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
In the interest of speed, ROI analysis relied on existing data.
1. Cost for the initiative.
2. Participating dealers' net revenue dollars, according to three
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.
To determine the direct contribution of the sales training program
to improved performance, the effects of the program were isolated
from other influences by:
- Documenting net revenue changes.
- 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:
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
ROI = (1,200,000 - 208,460) / 208,460) x 100 = 476 percent
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).