Fortunes are spent on generating new prospects to drive sales growth. This is a minefield of challenges, what works today may not work tomorrow, and you cannot control the things your competitors do to reduce prices. However, one area you can have significant control over is your prospect conversion rate; this is very much in your hands and can be one of the highest profit strategies you focus on.
The great unknown
What defies logic is the fact that very few companies can accurately measure and report their conversion rates. So much money is invested in bringing leads in the front gate only to let them walk out the back gate. If out of ten enquiries you currently convert two you have a 20 per cent conversion rate if your average new customer sale value is $1000 you have $2000 in new sales. If you convert just one more to three out of ten, you have just increased your conversion rate by 50 per cent. You have also increased your revenue of new customers by 50 per cent to $3000 which is massive. Don’t spend money generating more leads until you master the conversion rates of the ones you have already purchased an opportunity with.
Cause responsibility
It’s essential to make your sales/BDM/account managers responsible for measuring and reporting their conversion rates. Make sure you have trained your team in the optimal sales process to convert leads, however, make sure it’s not linked to discounting. Any hack can sell on price; true professionals sell on value and quality.
Once you have this in play, set a target of what the conversion rates need to be, and segment them into groups such as us referrals, walk-ins, web inquiry, lead gen strategies, etc. as these will have varying levels of conversion rate.
Knowing that referrals are the greatest and most profitable conversion rate, you would think companies would invest heavily in being able to generate referrals. A big mistake companies make is having a process to buy referrals via rewards programs, these can generate the wrong type of lead and often they are linked to discounting.
The reality is that if your service is excellent, you will receive many referrals that won’t cost you a cent, we all refer those who look after us. Service excellence has its own unique currency; it generates, retention, referrals, wallet share and the highest margins.
The solution
Every company in a competitive market will have a marketing budget. The allocation of funds will be determined via resources required; sales teams, marketing strategies, etc. However, very few companies have a client retention budget.
We all know it’s at least six times more expensive to buy a new client than to get an existing one to return, so why don’t more companies invest in their retention (other than rewards/discount programs) by training their team in service excellence?
The ability to deliver the highest standards of service has a compounding effect. It optimises the original sale conversion rates at the highest margins, it causes repeat transactions, it optimises average dollar sale values and wallet share, it causes referrals with the highest conversion rate, and then the cycle repeats causing revenue to spiral upwards.
What you cannot measure you cannot manage. But having accurate conversion rate data is critical if you want to optimise revenue from your marketing investments. Most importantly, ensure conversion rates are linked to revenue and margin. It’s easy to sell the cheap stuff; it’s a lot harder to sell the best solution.
Darrell Hardidge, CEO, Saguity, and author of “The Client Revolution and The 10 Commandments of Client Appreciation”
