Wednesday, June 19, 2013
WHAT IS YOUR FLIGHT PLAN FOR BUSINESS GROWTH? - Part 2
How To
Increase Your Number Of Clients
It is interesting how many companies when income curves become stagnant tend to whip sales & account management teams to do more of the same, when better incentives might be the simple solution.
For example, a company experiencing income stagnation applied a compensation program that paid the sales person 10% of the profit per sale. So when a $1,000 sale was made the company retained $900 whilst the sales person was compensated with $100.
Upon consultation the company calculated the following 3 simple questions:
- Average worth of
first purchase from new client?
- Average number of
times new client will purchase in the first year?
- Average number of
years client will continue to purchase?
The company responded...
- Average profit of
$200 for each new client first purchase of which the company kept $180
& compensated the salesperson with $20
- Average number of
purchases per year was 5
- Average number of
years new client continued to purchase was 3
Based on this the company accumulated approximately $3,000 profit over the average lifetime of a new client of which the company kept $2,700 and compensated the salesperson with $300.
Upon further consultation, the company was advised to:
- Compensate the salesperson with
100% of the profit from every first sale they produce
- Compensate salesperson with 10%
of every ongoing purchase from new client
- 10% ongoing compensation to
continue ONLY if salesperson maintained new client to continue average
purchases (5 x per year over 3 years)
What do you think happened?
First, the salesperson was compensated $200 instead of $20 for every new clients sale therefore, the sales team was 9 x more motivated
Second, the life time value of each new client was worth approximately $3,000 therefore, with this strategy the company now keeps $2,520 and compensates the salesperson with $480
Ultimately, with the sales team greater motivated, the company TRIPLED it's number of new clients in only 9 months!!!
Evidently there are many additional ways to increase your number of clients and so, look out for our next newsletters.
All the best with your business!
If you would like to discuss how to improve your organisations capability in the areas of Leadership, Communication, Presentation & Sales then simply contact us for a complimentary, no obligation conversation.
Go to www.EffectiveCommunication.com.au to find out more
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by effectivecommunication.com.au
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