In 2001, 14 dealers from a Latin- American power company had their sales representatives participate in a program intended to increase revenue by improving sales performance. The trainers conducted an evaluation, including ROI, to quickly determine the business benefits.

In the interest of speed, ROI analysis relied on existing data. This included:

1. Cost for the initiative.

2. Participating dealers' net revenue dollars, according to three classifications:

a. Win-back revenue: former customers became customers again.

b. New customer revenue.

c. Loyal customers who purchased products in 2001.

3. Participant evaluations. Seventy-six percent of the participants turned in post-training surveys.

Evaluation Results

To determine the direct contribution of the sales training program to improved performance, the effects of the program were isolated from other influences by:

  1. Documenting net revenue changes.
  2. Estimating revenue changes due to the program.

A loyal customer dealer net revenue increase of $5.8 million (MM) was excluded from cost benefits, since a portion of that increase would likely have happened without the training initiative. While the $9.6MM of winback customers and new customers were partly due to training, isolating the direct impact of training created a more credible ROI. Experts estimated the isolation factor at 50 percent, which includes contribution and confidence factors. The cost-benefit calculation is:

Cost benefits = $ 9.6 MM x 50 percent Isolation factor = $ 4.8 MM

Level 5: Return on Investment

ROI = (Benefits - Cost) / Cost) x 100:

Total Program Cost

Total program costs for both participant groups were:

Manufacturer $460,000

Dealers $208,460

ROI for Manufacturers

$4.8 MM x12 percent margin = $.576 MM ROI = (.567 -.460) /.460) x 100 = 25 percent

ROI for Dealers

$ 4.8 MM x 150 percent incremental revenue= $7.2 MM x margin = $1.2 MM

ROI = (1,200,000 - 208,460) / 208,460) x 100 = 476 percent

Summary

The sales-performance improvement program offered dealers a proven approach to increase net revenue. The manufacturer can offer this program to dealers at cost (25 percent ROI) enabling dealers to realize a significant ROI (467 percent).