Renewing Contracts | The Missing Bullet Holes

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Imagine, sellers would be rational individuals like Mr. Spock, the fictional character in the Star Trek media franchise - the commander of Starship Enterprise who always followed the rules of logic, never distracted by emotions.

I agree, this is neither realistic nor desirable to move mixed human-vulcans into sales roles. Some sales leaders would not want to lose their financial controllers either.

Experience tells, winning a new customer means 6 times more investment than maintaining an already loyal customer. Isn´t this a really good reason for you as a commander to go deep on what is driving the Enterprise towards customer loyalty?

I don't know anything, but I do know that everything is interesting if you go into it deeply enough.
Richard Feynman, Nobel Prize in Physics 1965

This usually is the point where measuring the world starts and big data is put into action. It begins with identifying statistically significant parameters. Try to understand what sets a successful contract renewal apart from those which did not renew. If you want to go beyond anecdotal evidence, a lot of data points are involved, but the effort is worth it. Aberdeen Group research states that Analytically Grounded Sales Teams average a 2.7 times greater annual increase in customer renewal rates. Meanwhile, such data analysis is well supported by BI tools or even Artificial Intelligence engines and it is backed by external business consultant experience.​

Business Acumen remains key to success in increasing the likelihood to renew a contract. Even though you may find significant correlations, it´s the causation which makes it relevant. The correlation between growth on ice-cream sales and the outbreak of bushfires in southern California maybe a strong correlation but it´s not the cause. Mind the difference between correlation and causation.

Turning good analytical work into concrete action is what makes the difference in business. Overhasty conclusions and bias on this last but most important step may put your whole endeavor at risk. Following historical anecdote shows why.

The United States Statistical Research Group (SRG) once used to be on mission to help win world war II. Sales is not war and trying to find a way to minimize the loss of airplanes through better armor is not business optimization. Surprisingly enough, we still can learn from their work.

Source: Aberdeen Group, Sept. 2016 | "YoY Advantages of Analytical Grounded Sales Teams"

When American planes came back from engagements over Europe, they were covered in bullet holes like a Swiss cheese. But the damage wasn’t uniformly distributed across the aircraft. There were more bullet holes in the fuselage, not so many in the engines. So, how can the armor be optimized  on the weakest parts without negatively impacting the overall performance of the aircraft?

Columbia University professor Abraham Wald came up with a surprising answer: The armor, said Wald, doesn’t go where most of the bullet holes are. It goes where the bullet holes aren’t - on the engines!

You’d have planes coming back with bullet holes all over the wings, the fuselage, the nose — but none at all on the engine. Simply because those severely damaged engines did not return from their mission and therefore don´t show up in your analysis. Protecting engines and pilots better, increased the likelihood to return from the battlefield.

By McGeddon - Own work, CC BY-SA 4.0, Link

​Taking the recurring business scientifically to the next level implies a lot of work but it is the right choice in the digital era.  Even if you decide to start small, next time you assess the feedback of your customer satisfaction survey with your teams, make sure you especially understand where the bullet holes are missing - it might well be your blind spot hiding the lethal risk to your business mission.