Web Business Marketing Blog

The question: if your market requires a direct marketing approach, how much turnover per customer do you need to generate? Or put otherwise, considering the length of your sales funnel, and its successful closure rate, what order size justifies sending a sales person or team to a customer?

If your typical account is over 1 M$ per year, stop worrying about this question. Do whatever it takes within reason to acquire or maintain the account.

On the other extreme, if a good spot order in your business is 25,000 - 50,000 $, you probably cannot afford the direct approach unless you have lots of potential customers concentrated in a confined geographical area.

Between these 2 extremes, where is the threshold?

• Companies typically generate 100,000 - 200,000 $ of turnover per employee and per year, with 5% of employees working in sales. Therefore, a sales person needs to bring in 2 to 4 M$ orders per year, or on average 3 M$/year - 250 K$/month
• A sales funnel requiring 5 visits to close, with a 25% success rate requires 12 visits per sale
• Assuming that a sales person can make 30 sales calls per month, and closes on average 2.5 times, the average order should be minimum 100 K$.

This establishes a rough benchmark - above 100 K$, you’re probably doing the right thing having sales people in the field talking face-to-face to customers. Below 100 K$, consider using trade press advertising and direct mail supported by a telephone sales force and an ecommerce website.

As with anything in marketing, there will be lots of special cases:

• Regular business: if you’re supplying high value-added consumables for a manufacturing operation, you need to take a customer lifecycle perspective
• If you’re in a low value-added business, the threshold should be substantially higher
• In commodity business, accounts can be 100 M$/year and more. Only direct approach makes sense.
• Infrastructure business (e.g. selling B$ power stations or civil engineering projects): a sales person will be doing well landing a single project every couple of years

The size of an account also drives how you organise the sales function. Ideally, the same person should be responsible for a customer over the lifecycle, taking care of acquisition, sales & sales support (and effectively delivering on the promises made during the sales cycle). However, low order volume/customer businesses often cannot affort account managers, Also many companies choose to separate the functions of business development and sales support because they require totally different mindsets.

In the above example, the average cost of making a sale was around 5,000 $ (assuming a cost of 400$ per sales visit). A lead generation process that improves your closure rate or shortens your sales funnel by 10% should be worth 500 $ per lead.

I would love some feedback on these benchmarks.