Sales effectiveness

Sales effectiveness refers to the ability of a company’s sales professionals to “win” at each stage of the customer’s buying process, and ultimately earn the business on the right terms and in the right timeframe.

Improving sales effectiveness is not just a sales function issue; it’s a company issue, as it requires deep collaboration between sales and marketing to understand what’s working and not working, and continuous improvement of the knowledge, messages, skills, and strategies that sales people apply as they work sales opportunities.

Sales effectiveness has historically been used to describe a category of technologies and consulting services aimed at helping companies improve their sales results.

Many companies are creating sales effectiveness functions and have even given people titles such as VP of Sales Effectiveness.

"By analyzing sales force performance, managers can make changes to optimize sales going forward. Toward that end, there are many ways to gauge the performance of individual salespeople and of the sales force as a whole, in addition to total annual sales." In a survey of nearly 200 senior marketing managers, 54 percent responded that they found the "sales force effectiveness" metric very useful.

Purpose

The purpose of sales force effectiveness is to increase company revenues through increased customer acquisition, product/service sales, and up-selling/cross-selling additional products and services.

The purpose of sales force effectiveness metrics is "to measure the performance of a sales force and of individual salespeople." "When analyzing the performance of a salesperson, a number of metrics can be compared. These can reveal more about the salesperson than can be gauged by his or her total sales. When analyzing the performance of a sales team, an increase in revenue-per-rep can indicate improvement in sales force effectiveness."

Construction

An authoritative source lists the following ratios as useful in assessing the relative effectiveness of sales personnel.

1. Sales ($) / Contacts with Clients (Calls) (#)
2. Sales ($) / Potential Accounts (#)
3. Sales ($) / Active Accounts (#)
4. Sales ($) / Buying Power ($)

"These formulas can be useful for comparing salespeople from different territories and for examining trends over time. They can reveal distinctions that can be obscured by total sales results, particularly in districts where territories vary in size, in number of potential accounts, or in buying power. These ratios provide insight into the factors behind sales performance. If an individual’s sales per call ratio is low, for example, that may indicate that the salesperson in question needs training in moving customers toward larger purchases. Or it may indicate a lack of closing skills. If the sales per potential account or sales per buying power metric is low, the salesperson may not be doing enough to seek out new accounts. These metrics reveal much about prospecting and lead generation because they’re based on each salesperson’s entire territory, including potential as well as current customers. The sales per active account metric provides a useful indicator of a salesperson’s effectiveness in maximizing the value of existing customers. Although it is important to make the most of every call, a salesperson will not reach his or her goal in just one call. A certain amount of effort is required to complete sales."

Methodologies

Benchmarking

Benchmarking is a methodology used to evaluate the sales effectiveness of an organization. A comprehensive survey of over 11,000 frontline sales people and 7,000 sales manager was conducted by The Blackdot which identified that a well defined organizational sales process is the key driver for sales performance.

The benchmark study also identified 5 distinctive groups of people existing in every organization:

• True believers - Has great adherence towards the sales process and believes its enabling powers
• Compliants - Follows the sales process but do not believe it as enabling
• Mavericks - Recognizes that a well defined sales process exists, but choose to follow their own processes
• Self Reliants - Does not know that a defined sales process exists and needs to work it out themselves
• Clueless - The remaining group who confesses that they do not know of any sales process and do not believe it as enabling.

Note

No sales force effectiveness methodologies have been independently audited by the Marketing Accountability Standards Board (MASB) according to MMAP (Marketing Metric Audit Protocol).

References

As of April 10, 2012, this article is derived in whole or in part from Marketing Metrics: The Definitive Guide to Measuring Marketing Performance by Farris, Bendle, Pfeifer and Reibstein. The copyright holder has licensed the content in a manner that permits reuse under CC BY-SA 3.0 and GFDL. All relevant terms must be followed.

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