This article originally appeared here in the Sales Management Association blog.
Part Three of a Four Part Series
In previous installments from our book Cracking the Sales Management Code (see part 1 and part 2), we shared research findings that revealed three types of sales force metrics, Sales Activities, Sales Objectives, and Business Results. We also identified five discrete sales processes – call management, opportunity management, account management, territory management, and sales force enablement. Now we will explore Sales Objectives and their links to Sales Activities.
Defining a Sales Objective
“Sales Objectives” are the outcomes a sales force strives for, the goals toward which selling effort is directed. And since they are the outcomes of Sales Activities, we cannot manage Sales Objectives with the same degree of control as the Activities themselves. We can only achieve the Objectives we desire indirectly by managing our sales force’s Activities.
For example, a Sales Objective might be to increase the number of new accounts, which could be achieved by putting greater effort into cold calling or by visiting more prospects. You cannot direct a salesperson to have more new accounts, because prospects must agree to become your customers. But you can set an Objective and then manage the upstream activities. Again, managing Sales Activities leads to achieving Sales Objectives.
Four Kinds of Sales Objectives
Just as we used our collection of Sales Activity metrics to isolate distinct processes, we also used our Sales Objective metrics to discern four categories into which all of the measures fell. Understand the nature of the Objectives your team is pursuing, and you will understand how to achieve them.
The first Sales Objective we called “Market Coverage.” These metrics tell you how thoroughly and accurately the sales force is addressing target markets, and they are used to ensure that there is enough total selling effort to cover all desired customers and prospects.
Sample market coverage metrics include:
- Percentage of customer-facing time
- Sales rep turnover
- Percentage of prospects contacted
“Sales Force Capability” metrics tell you how effectively sales selling effort is being applied. That is, if your salespeople have six hours each day to spend with prospects and customers, how successful are they in advancing opportunities, winning deals, or accomplishing other desired outcomes of their customer interactions?
Sample sales force capability metrics include:
- Percentage of calls advanced
- Percentage of deals won
- Number of sales per call
“Product Focus” metrics report whether a sales force is selling the products and services that are deemed optimal to the company. These could be products with higher profitability or products with some strategic value, such as a new line of products.
Sample product focus metrics include:
- Ratio of new vs. existing products
- Percentage of cross-selling
- Average deal size
“Customer Focus” metrics reveal whether the sales force is attracting, retaining, and growing the company’s targeted customers. These could be customers that are either more profitable or customers that are somehow strategically important, like those in a new market or geography.
Sample customer focus metrics include:
- Ratio of new vs. existing customers
- Rate of customer retention
- Revenue by customer type
In sum, these four types of Sales Objectives provide guidance to a sales force about which things are important and what reps should be trying to accomplish in the field. However, simply communicating objectives or even aligning them with incentives will not create the desired outcomes. To confidently achieve your Objectives, you must embed them in the day-to-day activities of your salespeople.
How to Achieve Sales Objectives
Sales Objectives cannot be directly managed – they can only be influenced by directing specific Sales Activities. Certain Sales Activities influence certain Sales Objectives. If you set a new Sales Objective, you should know exactly what to do to achieve it…Track backward to the Activities that have an impact on that Objective, and then manage those Activities proactively.
You might set an Objective for the year to improve your customer retention rate. First, you could alter your compensation and coaching to shift the focus of reps toward servicing existing customers. Or you could allocate more visits to those customers and put an account management process in place to help salespeople become more intimate with key customer issues. These Activities would be managed and measured all along to ensure proper execution of the tasks.
Management’s judgment must be used in all cases to identify the best course of action to influence a given Objective. But the Activity-Objective relationships demonstrated here are useful departure points for good managerial decision-making, good coaching, and good selling.
The Lessons for Sales Leaders
We believe the link between Sales Activities and Sales Objectives is the missing link in sales performance management: The ability to set specific Sales Objectives and then manage day-to-day Activities to predictably achieve those outcomes. Rather than just asking for the outcomes desired, a sales force must be shown how to accomplish them.
Sales leaders must first make certain that the right sales processes are in place for each of the company’s selling roles. Then clear Sales Objectives may be set and salespeople’s Activities aligned to achieve these outcomes. With clear Objectives and formal Activities, leaders have the means to set a new strategic direction and ensure consistent execution in the field.
It is also wise to maintain a good mix of the Sales Objectives to track. Market coverage metrics demonstrate sufficient sales effort is available to meet company goals. Sales force capability metrics show whether or not salespeople are using that effort effectively. And product focus and customer focus metrics give assurance that they are selling the right things to the right people. All of these are metrics a sales leader needs to know, if the team is to perform consistently at the highest possible level.
In the final installment of this series, we will reveal the different types of Business Results we found in our research and show how you can convert those Business Results into Sales Objectives that will drive your salespeople’s day-to-day Activities.