The Cost of a Sales Call
Do you know the cost of a typical sales call in terms of real dollars and cents? More importantly, do your salespeople know the cost of a sales call?
I suspect that if salespeople realized the real cost of making a sales call they might be more careful about how they spend their time and who they spend it with. I mean it just doesn’t make sense to make a $200 sales call to sell a $100 item does it? Yet, that’s the kind of thing that’s going on day after day. In fact, a lot of people are making $200 sales calls and not selling a thing!
Is It Happening to You?
It’s fairly easy to figure out what a typical sales call is costing you if you keep reasonable sales records.
You simply calculate the salesperson’s costs by totalling his or her compensation, benefits, and travel-and-entertainment expenses and divide that amount by the number of sales calls he or she made over the past month, quarter, or year.
While the costs are usually easy to find out, the one piece of information that may be missing is the actual number of calls your salespeople are making. You may need to have your people turn in their numbers every day or week until you’ve got enough to work with. You’re looking for the total number of face-to-face calls your people made, not just “sales calls.” If all else fails, you may have to make an educated guess at this number.
What Should the Numbers Be?
The numbers will depend on the type of selling your people do. Basically, the four types of selling are:
- Transactional/commodity selling
2: Basic feature/benefit selling
3: Solution selling
4: Value-based selling
On average, a typical sales call is costing around $180-$185 in US funds (this is in 2005 dollars and it’s just got to be even more today!).
If you’re primarily doing transactional (commodity) selling where simply completing the paperwork is the major part of the transaction, then your cost of sales should probably be about $60-$65. This is a type of “selling” where there is usually more buying going on then there is selling.
If you’re doing feature/benefit selling where price and features are equally important the type of selling that involves matching your product/service’s benefits to the prospect’s needs, then your cost of selling will most likely be around $155-$160 per sales call. That’s a sizeable jump over the cost of a commodity sale.
Then we have what is called solution selling. While it could be argued that all selling is solution selling, what we mean here is the type of selling where the product is tailored to the customer and price is secondary. Costs here are about $180-$185 per sales call.
The last category is value-based/team selling. While like solution selling, value-based selling is where the solution is the key factor and price is much less important. Here your costs are likely to run between $230-$235 per sales call.
If your numbers are in the ballpark, don’t worry too much, but if your numbers are out of whack, it might be wise to take some corrective measures, especially if your costs are too high.
What Are You Paying For?
You certainly don’t want to be paying $230 for someone to go around making social calls, comfort calls, or delivering literature. You want to be sure your people are making calls with a purpose and hopefully that purpose is to start, advance, or close a sales opportunity. That’s what they’re getting paid to do.
Of course, all the calls in the world aren’t worth dust unless sales are being made. You need to balance the cost of a sales call against sales results. If sales are roaring in, you can be less concerned about your cost of a sales call but don’t get complacent. Keep your financial finger on the pulse of your sales team.
Tell the Troops
Once you’ve gone through this exercise, I recommend that you let your salespeople know what it’s costing you to have them make calls. I’m not suggesting you do this to intimidate them. Don’t use the information as a club, use it as a tool. The primary purpose for telling them is to create awareness among the team that their time and effort has a dollar value associated with it.
The average salesperson might find the numbers interesting but won’t know what to do about it. Those at the bottom of the sales food chain won’t give a damn. But the smart ones will think twice before making a call without setting a call objective. The smart ones will make every call count and that’s what you’re looking for.
Now your challenge is to hire and/or develop a bunch of smart ones!