Sales operations have historically been tasked with driving top line results. Today, the very best sales teams are boosting profitability and company value too. Front line teams have access to the highest leveraged drivers to impact profit margins throughout their daily activities. Improving awareness of these drivers and their impact on margins alone can deliver significant profit enhancement.
Four components deliver profitability through sales: Value, Price, Data and Incentives.
Recognizing your true economic value and being able to sell that value will close more deals and improve profit margins. How? Selling the economics of your offering shows the buyer how you will help reduce costs, increase sales, reduce risk or improve competitiveness. Each of these can be quantified and communicated. It requires that sales team get comfortable with the numbers. The key lies in a repeatable value selling process instead of traditional selling tactics.
If your sales team has the authority to adjust prices through discounting or even set prices, there is a significant opportunity to improve profitability. The average company will realize an 11% increase in operating profit with a 1% improvement in price. Sales teams will deliver 1% price improvement with the right skills. Knowing how to defend prices, reduce discounting and capture price premiums will easily hit the 1% mark.
Your sales invoice data and a little cost data are a goldmine of profit enhancement just waiting to happen. Analyzing customer profitability, product and customer mix, volume, and sales rep margins are just a few of the analytics that give insight to powerful margin opportunities. Add cost to serve to customer profitability calculations for a more accurate metric of profitability.
We see a lot of firms struggling to get impact on profitability through sales team incentives. Reward sales teams on the profit drivers that they can affect. Consider compensation plans that include incentives for sales achievement and price achievement if your team has influence over price. Or, add gross margin percent to a plan with profit margins dollars to insure profitable growth.
It’s never too late to start thinking about driving profit through your sales organization. As you can see, there are multiple avenues by which profit enhancement can be realized without a wholesale change to your organization.