Do you want to increase sales revenue? There are two ways to do it. One is to increase sales velocity by increasing the number of opportunities that flow through our sales pipeline and ‘close’ in any particular month or quarter. If we put twenty deals through the pipeline last quarter, and we were able to put twenty-five through this quarter, then we would have increased sales by 25 percent, assuming they were similar in average size.
The other way to grow revenue is to increase the average size of each sale. If we could increase our average deal size from $50,000 to $60,000 and we could close just as many, we would see a 20 percent increase in gross revenue. I often ask new clients which one they want to focus on. What do you suppose they say? You guessed it. ‘Both!’
There are many specific techniques and approaches that can be used to increase average deal size. One of the most important is reducing price erosion, which simply means to quit giving away so much in discounts and price reductions. Negotiation skills is an entire subject area unto itself that we will not formally explore here, but I would like to point out that . . .
Our effectiveness in negotiations is determined by how well we establish and influence the perceived value in our customer’s mind throughout the entire sales campaign.
If our customer arrives at the end of their buying process without believing that we offer value that is superior to our competition, we’ve got nothing to negotiate about. That’s one of the reasons we spent so much time on understanding how customers perceive value in the first half of this articles.
There are several other specific techniques that are equally valuable both in increasing deal size and increasing sales velocity. We will discuss several of them here, and I will point out certain instances that apply as we go, but this chapter will be focused primarily on maximizing sales velocity. It is a vitally important aspect of sales success in today’s marketplace, because any situation that erodes profit margins- such as an economic downturn, or increased competition-has a negative impact on profitability. If we earn less profit on each transaction, then to increase total profit we have to increase the frequency of transactions. Some industries call this increasing ‘turnover.’ That’s what this chapter is about.
We are going to be talking about the specific strategies, tactics, and techniques for accelerating our customer’s buying process. This acceleration is good for us and good for our customer. Many companies, and especially technology solutions manufacturers, have gone to tremendous lengths to make their solutions easier to install, quicker to implement, and faster time-to-benefit. Why do we do that? Why do we, as vendors and suppliers, give so much attention to how ‘fast’ our customers can see Return of Payback? Because customers demand it, right? Once they buy, they want to get to point ‘C’ as fast as they possibly can.
Every day that we can drive out of our customer’s Implementation and Utilization Process adds real Economic Value to their bottom line. The faster we can help them get from point ‘B’ to point ‘C,’ the faster they see returns, the faster the investment pays for itself, and the faster they can free up capital for the next investment. But if our customers start out at ‘A,’ and the destination is ‘C,’ then every day that we can drive out of the Selection and Buying Process (the time it takes to get from ‘A’ to ‘B’) is just as valuable, isn’t it? Accelerating the buying process creates value for our customers because it helps them get to ‘C’ faster. But the flip side, of course, is Risk. They can’t afford to buy too fast because a mistake could actually set them back and make the entire journey to ‘C’ that much longer.