The Multi-Step Sales Process
by Bob Hacker
How a product's price and complexity impact which strategy will work
in multi-step selling, there are three key drivers many people ignore when they plan their campaigns.
1. The real price of the product.
2. The prospective buyer's perception of product complexity/utility and price.
3. The number of steps in the selling system required to close the sale.
Part 1: Basic Strategy
In the first part of this article, I will prove why failure to understand how these three drivers can affect program strategy can ensure failure.
A client came to us with a selling strategy to sell a product for $135 per unit with no add-on sales opportunity. Gross margin is 50 percent or $67.50 with a target cost-per-sale of 40 percent of the gross margin or $27. The sale will be made via a four-step process:
Step #1: Generate a lead; the package cost was about 65 cents each.
Step #2: Trap the lead at a cost of $2 per call or BRC to trap the data.
Step #3: Fulfill the lead at $2 per fulfilled lead.
Step #4: Call back to close at $4 per call and a 35-percent close rate.
We told them not to do it! We didn't think anybody could hit a 44.8-percent response rate! "44.8 percent," exclaimed the client! "No way! This is a great product, so good it will almost sell itself."
Still no, we said, and here's the proof! (See Break-Even Analysis, below.)
This example clearly falls into Strategy Segment (SS) A or B noted in the chart at right. There just isn't enough gross margin to support a complicated direct selling strategy. (We recommended a sales promotion strategy to drive sales through the retail channel, thereby shifting cost to the retailer and away from our client.)
Let's spend some time with this model to understand how price and the perception of product complexity and utility can be used to build a plan. It looks something like this.