Part II SALES FORCE ACTIVITIES Chapter 3: Sales Opportunity Management.

Part IIPart II

SALES FORCE SALES FORCE ACTIVITIESACTIVITIES

Part IIPart II

SALES FORCE SALES FORCE ACTIVITIESACTIVITIES

Chapter 3:Chapter 3:

Sales Opportunity Sales Opportunity ManagementManagement

Sales opportunity management

One way to increase productivity is One way to increase productivity is to focus sales force time on those to focus sales force time on those prospects that have a probability prospects that have a probability of becoming an important of becoming an important customers.customers.

Sales Opportunity Management

GeneratingNew

Accounts

ManagingExistingAccounts

PersonalTime

Management

Sales VersusProfits

A process for generating new accounts

Business places a lot of emphasis Business places a lot of emphasis on growing by getting closer to the on growing by getting closer to the present customers. Although this is present customers. Although this is an important opportunity to an important opportunity to businesses , many companies businesses , many companies focus on finding new customers to focus on finding new customers to achieve their growth objectives.achieve their growth objectives.


No matter how strong your No matter how strong your products , how great your products , how great your customer service , or how customer service , or how aggressive your sales force, aggressive your sales force, business lose customers every business lose customers every year when companies are bought year when companies are bought and sold , management changes and sold , management changes and global economies fluctuate.and global economies fluctuate.


The key to building sales through The key to building sales through prospecting is to spend time with prospecting is to spend time with prospects that are likely to become prospects that are likely to become good customers. So an important good customers. So an important first step in acquiring new first step in acquiring new customers is for the salespeople to customers is for the salespeople to build a good prospects profile.build a good prospects profile.

What CreatesSatisfied Customers?

AcquiringNew Customers

Mergers andAcquisitions

IntroducingNew Products

IncreasingBusiness withExisting Customers

42%

42%

10%

15%

Figure 3-1: What’s the Best Way to Grow?

Building a prospect Profile

Not all businesses will want or Not all businesses will want or need your products and services, need your products and services, some prospects will be a waste of some prospects will be a waste of your time, while others will not buy your time, while others will not buy enough to make it worth your time.enough to make it worth your time.

The salespeople should decide The salespeople should decide what factors determine who is a what factors determine who is a good prospects. That’s mean good prospects. That’s mean building a prospect profile.building a prospect profile.

Building a prospect Profile

A profile of what the best prospect looks A profile of what the best prospect looks like.like.

There are many factors help in building There are many factors help in building the prospect profile include the the prospect profile include the followingfollowing::

1.1. Size of the businessSize of the business

2.2. Age of the equipment to be replacedAge of the equipment to be replaced

3.3. Geographic distance from shipping Geographic distance from shipping pointspoints

4.4. Product line specialtyProduct line specialty

Building a prospect list

The next step is to develop a list of The next step is to develop a list of prospects matching the profile prospects matching the profile developed in the first step.developed in the first step.

The traditional way in generating The traditional way in generating prospects through cold canvassingprospects through cold canvassing

Cold Canvassing: Involves Cold Canvassing: Involves contacting prospective customers contacting prospective customers without appointment.without appointment.


Salespeople selling office supplies , Salespeople selling office supplies , paper supplies use this approach paper supplies use this approach as the target markets for these as the target markets for these products are fairly broad.products are fairly broad.

The drawback is that the The drawback is that the salesperson could waste time salesperson could waste time soliciting low quality prospects, soliciting low quality prospects, Canvassing maybe more efficiently Canvassing maybe more efficiently accomplished by phone.accomplished by phone.


There are many methods used to There are many methods used to identify the good prospects include identify the good prospects include direct inquiries, trade shows, direct inquiries, trade shows, Directories, internet and referrals Directories, internet and referrals


Direct mailDirect mail_ All companies receive direct inquiries _ All companies receive direct inquiries

about products or services from about products or services from potential customers.potential customers.

_ Direct mail is an excellent way for _ Direct mail is an excellent way for locating prospective customers.locating prospective customers.

_ The use of e-mail inquiries has made it _ The use of e-mail inquiries has made it possible to increase the speed with possible to increase the speed with which companies can respond to a which companies can respond to a direct mail inquiry, which helps to direct mail inquiry, which helps to increase the rate at which inquiries are increase the rate at which inquiries are converted to sales.converted to sales.


Trade showsTrade shows_ Are also an excellent way for generating _ Are also an excellent way for generating

good prospects.good prospects._ There are two reasons in growing the _ There are two reasons in growing the

popularity of the trade shows which are:popularity of the trade shows which are:1.1. Low cost per customer contact.Low cost per customer contact.2.2. The organization can project a coherent The organization can project a coherent

and consistent message to all the and consistent message to all the prospectsprospects

Note : trade shows don’t permit the writing Note : trade shows don’t permit the writing of orders.of orders.


DirectoriesDirectories

_ Special direct inquiry directories _ Special direct inquiry directories and open to bid announcement are and open to bid announcement are important sources of leads for important sources of leads for many firms.many firms.

InternetInternet

_ It has revolutionized the process of _ It has revolutionized the process of selling and qualifying prospects.selling and qualifying prospects.


ReferralsReferrals_ With referrals, a satisfied customers is _ With referrals, a satisfied customers is

asked to provide the names of others who asked to provide the names of others who might be interested in the product.might be interested in the product.

_ The person may also supply an introduction _ The person may also supply an introduction of the salesperson to the prospects.of the salesperson to the prospects.

_ The advantage of referrals is that the _ The advantage of referrals is that the person can say things about the person can say things about the salesperson and the product line that salesperson and the product line that might not be as credible coming directly might not be as credible coming directly from the salesperson.from the salesperson.

Qualifying Prospects

Qualify a prospect: determine if Qualify a prospect: determine if the prospect is likely to be the prospect is likely to be converted to a buying customer.converted to a buying customer.

Salesperson needs information Salesperson needs information about customer needs , buying about customer needs , buying authority and ability to pay.authority and ability to pay.


Needs:Needs:_ Qualified leads are those that have _ Qualified leads are those that have

a use for the seller’s goods or a use for the seller’s goods or services and are planning to buy in services and are planning to buy in the near future.the near future.

_ A prospect that is satisfied with the _ A prospect that is satisfied with the present supplier and has no desire present supplier and has no desire to change is going to be very to change is going to be very difficult to convert into the difficult to convert into the customer.customer.


Buying Authority:Buying Authority:

_ Business to Business salespeople _ Business to Business salespeople often have problems identifying often have problems identifying who has the authority to buy who has the authority to buy within an organization because of within an organization because of the number of people involved in the number of people involved in making a purchasing decision.making a purchasing decision.


Ability to Pay:Ability to Pay:

_ Finding prospects that want a product _ Finding prospects that want a product and also have the authority to buy will and also have the authority to buy will not be productive if they lack the not be productive if they lack the financial resources to buy.financial resources to buy.

_ Salespeople should make an initial _ Salespeople should make an initial screening of prospects on their ability screening of prospects on their ability to buy, the objective is to eliminate to buy, the objective is to eliminate prospects who represent too high a prospects who represent too high a credit risk.credit risk.

Managing existing account

Generating new customer is Generating new customer is important, but many sales and important, but many sales and marketing managers feel that the marketing managers feel that the companies that will prosper will be companies that will prosper will be ones that maintain strong ones that maintain strong customer loyaltycustomer loyalty

When is an account too small?

An important starting point in An important starting point in managing existing account is managing existing account is determining the minimum determining the minimum opportunity on which the opportunity on which the salespeople should spend their time.salespeople should spend their time.

Salespeople who are supplied with Salespeople who are supplied with the necessary direct selling expense the necessary direct selling expense information are in an excellent information are in an excellent position to perform a minimum position to perform a minimum account size analysis.account size analysis.

When is an account too small?

This analysis involves two steps:This analysis involves two steps:

1.1. Calculating a personal cost per Calculating a personal cost per sales callsales call

2.2. Breakeven sales volume.Breakeven sales volume.

Cost per call

Is a function of the numbers of call Is a function of the numbers of call the salespeople make per day, the the salespeople make per day, the number of days available to call on number of days available to call on customers , and your direct selling customers , and your direct selling expenses include such expenses as expenses include such expenses as compensation , travel, compensation , travel, entertainment and communications, entertainment and communications, these expenses are referred to as these expenses are referred to as direct selling expenses.direct selling expenses.

Table 3-1 Computing the Cost per Call for an Industrial Products Salesperson

CompensationCompensation

Salary, commissions, and bonus $69,035

Fringe benefits (hospital, life insurance, social security) $10,985 $80,020

Direct Selling ExpensesDirect Selling Expenses

Automobile 8,000

Lodging and meals 6,250

Entertainment 3,250

Communications 4,500

Samples, promotional material 1,750

Miscellaneous 1,700 25,450

Total Direct Expenses $105,470

Calls Per YearCalls Per Year

Total available days 260 days

Less:

Vacation 10 days

Holidays 10 days

Sickness 5 days

Meetings 18 days

Training 12 days 55 days

Net Selling Days 205 days

Average calls per day 3 calls

Total Calls per Year (205 X 3) 615 Calls

Average Cost per Call ($105,470/615)Average Cost per Call ($105,470/615) $171.50

Breakeven sales Volume

Is the sales volume necessary to cover Is the sales volume necessary to cover the direct selling expenses, it’s necessary the direct selling expenses, it’s necessary to calculate the breakeven sales volume to calculate the breakeven sales volume in order to determine the minimum size in order to determine the minimum size customer that should be pursued.customer that should be pursued.

Calculating the breakeven volume Calculating the breakeven volume requires that we know the number of calls requires that we know the number of calls necessary to close a sale and what direct necessary to close a sale and what direct selling expenses are budgeted to be as a selling expenses are budgeted to be as a percentage of total sales.percentage of total sales.

Sales Opportunity ManagementKey to Productivity

Breakeven Sales VolumeBreakeven Sales Volume

(Cost per Call) x (Number of Calls to Close)

Sales Calls as a % of Sales

Table 3-2 Selected Statistics on Cost per Call and Number of Calls Needed to Close a Sale

IndustryIndustryCost Cost

per Callper Call

Number of Number of Calls Needed Calls Needed

to Close a Sale to Close a Sale

Sales Costs as Sales Costs as aa

Percentage ofPercentage of

Total Sales Total Sales

Business Services $ 46.00 4.6 10.3%

Chemicals 165.80 2.8 3.4

Construction 111.20 2.8 7.2

Electronics 133.30 3.9 12.6

Food Products 131.60 4.8 2.7

Instruments 226.00 5.3 14.8

Machinery 68.50 3.0 11.3

Office Equipment 25.00 3.7 2.4

Printing/Publishing 70.10 4.5 22.2

Rubber/Plastic 248.20 4.7 3.6

Sales Opportunity ManagementSelected Break-Even Results

IndustryIndustry BreakevenBreakeven

Business Services 1,096.37

Chemicals 15,474.67

Construction 9,730.00

Electronics 433.25

Food Products 6,580.00

Instruments 11,629.13

Machinery 1,580.77

Office Equipment 616.67

Printing/Publishing 3,811.61

Rubber/Plastics 41,662.14

I can’t afford to lose this business

Many factors should be considered Many factors should be considered before dropping a customer or reducing before dropping a customer or reducing the selling effort. For example the sales the selling effort. For example the sales customers may be growing , which may customers may be growing , which may be due to one of two causes:be due to one of two causes:

1.1. The customer’s business is growing The customer’s business is growing rapidly , so its need for suppliers is also rapidly , so its need for suppliers is also increasing.increasing.

2.2. Your sales to this account is increasing Your sales to this account is increasing because you are getting a larger share because you are getting a larger share of the customer’s business.of the customer’s business.

Methods for setting account priorities

Breakeven account analysis Breakeven account analysis provides a starting place from which provides a starting place from which to determine the minimum size to determine the minimum size account that should be called on. account that should be called on. But this analysis doesn’t address But this analysis doesn’t address the issue of how much time should the issue of how much time should be allocating to each prospects.be allocating to each prospects.

There are four methods for setting There are four methods for setting account priorities along with the account priorities along with the situation situation

1. Single-Factor Model

The easiest and the most widely The easiest and the most widely used model for allocating used model for allocating salespeople’s time is the single salespeople’s time is the single factor modelfactor model

This model examines the single This model examines the single customer characteristics , customer characteristics , usually usually the sales volume to arrive at the the sales volume to arrive at the allocation of the sales calls.allocation of the sales calls.

Table 3-3: ABC Account Classification

No. ofNo. of TotalTotal SalesSales TotalTotal Total callsTotal calls Sales ($)Sales ($)

AccountAccount Accts.Accts. Accts.Accts. (000)(000) SalesSales Per Classif.Per Classif. Per CallPer Call

ClassificationClassification (1) (1) (2) (2) (3) (3) (4) (4) (5) (5) (6) (6)

AA 21 21 15% 15% $910 $910 65% 65% 105 105 $8,667 $8,667

BB 28 28 20 20 280 280 20 20 140 140 2,000 2,000

CC 9191 6565 210210 1515 455455 462462

TotalsTotals 140 140 100%100% $1,400$1,400100%100% 700 700 $2,000 (Avg) $2,000 (Avg)

1. Single-Factor Model

The main limitation of this models is The main limitation of this models is that they mayn’t include all the that they mayn’t include all the factors that should be considered factors that should be considered when evaluating an account’s sales when evaluating an account’s sales potential.potential.

Single factor model is likely to be used Single factor model is likely to be used in the mature markets, when demand in the mature markets, when demand and competition are stable, and it will and competition are stable, and it will be appropriate for sales force be appropriate for sales force program with transactional type.program with transactional type.

2. Portfolio Model

Attempt to overcome the Attempt to overcome the limitations of the single factor limitations of the single factor models by considering multiple models by considering multiple factors when determining the factors when determining the attractiveness of the individual attractiveness of the individual accounts within a territory.accounts within a territory.

The portfolio model classifies The portfolio model classifies accounts into one of four categories accounts into one of four categories by determining the account by determining the account attractiveness based on two criteriaattractiveness based on two criteria

2. Portfolio Model

1.1. Account Opportunity: refers to Account Opportunity: refers to the magnitude of an account’s the magnitude of an account’s present and future need for the present and future need for the salesperson’s offeringsalesperson’s offering

2.2. Competitive position : based on Competitive position : based on the outcome measures such as the outcome measures such as the account’s total gross profit the account’s total gross profit dollars.dollars.

Core Accounts

Accounts are veryattractive.

Invest heavily in sellingresources.

Core Accounts

Accounts are veryattractive.

Invest heavily in sellingresources.

Drag Accounts

Accounts are moderatelyattractive.

Invest enough to maintaincurrent position.

Drag Accounts

Accounts are moderatelyattractive.

Invest enough to maintaincurrent position.

ProblemAccounts

Accounts are veryunattractive.

Minimal investmentof selling resources.

ProblemAccounts

Accounts are veryunattractive.

Minimal investmentof selling resources.

GrowthAccounts

Accounts are potentiallyattractive.

May want to investin heavily

GrowthAccounts

Accounts are potentiallyattractive.

May want to investin heavily

Competitive Position

Strong Weak

Acc

ount

Opp

ortu

nity

High

Low

Figure 3-2: PortfolioModel

2. Portfolio Model

Portfolio models offer several benefits:Portfolio models offer several benefits:

1.1. Help the sales team to identify the Help the sales team to identify the important customer issuesimportant customer issues

2.2. Facilitate the communication between Facilitate the communication between salespeople and sales managersalespeople and sales manager

3.3. Help isolate the information gaps and Help isolate the information gaps and set priorities for customer data set priorities for customer data collectioncollection

4.4. Force the sales team to think about the Force the sales team to think about the future.future.

2. Portfolio Model

Are most likely used in sales force Are most likely used in sales force programs with more of programs with more of consultative type account consultative type account relationship strategy where relationship strategy where understanding the customer needs understanding the customer needs and the strength of the relation are and the strength of the relation are very criticalvery critical

3. Decision Models

Although portfolio models have the Although portfolio models have the advantage of using multiple advantage of using multiple characteristics to classify accounts, characteristics to classify accounts, several shortcomings remain:several shortcomings remain:

1.1. Accounts must be grouped into four Accounts must be grouped into four quadrants for the purpose of allocating quadrants for the purpose of allocating the sales calls, difference between the sales calls, difference between firms aren’t taken into consideration.firms aren’t taken into consideration.

2.2. The process doesn’t arrive an The process doesn’t arrive an optimum allocation of the sales callsoptimum allocation of the sales calls

3. Decision Models

Decision models for allocating sales calls Decision models for allocating sales calls overcome these two shortcomings by overcome these two shortcomings by focusing on the response of each account focusing on the response of each account to the number of the sales calls made to the number of the sales calls made over a period of time, these models over a period of time, these models consist of only two parts, the first part consist of only two parts, the first part develops the relationship between the develops the relationship between the number of the sales calls over a period of number of the sales calls over a period of time and sales to particular account. This time and sales to particular account. This is referred to as a Sales Response is referred to as a Sales Response Function.Function.

Dol

lar

Sal

es p

er Q

uart

er

Number of Sales Calls Per Quarter

$20,000

$10,000

1 2 3 4 5 6

Figure 3-3: Number of Sales Calls Response Function

3. Decision Models

The second part of these models The second part of these models uses the individual response uses the individual response function to allocate calls so as to function to allocate calls so as to maximize sales. maximize sales.

Essentially, these models continue Essentially, these models continue to allocate sales calls to an to allocate sales calls to an account until more sales can be account until more sales can be generated by calling on another generated by calling on another account.account.

4. Sales Process Models

Despite the advantages of sophisticated Despite the advantages of sophisticated call allocation programs , they aren’t call allocation programs , they aren’t appropriate for all the situations.appropriate for all the situations.

Sales process models focus on where Sales process models focus on where the opportunity is currently classified in the opportunity is currently classified in the selling process.the selling process.

An example of this model is the sales An example of this model is the sales Funnel, this system categorizes the Funnel, this system categorizes the sales opportunities not accounts, this is sales opportunities not accounts, this is necessary because the sales team may necessary because the sales team may have multiple selling objectives at one have multiple selling objectives at one account at the same time.account at the same time.


Each sales opportunity is Each sales opportunity is categorized based on the level of categorized based on the level of uncertainty in meeting the uncertainty in meeting the opportunity:opportunity:

1.1. Unqualified Opportunities: data Unqualified Opportunities: data suggest that a possible need exists suggest that a possible need exists but this need hasn’t verified with but this need hasn’t verified with key people in the account.key people in the account.

2.2. Qualified Opportunities: must meet Qualified Opportunities: must meet four criteriafour criteria


1.1. The need has been verified with at The need has been verified with at least one of the buying influences.least one of the buying influences.

2.2. There is a confirmed intention to buy There is a confirmed intention to buy a new product or service , replace a new product or service , replace an existing one, or switch suppliersan existing one, or switch suppliers

3.3. Funding of the purchase already Funding of the purchase already existsexists

4.4. There is an identified time frame There is an identified time frame within which the purchase will be within which the purchase will be mademade


3. Best few Opportunities: all the 3. Best few Opportunities: all the buyers have been contacted and buyers have been contacted and their needs identified and in your their needs identified and in your judgment have been developed to judgment have been developed to make the sale.make the sale.

Unqualified

Qualified

Best few

50% closure probability



2113 15 2322 18

24 2019 17

16 14

9 12

1011

8

7 5

6

3

1 2

4

Figure 3-4: The Sales Funnel

Sales Versus profits

Customers may pay different prices for Customers may pay different prices for similar products and services, in other similar products and services, in other words large customers can demand and words large customers can demand and get lower prices because a seller cant get lower prices because a seller cant afford to lose their businesses.afford to lose their businesses.

Other customers are simply able to get Other customers are simply able to get lower prices because of their lower prices because of their negotiation skills and still other negotiation skills and still other customers exploit deals and promotions customers exploit deals and promotions more than others and “ Forward Buy” more than others and “ Forward Buy” which means they buy a large amount which means they buy a large amount of their annual needs at one time when of their annual needs at one time when the product is on discount.the product is on discount.

Customer lifetime value (CLV)

Marketers are starting to adopt Marketers are starting to adopt customer lifetime value (CLV) as an customer lifetime value (CLV) as an appropriate metric for measuring appropriate metric for measuring marketing performance.marketing performance.

Calculating the CLV requires Calculating the CLV requires knowing or making judgments knowing or making judgments about the following inputs: about the following inputs:

1. The company’s discount rate ( Cost 1. The company’s discount rate ( Cost of Capital )of Capital )

Customer lifetime value (CLV)

2. The company’s planning Horizon 2. The company’s planning Horizon

3. The customer’s product category 3. The customer’s product category purchases in each periodpurchases in each period

4. The average contribution from 4. The average contribution from purchasespurchases

5. Each supplier’s share of total 5. Each supplier’s share of total category purchases.category purchases.

Time management

Is one of the most mentioned Is one of the most mentioned training topics , the reason is that training topics , the reason is that significant productivity gains can significant productivity gains can be made through better time be made through better time management.management.

The following figure shows how The following figure shows how salespeople spend their time , the salespeople spend their time , the amount of time spent selling either amount of time spent selling either face to face or over the phoneface to face or over the phone

13%

29%16%

17%25%

SellingFace-to-Face

Service Calls

AdministrativeTasks

Waiting andTravel

Figure 3-5: How Salespeople Spend Their Time

Selling overthe phone

The “Travelling salesperson” problem

On average , 17% of the salespeople time On average , 17% of the salespeople time is spent travelling and waitingis spent travelling and waiting..

Techniques used to schedule and route Techniques used to schedule and route salespeople, the issue has become known salespeople, the issue has become known as ‘travelling salesperson problem’, the as ‘travelling salesperson problem’, the dilemma is stated as a search for a route dilemma is stated as a search for a route through the region that allows a through the region that allows a salesperson to visit each customer and salesperson to visit each customer and return to the starting point with minimum return to the starting point with minimum expenditure of their time or moneyexpenditure of their time or money

The “Travelling salesperson” problem

To plan a travel route based on To plan a travel route based on four basic rules:four basic rules:

1.1. The route should be circularThe route should be circular

2.2. The route should never cross itselfThe route should never cross itself

3.3. The same route shouldn’t be used The same route shouldn’t be used to travel to and from a customerto travel to and from a customer

4.4. Customers in neighboring areas Customers in neighboring areas should be visited in sequence.should be visited in sequence.

Overall Time Management

A key aspect of managing time effectively A key aspect of managing time effectively is to recognize and control things that is to recognize and control things that used to waste time such as:used to waste time such as:

1.1. Telephone interruptionTelephone interruption

2.2. Drop-in visitorsDrop-in visitors

3.3. Lack of self disciplineLack of self discipline

4.4. CrisesCrises

5.5. MeetingsMeetings

6.6. Lack of objectives , priorities and Lack of objectives , priorities and deadlinesdeadlines


7. Indecision and procrastination7. Indecision and procrastination

8. Attempting too much at once8. Attempting too much at once

9. Leaving tasks unfinished9. Leaving tasks unfinished

10. Unclear communication10. Unclear communication

Note : It’s important in time Note : It’s important in time management to know when the management to know when the customer is available.customer is available.

* In time management we used a * In time management we used a framework which based on two criteriaframework which based on two criteria


1.1. Importance : refers to the Importance : refers to the activities that are importance to activities that are importance to you in meeting your objectives.you in meeting your objectives.

2.2. Urgency : is the time pressure we Urgency : is the time pressure we feel to perform certain activities .feel to perform certain activities .

EmergenciesEmergencies

Personal Growth

Personal Growth

TimeWastersTime

Wasters

RecreationRecreation

Importance High Low

High

LowUrg

ency

Figure 3-6: Time Management

Part II SALES FORCE ACTIVITIES Chapter 3: Sales Opportunity Management.

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Transcript of Part II SALES FORCE ACTIVITIES Chapter 3: Sales Opportunity Management.