The Magnificent SPIFF

Have you ever wondered about the impact of a SPIFF? (That’s a Sales Performance Incentive Ffund) . Does it really make a material difference to sales performance? Should pre-sales engineers participate in a SPIFF? What happens if you reverse a SPIFF and exclude Sales?

Well – this may not answer all of those questions – but it will lead you to some interesting conclusions. Here are the long-term results of a SPIFF program, paid out by an enterprise software company, over a 7 year period.

Bottom Line Up Front - Here is the Data

Year	Participants	SPIFF Design	Product Pull Through
2006	None	None	14.2%
2007	Sales only	1.5x quota credit	24.2%
2008	Sales only	Sell 500k , get 25k bonus	20.5%
2009	Sales + SEs	5k/sale ; split 75/25	41.0%
2010	SE’s only	2.5k / sale	35.2%
2011	SE’s only	1.25x quota credit	34.9%
2012	Sales only	1.5x quota credit	26.1%
2013	None	None	12.1%

 Here is the Background

Every year (from 2007 through 2012) the company had a 2^nd quarter special where they incented part or all of the sales team to upgrade existing customers to the latest release – and potentially cross-sell them an additional module. They measured the amount of additional product sold as “product pullthrough” – the last column. As I cannot reveal financials it is expressed as a % of the installed base which is in direct proportion to revenue because of their business model.

There were also three different combinations who had differing opinions about the efficiency and structure of SPIFFs. Those are the three shaded areas.

And The Analysis

By dividing the program into three different periods some factors emerge.

1.       Reps are more motivated by quota credit than a bonus (2007 and 2012 vs 2008)

2.       As soon as you add SE’s to the SPIFF, performance rises quite dramatically from approx. 22% to 35%). That’s comparing 2007/8 to 2009-11.

3.       With just SE’s receiving a SPIFF you get better performance than just Reps, but not as good as the 2009 team-based SPIFF which yielded a 41% pull through.

4.       SPIFFS in general made a difference raising an average 13% pull through with no incentive to 31% with an incentive.

Now you can argue that the product upgrade or module additions may have been better in some years than others, the economy changed, personnel changed – and even that this was an upgrade into an installed base, rather than net new logo sales. All perfectly valid points which are difficult to prove or disprove, but unless you have something better and data to back it up you are arguing emotion versus facts.

And my ultimate point – if you practice team-based selling then you should practice team-based compensation and share the SPIFF. That’s where the revenue is!

Is 2015 The Year Of Sales Engineering Leadership?

 

I have long maintained that first line leadership, whether as a sales or as a presales manager, is one of the hardest jobs in the company. You are responsible and accountable for so much, yet have little decision making authority. Add to that the fact that the management selection and promotion process is often “who is our best SE – let’s make him/her a manager so they can teach everyone else to be just like them” instead of “who would make the best leader, make smart decisions and motivate their team to obtain maximum efficiency?”

This means that first line managers often flounder and struggle in their new positions and don’t receive much guidance and training except perhaps for some generic HR stuff. This is where the sales and presales path tends to divide. Sales managers can attend coaching classes about negotiation, about mentoring, and about guiding reps in account review processes. The metrics that sales managers have to measure and are judged by are relatively simplistic and predominately monetary. Presales managers get … reheated sales training or sent back to that generic HR material …  and no clue as to how to run presales as a business.

For years I have had a passion about SE leadership as it is one of the few things I miss about the corporate world. I sure don’t miss waking up in the morning wondering which of my SE’s want to quit, who had a fight with a rep, who skipped training, who apparently “screwed up” a deal etc… And every year I run maybe one or two SE leadership oriented sessions with an “enlightened” client.

That is now changing in 2015.

Already, here at MTS, we have four SE leadership sessions booked, and three more that I would be willing to forecast to my boss (if I had one). I’d also place another five or six early in the pipeline.

What is happening?

I don’t believe that I, or my business partners in Singapore, have suddenly gotten smarter about how to pitch and sell the requirement for this kind of training.. No .. you, the collective SE/High Tech community have suddenly realized that you have been significantly under-investing in a key component of your sales force. One of my more famous analogy quotes is “Sales Engineering is the oil that keeps the sales engine running smoothly”. If you believe that the #1 job of a SE Manager is to develop and serve their people then maybe the manager is both the filter that keeps the oil clean and the mechanic that ensures it is regularly topped up and doing its job.

It seems that 2015 is shaping up to be the year of improvement for the SE Leader – and maybe we can rid ourselves of that horrible “Player/Coach” position whilst we are at it!”

The Technical Win : A Worthless Metric?

I have always disliked the concept that Sales Engineers are responsible for winning the technical sale

and gaining the Technical Win. During my pre-MTS career as a presales leader anyone in my organization who spent a lot of time talking about The Technical Win (TW) was generally met with a withering glare and a statement like “Where in your compensation plan does it say that you get paid on the Technical Win?”. It’s an intermediate point in the sales process – at best.

Has the Technical Win become redundant in the modern world of Solution Selling? Ask any group of Sales Engineers to define their job, and the phrase “we’re responsible for winning the technical sale” is mentioned. Many SE organizations measure and publish their Technical Win Rate for RFPs, Proof of Concepts and Trial/Evaluations. This month I will examine the Technical Win (TW) and determine if it is real, if you should care, and what the metric tells you.

 A VP of Sales Engineering at a large software company told me his POC Technical Win rate was 82%, yet the Business Win rate (generating revenue) was only 59%. I asked if his team was directly compensated for a Technical Win. They are not. My point exactly. But you can learn something from the statistics.

The Technical Win

The strict definition of a TW is when you are informed, in writing, that your solution has been accepted and judged superior to that of your competition. For example, you may have scored a 13/14 on a POC evaluation compared to an 11/14 by your competitor.

Most SE organizations have a far looser definition, which may only require you to complete a POC or trial by meeting the success criteria. Acceptance may also come in verbal fashion. Recording of the TW may be as simple as checking a box on a screen in salesforce with no proof. An exasperated Regional VP of Sales based in Hong Kong once told me that in his opinion the TW was the equivalent of not losing – which is very different from winning.

 By contrast, the Business Win is definitive and measurable – as it will result in the generation in revenue flowing from the customer to your company, and eventually, one hopes, into your personal bank account. You are paid to generate business that will cause a purchase order to be issued.

Should You Care About The Technical Win?

Another way of looking at the TW is that it says to everyone that the SE organization did its job and the sales force did not. This is hardly the best way to promote teaming between sales and pre-sales. I have always believed that pre-sales is also responsible for the Business Win, just as sales has some responsibility for the Technical Win.

Given the incredible focus that most organizations currently have on Selling Solutions instead of Selling Products it is hard to rationalize the justification of a Technical Win in that environment. Selling value means that you continually need to link your achievements in a proof, trial or evaluation to not only the technical criteria, but also to the business and financial criteria. Put simply, how does your solution increase revenue; decrease costs or mitigate business risk better than the other guy’s stuff? Technology and Business are inextricably linked.

It is an unpleasant fact (small startups aside) that the TW rate will always be higher than the BW rate. Companies can decide to do nothing, lose or move funding, make an acquisition, change market strategy, fire your internal champion or base their decision upon boardroom or golf course politics. The BW rate can underperform the TW rate by 20 or 30 percentage points.

The most important aspect of the TW versus the BW is why the difference occurs for each specific deal. Should an SE team successfully complete an onsite evaluation, but then generate no revenue because there was no executive sponsor, no budget or no agreement to consider a purchase – then that is a sales execution problem. However, that leaves the SE organization open to charges of execution errors every time they engage in a perfectly teed-up evaluation and lose. It is a two edged sword.

 How To Use The Technical Win Rate

1.      Measure a TW against a tight definition – with proof required from the participating SE team. Which means define your rules for a TW and then stick to them. No cheating or grey areas.

2.      Make TW an internal SE metric, which is never provided to sales unless accompanied by a fully prepared pre-sales executive. Given a statistically valid quantity, breakdown the numbers by geography, vertical, solution area and competitor and monitor the trends for a rolling period equivalent to your average sales cycle.

3.      When presented to sales, position the TW-BW difference as an opportunity to (a) close more deals; (b) highlight competitive or regional trends and (c) operate more efficiently.

4.      Investigate the reverse win. That’s when the SE team loses the TW but your company gains the BW. There are often patterns, especially around executive access or partner utilization, that can yield positive results the next time around.

Summary

When the SE organization is focused upon, and satisfied with, the Technical Win you are doing your company and your bank balance a disservice. It is a useful intermediate metric, and can promote a good discussion at the executive level, but should be selectively applied at a field level. If you are truly focused upon selling value, then look at a Solution Win – which is when both the business and the users accept your solution as being uniquely qualified to solve their problems.

 

Because no one is paid for a Technical Win.

So What Happened To The January Newsletter?

It's late! We're actually going to publish the Mastering Technical Sales Edge next Tuesday - January 13th. But there is a really good reason, and it's worth explaining and it points out the power of making a change.

December 2013 was a crazy busy month for the company, which - coupled with a death in the family - didn't allow a lot of time to enjoy the holidays with my family and celebrate Christmas. It was all too hectic and rushed. So one of my 2014 resolutions was to improve my work/life balance. Now I think I have one of the best jobs in the world, and although I travel a lot (150,000 miles in 2014), I really do get to spend a lot of time with my wife, Allison, and with two of my children. Just not before and during the Christmas of 2013.

I vowed I would do better. And instead of a vague "do better" I made a series of micro-resolutions. (See Book of the Year - Small Move, Big Change for more details). One of them involved not working on certain days or when my wife was off work. Circumstances meant that I spent a lot of wonderful time with friends and family - and didn't write. Hence the late delivery. It's a good reason. The good news is that one of my 2015 micro-resolutions is that I will blog/write at least twice per month. (Instead of saying I will blog more - which means nothing.)

There is already some new content on the website. You'll find my annual list of suggested 2015 New Years Resolutions For the Sales Engineer. (Which also apply for the Year of the Sheep) I'm also going to take another look at The Technical Win which is a term I absolutely hate and think drives a wedge between sales and sales engineers.

During February I'm going to write something up about useful presales metrics and the fallacy of metrics. Books on the list over the next few months include The Power of Habit by Charles Duhigg and Wiser (Making Groups Smarter) by Prof Cass Sunstein. If there are any other books out there you'd like to recommend to me please email or leave a comment.

The Challenger SE Part 2 - Don't Call The Baby Ugly!

The Challenger Sale has really had an impressive impact on the high technology salesforce. More than 50% of my clients have either formally or informally adopted it as an overlay on top of their current sales process. Yet looking back at implementation over the past two years I’ve noticed one persistent problem in both the sales and pre-sales utilization of the “Challenge” – and that is what I now label as “Calling The Baby Ugly”

The Ugly Baby

You would never, ever, tell parents that their baby is ugly. You always look for something positive to say and provide some form of complement. Yet sales and presales alike, emboldened by the Challenger Sale, quickly launch into a description of why a customer’s processes/personnel/strategy/implementation is wrong (i.e. ugly) and then offer to fix this ugliness. Customers have invested their time, money and resources into their current situation and take pride in their work – so a full-frontal attack on the status quo rarely works.

 Customer Reaction – The Three “D’s”

 Sales takes the Challenger Sale and tries to disrupt the customer and their thought process, which can be a very unpleasant experience. You more directly you challenge, the more you need to be 100% accurate and on-point. Customers can react negatively in one of three ways:

1.    Defend – they defend the status quo and why things run the way they do. This is an almost guaranteed way to ensure that “Do Nothing Inc.” gets the deal. Nothing will happen and the harder you try to push your Challenge the stronger the defense will become.

2.    Deny – they will deny that there is a problem. Remember the rule that “it is not a problem until the customer says it is a problem”. Denial and defending tend to go hand in hand.

3.    Destroy – they will destroy your ideas and also destroy your client relationship. There is no upside to following this path.

In all of these cases you need to make a decision how to react when you start to get some pushback or objections – in almost all cases you need to proceed with caution.

Asking Better Questions – The Three Customer “C’s”

 

Companies invest a lot of time and money teaching their salesforce how to ask better questions – the problem is that the customers don’t play along.

1.    Customers rarely follow a script and allow you to follow a pre-determined line of questioning, no matter how well you prepare.

2.    Customers don’t always know what they want. So sometimes that voyage of self-discovery just gets them lost, dazed and confused.

3.    Customers don’t always tell you everything you need to know and you cannot get the whole story. Sometimes that is accidental and sometimes deliberate.

So What Should A Sales Engineer Do?

In Part 1 of this series I explained how customers believe that the SE offers more value than anyone else from the vendor organization and detailed some ways to capitalize on that. The key is to approach the customer with some humility and deference. (Sometimes you have to approach the challenge head-on and directly – possibly with the classic Wall Street Managing Director or the Executive who says you have two minutes – but let’s say for now that is a corner case and not the norm). How do you take this approach?

Step 1 – Will The Customer Listen To Me?

 

Many SE’s use that Trusted Advisor term, which in this case means will the customer listen to, and accept, my advice? We’ve all been in the position when we have given someone really good advice and they have ignored us. If you have that T/A relationship with the customer, life is easier. If you don’t, you are explicitly going to have to ask permission. As an extreme, contrast the Global Account SE who lives and breathes one large client, compared to the inside SE who may deal with 8 clients a day!

 

Step 2 – Asking Permission

 

Customers accept negative news much better when presented in a positive manner. That means keeping the results and outcomes in mind, rather than focusing entirely on the current problems. My preferred approach is to preface the Challenge with a softening or even self-deprecating statement. Set-up examples might be:

“Can I share something with you about how Customer “X” dealt with a similar situation? I’m sure it’s not an exact match as I still have a lot to learn about your company, but I think you’ll find it worthwhile”

“Can I ask you something off the record?”

“I understand the company has a lot of time and effort vested in this current process and its serving you well. Would you be interested in learning about some ideas..”

“How about we take a break, go grab some tea/coffee, as I’d like to run a few ideas by you about alternative ways to..”

Step 3 – Make The Challenge

The challenge needs to be made from a twin basis of success and facts. That means speaking about how other customers have overcome similar obstacles and the results they achieved rather than diving down into the details of all the current issues. You also need to be clued into the non-verbal signals from the customer. Often the best approach is to get them out of a “sales environment” by moving to the cafeteria, or at least closing down the laptop.

The more people you have in the room, especially once you get past five, the lower the probability of Challenge success. That may sound counter-intuitive as you’d think your spark would have a greater chance of catching fire, yet mass psychology takes over and audiences conform to the norm. So the Challenge works better in small groups and one-to-one. Note that Rep + SE versus a single non-executive customer also isn’t a good situation as that also leads to defense.

Step 4 – Support The Challenge

Once the customer opens up to the Challenge, provide specific examples (evidence and impact) and back that up with numbers (usually time, money or headcount). Remember you are trying to spark curiosity and get a “tell me more” response and not trying to close the deal or stun the client with your intelligence!

Summary

 

The introduction of the Challenger Sale presents a great opportunity for the SE team to reassert themselves back into the customer relationship and break away from being a technical resource. There is a crisis in sales right now as reps struggle to cope with the better educated buyer, to ask more insightful questions and to truly provide value , so ….

“Never let a good crisis go to waste..”

-      Rahm Emanuel, Mayor of Chicago

Sales Engineering in Japan

Last month I spent a few days in Fukuoka, Japan and then in Tokyo. During that time I was interviewed by Keiichi Takagi on behalf of ITPro - the biggest online tech magazine in Japan.

They were interested in learning not only about Mastering Technical Sales, but why there was such a market for specialized professional skills training for presales engineers. This kind of training is extremely uncommon in Japan, which is why it generated so much interest.

For my Japanese readers - the native text of the article is here http://itpro.nikkeibp.co.jp/atcl/interview/14/262522/092600039/?ST=selfup&P=1

For everyone else - here is the interview in English/American.

Q: What is the Mastering Technical Sales? How is it difference from others?

Mastering Technical Sales is unique because the role of the Sales Engineer is unique. If you think about the complex technology sale, there is usually an account manager who has the relationship with the customer and discovers a sales opportunity. The salesperson then has to bring someone technical with them to present, demonstrate and generally explain how the product or service actually works and how it will fit into the customer’s environment. That person is known as a Sales Engineer.

There are thousands of companies and thousands of books which claim to train and to optimize the salesforce. They all focus on the quota-carrying salespeople. We focus exclusively on the Sales Engineers who make up between 20 and 35% of a typical high-technology sales organization. It is an growing market and the SEs we work with are always very appreciative of the services we provide.

 

Q: What is the reason you wrote MTS in 2002?

A: It really started back in 1999. As a Sales Engineering leader I was frustrated because there was no specific professional skills training for my SE (Sales Engineer) team – all we had was sales training. I was sitting in a large windowless room in Atlanta, Georgia with my team of 40 SE’s and about 100 salespeople. We had a week of sales process training. It was boring as only about 25% of the content was useful to my staff and I felt we could learn it three faster than the salespeople!

 

I sat in my chair and said “why are we doing this? Someone should write a book about being a Sales Engineer!”. One of my young engineers looked back at me and replied “if you are so smart, who don’t you write one?”  That gave me the idea and I started to write the book the next day.

Q: Then, what is the reason for having revised the book in 2009 and again in 2014? What is the difference between a decade ago and now?

A: Much has changed about the basic SE job, the technology we use and the technology we sell.

First - fifteen years ago, is you know all the technical details of your product and could explain or demo them to technical people – that made you a great SE! Now that is a basic requirement of the role. SE’s are expected to have far more business expertise and to be able to link their technology back to the business benefits. There is now as much attention paid to the “sales” as to the “engineer”.

Second – with the introduction of virtualization, the usage of webcasts and cloud-based solutions I feel the technical side of the job has become a little easier. Virtualization allows an SE organization to create and to package up demo systems which can be easily reused and distributed. Webcasts allow a sales team to be far more responsive to their customers and to handle a multi-national customer base. Many companies now have large teams of “inside SE’s” whose primary role is to discover, qualify and demo over the phone/web. And then the cloud has allowed companies like salesforce to sell SaaS based solutions. Now almost every company has some form of cloud-based system which supports public, private or hybrid cloud hosting.

Finally that cloud base makes things like Proofs Of Concepts and general installations much easier to control for the SE. You can set up a demo system for a customer in a couple of hours, compared to the days or weeks it used to take when you had to go visit the customer on premise with a bunch of CDs, tapes and manuals!

Q: I'm going to ask you to look at the future. Will the role of SE change?

A: The role of the SE is already changing very quickly within the mid to large sized vendor. Smaller single product companies still focus on their technology and the technical advantages that brings to first movers who adopt their “solution”. The larger companies are asking their SE’s to become far more business oriented because that is what their clients want. A few years ago we helped run a survey of almost 1,900 senior level IT executives across the globe. They were asked “what are the skills you value most in a vendors presales team?” The #1 answer was “someone who understand my business”, followed by “#2 - someone I can trust”, ‘#3 - someone who can design innovative solutions with my staff” and “#4 - someone who can clearly and effectively communicate with me”. The #5 answer was “someone with deep technical skills”.

The demand now is for SE’s who can put together the technical skills with the business oriented skills and be able to speak technically to the IT audience and in value terms of revenue, cost and risk to the business and IT leaders. That is a hard profile to develop and even harder to hire in the general market.

 

Q: How about your business? How will you develop MTS for the future?

 

A: Business right now is wonderful. Professional skill development for Sales Engineers is a very underserved market – not just here in Japan, but everywhere in the world. My personal mission is to improve the profession of the presales engineer and to actually start a professional organization for all 250,000 of us in the trade.

We will continue to supply the basic skills every SE needs – through Discovery, Effective Demonstrations and Presentations, Webcasts, White Boarding, Handling Questions, The Executive Connection. I don’t think that will ever change.

We have spent a lot of time over the past 18 months working on some advanced material around “The Trusted Advisor Sales Engineer” – in fact that is the title of my next book. Since customers feel that SE’s contribute more value in the sales process than the Account Manager, we are focusing on the skills a SE needs to become that Trusted Advisor, to the point where we can now measure a “trust score” between an SE and her client.

We are also expanding the reach of MTS. We started in the US, expanded into Europe, and now thanks to our partnership with Up2Speed in Singapore we have a large Asian presence. We can now deliver most of our material in Mandarin, Korean and Japanese (plus Australian!). As an example, last month we ran a couple of white boarding classes here in Tokyo for a client. I saw a video of the session. I cannot speak Japanese, but it was apparent that everyone was enjoying themselves in the class and were learning new skills.

 

Q: How you see Japanese IT companies? Please give us your advice, how SE can contribute in order that a Japanese company survive in global competition.

A: I’m still learning about the Japanese market and culture. This is only my second trip to your country so I still have a lot to learn. I think you can probably teach me more than I can teach you!

That philosophy applies to Japanese SE teams as well – there is a lot they can learn from other parts of the global SE organization, and there is a lot the global SE teams can learn from Japan. As they say in the USA – you need to “share your toys”. Over the years I have seen some great ideas and tools developed within Japan – like custom demonstrations, great competitive ideas and partner enablement. I’m also learning as I conduct more research about the Trusted Advisor” that it is a well-developed concept here in Japan, perhaps more than in any other part of the world.

I think everyone needs to be more willing to share, and that is one of the advantages of being an SE – in that we tend to share far more than salespeople or development teams ever will.

Q: John, any final thoughts for us?

A:  Yes. I have two for you. First I just have to say how excited we are about the Japanese market and the opportunity to work with the entire Japanese SE community. Turing the role of the SE from a job to a profession is important to me. Secondly, (and this isn’t a very Japanese thing to do), is to encourage every SE out there to understand that they are a very valuable part of the sales process and that they “own the account” as much as the salesperson does. Don’t just sit by the phone or wait for your inbox to light up with a task and be reactive to what the salesperson wants – make your own contacts and network within the customer!

Good luck and good selling!