Understanding sales strategy and implementing effective plans can help a company sell more of its product and target the appropriate customer. This lesson explains the logic in establishing a sales strategy.
What Is a Sales Strategy?
When a company is developing its sales plan, sales strategies are important to consider. A sales strategy considers the product and/or services a company offers and determines the best steps to take to reach potential customers and increase sales.
Let's say you're creating a sales strategy for an energy drink company. Your company is planning to sell five different drinks, and you want to create a plan for selling the drinks next year. There are several things you must consider, including who your target market is, how you will sell the drinks, and what sales activities you will employ to reach your sales goals. As you review the market research, you find that your most likely customers will be males ages 17-24. In developing your sales strategies, you'll keep this target market in mind.
Elements of an Effective Sales Strategy
One of the first steps in creating an effective sales plan is organizing your sales team. How will you organize your sales people to sell as many drinks as possible and grow the success of your beverages?
First, you'll need to determine the type of sales force. Do you want internal sales people or independent representatives? Internal sales people are employees of the company and focus exclusively on growing the sales for their employer. Independent representatives are contractors who work for themselves. They might work for additional companies and sell multiple products.
Because you want to grow your drink business and reach the right customers, you decide you need a mix of internal and independent sales people. The internal employees will actively seek out independent stores, regional distribution, and lower-volume accounts. The independent representatives will reach the larger, national accounts that they already have relationships with. Additionally, the independent representatives will help grow the industry contacts for your company, since many independent representatives know key buyers and can introduce you to important people.
Managing a Sales Team
Creating a prosperous, exciting sales team is fundamental to your success in the beverage market. There are several key components to consider when developing your sales strategy:
First is the size of your sales force. You hope to sell $1 million in beverages next year. To do that, you've decided you need to hire eight internal sales people and four independent representatives. The larger the roll-out and industry, the larger your sales team needs to be. If you're focusing regionally or need less hands-on contacts, you can go with a smaller sales team.
The next component to consider is the method of compensation. There are a number of effective ways to compensate sales professionals. Many internal sales people earn a combination of a base salary and commission and/or bonuses based on their sales activities. The more they sell, the more they earn. Most independent representatives work primarily on commission, earning a specific amount or percentage of the total they sell. They might earn a set fee for each item they sell, or they might earn a portion of the total ticket.
Because your beverages sales can easily be tracked, you decide to pay your independent representatives a flat 3% of their total sales. The internal employees will be paid a base salary of $25,000 per year and earn 1% of their total sales. This offers them the security of having an income, while also giving them an incentive to sell more drinks and earn more money.
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The sales strategy isn't complete without plans to train the salespeople. They need to stay current on product details, contact new customers, increase sales to current customers, and introduce new products to existing customers.
As your drink company is still very new, most of your sales people will need extensive training on the product line, ways to answer questions, and guidance on how to increase sales to customers.
Business Plans for Sales Activities
Another part of a successful sales strategy is to plan appropriate sales activities. You should consider the following aspects when creating a sales plan:
First is prospecting. How will you find new customers? Understanding your target market will help you determine how you can best inform them about your product and entice them to buy.
Next is pioritizing contacts. Within your target market, there are stronger prospects than others. Consider the drink clients in the previous example. When the target market is males ages 17-24, you might find that males 19-21 are the strongest segment because they have more disposable income and busier lifestyles, and therefore, are more likely to purchase energy drinks. They would be a higher priority than other members of the target market.
You'll also want to establish goals for average sales calls and average dollars per sale. Average sales calls refers to the number of contacts a sales person can make in a day. If a person is contacting clients on the phone, their average sales calls should be much higher than a sales person who is making contacts in person. This is an important measurement to make sure all of your sales staff is efficient and contacting the right number of customers every day. Average dollar per sale ensures that each sales person is hitting an appropriate amount of sales on average. If you have five sales people and one is much lower than the other four, you might need to dedicate time to coach or train that person.
Establishing a sales strategy takes planning. You need to consider the target market, the resources available, and the right format for your business. By determining what type of sales force is needed and ensuring the sales staff is trained, you can go through the sales activities that lead to solid sales. Effective sales people will prospect, prioritize contacts, meet average sales call goals, and have an average dollars per sale consistent with other salespeople.
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