Sales Value Productivity KPI-Class

This KPI class measures the performance around sales value achieved per sales channel instance (sales executive, sales manager, sales outlet….) period of time. Please go through ‘Sales Productivity page.

Business Objective behind this KPI-Class:

Maximizing the sales value productivity

Explanation & Specification

Sales value productivity KPI class is the ‘mother’ KPI class. A ‘mother’ KPI-class is defined as the final KPI which a business manager wants to see for a given business objective. For example- Sales velocity and sales strike rate finally contributes to the sales productivity. In other words, sales productivity is ‘what is happening’ KPI class, and sales velocity is ‘why’ KPI class. A low sales velocity will contribute to lower sales productivity.

Definition

Sales value productivity KPI class, is calculated as sales value achieved for all the sales invoice raised to the customer (reflecting as the accounts receivable in the financial books) divided by the number of sales persons. As sales revenue as a measure has different connotations, there can be multiple KPI’s within the KPI class.

Type of KPI

• What (tells on what is happening and not why is it happening)
• Lagging (Post-facto performance, cannot project performance)
• P&L or Period activity (tells the activity for a period and not the status at a time- like profit and loss account)

Examples of KPIs in the sales value productivity KPI class

• Gross Sales value per sales person per period of time
• Net Sales Value (net of all the taxes) per sales person per period of time
• Base Product sale value (for example laptop base configuration value)
• Add-on product sales value (for example sales value associated with additional RAM in a lap-top)
• Add-on services  sales value (for example added 2-year warranty package)
• Sales value productivity per day with or without holidays.
• Sales value productivity with existing customers (up-sell and cross-sell)
• Sales value productivity with new customers
• Sales value productivity with existing contracts (renewal of warranty on a laptop). This is different from sales value productivity from an existing customer (existing customer buying a new laptop)
• Sales value productivity net of returns (when a customer returns the purchase and asks for the refund)

Inclusions

• Include the returns from the customer and asking for the refund
• Include the specific mention of the sales campaign.

Exclusions

• Taxes and other charges which business has no control. In some of the products taxes have a significant proportion of the product price.
• Pipeline sales, for which the invoices have not been raised. This aspect is covered in a different KPI class. Using the word ‘sales value productivity’ for an incomplete sale can be extremely misguiding and can introduce mal-practices.

Clarity is needed on:

Here are the areas, which will need clarity within the organization to ensure that we know what we are measuring:

• What constitute a customer return?
• Do we need to take into account the additional services being offered to get the sale? This increases the sales value productivity but reduces the margin (sometime over the long term, by which the head of sales has got the promotion and moved on..)
• Do we need to take into account the sales value productivity surge due to a sales campaign?

Success Factors of sales value productivity KPI Class

As sales productivity is a ‘mother’ KPI-class or ‘what’ KPI class, most of what we do in an organization, impact this KPI.

• The tenure of sales person.
• The quality of training
• Quality of leads.
• IT systems
• Operations support.
• Direct sales force vs indirect sales force
• Emerging vs mature market
• Sales collateral/material
• Maximizing the seasonality or a campaign

Interpretation and root-cause analysis

There can be Apart from looking at the success-drivers (as mentioned above and which will point to most of the root causes), one can also look at some other root causes.

If the KPI performance is coming lower than expected,:

• Check on the pipeline status – If the pipeline status is higher than usual, it might be just a timing issue and you may catch-up next period)
• Any significant attrition of high quality sales force.
• Any sales campaign finishing in the previous period

If the KPI performance is higher than expected,:

• Any sales campaign in the period
• Any recent geographic expansion in past few periods (as a new office takes some time to start adding value)

Measures of sales productivity

• Sales value

Dimensions or attribute on which you can slice and dice the Sales Value Productivity KPI class*

• Location (sales value productivity for London Office)
• Product (you can have different level of productivity given the complexity/demand of a given product)
• Business Unit  (sales value productivity for OPD critical disease patients)
• Time (sales value productivity
• Tenure slab of sales staff
• Sales channel
• Sales Campaign

Direction of improvement

Maximize

Industry Relevance

All

Functional Relevance

Sales & Distribution