An Executive Summary of How Organization Measure Sales/Marketing Organization Effectiveness
The talk about AI permeates every online article about Sales Orgs but it's not the place to start according to Frank Cespedes, professor at Harvard Business School and article on: "How One Company Used AI to Broaden Its Customer Base"by Sunil Gupta and Frank V. Cespedes.
He says, in effect, study your sales/marketing organization, see what needs to be done to improve its effectiveness, and use AI as an aide to do that.
With that in mind, what measures of financial effectiveness do companies use, particularly in C&I Energy and Energy Software?
| Financial measure | What it reveals |
|---|---|
| Revenue per salesperson | How effectively the sales organization generates revenue |
| Gross profit per salesperson | Whether productivity creates profitable revenue, not merely sales volume |
| Sales expense as % of gross profit | How efficiently the company converts selling expense into gross profit |
| Customer acquisition cost (CAC) | What it costs to acquire a new customer |
| Customer lifetime value (LTV) | The economic value of customers acquired and retained |
| Sales payback period | How long it takes to recover the cost of acquiring a customer |
Note, these measures don't break out marketing spend, so change by adding:
| Cost category | Typical expenses | Primary analysis |
|---|---|---|
| Direct sales | Salaries, commissions, benefits, travel | Cost per customer acquired; revenue per salesperson |
| Sales management | Managers, directors, sales operations | Management overhead; span of control |
| Marketing personnel | Marketing management, content, digital, product marketing | Marketing expense relative to pipeline and revenue |
| Marketing programs | Advertising, campaigns, events, webinars, content | Cost per qualified lead and opportunity |
| Channel management | Partner managers, partner incentives, joint marketing | Partner acquisition cost; channel profitability |
| Sales technology | CRM, prospecting tools, marketing automation | Cost per seller; productivity impact |
| Customer success | Onboarding, account management, retention | Retention cost; expansion contribution |
Where Do You Start The Analysis
According to most reports/websites, firms start with a historical analysis, measuring the items above over some period of time and drilling down to find cause and effect.
Market Efficiency
Another viewpoint is to compare sales/revenue success to the markets your firm participates in.
What is the growth rate of that market, e.g. Demand Response, and how does your firm's revenue growth compare?
We're preparing an article on "six dimensions of market and product performance", look for that in an upcoming episode.
