I witnessed a sales call involving a customer who was not happy. The company had had to call for service frequently, causing irritation and lost revenue. The supplier wasn't happy, either because those numerous customer service calls eroded its profits.
The salesman was able to salvage the customer by making some shrewd additions to the deal and taking what I call an integrated approach. The contract required the customer to get training on the equipment, and it required customer service and product design to study the problems the customer was experiencing and provide the customer with feedback on proposed solutions.
‘Under traditional metrics, the revenue garnered in the particular deal may not have been considered high.’
This was a very successful sales visit for all concerned. It increased the loyalty of the customer, as measured by customer satisfaction scores and increased sales. Executives at the client company felt they were being valued. Yet, most traditional metrics of sales activities would not have shown the benefits of the integrated approach.
Consider a different sales experience. The salesperson has heard rumors of problems with a specific customer but has no data. The salesperson decides to severely discount the new order to make sure the customer purchases from the company again. What happens to revenue? It may be temporarily increased—what the revenue metric encourages—but at what cost?
Long-term loyalty has not necessarily been increased. The customer will always expect to receive a huge discount in the future. The customer service and/or delivery and product design issues have not been addressed. Such issues can erode profits beyond the discount offered. The salesperson is managing his or her activity based upon the key performance metric (revenue), but no one wins! Neither the supplier (who sees reduced profits) nor the buyer (who has continued customer service, delivery and product issues) is getting what either wanted. But the short-term metric looks OK.
How do you measure salespeople? In most organizations I have seen, salespeople are held accountable for two metrics: gross revenue and the number of sales calls made. Rather than measuring salespeople solely based upon activity and revenue generated, however, I believe they should be measured based upon how well they maintain or increase the loyalty of the company's most profitable customers.
Hidden profits and costs
Some customers are more profitable than others for many reasons, including the number of customer service calls generated and the customer's ability to solve its own problems. Do your salespeople have access to that kind of information when they negotiate the deal? Do the sales, marketing, customer service and profitability databases talk to each other in your company? Do the salespeople have access to the company performance data from throughout the customer experience, from sales to delivery to product performance?
Having access to these data would help your salespeople know more about the potential threats to loyalty and what the customer's experiences with your company mean to both organizations. This would enable the salesperson to negotiate the deal that is the best for your company and your customer.
Consider the sales call I witnessed. Under traditional metrics, the revenue garnered in the particular deal may not have been considered high. And, too, the negotiations may have required a few visits and telephone calls. Yet the end result was that customer loyalty was greatly increased, not only through the purchase but also through the partnership activities. And while the deal, itself, didn't result in the highest dollar value, the increased loyalty resulted in increased revenue over the long term—months and years.
The salesman and his company also created a better educated and trained customer who will make fewer service calls, lowering expenses. The agreement to include the customer in the product and service design also had significant payoff, leading the company to refine the product to meet customers' needs.
In the call I witnessed, I believe everyone benefited from have a more integrated approach. The salesman had access to all the data that was needed and the authority to use it.
How are your salespeople measured? What customer experience metrics do they have access to when negotiating a deal with a customer? How integrated are the various databases that would be needed to provide the salesperson with the metrics that they need? Does your sales software support the types of analysis that are needed to make sure that everyone benefits from the negotiation?
To truly measure the value of the deal, you need to subtract the often uncharted expenses from the contract price. And to get better deals, you need to give your salespeople access to all the information concerning the customer's experience as well as the power to confer with everyone in your company who can turn the deal into a win-win package.
Many people say, "You get what you measure." That's true, provided you are measuring the pluses—and minuses—of the proposed contract.