Wednesday, July 18, 2012

Use of BSC for Sales Strategies Evaluation

Success of every business depends on sales, be it products or services. Every commercial organization looks for as many customers as possible to make profits. However, the recent crisis has negatively affected purchasing power of customers in lots of countries. Thus, people do not have enough money to afford products and services they used to afford. Therefore, companies had to re-orient their businesses to offer clients exactly what they needed at the moment.

Every sales department has certain goals and plans (for instance, to sell 200K smartphones a month or attract 10K new customers). Yet, often sales goals do not fully comply with goals of other departments, and what's more important, goals of the entire company, its mission, vision and strategies. In other words, a sales department may fulfill its goals, but this will be not enough to succeed on a larger scale. For this reason, many organizations use performance evaluation and strategic management tools to measure performance of sales departments and align strategies designed for sales managers.

There are many popular strategic management frameworks these days, such as Kaizen or Six Sigma. Yet, Balanced Scorecard is known as the most user-friendly and easy to implement system for performance evaluation and strategy supervision. BSC was developed in early 1990s, but has received only minor updated and modifications since then. Its creators Norton and Kaplan had one basic idea when developing the concept - any strategic management framework should include non-financial indicators. This means that financial results of any organization with clear commercial goals largely depend on non financial factors, such as dedication of personnel, internal business processes etc. This is where Balanced Scorecard shows its true power.

The beauty of BSC is that it can be easily used in a variety of industries and company departments. Moreover, it is possible to design cascading scorecards that feed data to one another which makes it possible for top managers to have summarized information on company performance, analyze strength and weaknesses, progress and regress in implementation of strategic goals etc. So, it is possible to create a scorecard project for a sales department, while this bsc map will be a part of a larger performance evaluation project that covers all department and global strategic goals.

As to evaluation of a sales department, it is imperative to choose winning kpis. KPIs stand for key performance indicators which are measures representing major success factors for various business areas. Down the page are a few typical examples of common sales KPIs.

Online sales revenue versus total sales. Today, in the age of the Internet and technology, the majority of businesses target online markets since this is where customers are. Growth of online sales may well signal about progress of a company and strengthening its positions in the market.

Customer retention rate. There is a simple rule. If a customer returns for another purchase, the sales department performs well. So, the more customers become loyal, the better.

Average % of revenue per one sales person. It is very important to accurately calculate how much revenue one sales person brings to the company.

With our sales kpi package it is easier to create a sample scorecard for your sales department. Please, visit our site to find KPIs for a variety of industries.

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