Who are your best customers?

2 minutes read

Many people (even sales leaders) have difficulty explaining sales effectiveness in selling. And many of them mix it with sales efficiency. You can find many articles explaining the difference between efficiency and effectiveness so I will keep it simple. In one sentence…being effective is about doing the right things while being efficient is about doing things right. For example, you can have very high conversion rates of your leads to order (efficiency), however, if you are selling primarily low-profit products, your contribution to the bottom line (effectiveness) will be minimal. 

Sales effectiveness can simply be described as the average output per salesperson. This output is mainly considered as revenue. From my point of view, it is not enough. We need to see the impact of a salesperson on the bottom line. Yet, it is not easy to measure it. That is why many companies use revenues as output instead of profit.

It depends on the commercial and marketing strategy of each company but selling a lot is not enough to keep a business alive. In the long run, what keeps a business running is selling profitably. 

So, how to make sure that you are selling profitable? Here are some questions to answer:

1. To whom are you selling?

Are you selling to the type of customers who value your solutions the most? Or you are simply responding to incoming leads regardless?

2. Which solutions (products/services) are you selling?

Most of the time, the most profitable products are the ones that are relatively more difficult to sell. And best selling products are most of the time considered as “bread and butter” due to their lower profitability. You need to define the right mix.

3. How cost-effective are you selling?

As a salesperson, you are the most critical cost of selling. Therefore, it is very critical to decide how you spend your time. Referring to the first two points, it is crucial to spend time with the customers who value your solutions the most and whose problems can be solved ideally with your most profitable solutions.

Responding to all types of customers requesting only the price of your solutions is not necessarily the most effective way of selling. Even if you operate with high conversion ratios, you will perform with low sales effectiveness. So, each time you look for profit growth, you will need to increase your pipeline and quickly reach your physical limits in terms of working hours, which is very likely to cause burnout. The only option will be recruiting new salespeople which is the expensive way to look for additional growth.

To sum up, calculating the profitability of a sales transaction beyond the margin requires some questioning. And the answers will show how effectively you are selling.

To make it even simpler, I like to ask salespeople one question…

Who are your best customers? And why?