Make the biggest impact on sales performance: prioritize customers and prospects

Published: Thu, 10/15/20

8 Steps to Prioritize Customers and Prospects

One area of business that is important to manage is prioritizing customers and prospects. Fortunately, it’s also the area of a sales job that will make the biggest impact on sales performance. From my personal experience as a salesperson for 30+ years, plus my experience in consulting with over 300 companies and training tens of thousands of salespeople, I’m convinced that this one area holds more potential for making dramatic and immediate changes in your results than any other.

It’s the first consideration for working effectively. Becoming more effective starts with deciding which customers and prospects to invest your precious time.

Check Your Attitude First

Start with an attitude check. Too often salespeople spend time with customers who like them, or who are easy to see, or who have become friends. All these are nice, and certainly, there is a place in every sales territory for those kinds of customers. But if those customers aren’t high potential, then investing time in them isn’t smart.

Other salespeople allow their days to be controlled by the problems, interests, and whims of their customers without regard to their potential. They spend all day responding and reacting to whoever is on the phone or asking for their time. Again, there is a place for this, but those salespeople who allow this reaction to customer inquiries to shape their days are not working smart.

An Attitude Adjustment

Working smart requires a proper attitude. The attitude is this: I will make cold-blooded business decisions about where to invest my time.

Why cold-blooded? Because we’re naturally drawn to people who are easy and comfortable for us to visit. We like to be among people where we are warmly regarded. But just because a group of customers makes us comfortable, doesn’t mean that we should spend our time there. We need to eliminate that natural propensity for the comfortable call by instilling an attitude of cold-bloodedness. We need to make decisions about where to invest our time on some more logical, hard, and fast, money-related criteria. We’ve got to apply cold-blooded logic to protect ourselves from ourselves, and to make the most effective use of our most precious asset – our selling time.

Let’s consider this together. Some prospects and customers have more potential than others do. It doesn’t take a rocket scientist to figure that one out. But what is the implication for our behavior? If some prospects and customers have more potential than others, shouldn’t we then spend the most time with the highest potential?

Of course. That makes sense. So, did you spend most of your time last week with your highest potential customers and prospects? Probably not. Let’s change that.

The Pareto Principle

There is a basic principle to human labor that says most of your results will come from only a small portion of your market. You are familiar with the Pareto Principle, for example, which states that 80% of your sales will come from 20% of your customers. A number of years ago, I came across a similar principle put forth in the book, “Everything I Need to Know About Success, I Learned in the Bible,” by Richard Gaylord Briley. Briley described the 5/50 principle, which states that 50% of the jobs and affluence in a society will be generated by the work of 5% of the population. I’ve applied that to businesses and sales territories and found it to be invariably true – 50% of the business comes from 5% of the customers.

My personal experience supports this insight. In my consulting practice, on about a dozen occasions, I’ve been a part of a project in which the client analyzed the net contribution to company profits by each customer. This is an attempt to allocate all the company’s costs to all its customers in a fair and objective way, and to determine which customers are most profitable for the company, on a net, not gross profit, basis. In every case the results have been the same. About 10% of the customers provide all the profit for the company, and subsidize the business for the other 90%!

This project is a little different than what we’re talking about. It focuses on analyzing the net profitability for the entire company, while we are discussing your personal return on investment for just your sales territory. Regardless, the principle is the same: The overwhelming majority of your business will potentially come from a handful of your customers. So, when we say, “Some prospects and customers have more potential than others,” what we really mean is that “5% to 20% of your customers have 50% – 80% of your potential.”

And, when we say that, “You should spend the most time with the highest potential,” we mean, “You should spend the most time with those high-potential 5% – 20% of your account base.”

This doesn’t mean that you forget most of your customers and ignore the majority of your prospects. What it does mean, however, is that you become guided by this very practical rule for cold-blooded decisions:

Spend 50% of your selling time on the high-potential accounts, and 50% of your time on everyone else.

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Better Results = Focusing on a Few High Potential Accounts

Suppose you have $1,000,000 in potential in one high-potential account and the same potential equally spread in ten lower-potential accounts. How many hours will it take to make one call on each of those ten accounts? Include drive time, and time spent making appointments, waiting time, preparation time, and so on. Now, how long will it take you to call on that high potential account? Considerably less. Even if you were to call on ten people in that one high potential account, your total investment in time will still be less. So, just from an efficiency perspective, it makes good sense to focus on high-potential accounts.

Not only that but once you have established a presence in a high-potential account, it’s easier to sell. You can leverage your relationships more easily in larger, high-potential accounts. Get one person on your side, advocating for you, and he/she can spread the good word about you quickly to half a dozen people. It is like the pebble dropped into the lake causing ripples to move outward from the center. Your good contact is like the pebble, spreading every increasing ripple of good press about you. Get one good small account person on your side, and they don’t tell anyone, because there is no one to tell. A pebble dropped into a glass of water won’t make ripples for long because there isn’t enough water around it. You can’t leverage your relationship like you can in larger accounts.

Defining High-Potential Customers and Prospects

In order to implement this strategy, you need to have a workable definition of “high potential.” Many salespeople labor under a big misconception when it comes to potential. They define potential in terms of history. In other words, if I asked you to show me your high potential accounts, you’d pull out a computer report showing sales history. In reality, however, history has little to do with potential. Just because an account has been a good customer in the past does not necessarily mean that it is a high potential customer for the future. Potential describes what they could buy – the future –while sales reports record the past.

The second common misconception is thinking that potential is only measured in dollars of sales. In other words, an account that could buy $500,000 from you is automatically thought of as having more potential than an account that could buy $250,000. It isn’t necessarily so. Stick with me a moment, and consider this.

The real potential is not measured by one number, it’s measured by a ratio of two. High potential is the ratio of the likelihood of dollars received compared to the amount of time invested in order to achieve those dollars.

Let’s look at two accounts. Smith Brothers theoretically could buy $500,000 from you next year, while Ajax Manufacturing could buy half as much — $250,000. If we only look at total dollars, Smith has more potential. But that view is too simplistic and doesn’t reflect the reality of the situation. Suppose the real situation is this: Smith Brothers has a long-standing contract with one of your competitors. That sole-source contract is not due to expire for three more years. Not only that, but your competitor and Smith Brothers are extremely close in other ways, as the CEOs of Smith Brothers and your competitor are brothers-in-law. You can spend hundreds of hours calling on Smith Brothers and chances are you are not going to see a penny in additional sales.

Ajax, on the other hand, has no such affinity for your competitors. In fact, the personal relationships between you and the key players there are very good. Their business philosophy is very close to yours, and you have a good history of relationships between your company and theirs. You know several people in key roles inside the organization, and you’ve even had lunch with the CEO.

Now, considering the reality of the situation between the two accounts, where is the most promising investment in your time? Is it Smith, with its larger dollar potential? Or is it Ajax, with its smaller potential volume? It would take me about two seconds to select Ajax. Why? Because the potential of the customer or prospect is not one number, it’s the ratio of two.

Potential is defined by the likelihood of dollars returned for your investment of time
10 hours of selling time invested in Ajax will bring you far more dollars returned than the same investment in Smith
It’s not how much they can buy, it’s how much they are likely to buy in return for your investment of selling time in them

This is a keystone concept in your battle to become more effective. Many of the decisions you make will rest on this understanding. Once you are comfortable with this idea – the potential isn’t dollars, the potential is the likelihood of dollars returned for time invested – then the question becomes, “How do I determine that potential?”

Determining Potential of Customers and Prospects

Potential, as we define it above, is comprised of two components; quantified purchasing capability (QPC), and partnerability.

Quantified purchasing capability (QPC) is the objective measurement of how much of your product the account could buy if they bought everything they could from you. It’s usually calculated in annual terms. Obviously, each account has a different capability to purchase your product or service. Let’s work with this to completely understand it.

One component of this has to do with how much they could buy from you. It has to do with their capability to purchase the products or services that you sell. For example, you may be selling radio advertising. Jones Manufacturers has an advertising budget of $20,000 for the next year, and the XYZ Consulting group has a budget of $40,000. However, you don’t sell all types of advertising, you sell only radio advertising. And Jones has decided to put 100% of their budget, or $20,000 into radio advertising, while XYZ has decided on 5% of their budget, or $2,000, for radio. Jones Manufacturing, while smaller and having a smaller advertising budget, actually has a QPC that is ten times larger than the bigger and more prestigious XYZ Consulting group. So, in terms of QPC, Jones far outranks XYZ. The first rule for calculating QPC, then, is understanding that it only measures the account’s ability to purchase YOUR products and services.

What about the account that is already buying everything they can from you? Does it have any QPC? Sure. Remember, QPC is an annual measure of how much they can buy from you in the future. So, for example, you may be selling cleaning supplies to Quik-Clean Janitorial Services. Over the years, you’ve built a great relationship with them, and they buy everything from you. Last year, they bought $75,000 worth of your stuff. They expect to grow their business this year, and they’ll probably buy $80,000 of your supplies. What’s the QPC? $80,000. QPC is a measurement of how much of your products or services the account could buy annually if they bought everything they could from you. It focuses on the future, not the past. So, when you calculate QPC, you don’t dwell on what they bought in the past, you calculate their capability to purchase in the future.

Notice the word “Quantified” in the title of this measurement. The word is there for a purpose. It means that you have some logical, defendable way of determining how much they could buy from you. Too many salespeople rely on intuition and gut reactions and are often misguided. In this economy, you must be better than that. “It looks pretty big” is not a logical, defendable measure of purchasing capability.

How do you measure QPC?

The easiest way is to ask the account and have them give you an honest and accurate answer. In some industries and with some accounts this is the norm. You may be selling production machinery, for example. When you ask the purchasing agent what their budget is for capital expenditures on production equipment next year, they may just tell you. Or, you may sell, as I did, hospital supplies. When you ask the materials manager how much they spent for surgical gloves last year, he could probably tell you, down to the penny. Then, you could ask him if he expects that to increase, decrease or remain flat, and by what percentage. Then do the math, and bingo, you’d have a very good measurement of QPC for surgical gloves.

While asking is always the easiest way to get this number, it doesn’t always work. Some accounts don’t know, and others know but they won’t tell you. In those cases, you have to use other means.

One way is to mathematically calculate the QPC based on some formula driven by a measurement that you do know...(read more)

Featured Podcast:

How to Measure Sales Potential

Good information leads to good decisions. Sales Potential is one often neglected piece of information that every sales person needs to collect.

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