Tuesday, February 19, 2019

How many customers do you need?

For many sales people marketing seems to be a separate division of the company with its own, unrelated agenda. However, marketing strategies can be used individually to help build your business.

The first step in marketing is to identify your target customer and determine how many customers it will take to maintain your business. Here’s what I mean, using examples from different industries.

Let’s say you wanted to sell residential real estate for a living. You would need to stake out an area that has a minimum of 500 houses. If you began a systematic schedule of contacting these 500 homeowners on a monthly basis, some in person, some on the phone, some by mail, there would be enough houses bought and sold each year to make a living.

Another good example is insurance. You would have to have a list of one thousand households and contact them on a regular basis. There would be enough insurance needs to earn a living. Both examples depend, of course, on your ability to out sell the competition.

Even a nursing home with one hundred beds has to have them filled with residents. If they have ten empty beds for any length of time their expenses go up and their profits go down.

A hospital is in a similar situation. The success of their marketing is measured by their “occupancy rate”. The next time you call on a hospital ask what their occupancy rate is and you will be surprised at how quickly they can give you the percentage.

A manufacturer looking for national distribution needs 200 distributors.

Looking at a restaurant’s business from a marketing perspective can also be measured with mathematical precision. A restaurant needing to sell a thousand meals each week to take in enough money to pay all their expenses needs a customer base of five thousand. A marketing “rule of thumb” for a restaurant is to take one week’s business and multiply it times five. Restaurant customers normally rotate their eating out, so we would want to be sure that we had five thousand people “rotating” into our business at least once every five weeks.

This brings us to our basic marketing strategy as a Distributor Sales Rep (DSR). How many customers do you need and how much do you have to sell each account to make a living?

The average DSR sells a little over two million dollars each year, or $40,000 each week. The average order size in the industry is $500. That means to be “average” you would have to sell 80 accounts $500 every week. NOT A GOOD PLAN!

What if we double the order size to $1,000? That brings the number of accounts down to 40. Forty accounts purchasing $1,000 each week sounds better, however, we are still only “average”.

Let’s give it one more twist. Let’s weed out the low margin price shoppers and carefully select 40 accounts that could buy at least $2,000 per week from you. Now you are investing your time and effort with accounts that will give you sales exceeding four million dollars per year.

It look’s good on paper, as all marketing plans do. However, it is still up to you to make it happen the old fashioned way, by selling.

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