Top Sales KPIs and Metrics You Need to Be Tracking in 2020posted on 20-3-21-Sat 06:13
|What is a KPI in Sales?|
|5 Reasons Why KPIs and Metrics are Important to Sales?|
|Track These 16 Sales KPIs and Metrics for Sales Success in 2020|
|How to Choose the Right Sales KPIs and Metrics|
If there is one department in any company where underperformance is detrimental, it is the sales department. After all, they are the ones responsible for connecting a business with its customers, building and sustaining strong relationships in the process. Not only that, but they are also responsible for the company’s growth and profitability.
With the stakes being high when it comes to the performance of the sales department, it becomes important to make sure that they are always doing their job. One of the best ways to do this is by tracking sales key performance indicators (KPIs) and metrics. But not many people know which ones to track.
With competition being as fierce as it is in 2020, tracking the right KPIs and metrics can provide a much needed competitive advantage. So keep on reading to find out which KPIs and metrics you should keep your eyes on.
What is a KPI in Sales?
Before talking about what to track, let us define what KPIs are in regards to sales. When you hear someone mention KPIs, just know there are talking measures of performance. KPIs tell a business if their activities are moving them forward or not according to the strategic goals that they have set. By measuring KPIs, they know where the company currently is and see how far it has to go.
If there is no significant movement forward, then it is up to the company’s decision-makers to take corrective action. That way, they ensure that the business ultimately achieves its goals. This is the general reason why KPIs are important.
So what are sales KPIs? These are KPIs that ensure the sales department is meeting its objectives or targets. For example, if one of the strategic goals set by the company executives is to increase sales by 25% next quarter, they will track a KPI like sales growth percentage (more on this later) to see how the sales team is progressing towards achieving this goal.
Depending on what is revealed by the data analysis, they will take the necessary action. But perhaps the most comforting thing is that whatever decision they take, it will be backed by data, hence highly informed. This means there is a high chance that the decision will move the company towards its goals.
5 Reasons Why KPIs and Metrics are Important to Sales?
As you have seen in the example in the previous section, tracking KPI metrics can be directly beneficial for the business, but that is not always the case. Sometimes, KPI tracking can benefit the company indirectly by how it affects the sales teams.
There are five reasons why sales KPIs and Metrics are extremely important in this regard:
- Clarifies expectations
- Identifies Weaknesses of the Sales Department
- Keeps sales staff focused
- Motivates sales representatives
- Helps the sales team make more sales
1. Clarifies Expectations
When the sales team is aware of the KPIs being measured, it removes a whole lot of ambiguity from their job. This level of clarity is important since they know what is expected from them when it comes to performance. They can clearly see where the business currently is and chart a clear path to getting it where it needs to be without relying too much on guesswork and gut feelings.
2. Identify Weakness of the Sales Department
By tracking the right type of sales KPI metrics, the sales department can root out inefficiencies that lead to waste. Then they can work on improving processes within the department to make sure that there is significant waste reduction and that consistent value is being delivered to customers.
For example, if the sales team is constantly missing their daily sales targets, they can look into it further to see what is hindering them from hitting their targets. It could be discovered that certain personnel in the sales team could use more training to fully grasp the sales process. Then it would be up to management to provide the necessary training to make sure that everyone is using the sales process to its full potential.
Not only does it help identify weaknesses (inefficiencies), but it also helps identify the strengths (efficiencies). These can either be improved to make processes more efficient in the sales department. Or they can be understood to make sure that all future sales activities follow the same procedures to increase the chance of successful outcomes.
3. Keep Sales Staff Focused
When expectations are clear, it means that the sales staff can become more focused. KPIs work with targets, meaning that everyone knows where their attention should be placed. With focus, the sales team’s quality of work will improve. Also, they will be able to manage their time better, leading to work being done faster. Not only that, it frees their mind of unnecessary concerns, allowing them to come up with creative solutions to sales-related problems.
4. Motivate Sales Representatives
KPIs help the sales department understand why meeting their targets is important to the company. As such, they become more motivated to work harder for the benefit of the company. Not only that, but tracking KPI metrics also puts their performance on blast since the performance data is available to everyone in the company. No department would want to be the one dragging the entire company down, which gives them incentive to work harder.
5. Helps the Sales Team Make More Sales
With inefficiencies removed or significantly reduced, the sales departments can do what it does best: selling. As the sales team makes more sales, the company will get more revenue and potentially become profitable. This is a recipe for success and growth in all departments.
Track These 16 Sales KPIs and Metrics for Sales Success in 2020
Now that you know what sales KPIs are and why they are important, now comes the important part: knowing which ones to track. With sales being the most important department in a company, there are plenty of KPIs to track. But tracking them all isn’t feasible, meaning that the most important KPIs and metrics need to be selected.
Below, you will find a list of 16 of such important metrics:
1. Sales Leads
An important KPI for the sales teams to track is how many sales leads they have. A sales lead can be a person or business that has expressed interest in becoming a customer or client. These people are identified by the company through their marketing efforts, and it is up to the sales team to vet them further before they can be classified as a guaranteed prospect.
2. Lead to Sales Ratio
Each individual member of the sales team has his or her own set of leads that they need to convert. The leads to sales ratio or leads to close ratio is the percentage of the leads that a sales representative managed to convert to paying customers. It helps the company judge the efficiency of a single sales representative.
To calculate this figure, we divide the number of leads a sales representative managed to close by the total number of leads they have. Then we divide the result by 100 to get the percentage. For instance, if a sales representative had 100 leads and closed 25 of them, then 25 ÷ 100 x 100 = 25. This means that his or her leads to sales ratio is 25%.
3. Conversion Rate
While the leads to sales ratio looks at an individual sales representative, the conversion rate looks at the efficiency of the sales team as a whole. The conversion rate, in this case, is the amount of leads that the sales team was able to convince to buy from you. It can tell you if the sales team is performing as expected or is underperforming.
This is calculated by taking the combined sales of the sales team and dividing them by all the leads and then multiplying the resulting figure by 100. So if marketing managed to identify 500 leads and the sales team managed to convert 50 of them, the conversion rate is 10%. Whether this is good or bad will depend on a number of factors, such as the industry benchmark.
4. Sales Per Representative
While looking at the leads to sales ratio is important, it doesn’t necessarily tell us how many sales each representative made. For this to happen, the sales manager usually looks at the sale per representative KPI. This is a good KPI to measure because it tells them how much revenue a sales representative is making for the company.
It is also good for the sales representatives to know that this KPI is being tracked. This is because it fosters a bit of a healthy competition that will ultimately benefit the business as a whole. When someone on the sales team sees that their figures are falling below his or her peers, it will force them to up their game and bring in more revenue.
5. Monthly Calls Per Sales Representative
Sometimes, in order to make sales, members of the sales team need to make outbound calls to potential customers. Monthly calls per sales representative is the KPI that helps the sales manager keep track of these calls. This KPI is not only limited to calls, as it can also extend to emails and even in-person visits.
One of the biggest reasons why sales managers track monthly calls per sales representative is because they have a quota they need each team member to reach per month. This is a quota that the sales manager has identified will help the sales team meet their sales targets. If an employee underperforms, measures can be taken to help them improve their performance.
6. Sales Targets
Is your sales team meeting its monthly, quarterly or yearly targets? The only way you can measure their performance in this regard is by looking at the sales target KPI. This tells the sales managers how the sales team performance is looking compared to the sales targets.
Besides judging the sales team’s performance, this KPI is important to track because it helps align the team’s goals. Rather than an individual worrying about meeting his or her own individual targets, the sales team works together to gather the necessary insights from the KPI and figure how best they can work together to meet the targets.
7. Sales Opportunities
As the marketing team identifies leads and the sales team works to close them, all of it will be for nothing if the people aren’t interested in your offerings. This is where this KPI comes in to identify which opportunities are worth pursuing. It does this by looking at the opportunity value of each lead and how likely it is to convert them.
8. Monthly Sales Bookings
This is a KPI that is popular in SaaS. Sometimes when you get a lead, they will immediately move to becoming a paying customer. But others will need extra convincing by requesting something like a demo in order to try out the product first. And this KPI keeps track of such instances that your sales team or individual representative gets.
When a potential customer gets to this stage, it means they are more likely to buy. The sales teams can learn a lot from this KPI in order to close deals faster. And the sales managers can use this KPI to see if there are areas in the sales process that need to be improved.
9. Quote to Close Ratio
This ratio is similar to the conversions, but the key difference is that it tracks how many of the customers that you engaged and gave quotes to actually made a purchase. It helps you determine if your efforts to reach out to your customers for business are actually paying off.
To calculate this ratio, you need to take the total number of sales you made from the quotes you gave out. Then you have to divide that number by the total number of quotes that you gave out and then multiply it by 100. That should give you your quote to close ratio.
10. Percentage of Sales Growth
One of the biggest measures of success is the growth of the company’s sales. If sales are growing, it shows that the company is in great financial health. If not or the sales are shrinking, management needs to take a look at what the problem is. If companies can’t generate enough money to meet their expenses, they risk closure. And if sales aren’t growing, they can’t scale.
Calculating this number requires subtracting current net sales and the previous period’s sales. The result is then divided by the previous period’s sale and then multiplied by 100 to come up with the percentage of sales growth.
11. Sales Qualified Lead (SQL)
A potential customer is vetted twice before efforts are put into acquiring them. First, they are vetted by the marketing team to see if they are likely to become a customer (market qualified lead or MQL). Then they are vetted by the sales team to see if they are ready for the next step (becoming a customer). If they are, they are called a sales qualified lead or SQL.
12. Customer Acquisition Cost (CAC)
How many customers have you acquired through your marketing activities? And how much did it cost you? The answer to both these questions is what is known as the customer acquisition cost. This KPI metric is extremely important to know since it informs your next customer acquisition budget depending on the level of success.
13. Customer Lifetime Value (LTV)
As long as an individual is your customer, you expect them to spend a certain amount of money on your products and services. This is customer lifetime value or LTV in nutshell. The purpose of this KPI is to let you know if you should further invest into customer acquisition and how much you should invest to make it worth your while.
To calculate LTV, you must multiply the average purchase frequency rate by the average purchase value. Then you multiply the result by the average lifespan of a customer to get customer lifetime value. Needless to say, the longer the customer spends purchasing your products and services, the more revenue you make.
14. Churn Rate
One of the figures that no business wants to see rise is the churn rate. This is the percentage of customers who no longer wish to do business with a company. Basically, for a business to grow, it needs to get more customers than it is losing. If that is not the case, the growth rate of the company is negatively impacted.
To calculate the churn rate, you need to take the number of customers lost over a period of time and divide that by the number of customers acquired over that same period of time. To get the actual churn rate, you then multiply the resulting figure by 100.
Customers leave for various reasons. Some of the reasons, such as poor product quality or poor customer service, are under your control. And other reasons, such as the customer not having enough money to continue being the customer, are not. If it is the latter, then you need to look into it and do something about it before you lose more customers.
15. Upsell Rate
If you have managed to convince someone to buy from you, chances are, you can convince them to buy from you again. But not only that, you can convince them to buy one of your other more expensive products. This is what is known as upselling. Your upsell rate is the percentage of customers that you successfully managed to upsell.
To calculate this figure, you first calculate the number of customers you managed to upsell your product or service to. Then you divide that number by the customers that bought from you and then multiply it by 100 to get the upsell rate.
16. Product Performance
If you have multiple products (or services) in the market, the ideal situation is to have them all perform well. Unfortunately, some are more likely to perform better (bringing in more revenue, for example) than others. You can find out which ones are your top performers or your under performers by looking at this KPI. This allows the sales manager to know which products to invest more in or find ways to get the underperformers to perform better.
How to Choose the Right Sales KPIs and Metrics
For the KPI metrics to benefit your sales team, you need to pick the right ones. All too often, people find themselves tracking the wrong KPIs and wonder why they aren’t meeting their sales targets. Here are two majors ways in which this can be avoided:
- Reference the company goals : While starting with the 16 sales KPIs and metrics mentioned in the previous section is a good idea, some of them might not be in line with your company goals. This means you might want to narrow down the list to the most important ones or even add some that the list omitted to be more in line with your strategic goals.
- Reference the current challenges as well : You also can’t choose which KPIs to measure without considering the current challenges that the sales team is facing. For example, if calls with customers are taking too long, you might want to decrease that time. For that, you need to track the right KPI metric that is in line with this problem.
There is no list of sales KPIs and metrics that can apply to every business on the planet. While having a list of common KPIs is a good idea, they need to be evaluated to see if they can serve the company’s needs when it comes to sales. Keep these two tips above in mind when you are choosing your KPIs to ensure that you pick the right ones.
Sales are essential to the survival of any business. And the department that is in charge of this is the sales department. Because of this, the performance of the sales team needs to be in line with the expectations of the company. This requires measuring the performance of the sales team by looking at the right KPIs and metrics. Now you know 16 of such metrics and KPIs you need to be tracking, especially in 2020, where competition is high.