It’s critical for salespeople to come up with the specific reasons why they lose a customer. They may be in jeopardy of losing other customers for the same reasons. Salespeople who take the time to listen to their customers and gather, manage and analyze their feedback may not only survive but may thrive in attracting, retaining and competing for customers. Research shows that gathering customer feedback can increase customer retention by 15 to 20%.

Salespeople have been warned for years about the economic impact of losing customers. With the advent of the Internet, here are new hidden costs that should be considered:

• Negative word-of-mouth, especially with the advent of bloging and social networking where people can now broadcast their points of view to thousands or millions of people.
• Substantial costs involving in trying to recruit and acquire new customers to replace lost customers.
• The amount of time it takes for a customer to become profitable to a company.
• Lost opportunities for customer referrals/recommendations.
• The toll that losing customers take on a company’s employees caused by layoffs and office or plant closings due to lost revenues.

Building relationships with customers that last requires feedback in three areas. Share them with your salespeople.

1. Why your current customers continue to do business with you?
2. What specific factors are causing customers to leave?
3. Which of your products or services do customers care about most?

These questions are best asked in person or on the phone. A good opening statement might be “We are working on our marketing plans for the second half of the year, I’d like to ask you a few direct questions. The first one is why do you do business with our company” Take careful notes and look for the common answers between customers.
Here are tips that may increase your customer retention rate:

1. Find out what customers think, want and need, and the factors causing them to stay or leave. Survey your existing customers to find out. Are customers unhappy? Are there any changes and/or additions that your company should be making to its products or services?
2. Continually collect and promote customer feedback. Try not to wait until there’s a problem to contact or follow-up with customers. Research shows that gathering customer feedback can increase customer retention by 15 to 20%.
3. Address customer concerns immediately. Up to 70% of customers will buy again if their complaint is resolved. That figure jumps to 95% if the customer feels the complaint is resolved quickly. Customers whose complaints are resolved satisfactorily tell an average of five people about their good treatment.
4. Let customers know whenever your company initiates change as a result of their suggestions or feedback. If you’re not able to use a customer’s suggestion, let him or her know that you heard the suggestion and appreciate their feedback. Measure the results. Study the impact of the changes you make based on customer feedback. Some of the areas you may want to consider include customer retention rate, revenue per customer, customer referrals and customers saved due to feedback.

Remember to include improving your customer retention rate whenever you forecast sales. If your annual retention rate is 85% and you are projecting a 10% increase, you really have to focus on a 25% increase to get the 10% projection. It’s amazing how many sales managers ignore reality when projecting sales.

• How do they think?
• How do they act?
• What motivates them?
• How do they interact with other people?

All four apply when considering how to recruit and select sales­people.

What should sales managers keep in mind when recruiting and selecting salespeople?

The most critical ingredient for the survival and growth of any organization is talented person­nel. One problem many man­agers have is they hire quickly and fire slowly, when actually managers should be slow to hire and quick to fire.

First, know what you’re looking for. Take time to develop a pro­file – a benchmark that defines the best candidate for the posi­tion. If you’re selling a big ticket item like a software sys­tem or a $1.2 million CAT scanner, you need a different salesperson than someone sell­ing shoes or office copiers. For big ticket sales, we look for discerning people who can adjust to the styles of different decision makers. Their job is to find out what the customer needs. Going for the throat aggressively is outdated. The fact is trying to change behavior is a waste of time.

Once today’s consultative salesperson establishes the customer’s needs, closing the business is just the next step in the process. A certain amount of assertiveness is required in sales, but it varies depending on the selling environment. In addition to discernment and assertiveness, we look for an achiever trait – someone who’s motivated to succeed in a com­petitive environment. Salespeople need to relate quick­ly to the prospect, empathize, and persuade.

How can you find out if some­one is persuasive?  One of the best ways is to let them show you how persuasive they are in the interview. Has the applicant persuaded you he or she is the best person for the job? Remember you’re hiring, renting, or leasing behavior. From what you learn in the interview, how will the appli­cant behave?

Can’t behavior be changed, if an applicant has other strengths? Sure, there are plenty of ways to change behavior. Psycho­therapy for about 27 years might work, or maybe a frontal loboto­my, if they’re legal where you work. You might try religious conversion, drugs, or send them to California. No, the fact is trying to change behavior is a waste of time. Sales managers ought to get out of behavior modification and into behavior selection.
 
Don’t you put any weight on what the applicant knows or is capable of learning?
You need to ask yourself these questions about a prospective salesperson:

• Can I work with this person?
• Can he or she do the job?
• What does the person know about our business?

But the knowledge can be learned. One of our clients markets sophisticated medical instruments. They told me the sales­people have to have college degrees. We looked at their 15 best sales reps. About six or seven of them had no college degree. You should be focused on who can deliver the behav­iors you need.

Another company I know raised eyebrows when they hired a guy out of a clothing store to sell mainframe computers. He knew nothing about computers, but he knew how to relate to people. He picked up the computer knowledge very quickly. First thing you know, he sold a $7.6 million order to the office of a prominent state officeholder, despite the fact that the comput­er company had supported that politician’s opponent in the last election. That’s overcoming the odds, without knowing much at all about computers.
Interviewing is something of an art. Why are so few good man­agers also good interviewers?
Most managers admit they don’t interview well, and here’s why. First, they’re not sure what they’re looking for, so they don’t ask the right questions. Get through theory to behavior. Instead of asking, “Are you assertive?” ask, “Can you give me a recent example of when you were assertive?” If the can­didate can be very specific with the example, then very likely that behavior is practiced.

Second, they’re not well pre­pared. Instead, they think of questions as they go along. Finally, they’re strong boosters of their own company, so when there’s a chance to sell the com­pany, they’re off to the races. The interviewer ends up doing all the talking. Managers have to be much more disciplined in interviewing.

How do you define what you’re looking for? It takes time. You have to estab­lish what traits are required for success in your marketplace. Then build “behavior profiles” for each position. The best way to develop a behaviors profile is to identify your top employees in any given position. Then ask: What makes him or her so good? Water runs downhill. In any organization, so does talent.
 
You mean hiring someone bet­ter than you are?
Yes, and that’s hard. You need people smarter, better, or at least as good as your best peo­ple, including yourself.

What’s the best way to find ideal job candidates?
The very best way to find can­didates is through referrals. As a guideline, 70 percent of your people should come from refer­rals, though most companies are at about 40 percent.

What are the most common mistakes sales managers make in recruiting and selecting salespeople?

First, they’re often not clear about what they’re looking for. They tend to be over-impressed with candidates who look right, dress well, and present them­selves effectively. Second, they look at resumes and make choices, when resumes are no more than balance sheets that don’t list the liabilities. Third, they’re not trained in interview­ing’ and they often end up doing most of the talking.

I know that at first glance this all looks complex and time consuming. Before you dismiss the process, consider what it costs you to hire the wrong person.

Why then, amidst all the fanfare, do some sales managers find their “pay for performance” plans to be ineffective in gener­ating desired sales and profits? Why do their salespeople appear to be somewhat non-aggressive and demoralized? In many cases, the answer lies in the four-letter word: GOAL.

THE UGLY. Perhaps one of the greatest reasons “pay for performance” plans fail is that management assigns stretch goals, which is often code for unrealistic goals that sales man­agers know the sales organization will have difficulty achieving. Although some degree of stretch

may be desirable in certain envi­ronments, often such goals result in a “lose-lose” situation for both the company and the sales organization.

Why then does management set goals in such a manner? In most cases, management convinces itself that if the goals are set 20% to 30% higher than the firm’s true expectations, the company will still reach its goals even though the individual salespeople may miss their personal goals.

Unfortunately, under such scenar­ios, the sales organizations not only miss by 20% to 30 %, but often by as much as 40%. The reaction of most sales organiza­tions is quite typical. The sales­people begin to question their own skills and management’s judgment. Morale plummets and resumes begin to circulate. The hidden and not-so-hidden cost consequences to the firm are usually enormous under such circumstances.

THE BAD. In setting goals, many sales man­agers frequently follow the dic­tate we so often preach, set the individual sales goals equal to the internal goals of the firm. Such an approach will help ensure that the organization either rejoices together or cries together. Although their intent may be commendable, often their processes break down when selecting the information upon which they will base their deci­sions. The most common mis­take made by sales managers is to base the goal setting process solely on sales history. A com­petitive sales environment does not allow long-lasting success for those companies continually looking to the past for answers.

Why do managers continually set goals based solely on sales history? One explanation may be rooted in the idea that many sales managers do not know what other data to use in mak­ing their decisions. Perhaps an even better explanation is that some sales managers are uncer­tain how to identify, size and account for potential, economic conditions, channel shifts and other factors typically included in solid goal setting processes.

An example of a bad situation that often arises when sales managers fail to consider poten­tial in setting goals is penaliz­ing good salespeople who have deeply penetrated their markets. Better performing salespeople will have a limited number of prospective customers, while poor performers will continue to have significant opportunity. As one salesperson has stated, the best solution under such a sce­nario is to “quit and then get re­hired to sell in a territory which has been under penetrated.”

THE GOOD. Good goal setting processes will link the individual sales­people’s goals to the firm’s goals. Tougher environments may require that the goals be set slightly lower than the inter­nal goals to ensure a significant, portion of the sales organiza­tion “remains in the game” and a positive morale is maintained. It is also essential that goals be set based upon a combination of considerations: sales history, potential,. economic conditions, channel shifts and any other market conditions impacting the selling effort.

Good goal setting processes will attempt to encompass all of the above considerations where appropriate. Although such a process will undoubtedly require a significant degree of thought and analysis, many sales man­agers find that the subsequent returns more than offset their efforts. Often the resulting goals will be viewed as highly equitable by the salespeople. More importantly, they will be supported by solid rationale. Good performers will not be penalized and thus will be encouraged to aggressively pur­sue sales growth. Areas requir­ing additional or reduced staffing and resources will also be more evident.

If done incorrectly, goal setting will often create significant productivity problems in the sales organization, resulting in a “lose-lose” situation for the firm and the salespeople. Good goal setting processes will link the individual salesperson’s and the firm’s goals. They will be based on a number of considera­tions, not solely on sales history. Most importantly, they will be realistic and obtainable.