Q and A for sales people
Q. What is the best and ideal number of visits to be done on a current customer on a regular basis to retain his loyalty?
A. Here I go again. It depends.
So many questions in the world of professional sales are answered by that phrase.
- It depends on how detailed is your product line. The more complex and difficult it is for the customer to decipher, the more visits by you. The more simple the product line, the fewer the visits.
- It depends on how active your competitors are in the account. The more active, the more visits. The less active, the fewer visits.
- It depends on the relationship the customer has with your colleagues and inside people. The broader and deeper the relationship, the fewer visits are necessary on your part. If the customer knows no one he/she can rely upon in your company, the more you have to be there.
We could go on and on with these variables. But, probably the biggest is the economic equation. You should never invest more time in the account than it is worth.
Here’s a way to understand this. Start out by calculating what it costs your company for you to make one live, outside sales call. A simple way to do this is to take your gross wages then add about 30 percent more to it to account for fringes, taxes, expense reimbursements, etc. For an example, let’s say that you made $5,000 last month. Add 30 percent, and you probably cost the company $6,500. Now, how many sales calls did you make in that same period of time? I mean real sales calls, where you uncovered an opportunity, and/or presented a solution – not those where you just stopped by to say hello because you happened to be in the area. For our example, let’s say that you made two of those a day, for 20 selling days last month. Do the math. Divide the $6,500 by 40 calls and you have an average cost per call of $163.00.
Now, the number that we are after is the ratio of what it costs to what you get in return. Remember that we are working with general rules of thumb here, so that there is room for error on both sides of this equation. With that as preface, I generally believe that you cannot cost the company more than 25% of the gross profit if you want to be profitable to your company. In other words, if you get a sale that brings in $1,000 of gross profit, you should not have invested more than $250.00 in your costs.
Let’s use this understanding, now, to determine how many calls to make on a customer. The first question is, “How much gross profit does this customer produce per year?” Let’s say the answer is $10,000. OK, what is 25% of that? $2,500. And, if you cost the company $163 per sales call, how many sales calls can you afford to make? ($2,500 divided by $163 = fifteen). Easy. Simple. Economically defendable.
Let’s review the process to make sure you can use this for every customer.
1. Calculate your cost per sales call. (Total costs divided by total sales calls)
2. Calculate the expected gross profit from the customer.
3. Divide the gross profit by the average cost per sales call. Bingo. That’s the economic calculation.
As you may have inferred by reading this, there is a lot more to be said about this approach to making decisions about your sales time. If you want to dig deeper, I’d recommend Chapter Six of my book, 11 Secrets of Time Management for Sales People.
I expect to have lots of comments and questions on this one, as it is a way of looking at sales that few salespeople and sales managers have encountered before. Feel free to email your questions and comments to [email protected]. Fire away.
Dave Kahle has trained tens of thousands of distributor and B2B salespeople and sales managers to be more effective in the 21st century economy. He’s authored nine books, and presented in 47 states and eight countries. Sign up for his free weekly Ezine or visit his blog at www.davekahle.com. E-mail [email protected] to contact Dave.
