ROI in Sales – Food for Thought “Only” or Inspiration for Action?

– Do have good data that highlights where your greatest sales Return On Investment (ROI) is, or might be?

– Have you freed up your sales reps’ time for selling, meaning … when was the last time you took hard look at your sales support systems?

Managing large sales forces has never been easy for multinational companies. Increasing competition, margin pressure, the rise of digital and proliferating channels have added a significant layer of complexity. Already today nearly a third of all Business-To-Business (B2B) purchases are done digitally while customers use an average of six channels for prospecting, forcing sales leaders to rethink how they source leads, manage pipelines, and sell more effectively.

Rather than being overwhelmed, the best sales leaders have figured out how to overcome this complexity to drive above-market growth. Top 25% companies achieve a better than 2x higher sales ROI compared to the bottom 25 percent.

– Where do you fit in?

– What do they do right? 

Based on our experience and analysis, they maintain a clear focus on four things:

1. They understand what really matters 

The key to smart investing is having good data that highlights where the greatest sales ROI is. That starts by knowing what to measure. Many companies, however, measure sales efficiency in terms of sales cost versus revenue. That metric is misleading because it does not sufficiently reflect the margin differences between sales channels. A more meaningful sales ROI is to measure sales cost against gross margin or profit (EBIT).

This sales ROI metric helps leaders more effectively align the number of accounts per sales employee with actual and potential revenues.  By analysing the sales ROI potential of various segments, for example, sales leaders uncover different channel approaches for each. In one company, analysis revealed that sales ROI in indirect channels was 50 percent greater than in direct channels.

The best leaders also achieve such high sales ROI by reducing overall sales costs without giving away too much margin. Approaches include a strong “quality instead of quantity” focus on their highest-performing partners. They also tend to de-emphasise direct discounts, such as rebates and product offerings.

2. They don’t waste money 

While the old adage “It takes money to make money” is popular, it’s not true when it comes to the best sales leaders. The best of them keep their costs lower than their peers do. Effectively controlling costs requires a clear and objective view of profitability and cost-to-sell by channel, product, and customer.

With this foundation, sales leaders can make better decisions, such as scaling back sales efforts for lower-value orders. They also invest in processes and training that cut costs, such as installing technologies that reduce the number of order exceptions and cross-training people to have multiple skills. This level of efficiency not only reduces costs but also allows sales leaders to profitably pursue lower-margin business.

3. They free up their salespeople for selling

Top-performing sales organisations have the same percentage of sales staff in sales management roles—around 8 percent—as lower-performing companies. However, they have about 30 percent more sales staff in support roles. While this may seem counterintuitive, this approach frees up sales reps from more administrative tasks, such as order management and developing sales collateral, and allows them  to devote more of their time to customers. The result is that frontline sales reps are three times more productive than their peers.

Sales executives also need to take a hard look at their sales support systems. Some activities can be automated or streamlined, some can be delegated and pooled into back-office sales factories, and others can be cut entirely. Implementing such operational and structural changes requires a clear understanding of just what constitutes low- versus high-value-add activities and what resources are currently devoted to each.

4. They are adept at multichannel selling 

Companies that effectively sell across multiple channels (inside sales, outsourced agents, value-added resellers, third-party retail stores, distributors, or wholesalers) achieve more than 40% higher sales ROI than companies wedded to a single channel model (only key account management and/or field sales). Managing multiple channels calls for effectively addressing selling opportunities based on value versus on volume, and recognising that not every channel is optimal for every product. For instance, inside sales reps can handle key accounts with low-complexity products, whereas more costly in-person support should be assigned exclusively to key accounts with high-complexity products.

Companies looking for above-market growth shouldn’t be afraid to “tinker with” sales.

– How does this work in practice in your organisation? 

– Good questions are the answer … aren’t they just?

– Leverage our expertise and let us help answer those vital questions … pro-actively!

– Pro-active sales people develop action – Re-active sales people have great excuses for lack of performance. 

– Where would you rather be?

Call us if you want to discuss!

This post is the summary of a series of discussions I enjoyed with my friend and mentor Hans Ouwerkerk and I truly thank him – again – for the inspiration