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PROFESSIONAL SERVICES BUSINESS DEVELOPMENT AND MARKETING INSIGHTS

| 1 minute read

Sales efficiency as a target for marketing

Marketing departments have a surprisingly wide range of goals and targets. Often these are short-term and tied to measurable digital metrics, such as the number of visitors to a particular page or the number of Marketing Qualified Leads generated over time. Those metrics are essential for assessing tactics like comparing similar ad campaigns or helping to decide where to spend budget but they don't really inform long-term marketing strategy performance. 

Contrarily, taking the 5P's approach which looks at Product, Price, Promotion, Place, and People (outlined in the graphic below) is wonderfully broad and designed to position a business strategically but can be hard to pin down as a single metric. 

I came across the calculation below recently. It is really simplistic and only brings in direct sales costs. However, just by adding in marketing costs, it encapsulates the effectiveness of revenue-generating departments as a function of their costs. Essentially it shows how many $$$$ we get for each $ spent.

This view represents the full strategic progress of an offering across all five Ps and tracks the progress of a business toward product-market fit over the long term. As the product gets better, the client list is grown, the packaging is redesigned, every choice is designed to make the offering more attractive. All of this feeds down to this single metric which is extremely helpful for working out where and when to invest. 

Image from the Corporate Finance Institute

Calculation Sales efficiency is the ratio of gross revenue generated by a sales team as compared to the cost of the team including salaries, benefits, incentives, office space, training, software and other expenses. Sales efficiency = (revenue / sales cost) x 100 For example, a sales team generates revenue of $12 million at a total expense of $2 million. Sales efficiency = (12/2) x 100 = 600%

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Tags

abm, sales, sales effectiveness, marketing strategy