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Definition

Sales force 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 time frame. 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.[1]

Purpose

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.

Construction

The Complete Guide to Accelerating Sales Force Performance lists the following ratios as useful in assessing the relative effectiveness of sales personnel.[2]
  • Sales ($) ÷ Contacts with Clients (Calls) (#)
  • Sales ($) ÷ Potential Accounts (#)
  • Sales ($) ÷ Active Accounts (#)
  • Sales ($) ÷ 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.

References

  1. ^ Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeifer; and David J. Reibstein (2010). Marketing Metrics: The Definitive Guide to Measuring Marketing Performance (Second Edition). Upper Saddle River, New Jersey: Pearson Education, Inc. <http://www.amazon.com/Marketing-Metrics-Definitive-Measuring-Performance/dp/0137058292>
  2. ^ Zoltners, Andris.; Prabhakant Sinha; and Greggor Zoltners (2001). The Complete Guide to Accelerating Sales Force Performance. New York: AMACON.

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