Which Type of Sale Has the Best ROSE?

Before we can answer that question, we first need to look at the types of sales.? All opportunities for a sale and all of the sales that have ever occurred and will ever occur can be classified as one of two types.? Do you know what they are? You do, but you probably don’t realize or think about it. Most of the salespeople I have coached for the past 10-12 years can probably tell you, as this is one of my favorite aspects of sales to coach.? ?Before I tell you what they are, let’s first look at the broad characteristics that describe or define each type.

One type is far more common, so let’s refer to it as the common type or Type C. The other type is the opposite, as it is far less common.? So, let’s refer to that as the rare type or Type R.? Type C deals and opportunities vastly outnumber Type R.? Said another way, the quantity (QTY) of Type C is greater than the quantity of Type R, or Qty Type C > Qty Type R.? Why is that?

Well, this distinction is self-perpetuating and self-reinforcing. Because Type Cs are far more common, they are easier to find, and because Type Rs are rare, they are harder to find. Most marketers and salespeople don’t realize or think about this distinction; they are simply looking for opportunities and deals and naturally find the more common variety.

But here is where things start to get interesting. Sometimes, when a rare opportunity is stumbled upon, the average salesperson disqualifies the Type R because the prospect has not yet defined or acknowledged “BANT” (budget, authority, need, and timeline).? The elite seller, however, is aware of the distinction between Type C and Type R deals and is focused on finding the latter despite the lack of “BANT.”? Why?

Like many rare things, Type R opportunities are better, more valuable, and offer higher overall quality than Type C opportunities.? Said another way, the quality (QLT) of Type R is greater than that of Type C, or QLT Type R > QLT Type C.? What makes Type R deals better and more valuable?

For starters, Type C deals are almost always competitive with multiple bidders. ?Type R deals, on the other hand, often face no competition, and if they do, it is usually a formality that does not impact the result.? This usually means that Type C deals end up discounted and result in lower margins, whereas Type R deals typically get done at list price and therefore higher margins.

Additionally, in Type C deals, you typically deal with lower-level people who are minimal influencers at best, but usually block you from having access to decision-makers and major influencers.? In Type R deals, however, you deal directly with the highest-level people.? Because they are the decision-makers and major influencers, they can create a budget or find the funding and get the deal done and implemented.

Finally, because of the nature of Type C deals vs. Type R deals, the win ratio for Type C opportunities is significantly lower than that for Type R deals. Exact data is hard to come by, as CRM systems are rarely configured to identify the distinction here. From my experience, however, Type C deals typically have 15%—25% win ratios, whereas Type R deals close at a minimum of a 50% win ratio and sometimes much higher.

If you believe the close ratios, I probably convinced you that one Type C deal is better than one Type R deal.? Ok, but should a salesperson (or a team or a company) focus only on finding Type R deals?? Let’s do a simple ROSE analysis to answer that question.?

ROSE analysis?? What’s that?? ROSE stands for Return on Sales Effort.? (I owe a hat tip for teaching me this term to Keenan . , the author of Gap Selling, one of my top five).? We need to make some assumptions on additional key pieces of information to compare between pursuing only Type R deals instead of Type C deals.

First, assume that your average salesperson can find and generate 20 Type C opportunities for $100K each (average deal size) in a quarter for a new pipeline of $2M.? Let’s also assume that another average salesperson can find and generate 10 Type R opportunities for $100K each in a quarter for a new pipeline of $1M.? I will submit that the ratio of Type Cs to Type Rs is realistic once you know what Type Rs are and how to find them.

Second, let’s assume that the salesperson with the Type C opportunities will end up closing 25% of his pipeline as won but will have to discount those deals by 15% to win them.? The salesperson with the Type R opportunities will end up closing 50% of his pipeline as won with no discounting.

Ok, so let’s now do the math.? The Type C salesperson closes 25% of his pipeline, 5 deals at $85K each for $425K.? The Type R salesperson closes 50% of his pipeline, which 5 deals at $100K each for $500K.? That is an 18% outperformance by the Type R salesperson over the Type C salesperson.? That could be the difference between meeting and missing quotas, between bonuses and no bonuses.

However, I will argue that, in reality, most of the Type C deals do not close when originally forecast and get pushed at least once, if not twice, before ultimately closing. Conversely, most Type R deals closed when they were forecast to close. Furthermore, I will argue that, for the “average” salesperson, Type C deals close at a lower win ratio and a bigger discount.

So, it seems to be in the salesperson’s best interest to determine what Type R deals are and how to find them.? But let’s next look at the math from the company’s perspective.? The company is interested not just in top-line revenue growth but also in increasing or at least maintaining gross margins.? If we assume that the average COGS (cost of goods sold) is $50K on an average $100K list price deal, then the Type R salesperson generated $250K in gross margin vs. the Type C’s $175K in gross margin, which is a 43% better performance and therefore very much in the company’s best interest to focus on Type R deals.

Have you figured out what Type C and Type R deals are yet?

Let me give you a big hint.? In my last article, “What are Your Top Five?” I highlighted The Challenger Customer by Matt Dixon , Brent Adamson , Pat Spenner , and Nick Toman as one of my top five books on sales.? In that book, one of the challenging things we learned was that, on average (based on a study of 1,400 B2B customers), buyers are 57% of the way through their buying process when they engage with a salesperson.? If buyers have identified that they want or need to buy something and have already embarked on a buying process before you find them, those are all Type C deals.

(Lightbulb lights and the bell rings “Ding Ding Ding!)?

Does that mean Type R deals are those where the buyer has not yet identified that they want or need to buy something?? And, they have not yet embarked on a buying process?? Exactly!!? Type C deals are those where the prospect already decided they needed to buy what you are selling before engaging with them.? Type R deals are those where the prospect did NOT know that they needed to buy what you are selling, and you are the salesperson who convinced them that they do.

How do I find and win Type R deals?? Should I continue to pursue and close Type C deals in my pipeline?? If so, which ones, and how do I ensure I win them?? What should I do if I find a new Type C opportunity – pursue it or walk away?

All good questions and a few topics for future articles are among some of the answers.? For now, I’ll say that a lot depends on your company and the solutions that you are selling.? Regardless, you will always want to know the difference between Type C and Type R and which one you are dealing with at each opportunity.? You will always want to know your overall ROSE for each opportunity.? For most salespeople at most companies, you will continue to deal with more Type Cs than Type Rs. Still, you will want to try to find more Type Rs whenever possible and disqualify the low-probability Type Cs to maximize your ROSE.

Meanwhile, stay tuned for more sales coaching articles coming your way soon…