It's almost impossible to overstate the importance of sales performance metrics for any B2B organization. For everyone from run-of-the-mill office supply salespeople to the highest tech Software as a Service (SaaS) organizations, regularly tracking a comprehensive set of KPIs and using the results to inform your strategy and goals is crucial for success. Great sales talent, an attractive product, and a competitive price can get you far, but getting the most out of your resources requires knowing what you have achieved in relation to what is possible.
In order to inspire their team and achieve optimal performance results from sales processes, a sales manager must be able to give honest and accurate assessments of the sales unit's performance. Choosing the right KPIs can help reduce and even eliminate human biases and error, which can often put a damper on an organization and leave you scrambling for consistency, when evaluating performance. When trends in results are analyzed over time, they can point to breakdowns in various sales processes such as hiring, training, and technology implementation, and help you build a bridge to a more productive and prosperous path forward.
It's truly amazing how advanced analytics have transformed the sales profession and created so many new possibilities to increase efficiency, help you work smarter, and improve the customer experience. So when there are so many factors that can be measured, how do you best use your time and resources? Read on below to decide what to measure.
Assessing Organizational Structure
The metrics you should focus your attention on depend somewhat on certain business-specific factors. If you're in the process of reevaluating your KPIs (or finally codifying a program that has been left unwritten for too long), the first step should be a thorough examination of the makeup of your team, the technological resources available, and the sales needs of your company.
The trend toward inside sales and the increasingly complex sales cycles that follow also drive the need for a review of effective sales KPIs. A study by the Harvard Business Review found that over a two-year period, 46 per cent of participants had switched from a field sales model to an inside sales model, compared to only 21 per cent shifting in the opposite direction. As more organizations adopt inside sales practices to adapt to a marketplace filled with complex B2B products, the metrics that take priority may need to evolve to paint an accurate picture of the unit's strengths and weaknesses. Below are six sales metrics your team should consider.
1. Sales Cycle Length
After indicators tied to revenue, the length of the sales cycle is one of the most important metrics you can track. Looking closely at the length of your average sales cycle on a monthly basis helps determine if, and where, there are any bottlenecks throughout the pipeline. In addition to examining the entire length of time it takes to convert a lead into a sale, you also need to pay attention to the length of each individual stage of the sales cycle in order to determine which areas you can make more efficient.
2. Percentage Achieving Quota
Every sales director must ask themselves the question, "Am I doing everything I can to set my team up for success?" Evaluating the percentage of your sales reps who meet 100 per cent of their quotas can be an important step to answer this query. If you find that a consistent percentage of your salespeople regularly fall short of meeting their quotas, there's likely an issue that needs to be addressed with your hiring, strategic plan, or training. Once you identify the symptom, you can analyze all of your data to help find a solution.
3. Lead Response Time
B2B customers have a wealth of buying options available to them, which makes your lead response time more important than ever. If a buyer feels they're waiting too long for a response from a salesperson, it's easy for them to research other products in-depth and move on to the next stage in the process with the first person to contact them. Research shows that sales reps who respond to leads quickly generate considerably more conversations than those who wait longer to respond.
4. Opportunity Win Rate
Not all sales reps, even the talented ones, are created equally. Some team members may excel when it comes to engaging new prospects and building trusting relationships, yet they may not be quite as adept at guiding the client to put pen to paper. Opportunity win rate is one metric where looking at a specific data point isn't likely to provide much insight. A single potential deal can dissolve for any number of reasons, many of them completely out of the salesperson's control. However, when you evaluate the numbers over the long term, compelling patterns can indicate whether a particular sales rep requires in-depth coaching on the closing process.
5. Average New Deal Size
Your average deal size can have important ramifications for your company's lead generation efforts and pricing strategy. It's possible there is a disconnect in the lead generation process that prevents you from identifying your ideal buyers. Or it's possible that your package pricing discourages customers from making larger purchases at one time. This indicator is also helpful in conjunction with the cost of acquiring a new customer to determine if certain deals should be pursued or left on the table.
6. Revenue from SMBs Versus Large Enterprises
Strategically, it may be important to examine separately how your sales effort is connecting with small businesses, mid-market players, and larger enterprises. If one segment is thriving while another is lacking, it may be necessary to reshape some of your sales processes to better court a group of customers who are more receptive to your sales pitch.
Field Sales Metrics Versus Inside Sales Metrics
This is an expansive category that can be composed of many different indicators, but if your company employs both field sales and inside sales, it can be helpful to look at the performance and trends of each initiative. Not only are these numbers important for the overall direction of your sales operation, but they can also reveal insights concerning your specific sales functions and resources.
For instance, do your inside sales revenues grow at a slower pace when compared to the field sales despite diverting resources into inside sales? If that is the case, do the increased costs associated with acquiring a new customer via field sales calls render the revenue gains moot? Are your field sales reps consistently outperforming their quotas, while the inside sales reps come up short? Once you are able to benchmark several indicators and make comparisons between the two units, you will have a much clearer idea of where resources need to be allocated to achieve your goals. To further measure the effectiveness of your sales team, here are three additional metrics to track.
1. Marketing Collateral Usage
Considering marketing and sales teams frequently collaborate on content generation, sales leaders need to know resources are used effectively. This interdepartmental alignment is crucial because recent survey results from the American Marketing Association indicate that approximately 90 per cent of sales professionals find marketing collateral to be useless. Monitoring the usage of marketing materials by the sales department is a key component to remove inefficiencies in the handoff from marketing to sales and strengthen the connection between the two units.
2. Cost of Sales to Revenue Ratio
It's not enough to know that any dedicated sales effort is going to cost money; you need to have a clear and evolving framework that details exactly how much is being spent to reach your current results. Executives and shareholders love to see large revenue gains, but we all know that achieving such gains is sometimes so costly that it results in net losses or nominal profits once you have a complete tally. By scrutinizing your cost of sales to revenue ratio, you'll have the data to justify more incremental gains in revenue that may be won for a fraction of the cost.
3. Sales Preparedness
With more sales technology tools available and their increasing importance in complex new sales cycles, leaders must be attuned to choosing the right solutions for their teams as well as ensuring that all employees have received proper training before interacting with prospects and clients. Analyzing your sales preparedness levels in quantitative terms is the gateway to aligning your training and technology functions. When your technological tools and your training protocols are optimized for your organization and your sales team, your sales professionals will be well-equipped to deliver an exceptional customer experience throughout every stage of the sales funnel and contribute to a sustainable and growing revenue stream for the company.
Building a cohesive suite of metrics that work for your sales team
While each of these metrics reveals interesting individual truths, the true power of data is uncovered when you analyze your KPIs in concert with each other to develop a quantitatively based view of your sales effort that is wide in scope. Every organization's sales unit structure is ultimately unique, and every team has a specific set of realities and limitations that must be addressed in the chosen performance metrics. Thankfully, innovative tools make it easier than ever for sales managers to accurately track a wide variety of advanced sales metrics simultaneously and use real-time results to make swift adjustments when needed.
This post originally appeared on the Salesforce Canada blog and is republished with permission.
Danny Wong is the co-founder of Blank Label, an award-winning luxury menswear company. He also leads marketing for Conversio, an all-in-one ecommerce marketing dashboard, and Tenfold, a modern phone intelligence platform. To connect, tweet him @dannywong1190 or message him on LinkedIn. For more of his clips, visit his portfolio.