By Dave Kahle

The Power is in the Sales Process

In all of my training and consulting work, I’ve found it helpful to establish, right at the beginning, a big-picture view of the sales process.

Once we have an overview, we can understand every sales principle and practice, and use the big picture to focus our efforts to improve the effectiveness of our organization and our personal efforts.

Here’s the simple graphic I use to illustrate the big picture process.

Let’s make some observations:

  • Note that it is all about customers. Without customers and potential customers, there can be no such thing as sales. Customers are the foundational element of any sales process. You can’t even define sales without reference to customers.  So, our process describes stages a customer travels through in their financial relationship with you and your organization.
  • It describes the process of an individual or account moving closer and closer into a committed financial relationship with the seller. And that defines the big picture sales process. Moving a sufficient quantity and quality of people through every stage is the fundamental work of every sales system, every sales organization, and to a less degree, every salesperson.

So, every chief sales officer, every entrepreneur, every sales leader, and every salesperson should understand this ‘big picture ‘process as a way to make sense of his, and his organization’s, sales efforts.

Understanding the Sales Process

The process begins with the illustration of the globe, in which billions of people live, and which we call the land of apathy and ignorance.  They don’t know that you, your company, and your products or services exist, so they are ignorant of you. And they don’t care.  Their lives have been fine without you.  Their companies and organizations have survived without you So, they are apathetic to you.

The first task of a sales system, and the sales process, is to reach into the land of apathy and ignorance and identify some suspects.  Suspects are individuals or organizations that you suspect may one day purchase your products and services.

There are a whole host of possible strategies to identify suspects, and well deal with those in other articles and podcasts.

Once a body of suspects is identified, the sales system must then sort through them and identify some as prospects and discard the rest.  A prospect is an individual or organization who

* Has a real need or interest in your product or service

* Can make the decision to buy your product

* Can pay for it

Typically, in a B2B environment, this involves some research.

At some point, prospects have to be identified and, if there are enough of them, prioritized.

The next step in the process is the most difficult: Moving a prospect to become a customer.  A customer is a prospect who has given you money for your products or services.

When money changes hands, the relationship changes dramatically.  Now, you are a known entity.  The prospect has taken a risk with you, and you have delivered to the point that he pays for it.  You are now an entry on their computer and they in yours.  You know at least one person and they know you. Everything changes for the better.

This is difficult because the customer takes a risk in dealing with you.  He puts his reputation at risk, and also risks the specific applications for which your product was selected.  It is so difficult that some salespeople rarely if ever attempt to accomplish it, preferring, instead to spend their time only with customers.

Typically, the company has spent money to get to this point in the system, while there may be some gross profit in the first purchase, it rarely is enough to offset the total costs of bringing someone to this point.

So, the selling company invests in the acquisition of a new customer.  In light of that, it’s helpful to calculate the lifetime value of a customer.  Here’s a simple formula to do that.  Review your financial records and calculate:

The average annual sales for all of your customers.

Multiply that times the average gross profit.  This will yield the average annual gross profit per customer.

Calculate the average length of time that a customer continues to buy from you.

Multiply that times the average annual gross profit and presto, you have the lifetime value of a customer in your business.  Here’s an example:

Average annual sales per customer: $20,000

Average gross profit percentage: 34%

Average annual gross profit per customer: $6,800

Average number of years a customer continues to buy: 12

Total lifetime value of an average customer: $81,600

This is helpful to add some perspective to the costs of acquiring a customer – the first part of the process.  If a customer is worth $81,600, how much should you spend to acquire one?

Our training program, “The Sales Master’s Approach to Acquiring New Customers” addresses this process for a typical B2B selling organization.

This task of moving people from the land of apathy and ignorance to the point at which they have given you money for what you have is one of three mini-processes within the total process.

Partners Sales Process

Each of the mini processes requires its own set of tools, tactics, and, often skill sets on the part of the salespeople who orchestrate those processes.

The next mini process involves moving a customer to a client.  A client is a customer who buys over and over again.  That process requires a different set of practices and salesperson skill sets than the new customer process.  It’s for this reason that salespeople are often classified as hunters or farmers.  Hunters are equipped to implement the new customer process, while Farmers are e personally better equipped to work with people they already know.

Economically, it is in this stage that most salespeople and sales organizations make their money.  While it costs to acquire a customer, moving them to become a client brings a return on that investment.

Not all customers become clients.  And there can be lots of different classes and types of clients.

The final step of the process is one that many sales systems don’t formally acknowledge – to their own detriment.  That is moving a client to a partner.  A partner is an individual or organization that buys almost everything they can from you and is committed and loyal to you.

Typically, about 3 – 5% of customers grow into partners.  So, if you had 200 customers, for example, you may have 6 – 10 partners.  However, that small handful of customers often produce 50% of your total revenues.

Because of the disproportionate contribution to the company’s profits, formally and intentionally addressing the idea of creating partners is one of the most effective initiatives a sales organization can undertake.

There are thousands of practices, strategies, tactics, and tools that can be added to make your system work. That’s why every system is different.

This basic and fundamental understanding provides you a way to focus on the most effective efforts and then keep you focused on the end result of working with customers to fill their needs and being rewarded financially for that work.