A sales objective is a goal established for quantifying the success of a company's sales or its sales staff. Companies set objectives for two reasons. One objective gauges marketing and sales results, and the other judges the performance of the process or person. Companies analyze sales performance objectives to refine them for greater efficiency and better revenue results.
Gross revenue represents the total amount of sales generated by a given sales representative or by the company as a whole. A sales professional wants to increase her revenue each year, but she needs parameters that help her determine how much revenue she needs to generate from year to year. Some of the factors that go into creating sales performance objectives include the number of units sold, the effectiveness of sales or marketing programs, a company's market share, profitability and market or industry position.
In sales, progress against the competition is often judged by how much of the market a company's sales represent. You can increase your revenue by 10 percent for a given year, but if you have lost 20 percent of the market share that you once had, then the rise in revenue is a false positive indicator. Businesses typically use an increase in market share percentages as a sales objective for each sales representative and for the entire company.
A business looks at its gross profit margin as a culmination of its sales staff performance throughout the year. Some companies prefer to use a structured pricing matrix to help maintain the gross profit margin for all sales associates, while others allow experienced sales professionals to use lower margins for some deals at their discretion in order to win new clients or business. A company can calculate its gross profit margin as a ratio of gross profits to the cost of goods sold – or the expenses directly associated with making the product.
New Clients and Customer Retention
A primary objective for any sales performance appraisal is the ability for the representative to retain existing customers and develop new ones. The addition of new customers each year offers a way for the sales rep to increase market share and revenue, but if he loses those customer over time, meaning customer retention is low then his ability to reach the sales objectives in other areas can be affected.
- 4774344sean/iStock/Getty Images