Here’s how the economic downturn really impacts your deals
This article is part of the Gong Labs series, where we publish findings from our data research team. We analyze sales conversations and deals using the Gong Reality Platform’s proprietary AI, then share the results to help you win more deals. Subscribe here to read upcoming research.
“Look, I’ve got bad news…”
“It’s got nothing to do with you as a rep, your product, or anything like that. It’s COVID, its impact on our pipeline and budget, and we had to make a quick decision on where to make a cut right now.”
The rep looked stunned.
After a successful pilot, the green light from his buyer’s finance team, he was getting “broken up” with. It was March 25th, 2020, barely one week after shelter-in-place orders were put in place and he hadn’t fully recognized the impact the economic uncertainty of the pandemic would have on his deal.
His enablement team had put together a COVID-19 talk track to handle this objection, but he was too late. After doing everything right, factors outside of his control ultimately lost him the deal right as it was crossing the finish line.
If only he saw it coming.
Today, we find ourselves in a time of continued uncertainty. You see it in the news daily. Headlines addressing supply chain issues, political turmoil, layoffs, rising inflation, and interest rates.
Whether you’re a sales leader driving GTM strategy or an SDR prospecting, what does it actually mean?
What impact is the economy having on prospects? Your current customers?
Fortunately, we’ve got some answers.
We analyzed over 486,600 sales calls to understand how prevalent macroeconomic factors were in recent conversations and the impact they have on deals. Use these insights to adjust your selling strategy and turn challenges and obstacles into closed-won opportunities.
To run this analysis we used Economic Pulse, new functionality within Gong’s Reality Platform that identifies, tracks, and alerts revenue teams when economic triggers are mentioned in customer conversations.
Economic Pulse detects common references related to economic uncertainty. (Think of phrases like: “changes in market conditions, cost increases, crazy market, until things are back to normal, inflation, etc.”)
Here’s what we found…
CUSTOMER MENTIONS OF MACROECONOMIC FACTORS HAVE INCREASED 55% IN ACTIVE DEALS
Mentions of the macroeconomic environment have increased substantially: 55% in active deals since October 2021. That means you’re not alone when you hear these objections in your sales cycles.
Even with this increase, only 5% of active deals have been impacted. Of the industries and buying centers you’re selling into, many of your customers may not yet be feeling the pressure of an uncertain economic climate.
So what determines the likelihood of macroeconomic factors being mentioned?
Who you’re talking to.
THE MORE SENIOR THE CONTACT AT THE ACCOUNT, THE MORE LIKELY THEY ARE TO BRING UP THE IMPACT THE ECONOMY HAS ON THEIR BUSINESS
This makes total sense.
When selling to higher-level execs be prepared to handle objections pertaining to cutting costs or shrinking budgets to weather economic uncertainty.
Be honest with yourself.
- Have you clearly positioned yourself as a partner to help customers thrive through turbulent times?
- What is the cost if they stick with the status quo?
If you’re unable to answer these questions, research how your customer’s industries are being impacted and tailor talk-tracks and messaging to proactively address their likely concerns. Not only will this show an intimate knowledge of their business, but can actually help you frame the conversation.
As new spend is put under more scrutiny, CFOs will be involved in more of your deals. It’s important that you and your champion use words and language that will resonate when making their business case to finance.
Here’s a ready-to-use template you can leverage with customers to win over their CFO and get your deal inked.
Speaking of customers…
RENEWALS AND UPSELLS ARE IMPACTED THE MOST BY ECONOMIC MENTIONS
Keeping existing customers is usually easier and less costly than acquiring new ones. But when faced with economic headwinds, the stakes are raised even higher. Rising churn rates have serious consequences for your organization’s growth goals.
Looking at the data, the economic pulse tracker popped up more frequently in renewal and upsell conversations within existing accounts.
Not only was the tracker more prevalent in these types of opportunities, but we also saw the largest influence on their win rates when the current state of the economy was mentioned.
A decrease in upsell win rate by nearly 7 percentage points.
To increase retention of valuable customers when budgets tighten because of economic uncertainty, proactively address challenges during your QBRs or even update terms to better benefit the customer.
If you’re a revenue leader, find this and more tips to adapt and win in Gong’s Economic Downturn Checklist.
WHEN MARKET CONDITIONS ARE TOP OF MIND FOR CUSTOMERS YOUR SALES CYCLE LENGTH INCREASES
While most frequently brought up during prequalification, we found that mentions of the economy actually occur more frequently after contracts are sent. However, the impact to win rate is less severe.
When looking into the context of these mentions, many customers leverage the economic environment during pricing negotiations. (Typical!) This back and forth can prolong sales cycles, as we see an increase in overall deal duration by an average of 14% when market conditions are mentioned.
In addition to taking longer to close, deals identified by the economic pulse tracker were twice as likely to decrease in dollar amount.
Time kills deals. Don’t let the added pressure of an uncertain market make matters worse. Once you get your “yes,” set clear expectations at the beginning of the contract process and confidently send across paperwork with firm deadlines.
CHANGE IS HERE, BUT YOU’RE READY FOR IT
Unpredictable market conditions can be scary, but by developing a deep understanding of how it impacts your prospects, customers, and deals will allow you to continue to thrive.
We’ve got your back.
We’ve put together a checklist for revenue leaders with 9 questions to ask today to take a proactive approach to thrive through change.