Study shows new business development needs attention

By Published on .

Most Popular
Companies are missing out on potential revenue growth as a result of mismanaged new business development practices, according to a joint study by the Chief Marketing Officer Council and the Business Performance Management Forum.

The study, "Gauging the Cost of What's Lost," was sponsored by Wendover Consulting and was based on online survey responses from 722 decision-makers at U.S. companies. Forty-seven percent of the respondents had the title of CEO, CFO, COO or group executive.

One of the key findings from the study was the high level of dissatisfaction among survey respondents with the processes at their companies for developing new business.

While 66.4% of respondents said customer acquisition was "very important" to the growth of their business, 43.6% said they were dissatisfied with the way their company generates new business.

"Despite the fact that dollars are being reallocated to lead-generation activities, we are not seeing the conversion of prospects into revenue opportunities," said Donovan Neale-May, executive director of the CMO Council and founder of the BPM Forum.

The survey found that 55.9% of respondents said their companies convert less than 10% of their business prospects into deals; 20.1% said they convert between 10% and 20% of prospects into deals; and 22.9% reported a conversion rate of more than 20%.

Only 5.1% of respondents said they were satisfied with their company's conversion rate, while 21.2% were not satisfied at all. The rest fell in between.

More than half (53.4%) of respondents said their company has no formal process for generating, qualifying, clarifying and validating new business opportunities.

"Prospect processing has to be improved," Neale-May said. "There are not proper systems, methodologies and processes in place to take the increasing number of prospects coming into organizations and put them into qualified channels of conversions."

When asked how much incremental revenue could be added to their company's bottom line if business development and prospect harvesting practices were improved, 37.3% of respondents said more than 20%; 23.5% of respondents said between 15% and 20%; 19.1% said between 5% and 10%; and 11.4% said less than 5%.

The survey also asked respondents to rate the relationship between sales and marketing departments at their companies and how effectively they work together.

While 52.9% of respondents said the sales and marketing functions at their organizations have a close and collaborative relationship, only 7% said the two groups work together very effectively to harvest business prospects.

"The sales guys only want to take the leads they know they can close," Neale-May said.

"They say marketing doesn't deliver quality leads. The credit is never given to marketing."

In response to the question, "How often does sales complain about the quality of leads from marketing," 22.7% of respondents said a few times a month, 18.5% said quarterly, 9.8% said weekly and 4.5% said daily.

However, Donald MacDonald, VP at researcher IDC, disagreed with the adversarial picture presented by the CMO/BPM report.

"I believe that sales and marketing organizations work more closely than the study suggests," he said, pointing to a survey of 26 senior sales executives he recently completed.

"I found, in contrast, that sales executives took primary responsibility for generating leads, and not one of them indicated they had a problem with their marketing organization," MacDonald said.

The IDC survey, "The Sales Executive Challenge: Sales Productivity and Solution Selling at Odds," was published in October.

It found the greatest challenge for sales executives was converting strategy to a go-to-market plan (23%), followed by alignment with the rest of the company and market (20%) and selling solutions (16%).

"What has really changed is the notion of solution selling," MacDonald said. "If you are only out there selling products or one-off offerings, you could become more narrowly focused on what sales and marketing are doing."

"Customers today are demanding that companies offer solutions," he added. "If you start the discussion using the voice of the customer, then the notion of an adversarial relationship between sales and marketing immediately goes away."

IDC's Sales Executive Service recommends a model it calls R.E.P.S. (revenue, expenses, productivity and stakeholders) to improve sales productivity.

Using these salescentric performance metrics, companies can better understand and evaluate the effectiveness of sales performance, MacDonald said. 

In this article: