When you and your fellow sales representatives go out to sell to customers, you likely have a quota you’re trying to meet towards your sales efforts and business needs. This quota, as well as each successful sale you make, a customer you convert, and dollar you earn, are all important pieces of data for tracking the success of your sales process.
These data are sales metrics, sometimes also referred to as key performance indicators (KPI), and are worth studying in-depth. This is key to the successful conversion of sales opportunities.
Whether your sales team quota is reviewed by your sales manager/sales leaders weekly, biweekly, or even monthly on their sales dashboard, by identifying key performance indicators for your sales processes, you and your sales managers/sales leaders can derive useful information that can help sales activities and further the company goals.
The bottom line is that anytime is as good a time as ever to begin monitoring your sales KPI if you’re not already doing so. This is a primary business strategy.
If you’re curious about how to begin, we’d recommend reading through this article. In it, we will provide a clear definition of key performance sales metrics, including discussing how they apply to your sales techniques.
We’ll also touch on tactics for measuring your sales KPI, how to choose which metrics are most important, and how to use a customer relationship management software or CRM with your KPI.
If you’re ready to boost your sales performance for 2020, then keep reading, as this article will provide the stepping stones of the sales strategy you need to skyrocket your sales revenue.
What Are KPIs?
As promised, let’s begin by exploring the concept of KPIs or key performance indicators in more detail. While we’ll examine KPI through the lens of sales throughout this article, it’s important to mention that these sales metrics exist in many different industries besides just sales and marketing.
To reiterate what we stated in the intro, KPI is an abbreviation for key performance metrics, which are sometimes also called performance indicators. Regardless of which name you prefer, a KPI works the same way, as a means of tracking and measuring performance.
This performance can apply to many different areas, such as a company initiative, sales opportunities for a new product or service, a fresh company program, or even a project launch.
Your company or your sales managers/sales leaders/sales directors or any other sales job title may decide to measure performance metrics on an individual level, by a team, by division or department, or even for the company as a whole.
When tracking metrics for long enough, you can reveal qualitative and quantitative values in your sales data, both of which are useful for determining the success of a project, campaign, or even a team or individual.
When we talk about qualitative values, we’re referring to those that take into account opinions, tastes, and personal feelings while still being presented as a textual or numeric value.
While it may seem unnecessary to review qualitative values, they’re very much a part of your company’s success (or lack thereof).
How your existing customers and would-be customers feel about your products, services, purchase value, and company reputation can determine whether they decide to do business with you, after all.
Besides qualitative values, there are also quantitative values or facts when tracking sales KPIs. Unlike qualitative values, which are a little more personal, quantitative values are typically numeric and free of interpretations and personal feelings.
The lack of prejudices included in these values means they’re just straight, hard facts—and explains why quantitative values are sometimes called quantitative facts.
There are so many important KPIs out there, as we’ll talk about shortly, but some metrics will matter more to certain businesses than others.
No matter which tells you the most about your company, the performance indicators you measure will almost always include these elements:
- Control, which dictates the production of an action
- The mechanism, which includes systems and human employees
- Activity, or the process
- Output, or what the company/individual/team gets for the work they’ve put in
- Input, or the work that is done to generate an output
Ideally, by studying your important KPIs monthly, quarterly, or even annually, you can see the areas in which your company currently excels.
You also have a chance to glean what isn’t being done quite as well so you can create a plan for future changes that better meet your customer’s standards.
What Is KPI in Sales?
The above definition and description, as we said, was of KPI in general, not applied to one specific industry. Given your role in sales activities, you may be interested in a sales KPIs definition to use going forward.
Sales KPIs refer to the metrics your company or your sales managers/sales leaders/sales directors track in real time as pertaining to your sales team and their performance, either individually or in their entirety.
The metrics encompass the methods used to initiate contact with quality leads, interest them in your products and services, convince them of the purchase value, pitch a sale, and then convert the lead into a buying customer throughout the sales pipeline.
From the beginning of the sales funnel to the end, KPI for sales gives you a deep, pertinent glimpse into every part of the sales process.
We said before that we’d talk about specific sales KPIs, so there’s that list.
These performance indicators include incremental sales by the campaign, cross-sell and upsell rates, the margin of profit and revenue per sales rep, lead conversion ratio, opportunity-to-win ratio, lead-to-opportunity ratio, average sales cycle length, customer churn rates, average sales revenue per unit, customer acquisition costs, sales target, and sales growth.
Other sales metrics to keep an eye on in real time within your sales process are your website conversion rate, service/product usage, monthly sale demo quantity, net promoter score, monthly new leads, and monthly new sales volume.
How to Measure Sales KPIs
- Incremental Sales by Campaign
- Cross-Sell and Upsell Ratio
- Profit Margin Per Sales Rep
- Revenue Per Sales Rep
- Lead Conversion Ratio
- Opportunity-to-Win Ratio
- Lead-to-Opportunity Ratio
- Average Sales Cycle Length
- Customer Churn Rate
- Customer Lifetime Value
- Average Sales Revenue Per Unit
- Customer Acquisition Cost
- Sales Target
- Sales Growth
- Website Conversion Rate
- Service/Product Usage
- Monthly Sale Demo Quantity
- Monthly New Leads
- Monthly New Customers
For this section, we will define each of the metrics we introduced in the paragraphs above and explain how they’re useful in understanding the right Sales KPIs and promoting and maintaining a sales team’s success.
Incremental Sales by Campaign
You need many sales campaigns under your belt before you can begin measuring the right Sales KPIs and metrics like incremental sales by campaign.
For every marketing campaign your company launches, you can see how many sales were made to determine which campaign was the most lucrative.
To calculate your own incremental sales by the campaign, taking your baseline sales, and subtracting them from your newly generated sales is a great way.
Cross-Sell and Upsell Ratio
As a glimpse inside sales teams, you likely rely on tactics like cross-selling and upselling frequently. When you cross-sell, you take a product that the customer doesn’t already own and try to sell it to them as they make their original purchase.
Upselling is attempting to get the customer to buy a related product or accessory that pairs with their original purchase. Both cross-selling and upselling can increase sales pipeline value, sales quota, and revenue growth if done correctly.
With cross-sell and upsell ratio Sales KPIs, your sales professionals can review data as it applies to these selling tactics and how well they work on customers.
If your audience isn’t reacting well to attempts at cross-selling or upselling, you may wish to revise the methods you use, as many companies find this an easy and effective way of generating further sales.
Profit Margin Per Sales Rep
If you recall from our introductory paragraphs on business KPIs, we mentioned that in sales and general business, real time metrics may be applied to individuals such as sales managers, sales teams, departments, or the entire company.
With the profit margins per sales rep metric, this does review the performance of each individual member of the sales team and is one of the important Sales KPIs in the sales pipeline.
Such numbers you might review with this metric are the percentage of sales compared to the previous sales period, whether the sales reps are meeting their target sales (represented by percentage), and the profit margin per sale.
If one sales team member has proven to have a continuously impressive performance, then they may be used as the yardstick in which other sales reps should perform going forward.
If there’s a weaker link on the sales team, this individual may be trained by the sales manager to do their job better. This also leads to better team performance and employee satisfaction.
Revenue Per Sales Rep
This next metric for Sales KPIs is quite a lot like profit margin per sales rep, except it’s more about numbers than percentages. With revenue, you’d count how much money every sales team member generates for the company.
You or your account managers can track this period over weeks, months, or even years if the data goes back that far.
This metric also gives you the freedom to compare current sales periods against past ones to see if certain trends emerge throughout the year that may affect selling. This is different from revenue per customer.
Lead Conversion Ratio
Every one of your customers began as a lead at some point until they progressed through the sales cycle via a sales team member.
The main goal of the sales reps is to make money, yes, but also to convert qualified leads to customers.
This allows the customer to understand the purchase value and become a repeat buyer that earns the company money over the long-term, not just one time.
The lead conversion ratio displays conversion rates as both a ratio and a percentage. This lead conversion rate percentage can be tweaked to be indicative of an individual’s performance or that of the sales teams.
In sales, winning is another way of saying that a sales team member closed the deal, or confirmed a sale with a lead/customer.
You hired your sales reps for closing deals as quickly as possible, it doesn’t always happen, and now you can understand why.
Perhaps it’s that the sales team member can talk very well but gets flustered if a customer doesn’t jump right on board with a product or service.
In many cases, with further training, it’s possible to improve the opportunity-to-win ratio so it’s higher than where it stands at current and closing deals become easier.
You can adjust these Sales KPIs based on weeks or months and see not only which individual sales team member has the highest win percentage, but what your company’s overall win percentage is.
The lead-to-opportunity ratio concerns itself more with the quality of the leads your company generates.
This is something we’ve talked about on this blog many a time, but we’ll recap now in case you’ve missed those posts. A lead that doesn’t know much about your company and is of questionable fit would be considered an unqualified lead.
Their likelihood of buying is low, but that could change with some finessing from the sales teams and the marketing teams.
Qualified leads are more ideal, as they have some knowledge of the company, an appreciation of the purchase value, and a higher likelihood of buying.
With the lead-to-opportunity ratio, you can identify how many of these unqualified leads become sales qualified.
If it’s not as many as you want, then it’s time to hold a company meeting to try and figure out why.
Could it be the marketing team and the sales team could be doing more to identify which sales qualified leads may be more likely to enter the sales funnel?
No matter where you attribute your weak areas, you can begin to ameliorate the issue after seeing these Sales KPIs metrics.
Average Sales Cycle Length
To put it simply, the longer a sales cycle goes on, the unlikelier a closed deal becomes.
This lead or customer may be wishy-washy, waffling between making the purchase, and not doing so. Your sales force wants to close the deal and move on, but they may not know what to do with this long-standing problem lead.
While longer sales cycles suit some products and services, your company probably has an ideal sales cycle length in mind.
By using that as the backbone for this Sales KPIs metric, you can see where your sales reps measure up and where they still have work to do.
The average sales cycle length metric even breaks down handy data like how long the sales opportunity, sales proposal, negotiation, and closing stages last.
Customer Churn Rate
Also known as customer turnover rate, customer churn rate isn’t a positive Sales KPIs metric in the sales process, but it’s still worth monitoring anyway.
This data tells you how many paying customers quit on your company’s products and services, although it’s on you to figure out why this may be.
To paint an accurate picture of your customer churn rate, you need to track this rate monthly and then create a chart or graph with yearly data.
You always want the customer churn rates to trend lower than higher as the year wears on. If you have prior years of data to look through, add this to the mix as well. You may see that certain times of the year lead to more turnover than others.
You can determine your own customer churn rate today by taking your monthly sales or quantity of customers and dividing them by the customer loss for that month.
Customer Lifetime Value
The customer lifetime value or CLV is something we’ve discussed on this blog before because it’s an important metric even outside of sales management.
If there’s one must-have metric you absolutely should not skip out of all these, it would be the Customer Lifetime Value.
This relates to how long your existing customers have stuck with you and continued buying your products and services.
You can see such information in the CLV as the total length of time a customer has purchased from you and how much money they’ve generated for you over time.
Should you want to, you can even break this information down month by month or year by year.
Every company wants an army of long-term buying customers and knowing your Customer Lifetime Value will let you make a game plan for how to get these paying customers.
You may have thought you had more loyal customers than you actually do, in which case, it’s time to switch up your sales efforts and marketing tactics.
Average Revenue Per Unit
The average revenue per unit or ARPU is sometimes also called average revenue per user, in which case, the abbreviation would be the same.
When calculating ARPU for your own company, you want to take your current overall revenue and divide it by how many subscribers or customers you have.
Customer Acquisition Cost
When you convert a lead to a customer, very rarely do you do this completely for free.
The marketing materials, sales tactics, and efforts employed by other members of your company come with a fee attached, and with the customer acquisition cost, you can know that exact fee.
While there’s no way to avoid spending money on customer acquisition, you do want to ensure the revenue you’re generating per customer is more than the money you spent to convert them.
If it isn’t, then your company may want to review some cost-saving measures you can begin using as this year gets underway.
When your sales reps set their sales target, they’re introducing a short-term or long-term goal or conversion rate they wish to meet.
Perhaps they want to hit a certain number as a revenue target this year or gain X number of customers in the first quarter.
The sales target metric lets the sales reps see how close they are to meeting this goal, and, should they achieve it, how long it takes your sales teams to achieve the desired conversion rates.
Having lofty sales targets can muddy up the waters, so it’s always best to make realistic plans your sales department can meet.
Give the team a realistic amount of time to achieve these company goals as well or your sales targets will be resoundingly negative.
Besides making money, your company plans to grow, acquiring more and more customers in the process.
The sales growth metric lets your company see how close you are to sales success, showing revenue by the current period, previous period, and even over the last several months or years.
Website Conversion Rate
Your company, like every other, has a website that attracts traffic in the form of leads and customers.
You wish to convert those qualified leads, but how well does your website excel at this? With the website conversion rate metric, you don’t have to guess anymore, as the conversion rates data will be right in front of you.
While you do want to know the churn rate, or how many customers have abandoned your product or service, those numbers don’t mean as much without knowing how many people actively do use your products/services.
The service/product usage metric will present this information so you can compare it against the churn rate and see if your churn is above average.
Monthly Sales Demo Quantity
Another of the Sales KPIs for sales teams is the monthly sales demo quantity, a metric you can only make use of if your company sells products that require demo calls.
Using a demo is a great opportunity to drum up interest in your product as your customers get a feel for it. They can also determine if it’s something they want to buy when they try the demo for seven to 30 days.
Net Promoter Score
Image courtesy of TeamSupport
When the customer experience is good with your company and product performance, they may be more likely to recommend your products and services to their friends, family, and colleagues.
There’s a way to track this, too, and it’s known as the net promoter score. This score has three categories you can rank your customers: detractors, passives, and promoters.
The detractors have the lowest score, zero through six, and tend to have negative things to say about your company and its products/services.
Passives are middle of the road (scored seven through eight) and don’t really help matters.
It’s the promoters, with a score of nine to 10, that you want to spread the word about your business. They have lots of good to say and can convince others to get on board with your products or services and are convinced of the product performance.
Monthly New Leads
As a use case, your sales reps may have converted some leads to customers lately, but now is no time to rest on laurels, as there’s still more work to do.
The monthly new leads metric informs you of how many qualified leads enter your sales funnel per month, be from your advertisements, word of mouth, referrals, phone calls, emails, social media, your website, or any other contact method.
Monthly New Customers
The lead conversion ratio isn’t quite the same as monthly new sales volume, as this lets you go month by month to see when new customers have become the most abundant.
If anything, you want to do a direct comparison against the monthly new leads to get a gauge of where conversions may occur and in what quantity.
Understanding these example Sales KPIs and metrics is the first step to optimizing your sales process and bettering the performance of your own company.
How to Define the Sales Metrics for Your B2B Sales Team
- Identify Your Main Objective and Other Goals
- Focus on the Goals
- Action + Planning = Success
- Select the Metrics That Match Your Goals
- Watch and Update Metrics as Needed
We just walked you through a slew of sales performance metrics or Sales KPIs, perhaps even more than you know what to do with.
You understand more about every metric in the above section, but the thought of parsing through all this data is making your head spin. As a B2B sales team, how can you define which sales metrics are most important to meeting your KPI sales goals?
Having a reliable Sales KPIs format and staying goal-minded will allow you to take the sales performance metrics data you have and pull it together into something comprehensive.
Once you begin doing this, it will feel like assembling a puzzle: you can see all the small details and how they interrelate to one another while appreciating the overall bigger picture as well.
Identify Your Main Objective and Other Goals
To keep the process of defining your B2B Sales KPI as organized as possible, you want to first select your company’s main objective or goal.
As your company grows and expands, don’t be surprised if the objective changes (and you should want it to). At the birth of your company, you may be interested in acquiring as many customers or bringing in as much revenue as you can possibly earn.
Once you’re more established, then customer retention will become a bigger objective, as you wish to hold onto a group of loyal, buying customers over the long-term.
No matter what your primary goal or objective is, it’s important to select with it up to two smaller goals. These typically relate to your main objective, but their significance may be somewhat smaller.
A company-wide meeting is useful for all staff to align on the primary goal and secondary ones since if everyone isn’t on the same page, the company cannot succeed.
Focus on the Goals
While your brainstorming may have produced some broad objectives and goals, it’s now time to hone in on the plan you’ve created, teasing out the smaller details.
If you want to increase your annual sales opportunities, for example, then you’d want to take the approach of going month by month, adding pieces to the whole that is the right sales goal.
You can get more specific than that, calculating what a realistic annual income might look like for your company at this stage.
From there, you can take that number to set the monthly sales goals your company should work towards. As we said before, you want your sales objectives both realistic and attainable or else everyone loses.
Action + Planning = Success
Okay, so you have your goals sorted and you’ve drawn up some numbers you’re working towards (be those revenues, conversions, or the like).
Now comes the time to put this plan into action, deciding what your sales and marketing teams would have to do to meet the primary objective.
Does it require revamping the sales process, marketing more heavily, executing follow ups, or changing tact with leads or customers? Maybe you need to increase how many leads you mail from your email list or cold calling to increase the prospects entering the sales funnel by sharing their email address or other contact information.
Select the Metrics That Match Your Goals
Now, from the list above, it’s time to page through those important KPIs for sales activity and choose the ones that are most relevant to you right now.
Let’s use the same example from before, that your company wants to increase annual sales opportunities by boosting monthly revenue.
In that case, then the Sales KPIs that may catch your eye would be the cross-sell and upsell rates, the margin of profit per sales rep, revenue per sales rep, average sales cycle length, average revenue per unit, sales target, or sales growth.
Other performance sales metrics that we discussed throughout this article would apply as well but at different stages of accomplishing your primary objective and secondary goals.
While it’s okay to switch metrics as your campaign progresses, you don’t want to keep stacking Sales KPI on top of Sales KPI. Try to stick to five right sales metrics at any one time or as many as eight if you must.
Studying too few metrics can generate information that looks really black and white but often lacks supporting context to really mean much. Too many metrics complicates everything, so keep to that sweet spot of about five.
Watch and Update Metrics as Needed
Remember, just because you chose a set of sales metrics now doesn’t mean you’re locked in with those same ones forever. The evolution of your campaign could call for different performance sales metrics, as would selecting a new primary objective.
Another reason you might swap important sales metrics is that you realize the ones you picked aren’t providing the kind of data you need to inform the future of your campaign.
That said, don’t discard a metric because the results are negative. You need to pay more attention to negative metrics even more than positive ones, as the negative metrics are showing you weak spots in your company.
How to Track Sales KPI in a CRM
- Sales Funnel Drop-Off Rate
- Relationship Freshness Rate
- Response Time Rate
Your company likely already uses a customer relationship management software or CRM like the free one offered by EngageBay to automate and simplify business processes as well as enable customer retention and exceptional customer service/customer support.
Your smart KPI should play nicely with this software, allowing you to generate CRM metrics that will drive your business forward.
To begin tracking sales with a CRM KPI, make sure you follow these important sales metrics closely.
Funnel Drop-Off Rate
Like with the prior Sales KPIs you’ve reviewed, your CRM KPI scorecard will have both negative and positive sales data within.
The funnel drop-off rate, while not positive, can tell you where your company can do better when it comes to keeping leads and prospects within the sales funnel.
As the name implies, the funnel drop-off rate is the quantity of those who enter your sales funnel but exit prematurely.
Perhaps they jump off before they make a single purchase, or perhaps all you get out of them is money for one product/service.
This sales report KPI can include email open and click-through rate, email address newsletter unsubscribes, and more.
Relationship Freshness Rate
No, this isn’t how about how new the relationship with a customer is, but rather, the relationship freshness rate tracks the recent rate of contact between you and the customer.
Has your sales team been in touch within the last week, or have months passed by without any contact? Without nurturing and engaging with quality leads and customers alike, you’ll lose both, so make sure you don’t let your relationship freshness rate slip.
Response Time Rate
In the same vein as the relationship freshness rate is your sales team’s response time rate, as both these metrics are to the benefit of your relationship with your customer.
With the response time rate, how long it takes the sales rep to reach out is reviewed, especially in relation to its effect on the lead conversion rates.
Key performance indicators or KPIs benefit businesses of all kinds, but if you’re looking to increase your sales opportunities, revenue, conversions, and long-term customer base, you’ll want to look at the important Sales KPIs specifically.
These sales metrics or KPIs for sales measure performance on an individual or team level, allowing you and your sales managers to see who the superstar sales reps are and how they maintain their success.
Not all sales metrics are positive, and that’s okay, as, without these, you can’t make improvements that increase customer satisfaction even further.