Market Share, Sales Participation and Closure

Market Share, Sales Participation and Closure

Guest writer Kurt Pease is back with a blog post on the topic of “sales participation, market share, and closure,” and the ways these elements can be improved upon in your business.

Leadership teams at both the dealer and manufacturer levels dedicate considerable attention to strategizing ways to expand their customer base. The primary objective behind this effort is to increase revenue by attracting a larger number of customers. Stakeholders from both the dealer and manufacturer levels are inclined to invest in companies that consistently demonstrate year-over-year growth in profitability. The term market share is the most used metric to gauge growth. Participating and closing deals are both terms that directly impact market share. Let’s dive deeper into these concepts:

Market Share:

Market share refers to the percentage of total sales within a specific market that a company or product holds. It is an important sales metric that indicates a company’s competitiveness. A higher market share often leads to a larger customer base, increased parts and service needs, and higher dealer revenue. The Association of Equipment Manufacturers (AEM) collects data on new equipment sales from participating original equipment manufacturers (OEMs) to calculate market share. This data is categorized by county, machine type, and horsepower. Market share is determined by dividing new dealer settlements by the aggregate AEM data, typically reported on a monthly, year-to-date (YTD), fiscal year-to-date (FYTD), or rolling 12-month basis. Sales participation and closure directly impact market share.

Sales Participation:

Sales participation measures the engagement of a salesforce with their assigned customer base. The goal is to achieve a 100% participation rate, where every customer provides an opportunity to quote when purchasing equipment. This metric is calculated by the dealer or manufacturer using new dealer settlements and AEM industry data. The formula is:

(New Equipment Settlements + Quoted but Lost) / (Industry Settlements – Dealer Owned Rental Fleet)

“Quoted but lost” refers to quotes entered into the dealership’s customer relationship management (CRM) system, which either result in equipment purchases or are marked as lost customer sales. The dealer-owned rental fleet is excluded from the denominator to focus on sales influenced by the sales process.

Closure Rate:

The closure rate calculates the percentage of deals in which the sales team participates but does not close. Reasons for non-closure can vary, including customer brand preference, machine availability, salesman-customer relationship, and pricing. Price is often cited as a primary reason for non-closure. On average, dealers participate in 50% of opportunities and close approximately 50% of those deals. Multiplying these percentages together gives an estimated dealer market share of 25%. When forecasting an increase in market share, it is important to identify whether the focus will be on increasing participation, closure, or both.

Increasing Sales Participation:

One method for increasing sales participation is to utilize UCC1 data during sales meetings for salesperson coaching and customer engagement. For example, the UCC1 new equipment data can be downloaded into mapping software, which helps visualize customer and machine details. This approach enhances engagement and response from sales teams. Sales meetings provide an opportunity to review past sales details, use the map and data points to identify customers who purchased from a competitor, and check if quotes were generated by the assigned salesperson in the CRM.

Follow-up questions to be asked:

  1. Was the customer identified in the CRM?
  2. How is the customer call frequency classified in your CRM? (A, B, C, D, or E). For example, were they to be called on a weekly, monthly, quarterly, semiannually, or annual basis?
  3. Based on the CRM details, did the salesperson complete call reports based on call frequency?
  4. Did the salespeople participate in the deal?
  5. Why did we lose the sale (closure)? Possible reasons include price, availability, equipment features, and salesperson relationship.

If we participated and lost the deal, at least we earned the right to quote. However, if we did not establish a relationship by not calling on the customer, it presents an opportunity for further investigation. Sales managers can ask key questions based on CRM data to gain insights into customer engagement and sales performance. Understanding the reasons behind lost sales and integrating them into future strategies is crucial for increasing market share. Increasing market share requires actively participating in more deals and closing on those opportunities. Awareness alone is not enough; salespeople must quote to generate market share.

It’s worth noting that customers may not always share the real reason why they did not purchase from your salesperson, making it an imprecise science. Price is often given as the reason for a lost sale. Understanding how sales participation and closure rates are calculated, as well as the underlying data that drives these metrics, is critical for effectively increasing market share.

By understanding the importance of market share and the data that drives this metric, leadership teams can manage their sales teams and lay a sound foundation to generate year-over-year growth in both revenue and profitability.

Did you enjoy this blog? Read more great blog posts here.
For our course lists, please click here.