"Manager's Minute" Tip

(Article Archive)

Confidence Builds Gross Margins
by Bill Lee

The following is an interview I conducted with a young salesperson in his 30s who in 2005 generated the highest gross margin in his company at 28.62%; he was also the highest volume salesperson on his company's sales team with sales of just over $6 million.

Here's how the interview went:

Lee: How much pricing pressure do you get from your customer base?

Salesperson: In the beginning when I was new, I got a lot, they tested me like crazy. But since I gained confidence in myself and in the competitiveness of my prices, not much at all.

Lee: How do you go about prospecting for new business?

Salesperson: I use my existing customers. I ask them to help me. I know they're happy with me, so I ask them if they have any friends who they believe could benefit from the kind of service I give them. So far, they have been happy not only to give me some names, but also to pick up the phone and call a friend on my behalf.

Lee: Aren't these prospects already in bed with a competitor?

Salesperson: Well, I wouldn't put it that strongly, but yes, they are all currently doing business with a competitor.

Lee: So how do you approach one of these prospects?

Salesperson: Okay, here's how it typically goes down. One of my loyal customers makes a phone call to a friend and tells him about me and how happy he is with the way I handle his account and that our prices are competitive. He tells them that he is going to give me their phone number and he asks them to be sure to take my call. So after he tells me that he's made the call, I follow up that same day with a call of my own and ask for an appointment.

Lee: So tell me how you structure the first sales call on one of these prospects.

Salesperson: On the first call, all I do is meet the prospect and get to know him. We usually talk about his business. I ask him all kinds of questions about the way he likes to do business with a supplier, you know, what his pet peeves are, what kind of order lead times he is able to give, how he likes his material delivered, etc. Then I ask him if I can meet him on one of his projects to see firsthand a few of the products he uses and perhaps meet a couple of his sub contractors. The prospect almost always agrees to this next step, so we set a date. I leave him with one of our company brochures and a business card.

Lee: Now tell me about the next appointment.

Salesperson: Before I meet him in the field, I scout out one of his jobs alone. I make a list of questions to ask him, all of them pertaining to why he chose a particular product or a particular application. In other words, I do a lot of homework, so much that when it comes time for our appointment, he's pretty impressed with how much I know about him and the way he does business.

Lee: How long after that first appointment are you able to get the initial order?

Salesperson: That depends. Some prospects move the process along faster than others, but unless something is said or I sense that something is not exactly right, at this point I usually ask him if he is willing to fill out a credit app. If I sense that he might be hesitant, I don't move forward on the credit app. But if I do get him to sign a credit app and if our credit manager agrees to extend him credit, I call him and ask for another appointment. On this appointment, I ask for permission to ship product to his next job.

Lee: Would one of these prospects usually want to see your prices first?

Salesperson: Sometimes yes and sometimes no. The answer to that question depends on how well my good customer has set him up. Some of them already trust me because they trust the friend that called them on my behalf. Others do ask to see some prices on a handful of items.

Lee: Do you quote your standard prices?

Salesperson: Always! I learned a long time ago that it's best not to try to fool prospects into thinking that my prices are lower than they are accustomed to paying. My company is competitive, but we make no claim to have the lowest prices in town.

Needless to say, I was impressed with this salesperson's level of maturity and what he has accomplished at such a young age.

What did you learn from this interview?

What will you do differently after reading this interview?

As I see it, the real key to this salesperson's success at earning the right to ask for an order so early in the prospecting process was the personal trust he was able to generate with his prospect through the confidence the prospect had in the salesperson's customer. What do you think?

A customer who is willing to pick up the telephone and call a prospect on a salesperson's behalf is called an advocate. Advocates are worth their weight in gold.

About The Author:
Bill Lee is president of Lee Resources, Inc., a consulting and training firm that works with owners and general managers who want to earn optimal bottom line profits and with salespeople who want to increase their sales and improve their gross margin.

Bill’s national clients include: Ace Hardware, Amarok, American Wholesale, Andersen Window Corporation, BMA, BMC-West, BSC Corp., Budget Car Rental, Blue Tarp Financial, Building Suppliers Corp., CALPLY, ENAP, Stock Lumber, Datastream Corporation, Diamond Hill Plywood, Do-It Best Corporation, Drake Group, Home Depot, Equipment Resources, Lanoga Corp., LMC, Lowe’s Companies, Lumberman’s Merchandising Corporation, National Gypsum Company, National Lumber and Building Material Dealers Association, Nextel, Owens Corning Fiberglas, True Value Hardware, and Zep Manufacturing.

Bill can be reached at 800-277-7888 or at blee3paris@aol.com.

Website: http://www.billleeonline.com/

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