Lesson 5 Commentary: The Universe, Suspects, and Prospects

In this lesson you are introduced to prospecting. Prospecting is a process whereby you identify new firms or individuals that can benefit from the purchase of your product. Because salespeople are largely responsible for prospecting in their territory, this lesson is devoted to teaching you how to identify solid prospective customers within a target market, and how to use what you learn while prospecting to plan your calls. You will learn how to tell the difference between a suspect (lead), prospect, and qualified prospect. You will see why effective prospecting is critical to success in selling. Finally, you will gain first-hand experience at prospecting, and at prioritizing a list of prospects into a territory call strategy.

Lesson 5 Objectives

After completing this lesson, you should:

Know which characteristics of members of your target market identify them as qualified prospects;
Understand why carefully qualifying members of your target market is critical to your success as a salesperson;
Understand how and where to obtain prospects;
Have gained practice interviewing a prospective customer;
Have prioritized a group of accounts according to their status as prospects for your products;
Have established call objectives and a call strategy for a select group of qualified prospects.

Reading

Be sure to complete the reading assignments for Lesson 5 (listed in the Course Syllabus) before continuing with this lesson. You can also review a PowerPoint summary of the textbook chapter.

Commentary

The word “prospect” can be used either as a verb or a noun. As a verb, it means “to search for or explore,” bringing to mind gold-crazed ‘49ers, panning tools at hand, bent over a California stream “prospecting” for gold. As a noun, it means “the likelihood of something happening,” as in “the prospects of your loan for that new car being approved are good.” Both images combined describe the selling activity known as “prospecting”: You go out in search of people who are most likely to purchase your products. It is a classic business adventure—undertaken with no guarantee of success, when it is successful it brings an unparalleled exhilaration.

The Universe, Suspects, and Prospects

It’s a large world in which to sell. The population of the United States alone has now exceeds 300,000,000. In addition, more than 25 million businesses operate on a given day. For international marketers, the numbers, of course, are even larger. Somewhere among all of those people and organizations are a goodly number who want or need your product. How do you find them?

In the United States, you could acquire copies of each of the 9,000 telephone directories published or get most of them online. Then, working from Abbeyville, Alabama, to Yoder, Wyoming, you could telephone each entry to learn if the occupant is in the market for what you sell. Such an approach would insure that you’d never run out of work to do. It would also see you starve as your dismal sales productivity would result in a lack of income.

A more effective approach would be to make an organized effort to locate the people or organizations that stand to benefit from your product. Such people are going to be more willing to talk with you. And a greater proportion of them will subsequently buy from you. This promise—more presentations that result in more closed sales—is what makes prospecting an attractive activity for salespeople. How does prospecting work?

The Universe

Our discussion of the marketing mix made the point that in today’s business environment, products are developed with a target market in mind. The sum of all occupants of the target market is known to salespeople as the universe. It is the largest possible number of potential customers. For example, suppose you are a photographer who specializes in portraits of newborns and young children. The target market/universe for your photographic services consists of all parents—those of newborns as well as of young children—within your territory or area of business (we specify parents because they, and not their children, make this buying decision), as well as school districts that provide individual and class portraits, youth sport organizations that provide individual and team pictures, and gift givers (such as grandparents).

Suspects

If you’ve never sold before you may not realize it, but not everyone who could benefit from your product will take advantage of the opportunity to buy it. So within a universe you want to discover suspects, those you “suspect” will have an interest in or need for your product. How can you identify certain members of the universe as “suspects”? Recall that our definition of personal selling which included the need to call on other human beings “chosen based on characteristics that indicate a close affinity with your products and services.” Look for these indicators of close affinity:

Current interests: Some members of the universe may have an ongoing or recently adopted interest that involves your product. Among the ways you could learn of this interest are that the person calls or writes to tell you of it (thus creating a “lead”), from being referred to one another by a third party, or by your being alert and observant, and thus noticing an opportunity that may not be obvious to others (including potential customers).

They look like your customers: If a study or experience shows that your customers are overwhelmingly single males aged 18–35 who have a 4-year college degree and whose income averages $35,000/year, look for others who fit this description.

They buy from a competitor: Once you learn this, one of your jobs becomes to get them to buy from you.

They experienced a recent change: Similar to #1 above, in this case some event creates a sudden interest in your product. For example, a doctor, who may not need a new photocopier for her existing office, decides to open a second office at a new location. She has just created her need for a new photocopier.

Their recent buying behavior: As people and organizations grow, or change in other ways, new needs arise. You may have noticed that soon after you bought a new camera, and sent in the warranty registration, you began getting solicitations to buy photographic supplies, magazines, how-to books, and more.

Prospects

In this light, one group of suspects for your photography business would be parents of newborns (a recent change). You can identify them by scanning each day’s birth announcements in the local newspaper. Using the names provided there, you go to the telephone directory to look up their addresses and telephone numbers. You now have a suspect list. For our continuing example, let’s say you’ve found 12 new parents in today’s newspaper. From among these suspects you want to quickly identify prospects. Two characteristics define prospects: 1.) they are found only among suspects; and 2.) based on your preliminary research, you realize they will benefit from your product.

A call to each suspect produces the following results:

Two have arranged with other photographers to get pictures taken of their newborns.
One insists the father can take very acceptable pictures of his new child.
One objects on religious grounds to taking pictures of young children.
Eight have made no arrangements to have photographs taken of the newborns.

Those last eight people are your prospects. You know you can do a bang-up job taking pictures of their babies, and your experience tells you that as parents of newborns, they will want to get pictures taken.

Qualified Prospects

From among this group of prospects, your last prospecting activity involves identifying which ones are qualified prospects. Qualified prospects exhibit four characteristics, in addition to the two that made them prospects, that make them especially worthy of your time and attention. Qualified prospects:

Recognize a need to buy your product: Different from your realizing the person or organization can benefit from your product, in this case the prospect has come to this realization, either as a result of actions you take, or as a consequence of changing circumstances in his or her life.

Have the authority to buy: He or she is authorized to place the order, write the check, sign the purchase order, or in some other way approve the purchase. The authority to buy can be spread among a variety of people or departments. For example, as the only instructor teaching Personal Selling (MKTG 220) at Penn State, I have sole authority to select the textbook for this course. Another course on the other hand, might be taught by a number of faculty members as well as graduate students. As a result, a committee of interested faculty is responsible for choosing a textbook for that course, and all instructors must use the book chosen by the committee. In a course such as calculus, where students from engineering, chemistry, and physics join mathematics majors, the committee appointed to select a textbook may be made up of professors from the mathematics, engineering, chemistry, and physics departments.

Learning who has the authority to buy is an often difficult, but necessary, part of prospecting. Even something so straightforward as selling a man a suit becomes clouded when he is accompanied to the store by his wife. The salesperson has to figure out who is really going to make the purchase decision: the man, the woman, or both of them together? If you fail to learn who makes the ultimate buying decision, you may waste time presenting to someone who cannot buy, or wind up having to count on that person trying to do your job for you with his or her boss. In this latter scenario, you can be sure the employee does not know your product as well as you do, is not a trained salesperson, will not fight for the sale with the same level of assertiveness as you might employ, and, if he or she comes back to you with a “no” answer, will feel alienated when you have to go over his or her head to start the sales process anew.

Have the money to buy: Learning whether the prospect has the money to make the planned purchase, or can make arrangements to borrow the money if necessary, is a delicate but critical aspect of prospecting. Were you to go car shopping, for example, dressed in blue jeans and a T-shirt and driving a 1985-model car, when you drive onto a Ford dealer’s lot and ask to look at and test drive a new Focus, you will not raise an eyebrow on the salesperson. But when you later wheel your car into the Mercedes-Benz dealership, step out, and ask to test drive a $100,000 automobile, among the things the salesperson is going to have to decide is, “Can this person afford the car he’s asking about or is he just a test-driving car hobbyist?” If the prospect does not have the money to buy, there is little to be gained from your making a sales presentation.

Want or need to make the purchase now: Timeliness is an important aspect of qualifying prospects, but one often overlooked by textbooks. If you call a car insurance company’s 1-800 number to inquire about their rates, you will be asked your “X date” (jargon for “expiration date”). If your existing insurance doesn’t expire for five months, you will be sent the information you requested, then contacted at a later date. If your X date is within 60 days, the representative you’ve called knows you’ve probably already gotten a renewal notice from your established carrier. He or she will gather enough information to work up a price/coverage quote, you will be sent the requested information, and someone will call you within the week to ask for your business. If your X date is within 30 days, you will no doubt be transferred to a sales unit where a quote can be worked up right over the telephone. (The company you’ve called knows there is not enough time to apply a more leisurely pace to these proceedings you are apt to just write a check to your existing insurer and be done with it.) Learning when a purchase decision is going to be made is an important aspect of prospecting and planning your follow-up.

Taking this lesson to heart, you try to make appointments with each of the eight prospects for baby portraiture that your first calls identified. As you make these calls, you learn that:

One couple doesn’t want to take pictures of their newborn; they prefer to wait until the child’s first birthday.
One couple decides $150.00, your lowest-priced basic package, is too much for them to spend right now.
Two couples are going to rely on the newborn’s grandparents arranging for, and paying for, the pictures, and the grandparents live in another town some distance away.
Four couples are glad to hear from you and make appointments with you for next week to discuss the details and prices of your various packages.

Congratulations. You are now going to spend the bulk of your selling time with four couples who are very likely to buy from you. That’s all prospecting is. To make effective use of your time, you want to call only on those people who are likely to buy from you. You want to call on qualified prospects only.

Why Effective Prospecting is Critical to Success in Selling

Selling is, at its heart, a numbers game. A look at those numbers reveals why effective prospecting is such an important part of selling. Begin with this question: “How many people do I have to call on to close one sale?” Estimates vary from industry to industry. Regardless of the industry you work in, your answer will eventually be based on hard experience. For now, let’s use numbers which, experience in various industries shows, will serve you in planning your work.

A reasonable estimate of the number of members of your target market/universe that you would have to contact to produce a single suspect is 50. This response rate, 2 percent, is a common benchmark in direct marketing. From this point you can safely apply what I call “The Rule of 3s: For every three suspects you uncover, one will be a prospect; out of each three prospects, one will emerge as a “qualified” prospect; and among three qualified prospects, one will purchase from you at this time.

Now consider this arithmetic in reverse. To close one sale you’ll need to work with three qualified prospects. To do that, you’ll have had to start with nine prospects. These would be drawn from among 27 suspects. To get 27 suspects, you will have had to call on 1350 members of your universe. Suppose your typical call lasts 30 minutes. You could make 14 such calls in a 9-to-5 seven-hour day. At that rate, you would have to work nearly 100 days, or 20 weeks, or five months, to make one sale. If all this were true, one would hope you are selling a big-ticket item that pays enough commission for you to live on for five months (it probably wouldn’t, or the calls would last more than a half hour) and that you have a very patient employer (not to mention family). Otherwise, you are going to be very hungry, or unemployed, or both.

You can improve on these numbers in two ways. First, the better you are at targeting qualified prospects to begin with, the quicker you can move to the front of the numbers game to address those who are most likely to buy from you. Second, the more you improve your skill at converting qualified prospects into closed sales, the more you will convert qualified prospects to customers. You just have to improve the odds slightly to increase your sales. A 10 percent improvement in your selling skills, say, combined with a 5 percent improvement in your ability to qualify prospects, will increase your sales as much as 50 percent.

Remember, the only people who are going to buy from you are qualified prospects. Your employer’s advertising and promotion activity will identify who in the target market/universe are suspects and prospects. Then, it is up to you to learn, as quickly as possible, who among them are qualified prospects.

Personal selling is the most expensive form of communication a company can have with its customers. That necessitates that you be productive during every minute of your work day. Do so by learning to identify qualified prospects and disciplining yourself to spend your selling time with them exclusively. Only in that way will you maximize your productivity, work satisfaction, and financial reward.

Original lesson commentary written by James Porterfield.

Assignments

After completing the Lesson 5 readings, do the following:

Complete and submit the Request Form for Midterm Exam, located in the Exam Forms folder.
Complete the Self-Assessment Quiz for Chapter 7 from the textbook website:

http://highered.mcgraw-hill.com/sites/0073136905/student_view0/index.html

From the pull-down menu at this link, select the chapter number, then select "Multiple-Choice Quiz." After completing the quiz, post your comments about the most interesting and/or difficult quiz questions on the Chapter Quiz Discussion Forum.
Lesson 5 Discussion Forum Activity. In a paragraph or two, summarize your responses to the boldfaced prompts below, and post them on the Lesson 5 Discussion Forum. Consider the following scenario:

If you were a salesperson for “a travel agency specializing in Caribbean vacations,”
- How would you develop a prospect list? List alternative methods that could be used in this situation.
- One way to prospect is to engage in cold calls by using the cold canvass method. Some people use Internet Listservs or newsgroups to try to discover prospects. This approach is usually indirect: The salesperson subscribes to the group and then posts a message that includes some information about the product and how the salesperson can be contacted. Identify some newsgroups or Listservs that would reach a sizable group of leads for the travel agency.
- Write a message that you could post to generate interest in your product of service. (Note: You do not have to actually subscribe and post the message.)
Submit Lesson 5 Assignment -- Pre-Approach Homework: Prospect #13 -- to the Lesson 5 Assignment Drop Box on the course website.

Lesson 5 Commentary: The Universe, Suspects, and Prospects (Printer Friendly Format)