When Higher Conversion Equals Lower Sales
There’s an assumption that underpins the design and management of most sales processes: that conversion is the primary driver of sales. But this assumption is erroneous. In most sales processes, "opportunity" volume is the primary driver, not conversion. It’s quite easy to see why.
Imagine that a typical salesperson processes about 10 opportunities a month. Now assume that this salesperson wins 50% of those opportunities. Consider how much potential there is for this person to increase sales by improving conversion. Perhaps, with significant effort, this person could increase conversion rates by a percentage point or two. Let’s be generous and assume 10 points. That means this salesperson is generating six sales a month.
Now, consider the potential to increase sales by improving opportunity flow. If this person divests of low-yielding activities and dedicates his or her time to business-development appointments, processing 10 times the volume of sales opportunities each month will be easy. That’s 100, if you’re still counting.
So, opportunity flow should have primacy over conversion. Or, to express the relationship in "theory of constraints" terms, opportunity flow is the goal and conversion a necessary condition.
But the relationship between conversion and sales is even more complex than this. The reality is that a small increase in conversion is likely to actually come at the expense of a huge decrease in opportunity flow. The traditional approach to conversion improvement is for the salesperson to assume responsibility for more and more activities. The salesperson schedules and conducts every appointment; prepares every document; designs the solution; walks the client’s job through production; supervises implementation; and even manages the account on an ongoing basis.
Obviously, as the salesperson assumes responsibility for an increasing activity load, more and more of their capacity becomes unavailable for business-development activities.
It’s not just that the activities themselves consume the salesperson’s time; the fact that the salesperson has to synchronize numerous disparate tasks across multiple opportunities adds a significant overhead (one of the evils of multitasking).
So the relationship between conversion and opportunity flow is non-linear. An incremental increase in conversion will result in a geometric decrease in opportunity flow, which is all the more reason to shift your focus from maximizing conversion to maximizing opportunity flow.
Justin Roff Marsh President Ballistix Chicago