In their 2015 report, 'Predictive Analytics Are Transforming B2B Selling', Gartner analysts stated "during the past four years, predictive analytics technologies have emerged as viable options for IT leaders and B2B sales leaders." However, among the crowded field of all the new types of sales technologies now available, predictive analytics tools have been vying to establish what makes them different and why they are crucial to fast-growing companies of all sizes.
How does predictive analytics for sales work?
The first thing you should know is that predictive analytics is not the same as big data and is definitely not the same thing as magic. Predictive analytics solutions for sales teams work by using algorithms to study the data about your sales process and performance. For sales teams, that means understanding sales cycle times, deal sizes, contract prices, pipeline movement, close rates, and other sales related activities in order to give sales teams a better understanding of how they will perform in the future. These systems do not predict the future, they just calculate a possible set of outcomes. So, naturally, some solutions will be better at predicting outcomes than others.
Why does my sales team need a predictive analytics solution?
In Mckinsey's report on 'The Secret of High Growth Companies', they found that "even among fast-growing companies, only just over half—53 percent—claim to be moderately or extremely effective in using analytics to make decisions." These solutions are becoming more of an essential tool in a sales team's arsenal as the tools become more sophisticated in their ability to accurately evaluate and provide insights about sales rep's performance. Gartner's Hype Cycle report says that "[predictive analytics solutions] have a high benefit rating because current clients cite improvements in deal closure rates, forecast accuracy, renewal rates, pipeline growth and revenue growth." The data naturally generated by an adhered to sales process is being wasted if it is not easily digested and used to develop a stronger selling strategy.
What can I expect my return to be with predictive analytics solution?
You can immediately expect to have a leg up on the competitors that do not use predictive analytics solutions. Since the benefits of having a predictive analytics solution only increase the longer you take advantage of its capabilities, the advantage you'll gain against your competitors will only compound. Mckinsey's report found that "companies that use [predictive analytics solutions] extensively see profit improvements 126 percent higher than competitors who don’t." Overall, Mckinsey found, the most prominent return for investing in predictive analytics solutions is "[the] use of sophisticated analytics to decide not only what the best opportunities are but also which ones will help minimize risk."
What else should I be looking for when choosing a predictive analytics solution for my sales team?
This is probably the most important question. Predictive analytics solutions are available in pretty much every facet of sales operations and management and not all predictive analytics solutions are created equal. Some things that you should be looking for in the solution you choose (past the obviously reasonable price tag) are: 1) their commitment to 'time-to-value', 2) their focus on your historical data as the foundation for the analytics, and 3) prescriptive capabilities.
As supported by Gartner's Hype Cycle report, predictive analytics solutions should not be arduous projects for your sales operations team to integrate or maintain. Also, while there is some value in looking into external data when shopping for the predictive analytics solution for your sales team you should consider the Hype Cycle's advice and ensure the provider believes that "your most reliable data source will be your historical opportunity data." Lastly, while predictive analytics solutions give you performance projections based on your historical data, to get the tangible insight on how to improve performance, you'll need your solution to also have prescriptive capabilities. Solutions with prescriptive capabilities can be thought of as having an automated sales coach. Solutions with prescriptive capabilities not only identify, highlight, and project trends in your data but they also provide actionable feedback into how to improve sales performance. Currently, not many solutions have this prescriptive component, but as Gartner points out many vendors now have this in their product roadmaps.