Lowering Sales Cycle Times

Can sales actually be measured the same way cycle times are analyzed and reduced in manufacturing? While it’s true that cycle time analysis is often relegated to increasing production throughput, it is also applicable to reducing the time needed to close on opportunities and win business. A lower sales cycle time means a company will invoice sooner, get paid faster, and have a higher inventory turnover rate, thereby reducing the daily cost of money. Understanding the benefit of lowering the sales cycle, how do businesses go about reducing the time it takes to secure business?

Doesn’t the final decision rest with the customer?

When businesses look at reducing sales cycle times, the first issue is whether a company can actually make a customer decide to order sooner than they want to. After all, the final decision rests with the customer. They alone will decide when and whom they buy from. The approach is not to shorten the time the customer needs to make a decision. Pushing too hard for a decision can backfire. Rather, the approach is to guarantee that customer returns to your business for future orders. By incentivizing your customers to continue to order from your company, you’ll be able to lower the time it takes to secure repeat business, and increase your inventory turnover rate.

It’s not about singular sales transactions and trying to close them faster. It’s about securing those long term contractual supply agreements that offer consistent business. These types of repeatable orders are easier to plan, lead to a high inventory turnover rate, and in the end, protect the company against obsolete, damaged and outdated stock. This is entirely different from increasing sales leads. While a company can increase its sales leads with better marketing initiatives, it can’t really guarantee to close those leads sooner. Increasing the number of leads that a sales team works on, will increase the number of available opportunities, but even the best sales person in the world can’t force customers to continually order from them and order sooner than they’d like. Here in lies the approach. Secure those repeatable orders and incentivize your customers to return. How is this done?

Incentivizing customer loyalty with the back-end rebate:

When it comes to securing new business, what’s the biggest issue companies face? More often than not, it’s turning that first sale into repeatable business. This requires the ability to distinguish a company’s service and product offering in the eyes of the customer. That new customer must somehow come to know that they have the opportunity to deal with a proactive and resourceful partner. This is done by using an incentive based customer reward program that encourages them to return. It’s called the back-end rebate program and in its simplest form, it provides a credit to customers based on their purchase volume over a given period of time.

How does this agreement work?

The back-end rebate program provides a per unit credit on each order the customer makes. The more the customer orders, the bigger their rebate amount. Consider it a rewards program similar to those used to incentivize consumers to come back to their favorite department or convenience store. However, this is more for business to business sales where a customer wants that lower pricing, but can’t afford to purchase all the volume at one time. Instead of handing over a large volume price to a customer who can only order a small amount, it’s best to provide a per unit rebate on each order. Over time, the customer gets their price, and your company keeps the volume. The worst outcome is to give that high volume pricing without the volume. In these instances, customers rarely return. Here are the essential steps to running the back-end rebate program.

• Agree upon both the order period, and total volume to be purchased.
• Provide a per unit rebate amount for each shipment.
• At the end of the order, should the customer reach their agreed upon volume threshold, they will receive the total rebate amount.
• Apply the rebate amount as a credit on their account towards future orders.

What are the benefits of this program?

Not only does this program incentivize customers to return, but it also provides key competitor and market information on pricing. Customers on this program will want to remain a part of the program regardless of the competitive bids they receive. In fact, if they do receive a competitive bid, they will contact your company directly. Why? They don’t want to lose their rebate amount, and want to know if your company can provide them with the same pricing. This provides your company with real time pricing information and gives your company the right of last refusal.

• The program provides real time market and competitive data.
• The rebate program protects pricing and gives the company the right of last refusal.
• It incentivizes customers to come back for more, and work on other possible rebate programs.
• It allows for easier planning of inventory.

When it comes to reducing the time it takes to secure orders, the solution lies in improving customer loyalty and retention. It’s not hard. In fact, this program is a simple and easy tool to bring customers on board, and keep them coming back. Most customers will want to run the same program on other parts they purchase and it could easily open the door to increasing your business holdings at your customer accounts.