Thursday, February 01, 2007




One of the problems that continue to plague Quality/Process measures is the difficulty in setting up tangible measures in the Service Industry, especially the Sales areas. It is understandable that implementing measures in the Service Industry is not as easy as it is in the Manufacturing environment. However, viewing the Sales Process from an end-end perspective and defining the tangible items that provides the input to the Provisioning Process can do it.

Sales in particular are different. Sales main goal or measurement is usually how much revenue they generate within a stated time period (i.e. monthly or quarterly). Some companies now include profitability and customer satisfaction with the sales process, but these measures are not always the most effective for the sales process.

Not to get into the debate regarding the definition of Quality, it is generally agreed upon that it is meeting/exceeding customer expectations. Customers are usually identified as both Internal and External and are usually those people who make or influence decisions regarding a product or service. Internal Customers and hand-offs are the ones usually not measured in a sales process. At any company these Internal Customers are the folks who receive the orders and provision them according to customer requirements.

So the first step in establishing sales measures is identifying all of your customers and then to begin to define their requirements. These requirements will begin to identify both Process Input (efficiency) and Quality Output Measures (effectiveness). For example, external customers (envision yourself as one) may measure salespeople on how quickly they respond to requests for information, how well the response meets their information requirements, or how well the salesperson understands his or her product or service. Customers also will perceive or evaluate the salesperson on how well the solution performs after it is delivered. In other words, did the product or service that the salesperson recommends meet the customer’s requirements?

One way to gather this Quality Output Measure is to survey customers, asking for their reaction to the sales process after they have made a purchasing decision. This provides a direct measure of the customer’s view of the quality of the salesperson and the output of the sales process. It is critical to also survey those customers who did not purchase the product or service as well as those who did.

One of the pitfalls that many companies fall into in gathering this type of information is having a middle person or outside agency (i.e. distributor, telemarketer) gathers this information and not truly understanding the requirements of the customer. Where I worked we contracted a distributor to sell some of our services. When sales were lower than forecasted we asked the distributor to survey customers as to why they did not buy the service, the distributor informed us that the price was too high.

With that in mind we contacted some of these customers directly and also through focus groups. The problems our customers were facing had little to do with price; the distributor had not been able to identify the customer’s wants and needs. This resulted in the distributor providing solutions that did not meet the customer requirements and in some cases were technologically impossible. This clearly indicated a breakdown in the sales process. We responded by training the distributors more thoroughly on our complex services as well as provide them an 800# that put them in direct contact with a technical expert for on the spot consultation.

Don’t forget about surveying or meeting with your internal customers to measure the quality output of the process that you are providing. In the sales process, the salesperson can take an order and submit it to an order reviewer or electronically to the order entry department in a particular city, state or country depending on the type of the order. The first questions naturally, were the orders submitted promptly, accurately and complete? While there may exist measures to measure the order itself are they used in performance reviews to educate the salesperson to change their behavior? One process measure that I don’t believe we are measuring is How often does the internal customer(s) have to go back to the salesperson or, worse yet, to the external customer to clarify their requirements and order?

The measures described thus far refer to the effectiveness or the output of the sales process as to how it meets internal/external customer requirements. These types of measures are traditionally displayed at the end of a month or stated time frame for review and discussion. Unfortunately, this is much too late and we may have even lost some customers. It is just as critical to establish In-Process Measures in the sales process to measure the effectiveness at various steps along the way and to track its efficiency. An analogy I like to use is when coaching my daughter’s basketball team. If I am only coaching by watching the scoreboard. I am not managing the action that is out on the floor.

SALES FUNNEL - Click On Pic To Enlarge Funnel

Think of the sales funnel like a plant conveyor belt, sales leads and information pass through the funnel (Process Measures P1 – P5) just like raw materials are passed on a conveyor belt. The Quality Output (Q1) of this process is a timely, accurate and complete order (closed) that meets customer requirements.

Measuring the sales process at each step can help sales managers predict (sole purpose of process measures) upcoming problems so they can take corrective/preventive actions. When preventive or corrective actions are required it is best to implement them as far upstream in the process as possible. For example, two key in-process measures that many companies have found useful is the average time it takes to get a lead through each step in the funnel process and the conversion rate that is associated with the leads. The conversion rate is the ratio of prospective customers or orders that move forward through each step of the sales process.

It is my belief that one of the most important qualities a manager can have is the ability to predict. In order to that a manager must be able to acquire the knowledge to base his/her decision on facts (ie; historical/ trend data) from an end-end perspective.

By measuring each step of the sales process (funnel) a Sales Manager can predict the number of leads that their sales people need to achieve their sales quota. The number of leads going into the funnel is a leading indicator of sales performance. While much of this is common knowledge to most Sales Teams, the one fault many make is to wait until the end of the month to take action. Historical data can also provide a means for prediction. For example, if we were to look back and calculate how many leads have turned into sales we can assume the future ratio will be the same unless improvement activities are put in place to change the process. Because we know every lead does not become a customer, another way to look at improving the process is to reject quickly those leads that are not likely to become a sell for a product or service.

Think of these leads like a defect. Just like in any process the objective is to remove the non-value added items as soon as possible so that the cycle time of the overall process is streamlined.

Aligning sales measures with the overall corporate objectives is a key factor. Salespeople are the lifeblood of a corporation and their input is required for many process improvement activities. Many companies today are also measuring salespeople on customer satisfaction. When I purchased my new van last year it wasn’t a week later that I received a survey in the mail requesting that I inform them on how well the salesperson performed. However, customer satisfaction scores based on small sample sizes can be misleading, caution should be taken if the salesperson does not have a high volume of customer transactions.

Implementation of any new process control system should be piloted in a few areas before wide spread rollout.

A useful tool to monitor and measure a salesperson’s in-process performance is by creating a “Sales Funnel Accomplishment Plan.”

Click on Pic To Enlarge

Additional measures to consider monitoring include:

Customer - measures from the customer’s perspective.
1) Did the product/service meet the customer’s requirements
2) Was the salesperson knowledgeable
3) Was the salesperson responsive
4) Retention Rate
5) New Sales vs Disconnects

Financial - traditional measures
1) Sales dollar volume
2) Profit by order
3) Profit by customer

Process - Effectiveness
1) Cycle Time - in total and by process step
2) Conversion & order close rates
3) Error or Defect Rates

Process - Efficiency
1) Sales cost per lead
2) Sales cost per order
3) Sales cost per dollar of revenue
4) Cost per sales call

See Post - Process Improvement In The Sales Process at

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