Sales Conversion Rates? Take the primary conversion rate: the ratio of the number of contacts you have to make and the number of business opportunities won from these contacts, e.g. you may have a primary rate of 1 new opportunity won from having made 20 new contacts. Such rates can be applied to the whole sales process. Three key rates are given in the example below.
If you do know your rates, that’s great, but what do you do with them? Do you apply them to your prospecting activities, your marketing, your pitching, negotiating and closing? If you can do anything to increase your conversion rate even slightly, how much difference would that make to your success and income?
If you don’t know your conversion rates, how can you know if what you are doing is really effective, or mostly a waste of time? How can you set targets that are realistic and achievable? How do you decide what works and what doesn’t?
Take this example:
A company has worked out that it needs another £120K of business over the next 12 months; apply your own figures, this applies to any size of business.
How many new opportunities need to be identified to achieve this figure? If you don’t know your conversion rates, you will have to guess. So, let’s assume conversion rates are known.
We know that the average spend of our customers is around £5K, so, straight away we can say that we need to find 24 new business opportunities.
Conversion rate 1: How many quotes or proposals result in an order? Say 1 in 2.
- So we need to have given (2x24) 48 quotes to have the chance of winning 24 new orders, resulting in £120K of new business.
Conversion rate 2: How many meetings result in a request for a quote? Say 1 in 3.
- So we need to have had (3x48) 144 meetings to have the chance of receiving 48 requests, …….resulting in £120K of new business.
Conversion rate 3: How many contacts made will result in an agreement to meet? Say 1 in 5.
- So we need to have contacted (5x144) 720 people/businesses to have the chance of agreeing 144 meetings…….resulting in £120K of new business.
This is, of course, the classic ‘Sales Funnel’ approach. Do you see how it works? With just three known conversion rates, you can work out how you might achieve your target. In this case you will need to contact in the region of 720 prospects in order to achieve your contacts. If you are just one person operating in sales this could be a problem! If there are a team of you; say five sales people, then we are back to 144 meetings each which need only be 2 or 3 per day.
However, it should be remembered that a sales person’s life is not just calling and then meeting customers. There is planning and preparation, prospecting and analysis of the list of targets. Then there is pitching outside of the meeting and writing the quote or proposal. Some negotiation is bound to be needed and there are many skills in closing. Beyond that there is the client management and development needed to retain and grow the customer loyalty and ‘spend’. With a team of 10 in sales, the overall targets will, of course, be proportionally higher.
This is just a quick demonstration of how knowledge of your conversion rates will help you to plan, devise strategies and manage your resources to make sure your targets can be met in the right time frame.
There are a number of key techniques for improving these conversion rates which will help you to hit targets or even exceed them. For instance, what would it mean if you improved conversion rate 2 from 1 in 3 to 1 in 2, i.e. if you were better at pitching and matching the need? Or, what difference would it make if you improved conversion rate 3 from 1 in 5 to 1 in 3, i.e. if you were better at making contact and making good first impressions? Believe me, it would be significant! If you would like to hear more about these techniques for improving conversion rates and how to apply them to your business, please contact Andy at Salient.