How does a firm know whether a salesperson is effective? Obviously, the short answer is that she produces high sales volume and meets or exceeds sales goals. But just increasing total dollar or unit sales volume is not always a good indicator of salesperson success.
The problem is, everything else being equal, salespeople who are compensated strictly on sales volume will simply sell whatever products are easiest to sell to maximize total sales. But these may not be the products with the highest profit margins, and they may not be the goods and services the firm identifies as key to future success in the market. Because of the problems with using raw sales volume as the sole indicator of salesperson success, some firms turn to a variety of other metrics, including input and output measures.
Input measures are effort measures-things that go into selling, such as the number and type of sales calls, expense account management, and a variety of nonselling activities such as follow-up work and client service.
Output measures, or the results of the salesperson's efforts, include sales volume but these also can be the number of orders, size of orders, number of new accounts, level of repeat business, customer profitability, and customer satisfaction. Ultimately, the best approach to measure salesperson success is to use a variety of metrics that are consistent with the goals of the firm, to ensure the salesperson understands the goals and related metrics, and to link rewards to the achievement of those goals.
If you were a professional salesperson, what type of metrics would you prefer to be evaluated against? Why?