What is Sales Productivity?
Sales productivity is a measure of your sales team’s ability to efficiently generate sales revenue. There is a direct relationship between a company’s revenue growth and sales productivity. It is well known that an increase in sales productivity also significantly improves your company’s profitability.
Measuring Sales Productivity
There are many different ways of measuring sales productivity. It depends on the nature of your business, the markets you operate in, and the goals you set for your company.
Here are some examples of how sales productivity is measured –
- sales revenue achieved by your sales reps
- how effectively your team is able to convert prospects or leads into paying customers, also referred to as deal win-rate or conversion-rate
- time difference between the time of lead generation and winning the deal, also called the sales cycle
- compare the sales revenue against the total investment made to generate that revenue, sometimes referred to as the return on investment
- sales revenue generated per unit of time or effort
- comparison between total deals won and deals lost
Sales velocity is possibly the most powerful way to measure and improve sales productivity. This single metric considers the most important factors required to run an efficient sales motion. These factors are the following –
- Total number of opportunities
- Average deal value
- Deal conversion rate or win rate
- Sales cycle length
You could go through this detailed article on sales velocity to know more about this metric.
Sales Productivity vs Sales Efficiency
These two terms are many a time used interchangeably. But they are different in a way.
Sales productivity is generally focused on the quantum of sales revenue generated. However, sales efficiency measures how effectively your sales reps leverage all the resources available to them to generate revenue.
Comparing the two metrics can provide interesting insights into your team’s strengths as well as the weaknesses that require improvement. It will help you identify all the critical aspects required to consistently drive sales performance and growth.
A razor-sharp focus on these metrics will help you grow revenue while optimizing your cost of sales. As a result, you can expect a positive impact on your bottom line too.
Most Common Reasons for Poor Sales Productivity
In any organization, there are many factors that hinder sales productivity. These factors could be attributed to either the sales team’s performance or organizational reasons or a combination of both.
Some of the most common factors that come in the way of improving sales productivity include –
- Poor market coverage
- Inadequate sales training
- Lack of sales tools like Sales CRM
- Inconsistent sales strategies
- Inefficient sales reviews
- Poor quality and quantity of leads
- Lack of communication and collaboration between sales leaders and reps
- Negative sales culture leading to low morale among the teams
- Lack of coaching and mentoring by sales managers
- Leakage of sales leads
- Unrealistic sales targets
- Complex organization structure that does not support agility and decision making
- Poor empowerment among sales teams
- Inadequate presales support
- Sales incentive structure is not compelling enough or it is difficult to understand by the reps
- High pricing of products and services making it difficult to win deals
- Poor product or solution fitment
You can easily add more to this partial list. There are innumerable such challenges that make sales productivity not reach its potential.
The key is to recognize these and put in a plan to rectify them at the earliest before it is too late.