Sales Force Performance Metrics
This presentation represents the difficult effort of re-constituting a firm’s sales effort by, evaluating existing practices, determining the necessary requirements, and developing and implementing a framework of metrics which would achieve the necessary territorial account growth and re-orientation of the sales force.
The company, largely a reseller of computer hardware, intended to begin its shift to selling higher margin services rather than low-margin products, because of the continued downward pressure on margins by what had become, increasingly a commodity business, but lacked a sufficient infrastructure to realistically support the effort.
Consequently, it became clear that, at least a portion of a successful strategy would have to include, both, a geographical expansion of their core business, to fund their transformation, and a careful monitoring of whether they were really building any lasting value in terms of customer “intimacy” before they continued with the policy of discounting products and provided loss-leading services. To do so otherwise would be to unconsciously succumb to an ever downward spiral.
Prior to my work, a condition existed whereas, sales persons would, in an effort to successfully differentiate the company’s offerings, and maintain their gross numbers, would essentially collaborate with their customers to compel the company to improve service levels, regardless of the additional cost being incurred. Sales commissions were largely unaffected by the increased cost of delivering these services, because they had been originally established in a different economic climate, when they were perceived as a normal cost of doing business – rationalized across the whole business – and were vendor-supported – their “true” cost not having not been properly rationalized back to the individual customer.
This, inevitably lead to an unrealistic perception by sales that the intended purpose of offering all services, was essentially, to maintain their ongoing relationship with their customers, regardless of whether the company was maintaining a positive CLV (Customer Lifetime Value) and resulted in a continued under-investment in the required infrastructure to support the transformation, as neither volumes, nor margins were increasing. The situation was compounded by paying sales persons commissions on the sale of services, but without properly rationalizing the cost of delivery back to the customer, or for that matter, the even the deal.
The combination of these factors was quickly defeating the company’s ability to change. The future of the company rested on addressing both of these issues post-haste – not only to protect the company’s decade-old investment in existing customers, but also to ensure that a sufficient investment was being made into those things that would be critical to maintaining these relationships in the future.
With the revised model, both the effectiveness of the sales personnel, and the spending characteristics of the customer in terms of purchasing, are being measured on a habitual basis. The static assignment of sales persons to (market) Segments and (geographic) Sectors was removed, in favor of a performance-based system in which penetration, diversity, and “customer-intimacy” were measured, in addition to merely sales “volume”.
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