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Sales metrics are a key part of any modern business, and they have been shown to improve sales performance. However, the most important metric is not always obvious. Here’s what your team should know about these metrics so you can increase your chances for success when working towards selling more products or services.
The “how to measure sales performance” is a 12-point list of metrics that can be used to improve sales performance. The list includes: revenue per customer, average order value, and cost per lead.
You may detect and improve things like total sales activity, sales projections, conversion rates, and overall process and cost-efficiency by measuring important sales indicators. These 12 sales metrics may help you uncover and repair weaknesses in your sales organization to raise sales performance, minimize waste, and increase profitability when compared to industry standards, past time periods, or internally amongst several representatives or teams.
1. Revenue Segmentation
What it assesses: Segment-by-segment breakdown of total sales revenue
While total income reflects how well your company is doing overall, segmenting revenue into categories reveals which areas are functioning well and which need to be improved. Product or service lines, geographic region, sales team, target customer or persona, lead source, and individual sales reps are all examples of segmented revenue.
The first stage in enhancing sales performance is segmented revenue analysis, which helps you to discover the “what,” or which areas require development. After you’ve determined what needs to be improved, come up with creative ways to enhance the particular area or income. Alternatively, if income is split down by lead source, you may opt to stop utilizing certain lead sources.
Let’s imagine you discovered that internet inbound leads created $100,000 in the previous six months, outbound sales prospecting generated $56,000, and trade show leads generated $9,000 in the last six months. You would therefore opt to devote more efforts to inbound marketing and outbound sales rather than future trade exhibitions.
Salesforce, a customer relationship management (CRM) software, displays sales income breakdown data on the system’s dashboard. Salesforce also creates up-to-date sales projections using your current key performance indicators (KPIs) and other data like as activity, opportunities in the pipeline, and deal prices. Real-time projections are useful for evaluating company growth by calculating the amount of revenue you expect to produce.
Dashboard for Salesforce sales and forecasting (Source: YouTube)
2. Customer Lifetime Value (ALV)
What it measures: The average revenue earned per client throughout the course of their relationship with a business.
Although it takes a few years of historical data to calculate CLV, it demonstrates the full worth of acquiring a new client in terms of lifetime revenue. The average customer lifetime value demonstrates how successful your company is in retaining and remarketing to current customers. This, in turn, reveals areas where changes may be made to lengthen the typical customer’s lifetime and raise the average amount spent throughout that time.
This sales measure is also a great method to see whether your salespeople and customer support representatives are doing a good job of cross-selling and upselling to new and current clients. You can also use this metric to examine how your company stacks up against industry norms and track it over time to determine whether you’re using the right tactics to boost average lifetime value.
3. Selling Price
What it assesses: Total selling expenses of your goods or service
When searching for strategies to increase sales performance, the most apparent KPIs to analyze are those connected to revenue or deals. The actual cost of selling, on the other hand, exposes how cost-effective your sales crew is. Sales materials, wages, commission expenditures, sales technology, travel expenses, and event costs are all included in the cost of selling.
The cost of selling may be examined as a whole for a business or broken down by sales teams, sales strategies, and product lines. By examining the whole cost of sales, you may enhance profitability by cutting or eliminating costs that aren’t required to generate sales.
Take, for example, the overall cost of selling divided by the three sales teams that make up your department. You learn that your top-selling team spent no money on travel since they met with remote prospects using video conferencing software. At the same time, you discover that despite spending $5,000 on trip, the two other teams generated substantially less money.
As a consequence, you come to the conclusion that travel expenditures aren’t vital for closing transactions, and you adjust your budget appropriately. This has a direct influence on your company’s Conclusion and profitability, in addition to decreasing waste and discovering the most successful selling tools and strategies.
To keep track of your spending, use a customer relationship management (CRM) system like Freshsales, which connects with popular company accounting software like QuickBooks. In addition, you may utilize QuickBooks to do invoicing and billing chores from the Freshsales CRM, and account values will be instantly updated since the Freshsales and QuickBooks systems are linked.
QuickBooks and Freshsales integration (Source: Freshsales)
4. Turnover Rate
What it assesses: Number of clients that opt not to buy from you again, cancel their membership, or don’t renew their contract.
You can assess your company’s customer service and ability to keep or resell current clients by knowing your churn rate (also known as customer turnover rate). Because acquiring a new customer or client is costly, it’s critical to maintain the churn rate as low as possible to achieve optimum sales value.
Your churn rate reveals how your income is produced, allowing you to make changes to enhance sales success. For example, if your company excels at recruiting new customers but has an 85% turnover rate, your CLV isn’t being maximized, and the cost of selling may be far higher than normal or ideal.
Improvements in your sales process that reduce churn and enhance client retention also lower the expenses of marketing and advertising to attract new customers. Adding resources to customer service, training sales and customer service agents, adding new products that appeal to existing customers, creating loyalty programs, and developing more effective cross-selling and upselling strategies are all examples of sales process improvements that can help reduce churn.
By designing and delivering client surveys, CRM solutions like HubSpot enable you to identify customer attrition before it occurs. Users of HubSpot CRM can immediately learn how their customers feel and take steps to enhance customer happiness, save selling costs, and raise average customer lifetime value.
Customer loyalty survey design tool from HubSpot (Image courtesy of HubSpot)
5. Sales Activity in Total
What it measures: Total sales activity accomplished by sales professionals on a daily, weekly, or monthly basis, such as calls made, emails sent, proposals delivered, appointments set, referrals asked, and sales presentations or product demonstrations given.
Sales activity data reveal how each salesperson or team spends their time. The activity of your firm will vary based on how leads are produced and how your sales funnel is set up. The concept behind tracking sales activity is that if you know your sales pipeline and funnel conversion rates, you can utilize overall activity to anticipate (and improve) sales success.
Consider this scenario: you want to produce $50,000 in revenue this quarter and you know it takes four product demonstrations to clinch one contract, with a $10,000 average deal size. You’re also aware that scheduling a product demo takes an average of 70 cold calls. According to this data, it will take 1,400 cold calls over the quarter to arrange enough appointments to complete five sales at $10,000 apiece.
CRM solutions like HubSpot make it simple to measure the activity indicators required to meet your company’s sales targets. HubSpot divides the overall amount of sales activity accomplished by sales rep and activity category. Managers may then develop sales reports to evaluate which representatives are doing well and which need more coaching or sales training.
Sales activity by HubSpot sales rep (Image courtesy of HubSpot)
6. The Percentage of Deals That Are Closed
What it measures: The percentage of transactions that have been completed vs the number of opportunities that are still available.
The deal closure rate is a sales forecast predictor as well as a performance measure for how efficient your sales funnel is. When used for forecasting, for example, if you know that concluded deals account for 3% of all prospects in the pipeline and you set your deal objective at 50 per year, you’ll need 1,667 total leads to meet your sales target.
You may increase performance by identifying bottlenecks in the pipeline that are adversely influencing closing rates when utilizing deal closing rate to examine your pipeline. Because the closing rate is an average of the whole sales process, you need also consider the conversion rates at each step in the pipeline to obtain a more complete view.
Let’s imagine your deal closing rate is 3%, but you’ve discovered a substantial drop-off in the number of chances lost at the sales presentation stage of the funnel. Knowing this, you may put money into sales training programs to help your staff make more effective sales presentations.
Closing rates and conversion rates for all phases of the sales funnel may be analyzed using CRMs like Zoho CRM. Through a funnel style, horizontal pipeline, and a detailed split by geographic region or lead source, you can observe how successful your sales force is at moving a lead to the next step through the pipeline analysis dashboard.
Pipeline analysis in Zoho CRM (Source: Zoho)
7. Source-Generated Leads
What it assesses: The total number of qualifying leads produced, split down by source.
This sales measure allows you to determine which lead sources are the most productive and efficient for your company. Tracking how many and where each lead comes from over a period of time reveals how effective your company is at generating leads and which lead sources have the greatest potential.
Using the leads produced sales measure broken down by source to increase sales performance is a great approach to determine which tactics are performing and where you should focus your efforts. It may also show you where to get the best qualified leads, or prospects that have shown some interest in your company and are therefore more likely to convert.
Let’s say 30 percent of your qualified leads come from online advertisements, 25 percent from outbound prospecting, 20 percent from networking events, 15 percent from referrals, and 10 percent through content marketing. Because creating content takes time, you may want to focus your efforts and resources on alternative lead generation strategies that are more productive and require less time to implement, such as asking for referrals or using online adverts.
Pro tip: Depending on your talents and resources, producing highly qualified leads in the business-to-business (B2B) arena may take many different shapes and strategies. In this post with the finest 14 B2B lead generation methods to attempt in 2022, you’ll find fresh ways to create leads for your organization.
Within the profile of a transaction, lead, or opportunity, CRMs like Pipedrive may trace the source of the deal, lead, or opportunity. This enables you (or any sales agent) to look up a contact’s record and see how they first learned about or got interested in your company, so you can be more prepared before initiating a discussion.
Deal profile on Pipedrive with lead source (Image courtesy of Ruler Analytics)
8. Deal Value on Average
It calculates the average income from a concluded contract or a won opportunity.
You can anticipate total income over a given period of time by knowing how much you bring in on average each contract done. If your typical transaction value is $10,000 per year and you know that 12 deals will be closed based on your pipeline conversion rates and overall activity quotas, your total predicted income is $120,000.
Knowing your average transaction value might also help you sell more by narrowing down your target audiences. Let’s imagine you’re a software firm that started out focusing on small companies, but after two years, you discovered that your average transaction value was far greater than projected due to certain huge deals done. This indicates that your product is well-suited for bigger enterprises, indicating that you should adjust your sales technique to generate higher-value, more lucrative agreements.
Dashboards in CRMs like Pipedrive provide a variety of transaction analysis. Pipedrive may present statistics on average deal value, average time to complete a transaction, deals lost, deals begun, and activity metrics to evaluate what’s being done to close the sale using data from your current opportunities and finished deals.
Dashboard for Pipedrive transaction analysis (Source: Pipedrive)
9. Average Sales Cycle Length
What it assesses: The average number of days it takes to convert a fresh lead into a paying client.
The average duration of your sales cycle is an essential sales measure for anticipating when a transaction will complete. If you assess the average duration of a sales cycle per sales rep to identify which ones are promptly reacting to opportunities and putting in lots of activity, you can take this statistic a step further to enhance individual performance.
When comparing the average duration of a sales cycle for John and Richard, you’ll see that John’s is 140 days and Richard’s is 230. You also investigate each representative’s activities and discover that John replies to all enquiries within one day and sends 20 follow-up emails every day. Richard responds in three days and sends just five follow-up emails each day. You may use this information to help Richard establish clearer sales and follow-up expectations.
Create comparable revenue-to-activity reports using a CRM like Freshsales. Freshsales’ sales cycle and sales velocity reporting is one of its most distinctive features in this regard. It shows the average amount of time each sales person spends with a lead at each step of the funnel.
In the stage report, the average days for freshsales are shown. (Image courtesy of Freshsales)
10. Qualified Sales Rate
What it measures: The proportion of leads who are sales-qualified, either by showing interest in your goods or services, requesting cost estimates, or indicating to a sales representative that they are nearly ready to buy.
This metric reveals how well your sales and marketing teams are at detecting interest among leads who are ready to buy. The greatest degree of lead qualification a person may get before making a purchase decision is sales qualification. You’re more likely to complete transactions if your sales-qualified rate is high.
Tracking this sales measure will inform you what percentage of leads your sales people should be focusing on—the ones who are most likely to convert. If your marketing qualified leads (MQL) rates are high but your sales qualified leads (SQL) rates are low, you may increase your performance. For example, your team may make follow-up and sales promotions a priority to persuade leads to become sales-qualified.
Pro tip: Without the correct tools and information, qualifying leads may be difficult. Learn about the different kinds of qualified leads, why qualifying is essential, the advantages of lead qualification, and how to qualify your leads in our lead qualification guide.
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What it calculates: The total value of all transactions in the pipeline multiplied by the probability of each deal completing.
The weighted deal value of your sales pipeline is a method of forecasting total sales for your company. It takes into consideration a deal’s overall potential value as well as the probability of closing it, then combines all of the existing deals in your pipeline.
Consider the following scenario: you have 12 current opportunities. Six are for $4,000 and have a 20% probability of closing, while the other six are for $7,000 and have a 10% chance of closing. That pipeline’s total weighted contract value and project income is now $9,000. This data may be utilized to identify which path to pursue in order to increase revenue or meet revenue targets.
If your pipeline’s weighted deal value is lower than you’d like, you have three alternatives. The first is to generate more leads in order to create more possibilities. The second is to concentrate on leads and opportunities with a higher transaction value. The last alternative is to use lead nurturing actions to improve your chances of completing the business.
Lead score is one method of determining the chances of completing a transaction. Based on interactions with them and behavior indicators like links clicked, files downloaded, or emails read, lead scoring provides a quantifiable value to each lead in terms of how robust of an opportunity it is to pursue. CRM solutions like Zoho CRM can compute and monitor lead score for you.
Lead scoring in Zoho CRM (Source: Zoho)
12. Selling Activity Rate
What it measures: The percentage of a sales rep’s time spent on selling activities such as making calls, sending introduction or follow-up emails, writing and submitting proposals, giving presentations, or asking for referrals.
Sales managers may hold sales people responsible for performance objectives and activity quotas by knowing how much time they spend on selling-related tasks. It may also help you figure out “why” they aren’t meeting their activity quotas or income targets, such as if you discover they’re wasting too much time on non-selling tasks like browsing the web or performing data entry.
By tracking the pace at which sales are made, you may enhance operational performance by identifying the source of sales problems. For example, if a sales team missed its $500,000 revenue goal because they spent 50% of their time manually entering lead data into a CRM system, you may need to employ clerical personnel or automate data input.
Data input automation technologies like Zapier free up your sales team’s time to focus on closing deals. When a new lead contacts you or fills out an online web form, their contact information is instantly transferred to a data system like a CRM or spreadsheet thanks to Zapier connectors and process settings.
Data is transferred from Zapier to HubSpot. (Image courtesy of Zapier)
Improving Sales Performance with Sales Metrics
The ultimate purpose of utilizing sales data is to make changes that will enhance sales results. Many metrics are key performance indicators (KPIs) that advise sales managers which areas require the greatest improvement and which techniques are succeeding and should be extended. For instance, if a company’s total revenue is $600,000, but only $50,000 comes from repeat customers, a sales manager must discover strategies to reduce churn, enhance CLV, and boost customer loyalty.
Some indicators, such as overall sales activity and closing rates, may be utilized to display team and individual rep comparisons. These comparisons enable you to hold employees responsible for not meeting quotas while also revealing approaches or patterns of activity that perform effectively but were previously unconsidered.
Let’s imagine you examined the sales activities of three sales representatives and discovered that one of them produces more sales-qualified leads than the other two combined. Each month, the high-performing sales representative attends 12 networking events and one trade fair, resulting in a large number of personal relationships. As a result, you instruct your other two sales representatives to begin attending networking events and trade exhibits.
Sales metrics give a fuller narrative about what’s going on when you identify trends that lead to greater sales performance, enabling you to zero in on the fundamental reasons of bad sales performance. After that, you may utilize all of these sales KPIs to establish or revise your company’s sales strategy.
Conclusion
Sales metrics provide the truth about what’s going on in your sales department, allowing you to make informed choices about how to enhance sales results. Utilize sales analytics to alter your strategy, add resources, and give coaching to your sales teams after they’ve painted a picture of where adjustments are needed and where sections of your sales process are lagging behind.
The “sales data analysis python” is a tool that allows users to analyze sales data. The tool includes 12 metrics that are easy to use and can improve sales performance.
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