Independents

Column: How to Build an Effective Sales Plan

IndependentsJul 12, 2016

Column: How to Build an Effective Sales Plan

Forecasting business growth without any sort of tangible plan on exactly how a company will reach those sales goals is baseless, Peter Smith says.

2016-Peter_Smith_copy.jpg
Peter Smith has more than 30 years of experience building wholesale and retail sales teams. He currently is president of Vibhor Gems.


I had dinner in New York this past week with a young road salesman. He is, in many ways, an anomaly as there are precious few young people coming into our business. He asked me why I thought so many sales reps seemed to go from job to job in our industry, rarely staying any length of time with the same company.

There are, of course, a great many reasons why that happens--lack of fit in that particular culture (ask me about that one sometime over a glass or three of Pinot Noir!), promises made and unfulfilled on both sides, under-performance by the rep or under-delivery by the company and so on and so forth.

It seems to me, however, that the biggest reason for the revolving door has to do with irrational expectations on the part of the hiring company. The phenomenon is particularly widespread on the wholesale and branded side of our business, but it also is related to an issue that I see frequently on the retail side too. It is what Pulitzer Prize-winning economist and eminent psychologist Daniel Kahneman calls delusional optimism. In short, it means that we create a set of expectations that are not connected to anything more than hope and happenstance.

The thinking goes, if I did X amount of business last year, then it necessarily follows that I should do X plus 20 percent, or whatever number you dream up, this year. While the outcome is completely different on the two sides of the equation--the wholesaler tends to pull the trigger too fast and rid themselves of the “failing” sales person, and the retailer tends to hold onto him for 10 years--the illogic of goal setting is all too often flawed in the extreme. The burden of failure falls heavily on the salespeople who, if truth be told, were wearing wings and sporting halos when they first were interviewed.

I recently heard of a company that lowered its prices and predicted that sales would triple as a consequence. Since we don’t have a crystal ball, we can only surmise what the outcome of that action might be. But Kahneman cites numerous studies in his ground-breaking book, Thinking Fast And Slow, that show price reductions actually result in a 15 percent decrease in business, not an increase and certainly not triple the business.

Whether that particular company will buck the trend and realize
positive gains on their initiative is neither here nor there. What is interesting is the irrationality that tends to govern how we arrive at goals and, to wit, hold people like my young friend accountable for deliverables that are nothing more than wishful thinking.

Goal setting is, without a shadow of a doubt, an inexact science. We can and should look at past performance as a frame of reference, but doing so in and of itself is hardly sufficient to establish that your company or store ought to grow X percent in the coming year. Growing a businesses is, at its most basic level, a function of two things: either selling more stuff to your current customers, or acquiring more customers to whom you can sell products. A combination of the two, of course, is ideal.

Understanding how to impact those two outcomes is where many companies seem to fall short. Rather than getting their teams around a table and working the issue, they lazily and irrationally foist an increase on to the previous year’s result and expect that by some form of osmosis, it will be magically delivered.

To logically forecast sales goals, you have to invest the necessary time in working it with your team. You’ve got to break it down to its lowest common denominator and have a very clear and specific plan for how the number will be met.
“Planning an increase in business is not always the best plan. Sometimes the model is broken and the business needs to be rebuilt from the foundation up ... Adding more floors onto a fractured foundation is never a good idea.”
Doing more business with your existing customers means that you will not see any decline in their frequency or loyalty to your business (how is your customer retention?) and that your average sale to each will be greater than the previous year. That can happen by selling them more units, or by selling them the same number of units at a higher price.

So ask yourself, why will my customers spend more per transaction? Do I have a plan to improve my teams’ up-selling or cross-selling capabilities? Is there a plan to provide a better product or a noticeably improved customer experience? Are you implementing a strategy of clienteling that will see those customers visit your store more frequently and buy more from you when they do?

Any of the aforementioned efforts, provided there is a strategy to effectively implement and execute them, are worthwhile and should provide fuel for optimism in building your sales plan. If there are no specific steps to address those and other tangible areas of your business, then a forecast of increased business with your existing clients is baseless.

To acquire new customers, you must communicate a value proposition to people (or stores, if you are on the wholesale side of the business) that they have not previously heard about or cared about. One of the most obvious (I didn’t say easy) ways is to convert more people into customers. If you are converting three out of every 10 prospective customers (30 percent) and you increase that conversion to four of every 10, you will have grown your business by 33 percent. That’s a huge number, and yet I can count on one hand the number of times I have heard retailers develop a strategy to convert better.

Here’s a tip: start by installing a door counter. Creating a 33 percent increase in your business through marketing, product development, PR and social media would cost a small fortune and yet it is possible to do that by implementing a strong program of converting existing prospects into customers.

To drive more people into your store (hopefully not to have them fall through the cracks because of your lousy conversion ratio), you will need to examine all of your communication efforts. By definition, people that did not come into your store were not moved to do so by your previous marketing and communication efforts. There isn’t a year that goes by when we don’t have something to celebrate and yet those people that you are trying to inspire did not elect to frequent your store.

Again, get the team around a table and work the problem. What are you trying to say to whom? Why do you think that your message did not resonate last year?

Something has to move them, to inspire them to visit you when they had not previously done so. There might be an opportunity to better focus your message (telling less and doing it more often beats the daylights out of noise for its own sake). Perhaps what you are really saying is different than what you think you are saying ... “Hey, we’re all about bridal … did you see my Rolex billboard coming in?”

By the way, I should point out that planning an increase in business is not always the best plan. Sometimes the model is broken and the business needs to be rebuilt from the foundation up. In those situations, where the leader has the courage and conviction to do it, the business might be better served by forecasting flat or even declining sales while you retool. Adding more floors onto a fractured foundation is never a good idea.

David Brooks wrote about leaders in The Social Animal, saying “If there was one trait the best of them possessed, it was a talent for simplification. They had the ability to take a complex situation and capture the heart of the matter in simple terms.”

Again, there are two ways to grow the business: more from existing customers and/or more new customers. If you are going to build an increase into your numbers, you should be able to point to one or both of the above opportunities and explain how and why you believe you will get there.

In the meantime, be kind to my young friend if he comes calling. He’s one to watch for the future!

Peter Smith, author of Hiring Squirrels: 12 Essential Interview Questions to Uncover Great Retail Sales Talent, has spent more than 30 years building sales teams at retail and at wholesale. He currently is president of Vibhor Gems. Email him at peter@vibhorgems.com, dublinsmith@yahoo.com or reach him on LinkedIn.
Peter Smithis an industry consultant, speaker, and sales trainer, and author of 3 books on sales. Reach him at TheRetailSmiths@gmail.com.

The Latest

The Kat Florence Lumina
AuctionsApr 07, 2025
182-Carat Paraíba-Type Tourmaline Heading to Auction in Hong Kong

Bonhams will offer the “Kat Florence Lumina” at its May 22 jewelry auction.

Stock image of a gavel and books
CrimeApr 07, 2025
Third Man Involved in $2.7M Smash-and-Grab Is Sentenced

In March 2022, the men went into a jewelry store in Beverly Hills and smashed the display cases with sledgehammers and crowbars.

F.P. Journe Chronomètre Bleau Byblos Watch
AuctionsApr 07, 2025
Sotheby’s ‘Area_51’ Watch Auction Totals $1.6M

The 51 unique watches from Sotheby’s three-day sale and immersive exhibition all found buyers, with the top lot selling for $229,955.

gia-topimage 0325.jpg
Brought to you by
A Brilliant Future Is Here

Get online education from GIA experts.

Jewelers Mutual and Jewellers Loop logos
MajorsApr 07, 2025
Jewelers Mutual Expands to Australia Via New Acquisition

The company has acquired Australian jewelry insurance provider Jewellers Loop.

Weekly QuizApr 03, 2025
This Week’s Quiz
Test your jewelry news knowledge by answering these questions.
Take the Quiz
Neuroscientist and speaker Beau Lotto
Events & AwardsApr 07, 2025
Converge Taps Neuroscientist as Opening Keynote Speaker

Beau Lotto’s immersive presentation will be a blend of neuroscience, art, and entertainment.

Victorian Burmese sapphire and diamond brooch
AuctionsApr 04, 2025
25-Carat Burmese Sapphire Brooch Sells for $101K

A pink topaz Belle Époque pendant-brooch and a Victorian Egyptian Revival choker were also highlights at a recent Anderson & Garland sale.

bench jeweler 1872x1052.png
Brought to you by
The Heart of the Industry: Giving Bench Jewelers the Recognition They Deserve

Bench jewelers spend years honing their skills, Jewelers of America’s Certification validates their talents.

Mason Kay International Jade Summit 2025 Graphic
SourcingApr 04, 2025
Mason-Kay Jade to Hold Inaugural International Jade Summit

The event, which will co-locate with the Monterey Bay Jade Festival, will bring education sessions focused on jade to the United States.

Heather B. Moore Lily of the Valley Oval Charm
CollectionsApr 04, 2025
Piece of the Week: Heather B. Moore’s ‘Lily of the Valley’ Charm

The charm is a celebration of springtime as April showers bring May flowers with the piece’s cluster of diamond raindrops.

Stock image of people shopping in a mall
SurveysApr 03, 2025
2025 Retail Sales to Grow More Slowly Amid ‘Uncertainty,’ Says NRF

The National Retail Federation expects retail sales growth to return to pre-pandemic levels as consumers continue to face inflation.

Tallulah Willis’ Engagement Ring
TrendsApr 03, 2025
Tallulah Willis Imbues Antique Engagement Ring With Magic

The 4-carat, old mine brilliant-cut diamond engagement ring was co-designed by Willis and New York City-based brand Karina Noel.

158.2-carat yellow diamond from Diavik
SourcingApr 03, 2025
Canadian Mine Produces 158-Carat Yellow Diamond

Rio Tinto unearthed the diamond at its Diavik mine in Canada’s Northwest Territories.

Buccellati Naturalia exhibition
CollectionsApr 03, 2025
Buccellati to Open Immersive Exhibition in Milan

The multisensory experience, open April 8-13, will feature the brand’s silver creations among dream-like scenes of natural landscapes.

Jewelers of America logo
Policies & IssuesApr 03, 2025
Jewelers of America to Hold Webinar on Tariffs

The virtual event will take place April 7 at 3 p.m.

Bea Bongiasca Animali Tarallo Collection Royal Blue Tang Fish “Dory”
CollectionsApr 02, 2025
Bea Bongiasca’s ‘Tarallo’ Collection Expansion Is a Zoo

The pieces in “Animali Tarallo” portray animals from stingrays to elephants through portraits and interpretations of their patterns.

Neiman Marcus Downtown Dallas store
MajorsApr 02, 2025
Neiman Marcus’ Dallas Flagship Will Remain Open, For Now

Parent company Saks Global said the iconic location will be open through the holiday season as it decides what to do with the space.

Natural color diamonds on display at Smithsonian National Museum of History
SourcingApr 02, 2025
Winston’s Collection of Natural Color Diamonds Now on Display in D.C.

Ronald Winston, son of Harry Winston, donated the diamonds to the Smithsonian National Museum of Natural History in Washington, D.C.

Punchmark
Events & AwardsApr 02, 2025
Punchmark to Host Client Workshop

The educational event will take place in Charlotte, North Carolina, this May.

QVC Group Inc. logo
MajorsApr 01, 2025
QVC Group to Cut 900 Jobs in the U.S.

The layoffs come amid the TV shopping channel’s efforts to restructure and focus on live shopping through social media.

Coconut Grove Jewelry & Watch Show
Events & AwardsApr 01, 2025
U.S. Antique Shows Adds Fall Show in Florida

The debut event will take place in Miami’s Coconut Grove neighborhood this fall.

The Jewelry Symposium (TJS)
Events & AwardsApr 01, 2025
TJS to Host Discussion on Jewelry Industry’s Labor Shortage

The roundtable will take place May 17 ahead of the trade show’s welcome dinner.

Peanuts x Monica Rich Kosann Collection Bracelets
CollectionsApr 01, 2025
Monica Rich Kosann Says ‘Good Grief’ in Peanuts Jewelry Collection

The “Peanuts x Monica Rich Kosann” collection features the comic strip’s classic vocabulary across 10 bracelet designs.

Graphic for What Do We Mean When We Say “Recycled” Gold webinar
Recorded WebinarsMar 31, 2025
Watch: What Do We Mean When We Say ‘Recycled’ Gold?

Three industry experts dive into the complexities of the material often marketed as an “ethical” alternative for metal in jewelry.

Mindi Mond Clarity Earrings
TrendsMar 31, 2025
Amanda’s Style File: Dripping in Diamonds

Diamonds are not only one of the most prominent gemstones, but the birthstone for those born in April.

Lashbrook ring
MajorsMar 31, 2025
Lashbrook Expands Into Luxury Golf Gifts With Acquisition

The Utah-based company known for making wedding bands has acquired Doubloon Golf.

Bulgari and LVMH Watches CEO Jean-Christophe Babin
WatchesMar 31, 2025
Bulgari CEO Jean-Christophe Babin Will Also Head LVMH Watches

The longtime luxury executive led one of LVMH’s watch brands, TAG Heuer, for 12 years before taking over Bulgari in 2013.

×

This site uses cookies to give you the best online experience. By continuing to use & browse this site, we assume you agree to our Privacy Policy