Get Your ROSI Up: How to Improve Your Return on Sales Investment1. GET YOUR ROSI UP:
How to Improve Your Return on Sales Investment
April 18, 2012
Gunter Wessels, Ph.D., MBA Sam O’Rear, M.A. BA
Partner, Practice Principal, TIGI Senior Partner, Founder, TIGI
gunter@mytigi.net sam@mytigi.net
@gunterwessels @TIGI_Inc
www.tigi.net
© TIGI 2012 All rights reserved
2. What We’ll Cover
1 ROSI Defined
2 The Value of Sales Effort
3 Using ROSI to Improve Performance
4 Strategic and Tactical Implications
5 Recommendations
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3. 1 ROSI Defined
ROSI = Return On Sales Investment
ROSI is a measure of Sales Productivity
ROSI = Revenues
Sales Costs
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4. How to Find Your ROSI Costs!
Cost of the Sales Team is part of SG&A:
• Salesperson, Manager, and Support Staff Salaries
• Incentive Compensation Cost
• Travel Expenses
• Technology -- CRM Software, Cell-phones, iPads, etc.
• Customer Entertainment Expense
• Training and Skill Development Investment
• Business Intelligence Databases, Reports, etc.
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5. 2 Where’s the Value in Sales Effort?
We asked a group of 15,000 reps where they add value
Responses: Evaluation:
• Customer Education • Marcom / Product Function
• Transaction Support • Contracting, Logistics
• Capacity & Stocking • ERP and EDI
• Pricing • Product Marketing Function
• Relationship Management • Brand, Customer Service
• Customer Attention • Inbound Marketing
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6. The Value of Sales Effort
Personal selling adds value and is needed when...
• Customers face significant transaction and decision risk.
• Companies face transaction, customer, and COGS risk.
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7. ROSI Benchmarks
Improving the ROSI
Benchmark: ROSI - 8.0
How to Improve ROSI? SALES
• By Growing Sales
• With Sales Cost Flat, to Down
COSTS
Analysis by Albers, Mantrala & Sridar (2010 JMR)
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8. Value of Sales Activity: Benchmarks
Improving the ROSI with activity
Selling Expense Sales Revenue
Sales • 31% Current Period Elasticity
Management
• Meaning: a 10% increase in
sales activity leads to a 3.1%
change in sales volume.
Sales Effort
Yields +3.1%
Sales Activity
in Sales $
+10%
Analysis by Albers, Mantrala & Sridar (2010 JMR)
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9. ROSI Example
Your Company has $60 Million in Sales in 2012
Your sales target for 2013 will grow by 6%, i.e. $3.6M
The sales cost was $8M for 2012, and you have been
requested to keep sales cost level for next year.
• How do you attain the growth with zero sales rep adds?
• What is the 2012 ROSI?
• What will ROSI be for 2013?
• How will the Current Period Elasticity work for you?
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10. ROSI Example
Your Company has $60 Million in Sales in 2012...
Your sales target for 2013 will grow by 6%, i.e. $3.6M
The sales cost was $8M for 2012 and you have been
requested to keep sales cost level for next year.
• How do you attain the growth with zero sales rep adds?
• 2012 ROSI = 7.5 ROSI Target for 2013 = 7.9
• 20% increase in sales activity would yield sales $3.6M
Management Decision: How can we adjust incentives
and activities to increase "face-time" by 20%?
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11. ROSI Drivers
Driver Example
• Focused Sales Effort • Unsought Goods
• Product/Service Launches • Innovative Solutions
• Sales Effectiveness • Competitive Advantage
• Risk Management • Forecast Accuracy
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12. ROSI Killers
Killer Example
• Lack of Metrics • Outcome Measures
• Undisciplined Pricing • Evolving Pricing Policy
• Hybrid Channels • Double Coverage
• Commoditization • Built-in Demand
• Cumbersome Contract • Legalistic Approval and
Processes and Policies T&C Negotiation
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13. 3 Using ROSI to Improve Performance
ROSI measures the outcomes of sales behaviors: ROSI IS:
Therefore, to "Up Your ROSI"... Quality vs.
Quantity
• Sales Leadership Requires a Focus On--
Sales Activity: Wins, Velocity, Engagements, and Losses
• Performance Compensation Should Be Based On--
ROSI IS:
Sales Behaviors: Pay for targeted behaviors Activities vs.
• Sales Management Requires Focus On-- Outcomes
Coaching Behaviors: Coaching the right sales behaviors
in contact with the customer
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14. 4 Strategic & Tactical Implications
Strategic Sales Activities:
In a Commodity Market:
• Relationship Management
• Issue Resolution
In an Innovation Driven Market:
• Three Dimensions of Value Communication
• Influencer Engagement
• Leverage the Credibility Factor (Branding)
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15. 4 Strategic & Tactical Implications
Tactical Sales Activities:
When selling...
• Are we talking to the right people?
• What are we talking about when engaging these people?
• How is the organization supporting the engagement?
• Is there enough of the right activity?
Quality in Quantity
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16. 5 Recommendations
What to do today:
• Calculate your ROSI
• for your sales team
• for each territory
• Evaluate your performance metrics
• Re-focus on high value activities
• What/where/how do salespeople they spend their time?
• What/where/how do managers spend their time?
• Evaluate your management infrastructure
• What activities are the managers creating and motivating?
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17. 5 Recommendations
What to do next:
1. Upgrade skills: Business Acumen, Evidence-Based Selling,
Salesmanship, RFP Strategy
2. Update the playbook: Corporate Accounts, Contracting &
Coverage Models -- Aimed at the Best Activity Model
3. Revise metrics: Behavior Metrics--Customer Engagement,
Wins and losses, Attrition, Margin Compression
4. Assess, develop and package talent: Managers,
Specialists, Generalists, New-business, and Support
5. Recognize that behaviors lead to sales: Sales performance
is a trailing indicator; sales behaviors are a leading indicator.
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18. Questions?
www.tigi.net
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19. As a participant today:
Use Code: “2012ROSI”
• $1500 credit on a TIGI consultation
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20. Upcoming Webinars
May 16: 5 Medical Distribution Strategies Doomed to Fail in 2012
June 13: How Healthcare Reform Impacts Your Business Today
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21. Thank You
Gunter Wessels, Ph.D., MBA Sam O’Rear, M.A. BA
Partner, Practice Principal, TIGI Senior Partner, Founder, TIGI
gunter@mytigi.net sam@mytigi.net
@gunterwessels @TIGI_Inc
www.tigi.net
© TIGI 2012 All rights reserved
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