January 08, 2009

Sales Revenues Fall as Sales Effectiveness Slides

There are two key variables that explain the peformance of most sales teams: the levels of sales activity and effectiveness.

The first one is the number of sales leads, meetings, cycles, proposals, etc. The second is the conversion rates at each stage of the sales cycle - from sales meetings to sales cycles, as well as overall win rates. Here is a good example of this in the real world.

A long established business services company dominated its market for more than 20 years growing sales in a manner that at times seemed almost effortless. However, in more recent years sales had shown a dramatic decline.

The sales team pointed to increased competition, changing buying patterns and minimal marketing by the company as the causes of the downturn.

However, further analysis identified that low levels of sales activity and effectiveness as the prime factors involved. For example:

· On average sales reps met only one new customer, or potential customer, every 2.5 months (i.e. 4.8 per annum).

· Conversion rates stood at 25% and average order values of £15,000, posing a real challenge in terms of growing sales

· The sales manager complained that sales people were selling products, as opposed to solutions and pointed to the ability to communicate value as the key challenge.

· There were no targets for growing revenue among existing customers, a siloed approach to selling across divisions and no key account plans. These factors explained declining levels of repeat business among existing customers.

By increasing the level of new customer sales activity by 15% over 6 months, growing average order values by 10% and repeat business by 7%, the company reached its year-end target midway during quarter 3.

Where are the opportunties in your business? What is the potential to increase the level of sales activity, or sales effectiveness?

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