Every one of your current customers was, at one time, a prospect — that is, a potential user of your company's products and services. To convert those prospects into customers, someone (either you or one of your colleagues) sold them on what you and your company had to offer. Someone in a sales or support role did and said the right things to the right people at the right time, and did so in a way that separated your company from its competition. Someone convinced each of these customers that your company's products and services represented meaningful values unobtainable elsewhere. Someone instilled in the customers a sense of confidence in your company's ability to provide these values. Further, if you have kept these customers, and their business with you has grown, someone has reinforced this confidence through a company-wide commitment to the customers' satisfaction.
Every sale, and every successful long-term customer relationship, starts with a prospect. This point is a critical one because it highlights the importance of prospecting to your company's future growth and to your own personal success.
Much of any company's growth stems from increased sales with established accounts. But any firm that relies solely on current customers to achieve its growth objectives will, over time, lose market share. Eventually it will fail.
I should not have to prove this point; but if you doubt it, just look at the numbers. Compare your company's business five years ago with its business today. Unless you have fallen on extraordinarily hard times, or unless your market has undergone revolutionary change, your company's current sales revenues should be substantially greater today. Don't stop your comparison with the gross numbers, however. Get into the details to see exactly where all this money comes from by looking at these three classes of customers.
How much of your company's current sales revenue is generated by customers who didn't buy from you five years ago? What percentage of your current total business does this represent? What percentage of the increase in revenues does it represent?
These answers will demonstrate the value of new-account prospecting. For most successful companies new accounts are a significant percentage of their overall growth.
How much of your company's current sales revenue comes from established, long-term customers — that is, steady customers of at least five years? What percentage of your current business does this represent? How much has your business with them grown, in actual dollars, and as a percentage of total revenues over the past five years?
The size of these figures might surprise you, but most companies achieve a large part of their growth through the expansion of business with long-term customers. This growth (or in some instances, decline) will give you a fairly good indication of how well you and your colleagues are prospecting for new business within existing accounts.
How much of your company's sales revenue of five years ago came from customers who no longer buy from you? What percentage of your total revenue at the time did this represent? If you had kept this business, what percentage of your current total revenue would this represent today?
This last figure is the cost, in lost sales revenue, of turnover among your customer base. If you want to make this data more meaningful, display a running total for several years to help isolate the effects on your business of economic conditions and other external factors.
Some experts label this annual decrease the “cost of customer dissatisfaction.” But this label is a gross and deceptive oversimplification. It can lead to bad decisions by managers and salespeople. Customer dissatisfaction, while an important cause of lost business, never represents the entire story. Some business is lost because of changes in customers' markets and a subsequent redefinition of their businesses. Some is lost due to plant or office relocation. Some lost business results from personnel changes or customer reorganizations. Some results from changes instituted by your company — for example, the elimination of a product line. And some customers simply go out of business.
This is not to say that much of this lost business is not preventable; but placing it all under the general heading of “customer dissatisfaction” can disguise the real problem and lead to the implementation of incorrect solutions.
Some lost business is preventable, but not all. You will not retain every account, and those that you lose will be lost for a variety of reasons. But whatever the reasons for this turnover, the losses must be replaced. Successful and aggressive prospecting can therefore be a major determinant in ensuring your company's continued profitability and your own professional future.
Keys to Successful Prospecting
When it comes to prospecting, the problem for most salespeople is time. All salespeople have heard or said the following: “How can I prospect for new customers when the demands of my current customers (selling and servicing established accounts) take up virtually all of my time?” It's an old refrain, but in most instances it's an excuse, not a valid reason. Unless you are a major account manager with overall account responsibility for only one or two major customers, you must engage in prospecting. It's not an option. It's an absolute requirement. Even the major account manager should continually be on the lookout for potential business … if, that is, he or she has any concern for the company's future profitability.
We use the word “prospecting” for a good reason. Like the proverbial prospector who roamed the old West searching for the mother lode, you can approach your task randomly, knocking on the door of every plant or office you encounter. You might on occasion hit modest pay dirt, but the chances are greater that you will waste a lot of time and effort, achieving little on the way of long-term value. This approach, often called “smokestacking” by the old timers, might have been reasonable years ago, but today it is far too costly in time and money.
Instead of engaging in random searching, take a lesson from the modern prospector who makes use of a wide array of tools — geologic surveys, satellite photo interpretation, test bores, etc. — to increase the probability of success. The key is not how much you prospect, but how efficiently you do it. As always, the most successful salespeople are those who not only work harder, but also work smarter.
Salespeople who don't prospect successfully are usually guilty of one of these failings:
They don't understand the nature of prospecting and therefore spend little time thinking about the task and what it really entails.
They prospect incorrectly and waste time doing the wrong things.
They don't prospect very much at all because they are simply too lazy.
If you fall into the last category, there is little that I, or anyone else, can do to help you. Laziness is a failing only you can correct. But to help you motivate yourself, let me say only that effective prospecting will likely have a greater impact on your personal success (and your income) than any other aspect of your job. For the rest of you — you who realize the value of prospecting and work hard at it, but do not seem to be achieving your goals — let me offer some tips to help you prospect more efficiently and effectively.
Successful prospecting requires persistence, organization and planning, coupled with a good dose of creativity. To take advantage of these traits in yourself, do not view prospecting as something you do only on Tuesdays, or every third week, or at any other specified time. The salespeople who prospect most effectively, always prospect. They observe and they listen. They are constantly on the lookout for new potential customers. They make use of any and every available source of information, and they do not hesitate to ask satisfied customers and others for referrals.
The number and types of sources from which you can identify good prospects are limited only by your own creativity and persistence. Do not discount formal sales leads like responses to advertising, mailings or telemarketing. But you should realize that the most profitable leads are often those that come from people you encounter personally in the field or those that you can deduce from reliable information you uncover. In each instance, however, you must be receptive to such information to recognize it for what it is.
Some of the best leads result from your willingness and ability to keep your ears and eyes open. In fact, by looking in the obvious places and by paying attention to what goes on around you, you can generate your own leads. The following examples all happened to one salesperson in the course of a six-month period. His company offers environmental services and related products, largely to heavy industry. Put yourself in his position and consider what you would do in each instance.
A young plant engineer from a large corporation approaches your booth at a trade show and hands you his card. He volunteers that he has no purchasing responsibility for your products, but is very impressed by what he has seen and heard. Could you tell him more?
While driving to an appointment, you hear a guest on a radio talk show discussing his company's commitment to improving its environmental record. The guest, the vice president of communications, states that, “We are in the process of re-examining our investment in this area and expect it to increase substantially over the next five years.”
In an article in a regional business magazine, the chief executive of prospective account states that his company is totally revamping its purchasing function, placing strong emphasis on quality, delivery and in-depth service. “A lot of our current suppliers simply can't cut the mustard.”
A colleague tells you that another division of one of his accounts (a division located in your territory) has just experienced a costly plant shutdown resulting from a failure of one of your competitor's products.
An article in the Wall Street Journal refers to a company's expansion into a new business, one that fits well with your company's products.
A customer happily mentions that one of his competitors, who does not buy from your company, is having serious problems in an area directly related to the products you offer.
Of these six leads, five ultimately led to a sale. More importantly, four of the six prospects became long-term established customers. This would not have happened had the salesperson not recognized the opportunity in each situation and acted on it promptly. Incidentally, only three of the prospective accounts were actually in the salesperson's territory, but his commitment to his company's overall objectives and his well-developed sense of teamwork caused him to take the initial steps that resulted in a substantial amount of new business. Is it any surprise that this individual is consistently among his company's top producers?
The first step to successful prospecting, then, is your willingness to consider it a major aspect of your work as a professional salesperson. The second step is to be open to the opportunities that you encounter on an almost daily basis — and to respond quickly to these opportunities.
In the next article, we will discuss how to set priorities among your prospective accounts and how to categorize and approach different kinds of prospects. (To be continued.)