Are you failing to make the big market share gains you promised management? Is your sales force starving for leads? If so, you are most likely not creating enough demand to fulfill the sales forecast. For instance, if there are 10,000 products sold in your marketplace each year and you only produce 1500 inquiries, it isn’t difficult to understand the issue.
Studies have shown that the salespeople’ number one compliant have is that they don’t have enough inquiries, hence leads, to pursue. Solving this requires a six step process.
Six Step Process to Create Enough Inquiries to Match Quota (forecast).
1. Estimate how many products are sold in your market place each year; this is your total available market place (TAM). Now you know that total target. You can probably only afford to find a portion of these, but at least you know the TAM.
2. From the TAM, estimate your servable available market (SAM). You probably only serve part of the market. Maybe you serve the lower priced end, or the higher priced portion. Could be you only serve the domestic market, international or both. This chunks down the TAM to your SAM. You now know the available market to be sold into: total units or dollars.
3. What is your total sales forecast? Dollars or units?
4. Subtract from the sales forecast from the SAM. This is a reality check. If If your forecast is less than the SAM you have a number to pursue. If you want to substantially boost growth, create at least as many inquiries as there are products sold in the market place.
5. Estimate how much in sales will come to you via the current pipeline (without lead generation). Dollars or units.
6. You now know how much demand you have to create as a raw number of inquiries. Take the forecast, less the expected close ratio in the pipeline and create enough inquiries to make quota. Let’s suppose you have to sell 500 products beyond what is in the pipeline and you need enough sales inquiries to make this happen; your market share is 50%, your follow-up by the salespeople is 50% of the inquiries.
This is the formula to create enough inquiries:
Quota (units) / 45% buyers / % follow-up / % market share = inquiries
500 units / 45% / 50% follow-up / 50% market share = 4444 inquiries
From the raw number you have to factor:
A. Only 45% will buy from someone so if you have to sell 500 of something you will have to create 1111 inquiries just to find enough buyers. (1)
B. If you only have a 50% follow-up of inquiries, you have to take this into account and push the inquiry count up again by 1100 to 2222 inquiries.
C. If your market share is 50%, push up the inquiry count needed by 50% to 4444.
I am guessing, at this point, that you have realized that if you increase sales inquiry follow-up you can reduce marketing expenses by reducing the number of inquires needed to make quota. Increase follow-up to 75% and reduce the number of inquiries need to 2,962. Yes there are issues of when the inquiries are created, and time frame for typical closure, but that’s a lesson for a different time.
(1) James Obermayer, Managing Sales Leads: Turning Cold Prospects Into Hot Customers, (Mason, Ohio, Textere an imprint of Thomson/South-Western, 2007), and Racom Books, Page 10.
“The Rule of 45 is the basic premise from which you can measure the effectiveness of virtually all lead generation programs. It is a steady, reliable benchmark number that, simply stated, says that 45% of all inquirers will buy someone’s product.”