This article was first published in the June 2011 UK edition of Accounting and Business magazine.
Q: WE NEED A SALES STRATEGY
A: ANALYSE YOUR 'SALES FUNNEL'
Q: Our insurance firm is about to take a bit of a leap forward by recruiting a far larger sales team and I wondered if you had any advice as to the sales strategy we should employ to ensure that our growth continues. Basically we’re a family business and our sales team has, up to now, consisted of just my brother and me, so we have not considered such things before. Peter
Julia: A sales strategy is an essential part of any business success story, so you are right to ensure that one is in place before you recruit your team. Looking at your historical sales should provide you with a starting point to give you a view of how successful your current methodology has been and to point you in the direction of a stronger line of attack.
David: One of the most important elements of a sales strategy that you should be analysing is your ‘sales funnel’. It’s basically an assessment of the way your customers travel through your sales process to the point where they part with their hard-earned money.
Julia: Yes, this is so important because understanding the size and shape of your sales funnel, where you might lose potential customers along the way and what happens when you change your sales process, will allow you to accurately forecast conversion rates, manipulate your strategies to improve efficiencies and help you to build a more profitable organisation.
David: Every sale will follow a path: from gaining the interest of a potential customer, through various conversations in person, via email or on the phone, to asking them to complete the transaction, and then delivering the product or service to them. Each step along the way can help to strengthen your chances of making that sale or weaken your position, increasing the possibility of losing that customer. Developing your sales funnel means noting every process you go through within a sale and assessing how many customers you lose at each stage. This information will determine how wide your funnel is at the top and how narrow it is at the bottom. Of course, you really want it to be as cylindrical as possible, because this will indicate the least customer leakage.
Julia: By knowing the number of people entering your sales funnel as prospects and the number making it all the way through as sales, you can calculate your conversion rate. This information will allow you to adapt your sales strategy to reduce losses along the way. Then by continuously assessing the efficiency of your sales funnel and comparing it against your clients’ buying cycle, you can develop a strategy and a process that has the best chance of helping you to grow your business. Good luck, Peter.
Q: WE’RE LOSING OUR EDGE
A: LOOK AT YOUR DATA
Q: For 15 years we have had a reasonably successful credit control business handling clients throughout the capital. However, recently we’ve noticed that our conversions have started to suffer. It’s definitely not anything to do with the recession, as many of our competitors are thriving in this market. Can you help? John
Julia: Hello, John. If you look at the answer we’ve just given Peter, you’ll see how the sales funnel can help to answer your question, too. All too often business owners and managers consider that the most important goal is to pull or push as many prospects as possible through the door or on to the website or, alternatively, get them to call or email. However, this is just step one in what could be quite a long process in actually getting them to buy something from you. The length of this process will be determined by your industry, legal requirements, the payment processor you use, your sales strategy and quality guarantees, to name just a few. It’s the conversion of these potential customers into willing and, hopefully, repeat contributors to your profit margins that you should be focusing on. The architecture of your sales funnel will give you all the information you’ll need to determine where your customer leak could exist.
David: If your conversions are suffering, then you may need to review one or more of three things. First, are you attracting the right kind of customer? Secondly, are you attracting a manageable number of customers? And, thirdly, are your staff handling these customers efficiently? If you are attracting the wrong kind of customer to your business, you’ll be wasting time and robbing yourself of the time you could be spending with those elusive paying customers. If you are attracting more customers than you can handle – something that many might see as a problem they wish they had – then your salesforce could so easily become overwhelmed, leading to loss of quality, mistakes, additional stress and, ultimately, the reduction in customer service that could push potential customers away. Similarly, if your sales team have not been correctly trained, have become complacent or were indeed the wrong people to be recruited in the first place, there are so many things that could go wrong. They could spend too long with some customers to the detriment of others, put potentials off with their lack of knowledge or perceived lack of commitment, or they could simply allow for leaks to be created and go unchecked all along the entire process.
Julia: John, you need to develop a detailed sales funnel analysis immediately, so you can tell where these leaks are taking place and what is causing them. Only then can you formulate a plan of action to plug them. Too many business owners grasp at what the problem is, instead of relying on the hard and fast data that is already available within the business. The data will tell you what you need to know. Obviously, it won’t put it right, but it’s the starting point. A sales funnel is a living thing; it changes with trends and fashion. Your corporate image or marketing efforts can factor in its shape, and you do have the power to manipulate it to make your sales process run more efficiently and to improve your conversion rates. Without this information or analysis you cannot know with much certainty where your weaknesses lie, but with it you have all the knowledge you need to be able to implement the changes you must make to your company’s sales strategy and customer interaction that will turn things around for your business.
Julia Payne was a practising City lawyer before turning to business. She had three successful startups and exits, and sat on the board of two plcs before becoming CEO of an international consultancy, again with a successful exit. David Bowler has a background in sports management, and built and exited his first business by 23. He sits on the advisory council of Global Marketing Network. Incisive Edge provides consultancy, innovation and business growth programmes, working with SMEs to optimise revenue streams and drive value.