This is an interesting question. If you want growth, either in a particular area, product line or service, or just in general, then it’s up to your sales people to meet their stretch targets, right? Well maybe, if you have done all your due diligence, understand the market, and understand where a sales person starts and stops, then, yes you're right…. but if you haven’t you are just setting your sales people, and the business up for a fall, let me explain.
Let’s use a simple example of a new product or service release that your business has just launched for $1 (let’s call it (Widget X), and your first 12 months expectations is to sell 100 Widget Xs, therefore a sales target of $100 in the first year. Let’s also say that you have 10 sales people all of equal ability in similar sized territories - therefore you are going to lay off a requirement for them to sell 10 Widget Xs each this year, simple right? Maybe not, have you really looked at what this means to the business and requirements on the sales people and the broader organisation?
Let's work backwards here:
For 1 sales person to sell 1 Widget X - how many “live prospects" do they need to have in their active pipeline? Let's use the arbitrary number of 3 (this is called the sales conversion rate - "lead to sale”) so therefore each sales person needs $3 in “live leads” to generate 1 sale of $1. So for the full 12 months, they will need around $30 in live leads to generate the $10 in sales target results you are expecting.
So the next question; what activity do you need to do as a business to generate the 3 live leads for your sales people to prosecute? This can be a wide and varied series of answers depending on your market, offerings, etc.… the vehicles could be trade journals, social media activity, telemarketing, trade shows, user group activity, direct mail etc.… whatever it is, you as a business need to take responsible, set targets and expectation on your marketing activities in terms of return to feed your sales force with quality “live leads”.
Let me be very clear here, your expensive sales people should not be used to generate “live suspects” - using sales people to make “cold calls” either telemarketing or knocking on doors is the least efficient, least effective, and most costly way of generating leads…
Whatever vehicles you choose, you do need to know the answer to the following question; how many “live suspects” (these are people/organisations that have responded to one of your campaigns) do you need to generate one live prospect? (This is called the marketing conversion rate - "lead to prospect”), to keep it simple let’s say it’s 5 to 1, that is 5 suspects will generate 1 prospect. So that means your marketing activity needs to generate 150 “live suspects” per annum, per sales person… let have a look at this is picture form…
So what is all this telling us: well in my view the “Live Leads” and “Closed Won” columns above in fig.1 are the responsibility of your sales people. They are chartered with the responsibility to tease out, qualify and convert opportunities to sales. The Market analysis and “suspect generation” is the responsibility of the business – and as you can see this is no small requirement – to generated 100 sales of Widget X, you need 300 live leads, and 1500 suspects based on the assumption of conversion rates…. This doesn’t even test that market for whether there is a market of sufficient size to sustain this activity….
So back to my question; Are you asking too much of your sales people? Lots of businesses just launch a product/service because they think there is demand, put a sales target on sales people and ask them to go forth and multiply…. The questions that need to be asked are:
What is the size of the total market for this product?
What marketing vehicles are you going to use to gain access to the market?
How are you going to capture leads, first level qualify and hand off to the sales people?
What will the close loop process be to ensure that every lead is followed up and prosecuted effectively?
Then you need to measure, measure, measure...
There is an old saying that says, “activity leads to a result” – well if that’s true, then it makes sense that the refinement to that is, “quality activity leads to a quality result”.
The bottom line – do not leave it to your sales people to drive the market activity, that’s the business’ responsibility….
For more on these thoughts, or to discuss how you can better refine any or all of these sale and marketing components, please contact me at:
Shooter Sales Consulting
Office: +61 7 30401225