Reducing Sales Costs Through Higher Success Rates

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RISMEDIA-NRRE VOL 16-5 July 2000

Reducing Sales Costs Through Higher Success Rates

By John B. Sculley, CRP, Vice President/Managing Director, RIS Consulting Group

Do you have responsibilities for sales management, marketing or finance in a company serving the relocation market? Maybe you’re spending more than necessary to get the sales results you want. Here are some provocative thoughts on using marketplace feedback to retarget your marketing investments and fine tune your people?s performance.

The sales cycle for relocation services is often long, uncertain and expensive. Service providers invest heavily in field sales staffs and general marketing activities to shape a corporate identity, to generate a sustainable stream of sales opportunities and to convert a high proportion of those opportunities into ongoing clients.

Too often, though, providers miss opportunities because:

? prospects either misperceive or are not attracted by the chosen marketing messages;

? product/service capabilities and costs are not clearly differentiated from competition;

? individual sales staff performance is not optimized.

The temptation in sales and marketing is to rely on what?s worked before, the tried and true themes, slogans and service features to which the company attributes its past successes. Under pressure for fast proposal production and sheer volume management, original thinking and customization may be sacrificed to beat a deadline or to get one more bid out today. But those expediencies and old chestnuts in your sales materials and presentations may be hurting you in costly ways.

Your buyers may be smarter than you think. They know a boilerplate when they see it, and the off-the-shelf proposal is quickly recognized and discounted from serious consideration. To be a consistent winner today, you need to recognize the shifting service demands and expectations of your buyers and respond in a much more individualized manner than in the past, both in the style and substance of your offerings.

Not to do so means wasting a large part of the time and money spent on developing opportunities and participating in bidding processes. Service providers have estimated that their fully-loaded cost of people, materials and travel for participating in a typical corporate bidding process may be $20,000 -$40,000. Why take part at all in this high-stakes poker if your company is not going to be intellectually competitive as well as price/service competitive?

The quandary in changing or customizing a sales approach is that you need to know in advance what will work best for this particular prospect, yet your direct access to the decision-makers may be limited. While you can gather factual and public domain information, it’s much harder to get at the values and qualitative issues that will most influence this company?s considerations and selection.

The best market intelligence resource for most service providers should be their own experience with recent sales opportunities: Why you won some and why you lost others. Most providers don’t mine this vein of information as deeply or as objectively as they should. Victories are taken for granted or attributed to past strengths. Losses are blamed on price or on others? inside relationships, whether true or not, because this avoids troublesome issues like image, service structure, workstyle, sales performance or prospects? perceptions of management.

One strategy to reduce sales costs is to “spend more to get more,” that is, to invest in professional, consistent prospect feedback that will improve both the volume and capture of future opportunities. By understanding the reactions and judgments of prospects regarding its service offerings and sales approach, a service company can recalibrate its marketing themes, enhance its products and train salespeople more effectively.

What’s the value of prospect feedback? Let?s look at the value of a higher sales yield in a hypothetical relocation service company.

Our fictional example is an established multi-service relocation company that maintains a field sales staff and dedicated marketing support, and also spends on advertising, promotions and events targeted at the corporate services market, for a total marketing/sales cost of $700,000 per year.

In return for this investment, the provider has historically generated about 55 bona fide prospects each year, and its track record is a 27% signing success rate, or 15 new signings yearly. The marketing/sales costs averaged $12,700 per opportunity, and $46,700 per signing.

The 15 new signings represent $1.5 million in annual fee revenue growth and $375,000 in profits. Over an average five-year client retention period, the provider earns $1.875 million in profits from a single year?s signings.

The missed opportunity, though, is much larger. While 15 were signed each year, another 40 real opportunities were not, and by the above assumptions these represent $5 million in missed profits. Just a 1% improvement in signing success rate would have contributed $69,000 in new profits, and a modest two more signings would add $250,000. Buying better marketplace feedback would have been a very high-yield investment for this company.

Prospect feedback can make this happen. The candor and immediacy of independent post-decision interviews enable a service provider to continually improve its general marketing effectiveness as well as the specific tactical actions of its selling process, whether in a formal RFP or other selling situation. Through a stronger mix of media strategies, product enrichment and personal salesmanship, relocation service companies can use corporate decision insights both to reduce cost per sale and improve overall profits.

The best mechanism for ongoing prospect feedback is an independent professional service for post-decision interviews, using a script customized to the provider?s own products, competition and marketing concerns. The interview stream provides case-by-case diagnosis of both winning and unsuccessful situations and becomes the basis for higher analysis of company identity, competitiveness and sales performance. As a service provider gains self-awareness, the coordination of marketing and operations can be improved and the identity and distinction of the company strengthened.

A clearer message to the market directly supports profit growth. Consider obtaining better prospect feedback so you’ll know whether anyone?s listening to you, if they understand your message, and if they like what they hear. If you truly understand what happened with yesterday?s prospects, you’ll be much better prepared to win tomorrow.

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Saturday, March 20, 2010