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Direct Sales Basics

The Law of Averages

With every quarterly sales conference I’ve conducted (with new employees and veterans alike,) I’ve always started with a discussion regarding the Law of Averages. It usually starts with a visual exercise. One visual I often use at our sales training seminars is as follows: One of our trainers will play the old-fashioned ‘shell game’ with some of the participants. We usually have 3 or 4 shells with a marble under one of them. After having the participants ‘guess’ which shell contains the marble, we then discuss how the shells represent prospects, and the marble equals a sale! The higher your closing ratio, the more marbles under the shells.

Simply stated, the Law of Averages means that for every action you perform, you will see very similar reaction, given a large enough sample.

For example, if you make zero presentations in a day, the Law of Averages states that you will have zero sales. If you give ten presentations one week (with an average closing ratio of 50%,) the Law of Averages states that on average, you will have five sales! The Law of Averages doesn’t guarantee ANY result for a small sample, but states that you will see a very consistent result over time with a large enough sample.

Many sales people never really buy into the Law of Averages, or they don’t really care about it. But it is very important that you learn this concept. Why? Because as we mentioned, Sales is a NUMBERS game. Just like many other industries. Let’s look at a few examples.

How about the following:

1) Insurance Industry

2) Gaming (gambling) Industry

3) Funeral Industry

4) Advertising Industry

These are just a few of an endless number of businesses that predict (within an incredible amount of accuracy) their probabilities and adjust their pricing and policies to ensure a profit. In fact, the insurance industry is probably the easiest example to understand how and why the Law of Averages is so important. Insurance would not exist if this concept didn’t exist. Instead, Insurance companies, with the help of Actuarians, can predict almost every single scenario (from life insurance to flood and earthquake insurance,) develop an insurance product, and profitably sell these products to the public!

And as far as gambling, how do you think they can afford the HUGE casinos in Vegas even though offering some very sizeable jackpots? And as far as the funeral industry, well, you know they’re just dieing to make a sale. haha.

But what do insurance sales, gambling, and funeral homes have to do with my new sales

The answer is: EVERYTHING (IF you’re willing to learn and trust the Law of Averages!)

Here’s just a few examples. The Law of Averages will state and GUARANTEE:

1) If you make ENOUGH calls, you’re GUARANTEED to set some appointments

2) If you conduct enough appointments, you’re GURANTEED to eventually close
some of these appointments

3) If you close enough appointments, you’ll make money

4) If you make enough money, you’ll succeed in sales!

After you start performing sales actions such as making calls and doing presentations, your “averages” won’t let you down. Even if you have a bad day or an “off” month, you can be CERTAIN that the Law of Averages will GUARANTEE you an eventual result based on your current actions!

Just last week, one of our best sales people came running down the hall. “OUCH” she yelled! “I’ve done EIGHT demos and not had ONE sale!” She came down to my office for some quick support, and she knew I’d immediately tell her this was a fluke, and I told her she’d probably have the best afternoon of her life. Well, she returned about four hours later and had closed five deals in a row!

Just remember, if you believe in the Law of Averages, you will avoid being emotional about either ‘highs’ or ‘lows’ during your week or month. In fact, once you’re a true believer in the Law of Averages, you’ll soon feel in TOTAL control of your sales profession (providing you’re willing to follow the needed schedules and habits to ensure that the averages work for you.)

Going back to my early sales days, I would have days that I hadn’t sold anything; however, I knew by keeping my focus on the habits, I would soon be in luck. And you know what? IT ALWAYS WORKED. 

As much as the Law of Averages works in your advantage, it can also work against you. What I mean by this is NEVER ride the highs too high or the lows to low. And NEVER expect to start getting incredibly different results from your own personal Law of Averages without doing something to shift your average (such as learning new skills or observing someone else who is experiencing better results than you!) And don’t ever allow a ‘lucky day’ to interfere with following your schedules and habits routine. 

I once had a friend who would go out for the day and get ‘lucky,’ maybe closing a few sales. He would then proceed to take the rest of the week off exclaiming “why fight the law of averages, there’s no way I’ll make anymore sales!” Well, needless to say, this guy’s lack of following a solid schedule almost instantly defeated him. And, the great thing is, when you get lucky and bag a few sales, that’s the PRECISE moment you should keep going! Your attitude and momentum can keep you going while the iron’s hot!

Just remember the highs and enjoy them. Because if you hit a low, your memory of the high times will keep you going and make you believe in the Law of Averages. I’m always reminding people to savor the moment and enjoy the victories, but NEVER let the extremes affect you either way, because if you believe in this, you always remember that SALES IS A NUMBER GAME!

Bell-Shaped Curve Example

Here’s an illustration showing an example of the Law of Averages for a newer sales person (less skilled) versus the curve for an advanced (greater skilled) sales person. Using a “bell-shaped curve,” you can see that the beginner sales person, having completed eight sales presentations, will on average (in this example,) close three deals. If the beginner sales person kept selling the EXACT same way for two or three years, he should expect to keep closing three out of eight for a 37.5% closing ratio.

Beginner Sales Reps Bell Shaped Curve

Now, let’s look at the advanced sales person’s curve. For the doing the SAME number of presentations, our advanced sales person is closing four out of ten (or a forty percent closing ratio.) So if our advanced sales person kept selling the EXACT way for another two or three years, he will expect to keep closing about four out of ten on average.

Advanced Sales Persons Bell Shaped Curve

Would it be fair for our beginner sales person to sell the EXACT same way for two more years, yet expect to start seeing a higher closing ratio? The Law of Averages says NO! (Same action, same re-action.) The ONLY way the beginner sales person is going to expand his curve to look more like the advanced sales person is by “getting better” or improving his skills at selling. It’s true that there are several ways to increase your sales (more demos, bigger average dollar, higher closing ratio,) but the ONLY way to improve your closing ratio (and impacting the Law of Averages) is by “changing” what you’re doing during each of these ten presentations!

Back to Direct Sales Basics

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