Chapter 6 Notes PDF

Preview

Summary

chapter 6 notes...

Description

Chapter 6 Notes Prospecting -

An important activity for nearly all salespeople is locating qualified prospects.

THE IMPORTANCE OF PROSPECTING

-

Prospecting, the process of locating potential customers for a product or service, is the most important activity that many salespeople do.

-

Salespeople must find new customers to replace those that switch to competitors, go bankrupt, move out of the territory, merge with non-consumers, or decide to do without a product or service.

-

A salesperson often needs to prospect even in existing accounts because of downsizing, job changes, or retirements of buyers. Salespeople have to assess whether leads are good prospects.

-

CHARACTERISTICS OF A GOOD PROSPECT

-

Prospecting actually begins with locating a lead (sometimes called a “suspect”) – a potential prospect that may or may not have what it takes to be a true prospect. Some salespeople mistakenly consider every lead a prospect without first taking the time to see whether these people really provide an opportunity to make a sale.

-

To avoid that mistake, the salesperson must qualify the lead. Qualifying the process of determining whether a lead is in fact a prospect.

-

A prospect is a lead that is a good candidate for buying what the salesperson is selling.

-

If the salesperson determines that the lead is a good candidate for making a sale, that person or organization is no longer considered a lead and instead is called a prospect. Sales funnel – A prospecting term that reflects that some leads do not become prospects and that some prospects do not become customers. 1,000 leads might be needed, for example, to generate 200 prospects, of which only 15 might become customers. This funnel of smaller and smaller numbers is called the sales funnel.

-

The following five questions are used by many organizations to help qualify leads and pinpoint the good prospects: o Does a want or need exist? – Customers buy to satisfy practical needs as well as intangible needs, such as prestige or aesthetics. By using high-pressure tactics, sales attempts may be made to those who do not need or really want a product. Such sales benefit no one. The buyer will resent making the purchase, and a potential long-term customer will be lost. o Does the lead have the ability to pay? – Ability to pay includes both cash and credit. Many companies subscribe to a credit-rating service offered by firms such as Dun & Bradstreet. Salespeople use information from these sources to determine the financial status and credit rating of a lead. They can also qualify leads with information obtained from local credit agencies, consumer credit agencies such as Experian, noncompetitive salespeople, and the Better Business Bureau. Salespeople are sometimes surprised at their leads’ credit ratings. Some big-name firms have poor ratings. o Does the lead have the authority to buy? – Knowing who has the authority to make a purchase saves the salesperson time and effort and results in a higher percentage of closed sales. Because of downsizing, some firms are delegating their purchasing tasks to outside vendors. These service vendors, called systems integrators, have the authority to buy products and services on behalf of the delegating firm. Systems integrators usually assume complete responsibility for a project from its beginning to follow-up servicing. When systems integrators are involved, salespeople need to delineate clearly who has the authority to purchase. Sometimes the overall buyer will retain veto power over potential vendors. o Can the lead be approached favorably? – Some leads are simply not accessible to the salesperson. For example, the president of an international bank, a major executive of a large manufacturing company, or the senior partner in a wellestablished law firm would not be normally accessible to a young college graduate starting out as a financial advisor. Getting an interview with these people with these people may be so difficult and the chances of making a sale may be so small that the sales representative should eliminate them as possible prospects. o Is the lead eligible to buy? – For example, a salesperson who works for a firm that requires a large minimum order should not call on leads that could never

order in such volume. Likewise, a representative who sells exclusively to wholesalers should be certain the individuals he or she calls on are actually wholesalers, not retailers. Another factor that may determine the eligibility for a particular salesperson is the geographic location of the prospect. Most companies operate on the basis of exclusive sales territories, meaning that a particular salesperson can sell only to certain prospects and not to other prospects. A salesperson working for such a company must consider whether the prospect is eligible, based on location or customer type, to buy from him or her. Salespeople should also avoid targeting leads already covered by their corporate headquarters. Large customers or potential customers that are handled exclusively by corporate executives rather than a salesperson in that geographic location are often called house accounts.

-

Leads that meet the five criteria are generally considered excellent prospects by most companies.

-

Some firms look at the timing of purchase to determine whether a lead is really a good prospect. Relevant questions to consider include: o When does the prospect’s contract with our competitor expire? o Is a purchase decision really pending? o How do we know?

-

Other firms look at the long-term potential of developing a partnering relationship with a lead. Questions to ponder: o What is the climate at the organization – is it looking to develop partnering relationships with suppliers? o Do any of our competitors already have a partnering relationship there?

-

The Corporate Executive Board takes an entirely different approach to prospecting and qualifying leads, which it terms insight selling. Under this approach, salespeople evaluate prospects who do not necessarily have a clear understanding of what they need but are in a state of flux and have been shown to be quite agile in making changes (that is, they are able and willing to act quickly when a compelling case is made to them).

-

This approach also encourages salespeople to interact with people in the buying firm who are skeptical rather than friendly information providers and then coach these skeptical decision makers how to buy the seller’s solution. Why? – Proponents claim that buyers today already know a great deal about the marketplace and understand many of their options and that salespeople who follow the proposed approach are more successful in gaining commitment.

-

HOW AND WHERE TO OBTAIN PROSPECTS

-

Prospecting sources and methods vary for different types of selling. Overview of Common Sources of Leads:

-

-

-

SATISFIED CUSTOMERS – Satisfied customers, particularly those who are truly partners with the sellers, are the most effective sources for leads. o In fact, some trainers argue that successful salespeople should be getting the vast majority of their new business through referrals from customers, and firms are now encouraged to calculate customer referral value (CRV), which is the

o o o o o

o o o

o o

o o

o

-

monetary value of the referral as well as the costs to get and maintain the referral. Referrals of leads in the same industry are particularly useful because the salesperson already understands the unique needs of this type of organization. Referrals in some cultures, like Japan, are even more important than they are in North America. To maximize the usefulness of satisfied customers, salespeople should follow several logical steps. First, they should make a list of potential references (customers who might provide leads) from amongst their most satisfied customers. Some current customers could be called promoters or evangelists – these are your most loyal customers who not only keep buying from you but also urge their friends and associates to do the same. Next, salespeople should decide what they would like each customer to do to promote/refer you. Finally, salespeople should ask the customer for the names of leads and for the specific type of help he or she can provide. Salespeople sometimes gather leads at referral events, which are gatherings designed to allow current customers to introduce prospects to the salesperson. Other events that salespeople use including sporting events, theater visits, dinner at a nice restaurant, a short cruise, or golf lessons by a pro. They key is that the gathering should be fun and sociable and a way for a salesperson to gather leads. The name of a lead provided by either a customer or a prospect, known as a referred lead, is generally considered the most successful type of lead. Satisfied customers not only provide leads but also are usually prospects for additional sales. This situation is sometimes referred to as selling deeper to a current customer. Sales to existing customers often result in more profits than do sales to new customers. It is also possible that a customer could be the other kind of referrer – one who tells others about how poorly you or your product performed. This negative referral is not the kind of referral a salesperson likes to get, and every effort should be made to ensure that the customer is satisfied and stays satisfied with the solution offered by the salesperson. Finally, salespeople who leave one company can bring their sales clients with them to the new company for which they work.

ENDLESS-CHAIN METHOD – In the endless-chain method, sales representatives attempt to get at least one additional lead from each person they interview. o This method works best when the source is a satisfied customer and partner; however it may also be used even when a prospect does not buy. o Example of the Endless-Chain Method of Prospecting:

o

-

NETWORKING & CENTER OF INFLUENCE – Networking is the utilization of personal relationships by connected and cooperating individuals for the purpose of achieving goals. o In selling, networking simply means establishing connections to other people and then using those networks to generate leads, gather information, generate sales, etc. o Networking can, and often does, include satisfied customers o Networking is crucial in many selling situations. o Successful networkers offer a number of practical solutions:  Call at least 2 people per day, and go to at least 1 networking event every week  Make a special effort to move outside your own comfort zone in a social setting  Spend most of your initial conversation with a new contact talking about his or her business, not yours, and don’t forget to learn about the person’s nonbusiness interests  Follow up with your new contact on a regular basis with cards, notes of congratulations about awards or promotions, and articles and information that might help him or her  Whenever you receive a lead from your contact, send a handwritten note thanking the person for the information  Whenever possible, send your networking contact lead information as well.  Make free use of business cards  Consider joining Business Network International (BNI)  Be prepared to introduce yourself succinctly in social settings  Remember that the goal of networking events is to prospect.

o In one form of networking, the center-of-influence method, the salesperson cultivates a relationship with well-known, influential people in the territory who are willing to supply the names of leads.  Centers of influence tend to be those who enjoy being very socially involved in their communities  And people in the community not only trust these individuals but also seek their advice o Buying community – a small, informal group of people in similar positions, often from several companies, who communicate regularly, both socially and professionally

-

SOCIAL MEDIA – Salespeople are using social media, liked LinkedIn, Facebook, blogs, and Twitter, to communicate with buyers. Given the growing importance of these channels, these types of tools can also be used to prospect for new customers. o However, salespeople should not rely on social media for prospecting o Salespeople should first determine their overall approach for using social media, involving either a push or a pull strategy. o Some tips on the use of social media for prospecting by salespeople:  Go to the prospect’s website.  Go to LinkedIn and search for the company and the person you want to call on. Connect with them through a connection you already have.  Once you are connected, review the prospect’s LinkedIn page carefully and look for things in common  Follow the prospect on Twitter  If the prospect follows you back on Twitter, send her or him a DM.  Search for the prospect and the company on networking sites like YouTube and SlideShare  If your company has just launched a new product or service, ask users what they think about it via Twitter  Upload your contacts from your email program to LinkedIn and Facebook to search for more connections  Use Find Friends in Facebook to find other people whom you might be able to add to your network  Look at your friends’ list of friends and connect w them  Start a group page for your product in Facebook  Use the search feature in FB to find groups and fan pages that might be related to your business  Use the search updates feature in LinkedIn and data intelligence tools to see if prospects have secured any new business, are developing new products, and so forth  Create a blog that includes your opinions, educates prospects, provides news, and encourages reactions and postings from prospects

  

Follow competitors’ social media postings to gather competitor intelligence Monitor your social media sites for comments/postings by competitors and unsatisfied customers Use the TweetDeck feature to be alerted whenever a keywork has appeared in any tweet

-

OTHER INTERNET USES – Successful salespeople are using their companies’ Web sites, email, listservs, bulletin boards, forums, roundtables, and newsgroups to connect and learn more about individuals and companies that may be interested in their products or services o One advantage of Web-based promotions is the number of international leads that can be secured. o Firms are also developing extranets – Internet sites that are customized for specific target markets.  Extranets are usually used to build relationships with current customers, but some companies are also using these sites to generate leads.

-

MARKETING DEPARTMENT – Firms’ marketing departments have developed sophisticated systems to generate inquiries from leads, often including a toll-free number to call for more information, by using advertising and direct mail. o Account-based marketing efforts use an enterprise account sales/marketing team devoted to the customer. In these teams, marketing, works with the sales team, actually helps develop the account plan, rather than just supply the sales force with contact information, and so forth

-

SHOWS, FAIRS, AND MERCHANDISE MARKETS – Most companies display or demonstrate their products at trade shows, conventions, fairs, and merchandise markets. o Sales representatives, usually stationed at booths, are present to demonstrate products to visitors, many of whom salespeople have not called on before. o Trade shows are short (usually less than a week), temporary exhibitions of products by manufacturers and resellers. In Europe, trade shows are called trade fairs. o Merchandise markets are places where suppliers have sales offices and buyers from resellers visit to purchase merchandise.  The sellers are the manufacturers or distributors, and they sell only to resellers, not to the public

-

WEBINARS AND SEMINARS – Many firms use seminars and webinars (online seminars) to generate leads and to provide information to prospective customers.

o Make sure your seminar appeals to a specialized market and invite good prospects o The subject should be something your attendees have a strong interest in, while your speaker must be considered an authority on the topic o Try to go as high quality as possible and consider serving food o Take an active role before, during, and after the seminar

-

LIST & DIRECTORIES – Individual sales representatives can develop prospect lists from sources such as public records, telephone directories, chamber of commerce directories, newspapers, trade publications, club membership lists, and professional or trade membership lists. o It is often useful to know the Standard Industrial Classification (SIC) code or the North American Industry Classification System (NAICS) code, which is a uniform classification for all countries in North America, when researching using secondary sources. o Salespeople can purchase a number of prospecting directories and leadgenerating publications.

-

DATABASES & DATA MINING – Sophisticated firms are developing interactive databases that contain information about leads, prospects, and customers. o These systems result in better sales prospecting and more tailored sales presentations. o Companies are using data mining, which consists of artificial intelligence and statistical tools, to discover insights hidden in the volumes of data in their databases. o Only 15% of data that happens to be at a company’s disposal is actually analyzed

-

COLD CALLING – In using the cold canvass method, or cold calls (by call we usually mean a personal visit, not a telemarketing call), a sales representative tries to generate leads for new business by calling on totally unfamiliar organizations. o Cold calling can waste a salesperson’s time because many companies have neither a need for the product nor the ability to pay for it. o This fact stresses the importance of qualifying the lead quickly in a cold call so as not to waste time. o Today, cold calling is considered rude by many purchasing agents and other professionals. o Most firms now encourage their salespeople to qualify leads instead of relying on cold calls. o But sometimes, firms require their salespeople to start making cold calls, especially in downtimes o Salespersons prospecting must be willing to listen for needs and be forthcoming in developing a business and have customers’ best interests in mind.

o Some companies use a selective type of cold calling they refer to as a blitz: a large group of salespeople attempts to call on all the prospective businesses in a given geographic territory on a specified day.

-

SPOTTERS – Some salespeople use spotters, also called bird dogs. These individuals will, for a fee, provide leads for the salesperson. o The sales rep sometimes pays the fee simply for the name of the lead but more often pays only if the lead ends up buying the product or service. o Spotters are usually in a position to find out when someone is ready to make a purchase decision. o A more recent development is the use of outside paid consultants to locate and quantify leads. Small firms attempting to secure business with large organizations are most likely to use this approach.

-

INSIDE SALESPEOPLE – Firms combine efforts of inside and field salespeople to prospect effectively

-

EXPERTISE – Salespeople can prospect by developing their expertise in their field, resulting in prospects seeking information from them.

-

SALES LETTERS – Prospecting sales letters can be integrated into an overall ...