Sales Rx: Preventing Sales Depreciation

• By Tray Dunaway
• Sep 01, 2007

Classically, depreciation refers to the decrease of value that goods sustain after purchase. We’ve all heard the adage, “As soon as you drive a new car off the lot, it’s already depreciated.” But the term depreciation also refers to the salesman’s value depreciation. This is particularly noticeable in service markets, and many sales professionals are blissfully unaware of sales depreciation. Until the concept is fully understood, future success is limited.

What is the ultimate reward to a salesman? It may come as a surprise that it’s not the sale itself. Sure, the close of a sale is a reward — sometimes a reward with a commission — but the ultimate reward is the lifetime value of future sales to a new customer, not merely the first sale. If sales successes were only measured by initial sales to new clients, success would be short-lived. Ultimate success is linked to ongoing relationships with buyers. Your best new customer is the old customer.

The cost of closing a new client’s business is estimated at seven times the cost of repeat business with an established client. If your sales were limited to first-time clients, you’d have to work seven times harder for your commissions than the savvy salesman. A smart salesman, with less effort, could then outsell you by two, three or perhaps four to one. Now that’s a reward to a salesman — selling more with less effort. This leaves more time to pursue new clients to continue to grow sales, but you can only do this when you’ve earned the trust of the buyer to obtain the ultimate reward.

When a salesman closes a sale, sales depreciation begins. At that moment, the perceived value of the salesman begins to diminish from the buyer’s perspective. If the sale involves goods without post-sales support, the goods value to the buyer quickly decreases. Accordingly, the customer’s subsequent buying decisions will be price-based. If the sale involves selling service, you’re “selling the invisible,” as Harry Beckwith so aptly titled his book on service marketing. Sales support for services is simply the promised service. Failure to live up to the promises made at the outset dooms future relationships and the opportunity to convert a single sale into a lifetime of sales. Simply put: No trust, no future sales.

I recently bought a package of goods from Mike Stewart, the Internet Audio Guy. It included support in the form of tutorials and direct phone support for the equipment and Sony software. I paid full retail price for the software and equipment, the same as if I purchased it directly from the manufacturer. I could have found an online or discount retailer and purchased the same stuff at a lower cost, but the tutorials and service were worth more than the difference in cost, considering the amount of time I saved learning exactly what to do to make the stuff perform as promised. Because the service was so good, I decided to purchase additional stuff from Mike. He successfully established a relationship with me, gave me great service and now has additional business — at full retail price — because I trust him.

The value of a classic car that’s in great demand and has been properly maintained and serviced can actually appreciate. Be a sales professional who provides outstanding continued service, surpassing promises made before the sale closing. Savvy sellers also can experience salesman appreciation and look forward to a lifelong, mutually satisfying business relationship, founded in trust, with many buyers.

This article originally appeared in the Respiratory Management Sept/Oct 2007 issue of HME Business.