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The metric: Sales Efficiency Ratio
In this episode, we’re covering Sales Efficiency Ratio: which the Referral Rock team defines as “the ratio of salesperson sales, vs non-salesperson generated sales.”
John Bonini chats with Josh Ho, founder and CEO of Referral Rock, to learn how they improved their Sales Efficiency Ratio, and as a result:
- Onboarded customers faster
- Increased user’s “speed to launch” rate
- Removed a bottleneck to growth
- And were able to do more, with less
Why Sales Efficiency Ratio?
There were two main reasons why Josh and the team decided to try and move the needle on this metric:
- Selling primarily through sales reps was successful at first, but eventually became a bottleneck for growth
- They wanted to lean into product-led growth and grow the self-service side of their product
Before improving this metric, 90%~ of sales were closed by the sales team. This worked well for a while, but eventually became a bottleneck to growth.
The problem was, as the leads increased, so did the need for trained sales reps. And for a bootstrapped company like Referral Rock, this was costly in time & money.
It also made it challenging to test new channels because they didn’t have the ability to scale the sales team as fast as leads would come in. For example, if they decided to heavily invest in paid ad channels and it ended up driving lots of leads, they’d have to scramble to hire enough sales staff to help support the growth.
Besides all that, they had been intrigued by PLG (product-led growth), and how much more efficient that model could be for a SaaS company like theirs.
Up until that time, they were using traditional sales-led growth. The primary CTA drove users to book a demo, and 90% of their closed deals came from this sales-led method.
There was a self-service option, where users could start a free trial and build their program without input or assistance from sales. But only 10% of closed deals came through that route.
So they set out to improve their sales efficiency, by increasing the number of deals that were closed via non-sales methods.
How They Improved It
They made product improvements to foster more self-service.
They began working on shipping more PLG-inspired features to improve their existing self-service onboarding and upgrade flow. This way, if users preferred to set up their own referral program or upgrade their account, the experience was smoother for them.
They had CSMs lead group demos, then pass that group off to the product itself.
Before, they’d try to get important internal stakeholders onto the call, and take a more heavy-handed sales approach via sales reps.
With this “lighter touch” approach, they’d take a group of interested users, show them a demo and answer their questions, and then hand them off to the product ( = the self-service / PLG route they developed).
They initially built this “group demo to product” team by stealing from their CS team.
They started with one team member in particular who knew the product inside and out, and who had been on some sales calls before. He was critical in helping frame out the role, and make this new model more efficient.
Once they had the process in place and a better idea of what the role looked like, they began hiring outside talent to expand the team.
They promoted their two CTAs (“Book Demo” and “Start Free Trial”) equally.
They updated the layout and design of their site to give equal primacy to the two main CTAs. This let users choose how they wanted to buy.
They introduced intelligent routing which sent users to self-service or sales, depending on various criteria.
First, they implemented various tools & workflows in the product to get a better idea of what stage the potential buyer was in, and what type of company they were.
Then, based on those inputs, they’d put them in pre-set groups or buckets.
From there, they could route them to either the lighter-touch sales method they had developed (which resulted in self-service), or the traditional sales method, depending on which would serve them better.
In addition to that, they implemented a lead score mechanism to route the right leads to the right person.
Finally, they retooled their workflows to better serve prospective customers depending on which bucket they fell into.
For example, users in the CSM-led, "lighter-touch” sales group might get 1 series of emails and messaging. While users in the traditional sales bucket might get an entirely different set of messaging.
Results
In 6~ months these efforts resulted in them changing their Sales Efficiency Ratio ratio from 90/10 to 50/50.
In practical terms, this meant that:
- Customers were onboarding faster
- The team could expect the “speed to launch” rate (how fast customers get their referral programs launched) to increase significantly
- Hiring and training new sales reps was no longer a bottleneck to growth, or testing new channels
And ultimately, they were able to do more with less.
Check out the full episode here.
