Today's post is by Jason Jordan, a founding partner of Vantage Point Performance, a global sales management training and development firm, and co-author of Cracking the Sales Management Code. Jordan is a recognized thought leader in the domain of B2B sales and teaches sales and sales management at the University of Virginia’s Darden Graduate School of Business.
Sales trainers have long been challenged to demonstrate a return on investment for their efforts. Return on Investment (ROI) is a fairly straightforward calculation derived from two key numbers – the upfront investment and the eventual return. Divide the return by the investment, and, hopefully, a big number appears.
It’s fair to say that demonstrating ROI has been an ongoing challenge for sales management training and development teams, because the “return” portion is so difficult to measure. It’s easy to determine the “I” because the investment (or, as some like to think of it, the expense) is a known dollar amount that is budgeted and spent. Not accounting for other soft costs like internal company time and resources, this number is easily quantified and very apparent. No problems with the “I”. The “R” in “returns,” however....
What’s the Real Return on Sales Training?
Correlating specific returns with a particular sales management training investment is a bit of a challenge. First, there is the fact that the “R” can take a while to appear. Sales teams tend to want instant gratification; but that’s not how training works. It takes time for behaviors and skills to change – and even longer for them to demonstrably affect sales performance. Lengthy sales cycles may push the incremental returns well into the future, when the training is a distant memory and the budget long since spent.
A second challenge is even more difficult, though – the desire to measure the “R” in increased sales revenue. The investment is clearly a financial measure, so why shouldn’t the return be, too? It certainly could be…but, in our experience, it’s a hard case to make.
It’s a hard case to make because many elements affect revenue growth. For example: your products, your customers, the economy, the competition. Not to mention the fact that everyone – from product managers to the CEO – will try to take credit that their initiatives and activities increased sales.
How can we know for sure that increased revenue was the direct outcome of a specific sales management training program? That’s a tough fight. And you could be fighting over credit for revenue for a long, long time.
So we believe the best strategy is not to fight over credit for increased revenue. In fact, we think revenue is the wrong “R” to use for determining the impact of sales management training. There are other ways to measure the impact of sales training that are more direct and apparent.
Three Metrics that Show ROI on Sales Training
If you’ve read our book Cracking the Sales Management Code, viewed our webinars, or generally engaged with Vantage Point in any fashion, you’ve probably been exposed to our ROA metrics framework revealed in our 2008-2010 research effort. Stated simply, we found that there are three levels of metrics that sales forces measure:
- Business Results, like revenue, market share, and other things that are the outcome of many different influences
- Sales Objectives, like new customer acquisitions, deal win rates, customer retention, and other goals the sales force is asked to accomplish
- Sales Activities, like making sales calls, completing account plans, and (of course) attending training
One key insight from the research was that there are causal relationships between these different metrics. For instance, if I make more prospecting calls (an Activity), I should win more new customers (an Objective), and that should lead to more revenue (a Result). Or, if I do better account planning (an Activity), then I should retain more of my customers (an Objective), and I should maintain or grow my revenue (a Result).
So here’s where we think there is an opportunity for sales trainers to make a better case for the impact they are having on sales performance. In our opinion, trying to measure the impact of training (an Activity) on revenue (a Result) is too much of a leap. More specifically, it’s a leap right over the Sales Objectives that are more directly influenced by the changed salesperson behaviors that training creates.
Tracking a Sales Objective: Increased Close Rates
Let me give you an example. One of our major clients hired us to work with their sales managers to improve a very specific performance indicator. Was it to increase their revenue? Nope. It was to increase their close rates. They wanted to win more deals (a Sales Objective). Could we train their sales managers in such a way that close rates on new opportunities increased? Of course we could…and we did. Did that lead to increased revenue? Sure. But we didn’t have to fight over credit for that. We had increased the close rates – mission accomplished.
So aiming sales management training at a Sales Objective rather than a Business Result was a pretty smart strategy. It gave the sales trainers (in this case, us) something reasonable to accomplish: change certain behaviors that will directly affect a Sales Objective. We can design training to help reps cross-sell products. Or win new customers. Or grow existing accounts. The activities and behaviors that align with those Objectives are fairly apparent – much more apparent than “increase revenue.”
Now you understand why we propose that the return on sales management training not be measured in terms of revenue. We think the “R” should be measured in Sales Objectives that can be directly influenced by altered selling behaviors. Focusing on Sales Objectives provides a more direct target for the sales force and its trainers. And having a target you can assuredly hit is a very comforting thing.
Interesting point about increasing close rate to drive revenue. It's particularly important for concentrated industries like mine (grocery product).
All business worth pursuing is within the top 50 grocers in the country. We can't afford to have a low close ratio, we'll run out of prospects to pursue.
So we live and die by our close rate. You only get one first impression. We hired a company to create an effective system to introduce our product.
We take time with each prospect. We, "do less, but better."
Targeting fewer prospects, but doing a better job with them has catapulted our close rate to close to 50%. Growth is over 300% this year.
Goes to show - increase your close rate to increase your ROI.
(here's the vendor we use to create a warm intro, www.littlebookthatsells.com)
Posted by: D | 08/22/2016 at 07:44 AM