This article looks at how a sales operation can identify its strengths and weaknesses and drive performance improvement.
The current sales landscape is as competitive as it has ever been, increasing the pressure on sales people to consistently improve on their performance.
This pressure is driven by a variety of factors currently impacting on the industry including:
- Sales is an environment where only the fittest will survive, and in order to keep performing well staff must be at the top of their game;
- Narrowing of product differentiation means a shift in the expectations of customers;
- Today, customers are more knowledgeable and often have done their background research prior to entering a store. Because of this, they have decided on a product and are merely seeking your ability to convince them why they should purchase with you, rather than the competition.
As a sales manager or business owner, how do you assess your sales operation's effectiveness? Generally speaking, an effective sales operation achieves the right levels of performance in two areas:
- Quantity - are you doing enough of the right things?
- Quality - are you executing at a high standard in front of customers?
Similarly, sales management must evaluate performance on three levels:
- What does the data tell us about our performance?
- What is the underlying cause of any gaps?
- How do we close the gaps?
In this article, we will explore the first two of these questions (the 'find it' element) by using an example of data from our Client work. The next two articles will focusing on closing performance gaps by 'fixing' the problems.
The table below shows the averaged six month performance of a salesperson with a monthly revenue target of $80,000. As can be seen, this salesperson is a long way from meeting their revenue target and an analysis of their key ratios reveals some disturbing facts.
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Key Result Areas (KRAs)
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Actual
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Ratios
|
|
Approach calls
|
341
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7:1
|
|
First meetings
|
48
|
3.5:1
|
|
Proposal meetings
|
14
|
4.1
|
|
Orders
|
3.5
|
|
|
Revenue
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$31,500
|
|
Average order value
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$9,000
|
|
Performance Analysis
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|
Required order rate
|
8.9
|
|
Required proposal meetings
|
35.5
|
|
Required first meetings
|
122
|
|
Required approaches
|
866
|
With an average order value of $9,000 they will need approximately 2.5 times their existing order rate to reach their target. Their sales cycle management also needs considerable improvement.
It can't be said that they are being lazy, as they are averaging 17 approach calls and over three face-to-face prospect meetings a day. The problem is their current conversion rate means that in order to meet target, they'll have to average 43 approach calls and 7.8 meetings a day.
Having analysed the situation what should the manager do?
Clearly, the company cannot provide nearly 900 potential opportunities a month. You can, however, influence the key four ratios by addressing four questions:
-
Do we know who we want to approach and why?
- Can we articulate a compelling reason to meet with a salesperson?
- Is a phone call from the salesperson the best approach?
- Are our salespeople able to provide compelling reasons to buy our products?
The third question is a particularly interesting one and often causes much debate. Recent studies into sales effectiveness tell us that the more tasks we give to salespeople, the less effective at any of them they become.
We recently did some analysis for a client and discovered that if we took out raw prospecting, appointment gaining and a number of low-value activities grouped under the heading of 'account management', the salespeople were selling for 8% of their time.
Sales operations must make sure they develop effectiveness by improving key ratios.
Read the article "Finding And Fixing Sales Performance Problems - Defining The Solution"
Read the article "Finding And Fixing Sales Performance Problems - The Performance Improvement Process"