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Improve the Performance — and Profitability — of Your Sales Organization: Best Practices from Successful Sales Teams

by Dietmar Bohn | SAPinsider

October 1, 2007

Building a performance-focused sales force – one that best equips sales reps with the information and tools to identify and serve high-value customers – is key to improving a sales organization’s value to the line of business. Learn the five steps to becoming a performance-driven sales-force – including refining your KPIs and better connecting the right customers with the right sales reps. And find out how SAP CRM can help both sales reps and their managers target leads, focus on profitable accounts, and identify their priorities.
 

It used to be that a sales organization's success hinged solely on whether or not it hit its revenue goals. But heightened customer expectations, increased global competition, and tighter financial markets have changed the game for sales professionals. Since products are becoming less and less of a differentiator, sales organizations are challenged to increase their value to the business through improved productivity, closer customer relationships, and higher profit margins.

To take sales to the next level, sales organizations must focus on answering the following questions:

  • Do we have the best distribution and matching of sales professionals and accounts?

  • Are sales reps working on the right accounts and opportunities using the right strategies?

  • Do we know enough about the market to determine who our optimal customers and prospects are for additional revenue?

  • Do we have the correct KPIs and incentives in place to drive the desired behavior from both our reps and our managers?

  • Are sales reps equipped with the tools and information they need to be successful?

For sales managers, answering "yes" to all of these questions is contingent on a thorough understanding of your territory and your sales reps' day-to-day activities and performance: Which customers are they talking to? Which deals are they spending their time on? Are they investing their time in a way that is truly effective and efficient?

And for sales reps, if your organization embraces this performance-focused approach, it will translate into an improved ability for you to target highly qualified leads, focus on your most profitable accounts, and understand your priorities through bolstered communication with your sales manager (see sidebar).

What Would a Performance-Driven Sales Organization Look Like?
Benefits for Sales Reps and Managers

Consider a sales rep that has been pursuing a multimillion-dollar deal for the past six months. Closing the deal would mean big revenue for the company — and a big commission check for the rep. But any progress on the deal has been very slow, and the rep's chances of closing it in the next month are low given all the loose ends still outstanding.

Now imagine that, as the manager of that sales rep, you can look at the pipeline of all the rep's other accounts and see that three other profitable deals — which the rep has set aside to focus on this one large sale — may be easier to close in a shorter time period. You can see that if the rep doesn't attend to these deals, he'll lose them altogether. This performance-focused view can help the sales manager guide the sales rep to temporarily reallocate his time away from the bigger deal to get the best overall results. This is great news for the sales rep since he, in turn, can be much more productive — and profitable — for himself and the organization. It's a win-win situation, and a credit to a sales organization that's dedicated to optimizing its performance.

5 Steps Toward Becoming a More Productive Sales Organization

At SAP, we've learned that the most successful sales organizations are the ones that maintain a constant focus on acquiring, growing, and retaining profitable customer relationships. They do this by introducing a formal sales process (see sidebar) and providing all relevant customer information to their sales professionals in a meaningful, usable way — which translates into enhanced productivity.

What Do We Mean by "Sales Process"?

When we refer to a sales process, we're talking about more than just a systematic method for selling products or services. A good sales process tends to be cyclical, flowing between the early stages of planning and prospecting to the constant actions of measurement and follow-up.

Successful sales processes hinge on a shared framework for evaluating opportunities, allowing salespeople to quickly score each sales opportunity on a clear set of criteria — based on factors like budget and the presence of firm timelines. Without this common understanding, it's difficult to monitor the performance of — or drive more revenue from — a sales process.

While every sales organization has processes, not all are systematic, consistent, or designed to work for the team as a whole. We encourage sales teams to start building a structured sales process using the following five steps as guidelines. Or, if you already have a well-defined sales process in place, consider how you can improve it based on these five best practices of productive sales organizations.

Select KPIs for Productivity — Not Just Revenue

Gartner analysts have determined that, through 2010, an organization will miss 10% of total annual revenue (on average) in lost opportunities that could have been captured with better visibility into sales activities.1

Critical to improving sales visibility are key performance indicators (KPIs), the foundation of a successful sales process. A sales organization must first determine which KPIs are best aligned with its overarching productivity goals (see sidebar); then, with the correct performance measurement tools in place, the sales organization can measure, control, and correct the areas of the sales process that most need improvement.

The Most-Used KPIs in Successful Sales Organizations — and Some That Might Surprise You

Have you considered whether these KPIs would be a good fit for your sales organization?

  • Percentage of sales reps achieving quota

  • Increase in success rates at each major stage of the sales cycle

  • Pipeline required to make quota

  • Win rates of forecasted deals

  • Quotes per order

  • Coverage rate of most important customers (visits and calls)

  • Turnover rate in the sales force

Let's look at quotes per order, for example. Consider a scenario in which 20% of your sales force generates 80% of your total revenue. Analyzing and discovering those reps' best practices for sales quotes and sharing them with the rest of the team can improve overall performance.

When you analyze the characteristics of those deals closed by your top sales reps, say you find that these reps typically generate three sales quotes per order. The top reps understand the specific needs of their clients, so they provide a limited range of options to choose from (too few options increases the odds of the quotes being thrown out, while too many causes confusion and lengthens the buying-decision cycle). If other reps take the same approach, following the actions of the successful reps, it's an effective way to improve overall performance — without blaming the underperformers.

Consider how KPIs could work in new ways toward improving the performance of your sales team. First, a sales rep could view a simple report that updates him on his current sales status. He could learn from this report that his pipeline of prospects is insufficient to reach future sales targets.

Moreover, KPIs could help this rep understand the "why," determining whether the pipeline shortfall is because there simply aren't enough prospects or because the quality of existing prospects is questionable. This information is also critical for collaborating with the marketing department to refine target segments to attract prospects with the highest propensity to buy. For example, if sales reps know they need a pipeline worth three times their revenue target, then marketing must focus on generating enough demand at the right times throughout the year.

Finally, KPIs help translate information into predictions through "what-if" scenarios and simulation. Our salesperson would know precisely how many additional prospects he should contact per day to reach his sales goal, or what the result would likely be if he spent 50% more time with each new prospect to build greater rapport.

Choosing the right KPIs represents a huge opportunity for organizations to:

  • Increase productivity from existing sales resources

  • Gain quicker productivity increases from newly added sales resources

  • Increase penetration into existing accounts

  • Expand customer bases

The most successful sales organizations are the ones that maintain a constant focus on acquiring, growing, and retaining profitable customer relationships.

Take a More Nuanced Approach to Identifying High-Value Accounts

Sales deals today typically take longer to close because opportunities tend to be more complex. Accordingly, sales professionals need to do a better job of prioritizing their actions by better understanding their account base.

Value ranking classifies sales accounts based on how valuable and profitable they are to the business. Sales organizations commonly rank customers on a scale such as "A-B-C" — a simple way to give salespeople a quick indication of an account's value. But suppose an account that was a steady customer in the past is now headed for financial trouble. Are they still an A, or should they be downgraded? Consider another customer that buys goods from a competitor, but has recently become disenchanted with the competitor's service. Is this still a C account, or should it be upgraded? Even more important, which of these customers should receive priority?

Only by understanding the full sales, production, and marketing impact of a customer can we accurately score a customer as "high-value" (see sidebar). This analysis requires full enterprise-level integration across all lines of business to ensure not only the initial customer acquisition, but a relationship that remains high-value over time.

What Do We Mean by "High-Value" Customers?

It is deceptively easy to think that revenue or even margin alone can equate to "high-value." To truly determine who is a good customer for your company, you must evaluate several criteria:

  • Margins — How does the cost of ongoing support compare to the customer's current potential revenue?

  • Culture — Does this customer have unrealistic expectations?

  • Direct impact — Will having this customer hinder your ability to service other customers?

  • Intangibles — Is it necessary to have a marquee customer name in this space, even at a margin loss?

To account for both quantitative and qualitative factors, as well as historical and predicted future behavior, a more successful value-ranking strategy would consider the following questions:

  • What is the value of this customer based on how much they bought from me over a specified time period?

  • What is the potential value of this customer if I capture all of the available sales for the product or service type I am selling?

  • What is the likelihood of this customer purchasing the products or services that I am selling at all — either from me or my competitors?

  • What is this customer's potential to buy the products or services that I am selling from me instead of my competitor?

When the answers to these questions are structured in a value-ranking tool, sales professionals can more effectively prioritize their tasks. This approach also enables reps to segment their accounts into special groups, such as "large accounts with strong future potential that I do very little business with today" — a great group to know about! Using this grouping technique, sales managers can better plan strategy, forecast results, assign appropriate resources, and make the most of their client base.

Connect the Right Salespeople with the Right Customers

How does your company assign accounts to reps?

  • Geographically, hoping to turn the savings in travel time and customer visits into extra sales?

  • Through industry verticals, hoping that a salesperson will gain a complex understanding of one or a few particular industries and will therefore better understand customer needs, leading to increased sales success?

  • By "hunters and gatherers," aligning older, more experienced salespeople with valuable current customers and placing energetic, younger salespeople in the higher risk and reward category of creating new customers?

Some companies use a combination of these options or a different approach altogether; but how do you ensure your approach optimally aligns salespeople and customers? This rep/customer matching is a very complex process that requires management insight, salesperson involvement, and constant review and monitoring.

Consider a high-tech firm that realized certain salespeople were highly successful with some accounts, but not so successful with others. This company worked to create an open environment in which sales reps could admit that a particular account was not suitable for them, with the expectation that they would be assigned to a different customer. Sales managers could then review account alignment weekly — and despite the costs associated with shifting account coverage, they wouldn't fear reallocating resources on short notice in order to meet customer demand.

Give Your Sales Organization the Right Tools and Information

Although sales talent remains important, salespeople must have the necessary tools and information to quickly determine which activities and accounts deserve their time.

Sales managers cannot expect the sales force to execute at the highest level without first ensuring that reps have timely access to all relevant information that could help improve their odds of success — be that external contact data, contract information (expirations, terms, etc.), customer history, or suggested solutions for the salesperson to position.

To provide such information, a good sales tool should be linked to marketing, service, and back-office systems and should frequently feed the sales rep with leads and provide visibility into any service issues, open orders, or pending payments. Imagine how system-triggered alerts about critical situations, such as stalled deals, impending contract renewals, back orders, or credit issues, could support a sales rep in proactively engaging with a customer. What's more, knowing this pivotal information could be at their fingertips, sales reps will be more inclined to adopt new tools.

Top-tier sales organizations also empower their salespeople's success with the ability to prioritize productive activities. Sales reps, for example, must be able to determine the best prospects to call. Giving them information on when a prospect was last contacted, as well as that prospect's value potential, can help sales professionals quickly decide which prospect deserves priority. This insight can help sales reps find new opportunities with highly qualified prospects instead of wasting time on activities that have much lower chances of success — with "prospects" that currently have no budget to spend, for example. Additionally, it increases management's confidence that revenue targets will be achieved, since they know the right deals with the best chance of success are progressing accordingly.

Sales managers cannot expect the sales force to execute at the highest level without first ensuring that reps have timely access to all relevant information that could help improve their odds of success.

Improve Collaboration Between Managers and Sales Reps

Successful salespeople — those that are self-sufficient, are self-motivated, and can perform independently — represent approximately 20% of a typical sales force. The other 80%, however, may require some coaching, advice, motivation, and supervision to perform at their best.

Although many salespeople do not like to be micro-managed, the ability of a sales manager to aid in their success opens up a mutually beneficial relationship. Companies need to have the right processes in place to make this relationship as beneficial as possible.

A good, communicative sales process means that a sales manager is armed with helpful ways, many of which are technology based, to stay informed about account activities and opportunities (see Figure 1). This will lead to a sales manager being able to offer sales reps deeper insight into strategy, tactics, and priorities. With increased value built into the relationship, collaboration will emerge.

Figure 1
With SAP CRM's pipeline performance management capabilities, sales managers and reps can quickly compare current sales performance with targets and act accordingly

Ensuring the health of the relationship between sales managers and salespeople requires more than just people skills; it needs a solid understanding of how to deliver value, measured by the increased success of salespeople.

Summary

Increasing competition in the global sales environment means that sales success is no longer based on revenue goals alone. Focus has shifted to improving performance and delivering consistent, productive results; a well-defined sales process is critical to achieving these broader objectives.

To get there, sales performance management is an initiative focused on helping both managers and sales reps understand who their most profitable customers are — and then concentrating their efforts on those customers. It can also mean shifting focus away from your less valuable customers — pushing them to less-expensive support channels, for example.

But even the best sales performance management strategy is meaningless without an IT infrastructure to support it. We encourage all sales organizations, whether creating or fine-tuning your sales processes, to make sure that your underlying systems are set up to support your sales performance management objectives.



1 Michael Dunne, "Exceeding Targets with Sales Performance Management," Gartner Customer Relationship Management Summit (2006).


Additional Resources

The CRM 2008 conference in Las Vegas, March 3-5, 2008, for best practices and instruction to improve your sales performance management processes (www.sapcrm2008.com)

"Improve Your Sales Processes with mySAP CRM Opportunity Management" by Anupam Gupta (CRM Expert, Volume 1, Number 2, www.crmexpertonline.com)

"Get a Better View of Your Sales Team with Territory Management" by Amit Khanna (CRM Expert, Volume 3, Number 5, www.crmexpertonline.com)

Dietmar Bohn (dietmar.bohn@sap.com) is Vice President of CRM Solution Management at SAP AG. Prior to joining SAP in 2004, Dietmar was a Director at Heidelberg, where he led the international implementation of ERP and CRM templates for the sales and service units. He held a key position in the CRM Strategy Project, for which Heidelberg won the CRM Award in 2002. He has also held management positions in IT and R&D.

Jason Cole (jason.cole@sap.com) is Director of CRM Center of Excellence at SAP America, Inc., responsible for CRM business development. Jason has more than 15 years of experience working with leading technology companies, including Siebel, Oracle, and now SAP. Jason most recently served as the Senior Director of CRM for North America at Oracle, where he developed several innovative improvements, including new roles and tools to better arm the sales teams for tactical execution while focusing on strategic value.

Robert Rothschild (robert.rothschild@sap.com) is Director of CRM Solution Marketing at SAP Labs, LLC. He works closely with SAP Solution Management to ensure that product innovations address market and customer requirements. Robert joined SAP in 2005 after spending six years at PeopleSoft and Oracle in various product strategy and product management roles. He previously spent four years as Senior Manager of CRM Business Processes for Compaq and four years as a business process consultant with Digitas.

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