Waste Not, Want Not
authors Dave Yoho
“The true efficiency of a direct-to-consumer sales organization will be measured by the quantity and quality of leads produced, balanced by the quality of the sales organization entrusted with converting those leads to quality contracts.”
This statement has broad implications. First, consider the standard, which is being set by many companies, particularly those that have become more sophisticated in developing leads from various sources. A common belief has created an illogical standard: A 40 percent close rate against leads issued is considered as logical, practical and part of an efficient sales and marketing model. This became a “standard” because many companies use it as a measurement.
Consider where leads come from. There is great disparity. There are leads, which come from prospects who openly request an estimate/price. At the opposite extreme, is the less-qualified lead, often called “nebulous.” This may be a lead developed by third-party sources, the Internet or an SFI (Sell, Furnish, Install) relationship with a national brand.
In larger organizations, there are many more sources and styles of leads. Many companies create self-developed leads by personal contact, canvassing or shows and events. Therefore, if you put all these leads in a big pot, stir them up, hand them over to your salesforce, then sell 40 percent of all leads issued, you are in “clover” (a myth).
Determining the Quality of a Lead
A salesman asked his manager, “How would you describe a good lead?”
The manager responded, “A good lead is 28 to 3 at the 2-minute warning.”
When a lead is acquired, the value of that lead either is increased or diminished by the person “in-taking” the lead. Here, there are many variations: those who use an independent call center, some who have their own call center and control the scripts, and some who rely on internal personnel to intake the lead. The outcome can be based on scripting, monitoring and maintaining standards.
Next, consider the various regulations and myths, which control the way the lead is taken. Many organizations use outmoded/poorly worded scripts without customer satisfying methods, which encourage interested parties to be present. The flip side is the organization that writes a lead often called a “one legger” then insists that its salespeople make a presentation and quote “a price.” In other cases, salespeople do not give a presentation if two parties are not present (poor thinking/weak execution).
The Value of the Lead Depends Mostly on How It Is Handled
Does the company have a modern sales procedure, structured to respond to the values and buying practices of today’s homeowners? Many companies are analytical in script development and while they do have some “one-legger” leads, they have found that by sophisticated scripting, they increase the number of bona fide, two-party present leads.
A critical element is how salespeople are trained and managed, with no intent to be critical of sales managers who do not understand or follow modern sales management techniques. They need to learn and then teach selling as a science, not an art.
Some companies are unwilling to analyze how their salespeople are trained and managed. To others, 40 percent sales against 100 percent of leads issued may seem unattainable. Factually, the highest percentage of companies operate below 35 percent—some in the category of 20 percent or less. In today’s market, companies can develop more leads, get better prices and make a profit. So they perceive change as unwarranted. (You cannot correct what you will not acknowledge.)
The Role of the Sales Manager
One additional issue regarding sales organizations: Recent surveys (analytics) point out that most sales managers are incapable of efficiently managing more than seven or eight salespeople. Salespeople are hired to go into a home with your product, on a lead developed by various sources, and then sell their product, explain its installation and convince customers that despite price differences, their company will give the customer the best value and the best customer service. This is often done by hiring salespeople who know little or nothing about the industry or the products they sell. They are subjected to a month or more of training and—voila—they are expected to become good salespeople, often growing into superstars (right idea, lacking fulfilling execution).
Consider that with as few as eight salespeople, the sales manager, who probably came from a similar sales organization and understands presentation skills, closing techniques and customer-satisfaction selling, is now asked to have people skills. Each day the sales manager has to deal with salespeople who have dissimilar behavior and, in turn, sends them into circumstances where the customer has dissimilar behavior. The manager exhorts the salespeople to follow procedures, which they are told is customer-service oriented. However, the sales manager may have salespeople who are unsure of themselves, or who may have other problems. They may feel insecure adapting to the sales role. It could be a girl or boyfriend problem, a mortgage or car payment, or any problem connected to gambling, drinking, health or depression (the real world of managing salespeople).
What (How) Do Sales Managers Manage?
Sales managers don’t manage sales. They manage people. Sales managers are called upon to face circumstances and tasks with which they are not familiar. Sales managers have to be shown a way to upgrade their sales management skills, to value the importance of ride-alongs, to constantly practice the system like any other professional in sports, acting, music, etc. The goal of the sales manager is to teach people how to make a better presentation to benefit the customer, to benefit the company, to benefit the sales manager, all while instilling the fact that the first beneficiary is the salesperson.
All of the inequities that go into that 40-percent standard of sales closed to leads issued are even worse when companies operate at under 35 percent or under 30 percent.
So now, the company who does all those things, does them improperly and yet still makes a profit may not want to consider change. They believe the ability to raise prices and then make a profit is appropriate and they have done their job; however, what does it portend for the future of the business?
A Challenge: Analyze Your Business
A 40-percent close rate against leads issued is an illogical standard.
- Wasting 60 percent of costly developed leads is an unwise model.
- Most sales managers are incapable of efficiently managing more than seven or eight salespeople.
- Sales managers need to increase (upgrade) their skill levels, which increases their value to your company.
- These inequities are utilized and considered effective by raising prices, increasing revenue with higher (dollars) profits, yet lowering total pre-tax net profits.
- Unit sales are often down. The average new contract may contain fewer windows than before, for example. Other products sold include fewer options.
- You cannot know what you do not know. Analysis has to be coupled with a desire to admit what you do not know—then create a new model coupled with projections for improvement and the discipline to continually execute the plan.
A Challenge: Examine the Solutions
- You can improve the close-to-leads-issued ratio (attitude and plan).
- You can increase the add-ons, upgrades, change orders and referrals (a plan).
- You can redesign your business model, your sales training and compensation model for current and future needs and benefits. Same business plan, new model.
- You can effect asset recovery with unsold leads and not use price drops or secondary products. There are professional, proven customer satisfaction methods.
- You can help your sales manager to become more effective—and more professional—and increase earnings with changes in your business model. QR
Dave Yoho is the president of the oldest (since 1962), largest and the most successful small business consulting company specializing in the home improvement industry. His recorded materials are sold throughout the U.S. and many foreign countries. His company employs a staff of consulting experts who specialize in advising companies on how to become more profitable in their business. His company sponsors ongoing seminar programs. For more information on their products, consulting services or seminars, visit daveyoho.com or contact email@example.com. See our ad elsewhere in this magazine titled, Improving Your Business Is Our Business.