Where do I invest? Advertising vs. Sales Team Effectiveness
increasing advertising spend and Improving sales team effectiveness two distinct strategies to drive business growth, and each has its own set of benefits. In this analysis we compare general business data with industry insights, providing a comprehensive perspective on how these elements impact business strategies and outcomes.
1. Cost Efficiency:
Improving Sales Team Effectiveness:
High Return on Investment (ROI): Investing in sales training, process improvement, and better sales enablement tools can have long-term benefits with relatively lower upfront costs. Companies typically spend $1,500 - $3,000USD per salesperson per year on training. However, companies with highly effective sales teams see 24% higher profit margins compared to average-performing teams.Sales Tech Efficiency: Implementing CRM systems, sales analytics, and automation tools increases close rates and sales productivity by up to 29%.
Increasing Advertising Spend:
Diminishing Returns Over Time: The marginal return on additional advertising spend can decrease as it becomes harder to acquire new customers at the same cost.
Cost of Advertising: The cost per acquisition (CPA) in advertising can vary widely, but digital channels (e.g., Google Ads, Facebook Ads) often see rising costs as competition increases, leading to higher CPAs over time.
A study by Nielsen showed that increased advertising spend often leads to 2-3% growth, but the return diminishes at higher levels of spend without improved targeting or messaging.
2. Long-Term Impact:
Improving Sales Team Effectiveness:
Customer Lifetime Value (CLV): A skilled sales team can improve customer retention, upsell opportunities, and overall customer experience, contributing to higher CLV. Research shows that companies focusing on sales effectiveness increase customer retention by up to 18%.
Sales improvements often have lasting effects since process improvements, better sales techniques, and training help reps sell more effectively over time. This adds sustainable growth to the business.
Increasing Advertising Spend:
Short-Term Gains: Increased advertising can boost visibility and drive more leads or sales in the short term, but it's often not a sustainable growth lever unless the advertising strategy constantly evolves.
Dependency on Ad Spend: Businesses relying on advertising for growth may see sales drop if they reduce the spend or face rising ad costs.
3. Conversion Rates:
Improving Sales Team Effectiveness:
Sales reps with targeted training on handling objections, identifying customer needs, and nurturing leads have up to 50% higher close rates than poorly trained teams.
Top-performing sales teams convert 30% of leads into customers, while the average is closer to 18%. A well-optimized sales team can thus outperform most gains achieved via advertising.
Increasing Advertising Spend:
While ads may increase the number of leads, conversion rates from advertising channels depend heavily on the quality of the sales funnel and follow-up processes.
On average, only 2-5% of leads from digital ads convert into customers, though this varies by industry.
4. Brand and Relationship Building:
Improving Sales Team Effectiveness:
Sales teams can develop personal relationships with clients, understanding their unique needs and building long-term partnerships that contribute to repeat business and referrals. This relational aspect often cannot be replaced by advertising.Companies with top-tier sales forces tend to experience 23% higher customer satisfaction, which leads to better word-of-mouth marketing.
Increasing Advertising Spend:
Advertising is effective at creating brand awareness and generating leads, but it does not build the trust and relationship that a skilled salesperson can develop.Ads are usually more transactional, focusing on driving short-term sales rather than building long-term relationships.
5. Scalability:
Improving Sales Team Effectiveness:
Sales effectiveness can be scaled through continuous improvements in training, process optimisation, and leveraging sales technology. As the team becomes more effective, the impact grows exponentially.It can take time to see results since it involves people development, but the payoffs are often more sustainable.
Increasing Advertising Spend:
Ads are scalable quickly, but effectiveness often plateaus unless backed by a robust sales process. Scaling ad spend alone may lead to increasing lead volumes without corresponding increases in conversions unless the sales team is well-equipped.Conclusion:
While advertising may provide quicker, short-term boosts in lead generation or sales, improving sales team effectiveness tends to offer more sustainable, higher-value benefits. Optimising the sales team can lead to better conversion rates, higher customer retention, and more significant long-term profitability.
For many companies, the ideal approach would be to balance both strategies—investing in the sales team's ability to convert leads into customers while leveraging advertising to drive initial interest and traffic.
