Setting Sale

Increasing Margins & Reducing the Cycle

Sales Challenge No. 4:

Increasing Margins
Selling used to be about telling prospects how they'll increase revenue; today it's about showing them how a product or service will save them money. The Miller Heiman study found that 66 percent of respondents believe buyers want discounts before they'll make a purchase. "Buyers are tending to keep their eye on pricing more than once or twice per year," Johnson says.

Successful sales teams are breaking the discount habit through better service that allows them to offer premium pricing. They're bypassing prospects that demand huge price breaks and going for those more likely to appreciate quality service at a slightly higher price. "You'll have fatter margins that feed your business and allow you to get better customers who are more loyal," Trailer says.

ATA Services has increased its margins by incorporating value-added services into its bidding process, such as cleaning and polishing ATM machines for clients. "In our early sales process, the only thing we were selling is what we could cut the price [of]," Robson says. "Now we try not to cut the price, [but to] add more value." The result: ATA's profit margin is predicted to grow by almost 40 percent this year.

A profitability breakdown of each customer-which includes an analysis of time spent per customer, system changes made to accommodate the client, and the salesperson's salary-can identify where margin growth is being lost. "You'll find your most difficult customers [that take] up the most resources are also the ones causing the most problems-and where you have the lowest margins," Reese says. "Those are the customers you want to fire." Or at least figure out how to allocate fewer resources in servicing them.

Hessan tells clients a price break might mean putting a lower-level person on the account or cutting the number of reports the client receives. "I'm up for getting very aggressive about how we can cut our costs to serve clients and come up with ways for them to pay less," Hessan says. "But usually, if I'm coming up with a way for them to pay less, it's because they're going to get less." Communispace is growing 83 percent annually, and sales should exceed $5 million in 2004.

Sales Challenge No. 5:

Reducing the Sales Cycle
Pushing clients to closure is a real problem for sales teams. In fact, 90 percent of sales deals do not close as forecasted, according to the CSO Insights study. In the Miller Heiman study, meanwhile, 69 percent of sales leaders said prospects are regularly putting off final decisions. "If you have a six-month sales cycle, it typically takes nine calls to close the deal," says Trailer.

To reduce the sales cycle, Robson is working with his sales team to separate the real leads from ones that are a big waste of time. "We've had to determine who we can't sell to," Robson says. "I think it's one of the reasons we've survived." He's also revamped the company's sales reporting and compensation structures so salespeople work toward monthly and quarterly goals instead of an annual quota. These changes have cut the 12-to-18-month sales cycle down to three to six months.

Savvy sales managers are spending more time examining closing rates-how many sales aren't closing-and they're instituting "loss reviews," calling prospects who didn't buy to find out why. Nothing is sold during the interaction; it's an opportunity to find out why the deal fell through. "You may find you lost the deal for other reasons than you thought," Reese says. Managers use this information to alter sales tactics in ways that sell the next customer more effectively and quickly.

Trailer says companies need to pay greater attention to psychographics, not just demographics. Psychographic questions delve into a prospect's thought process, such as how much a prospect values premium services or seems risk-taking vs. being indecisive. By looking at common characteristics of their best customers, sales teams can better target messages and reduce the overall sales cycle. "Most [salespeople] aren't clear on their psychographics," Trailer says. "Look at the characteristics common among and unique to the best customers vs. the worst customers." With a few changes in strategy, sales teams may find their biggest challenge will be turning down business instead of creating it.

Can You Relate?
CRM technologies help growing businesses sell more efficiently. And while no single application is the solution for all your business needs, here are three CRM applications that aim to help you and your sales force close more sales and manage those all-important relationships. All three offer a free online trial, so you can try before you buy.

CRM OnDemand, From Siebel
(866) 906-7878
Price: $70 per user, per month

With Siebel's CRM OnDemand, you can choose either the general version or from one of the 23 industry-specific solutions in the areas of consumer goods, high-tech, manufacturing and more. An industry-specific solution provides interface templates featuring special key data fields as well as industry-specific business process support, analytics and reports. This CRM solution also covers the standard marketing, sales and customer support fields, and then some.

GoldMine 6.5, From FrontRange Solutions
(800) 776-7889
Price: $179.95

Goldmine 6.5 focuses on the four cycles of customer retention-marketing, sales, service and support, and management. These cycles include lead distribution through the Web; contact management through a single, centralized database; automated administrative tasks like sending customized e-mails; identifying high-margin leads and more. You can also import existing data from ACT! and Microsoft Excel or Outlook.

NetCRM, From NetSuite
(650) 627-1000
Price: $75 per user, per month

NetCRM includes built-in customizable dashboards that give snapshots of the most important performance indicators, such as customer and product rankings, and lead-generation statistics. NetCRM also includes commissions management, automated e-mail campaign statistics, customer support management, customizable online lead forms, customer privileges and more.

-Steve Cooper
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Chris Penttila is a Washington, DC-based freelance journalist who covers workplace issues on her blog, Workplacediva.blogspot.com.

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This article was originally published in the August 2004 print edition of Entrepreneur with the headline: Setting Sale.

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