Sales Definitions: The Ultimate A to Z Guide

by Briana Morgaine 9 Minutes
sales definitions

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If you’re a new small business owner, you might not have necessarily come from a sales background.

After all, you got into business because you have a skill or product you know someone needs—but you might not have considered the fact that you may have to convince them they need it.

These sales definitions will help you feel more confident going forward with sales for your new small business—so be sure to keep reading.

Like many freelancers, entrepreneurs, and new small business owners, I didn’t come from a sales background. However, even as a freelance writer and content marketing specialist, sales still comes into play. Sure, I might know that it’s important to have optimized website copy—but what if my prospective client doesn’t think it’s necessary?

That’s right—it’s time to become a salesperson.

So, knowing some key sales definitions can help make the process of learning how to become your own salesperson a bit easier. In addition, be sure to check out my other recent articles on the subject:

sales definitions

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Sales definitions A t0 Z

ABC: A bit antiquated, in the sales context “ABC” stands for “always be closing,” referencing the idea that everything you do should be part of the process that leads up to successfully closing a sale. Not only that, the idea assumes that the act of closing a sale is all that matters.

Rather than this type of thinking, modern sales techniques rely more on relationship building than a pushy sales attempt; the reframing of “always be connecting” is perhaps a better way to think about it.

Adoption process: Otherwise known as the buying process, this references the stages through which a potential customer goes—from hearing about your product or service, to inquiry, all the way to potentially becoming a customer.

Average dollar per sale: Quite simply, your total sales dollars divided by your number of sales. Simple, right? It’s a helpful metric to keep your eye on, however, as it’s one you should be continually striving to push higher.

Bad lead: A lead that, for one reason or another, is unlikely to be converted into a customer. Perhaps they are more interested in browsing or testing the waters, and have no intention of actually becoming a customer; or worse, perhaps you know enough about them to determine that their business will be more trouble than it is worth (because you’ve heard wind that they’re a terrible client to work with, or similar). Either way, it’s best to identify “bad” leads early on, so as not to devote too much time to them.

BANT: Originally developed by IBM, the BANT formula stands for “budget, authority, need, and timeline.” Essentially, it’s a way for a salesperson to determine whether or not their prospect has the ability to become a customer.

To determine this, ask yourself these questions about your prospective client or customer:

  • Do they have the budget to make the purchase?
  • Are they the person in their department/organization with the authority to make purchasing decisions?
  • Do they have a real need for your product or service?
  • What is the timeline for implementation?

Benefits: When it comes to sales definitions, “benefits” are what your prospective client or customer stands to gain from using your product or service. Note that these are different from “features”; for example, a feature of an insulated coffee mug might be its double-walled insulation, but the benefit is that the customer will be able to keep their coffee hot for the entire duration of their commute.

Bottom of funnel: Your sales funnel is the process by which prospective clients or customers become actual clients or customers.

The “bottom of the funnel” stage illustrates the stage closest to your prospect making a purchasing decision, and you converting to a customer. At this point, it’s your responsibility to effectively close the sale.

Buyer behavior: Understanding the wants, needs, goals, and general behavioral patterns of your buyers. Conducting plenty of market research and creating a buyer or user persona will help you get a sense for buyer behavior in the beginning; once you have paying clients, make note of the process you went through prior to converting them to from prospects to clients, and begin to build out your understanding of buyer behavior based on real customers, not just hypothetical guesses.

Buyer persona: As mentioned above, a buyer persona represents your articulation of your customer or client base—their needs, interests, goals, and even personal attributes like gender, location, hobbies, age, and so on. Refine your persona as you go; you may realize that some things you initially thought about your buyers is different than you expected, and perhaps your product or service actually serves an entirely different intended audience than you had imagined.

Buying criteria: Essentially a list of things your potential customer needs to know before they make a purchasing decision. This could be anything from price, to length of time the project will take, to reviews, to a clear explanation of why they need your product or service, and so on.

sales definitions

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Call (sales call): Some sales definitions seem so obvious that it’s almost unnecessary to include them—but the “sales call” is exactly what it sounds like—calling up a prospective client or customer to chat over the idea of trying your product or service. You’re delivering your sales pitch, and hopefully closing the sale. That being said, a sales call isn’t just on the phone—you can turn up in person and ask to speak with your potential lead. However, nowadays, beginning with a lighter touch (i.e. via phone or email) is often preferred.

Closing ratio: The number of deals closed (so products successfully sold, new projects commissioned, and so on), compared with the number of sales pitches you’ve given. Clearly, the higher the percentage, the better.

Cold call: If you drop by unexpected to chat up a new potential client, or call them on the phone when they are not expecting you, you’re “cold calling” them. Cold calling is a difficult task; not only are you approaching someone who may have no prior knowledge of you or your product or service, but you’re also catching your prospect off guard. Sending a preliminary email can be a good way to warm up your cold call.

Conversion: Turning a prospective customer or client to an actual, paying customer or client. “Conversion” is often used in the context of whether or not a prospect has been “converted” and signed on the dotted line, so to speak.

Conversion path: The path by which your prospective client or customer goes from a prospect to a real customer. Similar to buyer behavior, but while buyer behavior is more of a general understanding of how prospects learn about and interact with your product or service before buying, the conversion path is more specific, and involves taking a look at the actual trajectory—for example, where they landed on your website, how they found you, what links they clicked before they purchased, and so on.

Conversion rate: The number of prospects who take a desired action—most likely purchasing your product or services. Calculating the rate depends on exactly what you’re measuring; for example, if you’re looking at sales via your ecommerce site, you might measure conversion rate based on how many people enter your site over a month period, compared with how many make a purchase.

Cross-selling: You likely offer more than one kind of product or service—and cross-selling involves offering prospects complementary products or services, in addition to what drew them to you in the first place. This might look like a graphic designer who has been commissioned to design a logo also offering their services for creating customized business cards, for example.

CAC: CAC stands for “customer acquisition cost,” or the amount it costs you to close a sale and obtain a customer. Even if you close a sale, if you’ve spent an exorbitant amount of money to actually get that customer, your CAC is too high. A large marketing spend that brings in very little business, an expensive trade show booth that only nets a few customers—these are some situations that can result in an undesirably high customer acquisition cost.

CRM: If you have a lot of customers, you probably need a way to keep track of them all, and make sure they’re happy. CRM, or customer relationship management, is pretty much always said in the same breath as “software”—and there are more CRM software options than you can swing a stick at (and that’s another article).

Churn: Customers who “churn out” are those that stop buying or using your product or service over a given period of time. So, if you’re a subscription-based business, you’ll likely be considering how many customers churn out over the course of a month, three months, a year, and so on. The idea of churn is more relevant to SaaS or other subscription-based businesses (one-time purchases are not really subject to measurement via this metric) but it’s an important sales definition to know nonetheless.

sales definitions

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Lead: Your leads, your prospects, potential customers—it’s all essentially the same thing. These are people who are potentially interested in your product or service, either based on their match with your buyer persona, or based on interest they have expressed in a more tangible way (such as signing up for your newsletter).

LTV: The LTV, or lifetime value, is how much you stand to make from each client or customer over the course of their tenure doing business with you. Think about it: Customer A may commission your services for a bigger project, but you can tell that they are likely to be a one-off client. At the same time, you’re approached by Customer B, who is asking for a smaller piece of work, with the potential for a longer-term relationship. You know that the potential LTV of Customer B is higher, so it’s potentially wise to choose them over Customer A.

Middle of funnel: Middle of funnel content is, unsurprisingly, the stage of the sales funnel between top of funnel and bottom of funnel. If top of funnel is how clients are first brought into your sales funnel, and bottom of funnel is the point right before they buy, middle of funnel content has the job of moving clients forward effectively and leading them to the bottom of the sales funnel.

Pain point: What problem does your product or service solve for your customers or clients? This is their “pain point,” and the fact that you can solve this pain will likely be one of your main selling propositions. A pain point isn’t only something “painful” in the literal sense; to use the insulated coffee cup example from earlier, the pain point customers experience is an inability to keep their coffee warm long enough. If your double-walled insulated cup can effectively keep coffee warmer longer, you’ve solved this pain point.

Positioning statement: How do you introduce what you do or offer at a dinner party, or in the context of an elevator pitch? It probably sounds something like, “I make [your product or service] to help [your target customer] solve [their pain point].” This is essentially your positioning statement; it is a succinct summary of how your what your business does, and how your business solves your customer’s problem. Sales calls often open with a positioning statement, as a way to clearly convey what you do and the value you can bring to your prospective customer.

Prospect: A potential client, customer, lead—someone who may be interested in your product or service.

Prospecting: The act of finding prospects—and the process of prospecting will be different depending on your industry. Maybe it means a deep dive into your LinkedIn connections, or an audit of a certain type of small business in your area.

Qualified lead: Anyone potentially interested in your product or service is a lead, but not all leads are “qualified.” A qualified lead (also called a “sales qualified lead”) has been researched and vetted—for instance, does your lead actually have the power to make decisions within their business? If not, they’re not a qualified lead.

Sales pipeline: The sales pipeline is the process by which you move prospects through the sales process, and ultimately make a sale. While generally the sales pipeline is often used in reference to traditional salespeople, while the sales funnel often refers more to online content, there are definitely areas of overlap between the two.

Top of funnel: As you’ve probably guessed by now, the top of the sales funnel is how your leads are introduced to your product or service, and essentially “sucked in.” Think about the shape of a funnel, as well; the top is wide, and narrows as it goes down. Similarly, your top of funnel content will likely appeal to a broader group than will actually become clients.

Value proposition: What sets your product or service apart from the others like it in your niche? Do you offer exceptional customer service, day or night? Do you have the fastest shipping? Does your unique process enable you to offer your product for less than your competitors? The aspect of your business that sets you apart is your value proposition; it’s how you stand out from the crowd.

Are there sales definitions you are still unclear about? Anything else you’d like to see defined? Let me know in the comments. 

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by Briana Morgaine
Briana is a copy writer, copy editor, and freelance writer, covering the various facets of the small business and entrepreneurship space. She can be found writing for Bplans, and also on Twitter.