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The Importance of Sales Targets

Performance-related bonuses and incentives are essential to get the best from your salespeople. The advantage of sales roles is that the effectiveness of each salesperson can be measured and clearly determined.

Therefore targets should be set to give a clear indication of what kind of performance is expected, and incentives should be provided to encourage sales staff to meet and exceed those expectations.

Targets should be broken down into different areas depending on the type of customers being sought:

  • New customers – this is the main role of salespeople, to bring in new customers who have never previously purchased the product or service.
  • Existing customers – it’s likely that there are product or service enhancements that you can sell to existing customers, known as upselling. Upselling is the key to success for many businesses as the initial sale only has a small margin. It is upselling that is most profitable.
  • Past customers – previous customers should not be considered lost forever. Set targets to encourage salespeople to pursue past customers.

The exact sales targets will depend on what drives the profitability of your business.

Although you should set final sales targets it’s also important to set activity targets. These are day-to-day activities that your salespeople will carry out, each one increasing the likelihood of bringing in a successful sale. Possible activity targets include:

  • Phone calls – the number of completed phone calls, where a conversation has been held with a potential customer
  • Letters sent out – this refers to the number of prospects targeted. It will often be followed up with a phone call.
  • Leads generated – this figure will enable you to evaluate how effective your salespeople are at generating leads from each phone call.
  • Face-to-face meetings – actual appointments with customers.

With figures for the number of completed sales as well you’ll be able to identify a clear picture of how many prospects are converted into leads and how many leads into customers.

This can form the basis for identifying leakages in the system, such as a high percentage of generated leads not resulting in sales, to help you improve the efficiency of your sales staff. You may decide that it’s best to try to arrange a meeting with prospects if for example sending over additional information initially often results in the prospect losing interest. Alternatively the information that is sent over to prospects may need to be improved.

One aspect of the sales target process that is worth noting is that your sales staff should be involved in the process of deciding appropriate targets, as noted by Joel Deceuster, founder of Deceuster & Associates:

“By including your salespeople, you give them added motivation to succeed. But without inclusion, salespeople will figure out the best excuses in the world why they can’t achieve.”

Reassess targets from time to time and evaluate performance. It may be that the geographical areas for each salesperson to cover are too large, a competitor has introduced a new service which is more attractive compared to yours, or there’s a general slowdown. Move quickly to resolve any problems, readjusting sales targets where appropriate.

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