Sales Effectiveness and Sales Efficiency: A Thought Experiment

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When I write about selling I wince every time I have to use one of the two E words — ­Efficiency and Effectiveness. These occur so much in sales language that we’ve become complacent about their impact and meaning. All salespeople want to sell more — and they can creating more opportunities (Efficiency) or by winning more opportunities (Effectiveness).

I go overboard with the E words in my book, Sales Automation Done Right, (hey, that was written ten years ago, so no apologies). Then I used the simple example of the compounding effect of the building efficiency over effectiveness (E squared, if you are at all scientific.) You can find that discussion in the free e-book in our library. (Scroll down to the five SADR Extractions.)  I finished up that discussion with the proposition that “Effectiveness on top of efficiency produces dramatic increases in sales. It’s the same as compound interest in the bank account.” But something tells me that that discussion is just a little too abstract.

I came up with a “thought experiment” to illustrate this better.

From Wikipedia: A thought experiment … considers some hypothesis, theory, or principle for the purpose of thinking through its consequences. Given the structure of the experiment, it may or may not be possible to actually perform it …. The common goal of a thought experiment is to explore the potential consequences of the principle in question.

So, in the good company of Schrodinger’s cat and Maxwell’s demon, here we go.

Let’s start with two salespeople, Jurgen and Frieda, with their browbeaten manager Alex. Jurgen seems to be a natural at selling. As a child he traded his dinky toys at great gain from the neighbor’s children, much to the chagrin of their parents. Alex likes Jurgen because he’s not afraid of competition, he’s confident in his product line and knows that once into a sales situation Jurgen seems likely to win.

Freida is also one of Alex’s favorites. She regularly makes her quota and works really hard. She uses the company’s CRM system very effectively, adding good information on her accounts and working the archives to aid in her selling situations.

Alex is doing a bit of research on his sales team’s performance. The product that Alex team sells is the, MakPRE ,sells for $50,000. Each of Alex’s team is expected to sell $1 Million per year, or 20 MakPRE packages.

Alex finds that in the last fiscal year the sales data from the CRM system shows that both Jurgen and Freida sold their quota of 20 units for total sales of $1 Million each. Alex is happy about that — it was much what he was expecting with these two senior salespeople. Then he digs a bit deeper.

He looks at won/lost ratios — how many sales his people are winning against those they lose. He finds Jurgen wins six sales out of ten opportunities. For the competitive market that his company is in, Alex thinks that’s good.

But Alex sees Freida achieved her numbers in a different way. Her won/lost ration is not as good as Jurgen’s, 40% to his 60% . For every four sales opportunities that Freida wins, she loses six. So, although Freida loses more to the competition than Jurgen, she makes up for it by familiarizing herself with more of the market and knowing about more sales situations.

Alex does a little research on the sales numbers in the industries that the MakPRE serves and finds data on the total products sold in the year that Alex is reviewing. He figures out that the total number sold in each of Jurgen’s and Freida’s territories was 100 (hey, this is a thought experiment – anything is possible).

This data has some disturbing ramifications for Alex. He likes to think that his salespeople are on top of what’s happening in their territories. It looks as if Jurgen is aware of just 33% of the deals that go down in his “patch.” Freida is better, she knows of 50% of the sales that happen. But, they both turn in their required 20 MakPRE units and make their quota.

What Alex wants, is to wave a magic wand and get a transmutation of both — a salesperson with an awareness of 50% or better of the market (like Freida) and with a close rate of 60% (like Jurgen). A quick look at the math shows Alex that the transmutation would sell 30 MakPREs, a 50% improvement over the performance of his two best people!

Well, the results of the thought experiment shows something that sales managers deal with every day  — improving salespeople’s performance. But what is the best way to do that? An honest conversation between salesperson and manager is essential, with the two Es being front and center. Then a mix of skills training and modern selling tools can enable the kind of results the thought experiment demonstrates.

To get a head start on increasing both efficiency and effectiveness check out my previous post on Computational Selling.

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