In the rush to find profits in a slow economy, business leaders find themselves scrounging up new prospects wherever they can find them.
But Kim DeMotte, author of “The Positive Power of No,” says that can be a big mistake.
“In practical terms, the positive power of no is that distinct advantage you get when you are as clear about what you don’t want as much as what you want,” says DeMotte. “Why you would say no to potential business is because you don’t have the resources to say yes. The word ‘focus’ has been the key word in management training for the last 25 to 30 years: focus on audience, products or whatever. We haven’t been taught the flip side that anything that falls outside that focus needs to be rejected.”
DeMotte says that in the sales process, businesses are spending too much time qualifying prospects rather than disqualifying them. You should spend more energy (and money) trying to disqualify prospects from your database, so that what you are left with is a group of prospects that is highly qualified and more likely to need — and thus buy — your product. You might even save some money in the process.
For example, a publishing company had a database of 14,000 prospects that it had accumulated over a 15-year period from various lists, tradeshows and associations. Each year, the company spent about $27 in direct mail costs on each person on this list. That added up to an annual expense of $378,000 in direct mail costs to so-called prospects.
In one 30-day telephone sampling of the database, the company discovered that 42 percent of these prospects were out of business, had moved, no longer had a working phone number or didn’t have and never would have any use for the publisher’s products or services. The company was spending $158,760 a year on people who would never need its product or service.
DeMotte says companies would be better served using low-cost call centers to contact everyone in their database of prospects to ask a battery of questions to determine what each prospect’s potential need for your product really is. Once the list is whittled down, it can then be handed to the sales force, which is now prospecting off a list of highly qualified people who showed a definite interest in your product.
“The difference between our system and most teleprospecting is that most are getting paid on the number of leads or appointments they set up, which puts the call center rep in the position of doing the best job to convince the guy on the other end of the phone that he wants to deal with a salesperson,” says DeMotte. “We’re the antithesis of that. We only turn them over to a salesperson if they ask us to. Most organizations who do this can get by with fewer salespeople because they are all not running to unqualified prospects.
“Most salespeople don’t do well at making prospecting calls. There are thousands of potential people to call on any given day, and 98.5 percent of them don’t want to talk to you. If you put prospecting in a call center that can make 50 disqualifying calls in an hour, you can find the 1 to 1.5 percent that do want to talk to you today about what you have to sell. Because their income usually depends on talking to someone, the salesperson will spend time trying to find out if they ever buy widgets. They’ve wasted five to 10 minutes and gotten nowhere.” How to reach: Kim DeMotte, www.powerofno.com
Defining the perfect customer
You might look at your biggest customers as your most loyal ones and devote the most resources to them.
Maybe you should give them to your competitors instead.
“Customer loyalty can be overrated,” says Kim DeMotte, author of “The Power of No.” “If I look at and rank a business’s top 10 clients, the largest, most loyal customers are probably producing the lowest net profits. They might make up 30 to 40 percent of sales, but only make up 8 to 9 percent in net profits. If you filled that capacity with a smaller clientele, your profits would probably be significantly higher.
“It’s work. It’s easier to keep a client than find a new one, but larger clients blackmail their suppliers.”
Wal-Mart is one of the most notorious businesses for putting demands on its suppliers.
“There are companies out there that have Wal-Mart as their largest customer and their profitability stinks. Why? They are legendary for dictating prices. They make you bring it in, stock it, they don’t count it as inventory until it crosses the scanner, and then they take 60 days to pay you.”
“Sometimes loyalty is overrated. Look at the relationship you have with your top 10 clients. Is it worth giving up what you give them to keep them? With a good prospect system it is easier to find new businesses that need services and are willing to pay you for them.”
