Posted in Marketing & Strategy Articles, Total Reads: 2100
, Published on 15 June 2013
Mary Kay Ash, an inspirational business leader and entrepreneur who founded Mary Kay Cosmetics Inc. once said, “ Pretend that every single person you meet has a sign around his or her neck that says, ‘Make me feel important’. Not only will you succeed in sales, you will succeed in life.” The ‘make me feel important’ tag in sales lingo is called managing customer relationships. It is the foundation on which all business deals happen in a Business-to-Business (B2B) environment. Also, along the line a sales person needs to deal with various other key parameters such as identifying new, potential customers, retaining existing customers, mapping organizations, tracking existing leads, etc.
First, lets look at the sales process. The sales process can be defined as a 4-stage process that begins from prospecting you customer to eventually keeping or retaining your customer. Lets look at every stage:
Prospect: This stage involves making initial contact with a customer through cold callings and appointments to understand their business requirements
Engage: This stage deals with engaging the customer through a series of interactions to attract his trust and faith in your capabilities.
Acquire: This stage sees the real action in terms of negotiating and closing deals. This is the stage where a sales person would like to see most of his time spent. This stage is often the most critical as it is the deciding phase of the activities done before.
Keep: This stage deals with all post purchase or post sales action in terms of being able to retain a customer through good service and after sales support.
Every sales person should aim to gracefully persuade his or her customer into a win-win situation and not try to manipulate his or her thinking. Also, I couldn’t agree more with Mr. W Clement Stone in his belief that those sales are contingent upon the attitude of the salesman and not the attitude of the prospect. Even in B2B sales, it is not an organization that buys from another organization, but rather individuals that buy from individuals and it is here that the skill and attitude of a sales person that come to the fore.
To better understand how to satisfy the needs of our customer and to able to match our capabilities to the prevailing opportunities it is important o understand first who my potential customer is. We can identify our customers as follows:
Existing Customer: To get a new deal closed from an existing customer, we have focus more on the after sale service and the bundling aspects of the solution. Here the benchmark is our own old product and since we already have an existing relation with the customer, and in all possibility an existing solution or offering it is this fact that helps create a preference in the minds of the customer. This is also called ‘sticky solutions’ wherein the shifting cost is generally more of a hindrance to the customer. This ensures that we generally get the ‘last right of refusal’ on a deal.
Competitor’s Customer: Competitor’s customer or competitor’s account are generally the most difficult accounts to break into. These are customers who already have a preference to a competitor or a competitor’s solution offering. Since, the benchmark over here is generally the competitors offering, price is a critical factor to breakthrough. Strategic pricing is generally used by a sales person to get a foot in the door in such an account. One needs to have a clear picture of the competitor pricing and history of their acceptance and satisfaction in the eyes of the customer.
New Customer: These customers are the ones that have no previous history of using a similar solution from either you or your competitors. For these customers, it is very important to focus on the “value” to be delivered. Value could be either through cost savings, competitive advantage or both. If you are able to push through the value perspective, then pricing becomes far less of a constraint.
The next step would be categorizing customers to be able to track and treat them separately. We can categorize them as key accounts, accounts of strategic importance and other accounts that need to be catered to make up the numbers
Key Accounts: These are accounts that contribute the maximum to your sales. One could employ the 80:20 rule here to filter the Top 20% customers that contribute the most. However, this list needs to be looked into on an annual basis as customer spending and investment changes every year. A customer identified as a key account this year may not be one next year. You should concentrate your resources on these accounts and ensure a strong relation with them.
Strategic Accounts: These are the customers that may not contribute significantly to your sales, but it is imperative to follow and track these accounts due to their strategic nature. These could be accounts that have huge growth potential in the years to come or may be a competitor’s account that you have managed to break into. Improving relations with them will only ensure your long-term growth and sustainability.
Other Accounts: These are the customers that help you make up your sales numbers. They may not give you business on a frequent basis or the business may not be of large value, but they help you attain your targets, what we call ‘book and bill’ accounts. Business that you are able to book and bill (invoice) within the same quarter, half or year. These should not end up using too many resources.
Finally, lets look at how does one go about setting a sales target. This needs to be done very accurately and with some degree of estimation, as it is very difficult to get a clear idea of the business inflow at the very beginning of the year. We may have a clear picture of the potential business inflow up to the 2nd quarter; however, things beyond the 2nd quarter often are hazy and unclear. Many a times, it is forecasting of this number that puts sales people into trouble.
The Sales Funnel
The sales funnel is the most important concept when it comes to forecasting sales. As shown in the adjoining figure, depending on your hit rate or conversion rate, it is advisable to have a funnel consisting of sufficient leads or enquiries. For example, if you have a conversion ratio of 20%, meaning you convert every fifth lead into a successful deal; you would require leads that at least add up to 5 times your sales target. There are also instances when deals get shelved at the last minute or get shelved due to unforeseen circumstances. Sometimes deals also get shifted to the next quarter, half or year for that matter. Hence, having a substantial prospect pipeline is important.
Once, you have a sufficient prospect funnel you then go about filtering the relevant ones and concentrate on those engaging resources to the deals you believe you have a better chance of cracking. This also ensures an optimum utilization of resources.
It should not come as a surprise to note that although you may have more prospects, these could belong to fewer customers; as in a customer could be giving business through multiple deals or projects. This is also another way to revalidate that it is the key accounts that are giving most of the business.
This is the final step that goes into how you plan your business. Sales needs to be divided across all 4 quarters keeping in mind the resources, invoicing and also the larger picture, i.e. the Income statement. Planning your sales throughout the year will ensure steady cash inflow. For example, we can plan the sales as follows:
Sales as a % of the overall Sales Target
This distribution is a random allocation based on the below assumptions:
Q1 sales will be less because company budgets are generally drafted in this period.
Also, Q1 also sees invoicing done from the order backlog of the previous year.
Sales people generally tend to go on vacation in Q1 after a hectic and busy Q4/ year ending.
Q2 and Q3 sales are generally considered to be higher, based on invoicing plans and general trends in the industry.
Q4 sales are generally kept lower as a majority of sales done in this quarter are not billable and hence shift to the next year resulting in an order backlog.
This kind of planning comes with a certain degree of experience, industry knowledge and forecasting skills.
The author Siddharth Ravishankar, now a management student at SP Jain School of Global Management has 52 months of Front-end Sales experience with M/s Larsen & Toubro Limited, Mumbai in the role of Asst. Manager Sales catering to the Oil & Gas Industry in India.
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