The High Cost of the End of Month Sales Blitz

Many software companies have science and research divisions. I feel like InsideSales.com is a science company that sells software. We analyze vast data sets comprised of B2B and high touch B2C sales interactions of a breadth and depth unrivaled on the earth.

In addition to science, we believe in spreading the love and so regularly publish very rigorously prepared studies based on our data, intended to make the inside sales industry at large more effective.

We recently released what might be our most important and potentially impactful study yet, based on the analysis of 9.8-million closing events among 151 enterprise class companies – some of the largest sales organizations on the planet.

To understand the results of the study, you need to first understand the question we were asking.

We wanted to know whether it’s possible to optimize deal close rates and deal sizes by something as simple as managing when we engage leads, prospects and customers in closing conversations.

That’s it. Something as simple as when to hold deal-closing conversations.

As with anything meaningful, there's always a story to be told in data and in this case there's a fascinating one. So the first thing to understand is yes, if you can manage when you engage in final closing conversations and actually close deals in terms of your ideal closing period, you can boost revenue significantly.

But to understand how this one tactic can yield such a stark improvement, it’s important to understand the culture of the inside sales industry: we’re quota-driven, and quotas, in turn, are set by the calendar – usually monthly, sometimes quarterly and occasionally weekly. Whatever the case, sales teams are pressured to cram as many closings into the days leading up to the end of their calendar period as possible, and to do so, reps alter their behavior.

Specifically, they engage in high pressure sales tactics and deep discounting.

Customers who understand this truism will take advantage of it by drawing out closing conversations to the end of the period, in order to demand price cuts of up to 50% over what they would have been offered one or two days before.

Customers who don’t understand it will often react negatively to the rep’s suddenly disagreeable behavior and break off communication.

When the dust settles, new deals do indeed appear to spike on the 29th and 30th days of the month. What’s left unaccounted for is the significant amount of money left on the table and the otherwise potentially fruitful relationships trampled upon and lost in order to realize that spike.

A little statistical analysis reveals the true cost of the spike: 27%.

That is to say, among the 151 companies whose anonymized data we analyzed, we determined that improvements in revenue would average 27% – which in their case translates to nearly $100-million – by merely moving closing conversations to periods better suited to us, namely, the second or third weeks of the month.

Here are some of the highlights, broken down:

1- Deal win rates on the last day of the month are a full 51% lower than the rest of the month.

2- Deals closed on the last day of the month are 50% smaller than those closd just one day earlier.

3- Reps who push deals on weekends do so at a hefty price: customers punish pushy weekend-working reps by extracting 45% smaller deal sizes.

That the end-of-month sales push yields the richest rewards is longstanding B2B sales orthodoxy. And yet, science reveals this to be entirely incorrect.

Certainly, some of the observed deal-dropping is a consequence of reps cleaning out their list of dead or dying opportunities. But the data clearly indicate that the vast majority of lost deals are a consequence of reps forcing prospects into conversations that are not ready to be had.

As this chart makes clear, the better time to enter this territory begins earlier in the month and ends three to five days before months’ end. Applying that level of control over closing conversations leads to twice the deal size and double the win rate.

Calendars are arbitrary and artificial constructs. Human nature is real. Sales is as human nature-dependent an activity as can be, and yet so much of it is calendar-driven. Buyers are motivated by value, not the sellers’ calendar.

In other words, let your products’ value be the source of urgency, not a red circle around a date on a sales rep’s wall.

Let’s go back to where we began – data and science.

The application of general findings will yield no better than general results. This study offers general findings with general application to your organization. With this knowledge in hand, you should revisit your own data to see how they manifest themselves in your organization, specifically. Ideally, you would add your own data to ours via InsideSales.com technology to glean insights that are both specific and eminently actionable. 

You really should access the full study here.

Also, InsideSales.com co-Fouder and President Ken Krogue is the author of the study. Check out this Forbes article he wrote about it.

The quality of scientifically rigorous work Ken and InsideSales.com Labs are producing is very impressive. Watch for more invaluable insights to be examined regularly in this space.

I want to know what you think. Is the end of month sales push beneficial to your organization? Tell me your experience in the comments section below.