of the situation and the probability of outcomes. (Don’t argue, it was a good decision and if you still believe it’s bad, read Annie Duke’s book Thinking In Bets to understand why it's not.) 

The reaction to Carroll’s decision is a perfect example of a common term used among professional poker players - resulting. Resulting refers to the action when a poker player creates too tight a relationship between the quality of the outcome of decisions or actions that are taken vs. the quality of the decision, at the time the decision is made. In essence, resulting is the act of judging every decision by looking in a rearview mirror.

The world of sales has a big resulting problem that it must address to address a number of vulnerabilities that are dragging on business performance.

The Problem With Today’s Most Common Sales Metrics

As the old adage says, “what gets measured gets done.” The fastest and easiest way to determine how people will behave is to identify what gets measured and celebrated. 

In the sales world, there are three dominant metrics that create a series of unintended incentives that guide the behavior of salespeople (like an invisible hand) and lead to resulting - by salespeople, managers and executives alike. 

Most sales organizations use one or more of these metrics:

  • Sales Cycle Time
  • Closing Rate
  • Closed Sales

These metrics have three problems in common:

  1. They are metrics that correlate (at best) with success; they are not causal.
  2. They conflict with the goal of aligning with the buyer and their needs
  3. They overweight actions at the end of the sales process and basically ignore everything that happens earlier.

Consider all the studies that show buyers are conducting more and more of the purchasing process on their own before reaching out to sales organizations. If that’s true, is it true because buyers genuinely want it that way, or because we’ve created the hidden incentives that have led buyers to believe it’s the only way they can do it?

The Time Has Come For A Better Sales Metric

This problem is not unique to sales or marketing. Luckily for us, other disciplines have dug deeply into this problem, creating maps that we can follow. 

Poker is a great metaphor for customer acquisition as it is a competitive pursuit, the situation changes multiple times, and you never have access to all relevant information. The same is true for baseball.

That’s why poker players use odds and probabilities to assess the quality of their efforts and decisions. Baseball used to be a lot like sales, obsessed about analytics that not only didn’t contribute to their desired outcomes but often worked against them. Hence, they created “advanced analytics” (what real data-nerds know as sabermetrics). Today there is not a top-level professional franchise in any sport that would even consider moving forward with such analytics. (Hell, they’re even using such analytics for professional video game playing, uhm, I mean esports.)

The time has come for sales metrics to move into the modern age. It’s time for some advanced analytics. And, what WAR (wins over replacement) is to baseball, Selling Velocity is to sales.

For this new metric to be meaningful, it must be predictive and prescriptive so that it provides a strong signal into what is more or less likely to happen. It must also provide insights so that all those involved can do something to improve the likelihood of a positive outcome and to utilize their resources better. To meet this objective we identified the following requirements:

  • It must meet the basic criteria associated with a balanced scorecard. While it must avoid overweighting the over-rated activities that occur towards the end. At the same time, it must not overvalue the early activities that have a much greater influence on future activities, but are still largely speculative in nature.
  • It must integrate the hard and soft contributors to a sale. As such, the analytics must have a predictive nature. For the metric to be valuable, it must reinforce for the salesperson and manager, those elements that cause sales.
  • It must align with a probabilistic rather than a deterministic approach. One of the primary problems with the vast majority of go-to-market and attribution metrics is that they sacrifice insights & value to create a greater sense of (false) certainty. To make selling more predictive, we need to stop thinking about it as “right or wrong/win or lose.” Instead, we must look at it like other disciplines, to see if the actions we’re taking are increasing the probability of attaining the desired outcomes. The dynamic nature of sales (like life) will always create a meaningful level of uncertainty, and we must embrace that rather than ignore it. Here again, baseball is a great metaphor. All of the analytics used to assess progress and prescribe improvements are of very little value on any single at-bat, game or even series of games. Utilizing analytics increases the likelihood/probability of success over reasonable periods of time. In baseball, poker and sales you can do it right and lose (just like you can do it wrong and win). 
  • It must be simple in its application, but embrace the complexity and variance in the paths a sales organization or sales rep can take to be successful. Here again, the weakness of most metrics is they are used because they’re easy to measure, not because they’re valuable.
  • It must be flexible enough to align with the unique situations and context of different sales organizations and companies. Unlike poker, baseball or other examples I’ve referenced here, every sales organization should be playing a (at least a slightly) different game - their game - that should embrace their strengths and advantages.

Sales Velocity meets these objectives and provides additional benefits. Get the details of how to calculate yours at our Sales Velocity Resource Page.