Successful salespeople, and sales managers, like to talk about close rate. By that they mean, the percentage of leads that actually turned into sales. Or … the number of appointments that resulted in a transaction. So which is it? It depends on who you ask. “There are a lot of variables that go into close rate,” says Michael Majors, owner of Majors Home Improvement, in Milton, Fla. “One-leggers, for instance.” Those variables tempt salespeople to blow off leads that look like less than a solid bet, so they can keep their close ratio.
Accountability Is the Issue
That’s why for many owners the key metric in measuring sales productivity — and ultimately whether or not a salesperson remains with the company — is net sales per leads issued. That figure is determined by dividing the number of leads issued to a salesperson by the total amount of sales that person generated in a certain period of time.
Majors Home Improvement, for instance, moved from measuring sales productivity by close ratio to NSLI two years ago. Lead costs — now at about $350 per issued appointment — drove the change, Majors says. Since the company’s salesforce of three sells all its products — windows, siding, sunrooms, hurricane shutters — the company wants a return of $3,500 per lead issued. That not only allows Majors to see who is bringing in how many dollars, but it also helps him keep his marketing costs at 10% or less.
Lee Wegner, secretary/treasurer of ABC Seamless, a roofing, siding, and gutter company in Fargo, N.D., says that in addition to measuring productivity and holding marketing costs in place, using NSLI as the key sales metric enables managers to determine who is selling profitably. “If my lead cost is $100, and my NSLI is $1,000, then the guy who’s bringing back $2,000 per lead is hitting home runs,” Wegner says.
How To Raise It
Tom Slicko, sales manager at AAA Windows Siding Roofing, in Lincoln, Ill., says that the way to raise that slugging rate is for salespeople to increase the number of product demonstrations relative to leads. “Closing ratio doesn’t change,” he says, no matter how many leads you run. So someone showing product at 75% to 80% of appointments issued will produce twice the NSLI of a salesperson who is demo’ing only 40% or 50%. “If you have one or two pitching at 85%, that’s the greatest thing you can have as a sales manager. Because you can point to them and say: This is how it’s done.” —Jim Cory is editor of REPLACEMENT CONTRACTOR.
More REPLACEMENT CONTRACTOR articles about sales productivity:
Check the Metric: When and how often should you measure the performance of individual sales reps?
Beat the Clock: New sales hires usually have a limited time in which they must produce
Come Out Slugging: Savvy owners say net sales per lead issued will tell you more about sales productivity than any other measure