Securing more sales may seem like the obvious way to increase sales revenue. However, as the old adage insists, more is not always better. Improving sales effectiveness is a frequently overlooked component of creating better sales performance.
While many companies push for more ambitious quotas year after year, Salesforce reports that 57% of sales reps failed to meet the defined metrics consistently. The secret sauce to creating a more productive sales pipeline for your sales team may not lie in pushing for more prospects but increasing sales effectiveness.
What is sales effectiveness?
Sales effectiveness and sales efficiency sound similar, but these two terms encompass different aspects of sales performance. Sales effectiveness is your sales reps’ ability to convert prospects into customers or clients at various stages in the sales funnel. Sales effectiveness metrics can involve several actions your sales team takes during each step of the sales funnel to secure a conversion.
Sales efficiency refers to the speed of those conversions and how quickly they lead to a return on investment. Sales efficiency is often expressed as a factor of the revenue your sales team generates relative to the cost of converting those leads. This is referred to as the sales efficiency ratio and is calculated by taking current-quarter new revenue annualized and divided by prior-quarter sales and marketing expenses. In many cases, decreased sales efficiency metrics signal an issue with your sales process or an opportunity for better sales effectiveness.
Sales effectiveness metrics you should measure
Now that we’ve identified what sales effectiveness means and how to calculate sales efficiency, it’s worthwhile to discuss which sales effectiveness metrics you should measure. Keeping tabs on these metrics will help your sales team monitor progress towards better sales effectiveness and sales enablement.
Focus on revenue insights
Tracking revenue quarterly and annually is a good start, but identifying sales effectiveness requires digging into the details. Demonstrating how much of that revenue comes from new business versus existing customers is critical to evaluating the effectiveness of the sales pipeline. It’s also worthwhile to consider applying the Pareto Principle to focus your sales process. This economic principle has many applications, but in sales it implies that 80% of your revenue should come from 20% of your customers.
Identify what percent of your sales team is meeting quotas
The beauty of this sales effectiveness metric is that no matter where you land on the spectrum, it can tell you something about both your sales quota and your sales team. A high percentage of sales reps meeting the quota could indicate it’s not a motivating milestone. Quotas that simply scoop up low-hanging fruit could leave money on the table in terms of potential revenue. A low percentage of sales reps meeting quotas could mean your goals aren’t realistic and may be contributing to morale problems on your sales team.
Define the win rate
Let’s face it: No sales team closes every deal. But defining how often you win versus how often you lose can be a good benchmark to focus on improvement over time. Some wins and losses are also more crucial than others because they have greater impact on the bottom line, so be careful to take that into account when evaluating win-lose ratios.
7 ways to boost sales effectiveness
Now that you’ve got a handle on how to measure sales effectiveness, let’s take a closer look at ways to improve sales performance and zero in on a better sales process.
1. Set clear goals and KPIs
Make sure to use the principle of SMART goals to set clearly defined sales KPIs for your sales team. Here’s how to shape SMART goals to apply to sales performance and sales effectiveness.
Specific: It’s hard to hit a target if you don’t know what it is. Make sure your sales reps have goals tied to specific benchmarks that are clearly articulated.
Measurable: Define what success looks like by creating goals that can be measured, such as percentage increases in quarterly revenue or improved sales efficiency ratios.
Achievable: Creating achievable goals is a careful balance between striving for something ambitious while still keeping the KPI realistic. Think motivating but manageable.
Relevant: Not all measurable outcomes are relevant to the work your sales reps do, so strive to identify goals that are within your sales team’s sphere of influence.
Time-Bound: Just like projects without deadlines, goals that aren’t tethered to a specific timeframe tend to get put off. Set a reasonable timeline for accomplishment given the scope of the achievement.
2. Invest in sales technology and tools
Modernizing the tools and technology available to your sales team can drive sales enablement and align your sales process. A more efficient process means sales reps spend less time getting prospects through the funnel, resulting in a shorter sales cycle and the kind of increased productivity that can accelerate sales performance.
3. Identify bottlenecks and align your sales team
A close inspection of your sales process can turn up redundancies and inefficiencies that produce bottlenecks. Streamline the following daily activities among your marketing and sales team to ensure a well-aligned and efficient process that benefits everyone.
Even activities that are part of your sales team’s daily routine, such as route planning, can be more efficient with a little collaboration and attention to detail.
4. Perfect your sales process
The sales process is the steps a prospect or lead travels through in the sales funnel to become a customer or client. Learning more about that journey from the customer’s perspective can help your sales team create a blueprint for a better sales process.
Part of perfecting the sales process involves helping sales reps get a handle on who customers are, the problem they’re trying to solve, and why the product or services your sales team offers are the ideal solution. It’s also important to note that the sales process doesn’t end with a sale but should continue through gathering feedback and customer follow-up.
5. Know your audience
Part of sales effectiveness is focusing not on more prospects but on the right prospects. In other words, work smarter not harder. Getting your hands on data to identify the best leads is a good start, but you’ll have to sift through that information to decide who is most likely to convert and what they want to hear.
Start by helping sales teams to clearly define their audience through actionable buyer personas that identify who your ideal customer is, where they’re located, and what their pain points or needs are.
6. Make sales collateral easy to find and customize
When you ask your sales reps how they spend their time, you may be startled to discover they’re usually chasing down product information, drafting email communication, or performing tasks that could be automated.
Using a brand templating solution like Lucidpress not only helps you level up your content creation but can also streamline sales collateral and make it easier to find for both sales and marketing teams.
7. Engage your sales reps with sales coaching and sales training
Many companies have an onboarding process of some sort but don’t take time to build ongoing coaching into their sales training approach. Sales managers that continuously support and engage with sales reps reinforce best practices and keep the sales process efficient and effective.
Investing in sales management and coaching allows sales leaders to stay on top of industry trends and adapt sales approaches to ensure the kind of sales effectiveness that benefits your entire team.