The term ‘prospecting’ relates to locating and qualifying new customers. Prospecting is necessary because –
i. Finding customers is a business compulsion for a new and existing product,
ii. There is a decline in the existing customer base as customers are taken away by competitors, and
iii. It helps in strengthening the existing customer base.
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Learn about:- 1. Meaning of Prospecting 2. Sources of Prospecting 3. Pre-Approach 4. Methods 5. Process.
Prospecting: Meaning, Sources, Pre-Approach, Methods and Process
Prospecting – Meaning
The term ‘prospecting’ relates to locating and qualifying new customers. Prospecting is necessary because –
i. Finding customers is a business compulsion for a new and existing product,
ii. There is a decline in the existing customer base as customers are taken away by competitors, and
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iii. It helps in strengthening the existing customer base.
The objective of prospecting is to identify qualified potential customers. An organization or an individual has to fulfil certain conditions to become a prospect. The qualification criteria for being a prospective customer requires them to have –
a. A need for the product/service,
b. The willingness to buy,
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c. Purchasing capacity,
d. The authority to buy, and
e. Accessibility to the salespeople.
If any of the above conditions are not met, no new customer is generated however industrious or efficient a salesperson might be. Therefore, qualifying the prospect is very crucial, otherwise a salesperson’s valuable time and effort is wasted.
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Identifying or locating the prospective customers involves the following steps:
a. Identify potential customers.
b. Generate sales leads.
c. Screen out weak leads.
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d. Select a group of qualified prospects.
e. Define the target customers.
Target customers are one or more specific groups of potential customers that a firm proposes to serve with a particular marketing programme. Developing a profile of prospective customers is the starting point of the selling process. To do so, one should start with defining the market segment and end with identifying the target market.
Segmentation involves classifying or dividing the market into clear subsets of customers with comparable need patterns and those who behave or act in the same way. If one wants to sell an encyclopedia, college and university libraries should be treated as market segments. Target markets are those where the salesperson finds accessibility, demand situation, intention of the recommending authority (e.g., head of the library), and support of departmental heads as influencers.
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Students and libraries in the management institutions, for instance are the target markets for publishers of marketing books. Classifying the entire student community into pure science, engineering, arts, law and management, etc., helps a marketer reach a definite market segment.
After this, the marketer evolves the potential market within the segment. Potential market consists of a set of customers who profess some level of interest in a defined marketing offer. But, only a section of people of the potential market have the interest, financial power, access, and qualification to accept a specific market offer. They are known as qualified available customers and the market, so evolved, is known as the qualified available market.
Target customers are those parts of the qualified available market which the company decides to pursue. A company can treat a whole set of qualified available customers as target customers. The company selects a target market depending on the geography, size, characteristics and interests of the qualified available customers.
The result of good prospecting is a number of qualified prospects. It is advisable to get a small number of qualified prospects who are sure shots for the salesperson to explain large volume of sales. In fact, these prospects become the major customers. Hovering on a large number of weak or unsolicited prospects is disastrous for a salesperson as no such significant sales get generated.
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Below are presented a set of questions that salespeople should ask a lead to identify them as a prospect.
Prospecting – 12 Important Sources and Ways of Identifying Prospects
Prospects can be generated from many sources and some of the common sources and ways of identifying prospects are discussed below:
Existing customers are the best source of prospecting. Present customers can be a good source of information about the names and whereabouts of their acquaintances, relatives, neighbourhoods, etc., who can be capable prospects. For instance, the departmental head of an arts faculty in an institution, a customer of a desktop computer company can suggest the name of the same in a different department to the salesperson of the computer firm as a potential customer for the product.
The database of a company can provide sufficient information about the whereabouts of their former customers. They can be traced, approached, and reasoned for their departure. Their current need levels for the same or new products can also be studied and they can finally be brought back to the company as present customers.
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3. Centre of Influence Approach:
This method is based on obtaining the names and identities of prospects from people who are well-known in a society or hold responsible positions in organizations, civic or local administration or have high social recognitions due to extraordinary accomplishments. They are known as centre of influence and their recommendations can help salespeople to get acquainted with unknown potential customers.
By interacting with friends, relatives, neighbours or acquaintances in seminars, conferences, social programmes, travelling, etc., a salesperson may develop plenty of opportunities to identify prospects.
A satisfied customer is requested to provide names of friends, business associates or any known acquaintances who may be potential customers. This procedure of generating a number of customers from them is repeated several times. So, this method implies a continuous cultivation of referral sources.
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6. Direct Mail or Telephonic Contacts:
By using telephone directories or yellow pages, salespeople can personally contact prospective buyers. They can also send letters along with product or service leaflets or booklets to the prospective buyers. Mass mailing gives a lot of exposure to the salespeople, company, and its products. Sometimes, a reply card or a similar format is attached with the letter for prompt response.
7. Cold Calling:
It is yet another approach used to identify potential customers without any reference. Salespeople can call strangers in anticipation of getting a prospective customer, introduce themselves, and gather information about the presence of need for their product. Making cold calls is encouraged among salespeople when they find time between their scheduled appointments.
Contacting prospective customers by sending them electronic mails along with attachments of product or service descriptions can also help generate a host of prospects for the salespeople. Besides, a firm can create blogs or use online social media channels to promote itself and/or its products.
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9. Exhibitions and Trade Shows:
A company can use exhibitions and trade shows as media to generate connections with prospective customers. A salesperson can distribute literature, pamphlets, free samples or exhibits to draw the attention of the prospects and approach them with their sales offer.
10. Non-Competing Sales Force:
Salesperson of non-competing firms often provides useful information about prospects for different product/service types as well. They are rich sources of information on new business opportunities. A salesperson selling LCD projectors in universities can be a good source of information for the demand for laptop or desktop computers in the universities.
Many organizations advertise their requirements in newspapers or local television networks. These become a source of information for the customers.
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Intermediaries include distributors, retailers or agents who work directly with customers, and can exchange valuable information about prospects to the salespeople.
Some Other Sources of Prospects:
Some of the sources from which we get prospects are:
1. Referrals
2. Friends, relations, centre of influence
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3. Directories
4. Trade publications
5. Trade shows
6. Telemarketing
7. DRA – Direct response ads and sales letters
8. Internet
9. Database
10. Cold calling
11. Networking
12. Educational seminars
13. Prospecting by non-sales personnel.
1. Referrals – This method is extensively used. It is an effective source as the close rates are high. There is an element of large sales. The sales cycle gets shortened. A referral is a prospect recommended by an existing customer or someone who is familiar with the product. We have satisfied customers who recommend their friends and acquaintances. Some business associates also recommend people.
There are prospects who do not buy right now, but are liberal enough to recommend others. It is easier to sell to a referral. There can be chain referrals. Sometimes, we get referral letters. Endless chain referrals means an open-ended query to ask who else might be interested in the product. It gives the person the freedom to recommend. When the contact suggested is approached, the name of the referring person is given.
In recommendatory letter method, apart from the name, a letter is obtained from the customer to be given to the potential customer.
Referrals reduce the amount of time spent on prospecting. It is easy to get an appointment. Even the prospect is in a better frame to receive the salesman.
A direct question would not generate referrals. Indirectly, we can ask a prospect about his associates. Later the names generated can be qualified. It is best to ask the referrals after the sale.
2. Friends, Relations, Centres of Influence – This becomes a fertile source for those who have entered the selling field newly. These are the people whom we knew before and after they are shot from the sky. These people ‘beat the bushes’ to find qualified prospects for a salesman who will pay them a commission if he makes for the sale.
3. Directories – Directories are treasure house used by salespeople to get the prospects. There are directories of telecom companies, trade associations, chambers of commerce, professional associations etc. There are yellow pages, regional and local directories. Some of them are free, and some are available at a price. Some international directories are available for the sale of products in the international market.
4. Trading Leads – Here, a system is set up whereby we trade leads with other salesmen, who sell to the same market. For e.g., home appliance salesman and people working from home.
5. Trade Publications – There are trade publications giving a detailed report about a particular industry, e.g., ORG report for pharmaceutical industry.
6. Trade Shows – There are trade exhibitions and shows either for industry in general or for one particular industry, e.g., book fair at Kolkata annually or auto expo at Pragati Maidan, Delhi. The prospects walk into the stall at such shows. It is easy to identify the prospects, and close the sale here. Sometimes, prospect is qualified at the show, and a follow-up sales call is needed to close the sale.
7. Telemarketing – Prospects are telephonically contacted. It is useful to identify prospects. Credit card issuers, personal loan providers, cellphone companies, home loan providers use telemarketing to qualify prospects for follow-up. At times, telemarketing is used to verify sales leads generated by ads, direct mailers and some other method.
8. Direct Response Ads, Sales Letters – Ads carry coupons where people request for additional information, catalogue and direct queries. Some companies provide self-addressed envelope where affixing postage is not necessary. The person who makes a query is reported to sales representative who may meet him. Sales letters are sent to prospects. They have the power to make a buying decision. There is a follow-up call and an appointment is sought.
9. Internet – Many companies maintain a website on internet. They are frequently used for lead generation.
10. Database – Data processing enables a company to match products and buyer needs. Either the company maintains its own database or buys it from outside. There are databases available for specific segments.
Salesmen use PCs to keep customer profiles, and use this information to personalize the selling process. For e.g., an insurance advisor keeps the data on policyholders. It provides information about the possibility of selling insurance in future either to other family members or to the person himself, e.g., health insurance, general insurance, car insurance, etc.
11. Cold Calling – Cold calling is calling a group of persons who may or may not be prospects. For e.g., every hospital is contacted by a salesman to sell pharmaceuticals. This method is the only alternative when referrals are difficult to come. There is a lot of planning before cold calling and personal visits. Cold calling has lot of wastage and is the least effective way to prospect.
12. Networking – In networking, you become your own best bird-dog. Creating contacts and nurturing them is a useful trait for any successful person. This is called networking. It is an art. Contacts are exploited here. Referrals are sought by this method. A salesman has to be social, and interactive to develop a network. He should not think of business while networking. A salesman classifies the contacts into productive and non-productive ones. A salesman has to do networking inside the organisation too, say with people in other departments. There is networking in any particular industry. There is also networking outside the industry.
13. Educational Seminars – A seminar is a good method to get prospects. In this situation, there is no pressure on the prospects to buy. Prospects are carefully invited to the seminar. Its content and delivery are also carefully planned.
14. Prospecting by Telephone – A salesman can use telephone to prospect in a wide area.
15. Prospecting by Non-sales Employees – Many organizations involve non-salespeople in prospecting. Prospecting is not the exclusive preserve only of salespeople. Non-salespeople are made sensitive to selling opportunities and are given an incentive to identify prospects.
16. Old Clients – Old clients can be contacted for business.
17. Combination Approaches – Organizations use either a single approach or a combination to get the prospects. Prospects may be identified at a trade show and later are subjected to telemarketing or are chosen to receive mailers or sales letters.
Prospecting – Pre-Approach: A Step towards Sales Planning
Pre-approach is a stage of collecting detailed information about prospects and deciding on the best sales method to reach them. Pre-approach is the fact-finding stage. Information about the needs of the prospects, their likes and dislikes, demographic characteristics, preferences, buying behaviour, personal behaviour, economic and social status is gathered, analysed, and used as a tool to lay down sales plan. In an organizational setting, pre-approach is more extensive.
In a small organization, a single person may act as buyer and influencer. Therefore, sale planning is comparatively easy. In large firms, a salesperson has to work out on more number of factors stated above to formulate a sales plan. A sales plan is a concise description of sales objectives, sales budget, and sales strategy of getting the product/service sold to the customers.
While planning a sales call, the following should be kept in mind to achieve best results:
1. Decide on the mode of appointment with the prospect, say sending an e-mail, writing a letter or telephonic contact, etc. Be particular on the kind of words used when taking an appointment. Words should be pre-planned or else a business opportunity may be lost forever.
2. After fixing the mode of appointment, a salesperson should go for call planning.
This includes:
i. Whom to call? (prospect)
ii. Where to call? (place)
iii. When to call? (date and time)
iv. How to call? (calling method)
v. At what expense to call? (sales budget)
Call planning should be made in a manner that allows salespeople to spend maximum possible time with major prospects because the latter are expected to account for large volume of business to the seller.
3. Prepare the sales talk, say, introductory message, points to be discussed, samples to be shown, probable objections from prospects to be faced during the presentation, replies to those objections, closing techniques, etc., should also be prepared.
4. Deciding on the sales strategy is another issue that should be tackled in the very beginning. It focuses on the means to reach the target customers successfully by matching the needs of the customers to the product or service.
5. It gives clear indication of the sales budgets, sales targets for salespeople within a time period, estimated sales revenues and profits, expected returns on investment, etc.
6. A sales plan suggests the type of salespeople who will be responsible to achieve the sales goals. It is important for them to be conversant with product or service attributes – characteristics, knowledge on company profiles, the strengths and weaknesses of the company, technology, growth prospect, profitability, future goals, etc.
7. A sales plan also has a provision of comparing actual versus target performance of the salespeople and prescribe different incentive schemes for high, medium, and low performing salespeople.
Selling strategies also varies according to different types of customers, organizations or even the products. The salespeople feel that sales transactions can only be effective if certain points are kept in mind.
The first impression is very crucial for the salespeople to begin a conversation with a reference or a common acquaintance or a referral. A salesperson should design the sales talk in a manner that can help him/her establish rapport with the prospect during the initial phase of approach itself. Non-business talks for a reasonable time are quite helpful to build a rapport.
The objectives of this approach are as follows:
i. To capture the attention of the prospect.
ii. To create a favourable impression on the prospects so that they can accept the salesperson.
After discussing certain tips that a salesperson should be familiar with, we will now list out a few techniques that can be used for approaching prospects:
i. Use a name of a referral – The name of a satisfied user of a product is an effective starting point.
ii. Cite the company or brand name – Citing the name of a company or brand can be a major influencer to draw the attention of the prospect.
iii. Compliment the prospect – A compliment is a novel way of establishing rapport with the prospect. By giving full recognition to him for some achievement or special award that the prospect acquires could be helpful as well.
iv. Offer a gift – By presenting a gift or novelty to a prospect, a salesperson may gain a complete attention of the prospect.
v. Give the prospect a feel of influence – Salespeople reiterates the authority of the prospects in taking a buying decision. This helps the prospects feel how important they are.
vi. Ask a planning question or statement – A good question (intelligent discussion) may open the prospect for discussion. For example, a sales person of UPS (uninterrupted power supply) equipment may ask a prospect, ‘would you please lend a share of your mind of how you solve the crisis of frequent power cuts’.
vii. Demonstrate the innovativeness in a product or service – A salesperson with an innovative product or service should not lose the opportunity to create an immediate impression by mentioning its features and benefits to the prospect and how it will be a better option than the existing product or service.
Prospecting – Top 11 Methods
Salespeople follow various methods for prospecting.
Some of the popular methods of prospecting are- Cold canvassing, Direct mail, Endless chain customer referral, Customer sales lead clubs, Prospect pool, Non-competing sales force, Centre of influence, Trade shows/demonstration, Direct mail, Telemarketing, Observation, Networking.
Method # 1. Cold Canvassing:
It is a method in which the salesperson goes from door to door in an identified area and tries to find out the prospects. Cold canvassing involves face-to-face interviews with people. In many instances, it may result in identifying the buyer’s needs, making a presentation, and doing an immediate sale. Often a cold call results in an appointment at a later date. In this case, cold calling is better than a telephone call.
It is easier to say ‘No’ to a salesperson over phone than in person. The sales representative finds out the name of the decision-maker, and when he calls the customer subsequently, the customer remembers him due to the personal nature of the visit. However, cold calling is a time consuming process, and one has to spend considerable time in qualifying the customers as the sales representative makes the cold call without much information about them.
The salesperson should be selective in making the cold call and should make an approximation of the area where there is a likelihood of high prospect density. At the end of the cold call, the sales representative should leave his business card so that the customer can automatically give a referral in the subsequent period.
Some customers who are not interested at the time of the cold call may get interested at a subsequent time. However, cold calling is not effective in all cases.
It is effective in consumer products and services that are in general use. It is also useful in business-to-business selling for standard items such as copiers, calculators, and faxes. Insurance agents and readymade garment resellers also do cold calling. In insurance sector, the territories are divided geographically and agents do cold calling on the territory allocated to them.
Method # 2. Endless Chain Customer Referral:
It is another popular method in which each customer is requested to give a list of names who might be interested in the product. It does not take much time to develop a lengthy list of prospects. This method of prospecting is particularly seen in the case of insurance and securities.
In Birla Sun Life Insurance, the insurance advisor asks for five names who are known to the customer and might be interested in the insurance products. Eureka Forbes also uses the customer referral method for generating a list of prospects.
In many instances, two sales representatives may end up with the same prospects, but the salesperson with a referral has a greater chance to succeed than the cold canvassing guy, as referral has a certain level prestige associated with it.
Getting a referral is a difficult proposition as sometimes people are hesitant to give referrals. In many instances, the salesperson takes a letter or a business card, or goes after a phone call. The salespeople can build their own list of prospects by this method.
Method # 3. Prospect Pool:
It is a group of names gathered from various sources such as a telephone directory or mailing list. A prospect pool is created from four main sources.
They are:
i. Leads – People and organizations salespeople know nothing or very little about
ii. Referrals – People or organizations salespeople know very little about other than what they learned from the referrals
iii. Orphans – Customers whose salesperson has left the company. Company records are the only source of information about these past customers
iv. Customers – The most important prospects for future sales
Method # 4. Centres of Influence:
These are the people who, because of their position, responsibility, accomplishments, or personality, exercise more than ordinary influence. These kinds of people are found in four spheres- social, business, religious, and political. They are found in trade associations, trade shows, seminars, and any business-related social events. In a typical buying process, they are the innovators who set trends in the society for others to follow them.
Film personalities and celebrities are the centres of influence who can influence purchasing patterns and serve as a potential source of prospects. The principle of power lead works in this case. A referral from a centre of influence is effective as it carries a certain level of authority.
Method # 5. Non-Competing Sales Force:
Salespeople of non-competing products are a rich source of getting prospect names. They have the information about new business openings, names of authorities who make decisions, and changes in the personnel in the purchase department, which can be collected by salespeople.
Non-competing sales personnel can strike agreements to exchange information. A salesperson selling copiers can provide information about the prospects for fax machines or computers. By listening to and observing the salespeople in the reception area of a prospect, a salesperson can collect a large amount of information on the prospect’s likelihood of qualifying and criteria of buying.
Method # 6. Observation:
In this method the salesperson looks around for the types of prospects that he or she needs. In the case of EPBAX sellers, they look for construction sites and newly coming up office spaces and then prepare a list of prospects. Many salespeople use their sales associates, called ‘bird dogs’, who make arrangements for their presentation to the prospects.
In many companies, the junior sales representatives do the prospecting and fix appointments for the senior sales personnel. Service station executives also work as ‘bird dogs’ for the automobile sellers who can collect information about the likelihood of replacement of cars by the owners and then build up a prospect list.
Method # 7. Friends and Acquaintances:
They constitute a rich source of prospects. Insurance agents and mutual fund sellers use this as a potential source for building a prospect list. Chambers of commerce, such as FICCI or CII, and trade associations, such as Indian Automobile Manufacturers constitute a source of acquaintances for industrial sellers.
The salespeople can ask a question such as ‘Whom do I know?’ in the sphere of school, previous job, hobbies and sports, club members, participants in public service organizations, neighbourhood, and professional organizations to which they are members to prepare a list of prospects.
Method # 8. Lists and Directories:
The list includes the list of customers the company has already entertained in the past. The salesperson can use other sources such as newspapers, trade association publications, and various commercial lists and directories.
Newspapers having information about new births, weddings and engagements, society news, new arrivals in town, new business ventures coming up in the city, real-estate information, and community events and participants are a potential source of building a sales prospect pool. Trade magazines, commercial publications, and computer generated databases are the potential sources of prospect lists.
Method # 9. Direct Mail:
Prospecting can be done by direct mail also. Prospects are mailed a business letter inviting reply if they are interested in certain products and services. Though the response rate is low, it is a rich source and it covers only interested potential customers. Repetition and follow-up procedure is used to improve the response rate.
Method # 10. Telemarketing:
There are various applications of telemarketing for generating prospects. In inbound telemarketing, the prospect calls the company and in outbound telemarketing, the company representatives call the customers. Order processing happens in inbound telemarketing. Companies use mass media such as advertising, direct mail, and other promotional activities to stimulate calls from prospects and customers.
By including a toll-free number, the company motivates customers to respond to their mass media campaign and call for added information. Data about the customers obtained though inbound telemarketing are used by salespeople to make outbound calls so that prospecting can be done for further sales.
Method # 11. Trade Shows and Demonstrations:
Many companies use tradeshows and demonstrations at exhibitions and public gatherings to undertake an exercise for collecting prospect data. A large number of people who visit the trade- show register their names for demonstration, and subsequently salespeople can call on those interested people to make a sale.
Prospecting – Process of Prospecting
Prospecting involves a series of steps, and one has to understand the steps to realize the significance of prospecting in the selling process. The salesperson searches for customers with unmet needs or needs that are not fully met by the existing product consumption habits. Prospecting is a never-ending process because existing customers may change their product preference, go out of business, change their needs, or have their needs met by competition.
A successful salesperson will allocate time to the process of generating quality prospects. In the process of prospecting, the salesperson can save his time and effort by differentiating ‘leads’ from ‘prospects’ so that optimum efforts can be put for realizing sales.
Sources of prospects can be the satisfied customers who are ready to give a referral, websites, newspapers and technical publications, trade association membership directory, company inquiry registers, territory records, suggestions from salespeople in other territories, and the company’s selling plan.
The company’s selling plan includes sales forecasts for specific industries in the industrial markets. The sales plan also reflects the comparative advantage of the product, the end consumer’s buying behaviour, and the list of products used for advertising and promotion, which help the salesperson in prospecting.
For a successful prospecting the salesperson has to first identify and define the prospects. He has to identify the attributes and features of the prospects, which may include the urgency of the need for the product, ability to make payments, expectations and practices of credit payments, authority and department involved in making the purchase decision, etc.
The next step will be searching for sources of potential accounts. As explained above, the sources can be primary or secondary. The primary sources include the immediate groups such as family, friends, and relatives, and suppliers of goods and services, employees, business associates, shareholders, and customers of the firm.
The secondary sources include those from which lists of prospects are generated through a deliberate process, such as surveys, replies to queries in the past, enquiries generated through advertising and marketing communications, list of customers published by trade associations and the directorate of commercial intelligence in the government at centre and state level, magazines and journals, and social contacts.
The next task is to distinguish the prospects from the suspects and then to determine the probable requirement of the prospects. It is a process by which the salesperson ranks the prospects on the basis of their payoffs. The payoff or expected value is the probability of the prospect buying multiplied with the magnitude of sale from that prospect. It is a process of estimating the probabilities and sales potential.
The salesperson will like to classify the prospects at the beginning to effectively utilize his selling time, his relationship building strategy, and also his effectiveness in handling customer objections.
The salesperson will classify a lead as a prospect when the lead has a reasonable probability of buying, has sufficient needs to justify a profitable sale, has the financial resources to buy, and can be classified as eligible to buy. A salesperson uses various indicators such as need indicators, ability indicators, authority to pay indicators, accessibility indicators, and salesperson fit indicators.
Need indicators are normally demographic and psychographic indicators such as age, gender, lifestyle, life cycle stages, and means of entertainment, dependence on family income and self-income, and materialistic possessions.
Ability to pay indicators include profession, age, sources of income, personal habits, social status, credit card buying habits, bank account holding patterns, and regularity of the income of the customer. Authority to pay indicators include business and official responsibilities, personal influence on his own life and business, organizational roles and responsibilities, etc.
Accessibility indicators include the physical and psychological distance of the buyer, and his position in business and family. These are the factors that influence the ability of the salesperson to reach the buyer. Salesperson fit indicators include the matching of the lifestyle and personality of the salesperson with that of the buyer. Education, age, caste, religion, and political thinking largely influence the purchase process in a country such as India. These are the factors that help a salesperson to establish a good relationship with the buyer.
By an effective prospecting process, the salesperson can build his sales strategy and methods to handle the customer objections and satisfy their needs. The purpose is to connect the customers with the company products. Salespeople can ask themselves three questions to determine whether the individual or organization is a qualified prospect.
These questions are:
1. Does the prospect have money to buy?
2. Does the prospect have the authority to buy?
3. Does the prospect have the desire to buy?
This principle is called MAD principle in selling, which talks about money, authority (in the context of the organization), and desire to buy a product. Sometimes the customer may not feel any need for the product. A salesperson plays the role of a need arouser and activates the process of buying for the customer.