Alvin's Musings: Measuring MEDDPICC

In the past couple of weeks, we talked about Discovery vs. Qualification, went through the differences between BANT and MEDDIC, the evolution of MEDDIC to MEDDICC and MEDDPICC. In today's blog, we'll find out whether MEDDPICC works or not. The evaluation of MEDDPICC's efficacy necessitates an insightful blend of qualitative and quantitative measures. To do this, we'll need to delve deeper into some key sales performance indicators (KPIs), illustrate practical examples, data collection methods, and potential computations for a comprehensive assessment of MEDDPICC's effectiveness.

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Direct Measures

1. Win Rate:

This primary metric evaluates the ratio of deals won to the overall deals pursued. A higher win rate signals MEDDPICC's effective guidance towards successful sales outcomes. For instance, if your sales team pursued 10 deals and won 6, the win rate is 60%. Each sales rep can track their own win rates by looking at their historical monthly pipeline and performing this calculation. Sales Management typically has this information at an aggregate level and can communicate it with their teams. As you get more experienced using MEDDICC, the hope and expectation is that Win Rates will go up as well.

2. Sales Cycle Length:

This KPI tracks the duration from initial contact to deal closure. An effective MEDDPICC implementation should result in a reduced average sales cycle length, indicating improved efficiency. For example, if the pre-MEDDPICC average sales cycle was 90 days and dropped to 60 days post-implementation, that's a 33% improvement. Intuitively, this makes sense. As you get better at qualifying opportunities, it becomes easier and faster to qualify deals “in” or “out” thereby reducing the average sales cycle length or duration.

3. Deal Size and Revenue:

This involves analyzing the average deal size and revenue generated by sales opportunities. A well-functioning MEDDPICC should result in an increased deal size and revenue. You can easily track your deal sizes in CRM. You might also notice that initial deal sizes could change over the course of working an opportunity. As we start to have value conversations with the customer, it should be possible to increase the perceived value of our solutions and reduce the amount of discounting we need to provide in order to seal the deal. This, in turn, drives up our revenue numbers as a whole.

4. Upsell and Cross-Sell Rates:

If your sales reps are successfully identifying opportunities for upselling and cross-selling using MEDDPICC, these rates should increase. Upsell and Cross-Sell rates are calculated by determining the number of successful upsell or cross-sell attempts compared to the total opportunities for such sales. ?For example, if out of 10 transactions, you were able to upsell 2 times, your upsell rate would be 20% (2/10 * 100).

5. Revenue Growth:

Monitor revenue growth over time. Effective MEDDPICC should contribute to increased revenue generation. For example, if revenue grew from $1 million to $1.2 million post-MEDDPICC, that's a 20% increase. Of course, there could be other factors contributing to revenue growth as well. But MEDDPICC will provide an attributable contribution to this growth as empirically shown from the early days of MEDDIC's introduction in the 1990s at PTC as well as countless other companies today.

6. Customer Lifetime Value (CLV):

An increase in CLV can indicate that MEDDPICC is helping your sales team to not only close deals but also to create lasting, profitable relationships with customers. Customer Lifetime Value (CLV) is a prediction of the net profit attributed to the entire future relationship with a customer. It helps businesses understand how much revenue they can expect one customer to generate over the course of the business relationship. The longer a customer continues to purchase from a company, the greater their lifetime value becomes.

Here's a simple formula to calculate CLV:

CLV = Average Purchase Value x Average Purchase Frequency x Average Customer Lifespan

Average Purchase Value: This is calculated by dividing the company's total revenue in a time period (usually one year) by the number of purchases over the course of that same period. ?

Average Purchase Frequency: This is calculated by dividing the number of purchases over the course of the time period by the number of unique customers who made purchases during that time period. ?

Average Customer Lifespan: This is the average number of years a customer continues purchasing from your company.

For example, let's say your customers, on average, spend $2,000 per year on your products and they make purchases an average of 2 times per year. If, on average, a customer continues buying from you for 3 years, you would calculate CLV as follows:

CLV = $2000 x 2 x 3 = $12,000

This means that over the course of doing business with you, a customer is likely to bring you $12,000 in revenue. Understanding this can help you determine how much you should spend on customer acquisition and retention.

Remember, this is a simplified version of the CLV calculation. It's also important to note that CLV should be seen as a prediction, not an exact value, as customer behavior can change over time.

7. Churn Rate:

A decrease in churn rate after implementing MEDDPICC signals that your sales team is closing deals with customers who are a good fit for your product or service. This rate is also known as the customer attrition rate, and is a business metric that calculates the number of customers who leave a product over a given period of time, divided by the remaining number of customers. It's a crucial metric for understanding customer retention and is especially vital for companies with subscription-based models.

Here is a basic formula for calculating churn rate:

Churn Rate = (Number of Customers at the Start of Period - Number of Customers at the End of Period) / Number of Customers at the Start of Period * 100%

For instance, if you start the quarter with 100 customers and end with 85, your churn rate would be:

Churn Rate = (100 - 85) / 100 * 100% = 15%

This indicates that 15% of your customers have churned during this period.

It's essential to remember that the goal is to have as low a churn rate as possible. A high churn rate could be indicative of customer dissatisfaction. It's also worth noting that gaining new customers is often more costly than retaining existing ones, making churn rate a critical metric for business sustainability.

In addition, for a more detailed analysis, you can calculate churn rate separately for different customer segments or calculate revenue churn rate, which represents the lost revenue due to churn.

Indirect Measures

1. Lead Response Time:

The time taken by the sales team to respond to a lead can be a crucial indicator of MEDDPICC's efficiency. The faster the response, the higher the chances of converting a lead into a customer. The idea being that if a sales rep is able to close a deal faster, that frees up additional time to service a new lead and build up a bigger and healthier pipeline.

2. Rate of Follow-Up Contact:

This measures how persistently your team follows up with potential clients. Increased follow-up often correlates with higher conversion rates. It is calculated by dividing the number of follow-ups by the total number of leads, and then multiplying the result by 100 to get a percentage. For example, if your sales team has 100 leads and makes 300 follow-up contacts (i.e., emails, calls, meetings, etc.), the rate of follow-up contact is 300%. This means, on average, each lead is followed up with three times.

A higher rate of follow-up contacts often correlates with higher conversion rates because it shows persistence and determination from the sales team. However, it's crucial to strike a balance. Too many follow-ups can annoy potential customers and harm the relationship.

3. Sales Team Attrition Rate:

This refers to the rate at which you lose salespeople. If MEDDPICC is effective, your salespeople should feel more empowered and less likely to leave, resulting in a lower attrition rate. As salespeople, we're highly motivated by winning deals and making money. And MEDDPICC helps us do just that, so we'll feel a higher sense of job satisfaction.

4. Number of Customer Touchpoints:

The number of interactions before closing a sale can provide insights into how effectively your team is applying MEDDPICC. A decrease in touchpoints towards the later stages of an opportunity could indicate that your team is focusing more efficiently on high-value prospects. To calculate the number of customer touchpoints for a single deal, you would need to add up all the interactions that occurred with the customer throughout the sales process. For example, if you have 3 phone calls, 2 meetings, 4 emails, and 1 demo with a customer before closing a deal, you would have a total of 10 touchpoints for that deal. If the sales team can achieve the same or better results with fewer touchpoints, it means they're communicating more effectively, qualifying leads more accurately, and using their time more efficiently.

This doesn't mean that fewer touchpoints are always better – sales is about building relationships, and that requires communication. But if the number of touchpoints is decreasing while sales outcomes are improving, that could be a sign that your sales team is making better use of MEDDPICC.

5. Conversion Rates at Each Stage:

This KPI provides insights into MEDDPICC's effectiveness in advancing prospects through the buyer's journey. For instance, if 100 leads entered the qualification stage and 50 proceeded to the proposal stage, the conversion rate is 50%. Low conversion stages can be improved by refining the MEDDPICC application.

6. Pipeline Velocity:?

This measures how quickly opportunities are moving through your sales pipeline. It's calculated by multiplying the number of Opportunities, Win Rate (%), and Average Deal Value, then dividing by the Sales Cycle Length.

For example, if you have 20 opportunities, a win rate of 20%, an average deal value of $10,000, and a sales cycle length of 30 days, your pipeline velocity would be (20 x 20% x $10,000) / 1 month = $40,000 per month.

This means that for each day an opportunity stays in your pipeline, it contributes around $1,333.33 to your revenue. The higher your pipeline velocity, the more efficient your sales process is.

Qualitative Measures

1. Customer Feedback and Satisfaction:

Customer feedback is a vital qualitative measure. Post-sales surveys or check-ins can gauge how well MEDDPICC aligns with customer needs and expectations. Work with your Renewals and Customer Success teams to uncover this additional layer of information. Analyze responses to identify potential MEDDPICC improvements.

2. Sales Rep Feedback:

Sales team input can highlight areas of MEDDPICC improvement and provide valuable refinement suggestions. Regular team meetings or anonymous feedback tools can facilitate data collection. Sometimes, it's the method we use to collect MEDDPICC answers that needs to be improved.

3. Sales Training Effectiveness:

The speed and effectiveness with which new salespeople are trained on MEDDPICC can also indicate its effectiveness. It is critical to include MEDDPICC as part of any new hire sales onboarding program to instill the necessary sales skills for success early on.

Key Takeaway

To answer whether MEDDPICC works, we need to be able to continuously measure the effectiveness of MEDDPICC based on continuous data gathering, metrics monitoring, and feedback solicitation of various KPIs. The aim is not just to collect data but to analyze it for actionable insights. It's these insights that will enable us to improve our use of MEDDPICC and, ultimately, boost our sales effectiveness as an organization.

Remember, "If you can't measure it, you can't improve it." We need to regularly review and refine our implementation of the MEDDPICC framework based on the insights gained. This proactive approach will optimize the performance of MEDDPICC and drive sales success. The beauty of MEDDPICC lies in its flexibility and adaptability, making it a powerful tool for any sales organization striving to achieve excellence.