Your phone doesn’t ring as much anymore. Does that mean there’s no demand and that customers are not spending? No, of course not. But it does demonstrate that the days of answering the phone, putting together an uncontested bid, and getting the job are over. For the foreseeable future order taking is being replaced by focused selling. Focused selling is new to most contractors and it is an investment essential to your business plan. The question is, “How much should I invest and where should I invest it to focus my selling?”
How much should I be investing?
The answer is based on knowledge of the expenses required to turn a lead and into a contract – the cost of making a sale. Let’s use some benchmark data from high growth companies. The cost of making a sale is usually spread all over your P&L statement and therefore it is often hard to see. But if you look, these costs at a minimum include expenses for sales staff (sales people, designers and estimators) including salaries and commissions, their perks (benefits, vehicles, computers, and phones), advertising and public relations expenses (phone books, direct mail, brochures and flyers), website and software management, and promotional spending (events, tickets, gifts, meals, and entertainment). Table 1 shows the benchmark cost of making a sale by market segment using a $2,000,000 company as a comparable baseline.
According to the Table, grounds maintenance contractors are budgeting 8% of revenues, design/build contractors spend more at 10%, while bid/build invest the least at 4% of revenues. While the relative mix of these costs may vary, the total level of investment is consistent within each segment. In other words, focused selling usually requires at least this level of investment.
Where should I be investing?
Per the Table, most of the cost of making a sale is staffing related. This makes sense since the most effective sales channel for contractors is what marketing people refer to as the direct channel. The primary marketing tool and expense in the direct channel is the sales rep. As any marketer knows the sales rep is expensive and too often can be inefficient in developing and closing leads.
The goal in the direct channel then is to increase efficiency and velocity thereby reducing the cost per sale. Efficiency is measured as a ratio of dollars sold per dollars bid. Velocity is measured as the total dollar volume of sales bid per time period (week, month, year). Focused selling employs three primary strategies to increase both velocity and efficiency. The first is pipeline management. Focused selling requires weekly management of a pipeline report. The pipeline report must monitor and manage sales activity starting from the appointment through the bidding/design process to final close and decision. Pipeline management addresses the problem that plagues many sales people; ineffective prioritization and use of time. Too many sales reps simply spend too time on low return activities.
The second element of focused selling is process streamlining. In many companies, sales people burn too much time in low value added activities monopolizing valuable selling time. An example of low value added activities for a sales rep may include site measurement, design drawing, take-offs, estimating input, and proposal writing. It is far more efficient to off load 70% to 80% these activities onto administrative and production functions to free up time for more valuable activities like lead generation and closing. By off loading these activities you can increase velocity by 50% or more.
The third element of focused selling is rep training. Many companies have experienced solid results fixing the most basic problems that cause many sales people to be less effective than they should be. These problems are; (1) asking the wrong questions to determine needs and wants, (2) talking too much about features and too little about benefits, and (3) unwillingness to ask for the business and get a signed contract. Addressing these typical sales rep problems increases efficiency significantly.
All these efforts in the direct sales channel must be supported by an investment in what marketers refer to as the indirect sale channel. The purpose of the indirect channel is to develop new leads and warm up prospects for the direct channel sales rep. In the indirect channel frequency is what matters – multiple contacts through multiple means. Consider the fact that more than 75% of new customers come from some kind of referral - including customers, vendors, general contractors, landscape architects, some associations, and sub contractors. Maintaining a consistent message and a consistent level o contact is the function of your investment in this channel. There are several elements essential to this channel. Your website is one of these but requires an entire article to address it. So look at the other three elements here.
The first is call center operations. We have several clients – particularly in the commercial grounds maintenance segment that are having success generating leads and appointments with property mangers and decision makers. There are two ways you can make this investment. The first – if you are large enough - is to hire a caller to set appointments for sales reps as well as mange the pipeline report. The second is to engage the services of a call center. The cost is typically based on a fixed dollar price per confirmed appointment (usually $75 to $100). Even if your close rate is 10% or less, you have gained 10 new names and emails for use in the next element of this channel.
The second is vertical email response. Vertical response is an email-based strategy that transmits a monthly “news item” to your referral and prospect list. The news item must be brief and provide a valuable or money saving idea. It must consist of no more than 50 words, fit within the vertical space of a Outlook email screen, and provide a link to your email address or better, your website. A typical vertical email blast might look like this:
Wet and cool weather causes fungus that can destroy your lawn. Make certain that your turf program is the right one so you don’t incur expensive replacement costs later. For more information click here (goes to your website), or click here to email us. Of course you can always call us at this number…….
An email address may be the single most important piece of customer information you own. You can use Outlook group mass mailing or you can sign up for a service like verticalresponse.com or constantcontact.com to manage this effort at a very reasonable cost.
The third element is customer events. Whether it is a lunch and learn, hosting an association event or staging a customer and vendor appreciation barbeque, getting together face to face with food and beverage is a great way to build relationships and generate additional referrals. Some of the wisest promotional money you spend is what I refer to as “on the golf course” money. Several of our clients host a lunch (lunch) monthly for the staff of a GC company or an architecture firm (at their offices) in exchange for a 10-minute presentation on a how the contractor can help them (and learns). These events always pay off in future referrals and build velocity into the direct channel.
The key to any marketing program is to focus your investment spending instead of spreading it everywhere. This has the intended effect of simplifying your approach to the market as well as showing which activities are having the most impact in your market driving velocity and efficiency. Has the customer gone away and stopped spending? No. They have just stopped calling. This means that you have to initiate the call and remind them that you are still here and that they need you.