How does your company measure sales with respect to your channels to market? Do you focus solely on a sale’s value, its strategic importance to your company, or are you more concerned about the gross profit generated by the sale? More importantly, what role does your company’s key performance indicators, or KPI, play in defining those sales that you’ve deemed important to your enterprise? Well, if you’ve not yet established your company’s sales KPI, you’ve likely not taken the time to define what types of business your company sees as important.
It’s not merely about securing an order, but about making sure that order is of value to your company. So, what can your company do to ensure your key performance indicators clearly define the types of business your channels to market should focus on?
Setting Up Key Performance Indicators
If there was ever one essential truth of marketing and sales, it has to be that not all business is the same and consequently, not all sales are good sales. Some companies rely upon specific strategies or partners that ultimately allow them to increase the gross profit of a given sale. As such, these companies may resort to using distributors or sales agents as their channel to market because of their market intelligence and knowledge. Other companies may choose to work with integrators and see these companies as ideally suited to selling their product, and providing the necessary technical support.
Some may focus on securing sales with low gross profit. Their intention is to grab market share and increase the company’s visibility amongst its clients and its market. Still, others may simply want to get a new product out into their market and see any sale, regardless of its profit, as an important step forward.
The key is to determine what your market strategies are and what role your key performance indicators should play in defining your company’s view of a given sale. This in turn should ultimately determine how you’ll judge your channels to market and their ability to secure and retain business. In essence, it’s about defining what sales are important to your enterprise and why, and then using your KPI to track your partner’s ability to secure that business.
To provide further insight, we’ll review some of those aforementioned examples and discuss how a company should go about determining its sales KPI for different channels to market. The first is to define sales KPI for distributors. The second is for sales agents and the third is for integrators.
1. Setting KPI for Distributors
How does your company want your distributors to market and sell your products? Are you willing to allow them to determine their own markups? Are you comfortable with them setting their own pricing strategies? Most importantly, how will your company measure their success? Granted, these are a lot of questions to answer. However, answering these questions starts by understanding how you want your distributors to price your product. It’s one of the biggest concerns companies have when they work with this kind of channel to market.
It’s essential that your company be able to gauge your distributor’s success or failure. Establish sales KPI that track their ability to grow gross profit within a given market. Next, come to agreement as to the benchmarks that will be used to gauge the distributor’s success.
2. Setting KPI for Sales Agents
Sales agents are different from distributors because they don’t stock your product and then resell it. Instead, they can be viewed as your company’s outsourced sales team or as your company’s “opportunity” providers. This allows your company to better control pricing. In essence, sales agents are tasked with securing opportunities.
Your company must determine whether their key performance indicators should be based on them bringing your company opportunities, or whether you’ll measure their success by their ability to close on those opportunities. You’ll have to account for the fact that your enterprise controls pricing. In this case, your sales agents can’t sell on price, but must instead be able to sell on the product’s features and benefits.
Learn about how to defend your pricing.
3. Setting KPI for Integrators
Integrators are often tasked with providing technical support for customers both before and after the customer’s purchase. This makes them more self-reliant and less likely to tie up your company’s operations and customer service department. In addition, because they can provide technical assistance, it also means they are less likely to sell on price. Instead, they tend to focus on the product’s attributes, and its cost-per-use benefits.
Determining key performance indicators for integrators must be focused not only on their ability to sell your products, but on their ability to save your company money by reducing the impact on your company’s operations and support. Therefore, use KPI that measure growth in market share and gross profit, but temper these benchmarks with the understanding that integrators should also be measured on their ability to reduce your service costs.
When it comes to defining sales KPI for your channels to market, start first by identifying how you want them to approach their market. Next, focus on how you’ll measure their success by assessing their unique market position. Distributors, sales agents and integrators all bring something different to the table. Determining how you’ll measure their success starts by understanding their differences and using them to your advantage.
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