HOSPITALITY SALES MANAGEMENT
HA - 400
P2, S4, T2
CUSTOMER DATABASE MANAGEMENT
By: Richard G. McNeill, 12/20/00
“The main purpose of a salesperson in not to make sales, but to create customers” says Gerhard Gschwandtner, editor of Selling Power. In earlier times, the goal of salespeople was to obtain as many sales as possible, thus quantity of transactions was valued over quality of transactions. This was the era of Transactional Selling. Today, potential buyers are more concentrated and these potential customers desire to deal with fewer suppliers/sellers. This makes competition more fierce. Thus, a new strategy evolved, Consultative Selling, which concentrated on repeat and referral business and long-term relationships.
Customers in Gschwandtner’s quote is translated to mean: (a) a buyer who is not a one-time purchaser and/or gives repeat business over time and (b) Referral business from this loyal first customer within the same organization. This second part of the meaning of customer expands from the transactional seller seeing the customer as a single individual to consultative sellers viewing the entire account or the organization itself as the customer.
Creating Customers - Basics
For the Consutative seller to create a long-term organizational customer requires the following:
First, the salesperson prospects & qualifies to create a pool of potential first time buyers. This is done in two ways: (a) Cold Sources (directories, etc.) to create a pool of potential first time buyers and (b) Warm Sources (initial relationship building) to create the pool (Both of these methods are discussed below).
Second, from the identified pool of prospective or potential first time buyers, the salesperson must make his/her first sale (This is done in two steps: Need Discovery and Presentation with Commitment (Close of the sale).
Third, the salesperson must establish an every deepening relationship with this first purchaser that will result in future repeat and referral business. This occurs with After-Sale Service which leads to deepening relationships and account penetration.
Creating Customers - The Sales Cycle
To accomplish these three accomplishmentsboth objectives above, the salesperson progresses through a classic sales cycle:
(a) Prospecting & Qualifying - Create a pool of potential first time buyers. NOTE: This part of the Sales Cycle is the subject of this article (detailed below).
(b) Need Discovery - A potential buyer or prospect from the pool becomes sufficiently interested to consider listening to the sales person's proposal and allows the salesperson to conduct an interview with him or her to learn about specific buyer needs.
(c) Presentation and Commitment - After the salesperson learned about the potential buyer's needs (in Needs Discovery above), he or she returns for a SECOND interview (selling appointment) to present a proposal to the potential buyer. This proposal is simply an orderly explanation of how the sellers product/service can meet or satisfy the potential buyer's needs. If the potential buyer agrees to purchase the product service then commitment is achieved. Now the buyer is no longer a potential buyer or prospect, but has been transformed into an initial customer. This customer becomes the key gatekeeper to penetrating the total organization or account. Account penetration depends on deepening the relationship with this initial gatekeeper while simultaneously generating repeat and referral business.
(d) After-Sale Service - These are all the activities that occur after a sale has occured. By fulfilling this part of the sales cycle in a thorough and professional manner, the buyer should award the salesperson with repeat business from themselves AND supply the saleperson with other potential buyers within the organization: referral business. This step of the sales cycle is where a long-term relationship with the customer (total organization) is initially established and maintained.
NOTE: Since transactional Salespeople are primarily interested in making as many sales with as many customers as possible, they don't spend much time in After-Sale Service. Why? Because it takes time away from finding new potential buyers. For the Consultative Seller, After-Sale Service is imperative because they depend on total organizational account penetration through repeat and referral business.
Customer DataBase Management and the Sales Cycle
The total sales cycle is dependent on the acquisition and management of customer information and this is accomplished with a developed Customer DataBase:
Prospecting starts the sales cycle and is dependent on information. When the salesperson starts to review all of the potential customers in their sales territory (geographic territory, industry category territory, etc.) it is important to keep three key qualifications in mind:
1. Need – Does this prospect (potential customer) need my product or service?
2. Affordability – Can this prospect afford what I’m selling
3. Authority – Does this prospect have the authority (decision making capability) to buy my product?
After-Sale Service completes the sales cycle and is the area where repeat and referral business is earned. This also relies on information. How is the product/service being implemented? Is the customer satisfied? How are the customer’s needs changing overtime and how can I (salesperson) help them? Are there other potential buyers within my first customer’s company that would be interested in my products/services? Do I have a well-developed relationship with my customers that will help me gain repeat and referral business?
In summary, effective management of customer information, Customer Database Management, is the competitive edge in the era of Consultative Selling. In this article, we will discuss the power of Customer Database Management on Prospecting. After-Sale Service will be discussed in depth at a later time.
CUSTOMER DATABASE MANAGEMENT AND PROSPECTING
Who are the Prospects of a Hospitality Consultative Salesperson?
Generally, consultative salespeople sell to organizations or businesses. They interface with individuals or teams who represent the buying organization that purchase large and complex products/services Why? Because salespeople cost to much in salary and commissions that would not justify small inexpensive sales (unless, of course, they had many single transactions of low cost items). In any case, in the hospitality industry, salespeople sell group travel (travel for business purposes or for pleasure).
Prospects for hospitality group business is found in two segments:
1. Group Travel for Business Purposes: (a) Corporate, (b) Association, and (c) S.M.E.R.F. (Social, Military/Government, Education, Religious, and Fraternal). Here the individual or team decision maker is the Meeting Planner.
2. Group Travel for Pleasure Purposes: Wholesale Tours. Here the individual decision maker (prospect) is the Wholesale Tour Operator.
Prospecting Is the Life Blood of Sales
Every salesperson must cope with customer attrition or the inevitable loss of customers over a period of time. Unless new prospects (potential customers) are found to replace lost customers, a salesperson will eventually face a reduction of income and possible loss of employment. There are several causes for attrition:
1. Relocation – The customer may move to a new geographic location outside the salesperson’s territory.
2. Dissolution of Business – An existing customer’s firm may go out of business or merge with another company.
3. Change of Company Position – A loyal buyer may leave the position because of promotion, retirement, resignation, or serious illness.
It has been estimated that the average company loses 15 to 20 percent of its customers every year. It becomes obvious that many customers are lost for reasons beyond the salesperson’s control. I salespeople want to keep their earnings at a stable level, they cannot rely on a static customer base and not add new customers to account for those that they will lose to simple attrition.
Sales expert, Joe Girard, succinctly summarizes the need to replace customers thorough an analogy of a Ferris Wheel at the State Fair: As the Ferris wheel stops and one rider gets off, the operator should be ready to replace that rider with a new one. So, the message to the salesperson is, “keep prospecting, and every time you lose a rider, you’ll have another one waiting in line to take his place.”
Some General Guidelines. Prospecting is a systematic process of locating and identifying your prospects. There are several ways to improve the quality of the prospecting effort:
1. Balance the number of people who board your Ferris Wheel with those who exit. You need to make sure that new incoming customers replace outgoing customers. Don’t forget that it takes a larger number of new prospects to convert to fewer customers. In other words, all prospects (potential customers) do not purchase and become (actual) customers.
2. Improve the quality of the prospects who board the Ferris Wheel. Quality here means prospects who have the potential to become long-term buyers, higher volume buyers, or have referral access to other potential buyers. Establishing relationships takes time and has real costs (salespeople are expensive) so it’s important that cost/benefits stay in balance.
3. Shorten the sales cycle. Mentioned earlier, the sales cycle is the process from prospecting to closing the sale and after-sale service. To shorten, the salesperson must gather as much information as possible, as early in the cycle as possible, to ensure that he/she is talking to a prospect that has a high potential of purchasing and becoming a customer. This is called qualifying the prospect. Too often, salespeople simply hope; that is, they don’t gather enough qualifying information on the prospect until late in the sales cycle. Too often, at this late date, they discover that the prospect really never had the potential to buy. Thus, wasted costly time and money.
Segmenting the Market. Segmentation can practically be accomplished in two steps: (a) Study the characteristics of your existing customers and (b) Locating prospects who have similar characteristics to your existing customers.
1. Study Your Existing Customers (Remember that you are looking for business or organizational prospects)
a. What are their geographic characteristics? Where are their headquarters located?
b. What are their demographic characteristics? Size of organizational meetings, types of meetings (general conference, training, what), number of meetings planned per year, area of country where meetings have historically been held, types of properties used (resorts, commercial hotels, airport properties, what). What are the titled positions of decision makers? Do they make buying decisions as individuals or do they use buying teams; what is their buying process?
c. What are their psychographic characteristics? View the organization as a living being with a living culture. What is their attitude toward meetings? Are they committed to educating their employees? Lavishing luxury on high performing employees? What are their attitudes toward meetings?
d. What are their Economic conditions? Certainly companies experiencing economic downturns try to cut costs and often meetings are some of the targeted cuts. What do you know about these conditions?
2. Find Prospects (Potential Customers) Who Have Similar Characteristics To Your Existing Customers.
a. Use Cold Sources. Cold here means that you have prior contact with or referral to the prospect.
(1) Directories – There are many directories that list known meeting planners. These are compiled by commercial firms specifically for the hospitality industry.
(2) Memberships – Meeting planners belong to many different meeting planning organizations. For example, Meeting Professionals International (MPI), Professional Convention Management Association (PCMA), and others. Often hospitality salespeople join these associations (as supplier members) for the purpose of networking and also obtaining the membership directories.
(3) Trade Publications – These trade magazines often sell subscribership lists. For example, Meetings and Convention (M&C) Magazine is read by and gives free subscriptions to meeting planners. Hospitality salespeople can purchase these lists.
(4) Trade Shows – There are many trade shows where hospitality suppliers (hotels, CVBs, Special Event Companies, etc) can purchase booth space. Attendees to these trade shows are meeting planners. They come to the show to view what is the latest and newest in products/services. Obviously, they potentially can stop by the salesperson’s booth and start a conversation that leads to potential business.
(5) Educational Seminars – Many salespeople offer free information or other attractive benefits to prospects. The purpose is to attract attendance and then convert this attendance into contacts.
(6) Cold-Calling – This term means that the salesperson telephones or
personally visits with the prospect UNANNOUNCED. This is a traditional method but has recently become less effective since potential buyers are very busy and have many salespeople wanting their time. It is questionable regarding this method’s viability. Might it be better to call for an appointment first? Or, can the salesperson find a way to offer real value and thus earn the right to the prospect’s time?
b. Use Warm Sources – Warm means that either the prospect has been referred to you or that the prospect has initiated the contact with the salesperson or selling organization. Generally, warm sources are easier to move through the sales cycle. Either they have been introduced by a satisfied customer or contact who thinks favorably of the salesperson or they have shown interest by contacting the selling organization.
(1) Referrals – This is a prospect who has been recommended by current customer or by someone who is familiar with the product/service. As mentioned earlier, this is one of the most important assets for the consultative salesperson. Referrals come from satisfied customers. When a hospitality organization hosts a successful function and ensures superior after-sale service, referrals from this source are extremely powerful and give competitive advantage.
(2) Networking – This is another form of referrals, however it differs somewhat. Salespeople belong to various organizations and associations where they come in social contact with other people who may be in a position to refer business or to actually purchase themselves. Networking is not dependent on having a satisfied customer or familiarity with the product/service. Knowing a lot of people generally increases your odds that one or more may result in new prospects.
(3) Direct Response Advertising – Here the prospect either receives a mail-in card through direct mail or clips a mail-in card from another source such as a trade magazine. In any case, the prospect mails the card to the selling organization and requests more information or to be contacted by a salesperson. In this case the prospect initiates the contact, thus, a warm source.
(4) Web Site – Today direct response advertising has evolved to the web. Instead of a mail-in card, the prospect finds contact information at the web site. Additionally, the web site may contain a REQUEST FOR PROPOSAL (RFP) form. Here the prospect not only requests more information, but also supplies meeting specifications and asks the hospitality selling organization to price the potential meeting. Certainly this prospect has indicated a strong interest. Of course, after the RFP is sent, a salesperson will contact the prospect.
Organize Your Prospect Information
Today’s salesperson is fortunate to have computer technology to manage their customer database. Information must not only collect information, but they must be able to access it and analyze it. More information allows the salesperson to get to know their customers better than their competitors. This translates not only in what you know but also in the timing of how you use the information.
Computer Databases. Let’s suppose that you have your computer database loaded up with all of the information that we talked about above. For example, you know when your prospects begin to plan a specific meeting. You know how large the meeting is. You know at what time of year the meeting is held. And, of course you have all of the prospect contact information including e-mail address loaded in your computer.
Now let’s suppose that you are a hotel group salesperson and it is now January 15. You look at your hotel’s future business on the books and notice that the month of November is completely empty (there are not group rooms sold and historically you must sell 60%). You have a problem since meeting usually book a long way in advance of their actual meeting. What do you do?
First, sort your data base for meetings historically held in November (also adjacent months). Second, sort for decision lead times; the time when meeting planners begin to lock up future meetings. The database will produce only those meeting planners who are currently planning their meetings for November. With their contact information displayed before you, you make phone calls. Thus, effectiveness and efficiency are realized. Before computers, this process was cumbersome and time consuming.
Contact/Relationship Management Systems. These inexpensive software programs allow the salesperson to maintain a list and activity log of his/her prospects and customers. There are many of these on the market. Delphi incorporates one into a hotel wide MIS. Free standing programs such as ACT and GoldMine reside in a PC. Essentially, each time the salesperson contacts a prospect/customer, a log of the contact is made and permanently stored. There are places for the saleperson to make notes regarding the conversation. Additionally, with one click a future contact is input on a calendar with reminders when the date arrives. E-mail is also initiated and logged from this database.
Today, the competitive advantage for salespeople comes from Customer Database Management. Information truly is power; economic power. There are more than enough propects to be found. The key is how you find and then manage these prospects. How do you systematically convert these prospects into customers; long-term customers whose relationship with you generates repeat and referral business.
Again quoting Gerhard Gschwandtner, editor of Selling Power, “The main purpose of a salesperson in not to make sales, but to create customers.”