To make the correct decisions that will increase sales and maximize profits, a sales leader must prioritize measuring sales metrics. The results of sales metrics can decide what move to take next and whether it will benefit your company. Continue reading to learn more about sales metrics, key performance indicators, and which metrics you should keep an eye on to maintain company progress.
What Are Sales Metrics?
Sales metrics are data representing the performance of individuals, teams, or entire companies. Sales leaders use sales metrics to keep track of numerous information pieces about the company, some of which include:
- Tracking progress towards goals
- Adjusting sales compensation
- Awarding bonuses and incentives
- Spot areas of concern before they grow worse
- Preparing for the future
This list barely covers all the purposes that sales metrics have for the company.
What Are KPIs?
KPIs (key performance indicators) are often associated with sales metrics. However, not all metrics qualify as KPIs. A KPI usually reflects a major priority or goal, such as the sales percentage of a major product a company is trying to push out. KPIs measure performance, and tie into the core strategy of a company.
In terms of sales, KPIs vary between companies and between departments. No single set of KPIs exists that a leader must supervise. Factors such as structures, targets, products, and obstacles vary between teams.
KPIs are the sales metrics that are important for measuring the performance of the entire company. Some of these metrics include:
- Customer Lifetime Value. The customer lifetime value (CLV), also known as the average lifetime value (LTV), shows you how much value a specific customer brings to the company over their lifetime. LTV is usually measured at regular intervals to track changes over time. This metric the multiplication of the annual revenue provided by the customer and the years of relationship, divided by CAC.
- Sales Growth. The most potent of the sales metrics, sales growth determines the ability of the sales team to increase revenue over a fixed amount of time. Due to its direct tie to time and revenue, it is very important, and the fate of the company depends on its growth. A large enough drop can result in the company becoming absorbed by another one.
There are several other types of KPIs, such as:
- Total revenue
- Market penetration
- New business revenue
- Existing customers’ revenue
- Business lost to competition
- Net Promoter Score (NPS)
- Territory revenue
- Market revenue
- Sales reps reaching 100% quota
- Year-over-year growth
Sales Productivity Metrics
Sales productivity accounts for the rate at which a sales team hits revenue targets. The less time it takes to meet a quote, the higher the productivity is.
- Time Spent Selling. This metric allows you to determine some of the largest time consumptions during your sale process. Lead generation is one of the biggest factors that results in lost rep time, since many reps struggle with finding leads that are interested in buying anything. Tracking the time spent will make it easier for you to determine the specific issues that are slowing down the process and resolve them.
Measuring productivity for sales reps also includes other factors (numbers), such as:
- Calls made
- Emails sent
- Scheduled meetings
- Social media interactions
- Demos and sales presentations
- Sent proposals
Lead Generation Sales Metrics
These metrics measure how your sales team is prospecting.
- Monthly New Leads. The number of leads each month measures the number of possible customers that are available in the pipeline. The leads depend on the chosen business model or the industry. Leads can either claim a free trial of your product, contact your sales team, or download a specific piece of content.
- Average Lead Response Time. The longer it takes for your sales reps to respond to leads that show interest, the greater the chance of that sales opportunity slipping away. If a prospect is seeking a solution, and one of your reps takes 24 hours to respond, that prospect will reach out to another business. According to the Harvard Business Review, lead response time is important, as this study proves that a response time within one hour increases the rep’s chance to make a sale by seven, while it decreases by 60 if it takes 24 hours.
- Customer Acquisition Cost. By tracking customer acquisition cost (CAC), you can understand the costs associated with business growth and expanding the customer base. This metric is particularly useful for startups attempting to demonstrate their values to their investors and to understand where to allocate your budget. To calculate CAC, you must add the money and time spent, then divide it by the customers acquired.
Other metrics (percentages) for lead generation include:
- Dropped leads
- Qualified leads
- Followed-up leads
- Followed-up leads in a time range
Sales Per Rep
Sometimes, to foster friendly competition, a leader will look at the sales per sales rep to see how each individual representative is performing. This metric also serves other purposes, such as making sure a rep did not chase unqualified leads to fill their pipelines, or how veteran reps may outperform newer team members.
Pipeline Sales Metrics
These metrics allow you to gauge the health of your sales pipeline. This information can help you understand what is working and what is not regarding the holistic sales process.
- Sales Pipeline Coverage (SPC). This metric allows you to analyze the opportunities for your sales team on making a quota for a specific amount of time. The SPC ratio compares the capacity of the pipeline to the quota for an amount of time. Not every opportunity ends up as a sale, so it shows how many opportunities need to occur at any point.
- Opportunity Win Rate. This metric measures the percentage of total sales opportunities that end up becoming customers. For example, 100 sale opportunities have 25 sales, which creates the rate of 25%. Calculating this metric allows you to set more attainable quotas for your team and create a more effective budget. This rate applies to both teams and individuals.
Other pipeline sales metrics include:
- Average sales cycle
- Average contract value (ACV)
- Conversion rate by sales funnel stage (team and individual)
- Total open opportunities by month and quarter (team and individual)
- Total closed opportunities by month and quarter (team and individual)
Cannibalization rate refers to the impact the release of your new product has on the sales of the older products. While a company usually has a goal of releasing new, more advanced products into the market, competition between the company’s own offerings is not always beneficial. Cannibalization can make your older products obsolete and alienate part of your customer base.
Learn More About Sales
Learning how to measure sales metrics and how they affect your company is overwhelming for a novice, but with the right training, you can ease yourself into learning more about sales. SNI’s sales training program does not just teach “what to do” when it comes to sales, but also the “how-to.” The program takes a systematic approach to increase the effectiveness of salespeople. We even measure your progress through several metrics systems, such as key performance indicators. Sign up today.