Optimizing Your Sales and Marketing Process:
How to Increase Sales Without Spending More
By Bob Norton / December 1, 2004
Ask marketing people what a company should do to increase sales, and most of them will probably say that you’ve got to spend more money on advertising. Or they’ll come up with equally expensive, complicated strategies that they think will capture new prospects. However, the reality is that very few companies obtain really good conversion results from prospect names they have already generated. Most of those leads go to waste. The conclusion is inescapable: the route to dramatically improved sales is properly optimizing your marketing and sales process.
What usually happens within a company is that the marketing folks generate the leads and then a bunch of names are somehow handed over to sales. This process is problematic, because it implies some sort of magical transition from marketing on the one hand to sales on the other. There must be a combination of sales and marketing directed at everyone in your prospect funnel. On a per-prospect basis, sales effort is almost always more expensive and labor intensive. Marketing provides a better opportunity to exercise economies of scale and move prospects along.
Most marketing experts say it requires between seven and nine “touches” before a customer will actually make a purchase, so it’s vitally important to design at least this number of communications or repetitions into the process whenever you have direct contact information for a prospect. Lower-cost marketing touches involve a one-time setup cost, followed thereafter by a very low cost per prospect. For example, the automation of marketing through computerized direct mail, e-mail, e-zines and other communications can be a cost-effective, even free, method to educate customers and bring them along in the sales process. E-mail auto-responders, which automatically mail a sequence of communications to customers every day, every week, or at whatever frequency you prefer, are a tremendously cost-effective way to touch customers without any human intervention. Auto-responders allow you to maintain a “perfect” scheduled contact frequency—there’s no salesperson who might drop the ball due to overwork, vacation or other distractions. By keeping your offering in front of prospects, automated e-mails reduce the education burden placed on your more expensive sales force and “soften the beach” for the time when the salesperson can contact the prospect personally.
Some prospects will require considerable personal contact to move along, but the additional automated contact is not likely to hurt. These extra marketing communication touches can also benefit your consultative sales.
Sales Funnel Diagram
Click Here For Higher Resolution Diagram
Companies often have trouble measuring, optimizing and assigning responsibility for the sales process. This task becomes much easier once the sales mechanism is broken down into its respective parts. The following diagram shows a generic sales and marketing funnel with three levels, designed to be implemented once the prospect has been identified. The three levels are somewhat arbitrary—your company may need a greater or smaller number—but it is usually best to start with a few levels and add more as the company becomes bigger and more people are involved in the sales process.
The steps to optimizing your funnel are simple. You’ll start by capturing all the right data in order to measure and improve upon each step. In order for the funnel to be effective, the following questions must be asked at each level:
How many prospects come into this level, and at what cost?
What are the key “leaks” (reasons that people fall out of the funnel) at this level?
What is the conversion ratio for moving from this level to the next?
What steps or tactics are available to move potential customers from this level to the next (or to eliminate them so expensive resources are not wasted)?
Because of the higher absolute numbers, improvements at the top of the funnel typically have a greater impact than those made at the bottom. Improvements at each level are multiplicative, not additive. A 10 percent improvement in conversion at one level can mean 10 percent more sales falling through each level to the bottom. However, a 10 percent improvement in two levels could mean a 30 percent improvement in sales at the bottom level, depending on your conversion ratios between levels. By doing the math and looking at the cumulative conversion ratio as you move down your funnel, you will begin to grasp the economics of your sales process. Unfortunately, most companies do not have an adequate understanding of these steps and ratios; they do not see the big picture and they can’t measure and optimize the entire process well.
Once you understand the development cycle of each sale better, it quickly becomes obvious exactly how much it costs to get a prospect into the funnel and ultimately move them through each level. This allows you to begin looking at real costs and determine the benefits of alternative strategies. In addition, you will be able to better rate each lead-generation strategy you are currently using and know what can be spent (or offered to partners) in order to bring in leads at each level of qualification. You’ll still need to tag each prospect back to the source of the lead and look at the overall quality of leads from each source as you compare costs, but the initial decision is made much simpler knowing what your likely revenue from 100 prospects is likely to be.
This is a partial chapter from The Startup Manual, a complete system for designing, launching and growing early-stage companies on minimum capital investment for maximum benefit to the entrepreneurial team. For the rest of this system and how you plug leaks in your funnel and increase your funnel yield by up to 500%, plus all our others models and systems for startup success please check out the Startup Manual here.