A good sales strategy turns your business and marketing plans into revenues and profits.
Your sales strategy identifies which customers you are targeting and how you will reach them. It also sets out your sales forecasts, allowing you to measure performance and identify opportunities to improve.
The right approach
Base your sales strategy on your business and marketing plans. Set out in detail how you will deliver marketing objectives, target market segments and support major marketing activities, such as promotional drives. Identify the key aims of your strategy. For example, which target markets you are aiming for and the timescales involved. Get realistic, accurate plans by involving sales people.
Understand your market
- Find out more about your customers. For example, their needs, what products they want and what level of service they expect.
- Establish when, where and how your existing customers buy.
- If you sell to other businesses, identify who influences buying decisions, who actually makes them and who places the orders.
- Monitor the key trends in your market, such as market changes and the activities of competitors. Take into account changing customer tastes and developments in technology or legislation.
- Identify the key drivers of your business - the people, knowledge and conditions that influence how well your business functions.
Concentrate on generating profitable business
- Rank customers in order of profitability, identifying existing, potential and key customers. Take into account the total cost of selling to each one.
- Identify criteria that enable you to understand what a profitable customer looks like. Use this profile to identify specific customers to market to.
- Identify what you are good at by analysing the activities that led to your most profitable sales last year.
- Define other benefits to your business of serving each type of customer. For example, a high-profile customer may provide you with credibility. Your first few customers in a new sector may make it easier to sell to others in that sector.
- Decide how important these different benefits are to you. Only sell to less profitable customers for a good reason.
- Try to improve your gross margin on your less profitable sales. For example, you might reach the customer using a cheaper sales channel.
Your target customers
Business growth depends on creating new, profitable business with different types of customer.
Generate business with new prospects. Target prospects efficiently. For example, analyse your top ten existing clients and identify customers with a similar profile. Plan how to approach each new customer. For example, to win the custom of a key customer, you may drop your prices - creating a loss-leader - or give your product away on a trial basis. Make sure you have a strategy to eventually move prices back up to a profitable level or be prepared to live with reduced margins from these customers.
Develop more business with existing customers. Set out what you will do to get existing customers to make higher-value purchases and buy different products (‘up-’ and ‘cross-selling’). Plan how to keep key customers happy and build relationships.
Build up a mix of customers to help safeguard your sales revenue. Do not rely too much on one customer. Be aware of potential customer cash flow problems. Work out a sensible balance between time spent developing new business and time spent keeping existing customers happy. Be aware of, and manage, seasonal sales. Many businesses find that only ten months out of 12 bring income.
Reaching the customer
Once you have worked out which customers to target, you need to decide which sales channels will be most effective.
You can either sell direct or through an intermediary. Weigh the costs of each channel against the benefits it would bring.
Most businesses sell to customers direct
- Direct sales methods include selling face-to-face, direct mail, telesales and ecommerce.
- Selling face-to-face is the most expensive sales method, and works well for high-value sales. Complex products (eg customised accounting software) need to be explained and sold by an experienced sales person.
- Direct mail and telesales are more cost-effective options for lower value products. For example, you might aim to complete all sales under £100 over the phone.
- Selling via your website can be the cheapest method of all. Involve sales and marketing employees in the design and layout of the site.
If you cannot reach your customers directly, use an intermediary. You might target customers that are individual consumers through retailers. If you are breaking into overseas markets, consider using an agent. You may need to focus on selling to the intermediaries. For example, persuading retailers to display your product prominently.
You may be able to join forces with other businesses to boost your sales effort. For example, related but non-competing companies might share customer information. Note that the Data Protection Act requires you to inform customers who you will share their information with and give them the option to object.
Promote and support your sales channels by communicating with your customers. Think carefully about how customers would prefer to hear about, and buy, your products or services. Advertise to build recognition and awareness of your product. Provide promotional material to intermediaries selling your product or service. For example, brochures and leaflets.
Together with your sales employees, prepare your sales forecast
- Prepare a detailed breakdown of the sales you plan to achieve by month, by customer and by product.
- Base forecasts on previous sales levels. Take into account information about major new orders, changes to customers’ buying habits, and other factors such as pricing and marketing activities.
- State the likelihood of achieving sales, using a percentage figure, and set out when you expect to close them.
- Agree how many leads are needed to achieve the forecast growth. Set out how many leads should come from new and existing customers.
- Identify customers by name or by the number you expect to sell to.
- Define the number of sales you expect from a set number of visits, calls or other contacts (your sales ‘conversion’ rate).
Determine the frequency and levels of sales activity needed to achieve targets. For example, allocate the amount of time to be spent on each account. Remember to include the whole range of activities needed to complete a sale. Decide how many sales people you need to achieve your sales targets, and allocate territories or accounts. Take into account your sales costs, including promotional materials, salaries and equipment. Plan sales costs in proportion to the returns you expect to make.
Prepare your annual sales budget. This is a summary of the sales forecast. It does not change, and acts as a benchmark that you can compare your updated forecasts with. Prepare pessimistic, realistic and optimistic versions of your budget, and plan what you will do in each case.
Revise your sales forecasts quarterly or annually, using past performance as a guide. Compare sales achieved with your sales budget. If there is a significant difference between the two figures, find out why. You may need to plan new sales initiatives or adjust your sales expenditure.
Be aware of sales cycles
- The total amount of time taken to complete a sale can have a critical impact on your cash flow.
- If you have a new, untested product or service, it may take longer to make sales.
- Work with customers’ decision-making habits. For example, large organisations may be slower to reach decisions.
- Time sales drives and product launches well. For example, suppliers to the retail industry are geared to making sales at exhibitions at the beginning of each year.
Co-ordinate sales with your other business activities. For example, do not plan for sales that your production processes cannot fulfil. Plan sales campaigns to support promotional efforts (eg new product launches). When you have defined your sales strategy, you may need to adjust your marketing plan accordingly. For example, your sales people may identify a new customer group to target.
Use sales tools to increase efficiency. A good database is essential to manage information on customers. Where possible, link information held on different databases. Consider what equipment could make your sales people more productive (eg mobile phones or laptop computers). Provide appropriate administrative support to allow sales people to focus on selling.
Give sales personnel access to the standard documents they need
- Include call sheets, standard contracts, proposal forms and promotional material.
- Use sales report forms to record relevant information for each customer contact. For example, customer name, reason for contact, issues covered and follow-up action required.
- Consult a lawyer to draw up major legal documents, such as long-term contracts or exclusive distributor agreements.
Organise and support your sales team
- Make sure sales people understand what sets your product or service apart from those of your competitors and what value your product or service brings to the customer (your value proposition). Get them to communicate this to customers.
- Give sales people key information - for example, about pricing, profit margins and negotiable areas.
- Get sales people to record their activities and produce weekly sales reports. These should give scores out of ten for each customer, reflecting the potential value of sales and the likelihood of conversion. Monitor the accuracy of their scores.
- Train your sales people, to improve their product and market knowledge, as well as selling skills.
- Monitor and drive progress in supportive, weekly one-to-one meetings.
Technology on your side
The right technology can significantly improve your selling efficiency. For example, you might provide your field sales reps with remote access to your intranet, so they can check warehouse supplies and input orders while on the customer’s premises. For best results, give your sales people the training and technical support they need to use it.
Customer relationship management (CRM) software can be an invaluable tool
- CRM software is most useful if you have high-value customers and prospects.
- Get CRM software from a supplier with knowledge of your industry.
- Make sure the software lets you generate the reports you need. For example, you should be able to analyse and group your customers using different criteria.
- If necessary, make sure data can be transferred and stored across different sites.
- Feed in data from different parts of your business. For example, a salesperson should be able to see if customers are over their agreed credit limit before selling them new products.
Conduct an annual or quarterly profitability analysis
- Examine and justify the time and money spent on different customers. Focus on profitability rather than volume of sales, and the quality rather than the quantity of contact.
- Find out if turnover was lower or higher than forecast, and why. Compare this year’s sales with the previous year’s and with those of similar companies in your market.
- Analyse which salespeople and which channels are most productive, and why.
- Monitor the returns on sales costs. Distinguish between sales representative and sales support costs.
Analyse conversion rates monthly, using salespeople’s weekly activity reports
- Work out how many sales have been made, and calculate their average value.
- Analyse the relationship between leads, visits, proposals and orders achieved.
- Monitor activity with both new and existing customers.
- Examine each stage in the selling process to find out where you are losing the sales.
Identify problems and find out what has caused them. For example, reductions in sales to key customers might be the result of an unreliable delivery service. Identify dead accounts and follow them up. Making a sale to an existing customer is far easier and cheaper than winning a new one. Find out what percentage of your customer base no longer buys from you, and why.
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"Overtrading is a common cause of business failure. Production and purchasing costs soar and payments are not yet coming in. Make sure you have the capacity and finances in place to enable you to fulfil your sales targets and order commitments." - June Lonsdale, Anglo Recycling Technology Ltd
"In recessive times, customers look for two factors - 'Am I putting my business into a safe pair of hands?' and 'Are we really getting good value for our hard earned money?'." - Guy Aston, Huthwaite International
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