How Effective is Your Selling?

We've heard, again and again, that "it's dog eat dog" in the business world. Nevermind the shark. As it turns out, there are some places where this is actually true. In your industry, for example, it's just not enough to be making money. You have to be growing, too. If you're not growing, at least as fast as your marketplace is, then you're losing market share to someone else. It truly can be dog eat dog.

But let's not use the term "growing" too glibly. Growing means increasing sales -- and not just maintaining the same level of sales and not just more than what you sold last year. Growing means that you're increasing sales faster than the market is growing -- it means you're taking sales away from other people, you're gaining market share.

If only it were that easy. More than a few of my clients, after having started a successful business, have awakened a few years later to the fact that their companies have stopped growing. They've stopped growing because their sales and marketing has somehow lost its effectiveness. And, worse, it's always a surprise to them! Unfortunately, by time they realize they've stopped growing, they're already in trouble. In the tough, fast-paced, global market environment of today, keeping your finger firmly on the pulse of your sales effectiveness, on your growth, is vital.

The good news is that it's not hard. Here are ten tips on keeping yourself up-to-date on just how effective your company is at its sales and marketing.

Look At The Data.

First and foremost, look at the data. Sure, you've been watching your top line and your bottom line and a few lines in between. But are you watching what goes on behind those P&L lines?

Tip 1. Calculate the conversion time to turn prospects into customers.

That's right. How long does it take to turn a prospect into a customer? It's the length of time from when a prospective buyer first shows up on your radar to the time they place their first order. Track it in days. If the number isn't going down, it means your selling effectiveness is.

Tip 2. While you're at it, check out the lost sales ratio.

Simple enough to do, of every hundred prospects that show up on your radar, how many don't buy within a fixed period of time (within 1.5x of your average conversion time)? If that number is staying flat or increasing, you've got a problem. Staying flat means you're not getting better. Increasing means your selling is actually getting worse.

Tip 3. Calculate the cost of a customer and the cost of an order.

Divide your entire sales and marketing budget for a period (and some suggest you throw in fixed or allocated costs for sales and marketing) by the number of new customers; that's the cost to acquire a customer. Now divide the budget by the number of new orders to determine the cost of a new order. If those numbers are increasing, your sales operations are becoming less efficient. If it doesn't stop, eventually it will kill you.

Tip 4. Now, look at the lifetime and lifetime value of a customer.

To truly appreciate your marketing and sales cost, however, you have to have some basic idea of what a customer is worth. Regularly measure average life of a customer and their value to you during that time. If you don't know this number then it's impossible to know how much you can or should spend to acquire a customer! Needless to say, the goal is that lifetime and lifetime value increase.

 Tip 5. Calculate your overall revenue per head.

This is a question of taking your total revenues and dividing them by the total number of people in your company... even the administrative and janitorial staff. The find out and compare your numbers to the typical ratios for your industry. Consider investing in the Culpepper Reports (if you're in the technology world) or purchasing the Robert Morris Associates (RMA) ratios. These will tell you what the average ratios are for other companies within your industry. An example of the Culpepper ratios is shown below. Note the diverse revenue per head values. Your banker may have access to the RMA reports (they're often used as the basis for assessing credit worthiness).

 

 Examine The Mechanics.

It's one thing to manipulate numbers to get an idea of what's going on, it's another to understand how these numbers happen. To find out, let's roll up your sleeves and get down in the dirt -- where the action is. Here's a few more tips...

Tip 6. Talk to your existing customers -- frequently.

Want to find out how your selling operation is doing? Who better to ask than your existing customers? Make a regular practice of talking to existing customers about your selling efforts. Pick a customer at random and get them on the phone. You'll find that not only do you learn something you didn't know, you'll find that they really appreciate your interest. Many successful companies make their entire senior staff do just this.

Tip 7. Talk to lost prospects.

If you think talking to customers is informative, take the time to talk to the "ones that got away." These are the one's you really need to give attention! Make a point, independent of your sales force to call customers that chose NOT to do business with your company. Try it!

Tip 8. Take a customer service person to lunch.

When you're done meeting with your customers and lost prospects, make a point to take one of the line-level customer service people to lunch. Or buy the pizzas and do a roundtable with them all! Customer service people get the problems first. They have to clean up the mess. Take them to lunch and you'll find out a lot about where your problems lay in setting expectations properly with your prospects, or about what's not working in the sales process, or where your quality problems are. You'll be surprised at what you'll learn!

Tip 9. Take a fresh look at your selling materials.

For marketing, my variant of Newton's Law says that once you set something in motion, it will tend to stay in motion until something stops it. Nowhere is this more true than with your selling materials. A brochure gets developed and tends to stay in circulation long after its content becomes obsolete. Same with your web site. And the same for presentations, and whitepapers, and case studies. Make it a point to see exactly what your sales prospect will see. Then act accordingly. If your sales materials are out of date, then your whole company and brand are out of date, too.

Tip 10. Contact your own company.

This is one of my favorites. Yes, call the 800 number, fill in the web form, send an email, or just call the receptionist and request some information on your company's products. Then start your stopwatch. If you think you'll be recognized, get someone else to do it for you. See what happens, what you get, and how fast. If your company is on top of its sales process, you'll have action and materials in an hour. If your company can't do that, you better worry about the competitor that can.

Dog eat dog. Up or out.

At the end of the business day, it's all about growth. And growth is all about sales. If your company can't grow enough, if your company can't sell effectively, then you're destined to lose to someone who can. It'll just be a matter of time. Try the 10 tips. You'll be surprised at what you learn about your own sales and marketing operation.