Prospecting is the first step in the sales process, which includes identifying potential clients, aka prospects. The objective of prospecting is to create a database of likely customers and then systematically communicate with them in the hopes of converting them from prospective client to current customer.
The initial use of the expression”prospector” refers to the attempts of people to locate gold by visually scanning creek beds and stone formations. When flecks of gold had been seen, the prospectors would spend some time sifting through dirt to get the valuable nuggets and flecks which were left behind when dirt was washed away.
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That is what modern day revenue prospectors do — sift through large lists of possible customers to try to uncover those people who are interested and ready to buy.
Steps in the Sales Process
Unless somebody has done business with you, it’s a guess as to whether they may be interested in your services or products. They’re potential customers at that stage, falling into one of two classes: prospects or suspects. The distinction between the two classes is:
Suspects –Individuals or businesses you think may have a need for your goods or services but who might not know about your company or its offerings. You suspect they could become clients, but you are not sure. To discover, you want to raise their awareness of and familiarity with your organization. As soon as they are aware, it is time to decide whether they may purchase in the future.
Prospects — Prospects are suspects you’ve made contact with and that have confirmed that they may be interested in purchasing from you at some stage. By way of instance, the owner of a 10-year-old automobile with 200,000 miles might be a hot prospect for your vehicle dealership, so long as they are conscious of it. Or the husband of a woman whose 40th birthday is quickly approaching could be a prospect for your jewelry store, so long as he knows where it is and is encouraged to come store — perhaps with a few incentives offered.
A client is a prospect that has spent money with you.
To make contact with earnings suspects — buyers that may or may not be potential customers for your company — there are a number of popular tools and tactics you can use, for example:
- Telephone calls — designed to initiate a conversation with the person who answers the telephone
- Automated voicemail messages — made to attempt to convince the listener to take action to get more information, like by visiting a site or making a telephone call
- Mail — made to share information and entice the recipient to take an action that will identify them as a potential
- Direct email — sent in the email as flyers, postcards, or catalogs, for example, made to share information that may tempt you to consider buying
The principal objective of these marketing efforts is to qualify a receiver as a potential, or someone who might have a need for your business’ goods or services, or not. Knowing that someone doesn’t anticipate having a demand for your offerings — and isn’t a potential — helps you refine your potential database so that you can focus your advertising dollars on those people most likely to become clients.
What is a Profit Margin?
Profit margin indicates the profitability of a product, service, or company. It is expressed as a percent; the greater the number, the more profitable the company.
Types of Profit Margins
Small companies, including retailers, frequently consider two types of profit margin:
- Gross profit margin
- Net profit margin
Gross Profit Margin
Gross profit margin generally applies to a particular product or line as opposed to an entire business. Calculating the gross profit margin helps a company determine pricing decisions as a reduced gross profit could indicate that the company should charge more to make selling a particular product worthwhile.
Calculate gross profit margin by subtracting the cost of goods sold from net sales. Divide the resulting number into the net sales to find the ratio, which represents the proportion. By way of instance, if earnings are $8,000 and costs total $6,000, the gap between the two is $2,000. Divide that gap by earnings — $8,000 — and multiply by 100 for 25 percent. That’s the gross profit margin.
Note that cost of goods sold includes direct product costs but does not include indirect costs, such as rent, office supplies, etc.
Net Profit Margin
Unlike gross profit margin, net profit margin is a calculation that expresses the sustainability of an entire business, not just one product or service. Additionally it is expressed in a percentage; the greater the number, the more profitable the firm. A very low profit margin may indicate a problem that’s interfering with fertility possibility, including unnecessarily high costs, productivity problems, or management issues.
Calculating the net profit margin is extremely similar to the measures for gross profit margin, but this procedure requires the whole company’s earnings and costs, not just those of one product. Divide the provider’s net income (the profit after expenses are deducted from gross earnings ) into total sales, then multiply the result by 100 to find the response expressed as a percent. Let us say gross earnings are $150,000 and costs are $75,000. That means net income is $75,000. Divide that number to gross earnings, $75,000 divided by $150,000, to find .50. Multiplying .50 by 100 equals 50 percent, the net profit margin.
People using internet profit margins to ascertain a provider’s profitability are cautioned not to evaluate a company in one business to a company in another. Industry features vary so much that it is unrealistic to expect a restaurant, as an instance, to be akin to an auto parts retailer.