01 Mar Sales Terms to Know
Sales lingo is a “competency thermometer” for how well you understand what selling is. Some of the most commonly used sales terms are found here.
This list is in alphabetical order:
Account Management. A tactical and strategic planning process that assists a salesperson in meeting specific selling objectives before, during, and after a solution is sold. It is specific to one account (meaning it is already a customer). The outcome of the account management process is a “balanced portfolio” of accounts with a strategy and corresponding tactics for increasing revenue from each relationship.
Benefit. A benefit is a solution attribute expressed in terms of what the buyer receives from the solution rather than its physical characteristics or features. Benefits are often paired with specific features, but they need not be. They are perceived, not necessarily real. One benefit of driving is freedom; another is cost-effective transportation.
Business-to-Business (B2B). An organization that is focused on business-to-business transactions. A business engaged in selling to another business.
Buyer. A buyer is someone who works to solve a problem and ultimately accepts the seller’s proposed solution or whose order for the solution is accepted by the seller. A buying organization is any company, association, team, person, or governmental body that has been identified as needing to purchase a product and/or service. A buying organization can be a suspect, prospect, or current/previous customer or client to the selling organization.
Client. A customer who is regularly and actively engaged by the selling organization.
Closing (aka deal close). Closing is a sales term that refers to the process of making a sale. Specifically, it refers to reaching the final step, which may be an exchange of money or acquiring a signature.Salespeople are often taught to think of targets not as strangers, but rather as prospective customers who already want or need what is being sold. Such prospects need only be “closed.” The term is usually distinguished from ordinary practices such as explaining a product’s benefits or justifying an expense. “Closing” is usually reserved for more artful means of persuasion. For example, a salesman might mention that his product is popular with a person’s neighbors, knowing that people tend to follow perceived trends.
Commission. A fee or percentage of a sale allowed to a sales represen- tative or an agent for services rendered.
Compensation Plan (aka comp plan). Compensation plans consist of a series of decisions that form a framework for rewarding employees for their participation and productivity, which result in the successful perform- ance of the organization. Since each person is different, these decisions must be able to be applied in varying circumstances while retaining the consistency required for equity. In this way, the employment exchange is an individual exchange between the person and the organization based on the variations in perception of each. In some cases, groups of employees have similar circumstances and/or perceptions that have led organizations to develop compensation programs that contain enough special characteristics to be dealt with separately.
Consultative Selling. Consultative selling involves deeper questioning of the prospect about organizational and operational issues that can typi cally extend beyond a specific product or solution in and of itself. This leads to greater understanding of the prospect’s wider needs (particularly those affected by the product), and the questioning process itself also re- sults in greater trust, rapport, and empathy between salesperson and buyer. The process has been practiced instinctively in good salespeople and organizations for many years, particularly since the 1970s, especially for concept selling or service solutions selling, driven by competitive pres sures, as buyers began to learn as much about the sales process and tech- niques as the salespeople themselves. In the 1970s and 1980s, various proprietary frameworks and models were established, and many of these remain in use today.
Cost of Goods Sold. The cost of goods sold describes the direct expenses incurred in producing a particular product or service (solution) for sale, including the actual cost of materials that comprise the solution, and direct labor expense in putting the solution in working condition. Cost of goods sold does not include indirect expenses such as office expenses, accounting, shipping, advertising, and other expenses that cannot be attributed to a particular item for sale. Subtracting the cost of goods sold for the amount billed when selling the solution (sales revenue) produces the gross profit on the good.
Cross-Sell. The sale of a product or service in addition to the product or service the customer has already purchased, but from a different product line. For example, an agent may sell an additional service such as broad- band Internet with a new telephone service. You can only cross-sell to existing customers. This is almost the same as up-sell, it’s just delineating the fact that the additional sale to an existing customer was for a different line of product, not the same as originally purchased.
Customer. A buying organization that (may) buy repeatedly but is not regularly or actively engaged by the selling organization. See also, client.
Feature. Features are the way benefits are provided to consumers. The tire feature of a car allows the car to roll down the road. Usually any one of several different features may be chosen to meet a customer need. For example, a car with a steering wheel and tires will not only allow the car to roll down the road, it will also allow the person to keep it on the road.
Gross Margin. Gross margin is an ambiguous phrase that expresses the relationship between gross profit and sales revenue. The ambiguity arises because it can be expressed in absolute terms:
Gross Margin = Revenue – Cost of Goods Sold
Or as the ratio of gross profit to sales revenue, usually in the form of a percentage:
Gross Margin Percentage = 100 × (Revenue – Cost of Goods Sold)
In everyday speech, the word percentage is sometimes omitted and this can create confusion. Higher gross margins for a manufacturer reflect greater efficiency in turning raw materials into income. For a retailer, it will be their markup over wholesale. Larger gross margins are generally good for compa- nies, with the exception of discount retailers. They need to show that opera- tions efficiency and financing allows them to operate with tiny margins.
Need Identification. In this stage, the salesperson takes a qualified prospect through a series of question-and-answer sessions in order to iden- tify the requirements of the prospect. During this step, the salesperson will attempt to help the buyer identify and quantify a business need or a “gap” between where the client is today and where they would like to be in the future. Based on that gap, needs can be clarified to determine if the solu- tion will fill all, or part of, the overall gap. From this procedure the sales- person is able to come up with a proposal suggesting various products or services that will meet the need as presented by the prospect.
Pricing. Price is the amount of currency to be paid. Pricing is a strategy as determined by one of the four Ps of marketing. The other three parts of the marketing mix are product, promotion, and placement. Pricing is the manual or automatic process of applying prices to purchase and sales orders based on factors such as a fixed amount, quantity break, promotion or sales campaign, specific vendor quote, price prevailing on entry, ship- ment or invoice date, combination of multiple orders or lines, and many others. Automated systems require more setup and maintenance but may prevent pricing errors.
Problem Network. The network of all buyers who need to work togheter to solve a specific problem. The problem network typically has a problem owner, problem manager, and a problem driver. These different altitudes can also exist across functions. Once mapped out, the salesperson can navigate the problem network easier in order to create a shared definition of successs.
Problem Solving Process. Where the sales actually starts. How buyers solve problems is critical to the success of any seller. Problem solving processes vary across customer organization and typically involve many people or committees. Salespeople who can help buyers manage their collaborative problem solving process will likely succeed.
Profit Margin. Profit margin is a measure of profitability. It is calcu- lated as
Net Income / Revenue = Profit Margin (expressed as a percentage)
For example, suppose a company produces bread and sells it for $5. It costs the company $3 to produce the bread and it also had to pay an addi- tional $1 in tax. That makes the company’s net income $1 (5 – (3 + 1)) and its revenue $5. The profit margin would be (1 / 5) or 20 percent. Profit margin is an indicator of a company’s pricing policies and its ability to con- trol costs. Differences in competitive strategy and product mix cause profit margins to vary among different companies.
Proposal. A business proposal is a requirement in complex sales. Clients sometimes issue a Request for Proposal (RFP) from which a proposal must be written, or, after needs identification, the salesperson creates a proposal that attempts to fill the needs as expressed by the buyer. A properly accomplished proposal will educate the prospective client about the full nature of his or her need. Often, a prospective client may be aware of only a portion of the need they expressed during needs identification. Hopefully, the proposal persuades the prospect that your solution has the ability to deliver what he or she needs, better than he or she can. The proposal should also provide justification, timelines, and investment figures for the entire portion of the prospect’s commitment during the duration intended and in terms that are useful and understandable to the client. Responses to RFPs require both adherence to the guidelines and require- ments of the RFP, and a complete explanation of why and how the cus- tomer will benefit by awarding the contract to the selling company.
Qualified Prospect. In the sales process, a qualified prospect is a potential buyer that shows interest, has the budget and authority to buy, the desire to move forward in the sales process, and time available to im- plement the solution. A qualified prospect is different than a sales lead be- cause a lead is just a name or someone who appears to be in the target market for the solution. A qualified prospect fits the same criteria as a sales lead, but then is “qualified” as someone who has:
the time to implement the solution
the budget to make the purchase
the need that can be solved by the solution
the desire to continue in the sales process
the decision-making authority to approve the purchase the ability to help facilitate a sale in the organization.
Revenue. In business, revenue is the amount of money that a company actually receives from its activities, mostly from sales of products and/or services to customers. To investors, revenue is less important than profit, or income, which is the amount of money the business has earned after deducting all business expenses. However, in sales, your quota and commissions are usually determined based on revenue you bring in.
Sales Cycle. A sales cycle is a length of time to initiate and complete a sale—to identify and qualify prospects, define the goods or services, and ac- cept and acknowledge the order. The length of the sales cycle often depends on product complexity and degree of custom engineering, and may include the use of firm planned orders based on partially completed bills of material to order long lead time items. Some sales cycles take 30 days; some take six months to a year.
Sales Process. The sales process is for managing a sales cycle. Most salespeople use it to understand the sales pipeline and its status. The sales cyccle usually has more volume at the beginning (representing prospects) and less later on in the process (representing closed sales). Remember, the sales funnel is dead. It’s not the best tool for managing the entire experience of the customer. A sales cycle can help you identify areas for improvement and understand what actions can help the sales and marketing process to both increase deal flow and lower the cost of sales.
Sales Lead (aka suspect). A sales lead is usually the name of the first stage of a sales process. A “lead” is a person or group of persons iden- tified as expressing some type of interest in a product or service. The lead may have a corporation or business associated with the person(s).
Sales leads come from either marketing lead-generation processes such as tradeshows, direct marketing, literature, and so on, or come from saleperson prospecting activities. For sales leads to convert to a prospect (or equivalently to move a lead from the process step sales lead to the process sales prospect), “qualification” must be performed and evaluated. Typically this involves identifying by direct questioning of the lead’s product appli- cability, availability of funding, and timeframe for purchase. This is also the entry point of a sales process.
Once a lead exists in this stage, additional operations may be performed such as background research on the lead’s employer, the general market that the lead belongs to, contact information beyond that provided in tially, or other information useful for contacting and evaluating a lead for elevation to prospect—the next sales step.
Sales Presentation (aka sales pitch, sales script). How the product or service is described and promoted to the customer. The sales presentation is what the salesperson uses to attract attention and interest in verbal and written introductions to prospects—it has to be concise, yet thorough. The message in the sales presentation should also be used by the selling company in its various advertising and promotional material aimed at the target market. Traditionally, the selling company’s marketing depart- ment would formulate the sales presentation, but these days salespeople greatly improve their selling effectiveness if they are able to refine and adapt the product offer (not the specification) for targeted sectors and individual major prospects.
Developing and tailoring a product offer, or proposition, is a vital part of the selling process, and the approach to this has changed over the years.
Sales Stages. Sales stages offer systematic methodology for performing a sales cycle. The reasons for having sales stages include seller and buyer risk management, achieving standardized customer interaction in sales, and scalable revenue generation. Specific steps in sales processes vary from company to company but generally include the following:
1. Prospecting 2. Approaching 3. Qualifying 4. Presenting 5. Discovering 6. Committing 7. Following up
From a seller’s point of view, a sales process mediates risk by providing milestones for deals based on a collection of information or execution of procedures that rate movement to the next step. This controls seller resource expenditure on nonperforming deals. Ideally, this also prevents buyers from purchasing products they don’t need, though such a benefit requires ethical intentions by the seller. Because of the uncertainty of this assurance, buyers often have a buying or purchasing process.
Sales stages are generally more common for companies that either have large revenue risks that require systematic assurance of revenue gen- eration and/or those that choose to use a more consultative sales approach (such as Saturn, IBM, or Hewlett-Packard).
Strictly speaking, even an effective ad hoc or retail sales stages can be described by steps of an ideal sales process, though some of the steps may be executed quickly. Often a bad sales experience can be analyzed and shown to have skipped key steps. This is where good sales processes medi- ate risk for both buyer and seller.
Many companies develop their own sales stages. However, off-the-shelf versions are available from companies such as Huthwaite International and Miller Heiman. These companies provide a customizable process and a set of electronic tools that can be freestanding or integrated if required with the company’s CRM or opportunity management system.
Terms and Conditions (aka Ts & Cs). For a legal contract, this will clearly create legally binding terms and conditions of the transaction. The terms and conditions spell out the rights and privileges of both the buyer and the seller, and what actions each may or must take. Examples include interest rate, length of payment terms, out-clauses, warranty, resell, copyrights, deferment options, late payment charges, and delinquency or de- fault consequences, and so on.
Territory. A territory is a defined area usually considered to be the “possession” of the salesperson and/or selling organization. A territory is a geographic area in which a salesperson sells, and is established based on the selling strategy of the selling firm. It can be city specific or regionally specific. A territory is different from a vertical market focus (focused on industry, not necessarily on territory).
Transaction. The transaction is the hub of global commerce. A deal transaction is a unique event where money exchanges hands in return for a product or service. The “transaction experience” is the buying, selling, and marketing cycle defined as the pre- and post-effects of that unique sale.
The transaction itself holds a key position as the hub of commerce. Each sale is identified and handled separately as a unique transaction experience. Each time a signature is provided by the buyer, and a sale is consummated by the buying organization, a single transaction has occurred, but the transaction experience may only be halfway over.
Transaction Experience. The pre- and post-experience of the buying and selling organization surrounding a unique transaction. A transaction is one point in time where money changes hands. A transaction experience encompasses the marketing, selling, and fulfillment (customer service) experience.
Unique Selling Proposition. A unique selling proposition is the strongest and most unique benefit for a given target market—unique being the operative word. Real or perceived uniqueness about your company is the most important aspect of the USP in the eyes of the buyer. Unique is also important because it generally causes a prospect to buy from one salesperson or supplier as opposed to another. USPs help a company sell the best against perceived competitors who don’t have a strong USP.
Up-Sell. The sale of a product or service in addition to the product or service the customer has already purchased. For example, an agent may sell an additional feature such as voicemail with a new telephone service. You can only up-sell to existing customers. This is almost the same as cross- sell; it’s just delineating the fact that the additional sale to an existing customer was for the same line of product purchased, not a different line.
Value Proposition (aka value prop). The value proposition should answer the consumer’s most important question: “What’s in it for me?” It is a clear and specific statement about the tangible benefits a consumer receives by using a product or service. A value proposition is a statement summarizing the customer targets, competitor targets, and the core strategy for how one intends to differentiate one’s product from the offerings of competitors.
Vertical Market. A market that is narrow and deep; that is, it is limited to customers in a few industries and many producers in the industry use the product. It defines a group of businesses, organizations, or enterprises that are viewed on the basis of the unique and specific nature of the products or services that they sell (or buy) in the activities in which they are engaged.