Participation rate and market share

I attended a sales / product training meeting several years ago where customers using competitive equipment were part of a panel taking questions from our sales team. One question posed was, “how often should a sales rep call on you?” The response was classic and one that hit home. “You can call on me every day, as long as you bring me value when you do.” That answer to me cut right to the chase, as well as set up the following question…, “how many calls do our sales team make without bringing any value?” I didn’t know what the answer was, but knew that no matter what the answer, any call that did not bring value was a wasted call. This one exchange set up a valuable coaching opportunity for years to come with the challenge that I made to every sales professional to ask this one simple question PRIOR to making a call. What value am I going to bring to the call today?

When one gauges their own personal buying experiences, the adage “people buy from people they like,” rings true. Why would it be any different from customers who buy from us…or who don’t? People buy from people for different reasons, but rarely is a purchase made from someone a buyer doesn’t like. I’m not necessarily talking about personalities here. Buyers buy from people who either deliver value or who successfully articulate value to be received. Value awareness clearly enhances the chances for a sale. Bring no value…don’t expect a sale.

Prior to getting to my main point, let me set this up further with an example of what I’m talking about. While reviewing a branch operation’s sales challenges several years ago, we conducted a meeting with the local Territory Managers assessing the market and competitive landscape

One manager continually defended his territory’s mediocre sales performance by detailing the actions and initiatives that the main competitor was using. Time and time again the discussion would default from what we SHOULD be doing to what the competitor WAS doing…or more importantly what the competitive salesman was doing. It became very apparent to our team we were simply getting out hustled. Every excuse was being thrown up against the wall, but the solution to this region’s mediocre performance was within the manager’s control. He just simply wasn’t executing. It didn’t matter how much we lowered the price, how much we bought down the interest rate or how long we extended the warranty, as long as we continued to allow the competitive salesman to out work us…we were going to be last in the value delivery game. To understand that result, go back and read the second paragraph. A sales professional understands quickly that they are not competing against a brand every day. The real competition is the person who is representing that brand. You do a better job in bringing value to your customers than they do, and it’s a guaranteed way to increase your sales and more importantly your income.

I’ve known Walt McDonald for almost 25 years. I attended a seminar he presented in the late 90’s where he was promoting DEAL VISIBILITY and made the very correct conclusion that higher visibility equated to higher share…and more important to the sales rep…higher income! I took those lessons from that seminar and incorporated them into my personal management strategies. For the sake of familiarity, I am going to substitute the term PARTICIPATION for VISIBILITY, although in most cases, they are one in the same.

My industry, construction and forestry equipment sales, provided us very accurate data within a very reasonable time that identified every unit sale, by model, by application, by horsepower class, by segment and by county! Simply adding up the number of sales won and adding it to the number of sales lost in that time frame determined one’s participation for that period. For simplicity, let’s say the reports determined there were 10 new sales in a defined territory for the period. Your salesman sold 3 and reported lost sales on 3 more. Total participation was 6, or 60%. Market share was 30%. Not by coincidence, multiplying participation rate by a closure rate of 50% yields a market share of 30% (P X CR = MS). Why closure rate of 50%? Without question, a sales professional utilizing all tools and skill sets available in today’s world should consistently close 50% of the deals that he/she truly participates in. Some observations on that number:

• If a sales professional is consistently hitting 80% participation and closing 60% of the deals…and has time on his hands…. EXPAND HIS / HER TERRITORY as you have a rock star on your hands!
• If you have a skilled sales professional working smart and hard who is delivering 50% closure and 60% participation, the odds are that the area of responsibility is too large. You will do yourself and the professional a favor by cutting back on accounts, which utilizing the same skills will result in higher sales for the company AND the sales professional. This one takes some trust.
• If a sales professional consistently hits above 60% closure but below 50% participation, the potential is high that the rep is simply calling on “favored accounts,” and not working to grow the territory.
• If a sales professional consistently comes in below 40% closure, some attention to sales closing skills is worth considering

Sales Manager’s Check List

The assumptions above are simply that, just assumptions. They merely put a sales manager in a position to ask questions. Further questions will determine what course of actions to take, if any. For industries where data is not available to tie down exact sales, the size of the territory and the ability to determining all potential accounts and knowledge of purchases is critical to tracking participation…or in this case deal visibility may be a more appropriate term. Either way, delivering value to the customers that you have responsibility for is the primary way of growing market share, solidifying margins and increasing sales commissions.

Before I leave this subject, I believe it is important to understand the value of understanding participation and closure in context to a report and who is the report valuable to. I’ve discussed above the potential value to a sales manager, but by far, my belief that this report is of greater value to the sales professional. Let me explain.

In many aspects of life, whether it be our health, our profession or making decisions on actions to take or not to take we rely on information. We go to the doctor and get information on blood pressure, sugar levels and cholesterol. Those concerned about improving their health act on these results in order to live a healthier and longer life. The doctor has the report, but it is of no value to the doctor other than to point out any potential issues to you. In professional golf, a player tracks how many fairways or how many greens are hit in regulation, how many sand trap saves and how many putts per hole. Those wishing to improve will take action to improve the area that is falling short and when they do, their scores get better and their prize money goes up! While the reports are made available to media and fans, the report is there for the pro to act, or not.

So, it was surprising to me to see so many sales employees take exception to having this information gathered, published and visible to the organization. When the report came out, the excuses started to fly. “Sales got reported in my territory that didn’t take place,” was a common one. “I knew about the deal, but it just would have been a waste of my time to pursue it,” was another. Wanting to include deals that they heard about AFTER the sale closes as participation was another, just to make the report look better. They viewed it as a “manager’s report,” when in fact it was a great tool for any professional salesperson to take an honest look at how they were doing in covering the territory they were given the opportunity / responsibility to cover. Those who viewed it as a “managers’ report” had the longer list of excuses. Those who viewed it as their report went to work attempting to influence future results. Let me explain.

Several years ago, when managing a large region for our company, we used the “P X CR =MS” [Participation Rate x Closure Rate = Market Share] report for individual salesmen. While valuable from a management standpoint, it was viewed with scorn by the sales team. So, we changed our approach. Rather than focusing on in individual territory, we grouped all 25 team members on one report, but combined all the data for the entire group of members who were achieving 70% participation or greater. Not their average data…we combined all the data as if it were one large territory. We did the same for all members who were achieving between 50% and 70% participation and finally combined all the data for those achieving less than 50% participation.

We knew the share, and we knew the participation based on deals won versus deals lost (lost sales reports) so we worked backwards to get the closure number. Closure rate was consistently close to the 50% rate for all categories over many years. The data was magical, but not surprising. The combined market share of those achieving +70% participation was generally 7-10 points north of our company’s share. The combined share of those achieving 50% to 70% participation at or slightly below our company share, and of course those with below 50% participation delivered share results 10-15 points south of our company share.

Participation Rate and Market Share

Again, in all categories, closure rates hovered very close to the 50% range…which was reflective of our product, product support and sales training. The very clear message was if you have the skill sets and support to yield a closure rate of 50%, then that number will remain consistent the more deals you are on. Getting in on more deals can only equate to higher sales, margins and most important of all to the sales professional, a much higher monthly commission check.

One more observation on this analysis. When a salesman who was in the lower tier of participation lost a sale, the agony, amenting and excuses would go on for days and weeks at a time. Conversely, when a salesman in the upper tier of participation lost a sale, the frustration might have lasted 30 minutes, but it was on to the next deal. The lower tier salesman didn’t have a next deal, thus the long-term pain. The real sales professional understood that if you were going to generate a 40% market share in the territory, you had to be in on most of the deals (80% participation) and you had to be prepared to lose half of the deals you were in on.

Perhaps I’ve made things much simpler than they are in the real world. But sometimes simplifying things makes the light glow a little brighter. Developing high participation or high visibility takes a lot of work. I used the term SALES PROFESSIONAL many times in this article and that professional understands this. The McDonald Group has documented “dynamic tools to build deal visibility.” Having the opportunity to participate involves using all the information available today through information technology.

It involves understanding your market through segmentation, analysis, identification and profiling. Finally, it involves an account plan including identifying contact strategy, follow up and control of the account. There are simply no shortcuts here. Those sales professionals who state they would rather “simply sell” rather than do all of the “other stuff,” are not sales professionals. They are merely commission chasers and live and die by the commission chasing strategy. They suffer, their company suffers and the manufacturer their company represents suffers as well.

Achieving high participation levels takes planning and commitment, but its not a mystery. The plan to get there is there for the taking. Part of the process in getting access to those harder to get accounts falls back on the advice given by our customer at the beginning of this paper. “You can call on me every day, as long as you bring me value when you do.

ABOUT THE AUTHOR: Tim J. Murphy spent 42 years in the construction and forestry equipment industry. He worked in for manufactures and distributors in senior leadership roles for Pioneer Machinery, Blount, Inc. and the US operations for Hawker Siddeley, Canada prior to joining Nortrax, Inc., a John Deere construction and forestry dealer. While at Nortrax, Tim was VP / General Manager for the Midwest Region for 13 years. He was promoted to President and CEO of Nortrax where he served for the last 6 years leading their multiple US and Canadian operations. He retired in February 2019.

Tim has been involved with multiple industry groups serving as an Executive Committee member of the Forestry Resources Association, and guest speaker for the Association of Equipment Distributor’s Young Executive Conference featuring his “Ten Leadership Lessons from the Real ‘World.” The “Leadership Lessons” were a product of his guest lecturer status at his alma mater, the University of Wisconsin-Eau Claire where he presented and discussed leadership strategies for over the 10 years.

Feel free provide your comments to Tim at timmurphy54@outlook.com or by phone at 715-829-5000