An investment bank I was working for put up millions of dollars to build a soap factory in China. Bank representatives flew over to China several times to oversee the construction of the facility. Once the factory was open, they kept close tabs on the production, and were amazed at how hard-working the Chinese employees were, doing shifts around the clock, seven days a week, producing several times more soap than the bank had ever dreamed of.
But as the months wore on, the bank was concerned that sales figures were incredibly low. Thinking that they may have been cheated, the bank sent auditors to China. When the auditors arrived, they saw the factory dwarfed by an enormous warehouse. “What is that?” they asked.
“That is where we keep all the soap we have been making.” Answered the factory owner.
“But don’t you have any plans to sell the soap?” Asked the auditors.
“Yes we do.” Answered the owner. “Any customers who come to the factory are welcome to buy the soap. So far, not many have come.”
Needless today, the bank cut their losses on the soap factory. They were hoping to find another investment opportunity, one with a more proactive marketing scheme.
Salespeople and shopkeepers both sell. But there is a fundamental difference. Shopkeepers depend heavily on advertising and promotions. They can sit back and wait for customers to come in and buy. They also get a great deal of walk-ins, customers who were passing by and either realized that they needed something, or were attracted by an item in the window.
Salespeople, on the other hand, must go out and find their own customers. Sitting in your office, waiting for people to buy, you could starve to death.
The process of finding customers is called prospecting. Prospecting can take many forms, each of which has its advantages and disadvantages: Cold calling, direct mail, referred lead prospecting, networking, and cold canvassing.
Cold calling has been the traditional means for most salespeople to obtain customers. Cold calling can serve two purposes. For simple products, low involvement, low price products cold calling can be a means of selling. In other words, the products can actually be sold on the phone. For higher involvement, high cost, or complicated products, cold calling is normally used to setup appointments for sales presentations.
Cold calling is strictly a numbers game. The more you call, the higher the probability of making one sale or setting one appointment. In general, private homes are so saturated with telemarketing calls that people hang up instantly, resulting in a dramatic drop in the efficacy of cold calling in consumer sales. In business to business sales cold calling may still be effective, particularly if you are calling to set an appointment, rather than selling a product. In general, in business to business sales, you could expect to set three appointments per hundred calls. With consumers, the number increases dramatically.
Stockbrokers who sell financial products to customers over the phone expect to make thousands of calls before making a single sale.
Generally 50% of appointments made over the phone, from a cold call, will cancel, no show, or re-schedule. So you need to make nearly double as many appointments as you need to fill up your week.
Direct mail is the junk mail we receive daily. Most of us throw this mail away without even opening it. In the past, it was believed that direct mail had a 1% effectiveness. Recently, a statistic was published stating that the effectiveness of direct mail was half of one percent.
If you need to make three sales per week, you will need to send 600 pieces of mail. In my own business, including advertising materials and postage, one direct mail piece costs me about $2.50. So, 600 pieces would run me $1,500. Even if you can keep your cost down to .80 per piece, you are still looking at a cost of $480 per week to close three sales. Your average commission better be extremely high if you are going to depend exclusively on direct mail.
Direct email is free and easy to send. The only major draw back is that the effectiveness is infinitesimal.
Referred lead prospecting: Asking friends, family, or existing customers for referrals. A potential problem is that people are afraid that if they give a name and you try to sell insurance or Amway to that person, that the friendship will be lost. This method works best for business to business sales, as business people are more apt to give up the names of other business people, than they would be to give up names of friends and relatives.
Most insurance sales jobs begin by having the new salesperson make a list of friends and family. The average person knows about 200 people. If you can get one third of them, about 70 people, to give you ten referrals each, then you will be starting off with a list of 700 names to call. From that list, you should get appointments with thirty percent, about 170 people, and be able to close a sale with thirty percent, about 55 sales.
An extremely successful insurance agent makes 100 sales per year. Where do the other 45 sales come from? You get the 55 new clients to give you three names each, 165 names, and you close thirty percent, 55 more sales. This gives you more than 100 for the year.
Although you should definitely employ this strategy, and constantly ask for referrals, at every step of the sales process, don’t count on these numbers holding up. They rarely do. Most insurance salespeople start out with a bang, selling to friends, family, and close referrals. Two months later, they are out of names.
Unless your parents are super-wealthy business people or politicians, your family probably doesn’t have enough contacts you need to make it in sales.
Once, when I was a temp at a brokerage firm, the top salesman said to me. “I never even ask the new guys about their friends and family. No matter who you are, your contacts are this much.” He measured out about two inches with his fingers. “But you need this much.” This time he measured out two feet.
For many novice salespeople, their career ends when they have sold to everyone they know. Some will then try another product, and another, with the same results, until their family and friends are saturated with insurance, vacuum cleaners, cutlery, or whatever other products they have tried to sell.
Networking is an extremely effective way to market. Make sure you always carry fifty to a hundred business cards to each networking event you attend. Try to meet and get a business card from every single person in the room. Talk to each person for no more than two minutes. Focus on them! A quick icebreaker is to ask “What is the biggest challenge you face in your field?” This is much better than the mundane “What do you do for a living?” Also, “Tell me about the challenges you face,” requires an essay type answer. The question shows you are interested in the person, and it opens up an opportunity for them to talk about themselves.
People love to talk about themselves. Listen intently and you decide where the synergy lays. Your challenge is to uncover the potential need for your product or service. Write significant data on the back of the person’s business card, such as “unhappy with his current service provider,” or “ships fifty metric tons per month.” The next morning you won’t remember which person gave you which card. Write a brief description of the person on the card, “fifties, fat, with glasses, looks like Uncle Schlomo.” If the first name is not gender revealing, write the person’s sex on the back of the card as well.
Networking is, by far, my favorite means of prospecting, and the way that I have built every business I have ever run. One major disadvantage of networking is that it is easy to get sidetracked, and to forget why you are attending the cocktail party or event. Networking is also very time consuming. It often costs money for these events and you get fat eating all those finger foods. Also, most networking opportunities are in the evenings, so it means late nights.
Being a salesman, as you know, means working a 24 hour day. If you are married or have children you may want to get home before your kids go to bed or your spouse forgets what you look like. Going home early can adversely impact your ability to build a client base.
Another method of prospecting is called, cold canvassing. This means stopping into companies and asking to see the owner. The effectiveness ratio is similar to that of cold calling. To be successful you will need to knock on 60 to 100 doors per day. It is time consuming, exhausting, and of course, you are out in the weather. Often, you won’t meet a decision-maker. An aggressive sales company in New York, who depends exclusively on cold canvassing, said that their effectiveness ratio ran like this: 80 doors, will give you 12 decision makers, and you will make 3-4 sales.
Are you depressed yet? Sales is a tough racket, but it is the only career with unlimited earning potential.
A wise man once said “The harder I work, the luckier I get.” The odds of selling anything by sitting back, listening to music and popping a beer are minimal. But by working you can increase your odds.
Since we have already established that a salesman can’t sell anything to himself, sitting in a room alone. Then the obvious answer is that a salesman should spend his day in front of people, selling to them, or, trying to get in front of people so you could sell to them.
To be successful, it would be best to use a mix of prospecting methods. For example:
1. You should definitely start by making a list of friends, family, and customers, and get as many referrals from them as possible. You should revisit this list approximately every three to six months and see if they have more names for you.
2. Remember to ask for the referral at every step of the sales process. When you initially call to set an appointment ask for a referral. At the first meeting ask for a referral. At the point of sale ask for a referral. At the time of delivery ask for a referral. When you do your service calls or follow up visits, ask for referrals.
3. Since you have to eat meals anyway, look for networking events held at meal times. Many organizations offer early morning breakfast events for business people. Wouldn’t it be nice to arrive at the office with the business cards of ten new prospects in your pocket? Attend another networking event at lunch, and again at dinner. BUT! Remember, networking is not a job. You are there to get business cards, get face time, and make appointments for sales.
4. You could schedule one or two canvassing days per week. Also, every time you leave the office, you go out to get coffee, or visit a client, you should stop into businesses on the way and introduce yourself.
5. Use cold calling to round out your week or fill in the gaps in your schedule.
6. Think of targeted direct mail programs you can do which will give you the most bang for the buck. At the end of every month I used to send one piece of mail to each business card I had collected during the month who didn’t become a client. Since I already had the card, this meant I had already met the person at least once, called them, and now this piece of mail would be at least a third contact. Always follow up with a phone call.
You can make the money. People are going to spend it anyway. You might as well get your cut. But sales is a job, you have to work. Put in the hours, and good things will come to you.
If this article makes sense to you, and you would like to hire me to teach sales training workshops at your company, contact me through my website speakingadventrue.com