Ask any sales manager what keeps them up at night and they will likely reply: “Worry about meeting my gross revenue goals!” Clearly, these goals represent why sales organizations exist-to produce the revenue side of the profit equation. Volumes have been written about increasing revenue, which is of course most important. But there is impact on the bottom line for every dollar of cost spent as well as for is for every dollar of revenue lost. I took on a great challenge to bring down the cost of sales by 30-40% for companies I coach. So recently this lead me to build a unique process called SWAS – Selling Without the Appearance of Selling to reduce these seven key mistakes that drive up the cost of sales unnecessarily:
- Lack of Connection. Great salespeople are masterful at story-telling. They convey relevant, powerful, and compelling reference stories that provide prospects hope and motivation for change. Despite this vital quality to generating business, sales-people are constantly caught in the rut of their method. They lead into their process too early without the connection that sets the foundation to conduct their sales process upon. The sales person is eager to move the buyer along, qualify her needs and win their business, rather than helping the buyer moving along at their pace as demand is created for something the buyer didn’t know they were missing, until now.
- Failure to disqualify. Every sales organization has criteria to qualify an opportunity. The problem is that if an opportunity does not initially qualify, salespeople will spend lots of time and resources trying to get it qualified-especially if it is a big one. Never confuse a big opportunity with a good one! What they lack is a set of criteria to disqualify one, so that the qualification process goes on and on in the hopes that it will somehow meet the qualification criteria if enough effort is spent. A disqualification process is useful only if there are other opportunities to work on once an opportunity has been disqualified. Don’t get me wrong; all sales organizations need a qualification process. But there must be a deliberate decision point at which an assessment is made as to the likelihood of the opportunity becoming qualified with a reasonable cost and time. If the likelihood is low, disqualify and start working on another opportunity.
- Long sales cycles. Every day a salesperson spends on an opportunity drives the cost of sales up. Many factors draw the sales cycle out longer than necessary. Disqualifying earlier will help, but even with qualified opportunities, effort is often spent on unnecessary activities. A major reason for long sales cycles is that salesmen do not have a clear, step-by-step, proven sales process. I have often heard the salesmen ask, “What do we do next with this opportunity?” A sale process provides the answer to this question. Without a process, the answer often is: “I’m not sure; it depends on what the customer wants to do next.”
- Misapplication of sales resources. A basic principle in efficient selling is to minimize time and resources on those who cannot make the buy decision happen, and spend it instead with one who can. Sales people often invest their energy on people who are receptive to their message whether they are in the decision loop or not. This is human nature. We all prefer working in that comfort zone that contains friendly people and has an environment we can enjoy. Decision-makers are demanding and make us defend our claims against worthy competitors.
- Misalignment with the customer. Buyers go through a buying process that typically has three phases: needs definition, product comparison against the needs and decision/risk. Effective selling aligns the sales activities with the buying process so that the sales person actually helps the customer buy. Being out of alignment can damage the sales person’s credibility and force the customer to focus on the wrong things at the wrong time. Sales activities that are done too early may have to be repeated if the customer is not ready yet. For example, a sales person that leads with his product detail will damage his credibility if the customer is first trying to understand his needs. If the customer sees a product function that he has not decided he needs, he may believe the product is not a match, or is overpriced. If the seller survives this “out of alignment” situation, he will have to cover the product detail discussion again later when the customer is ready to see it in the second phase. Being in alignment means executing the sales activity when the customer is ready for it, not sooner.
- Giving unnecessary price concessions at the close. In an effort to close an opportunity, salespeople often reduce the price to encourage the customer to make the decision now, or to overcome objections. Resisting the customer pressure to lower prices is difficult, but there are several approaches that make it easier: Add enough value during the sale to demand non-commodity prices at the close. Convince you care more about their ultimate success than winning with lowest price. Consider disqualifying if all they want is lowest price. Nothing speaks louder to your resistance to unnecessarily giving profit dollars away than letting the customer know you are willing to walk away from the deal rather than turning it into a bad deal and winning.
- Giving without getting. Customers are trained by their salesmen to get “freebies.” Freebies cost money. For expensive freebies such as product samples, pilot installations and training, customers think they have a right to them. Some freebies may be necessary, but how do we limit them? One way is to ask the customer for something in return – of equal value – when they ask for a freebie. Once the customer realizes there are no true freebies, they will limit their demands. And, the salesman might get something they would otherwise not get!
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Remember, the highest paid person in your company is the sales manager/director of sales. They are the life blood of your business because without sales you don’t have a business. Cost of sales/contribution margin is king of the metrics for building a sustainable company. Having a system to do this is like having food and water for your business. And perhaps your competitors will worry a whole lot more with you taking your business to new heights!