Filed under: Implementation September 29, 2010

yellow_star

A comparison of Salesforce.com’s Lead and Opportunity records offers some insights into salesforce strategy and implementation.

Lead vs. Opportunity Definitions

Salesforce.com distinguishes between a Lead and an Opportunity. As a flexible system, it is up to each customer to determine what each means to their business. However, for the purposes of this analysis we have assumed the following definitions.

A Lead is a prospect that has not done business with your company before. If it is likely to become a customer, the prospect is then converted to an Account, Contact, and Opportunity. In terms of a process, a Lead goes through a qualification step and then becomes an Opportunity which in turn tracks the prospect through to a closed deal. In the conversion process, Account and Contact data are separated in order to define relationships between Account, Contact, and Opportunity. For example, an Account can have many Contacts.

Table 1: Lead – Opportunity Matrix
# Successful Opportunities
High Low
#
F
r
e
s
h

L
e
a
d
s

H
i
g
h
Star Question
Mark
L
o
w
Cash
Cow
Dog

Another way to think about Leads versus Opportunities is that Leads are your big list of strangers you met at trade shows and deserve to be somewhat organized. Opportunities, on the other hand, are your narrowed list of prospective deals that deserve to be well organized and are no longer strangers.

Lead vs. Opportunity Matrix

Given these definitions, a strategic analysis of a company can be performed including deriving a salesforce strategy to improve sales. Salesforce.com features can then be implemented to support the salesforce strategy.

The key to this salesforce strategic analysis is in Table 1 which shows a Lead versus Opportunity matrix. The left side is the number of fresh Leads. “Fresh” does need to be defined relative to the company’s business. A prospect that shows up multiple times in the Lead list is not necessarily a duplicate. Across the top is the number of successful Opportunities. “Successful” is important because starting lots of Opportunities can be trivial. Closing them out successfully is the salesperson’s job.

The intersections or quadrants created by the two dimensions then characterizes the company. For example, a company with a high number of Leads and a high number of Opportunities would be a Star. The characterization of Star, Question Mark, Cash Cow, and Dog are borrowed from the Growth-Share Matrix developed by the business strategy consulting firm, Boston Consulting Group (BCG). Their matrix dealt with market share, market growth, investment, and returns. These characterizations were borrowed because they seem to fit, but this analysis is not the same as the Growth-Share Matrix.

The following will discuss each quadrant and offer suggestions of Salesforce.com features that could be used in a salesforce strategy to improve sales.

Question Mark

A Question Mark company has a high number of Leads but a low number of Opportunities. It is characterized that way because one wonders why so few Leads are being converted to successful Opportunities.

Some industries may simply have lots of prospects initially interested to purchase a product, but very few actually become customers. An example might be high-end sports cars. Many people may sign up for Maserati literature to be sent to them, but very few will actually purchase one.

Another possibility, however, is that there is a poor sales process. The Sales Process feature in Salesforce.com allows a process to be defined, measured, and improved. It has several capabilities:

  1. Opportunity Stages can be customized to fit a particular process. Multiple processes can be defined to serve multiple business lines as well.
  2. Stages have the probability that an Opportunity will be successfully closed linked to them. This facilitates generating sales forecasts. For example, a $5000 Opportunity in the Quote stage has a 75% chance of being closed successfully. Therefore, the forecasted expected value is $3,750.
  3. Reporting on the field can help identify bottlenecks.

Salesforce.com allows a sales manager to manage the Sales Process and thus improve the number of successful Opportunities.

Dog

A Dog company has few Leads and few Opportunities. This characterization is intended to have an emotional impact. However, there are optimistic reasons for this situation. Perhaps the company or product line is new and has not built up lots of Leads and Opportunities.

As mentioned previously, the Sales Process in Salesforce.com can help improve the conversion rate of the few Leads that do exist.

In addition, the Web To Lead feature can capture additional Leads. Web To Lead is a web form that can be placed on a company’s website and will automatically create Salesforce.com Lead records when a prospect enters information. Many times this is called a “Contact Us” page. The form can be styled to match the corporate presence.

Also, Salesforce.com can be used for moderate sized mass mailings. This includes the use of customized HTML email templates.

Salesforce.com Partners can also help find new Leads as well as handle larger volume mailings. Some offer user friendly tools to create email templates. Many have also taken steps to ensure only legitimate use of their service and thus avoid being associated with illegitimate uses.

Cash Cow

A Cash Cow company has few Leads but many successful Opportunities. This is because they are harvesting their existing customers for continuing business. The number of Leads could be low because the market is defined by a fixed number of players.

Your existing customers are stored as Accounts and Contacts in Salesforce.com.  Recall from the definitions that when they were first sold something, they started off as Leads and then were converted to Accounts, Contacts, and Opportunities and became customers. In addition, some Opportunities failed and not all Accounts and Contacts became customers, but they are valuable since time was put into them as good chances of becoming customers.

Salesforce.com uses Campaigns to market to existing Contacts.  For example, a sales team needs to contact a group of existing Contacts about a new service. Instead of creating Lead records for them, the Contacts are put together into a Campaign.  Campaigns allow Contacts to look like Lead records, but are already tied to Accounts and any past Opportunities they have had. Any promising Contacts can then be assigned to new Opportunities. (Leads may also be included in Campaigns, but that is not relevant for this scenario.)

It is also feasible to simply create new Opportunities with a first Stage as “Prospecting.” However, this can lead to a lot of Opportunities that do not go anywhere. Recall that Opportunities are your narrow list of good prospects. Campaigns can help keep the Opportunities list focussed.

Stars

A Star company has many fresh Leads and many successful Opportunities. The Opportunities are probably a combination of converted Leads and created from existing Accounts and Contacts. This is a company in its prime of life.

Efficiency is probably one of the main benefits Salesforce.com can provide. Workflow Rules and Actions are one of Salesforce.com’s most powerful features. It allows a set of criteria to be defined that automatically launch one or more actions. Actions include updating other fields, sending an email, communicating with another system, and assign tasks for people to perform. For example, when an Opportunity reaches the “Quote” Stage, the system could update a Close Date field, send an email to the VP, tell the accounting system to create a quote, and assign a reminder task to follow up in two days.

Lifecycle

The four quadrants can be examined separately, but together, they might also indicate a generalized lifecycle for a company. A company can start out as a Dog with few Leads and Opportunities. In can then strive to become at least a Question Mark by generating a lot of Leads indicating that there is a market. The company can then move into its prime by converting lots of Leads into successful Opportunities. As the market becomes saturated, the company moves into Cash Cow mode making deals with existing customers. In order to expand, the company should then start looking for new markets and start off as a Dog again. The new Dog stage would hopefully be shorter by leveraging the existing database.

Salesforce.com has features that can assist a company in any quadrant and on its trip through all the quadrants.

Criticism

The Lead-Opportunity Matrix and the Growth-Share BCG Matrix share a common criticism. They are both making assumptions about the success of the companies or sales organizations based on two factors. Clearly there are many more factors that determine success. However, as strategy, the goal is to simplify the problem so that it can be analyzed and then help set direction.

An additional criticism would be that Star, Cash Cow, Dog, and Question Mark might not be the most appropriate characterizations. They were selected, though, to provide images that could be remembered. The quadrants could have been labeled with roman numerals (e.g., I, II, III, IV) but those would hardly be memorable.

Summary

The Lead-Opportunity Matrix provides a framework to help define salesforce strategy. In two dimensions, it provides four quadrants that a company can find itself in. Each quadrant then has opportunities for improvement. Finally, Salesforce.com has features to assist in the salesforce strategy regardless of which quadrant a company is in.

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