One of the essential roles of a business owner or senior management is to increase sales and reduce costs to improve the profitability of the business.
In this post, we will look at a powerful tool that will help identify issues for sales and assist to fine-tune marketing for sales support.
Sales Performance Framework to increase Sales
The Sales Performance Framework is used to assess the performance of a sales team as a whole or for individual sales staff to identify unique challenges or areas that are preventing them from achieving sales targets.
The Sales Performance Framework works best to assess revenue generated from products in the same category or whose target customers are the same.
If your business has multiple revenue streams or different types of products, it is best to have separate Sales Performance Frameworks for each product category. This will allow you to assess how to increase sales for each product.
For purposes of this discussion, we will assume this framework is used to assess the sales performance of a business selling office furniture.
First, you start with revenue per day/ week/ month/ quarter/ year on one side.
Revenue is calculated by multiplying the number of orders by the average value of each order. That is, if you receive 100 orders for different office furniture a month at an average order value of $500, your monthly revenue is $50,000.
If you want to increase your revenue, there are only three possibilities:
1. Increase the Number of Orders
2. Increase the Average Order Value (AOV)
3. Increase Both the Number of Orders and AOV
Number of Orders
The number of orders is calculated by the number of quotes generated multiplied by the conversion rate. So if you generate 200 quotes for potential customers a month, and out of the 200 quotes, 100 get confirmed as orders, your conversion rate is 50% (100/ 200).
Number of Quotes
The number of quotes generated is determined by the number of organic inquiries you receive, and the number of inquiries “hunted” by the sales team.
The number of organic inquiries is mostly dependent on marketing efforts that create awareness for the brand and motivates prospects to request for quotations through offline and online channels.
The conversion rate depends on the factors that affect a prospect’s decision from placing an order. Most often, pricing is a determining factor. Other factors include providing added value such as brand equity, trustworthiness, excellent customer service, delivery timing, after-sales service, discounts and promotional offers. The conversion rate also depends on the abilities of the salespeople.
Average Order Value (AOV)
On the opposite side of “Number of Orders” is the AOV. This is determined by the type of customers who make the orders and the types of products that are sold.
Type of Customer
Different clients will make orders of varying value.
For example, if you are selling office furniture, larger companies will generally place larger orders since they will need more furniture.
Different clients will also order different ranges of office furniture.
Companies that open their offices to clients or customers to visit may prefer higher-end furniture that looks aesthetically pleasing and are more comfortable.
Companies that require furniture for back-room staff may invest in more functional furniture that is lower in price (value).
Type of Product
If you offer a range of products, you may have different products at different price points.
Based on manufacturing or procurement costs, different products may also provide higher net profits than others.
For lower value products, it will be necessary to sell more volume to generate a higher AOV.
For higher value products, you may not need to sell as many items, but you will need to find clients who are willing to make these higher-value purchases.
Once you map out your Sales Performance Framework, input historical sales figures into relevant areas. This will make it quite easy to identify and determine which areas need to be improved to increase sales and by what projected value.
For example, in the case of the business selling office furniture, after mapping out the framework, it may reveal that revenue can be increased if the number of orders is increased. Further analysis may reveal that the reason why the number of orders is not high is because the conversion rate is low, even though the number of quotes generated is high.
An in-depth analysis must be conducted to determine how to improve the conversion rate. Based on the factors that affect conversion rates, reasons for a low conversion rate may be due to a higher price point of the furniture as compared to competitors or the perception of brand equity due to perceived quality. Or it may be the tactical approach employed by the salespeople that is not effective.
As you can see, the framework is simple yet very powerful in identifying problem areas. It is also a very useful tool when presenting issues and solutions to the marketing and sales teams as well as management.
GENERATING LEADS and INCREASING SALES
The Sales Performance Framework is a very useful tool that allows you to break down how sales revenue is generated, which can then be used to pinpoint challenge areas.
You can use the framework to assess the performance of a sales team as a whole or for individual sales staff to identify unique challenges or areas that are preventing them from achieving sales targets.
When you identify areas of improvement to increase sales, you can apply the necessary lead generation tools as needed. For example, you might need to better align offline and online marketing efforts. Or you may need to increase your organic online lead conversion by optimising your website so that it becomes higher converting.