The sales manager is interested in all the same metrics as the salesperson, plus others. The metrics we discussed earlier can be used by the sales manager to evaluate salespeople, promote them, or pinpoint areas in which they need more training. Sales managers also use sales cycle metrics to make broader decisions. Perhaps everyone needs training in a particular stage of the sales process, or perhaps the leads generated by marketing are not effective, and new marketing ideas are warranted. Sales cycle metrics at the aggregate level can be very useful for making effective managerial decisions.
Sales managers also look at other measures such as market share, or how much of the market is buying from the firm versus its competitors; sales by product or by customer type; and sales per salesperson. Sales by product or by product line, especially viewed over time, can provide the sales executive with insight into whether a product should be divested or needs more investment. If the sales for the product line are declining but the product’s market share is holding firm, then the entire market is shrinking. A shrinking market can mean the firm needs to look for new markets or develop new offerings.
Time is yet another element that sales managers look at. If the firm’s sales are declining, is the company in a seasonal slump it will come out of, or does the firm have a serious, ongoing problem? Sales executives are also constantly concerned about what the firm’s sales are doing relative to what was forecasted for them. Forecasts turn in to sales quotas, or minimum levels of sales performance for each salesperson. In addition, forecasts turn into orders for raw materials and component parts, inventory levels, and other expenditures of money. If the forecast is way off, then money is lost, either because the company ran out of products or because too much was spent to build up inventories that didn’t sell.
In Figure 13.11 An Example of the Sales Data Sales Managers Utilize , you can see a sample of data a sales manager may review. As you can see, most of the sales teams are performing near quota. But what about the Midwest? Selling 7 percent more is a good thing, but an astute manager would want to know why sales were short by over $200,000. Inventory can be balanced against the Southeast’s shortfall, but that adds cost to ship from the plant to Atlanta, then to Chicago. Accurate forecasts would have put that product in the Midwest’s Chicago warehouse to start with.
Similarly, a manager would be concerned about Jerry’s lack of sales. That one salesperson accounts for the entire region’s shortfall against quota. Was the shortfall due to Jerry’s inability to sell, or did something happen in the territory? For example, if a hurricane came ashore in the Carolinas or if Jerry had a health problem arise, the manager’s concern would be different than if Jerry lost a major account or had a history of failing to reach quota.
Sales executives don’t just focus on sales, though. They also focus on costs. Why? Because many sales executives are held accountable not only for their firms’ sales levels but also for profit levels. Money has to be spent to sell products, of course: If the firm spends too little, the sales force will be unable to perform effectively. If the budget to attend trade shows is cut, for example, the quantity and quality of leads salespeople get could fall—and so could their sales. But if the firm spends too much on trade shows, the cost per lead generated increases with no real improvement in the sales force’s productivity. Perhaps the “additional” leads are duplicates or take too much time to follow up on.
Customer satisfaction is another important metric. Salespeople and their bosses want satisfied customers. Dissatisfied customers not only stop buying a company’s products, they often tell their friends and family members about their bad purchasing experiences. Sometimes they go so far as to write blogs or bad product reviews on Web sites such as Epinions.com. Some research studies have shown that average customer satisfaction scores are less important than the number of complaints a company gets. Perhaps it’s because of the negative word-of-mouth that unhappy customers generate.
In addition to tracking complaints, companies measure customer satisfaction levels through surveys. An average score of 3 on a scale of 1 to 5 could mean two things. The score could mean that everyone is, on average, happy and therefore gave the company a rating of 3.0. Or the score could mean that half of the customers are wildly enthusiastic and gave the company a 5 while the other half was bitterly disappointed and rated the company a 1. If the latter is the case, then half of the company’s customers are telling their friends about their negative experience and discouraging many others from buying. Sometimes companies hire firms like TeleSight, an organization capable of tracking satisfaction scores for an entire industry. Using a service like this, the sales executive can not only track the company’s customer satisfaction scores but also see how they compare with the scores of the industry overall.
The sales cycle is a basic unit of measurement indicating how long it takes to close a sale. Salespeople examine their performance at each stage of the sales cycle in order to identify specific areas for improvement. A salesperson who shortens the cycle is able to generate more revenue with the same amount of effort. Salespeople also track their conversion ratios to identify which stages of the sales cycle they need to work on.
Sales executives track the same metrics as individual salespeople but at the aggregate level. If many salespeople are struggling with one stage of the sales cycle, for example, then additional training or marketing may be needed, or a new strategy is necessary. Sales executives also look at their firm’s sales relative to their forecasts in order to spot possible trends. A firm’s sales trends affect many of the other decisions the company’s executives have to make, including manufacturing and output decisions. Sales managers also have to manage their company’s selling costs. Sales managers are often responsible for a firm’s sales and its profit levels.
- How might the sales cycle vary across the types of sales positions? How do salespeople use the sales cycle to manage their performance?
- What is the relationship between conversion ratios and activity goals? How do salespeople use this information? How do sales executives use the information?
- What metrics do sales executives use that salespeople are less concerned with?