February 2, 2009
In Part 1 of this post, we looked at why sales people want product knowledge and the factors that make this such a complex decision. In this post, we will discuss why making a firm decision about this can affect you as a sales leader.
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.
Posted in Cost of Sales, Selection 
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February 2, 2009
Many owners believe that sales is the easiest group to measure in their entire organization. Top line revenue does accurately reflect the result of your sales team. The dilemma for an owner is that if sales are off from Q1 to Q2 that revenue metric only tells you where you are not WHAT you can do to fix the problem.
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.
Posted in Cost of Sales, Strategy No Comments »
February 2, 2009
Customer acquisition costs take into account all the costs associated with persuading a consumer to buy your product or service, including research, marketing, and advertising costs. It is part of a business metric often referred to as customer valuation. Customer valuation basically tells a marketing and/or sales manager what level of resource to expend in trying to obtain that customer. In very loose terms, the customer valuation can be derived by dividing the customer ROI (often referred to as the total customer value – TCV) by the cost that were expended in acquiring them. This ratio can be very valuable in allocation of resources. The higher the ratio the more profitable your customer is. Therefore, if your company has multiple product lines, priority should be given to those product lines with the highest customer valuations.
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. Read the rest of this entry »
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February 2, 2009
Today’s salespeople may find it harder to sell amidst increasing competition and increased resistance to typical sales methods. At the same time, employers may have a desire to pay salespeople less just to stay competitive. In light of these challenges, it is imperative to make sure your sales compensation plan works – for the salesforce and for the company.
First, know the value of your sales reps. If they took their skills and experience to your competitors, what could they expect to make? Pay too little and you risk costly turnover. Pay too much and the company’s bottom line suffers. Further, morale will take a serious hit if you find you have to adjust sales incentives down at a later date in order to stay competitive.
Second, establish reasonable productivity goals. The best plans adjust goals based on factors such as: tenure of the producing salesperson, product being offered, sales territory and associated competition, etc. Unreasonable goals discourage and demotivate – the opposite of a compensation plan that works. A related concept to keep in mind is making sure that any hurdles/qualifiers for salespeople to qualify for sales bonuses are truly valued by the organization. One company had a team that was largely geared toward customer service, rather than sales. However, the incentive formula required a minimum number of sales as a hurdle to qualify for any incentive pay based on productivity. The manager admitted that there were few opportunities for sales, the sales really weren’t all that important to the organization, and they should be removed from the incentive pay formula. Including them was serving to demoralize the representatives, while providing little benefit to the organization. Make sure that there is a good reason for any qualifiers that you include in your compensation formulas.
Third, give your representatives a bigger piece of the pie once they achieve above a level that is high enough to cover their pay and benefits. If you can motivate your existing salesforce to produce more through higher incentive pay, it will certainly be more cost effective than hiring additional salespeople and paying their benefits. Employees who are motivated to achieve at high levels are a goldmine for your organization, since they lower your fixed costs (benefits, equipment, office space). On a similar note, and for the same reason, don’t put a cap on incentive pay. Why would you want to limit the incentive to produce. If incentive pay is capped at your organization, how much extra performance do you think you will get from your reps above the cap?
Finally, consider non-cash incentives such as recognition and rewards. Although these forms of “compensation” aren’t spendable, don’t underestimate how important they can be to employees. It feels good to be named “top dog.” And if you are named “top dog,” you won’t want to return to the bottom of the heap. Also, consider whether other forms of compensation may be more valuable than the cash it takes to provide the incentive. For example, paid company trips for top performing salespeople may be more valued than the cash required to provide the incentive. Additionally, there is the prestige that goes along with qualifying for such a trip that is similar to an award, just discussed.
Ensure your sales compensation plan adheres to these principles, and you will be well on your way to a sales compensation plan that works!
Posted in Compensation 1 Comment »
January 15, 2009
Put yourself in this scenario: You’ve just been hired as the new sales team leader – vice president of sales with a charge to turn around a stagnant and seemingly unmotivated team smack dab in the middle of the most challenging economic times in the past half century. Yikes!
You’ll need some strategy – and some questions. First, your strategic sales team plan, four strategies to implement right away:
- Ask questions. Meet with your sales team (conference calls work in a pinch) and brainstorm to identify the top three – only three – key activities that lead to the fastest, cleanest, most profitable sale for your company.
Once you’ve defined these key elements, begin to orient your energies and systems to create more time for the three elements. By getting all your sales people involved in this process you build trust, focus and create more accountability because team members are giving you answers based on sales data and experience.
No more excuses for failure if they don’t follow the formula they all agreed is the right one.
It will take less than one week to implement the four strategies, with little cost. The results and learning you will glean will enhance your knowledge, create more energy in the sales team and show your new boss that you were worth paying the big bucks to join their team.
You’ll also want to learn the personalities on your team. Based on research that indicates past success is a key predictor of future success and that, indeed, you’re looking for success, here are some behavior-based questions to ask in one-on-one discussions with your sales people.
The questions are conversational, non-threatening and created to generate life stories that will help you better understand each individual’s drive, life experience, sales training, personal status, behavioral patterns and how the person organizes their life.
Armed with this meta analysis, you can gauge who on your staff will best benefit from additional sales training/coaching – and who may not be worth additional investment at this time.
•1) Why don’t you start? What question do you have for me?
•2) What would really surprise me about you?
•3) For a prospect: What’s your real motivation to change jobs? Now what’s the real reason?
•4) What’s your philosophy on goal setting?
•5) What reading material would I find on your coffee table (or nightstand, kitchen table, car)?
•6) Tell me about a situation that placed you in an ethical dilemma? How did you handle it??
•7) How did you earn money in college?
•8) How far away from home have you traveled? (Have a map on your desk.)
•9) Draw a pie chart showing how you spend an eight-hour day.
•10) Are you a curious person? If so, give me an example.
•11) What’s your favorite success story? How about a failure story?
•12) What should I have asked you that I haven’t?
•13) Want to be a millionaire? Why? What are you doing to prepare for it?
•14) How would your world change if you made $35,000 more next year?
•15) For a prospect: Are you ready to resign from your job in five days? What will they do when you quit? What will they say about you after you have left the company?
•16) Share some stories about the four most influential people you know.
•17) Have you ever created a 30, 60, 90-day strategic plan for your job or a future job? Give me the outline of such a plan now.
Got a question of your own to ask author Russ Riendeau? You can reach Russ at www.russellriendeau.com or 847/381-0977.
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Behavioral scientist. Senior Partner, The East Wing Search Group.
Co-author, The CEO’s Guide To Talent Acquisition: Finding Talent Your Competitors Overlook (Eyecatcher Press 2008)
Nationally known speaker on retention strategies and peak performance.
Watch Russ at www.RussRiendeau.com. Email him at russ@RussRiendeau.com.
Article Source:http://www.articlesbase.com/sales-articles/great-questions-reveal-more-than-just-great-answers-how-to-find-the-sales-talent-you-need-today-812865.html
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