Sales Force Yield—the ability of a sales department to grow revenues faster than sales costs—is a foundation measure of sales force effectiveness. The best outcome is to have a positive sales force yield when revenues are growing. That is, as the company’s revenues grow, the sales force costs grow at a lesser rate. However, even when sales production declines, sales leadership can demonstrate a positive Sales Force Yield by reducing costs at a greater rate than sales revenue shrinkage.
The Alexander Group’s “2013 Sales Compensation Trends Survey” reports an average 3.28% positive yield of revenue growth to sales costs for 2012.
More than 125 companies participated in the 11th annual survey, which collected data in December 2012 and published results in January 2013. The survey gathered information on sales department performance in 2012 as compared to 2011 and projection about 2013 performance. The survey featured more than 36 questions regarding sales performance and sales compensation program costs and effectiveness.
Chart I displays the relationship between the percent change in sales revenue and the percent change in sales costs.
As Chart I demonstrates, greater sales growth usually requires greater sales cost.
Chart II shows the distribution of Sales Force Yield.
Most companies show a positive Sales Force Yield with revenue growth growing faster (positive numbers) than sales costs. The average Sales Force Yield is 3.28%.
Sales Force Yield provides a year-over-year measure of sales productivity improvement. While companies with higher growth rates tend to see costs increasing at a higher rate than lower growth companies, the more insightful measure is to compare the percent change in costs to the percent change in sales revenue. A positive Sales Force Yield will show that the percent of sales revenue change is higher than sales costs change. This demonstrates sales productivity increasing. Anytime the number is negative, the sales costs will be growing at a faster rate than sales revenue.