Improving Prospecting Performance

The traditional approach to prospecting has been to approach large numbers of cold prospects and convert a percentage to sales leads. The focus now is on high probability leads—those companies that are most likely to buy. Identifying high probability prospects is more time-consuming in the initial stages, but long-term results are likely to be better.

Prospecting is an integral part of the sales process, but the two are not the same. The objective of prospecting is to identify those companies and contacts most likely to respond positively to a sales proposal and generate new revenue.

Prospecting focuses on the best opportunities from new sales and existing customers. Simple new business prospecting might consist of choosing an industry, picking a company name from a directory, identifying the right level of contact, and finding out the name of the individual to call. That can produce results. If you are looking at existing customers, good prospecting can identify the best opportunities to increase revenue, introduce new products, or reduce the cost of sales. Existing customers can also give you additional prospecting opportunities through referrals.

Prospecting is an important and integral part of your sales strategy, and it is therefore important to measure performance. The metrics include:

• first contact-to-appointment ratio;
• first appointment to proposal ratio;
• closing ratio;
• sales cycle time;
• average revenue per sale.

Although other factors affect the final measure—average revenue per sale—this is the only true measure of prospecting success, because it demonstrates that you have identified the right candidates. Good prospecting provides the foundation for building a successful sales campaign. Effective prospecting techniques focus on raising performance in those areas, not simply contacting more and more prospects.

Commentators use terms like "bottom-up" or "top-down" to describe two fundamentally different approaches to prospecting. In "bottom-up" prospecting, a sales representative calls a company switchboard and asks "Who is responsible for purchasing XYZ products?" The representative may get a reasonable first contact-to-appointment ratio, but there is no guarantee, and the follow-up calls may be a waste of time. Applying other prospecting measures, this "bottom-up" approach is likely to result in:

• first contact-to-proposal ratio-decrease;
• closing ratio-decrease;
• sales cycle time-increase;
• average revenue per sale-decrease.

In the "top-down" approach, the representative carries out extensive research before making initial contact. This includes:

• selecting suitable industries;
• identifying the highest appropriate level of contact to each account; by company size and industry;
• checking contact name for each appropriate title and account;
• researching the nature of the prospects' business.

Although the representative spent more time on initial research, the results were considerably better:

• first contact-to-proposal ratio-increase
• closing ratio-increase
• sales cycle time-decrease
• average revenue per sale-increase

The "top-down" approach provides better overall results, but industry experience indicates that productivity and performance remains poor in the first contact-to-appointment ratio. The ratio is between 4% and 18% which means that representatives are making between 10 and 20 calls to get one or two appointments. This is clearly an area in which better prospecting could significantly improve sales performance. With sales representatives spending almost half of their working time on prospecting, improvements would free more time for actually selling.

One possible approach is to back the direct contact with an ongoing communications program based on the findings of the "top-down" research. Direct mail, e-mail, invitations to seminars, and newsletters can all form part of a program to maintain contact with the prospect.

The communications should demonstrate that your company understands the prospect's business and the challenges it faces. The prospect's perception moves from "they are trying to sell me something I might not need" to "they understand my needs and they are offering something that will overcome my problems." When the representative does make contact to arrange an appointment, the prospect is much warmer, and the conversion ratio is likely to be higher.

In planning your prospecting communications, make sure that you talk the language of each decision maker:

• If you are targeting senior business executives, communicate the benefits in terms such as improved competitiveness or better return on investment.
• Purchasing managers like to hear about value for their money, simpler ordering, or reliable delivery.
• Technical contacts would be more interested in terms such as improved performance and greater reliability.

By talking the language of your prospect, you are building an affinity and are more likely to overcome the initial resistance that characterizes new business situations.

You can refine this process even further by asking questions about your prospect's needs, rather than just trying to present your own products and services. Questioning gives you greater insight and helps to build a relationship that makes the next stage of selling easier. The only thing that a prospect cares about is what these features will do for them. In other words, speak in terms of benefits and your prospect will be more predisposed to listening to your presentation.

If you are contacting the prospect by phone, it may be useful to use a script. Scripting provides a useful framework for prospecting by setting out a logical sequence of questions. It allows you to refine the process by trying different approaches and testing which key benefits and qualifying questions work. However, it is important to personalize the script and use it flexibly so that it does not sound wooden.

Encouraging sales representatives to spend more time on research can improve the productivity of prospecting. You can make the process even more precise by using the services of a data modeling agency. Data modeling systems allow you to select data on key characteristics to target those most likely to be interested in your sales proposition. Data modeling breaks down prospects across a list into smaller groups or segments. There are two main reasons for doing this:

• You can target the segments most likely to be interested in a particular offer.
• You can tailor products, services, and offers better to the recipients.

The benefits are significant:

• supports targeted cost-effective communications that deliver a higher return on sales investment
• helps identify new opportunities and gaps in the market
• delivers relevant messages that improving customer response and propensity to buy
• improves prospecting performance and productivity

The objective of good prospecting is to obtain appointments with highly-qualified leads who are receptive to buying. Effective prospecting means discarding unqualified leads and concentrating on the top candidates. Traditional prospecting was based on working through large numbers of cold contacts. This is unproductive and produces poor results. Quality is more important than quantity.

As well as identifying new contacts, you can also improve prospecting performance by obtaining referrals. Referral business can reduce your sales costs and sales cycle time. It means less time calling cold prospects because you concentrate on your existing customers and their colleagues. The new prospects are likely to be warm to your company because the customer who refers them is probably a very satisfied customer.

It is important to give recent customers time to experience your service or product before asking for a referral. You should only ask for a referral if your customer is already delighted with your business. Not all customers are referral candidates. You need to identify those who are most enthusiastic about your business and ask them for referrals. You can help customers identify possible referrals by telling them the type of companies you can help.

If you have carried out good initial prospect research, it only takes a few questions to find out if your contact really needs the benefits you are offering and can afford your company's product or service. Do not waste time on people unmotivated or unable to buy. Remember to focus on quality leads with the highest potential to buy.

The more you know about your prospects, the more likely you are to build a relationship quickly by demonstrating that you understand their business and their issues. Company information is available on Web Sites, in company brochures, business directories, and magazines.

Hayden, C. J., Get Clients Now!, 2nd ed. AMACOM, 2007.

High Probability Selling: www.highprobsell.com