Sales, as pointed out by the Harvard Business Review, is equal parts art and science.
It requires not only logic, process, and organization. It requires people, emotion, and fast thinking sales reps who not only see the sales opportunity, but know how to make the most of it to increase average deal size, cross-sell, and customer lifetime value.
This complex combo of knowledge and skills makes it difficult for field sales managers and C-suite alike to get the whole picture. What do individual, team and organizational sales performance really look like?
Without the whole picture, it's impossible to execute effective strategies and meet goals. But when you're measuring important sales metrics, performance-tracking is straightforward. Trust that you're making the right moves for your organization because they are firmly founded on data.
These are the important sales metrics that matter. Let's take a look!
What’s a Sales Metric?
A sales metric is a piece of data that stands alone. It can scale to measure the performance of the individual, team or the entire organization.
Effective sales leaders stay informed. They track progress towards goals.
This not only allows you to forecast future opportunities. It gives the foresight to anticipate and manage challenges approaching through the sales pipeline.
Knowing sales metrics is critical to sales growth. Once you know those metrics, take measures to improve them.
Sales Metrics Vs KPI
They may seem interchangeable, they're not the same.
All KPIs are metrics. You use them to track progress and better understand how to lead your teams. But all metrics aren't KPIs.
The main differentiator is the word "Key" in key performance indicator. In order for a metric to be a KPI, it must reflect a major business priority or objective.
Unlike most metrics, a KPI is tied to the company’s core strategy. But where some companies fall short is in thinking that KPIs are all that matter.
They're not meeting a certain KPI. They know something's wrong, but it's unclear what caused the KPI to come up short.
This leads to educated assumptions and misguided strategy changes. Without other important sales metrics, you're unable to diagnose the problem behind that KPI's shortfall.
But with the right metrics, the cause and remedy are clearer. Now let's explore the sales metrics that matter.
Metrics That Matter
To effectively lead your team and company to success, you need to know the following.
1. Total Sales by Period
The first metric to track is sales on a reporting period basis or fiscal year. This isn't only helpful for setting standards and goals. It allows you to forecast for total sales per period.
Be it week over week, month over month, year over year, you'll be better prepared to manage those sales.
2. Sales Cycle Metrics
If a company has been in business for a while, it’s easy to notice patterns emerge. This information will highlight problem areas with the sales cycle.
Are you devoting too much time stuck on the first stage with a single lead? Are opportunities not reaching a deal? Flag circumstances like this. Address the source of the bottleneck.
Get that pipeline flowing. Meet those sales forecasts.
3. Sales by Product or Service
This metric tells you what’s selling and what isn’t.
When you know this important sales metric, it’s simple. Concentrate on what’s selling!
But don't stop there. A decline in sales of a product or service can help you identify opportunity for improvements. This opportunity would likely never be identified if you lead your team based on KPIs alone.
4. Sales by Lead Source
This gives insight into which marketing and sales efforts work best to bring in leads. Know which ones are wasting time and money.
The concept behind tracking this metric is the same as tracking product or services sales: Concentrate on what’s working. Improve what’s not working or get rid of it.
Note that we're not as concerned about the raw number of leads by lead source. This metric recognizes quality over quantity.
If the conversion rate for a lead source is abysmal, fix this issue. Or don't waste your resources.
Important sales metrics save you significant time and money.
5. New vs. Returning Customer Sales
A healthy business has both. They have an ongoing supply of new customers. They have old customers returning to buy more of the company's offerings.
This percentage ratio is going to be different for every company. But it’s important to note that repeat customers are often better wins than new customers. Your probability of selling to an existing customer is close to 70% compared to less than 5% for a new one.
On top of that, delighted customers become brand promoters. A referral from a happy customer has a 70% higher conversion rate. They have a 69% faster close time. And there's more.
Promoters write you great online reviews.
91% of people now check reviews online before buying. 84% trust an online review as much as a referral from a friend.
That equates to much lower customer acquisition costs. Let's look at those next.
6. Customer Acquisition Cost (CAC)
Customer acquisition cost (CAC) is the cost of acquiring a new customer. To get your CAC, simply divide all the costs spent on acquiring more customers (marketing expenses) by the number of customers acquired in the period the money was spent.
You can further segment your CAC by lead source. Compare it to the "sales by lead source" metric to better understand the ROI on various sales channels.
7. Customer Lifetime Value
Customer lifetime value is the single most important metric for understanding your customers. Be informed on appropriate:
- Spend to acquire a customer
- Spend to service and retain a customer
- Time spent on trying to acquire customers
When you know important sales metrics like this, you'll better allocate resources because you know your true ROI on those investments.
Managing Important Sales Metrics
Managing these metrics allows you to optimize sales performance to maximize profits.
Defining the metrics that matter and providing a relevant, compelling view of the data for users within the business, is the first hurdle in the adoption and communication of key sales metrics.
You need tools in place that give you easy, up-to-date access to these metrics. Seamless communication throughout the sales department regarding these metrics spells success.
These sales metrics give a purview of what really goes on with each closed deal and lost opportunity. It also shows you where you can improve and create management strategies and goals that address specific needs discovered through these metrics.
All of these metrics are affected by how your sales team is interacting with prospects and whether or not they have the right tools to acquire high-value customers at low costs. Give them sales engagement software that enables success.