Measuring sales force performance
Measuring your sales performance is an important step towards improving it — and your bottom line. There are plenty of points to consider and many ways to measure performance.
The first step is to plan for how you will measure your variables. Second, you will want to collect data, and third, you will need to analyze the information. The last step is to define and implement solutions for correcting and improving your sales performance.
One reliable way to measure performance is to analyze the different variables that most impact your sales in order of priority. You can also tally monthly numbers, but comparing quarterly and yearly numbers may paint a more accurate picture of your true sales performance.
Volume of sales in dollars: One of the easiest variables to measure is the total dollar amount brought in by employees or sales representatives. Be aware though, for a true sense of sales volume, you'll want to deduct refund-related costs and other expenses such as entertainment from the total sales.
- Volume of sales in dollars = total sales - (refunds + returns + expenses) from last period or
- $90 000 = $100,000 - ($2,000 + $3,000 + $5,000)
Total profit generated: Profit generated by a sales representative is simple to determine - roughly, it is the amount paid by customers less the representative's expenses less the product or service cost.
- Total profit generated = sales - (product cost + overhead + representative's expenses) or
- $24,000 or 24% = $100,000 - ($70,000 + $1,000 + $5,000)
Number of new accounts opened: It may be easy to track how many accounts a sales representative opens, but the number means little on its own. Representatives should also tend to existing accounts.
Number of 'calls' made to existing accounts: In today's world, a sales representative may keep in touch with customers in many ways. One customer may prefer in person meetings or phone calls. Another customer may prefer to be contacted by email or by text message. It is usually in the representative's best interest to understand a customer's preferred method of communication. For this variable, you can count the number of communications or the number of people contacted. These activities can be tracked and tallied more easily if your sales force uses customer relationship management (CRM) software.
Dollars spent entertaining customers: Depending on the nature of your business, you may cover a representative's travel and entertainment expenses. If so, it may be wise to deduct these expenses when considering the total profit attributed to the representative.
Extent to which the sales representative promotes your business: It can be difficult to measure the extent to which a representative sells your business. Paying attention to attitude, office talk, online discussions, and listening to client feedback can sometimes provide clues.
Completeness and accuracy of sales orders: Returned merchandise, inaccurate orders and billing mistakes can all be costly; be mindful that saving time doesn't always end up saving money. You can estimate a dollar amount per hour spent by subtracting the value of correcting errors, extra shipping charges and time necessary to resolve customer complaints.
Promptness in submitting reports: You can track whether or not representatives submit their reports within a set timeframe.
Knowledge of the business: When you compare performance between a number of sales representatives (or progress of an individual), you may want to measure their knowledge of the business on a scale from 1 to 10. You could choose to rate representative's knowledge on a number of specific aspects of your business.
Team player: If a representative helps another colleague in a way that enables smooth operations, such as assisting others in keeping or gaining clients, it may be worthwhile to note this when measuring their overall performance.
Improving a sales representative's performance
There are three main steps you can take to help improve a sales representative's performance.
Plan targets in advance with your sales representatives and ensure agreement upon goals to attain or exceed for the coming year. These goals can include profit contribution in dollars for:
- Each major profit line by product or service
- Each major market (by industry or geographical area)
- Each of the top 10 key target accounts (in obtaining new business)
Planning ahead also lets you set expense budget limits in dollars for:
- Customer entertainment and client acquisition costs
- Other miscellaneous business expenses
It is one thing to set targets and goals, but in order to get value you will want to review your sales representative's records for:
- Year-to-date progress toward a 12-month profit contribution goals
- Year-to-date budget and expense compliance
Course correcting, once you've identified that targets aren't going to be met, is the key to getting back on track.
Meet with your sales representative if his or her record is 10% or more off target and review the number of calls made on each significant account. You may also want to discuss what your sales representative feels are his or her problems and accomplishments. At this point, you can revise goals and put a new plan in place to achieve the original targets.
In addition, the following activities can also help improve performance:
- Provide more day-to-day help, coaching and direction
- Conduct regular status meetings to track progress
- Increase sales promotion or client acquisitions activities
- Establish tighter control over price variances allowed due to sales discounts
- Increase or reduce selling prices and/or financial incentives
- Transfer accounts to other sales representatives if there is insufficient effort or progress
- Transfer, replace, or discharge sales representatives
For more information, see the following helpful resources:
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