Flattening the “Hockey Stick”

Flattening the “Hockey Stick”:from Strategic Sales Training - QBS Research, Inc. by QBS Research, Inc.
One of the challenges many sales organizations face these days is the spike in revenue (i.e. hockey stick pattern) that develops at the end of a fiscal quarter. This phenomenon occurs in response to the pressures of Wall Street, which drives companies and salespeople to pull in every piece of business they can to meet quarterly sales goals. As a result, lucrative discounts are dangled in front of prospective customers to entice them to move forward with a purchase. Of course, after quarter-end passes and the special discounts go away, sales slow down again until this spike recurs at the end of next quarter.
Quarterly spikes in sales pose significant challenges for the revenue side of a business. They jeopardize the accuracy of the revenue forecast and increase the risk of missing the company’s sales projections. A quarterly spike in revenue is also problematic for the operations side of the business. To stay ahead of demand, companies either need to be able to accurately predict how much product to manufacture or risk potential delivery problems when the sales backlog exceeds production.
While I was always focused on achieving my sales goals by the end of each quarter, my employer wanted us to flatten this hockey stick pattern. They wanted the revenue, but they did not want the sales organization to wait until the end of the quarter to close business. Therefore, in an attempt to achieve consistency throughout the quarter, I stopped trying to entice potential buyers with quarter-end discounts and instead changed my approach.
Here’s what I’d do. For deals that have a legitimate chance of closing by the end of a fiscal quarter, I approached the customer (in advance) and say, “Mr. Prospect, we are very interested in earning your business. But since Wall Street closely watches our company very closel, we would also like to meet or exceed analyst’s expectations for the quarter. Therefore, we would much rather consummate a sales transaction on March 31^st, than April 1^st. We don’t want to push you into anything, but we would like to offer an additional discount or incentive that makes a March transaction mutually beneficial. The question is, does it make sense for us to have a more specific conversation about the possibility of wrapping this sale up in March?”
This positioning will intrigue most customers enough to ask, “What’s the incentive?” Although theirs is a legitimate question, now is not the time to get into specifics about the special offer. Your objective here is not to propose a discount, at least not yet. You are simply conveying that your company is interested in pulling business into the current quarter and you want to know if it makes sense to pursue a more in-depth discussion. If they indicate that an end-of-quarter transaction is indeed possible, then I set up a meeting where we can sit down and discuss possible incentives. If they push you to tell them the incentive up front, you say, “I don’t know what we can offer. I haven’t yet gone to management on your behalf. At this point, I just wanted to know if you were close enough to make a decision to warrant the conversation.” If a decision is close, your prospect will want to see your offer. This creates a window of opportunity for you to package and propose an incentive that will make a March transaction mutually beneficial.
Talk Dollar Discounts, Not Percentages
When offering special incentives, I encourage salespeople to stay away from percentage discounts. Percentages usually are non impactful. So many companies out there are offering such steep discounts (all the way up to 70% off), that if you are not prepared to offer an additional 30%, 40%, or 50% off, your percentage discount will likely sound small and insignificant to someone who is constantly hearing about larger discount percentages.
In fact, I never talk percentage discounts. Instead, I put any special incentives I plan to offer in hard dollar terms. This gives your discounts more teeth by making them sound like better incentives. When I want to wrap up a quarter-end deal, for example, I might say, “Mr. Prospect, when we last talked, I asked if it would make sense to offer you a special incentive to move forward with a decision this quarter.” With my revised quote in hand, I would then add, “If you are ready to move forward with a purchase, we would be willing to discount your cost by an additional $4,500. Essentially, it’s worth $4,500 for us to book your order on March 31^st, as opposed to April 1st.”
I also say the following as a disclaimer. “Mr. Prospect, this incentive is not intended to pressure you in any way. We merely want to offer those customers who are ready to make a decision a mutual incentive to pull the trigger one day sooner.” Taking the pressure off with a softer approach is almost always more productive. We’ll talk more about this later.
This positioning also protects sellers against having their prospects come back in a month asking for the same special discount. This happens a lot to those sellers in corporate sales who just slash and hope. Offering a specific discount for a specific reason, however, puts you in a strong position to explain to prospects that the discount was offered as an incentive to book the business in March, and there is unfortunately no way to go backward in time.
Pulling Deals Forward into Months One and Two
After offering special incentives at the end of a quarter, and wrapping up their deals, sellers are often left with a skimpy forecast. Of course, buyers have learned to hold off another three months knowing that the best deals won’t come until the end of next quarter. As a result of this built-in buying cycle, the hockey stick pattern becomes a self-fulfilling prophecy. Fortunately for sellers, the same strategy we used for closing deals at quarter-end can also be used to pull deals up into the first two months of the current quarter.
For those customers who were not ready to have a conversation about moving forward with a purchase at the end of last quarter, don’t offer a special incentive at the end of the quarter. Why bother if they’re not ready? Instead, I wait until the deal begins to ripen, say on April 17th. At that point, I approach prospects saying, “We are very interested in earning your business. But one thing my company is trying to prevent is the traditional hockey stick spike in revenue that occurs at the end of every fiscal quarter. Essentially, we would like to pull deals forward in the quarter—into months one and two. Therefore, we would like to see if it makes sense to explore opportunities that would create a mutual incentive to consummate this sale earlier in the quarter rather than waiting until the end of June?”
I would recommend against offering customers a special incentive in December, and then if they don’t move forward with a purchase, showing up again in January. I addressed this issue earlier by making the point that I only offer special incentives if there is a legitimate chance that the sales will close within the targeted timeframe.
The hidden beauty of this technique is that it gives salespeople many more milestones (twelve month-ends) for closing sales. Most of your competitors will only be offering special deals four times per year. You, on the other hand, can craft all kinds of scenarios that will accelerate your customer’s timeframe and satisfy your objectives for pulling revenue forward into October and November, instead of waiting until the last week of the fiscal year.