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About 20 years ago I hired a salesperson to develop the Midwest territory for my sales agency. I sold decorative tins, primarily to food packers, on a straight commission basis.
Decorative tins are typically a two-step sell. When you invite a new prospect to invest in a decorative tin promotion, the prospect often responds, “What’s a decorative tin promotion?” First, you sell the prospect on the concept of a customized decorative, which becomes a permanent point of purchase display in the consumers’ home; then you sell them on doing business with your company.
It’s not uncommon for the selling cycle to be six months or more, since:
Consequently, when I hired the optimistic salesperson I didn’t expect immediate sales. Yet for proper management I needed an intermediate metric. Here’s what we agreed to track: proposals on new business. He had to find and propose on $2 million in new business in the first quarter of employment.
He made a list and started calling on appropriate prospects. In week 4 of his first quarter of employment he identified a prospect who could buy $4 million of product from us annually. (At the time, I was selling about $6 million annually). This was a very large prospect.
What do you think the optimistic salesperson did for the balance of the 1st quarter (weeks 5-12)? He coasted. After all, he had doubled his objective, finding $2 million of business.
As you have probably guessed, there was a problem with this cheery scenario – the probability of closing. It turned out we had about a one-in-a-million chance of closing. Our competitor had special low-cost producer equipment, which we lacked. We never had a chance.
We learned from this experience to develop and track intermediate metrics that correlated better with closing the sale. For decorative tins these intermediate metrics – or payments in kind – could include:
With a stronger selling system in place, the optimistic salesperson became realistic and grew his sales to the point where he was earning $70,000 per year, mostly on commission.
This salesperson had a strong run of sales growth for about five years, using the selling system we developed and implemented. In the last year, he lost two major clients and didn’t have much in the pipeline. He reminded me of what he had done for the company years ago as a justification for continuing his compensation, without current results. I couldn’t support this; thus, he was facing a 40 percent cut in income.
So he became an optimistic salesperson once more.
He shopped his previous year’s W-2 income to my major competitor. He promised great things and was hired at a $10,000 increase in compensation.
Once again, there was a flaw in the scenario. While he offered access to my customers, it wasn’t serious access. He offered safe access.
With safe access, the prospect doesn’t intend to buy; the prospect is using us as a shopping exercise. With serious access, the prospect has an urgent need and is willing to discuss it.
The optimistic salesman had safe access. He was able to bring about 1½ percent of our sales to the competitor for one year. Then I regained the business.
One year later, the optimistic salesperson was out of a job.
The moral of this story is: If you don’t have a short selling process, establish significant intermediate benchmarks that make sure you are earning the right to serious access.