When you and your fellow sales team members go out to sell to customers, you likely have a quota you’re trying to meet. 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 career. These data are metrics, sometimes also referred to as key performance indicators (KPI), and are worth studying in-depth.
Whether your sales team quota is reviewed weekly, biweekly, or even monthly, by identifying KPI for sales, you can derive useful information that can help further the goals of your company. With a new year upon us, this is as good a time as ever to begin monitoring your sales KPI if you’re not already doing so.
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 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 you need to make this a banner year.
What Is a KPI?
As promised, let’s begin by exploring the concept of KPIs in more detail. While we’ll examine KPI through the lens of sales throughout this article, it’s important to mention that these 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 for a new product or service, a fresh company program, or even a project launch.
Your company may decide to measure performance metrics on an individual level, by 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 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 customers and would-be customers feel about your products, services, 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 KPI. 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 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 KPIs 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 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, you may be interested in a sales KPI definition to use going forward.
Sales KPI refers to the metrics your company tracks 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 leads, interest them in your products and services, pitch a sale, and then convert the lead into a buying customer. From the beginning of the sales funnel to the end, KPI for sales gives you a deep, pertinent glimpse into every part of the process.
We said before that we’d talk about specific sales KPIs, so there’s that list. They include incremental sales by the campaign, cross-sell and upsell rates, 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, average revenue per unit, customer acquisition cost, sales target, and sales growth.
Other metrics to keep an eye on are your website conversion rate, service/product usage, monthly sale demo quantity, net promoter score, monthly new leads, and monthly new customers.
How to Measure Sales KPI
For this section, we will define each of the metrics we introduced in the paragraphs above and explain how they’re useful in promoting and maintaining a sales team’s success.
Incremental Sales by Campaign
You need several sales campaigns under your belt before you can begin measuring 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, take your baseline sales and subtract them from your newly generated sales.
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 quotas and revenue if done correctly.
With a cross-sell and upsell ratio sales KPI, you 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 KPI, we mentioned that in sales and general business, metrics may be applied to individuals, teams, departments, or the entire company. With the profit margin per sales rep metric, this does review the performance of each individual member of the sales team.
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 members should perform going forward. If there’s a weaker link on the sales team, this individual may be trained to do their job better.
Revenue Per Sales Rep
This next metric is quite a lot like profit margin per sales rep, except it’s more about numbers than percentages. With revenue per sales rep, you’d count how much money each sales team member generates for the company. You 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.
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 team is to make money, yes, but also to convert leads to customers. This allows the customer to 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 percentage can be tweaked to be indicative of an individual’s performance or that of the sales team.
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 team to close as many deals 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. You can adjust this KPI 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 and marketing teams.
Qualified leads are more ideal, as they have some knowledge of the company and a higher likelihood of buying. With the lead-to-opportunity ratio, you can identify how many of these unqualified leads become 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 and sales teams could be doing more to identify which 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 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 team 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 metric, you can see where your sales team measures up and where they still have work to do. The average sales cycle length metric even breaks down handy data like how long the opportunity, proposal, negotiation, and closing stages last.
Customer Churn Rate
Also known as customer turnover rate, customer churn rate isn’t a positive metric, but it’s still worth monitoring anyway. This data tells you how many 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 rate 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 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. If there’s one must-have metric you absolutely should not skip out of all these, it would be the CLV.
This relates to how long your 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 CLV will let you make a game plan for how to get these 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 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 team sets their sales target, they’re introducing a short-term or long-term goal they wish to meet. Perhaps they want to hit a certain number for revenue this year or gain X number of customers in the first quarter. The sales target metric lets the sales team see how close they are to meeting this goal, and, should they achieve it, how long it took.
Having lofty sales targets can muddy up the waters, so it’s always best to make realistic plans your sales team can meet. Give the team a realistic amount of time to achieve these 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 doing just that, 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 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 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 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 customer churn is above average.
Monthly Sale Demo Quantity
Another KPI for sales teams is the monthly sale demo quantity, a metric you can only make use of if your company sells products that require a demo. 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 your customer has a good experience with your company, 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.
Monthly New Leads
Your sales team 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 leads enter your sales funnel per month, be from your advertisements, word of mouth, referrals, emails, social media, or your website.
Monthly New Customers
The lead conversion ratio isn’t quite the same as monthly new customers, 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 sales KPI examples and metrics is the first step to bettering the performance of your own company.
How to Define the Sales Metrics for Your B2B Sales Team
We just walked you through a slew of sales performance metrics, 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 metrics are most important to meeting your KPI sales goals?
Having a reliable KPI format for sales and staying goal-minded will allow you to take the 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 this 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, for example, then you’d want to take the approach of going month by month, adding pieces to the whole that is the 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 goals 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 revenue, 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, or changing tact with leads or customers? Maybe you need to increase how many leads you email or cold call to increase the prospects entering the sales funnel.
Select the Metrics That Match Your Goals
Now, from the list above, it’s time to page through those KPIs 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 by boosting monthly revenue. In that case, then the sales KPIs that may catch your eye would be the cross-sell and upsell rates, profit margin per sales rep, revenue per sales rep, average sales cycle length, average revenue per unit, sales target, or sales growth.
Other 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 sale KPI. Try to stick to five 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 metrics now doesn’t mean you’re locked in with those same ones forever. The evolution of your campaign could call for different metrics, as would selecting a new primary objective.
Another reason you might swap 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
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. Your smart KPI should play nicely with this software, allowing you to generate CRM metrics that will drive your business forward.
To begin tracking your sales with a CRM KPI, make sure you follow these 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 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 newsletter unsubscribes, and more.
Relationship Freshness Rate
No, this isn’t how about new a customer relationship 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 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 customer relationship. 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 conversion rate.
Key performance indicators or KPIs benefit businesses of all kinds, but if you’re looking to increase your revenue, conversions, and long-term customer base, you’ll want to look at sales KPIs specifically.
These metrics measure performance on an individual or team level, allowing you to see who the superstar sales reps are and how they maintain their success. Not all metrics are positive, and that’s okay, as, without these, you can’t make improvements that increase customer satisfaction even further.