Today’s article is written for owners, sales managers, commercial directors and anyone professionally connected with the sales.
The sales chain is everybody and everything that the client encounters from the first appeal to the purchase. The sales chain at the grocery store is as follows “The shelf → the cashbox”. In the online shop: “The showcase → the basket → the manager → the courier”. These are relatively simple chains.
There are more complex ones: “The Secretary → the sales manager → the product manager → the account manager → the project manager → the accountant → the lawyer → the manager of corporate security → etc».
Such schemes are used by integrators, complex equipment suppliers, large industrial corporations. And they are correctly applied: everyone should mind their own business. The secretary skillfully connects the client with the right person, the sales manager determines the need of the client and connects him with the product manager and further up the chain. Everyone does his business professionally.
The problems begin when the company lacks the feedback mechanism: the previous link does not care what happens with the next one. And so the whole chain: everyone wants to “throw” the client to the next link. And if the client drops out of the chain and doesn’t remind of himself, he will be forgotten.
The obvious remedy seems to hire universal people to lead the client throughout the chain. But the only person who is able to do this is the best sales manager of the company – commercial director. He can’t cope with everything.
Therefore, the task of the commercial director is to build the system with constant feedback throughout the sales chain and personal responsibility of the managers. To improve the employee’s management and to improve the sales’ results companies can use special helpful solutions like Salesforce.
This is a problem of the project companies, which do not have rigidly standardized service packages. The managers evaluate the cost of a project themselves. A simple trick is when the client calls to the company twice under different names, talks to different managers gives the same data and gets two commercial offers. One is bound to be cheaper.
What would you do, if you get two proposals on the same project? Probably, you would be pushing the company to make an even lower price.
A remedy is to standardize pricing.
Unmotivated sales managers
Imagine that the company employs 100 sales managers, each of which sells for a certain amount per month and their salary is calculated in accordance with this amount.
Managers can be unmotivated because of low wages and not value their job. It’s enough to offer them a slightly higher salary and they move to a new job. They do not want to learn or stay late hours, the most popular phrase in the sales department is “This is not my area of responsibility”.
The remedy: measure the effectiveness of each manager and choose the top 10. Dismiss others gradually. In six months the sales department will decrease from 100 to 10 people. All the clients will be distributed among the remaining 10 and the revenue per manager will increase nearly 10 times. The manager will value their job, and you’ll get a compact and productive sales department.
But the reduction of the department is associated with another risk – the emergence of the “stars”, which is causes other problems.
It is quite dangerous when there are 10 good sales managers in the company because if one of them quits and takes away 10% of the clients, the company will face significant financial loss. This is not fatal, but not very pleasant either.
When there are three or five managers in the company, the situation is critical: one employee controls 20-30% of the revenue. The loss of a fifth of the revenue introduces the company to the state of crisis; the loss of the third destroys the business.
Having such an influential tool, the employee may push the owner: demand increase in salary, a higher percentage, company car, contract for 5 years and a secretary.
Another situation is when the commercial director or team leader makes more sales himself than all his subordinates together. This means that he is a great sales manager, but a bad leader. And it’s also dangerous for business.
The same situation is with clients: if two clients provide 80% of the revenue, you risk losing business in the first crisis.
The remedy is to adjust the revenue of each employee, diversify the client portfolio and find the balance between distributed and concentrated revenue.
A mix of old and new sales
It’s always better and easier for a sales manager to sell products or services to existing customers than to attract new ones. It also brings more revenue. This position is useful for the company: it is incredibly important to keep current paying customers.
But there are stages when the company needs to grow rapidly and gain a larger customer base. Then there is a need for the managers who will be engaged in attracting new customers. They are called New Business Managers. Their motivation is not tied to the current sales but to the new customers.
The general rule is to use different incentive systems for sales to existing and new customers. Do not connect these functions to a single manager.
Another problem with the key clients is that they bring good revenue, but sometimes absorb the profit:
- The customer wants a loyalty discount.
- The client uses too many resources or support from your service department.
- The customer requires a personal visit to the manager instead of the phone call.
- Major customer requests to change the product in accordance with his desire etc.
The general rule is to continually assess the profitability of all customers, especially the key ones. When you assess the profitability of the customers, you are able to make an informed decision.
In general terms, there may be three possible outcomes:
- Increase profitability by selling additional services to the customer that he is now asking for free. If the client really needs personal service and round the clock technical support, he will be able to pay for it.
- Politely refuse to provide discounts and additional services. If your main product is really necessary, most of the clients will continue to work with you.
- Completely refuse to work with the client to focus on more profitable projects. This is not always bad for the business, especially if they work with the client does not affect your position in the market. But it is important to leave in a civilized manner.
If you do not measure the effectiveness of your business, you do not control it and you can not influence it. But too many metrics are not good either.
The balanced metric of sales is as follows:
- sales funnel of 4-5 statuses with conversions for each status;
- revenue for the whole company and each manager;
- profit and profitability of the company as a whole and for the customers;
- costs for the attraction of the customers.
All the parameters should be presented in dynamics, at least monthly and over the past 1-2 years. If your average transaction closes within 3-5 days, it is better to collect the data every week.
Some companies are so bothering on measurement that set counters to everything – from reading the pages of the site to interacting with the client. Advice to such companies: the metric is useful only if you can do something to improve it. For example, you know that you have three percent more applications in the afternoon. You do not hire three percent more managers on half-day. It is useless knowledge.
But if you work from 9 am to 7 pm and receive the most of requests from 11 am to 9 pm, with a peak at 8 pm, you can move the working day. But this option does not require continuous measurements, most of the companies are naturally embedded in the market biorhythms.
It does not mean that there is no need to collect statistics. You do need to collect and analyze the data, but only while commending favor.