Today’s unforgiving market dynamics and cutthroat competition requires product managers to see the trajectory of their every decision through the lens of KPIs (key performance indicators). KPIs are performance indicators that help show the health of your product. One such metric is the win rate or sales win rate.
Win rate is a transparent indicator of your sales momentum and a good win rate always points towards profitability. A poor win rate is an early warning sign, which, when improved timely, can save you from potential bankruptcy, and push your bank statements to millions.
What is win rate, how can you calculate it, and why does it matter so much? These are the questions you will find answers to in this article. Let’s dive right in!
Win rate is the number of successful deals your sales team closes versus the total number of sales opportunities your company or startup encountered in a defined period of time.
Win rate is commonly referred to as the North Star metric because it is foundational to developing promising sales strategies and predicting future sales.
The math is as simple as it gets. Let’s go through each step with an example:
The simplicity of these calculations might be underwhelming, but there’s more to their interpretation than you might think at first.
It’s important that you consider your time period carefully, or the win rate will just end up being another false alarm. It should represent the duration of the factors that you believe have influenced your win rate, for better or for worse.
For instance, seasonal variations in sales like those of the post-holiday season should be taken into account before giving the final verdict on your calculated win rates. Many retail businesses experienced a significant decline in sales in January, but that is a natural part of the retail sales cycle.
The length of the duration should also be chosen meticulously. Too little, and you might not capture the full picture. Too extensive, and you can miss insightful trends.
The period isn’t the only parameter to care for. When calculating the win rate, established companies sometimes consider only the qualified sales leads. This way, they can focus on turning legit sales leads into profits.
The criteria for good win rates depend on the nature of your business and your expectations. However, solid win rates are typically in the ballpark of 30 to 40 percent for average B2B companies. Some market-leading companies even push their win rate up to 50 percent.
As a product manager, you are the bridge between the intellectual capabilities of your technical teams and the diplomatic prowess of your sales personnel. Win rate can help diagnose specifically why you are not landing as many clients as you should.
There is no universal sales strategy that can win any negotiation. Marketing teams need to adapt to a variety of factors to sense the pain points of each prospective client. Win rates can clearly distinguish what brings potential clients on board and what acts as a deal-breaker. Moreover, a demotivating win rate despite your marketing team’s best efforts could simply mean your outreach channel isn’t leading to your targeted audience.
Many SAS businesses lose potential clients because their marketing teams don’t effectively pitch the software’s designs and merits as intended by your software developers. That’s why ambiguities in product specifications and sales pitches can cause your win rates to decrease.
A declining win rate might not always mean your sales team is slacking off. More than often, young startups advertise to everyone and anyone in their physical vicinity or network outreach. These undirected campaigns only earn them a handful of clients while taking a huge chunk out of their revenue.
A common misjudgment at this stage is assuming that there is still a need to reach more clients. Calculating and analyzing their win rates from the get-go can lead them to classify their targeted audience in far less time, saving a lot of money and headaches.
Even seasoned sales professionals misinterpret or take their win rate lightly at times and miss out on the changing expectations of their clients and emerging market trends. That’s why win rates serve as a quantitative measure of the adaptability of your sales tactics.
For instance, with a win rate of 30 percent, a company can deduce that three out of ten potential customers are likely to hop on board. So by pairing this data with a KPI like customer lifetime value (CLV), which tells how much revenue a customer brings for as long as they interact with you, companies can precisely estimate the number of opportunities they need to hit their financial goals.
This ability to make accurate forecasts greatly helps you find the optimum balance between spending on customer retention and acquiring new clients. It also enables them to deal with customer churn and other risks that are revealed by sales forecasts.
An increase or decrease in your win rate can also tell you which products are relevant to your company’s goals and give you a clear indication of which resources need to be allocated and where. For instance, if your win rates tell you that your app’s interface is raising eyebrows in the middle of the sales pitch, then you know you need to invest in better UI UX and perhaps hire more experienced designers.
A solid win rate is like a strong resume. It projects confidence in your services and sales practices. Your stakeholders trust your strategies and you can acquire more investments by advertising your win rates.
The art of selling is very sophisticated and you need to invest in the skill enhancement of your sales personnel to lead the market. Your marketing and sales teams should be highly proficient in client management and engagement, leveraging the spending habits of your targeted audience and recognizing the most effective channels to reach them.
Your business goals need to resonate with potential clients and your products/services should serve as a problem solver for them. Learning to see your product through the client’s eyes is perhaps the most important skill to ace almost any sales negotiation. Your sales teams should actively research the challenges faced by a prospect, their business goals, their market alliances, and even their personalities.
This way, you can gain insights into issues that your clients may not even know they have. Before finalizing your sales strategy, ensure that your offers align with your client’s interests and expectations. Otherwise, new opportunities in your pipeline will not increase your win rate.
Initially, you’ll catch the interest of the market and investors but most of them will end up declining. That’s why nurturing your clients through your sales funnel is paramount to winning more sales. This is easier said than done. Too many follow-ups and you might irritate them, too little and they’ll lose interest.
Your team also needs to adapt to the calendars of multiple clients. After the first contact, you need to actively schedule follow-up calls at every stage of the sales funnel at your clients’ convenience. This way, they’ll be able to digest your proposal and increase the chances of closing another deal. Use automation tools to automate repetitive tasks, enhance customer relationship management, and aid in data analysis.
Other than the relevance of your product to your audience, your win rate also tells you if your sales teams are underperforming or not. There is always room for improvement, and you should never miss a chance to enhance the marketing skills of your clients.
Enroll your employees, from the marketing department, in sales skill-enhancing programs. Invest in their soft skills as well as their hard skills, like CRM software proficiency. The training you arrange should include techniques for interacting with clients at various stages of the sales process, picking on buying cues, and sparking the interest of leads who are dicey about spending on your product.
To understand why the negotiations went south, you should make it a common practice to ask for client feedback on their experience dealing with you. This way you can account for flaws in your sales tactics when analyzing your win rates. Hold exclusive meetings regularly to discuss past mistakes as well as the trends behind successful deals. You can also give generous incentives to teams that show enthusiasm and bring more clients on board.
Not everyone who interacts with your company or shows interest in your product is willing to pay for your services. Your sales teams need to professionally handle such dead-end leads and differentiate them from those that are likely to convert. Your employees do this by applying data analysis techniques to qualify leads before directing their sales efforts toward them.
Win rate is a reflection of your marketing team’s competency and the effectiveness of your sales strategies. It also tells you if your advertising campaigns are targeting the right audience or not. Regularly calculating and analyzing win rates enhances your predictive power to forecast future sales and make calculated decisions.
To improve your win rate, your teams need to be well-versed in nurturing potential clients through the sales funnel. Your teams should carry out meticulous research before meetings. You can give generous incentives to teams that positively contribute to your win rates and invest in refining their soft skills. You can deploy strategic methods to qualify leads by defining your ICP and calculating lead scores before directing your sales efforts.
Bringing your solid win rates to your stakeholders’ attention will readily attract more investments and radiate confidence in your services. For businesses that aim to grow into giant corporations, win rate analysis can light the way to strategic triumphs and corporate success.
Featured image source: IconScout
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