Sales productivity measurements are subject to considerable debate. Unfortunately, there is no perfect formula to determine sales productivity. Nonetheless, these measurements are critical because they are often used to establish bonus and compensation schemes, as well as to determine who is laid off in a downturn. Additionally, sales productivity has a huge impact on the value of a company to its investors.
Below are a few key metrics that sales managers can use to evaluate their sales force.
Conversion Rates – How many leads are your sales reps bringing in? How many of those prospects are they converting into loyal customers? The more prospects the sales team converts, and the quicker its done, the better your productivity.
Cost of the Sales Force – For most organizations, the sales reps themselves are the most significant cost incurred. Perhaps you shelled out a lot of money to secure the top sales rep in your industry and true to his reputation, he’s a quick closer. However, his level of productivity can be deceiving. It’s important to factor in how much money he is costing the company vs. how much money he’s bringing in. If you’re not turning a profit, it’s not worth it.
Customer Acquisition Costs – Another key factor in determining sales productivity is the cost incurred to acquire a new customer. What you may find is that acquiring certain kinds of customers isn’t profitable for your business and focusing on a different market will yield a higher return on investment.
Market Conditions – It’s important to take existing market conditions into account when determining sales productivity. Companies in a fast-growing market with tons of competition require a different strategy than a company who is a leader in an established market. The company in the highly competitive market may find that they need the sales team to bring in more profit at a lower cost in order to sustain the business.
By keeping a close eye on these four key metrics, sales managers will always have an idea of the productivity of their team. A good CRM tool can help to determine some metrics such as how many leads of each their sales reps and their sales team as a whole are converting into customers.
Careful tracking and collaboration with other departments such as Finance may be necessary to determine how much revenue the sales team is bringing in vs how much the sales team is costing the company as well as how much it costs to acquire new customers in a certain segment. While staying abreast of the latest goings on within your industry will help you to predict how the conditions of the market will affect the bottom line.