3 Main Factors That Affect Sales Performance
Several key factors that affect sales performance go widely ignored by most leadership.
While many of the factors below are well-known, several sales performance levers go under-utilized in most sales organizations.
Understanding how all these factors interplay will help you leverage them to point your organization in the right direction during planning and course-correct when performance dips.
Core Factors Affecting Sales Performance
Although external factors (like the macroeconomic cycle or new regulations and competition) influence sales performance, internal factors have the most significant impact.
External factors cannot be controlled or avoided but can be anticipated and mitigated. How successfully we mitigate external factors depends largely on internal factors, which we can influence.
1. Your Product or Service
Regardless of your industry, the quality of your product or service will largely determine its sales performance. More and more, the longevity of that performance will depend on the level of customer support you provide customers.
High-quality products and service provision drive sales growth in several ways:
- Increases customer loyalty, leading to higher customer Life-Time Value
- Increases referrals, which increases Net New Revenue and reduces Customer Acquisition Costs
- Increases Return-on-Investment because people will tend to pay more for higher-quality products
- Reduces returns and complaints, which can have a high cost attached and will impact future sales through diminished brand equity
Listening to your customers is key to ensuring high product quality. Run focus groups, customer satisfaction and perception surveys regularly, and test products relentlessly before release. Detailing your product roadmap publicly can also help to ensure your product continues to be useful for your customers as it evolves.
2. Your Go-to-Market Strategy
While a poor product or service can produce revenue with a well-executed go-to-market strategy, it will always be an uphill battle to maintain.
Your go-to-market strategy is a powerful tool to adjust customer expectations to meet your product or service quality level. It will largely determine the success of your product in the market.
There are several elements to a go-to-market strategy.
Correct pricing is an essential component of the go-to-market strategy. Selling a low-quality product for a high price won’t last long. But pricing your product low can reduce customer expectations. Most people don’t expect high-quality products or customer support for budget items; many will not bother to return ultra-low-priced retail products.
Understanding your customer and their expectations is critical for an effective pricing strategy.
Once you have calculated the cost of raw materials and delivering the product to market, and your minimum acceptable margin, benchmark it against your competitors. If there are significant differences, adjust accordingly, or figure out a message that explains the price difference.
Your product positioning and messaging is key to your sales performance. It’s a far more valuable aspect of your brand than a logo or color palette.
If your brand story of quality, great service, unique experiences, or innovation resonates with your customers, they will often happily pay more to be a part of it.If your brand story of high-quality, great service, unique experiences, innovation, or responsibility resonates with people, they will happily pay more to be a part of it. Click To Tweet
Messaging and brand position are particularly important when selling premium products. If customers believe the return (benefit) they get from your product or service is more than the price, they will pay.
Sales & Marketing Strategy
Once you have developed your product positioning and messaging, you put it into the world through sales and marketing campaigns.
Define the sales and marketing strategy together — they are two halves of the same game.
Distribution activities will differ depending on the product and audience. Still, the aim is always the same: educate potential customers about your product story, and build trust until they’re comfortable with investing.
Explore your industry and learn where potential customers gather, what they talk about, and the problems they worry about. Then create content that helps them overcome those problems and educates them on your product and service as they progress down the pipeline.
Learning what attracts and persuades your customers is an ongoing process, so do not be alarmed if efforts do not pay off immediately.
Test channels and messaging frequently, and analyze feedback and combined performance data as often as makes sense for your sales cycle.
Budget and Investment
The final component of your go-to-market strategy is the budget. Customer Acquisition Costs will vary between industries and organizations, so this is largely down to your Finance and Exec team and the business objectives.
3. Your Sales Compensation Program
Sales incentives are the driving force behind your sales team’s performance. It provides more leverage on sales performance than most enterprises realize, influencing sales team morale and output.
How Territories and Quotas Impact Sales Performance
Sales territories and quotas have a significant impact on individual sales performance.
The first element is the psychological factor: If your reps don’t believe in their ability to meet targets, they will underperform. Even if they believe in them, if your quotas are not determined on balanced territories, they are unlikely to achieve them.
Traditional geographic territory setting fails to consider the huge variances between territories: competition, saturation, population, potential customer workload and account growth, to name a few.
It only accounts for one variable when variables like potential new customers are used to determine geographic boundaries. It doesn’t account for things like customer workload or competition level.
That can lead to significant imbalances between territories. Some are under-served, while others are over-served.
Think of it like a busy bar. A constant stream of orders and tips may be good for the barman (the sales rep). But it’s not good for the customers at the back who have to wait to place an order (or go somewhere else to get served), which is not good for the business overall. In an over-served bar, your sellers spend all day chatting to the same few regulars, who always pay the same.
To achieve balance, territory mapping and quota setting should be considered a single exercise, with the territory variables (and individual variables) determining the individual seller’s targets.
Forma.ai creates a custom-data model for each customer, which allows us to create indexes for variables like customer workload and account growth potential. We combine them to develop realistic quotas tailored to each rep and their region’s capacity.
That also helps them rapidly adjust to changes, like rep turnover or new products, by entering the new variables into the model to see how they will impact sales volume.To create realistic, balanced quotas, territory mapping and quota setting should be approached as a single exercise, with the variable integrated to reflect the region's true potential. #salecomp Click To Tweet
How Sales Compensation Function Agility Impacts Performance
While the above is nice in theory, it is beyond reach for many organizations due to their lack of agility in the sales compensation function.
While the data is there, analyzing and presenting findings clearly and promptly is still a significant obstacle for most businesses. Disparate strategic and executional elements are hindered by manual data processing and ineffective tools, limiting business agility.
Organizations built a unified, fully-automated sales comp function can use their incentive program to adjust to changing market conditions and mitigate competitive pressure. They process data rapidly and accurately, so they can model multiple changes and roll out adjustments to sales comp dashboards with minimal effort.
The more agile your sales comp process (from analysis and design to execution), the faster your organization can identify underperformance and course-correct it.
Organizational Agility is the Key Factor Influencing Sales Performance
Although external factors affect sales performance, they typically impact our competition too.
Product lines can be changed. Go-to-market strategies evolve. The real determinant of sales performance is our ability to correctly identify and react to changing conditions. The organizations that respond the fastest tend to be the winners.
The key to organizational agility is data fluency: the ability to process, analyze, and distribute important information quickly and coherently.
Sales performance data-fluency — particularly around variable compensation data — has typically lagged behind other organizational functions. The reliance on seller input and experience has rendered sales forecasting a running joke for decades.
New data tools have opened the door for more sophisticated sales performance data. Forma.ai builds highly-sophisticated predictive models by breaking sales compensation and performance data into its foundation elements and fully automating data processing into the platform.