The first place to look is the recruiting and selection process.   If there are 1,000 people looking for a sales position in your market, the number of people that have the background, qualifications, relationships and skills that you want will likely be a substantially small number.  Having the product knowledge you want, or having sold into the same market, reduces the number even further.  And then you still have to cross the hurdle of getting them to accept your company’s offer!

What I am getting at here is that a requirement around product or industry knowledge can throw out many candidates that could be perfectly valuable to you and your organization.   I am not suggesting that product knowledge isn’t important.  Only that you should really understand the impact it has on recruiting your team.

Next we can look at “on-boarding” someone new.   In real time, for most sales people with experience, product knowledge can be the bulk of their on-boarding time.  To consider a sales person productive, they need to be able to engage a prospect throughout the whole process and close sales by themselves.  A sale that requires a lot of product knowledge can slow this down significantly.   In most organizations, I find there is a way to have that person “selling” within a few days while the acumen around product knowledge is still pretty low.

You also have a decision to make around the part of product knowledge that is related to knowing the market and understanding the customer base.  Many companies choose to train this by using their internal market knowledge.  This knowledge is laden with our company’s perspective, our own Kool-aid, if you will.  If the sales people we are selecting are confident enough to do it, I find they can be quickly educated by the market and the current customer base.

There is a great deal of selling cost tied up in on-boarding people until they are capable of being productive on their own.  Just be clear that every product knowledge hurdle increases this cost.  If you are strong and efficient with selection and your retention of the sales people is well above average, this may not be a problem. For many of you, understanding this can be important.

Finally, as I alluded to in Part 1, some sales people use their product knowledge like a crutch.   It can inhibit their success both in the early stages of on-boarding and in their later productivity with you because of how it changes their sales conversations.

As a recap, am I suggesting that product knowledge is bad?  Far from it.  I am suggesting that as a sales leader you should make some definitive decisions about how much is necessary in the recruiting process, how much they really need to know before they are “on the phone” and finally, how you are going to efficiently and effectively get them the necessary product knowledge.

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This post will give you some additional thoughts about things you can measure in your sales organization that can shed some light on where the sales train is going off the track.

Numbers

1. # of phone outbound calls
2. # of contacts to appointments or full presentations
3. # of referrals generated
4. # of new prospects added to database
5. # of existing customer who placed follow-up orders in a fixed time period
6. # of sales of a particular product

Time

1. Time from lead generation to qualification
2. Time from qualifying conversation to proposal
3. Time from proposal to order
4. Time from qualification to order

Dollars

1. Avg transaction value
2. Avg spend per customer per year
3. Avg gross/net margin
4. Avg size of first order compared to fourth order

I am not at all suggesting this list is complete, just wanted to give you some things think about.  Also, I am not suggesting that every manager should be looking at all of these metrics.  I think that most organziations with a good list of 5 metrics accurately measured and reported (broken down by team and individual)  is solid for most organizations.

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For the purposes of this post, I am focusing on the element involved in determining the Customer Acquisition Cost (CAC).

There are four large buckets to examine:

1 Lead generation/advertising – Costs here can be quite hefty. They include all marketing efforts used to build your brand that compels your customer to finally fill out a web form or respond to some other type of direct response medium. Some of these items show up in a different part of the budget, but should not be ignored.
2 Follow up / qualifying – There is often a good deal of sales time spent here. These costs may be captured in the salary and commissions bucket. This is sometimes managed by third party resources. These costs should be identified and included here.
3 Proposal preparation / demonstration – These costs are all over the map in varying industries. They also can range a great deal depending on the complexity of the product. Take a hard look to include every cost that may be included here.
4 Salary and commissions – These costs should be straight forward. Be sure to include any spiffs or referral fees as well.

Good analysis of your CAC will assist you greatly in fishing in the right ponds. An accurate evaluation of the customer valuation will make clear that every potential customer is not worth pursuing. Conversely, some of your customers may be very profitable and worth additional allocation of time, resources, and manpower.

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