Can a sales close rate be too high?

 

The answer is yes, and let me explain why…

A friend owns a winery Northwest of Sydney. As we chatted, I asked about her business… and she said things are great.

Then our chat focused on her winery’s ranking on Google.

And she said “Things are good now that we moved from #1 to #2 on Google.”

I thought I misunderstood, so I asked her to repeat it. And yep, right as rain, she prefers the second spot.

Why?

Because #1 attracts tourists who want free wine – almost none of them convert into buyers!

The second position attracts serious wine connoisseurs who buy boxes of her stuff – her conversion rate is off the charts!

She’s much happier.

And it got me thinking about conversion rates.

Can they be too low? Can they be too high? What is the ideal sales conversion rate?

Reminds me of a client…

He has an 80% conversion rate from phone appointments into sales. Great number… but it’s probably TOO high.

Why?

Two reasons:

1. His pricing may be too low – I know he hasn’t tested higher prices. If he did, he may find he can raise prices by 30%… with only a slight compromise on conversion! Result: more sales, more profit without more headaches.
2. His audience targeting probably isn’t broad enough

Let me dive into that deeper….

Let’s say he has 100 leads per month and closing 80% – that’s 80 sales.

What if, by broadening his audience, he attracts 500 leads per month… but it HALVES his conversion rate to 40%.

Result: 250 sales per month – more than double.

Is that a better scenario? Most people reading this would agree, “yes”. And I think it is.

And what if he broadened his audience even further? And he attracts 5,000 leads per month… but his sales conversion rate halves again to 20%.

Result: 1000 sales per month – a 12.5x improvement from the baseline. That’s a huge bump. 

And is that a better scenario? Sure… from a sales viewpoint.

But at a 20% sales conversion rate there’ll be “knock on effects” to consider with the sales team.

Since they’re hearing “no” most of the time, it’ll mean call reluctance will creep in. Which means extra focus on training… recruitment etc., than at a 40% sales conversion rate.

Yes, there may be many more sales… but there’ll also be extra headaches.

Are those extra headaches worth it? That’s a decision each of us have to make for ourselves.

We have one client who travels the world with his family – makes millions per year – and almost everybody buys his stuff. 

We have another client that makes many more millions per year but doesn’t have the lifestyle. His team’s sales conversion rate is around 20% – but he has a much bigger business.

THE LESSON

Yep, you can have a sales conversion rate that is too high. Sometimes it’s high because your pricing is too low… or your audience targeting is too tight.

Truth is, there is no right answer.

A high sales conversion rate makes for a very predictable sales funnel. A low sales conversion rate will get scale… but there are undeniable knock on effects to consider.