The Sales Development Team: A Proven Framework for Success
Sales development is one of the most important processes an organization can build to deliver a seamless, efficient revenue machine. Sales development is a phone-based team that identifies, connects with, and qualifies leads. When a lead is qualified, they then pass the qualified lead to a sales person who takes over for the rest of the sales process. From Marketo’s Definitive Guide to Sales Lead Qualification and Sales Development: “Put simply, SDRs (Sales Development Reps) pass the baton between marketing and sales.”
In this post, we want to explore best practices for designing, building, and optimizing a sales development team.
The Case for Sales Development
To start, we need to understand why sales development is critical to the health of your revenue machine. There are eight compelling reasons to build a sales development organization.
1. Connecting with prospects requires time and resources
To understand how much effort it takes to reach a prospect by phone, look at these numbers provided by the demand generation firm Vorsight:
- Dials-to-connects – It takes 12.73 dials to get a connect when calling a list of prospects with direct phone numbers and 18.83 when calling switchboard numbers.
- Dials to Conversation – 22.5 dials to meaningful conversation is the industry average, but if you’re calling highly solicited divisions, such as IT or marketing, or very senior executives the number is closer to 30 dials to 1 conversation.
- Conversation to Appointment – 3 meaningful conversations are required to get 1 appointment.
To sum it up: it can take 60-90 dials to get an appointment with a prospect which is not an efficient use of a quota-carrying sales person’s time.
2. A fast, standardized lead follow-up process is the key to conversion
If we continue to use the numbers provided by Vorsight in bullet #1, then you can also assume that it takes more than 12 touches to reach an individual prospect. Furthermore, Sales Benchmark Index research finds that 70% of buyers prefer to work digitally. In other words, a sales person will not only have to make a lot of dials, but will also need to incorporate email and potentially social touches. As a matter of fact, we have found that combining digital touches with the phone generates higher touch-to-connect conversion rates. Quota-carrying sales reps do not have the bandwidth to manage the multi-channel campaign necessary to reach leads.
Another factor to consider is your lead response time. The following chart from Velocify (formerly Leads360) highlights the challenge and opportunity presented by response rates. The faster you respond to an inbound lead, the higher the conversion. At the end of day, a quota-carrying sales person who is responsible for the other 70% of a sales cycle for multiple deals cannot feasibly meet the required follow-up rates.
3. Converting a lead to an opportunity requires its own playbook and subsequent training and coaching
Sales development is fundamentally different than the rest of the sales cycle. The science of connecting with someone is hard enough, but when you connect, you have a few seconds to generate interest and a couple minutes to handle objections and close for a meeting. Effective sales development requires full-time management, specific training, and constant coaching.
4. Sales Development means a higher lead to opportunity conversion
Converting a lead takes time and effort. The best revenue machines have a sales development group to reach leads, overcome objections, make sure they are a fit, and get them connected to sales teams. From 2005-2011, the principals of TOPO founded and operated a company called Tippit. At Tippit we would use a variety of digital marketing tactics to generate leads for 100s of clients. When we looked across all our clients, the organizations with sales development teams converted leads to opportunities at an exponentially higher rate than those that did not. For example, we had two technology clients who sold competitive solutions to the same type of buyer. The company with an optimized sales development converted these leads at 40%. The other organization passed leads directly to quota-carrying sales reps and converted leads at less than 5%.
5. Marketing and contact data is vastly improved with sales development
Marketing can only optimize programs if they have the data they need to be successful. Sales reps are notoriously bad at maintaining good data and sales leadership cares about sales forecast data (with good reason). On the other hand, well managed sales development teams are remarkably good at providing data. Sales development teams literally “live” in the CRM application all day and are incented to get good data to marketing to make their lives easier.
6. Sales and marketing alignment
The biggest grievance from marketing is the fact that sales doesn’t follow up on their leads. Meanwhile the single biggest complaint from sales is that marketing leads are terrible. Sales development teams help bridge the gap between sales and marketing. When managed correctly, sales development solves lead follow-up issues. As for the issue of marketing’s leads “sucking”, this problem often happens when unqualified leads are sent directly to quota-carrying sales reps. The truth is that the vast majority of leads do “suck”. A very good conversion rate is 30% from lead-to-opportunity which means that 70% of the leads contacted won’t turn into anything. Quota-carrying sales reps don’t have the time to expend the effort needed to reach these leads only to find that 70% will turn into nothing. Sales development solves this problem by sending sales only qualified leads ready to talk.
7. Increased productivity and efficiency from quota-carrying sales reps = more revenue
Sales reps are expensive resources that you pay to close business – you have to free up their time to focus on the effort needed to achieve their goals. A great quota-carrying sales person is spending the majority of their day working the rest of the sales cycle: pitching, proposing, negotiating, trying to get buyers back on the phone, meeting with internal stakeholders, etc… We increase the odds of closing more business by allowing sales to begin their sales process with qualified leads who are ready to speak to sales.
The Marketo Definitive Guide to Leads Qualification and Sales Development provides compelling data highlighting the benefits of sales development to sales reps including a:
- 5% increase in selling time that can yield a 20% increase in revenue;
- 1% increase in pipeline value that can yield a 25% increase in revenue; and
- 15% decrease in sales cycle length that can yield a 30% increase in revenue.
8. Your buyer wants you to follow-up
In our research, we will often find buyers who filled out forms on vendor websites and then will actually complain that “no one followed up with them.” When we look at the data, the vendor actually had followed up. The problem was the sales rep sent one unremarkable email as “follow-up” and never reached back out. Believe it or not, well messaged, thoughtful yet persistent follow-up is part of a great buying experience. Buyers are extremely busy. They aren’t always ignoring your phone calls because they aren’t interested. Recently, I finally connected with a prospect I had been calling and emailing for three weeks who said: “Thanks for staying on top of this, I have been meaning to get back to you.”
A couple years ago I listened to a panel that featured IT leaders talking about what they expected from sales people. Andrew Baker, at the time a Director of IT Operations, said: “I want you to qualify me well so we both know whether we are wasting each other’s time. If it’s something relevant to me, I will want to know about it.” Some people may find this surprising, but proper qualification is actually an important point in the buying experience.
Designing the Sales Development Organization
The case for sales development is extremely compelling. The next step is to build your SDR function. This involves specifying your qualified definition, organizational design, compensation guidelines, training and enablement, metrics, and technology.
The importance of the qualified lead definition
We mention the qualified lead definition first because it’s what defines the success of an SDR team. Once you define a qualified lead, you can build the team, processes, methodology to deliver on a quota for qualified leads. The qualified lead definition is the point at which marketing is ready to hand a lead to sales. Once a qualified lead has been specifically defined, then sales must sign off and agree to follow up. The important factors for a qualified lead definition include:
Demographic qualifiers – demographic qualifiers need to be very specific and can include:
- Company variables – these include company size, industry, geography.
- The contact’s role – emphasize what the person does, as opposed to their title.
Behavioral qualifiers – behavioral qualifiers depend on your target market. For some companies, there is a large quantity of leads and SDRs act as gatekeepers trying to only send sales the very best ones. For other organizations where there is not as much lead flow, sales will accept anyone who fits the demographic qualifiers and is willing to take a meeting with sales. Here are some examples of common behavioral qualifiers:
- Willing to meet with sales – this is a mandatory requirement and we recommend the definition states that the meeting between the prospect and sales must happen to be defined as a qualified lead.
- Pain and need – does the prospect have a problem your product or service can solve?
- Timing – is there enough urgency that the buyer is willing work on this right now?
- Budget – most sales development processes have moved away from asking about budget on the first call and qualify leads on demographic qualifiers, need, timing, and a willingness to meet.
Depending on your company’s target market, you may want to create two lead definitions. For example, sales development groups generating demand from a constrained list of companies such as the Fortune 1000 or specific industries may want to pass leads to sales based on the following parameters: right company, right role, and willingness to meet with sales. Sales operations expert Lars Nilsson calls these leads “meaningful interactions” or MI’s.
Whatever definition is right for your business, the qualified lead definition is the first step to success and the number one factor in sales and marketing alignment.
Sales development organizational design
There are three critical factors to consider when designing the sales development organization: the number of SDRs, lead assignment, and management structure.
The number of SDRs – The best way to determine the number of SDRs needed is to decide on your ratio of SDRs to sales reps. We believe the optimal number is 1 SDR to 3 sales reps. The lowest ratio we recommend is 1:2 and the highest ratio is 1:5. The ratio of 1:5 (or more) typically fails because sales reps won’t get a meaningful number of qualified leads and the program struggles to get wide-spread support. The other factor to consider is to determine the number of raw leads an SDR can handle in a month and still be able to perform the required number of touches. The typical number of inbound leads an SDR can handle is 200-500, depending on the level of qualification.
Lead assignment – There are a number of models to consider when segmenting the SDR team. The most important thing to consider in designing your SDR lead assignments is conversion. Answer the question: “How will set up our team to optimize for conversion?” Here are some models to consider:
- Random assignment – Leads are randomly assigned to SDRs.
- First-come/first serve – Leads will be assigned to a queue where SDRs are can pick them up to follow-up on.
- Sales rep alignment – SDRs are teamed with quota-carrying sales reps and only work on leads in their territory. The territories can be geographic or industry-specific depending on your sales process.
- Inbound versus outbound – In this scenario, the team is split between SDRs who qualify only inbound leads and SDRs that are responsible for outbound prospecting.
- Buyer persona type – SDRs might be assigned to leads by company size such as SMB, mid-market, or enterprise.
When you decide on your lead assignment rules, make sure you have the proper time zone coverage. For example, if your sales development team is based on the west coast, then you will want to have SDRs on the phones at 6AM.
Management – Experienced, dedicated sales development management is absolutely essential to the success of the team. While you may require a manager/contributor in the early days of the group, there must be a dedicated manager in place once there are three or more SDRs. The biggest mistake organizations make is to have the SDRs report to a VP of Sales or Marketing who has other duties. SDRs require coaching and management. As you will see in the training section of this post, we believe that SDRs should receive at least 6 hours of coaching per month. In order to achieve this goal, there needs to be a manager and the SDR:Manager ratioshould not exceed 8:1.
Ownership – According to research from Bridge Group Inc, 70% of sales development teams reported to sales in 2012. We prefer marketing to own sales development because we want marketing to be responsible for delivering the highest quality leads possible. This keeps the sales organization wholly focused on closing business. That being said, we support sales development reporting to sales as well. The most important factor is that the sales development team is well-managed, supported, and focused on identifying and qualifying leads, no matter who owns it.
Insourcing versus outsourcing – While the vast majority of information in this post is used to build internal teams, we still support outsourced sales development. Many companies don’t want to deal with the hiring, headcount, management, and training challenges of an internal group. The two most important factors are that a sales development function exists and that there is an internal owner who owns the success of the program. An unmanaged process whether insourced or outsourced will fail.
According to Bridge Group Inc’s research, the average sales development rep earns roughly $47,000 in base and $71,600 in total comp. These numbers can be lower or higher based on location or target market. For example, in Silicon Valley, SDRs with significant experience calling enterprise accounts and decision makers can make over $100K in annual target compensation. Another factor is inbound versus outbound. If 100% of the leads are inbound, then the SDRs will typically make less.
We typically recommend a 50/50 or 60/40 split between base and compensation. Compensation should be based on the number of qualified leads generated per month (not quarterly or annually). As a matter of fact, performance accelerators should be monthly. For example, if the monthly quota is 10 qualified and the SDR delivers 12 QLs, then the SDR should paid the accelerator on the extra two leads.
According to Bridge Group Inc’s research, 53% of organizations use closed won/revenue to compensate their SDRs. We believe SDRs should be compensated only for generating qualified leads. Their compensation should not rely on the effectiveness of the sales team. A good middle ground is to offer a bonus on closed deals. Lars Nilsson recommends a 1% bonus on closed-won deals that are generated from qualified leads passed by an SDR.
Training, onboarding, and coaching
SDR training is often the missing link for the success of an SDR team. Many teams don’t train their SDRs at all and others put the SDRs through standard sales and product training. While product training is important, it is actually NOT the most important part of SDR training. There are some key training components critical to an SDR’s success:
- The buyer and the buying experience – Every SDR needs to be trained on their target buyer and how they buy. Then they need training on how to identify where the buyer is in the buying experience so they can determine whether the prospect is ready to be passed to sales.
- Situational plays – You should train the team on a sequential set of plays that inside sales reps should execute based on the buyer and what the buyer says on the phone call.
- Objection handling – The objections a quota-carrying sales rep faces are not the same as the objections an SDR faces. Sales typically deals with feature, price, and other sales cycle objections. SDRs are trying to convince a buyer to agree to time with a quota-carrying sales rep. The prospect has never met the SDR or in some cases they have never heard of the SDR’s company. They will face objections like “not interested” or “we already have XXX product” and have to be to turn these objections into a meeting.
- Messaging sound bytes – Sales development doesn’t get to use a powerpoint to explain products and solutions. They have 2-5 minutes to generate interest and turn the prospect into a qualified lead. They need compelling, concise sound bytes for the value proposition (they should be able to describe your company and why you are different in under 30 seconds) and for your solutions and products.
- Communications training (voicemail, email, live call) – The SDRs day-to-day life is voicemail, email, and live calls so you want to train them on what to say and when to say it. SDRs can customize the messages so they feel comfortable, but they should have a guide that is built on the proven best practices and fundamentals necessary to be successful.
- Automation and tools – SDRs should be trained on how and when to use automation and tools. This process includes sitting down with them and providing one-on-one tutoring.
- Closing techniques and scenarios – Closing is not just for revenue-generating sales reps, but also for SDRs. The difference is SDRs need to be trained to close a prospect on an appointment or meeting.
Training should end up in an easy-to-read playbook that SDRs can reference later. Another great best practice is to have new SDRs listen to experienced ones on live calls. When onboarding SDRs, you should require at least 8 hours of call monitoring.
Coaching is on-going instruction provided to sales development reps in both group sessions and one-on-ones. We recommend 5-6 hours per month of coaching per SDR. Call monitoring (listening to calls on a splitter) is one of the best ways to coach SDRs. Many SDRs are initially uncomfortable with this practice, but when you can add enough value they start to appreciate it. Even the most experienced SDRs want coaching. I once worked with an SDR who had 35 years of sales experience and was a VP of Sales for IBM. When we started working together, he said to me: “I want to meet with you every other day for a half-hour to work through situations, listen to my calls and see what advice you might have. I may not agree, but I will try anything to get better.”
Sales development hiring
The first step in hiring is to identify your ideal hiring profile. When initially building the team, these characteristics will be speculative. Once the team is launched and a model for a successful sales development rep emerges, you should model your future hires on the characteristics of these reps. Here are some factors to consider when determining your hiring profile:
- The target buyer – Experienced SDRs are a better for fit for outbound calling to executives while less experienced SDRs might be a better fit for lower-level prospects.
- The solution – The complexity of the solution will also determine your target hiring profile. For example, one of our clients has an open-source solution that is typically part of complex projects. They use less experienced SDRs but their hiring profile specifies that the SDRs must have the intellectual aptitude to understand the technology and their buyer’s environment.
- Inbound versus outbound – Inbound lead follow-up can be handled by less experienced SDRs.
Once you have a hiring profile, you will want to have a defined recruiting process to hire the right candidates. Here is an example of a defined recruiting process:
- Hold a series of interviews where candidates meet with with managers and current inside sales reps.
- Provide your interviewers with a scoresheet to evaluate candidates for fit to the hiring profile. An example of a scoresheet is in this presentation by HubSpot’s Mark Roberge.
- Have candidates complete an exercise related to the position. For example, Salesforce.com used to have inside sales candidates present the corporate presentation to managers. Other companies have candidates conduct calling exercises such as doing a cold call with a hiring manager.
- Evaluate multiple candidates before making the decision.
- Always check 2-3 references.
The right hiring profile is critical for scale. When you understand the type of SDR you need to be successful, then you can grow the team in a predictable, scalable manner.
Sales development metrics
There are two categories of metrics you should track when running an SDR team: operational and strategic. While every organization will have their own set of metrics, here are some ideas:
Operational metrics – Operational metrics provide the data to manager and optimize the day-to-day tactics of your SDR. The first set of recommended metrics should follow the steps of your lead follow-up process. With this data, you can optimize individual SDRs and your overall follow-up process. For example, you can divide calls/connects to determine the conversion rate:
- Calls – connects – conversations – qualified leads
- Touches – connects – conversations – qualified leads
Other operational conversion rates to track include:
- Email open rates and response rates
- Voicemail response rates
- Lead source effectiveness to determine which lead sources are working or not
- Qualified leads/sales accepted leads (If this conversion rate lags, you likely have an issue that you will need to address)
Strategic metrics should be designed to help you understand the effectiveness of the overall SDR organization. Examples include:
- Total pipeline sourced by SDRs
- Percentage of pipeline sourced by SDR
- Closed business from QLs
- Number of QLs passed per month
Sales development technology
One of the common characteristics of successful sales development teams is their use of technology and automation to be more effective. According to the Sales 2.0 conference, there have been over 2000 sales automation applications introduced to the market since 2006. In other words, there are a lot of options. In this post, we are focused on the critical applications needed to run your sales development team.
CRM – There is so much information and data to manage, every sales development team needs to have 100% adoption of the CRM application. The list of potential applications is too large to name in this post.
Sales intelligence and data – You want to provide your SDRs with applications that allow them to access information about leads while they are calling and qualifying them. All of the applications listed below provide data such as contact names and contact information. Some applications to consider include:
A note about LinkedIn: Linkedin is one of the most used sales intelligence applications. Many sales people use LinkedIn to find leads, but the aforementioned sources can deliver leads into your CRM system automatically, which LinkedIn does not do. That being said, every SDR should have LinkedIn open on one of their screens.
Data sources – Data sources are less focused on sales intelligence and more focused on providing contact names and information. There are a lot of data sources on the market. Some common ones that we recommend include:
- Data sources – Data.com, NetProspex, ZoomInfo
- Technology-specific data sources – RainKing, DiscoverOrg
- Targeted data source building (these sources provide the ability to build lists for specific roles versus titles or for contacts who are using certain applications) – Readycontacts, Reachforce, NexSales, Televerde
Dialing technology – You saw the dial numbers earlier in the post. These applications allow SDRs to autodial their list of contacts:
Sales email applications – Email is an essential channel for sales development teams. Sales email applications will alert SDRs when someone opens their emails. Clearslide will alert SDRs when a prospect has viewed any content they have sent. Here are some applications to consider:
When built and managed correctly, sales development is a key factor in the success of your revenue machine. We hope this post provides you with the framework necessary for you to get started. If you want to talk more, just let us know.