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Stop Racing To The Bottom! Start Focusing On Average Deal Size

 

A study by CSO Insights reports that, in 2013, the average size of B2B deals dropped 25% over the previous year.

The report summises that this was probably due to more demanding buyers and higher levels of discounting. Even so, this is a significant drop when you consider the supposed increase in economic confidence during the second half of 2013.

As our sales velocity calculator shows, average deal size is one of the four ‘levers’ that impact on sales velocity. So any drop in average deal size will have a corresponding negative impact on your sales performance.

To illustrate the problem, picture this

Let’s say your quarter target is $250,000. With 3 weeks to go, you’ve booked in 6 deals totalling $150,000. How do you go about creating this extra $100,000 of business in such a short timeframe?

Your first reaction is probably to do everything you can to win more deals.

So you go out there and start prospecting, calling, chasing leads, making contacts and, in desperation, discounting your prices to get deals over the line. And finally, after increasing your work load massively, working longer hours, taking shorter lunch breaks, reducing the perceived value of your products, you make it. You manage to win 6 more deals to reach your target.

You now have 12 deals generating $250,000 in revenue.  But was this an efficient use of your time and resources? And what impact will discounting have on your customer’s perception of the value your provide and your ability to sell more to them in future?

Is there a better way?

The above example is how most salespeople think. This comes from a mindset of competing on price alone, and not value.

If this is you, it’s time to stop!

Instead of always thinking ‘more deals’ start thinking ‘more from my deals’.

Anthony Iannarino hammers home the same point in this great post. And Jim Keenan does the same here.

When you think and strategize the right way, you’ll find it requires far less effort and resources to increase your average deal size than to try to find, chase and win new deals. All you need is a change in focus.

The secret – greater customer focus, insight and added value

One possible reason why reps are becoming less effective at maximizing deal value is because they are not doing enough to understand the buyer’s real business problems and then crafting a value-added solution around them.

This highlights the importance of having a robust sales process in place, so prospective deals can be qualified and assessed to measure their strategic and revenue potential. The TAS methodology does this better than any other.

A few statistics to consider:

  • Only 45% of reps are effective at maximizing the value of a deal
  • Only 61% of reps are good at uncovering customers’ business problems
  • Those who can uncover customers’ business problems are 28% more likely to make quota
  • 60% of reps don’t think they can access Key Players
  • Those who can access Key Players are 30% more likely to make quota.

How to become a ‘customer first’ sales team

Become a ‘customer first’ sales team by gaining insight into the customer’s business before you do anything else. Gain insight into their goals, business pressures and obstacles to progression.

Then figure out what insight you can bring to help them learn what you want them to know. When you can demonstrate an understanding of their problem, of its impact and the cost of inaction, you get the opportunity to sell to the customer’s priorities to maintain value. Not price.

Sometimes, you will need to change your approach to the account by adopting a flanking or fragment strategy to focus the customer on the value that you can deliver.

A few questions to ask yourself:

  • Does your sales team understand what value the Key Players expect from a solution?
  • Is each seller good at developing solutions that are customer focused?
  • Do your reps execute a strategy to compete that leads a customer to your Unique Business Value (UBV)?

Let us know what you think!

About The Author

Nigel Cullington
Nigel Cullington
Nigel Cullington is VP of Product Marketing at Altify, responsible for planning, creating and implementing the overall product marketing strategy for the company. Before joining Altify, he held similar roles at Openave Messaging and Critical Path, that helped contribute towards a successful acquisition by Synchronoss Technologies. Previously, Nigel co-founded a marketing and media agency for mobile content and technologies and held senior positions in software, publishing and internet companies. He resides in Dublin, Ireland with his wife and two children.
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