If you have a salesperson, I challenge you to try this simple ‘time and motion’ study. Follow her around for a week and take note of the different activities in which she engages – and the percentage of her working hours that are devoted to each. My guess is that you’ll discover something like the following:
- Sixty percent of her time is spent prospecting (looking for someone to sell to).
- Thirty percent of her time is spent face-to-face with qualified prospects (actually selling).
- And 10% of her time is spent servicing existing accounts (looking after people to whom she has already sold).
Now, ask yourself a question: is your salesperson investing her time in the most effective manner? To answer that question, let’s examine each of the activities in which she engages, starting with ‘servicing existing accounts’. In my experience, using salespeople to perform customer service duties is a little like trying to kill a butterfly with a hammer: you waste resources, and make a hell of a mess in the process! The fact is, the best salespeople tend not to be great at customer service – and visa versa. Better to give your customer service duties to a full-time, telephone-based customer service person who’ll do the job properly, for around half the salary. Your salesperson can now divide the time she saves between prospecting (now approximately 70% of her available time) and selling (now 30%). Let’s take a look now at prospecting – is this activity really an effective use of your salesperson’s time? If you’re paying your salesperson $70,000 a year, and this person has 20 timeslots a week that she could theoretically fill with appointments, 14 of these slots are currently being spent looking for people to sell to in the remaining six! Or, to put it another way, each appointment is costing you (in salary alone) $243, instead of the $73 you’d be paying per appointment if all of the available slots were filled. Is this so bad?
The answer’s no … and yes!
No, it’s not unrealistic to invest $243 to set an appointment for a $70,000 a year salesperson. But this calculation doesn’t take ‘opportunity cost’ into account. In other words, what’s it costing in lost sales revenue to have your salesperson perform only six out of a possible 20 appointments? Let’s assume that a typical customer is worth $10,000 to you (lifetime value) – and that your salesperson successfully ‘closes’ one sale for each six appointments. Right now, your salesperson is performing six appointments a week – which equates to one sale, worth $10,000 (or $1,670 revenue per appointment). If you can find another way to invest that available $243 per appointment, such that each of your salesperson’s 20 available timeslots is filled, your salesperson will now be performing an additional 14 appointments – lifting revenues to $33,400 a week. (That should just about cover your customer service person’s salary!) Therefore, the ‘opportunity cost’ of having your salesperson do her own prospecting is a massive $23,400 a week!
But that’s not the half of it!
If your salesperson is no longer setting her own appointments, who is? And what’s the likely impact on her closing ratio? Let’s assume that you were to use advertising to generate inquiries – you’ll find examples of lead-generation advertisements in this (and previous) editions of AdVerb. And let’s assume that you give your new customer service person the job of setting appointments for your salesperson. Our experience is that responses to a lead-generation advertisement placed in a metropolitan newspaper are likely to cost you somewhere in the region of $30 each. If your customer service person appoints one in five, each appointment will cost you $150. So will your salesperson’s closing rate suffer if her appointments are set for her? In our experience, no. The fact is, salespeople’s closing rates typically more than double when appointments are set with respondents to a lead-generation campaign. And there’s a simple reason why: those prospects who set appointments after responding to an advertisement – and then reading an information pack (usually the offer in a lead-generation advertisement) – are significantly better qualified than those appointed by a salesperson using traditional prospecting methods. If we assume that your salesperson’s closing rate increases by only 50%, she is now making five sales a week, worth a total of $50,000. So let’s take a look at what we’ve achieved with our little hypothetical ‘re-engineering’ exercise. Well, we’ve increased your costs. A good telephone-based customer service person will cost around $35,000 a year. And your lead-generation campaign will cost you $150 per appointment. (Accordingly, your costs have risen by around $3,700 a week.) But we’ve also increased your revenues – from $10,000 a week, to $50,000 a week. There are 40,000 good reasons to grab a notebook and a calculator – and spend a week spying on your salesperson (with her permission, of course)!
