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Home articles Forecast Accuracy is on the Decline…

Forecast Accuracy is on the Decline…

Posted on June 4, 2020 Written by Tom Freese Leave a Comment

Companies rely on forecasted revenue for many reasons, including inventory management, support resources, to project earnings. And as long as there are sales teams, salespeople will be expected to forecast the probability of pending deals.

Ironically, the accuracy of corporate sales forecasts has declined in recent years, though this trend has been somewhat masked by favorable economic conditions. For example, check out the dialogue below, which will likely play out many times. For example, check out the dialogue below, which will likely play out many times in upcoming account strategy calls:

Sales Mgr: “Is this a 30% opportunity…or 90%?”

Salesperson: “Well, I have a feeling it will close this month.”

When someone says, “I have a feeling,” or, “The customer gave me the impression that…”, that’s a pretty good indicator that there has been little (or no) direct conversation about the timing of the deal, or other factors that may influence the outcome of a forecasted opportunity.

A vague interpretation of what customers “may be” thinking, or how a rep “feels,” is called guessing. The considerable amount of guesswork these days may be directly related to an ever-increasing reliance on electronics for back-and-forth communication, as opposed to speaking directly with customers.

The question about how best to communicate with potential buyers comes up all the time in QBS training events. To illustrate a point, I sometimes ask participants to indicate the length of a typical prospect email message by holding their fingers apart.

Most folks adjust their fingers between one and four inches apart, which represents four to five meaningful sentences—maybe six. That’s just email. Text messages are even shorter.

Conversely, if someone transcribed the typical customer conversation, it would likely fill multiple type-written pages. As a bonus, “live” conversations allow you to pick up on non-verbal cues like voice inflection, tone, and the customer’s level of eagerness (or reluctance) to move forward.

I sometimes get pushback from sellers wanting to try and convince me that customers nowadays prefer email and text. Nope! While I agree that email and texting are useful tools, they were never intended to replace the value that comes from engaging in “live” sales conversations. Mutually beneficial business relationships and building customer loyalty are not the product of hand-held electronic devices.

Put it this way, prospects and customers are going to be talking with someone. It might as well be you. Sellers who engage in more productive customer conversations will have a clearer picture of where they stand in the sales process, and what else needs to happen to close deals.

The net result of superior communication is a more accurate forecast as companies and salespeople strive to achieve their goals.

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. . .which is very different than just probing for needs.

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