Sending a rep to a store to take an order or to introduce a new product to a new account is a very expensive business. Here’s why
Salespeople deal with more negativity than many other professionals. So when we talk about prospecting for new business, there is no wonder that the idea of such a task sends a shiver down the spine of many salespeople and strikes fear into a sales team, rendering them catatonic at the idea of hours and weeks of rejections, unanswered calls and emails that fall into the abyss. For every success, there is an endless stream of “thanks, but no thanks”.
Conversely, retailers are at a loss as to why they are always the last to know about new products and opportunities to improve their range assortment, screaming for more and more products and innovation to combat competition.
So why is there a growing gap between the have and have not’s, and why is it so hard to connect the dots. In simple terms “Face to face prospecting is expensive”.
So how expensive is expensive?
Industry statistics suggests that it can take five visits/contacts to a prospective client before they will commit. If a salesperson is required to successfully prospect five new accounts into the business each month and using a success rate of 20%, it will require that sales person to visit 25 new prospects and make a total of 125 visits/contacts to meet this objective.
If we then assume that the average cost of each call is a conservative $80 per call, it will cost the business $10,000 ($80 x 125) to gain these new accounts, and each new account will need to generate $2,000 ($10,000 ÷ 5) sales profit just to cover this costs.
So as you can see when the cost to serve is high – and the cost to prospect is even higher – it is understandable that companies struggle to balance in-field representation, service frequency and prospecting.
Data from McKinsey Global Institute shows that the average salesperson spends around 39% of their day doing role specific tasks. Most of their time is spent reading emails (28%), gathering information (19%) and internal communications/collaborations (14%). These figures do not take into account travel time.
The research also identified that if companies could re-allocate a salespersons time, they would have them spending at least 60% of their time directly related to sales and less time researching and gathering information, which is fundamental to prospecting and building new business.
Knowing the high cost of B2B sales calls, why would any company hire sales people to hunt down prospects with pure cold calling? Smart companies are recognising that prospecting and gathering insights to fill their sales lead pipeline with viable sales opportunities is not the role of their sales people, rather the role of a specialist to maximise call conversion rates, reduce the cost of doing business and increase overall productivity.
You can ready my full opinion piece in the next edition of C&I Magazine Aug/Sept, or go to our web site to find out more.
Thanks for reading
Craig Matthews is the MD of Stock Box, with over 30 years industry experience in retail development, specialising in independent retail programs.