Salespeople need to feel the love, that is, they need to be successful. But what that means for them, and what it means for the company they work for, may not always align. And why it matters is that a company distributing leads—leads that cost $300-plus each—to salespeople wants to be certain that those leads are going into the right hands, i.e., to the salesperson who's most likely to bring back a job, and at a price above the company average.
Close Rate vs. NSLI
Customer inquiries typically move through this matrix:
- Raw leads convert to set leads,
- Set leads convert to confirmed appointments,
- Appointments convert to demos (product presented, price offered), and
- Demos convert to sales.
Total gross sales are reduced by cancellations and credit rejects to net sales, i.e., revenue, or what the company keeps.
For owners and sales managers, the metric that matters can be either how many appointments actually converted to sales (close rate); or how much net revenue was created by a lead (net sales per lead issued, or NSLI). For salespeople, what matters is how many deals they closed on products pitched, even if it means blowing off the unpromising lead. “They figure: I did my job, I got them to say yes,” says Mike Damora, sales manager and REMODELING/REPLACEMENT CONTRACTOR columnist. “That’s really the juice.”
So for some owners, the only true measure of sales efficiency is what the company keeps relative to its marketing investment, i.e., the cost of a lead. For every lead distributed, X amount of money came back.
Where They’re At
As with many things, all of this is relative. For some owners, close rate matters more when reps first start, NSLI matters more later. They want to know, simply, whether or not a new salesperson can ask for the order and come back with a signed contract. If he can’t, other metrics are meaningless.
“If they’ve been here less than 12 months,” says Bob Quillen, owner of Quillen Bros. Windows, in Bryan, Ohio, “I am looking at their closing percentage. Confidence breeds competence.” For salespeople who’ve been with Quillen Bros. Windows for awhile, both close rate (40% or better) and NSLI come into play. “I know their (NSLI) numbers for the month and year to date,” Quillen says, and “anyone over $2,000, is a rock star.”
Factors Beyond Control
Close rate can be the more telling metric when it comes to determining the talent and energy of a salesperson. It’s also more fair, says Greg Garcia, vice president of American Exteriors, a Colorado company with multiple branches. NSLI “takes into account factors that are outside the salesperson’s control,” Garcia says. For instance, no-shows and the absence of all buying parties on the front end, and rescission and credit rejects once the deal is signed.
And then there’s chance. “The opportunity in front of a salesperson is often the luck of the draw,” says Jeff Moeslein, president and owner of Legacy Remodeling, in Pittsburgh. “I might hand out two window leads, giving the better one in the affluent neighborhood to my guy who I think is more likely to sell it. The next morning they may have both sold, but it could easily turn out that the good one turned out to be a small sale while the other one turned into a big sale.”
Demo Rate Matters
Close rate and NSLI are not a case of either/or. “We clock both,” says Jake Jacobson, VP of sales at Premier Window & Building, in Baltimore. And a third, not unrelated, metric he keeps his eye on is demo rate. Jacobson acknowledges that a certain number of appointments will fail to convert to product demonstrations simply out of luck or misunderstanding. But, he points out, the best salespeople can turn a so-so lead into a demo because they know how to explain their way into the house and show product. The more product demos, the more sales. “You want to follow their demo rate,” Jacobson says. At Premier, the standard is 80% appointments-to-demos. Legacy expects reps to demo 85% of appointments, and the company uses a metric that blends demo rate with close rate (expected to be 35% minimum) to produce a salesperson’s performance ratio.
For salespeople, it’s close rate that counts every time. “If you ask a
salesperson to self-evaluate, he’s going to say close rate,” Damora says. “But
from a purely business standpoint, I don’t care how many deals you close, I care how much revenue you're bringing in for
the marketing dollars I'm shelling out.”