Question: What is the ideal number of sales calls for a current customer? How many sales visits should I make on a regular basis to retain their loyalty?
Answer: Here I go again with my stock answer: It depends. So many questions in the world of professional sales are answered by that phrase.
- It depends on how detailed your product line is. The more complex and difficult it is for the customer to decipher, the more visits by you. The more simple the product line, the fewer the visits.
- It depends on the risk of the buying decision. The greater the risk, the more visits by you.
- It depends on the intricacy of the sales process. The more intricate and longer the sales process, the more visits by you.
- It depends on how active your competitors are in the account. The more active, the more visits. The less active, the fewer visits.
- It depends on the relationship the customer has with your colleagues and inside people. The broader and deeper the relationship, the fewer visits are necessary on your part. If the customer knows no one he/she can rely upon in your company, the more you have to be there.
An Economic Equation
We could go on and on with these variables. But, probably the biggest is the economic equation. You should never invest more time in the account than it is worth. And that is something that very few salespeople ever stop to consider.
Here’s a way to understand this. Start out by calculating what it costs your company for you to make one live, outside sales call. A simple way to do this is to take your gross wages then add about 30 percent more to it to account for fringes, taxes, expense reimbursements, etc. For example, let’s say that you made $5,000 last month. Add 30 percent, and you probably cost the company $6,500.
Now, how many sales calls did you make in that same period of time? I mean real sales calls, where you uncovered an opportunity, and/or presented a solution – not those where you just stopped by to say hello because you happened to be in the area.
For our example, let’s say that you made two of those a day, for 20 selling days last month. Do the math. You made 40 real sales calls last month, and it cost the company $6,500 to have you do that. So, divide the $6,500 by 40 calls and you have an average cost per call of $162.50.
The Ratio & ROI
Now, the number that we are after is the ratio of what it costs versus what you get in return. Understand that you are an investment by the company. Like any investment, you are expected to provide a return on that investment.
Not only that, but you should be looking at the potential return on your time invested in sales calls as a guideline for deciding how to invest your selling time. Good time management principles for salespeople require that you make “cold-blooded decisions about where to invest your sales time. (see my book, 11 Secrets of Time Management for Sales People.)
Remember that we are working with general rules of thumb here so that there is room for error on both sides of this equation. With that as a preface, I generally believe that you can not cost the company more than 25% of the gross profit if you want to be profitable to your company. In other words, if you get a sale that brings in $1,000 of gross profit, you should not have invested more than $250.00 in your costs.
Let’s use this understanding, now, to determine how many calls to make on a customer. The first question is, “How much gross profit does this customer produce per year?”
Let’s say the answer is $10,000. OK, what is 25% of that? $2,500. And, if you cost the company $162.50 per sales call, how many sales calls can you afford to make? ($2,500 divided by $162.50 = fifteen over the course of the year). Easy. Simple. Economically defendable.
We can take this a bit further. For example, for your purposes, to help you make “cold-blooded business decisions about the investment of your sales time,” you should calculate the potential gross profit the customer or prospect could produce.
Ask Yourself This Question
The best way to do that is simply to ask. “If a customer bought everything from me in the categories of product that I sell, how much would that be in the course of a year?” Get the number, apply your average gross profit percentage to it, and bingo, you have the magic number.
You can use that number to guide your decision making about the investment in your sales calls. For example, I could defend investing 15 sales calls in an account with an annual potential of gross profit of $50,000. But I would be hard-pressed to justify even two or three calls in an account whose potential was $2,000.
Let’s review the process to make sure you can use this for every customer.
- Calculate your cost per sales call. (Total costs divided by total sales calls)
- Calculate the potential annual gross profit from the customer.
- Divide the gross profit by the average cost per sales call. Bingo. That’s the economic calculation.
That’s the short-hand version of a much deeper concept. If you are intrigued, you really should read Chapter Six of 11 Secrets of Time Management for Sales People.
I expect to have lots of comments and questions on this one, as it is a way of looking at sales that few salespeople and sales managers have encountered before. Feel free to email me at email@example.com with your questions or comments!