Do you have a good product, and skilled sales reps, but still feel that sales could be better? Now you just need the right data. Learn the 9 essential sales KPIs that will help you improve your sales department processes.
1. Sales Activities
Let's start with the simplest one by far, and that is sales reps’ activity. You can measure the number of calls, emails, or meetings they have with customers. The more leads a salesperson generates, the more likely it is that a deal will close. But it's still only a small part of the entire sales process. The most successful companies also track another of the following sales KPIs.
2. Average Response Time
In some companies, sales reps don't have to do much prospecting for new business opportunities, as inquiries come to them via a web form, web chat, email, or phone themselves. In this case, the first key to success is not to keep the potential customer waiting.
It's important to answer inquiries from customers in a timely manner. A number of studies show that 5 minutes is the ideal response time, while other studies report the average response time to be several hours. However, 78 % of customers buy from the business that responds first. So it's always a good idea to measure your response times and look for ways to reduce them.
3. Percentage of Leads in Each Lifecycle Stage
Every company has a slightly different sales process. But you can always measure some milestones that a business opportunity must pass through. Whether it's sending an offer, meeting with a client in person or online, or signing a contract, at each stage a certain percentage of leads will leave. Measuring these milestones in your sales cycle will then help you uncover any potential weak points.
4. Close Ratio
When sales reps are successful in arranging enough meetings with clients, that's great, but at the end of the day, the most important thing is to close the deal. And that's exactly what the close ratio of business opportunities will show you. You calculate this simply by dividing the total number of closed business opportunities by the number of successfully closed opportunities over a specific period.
If you're not sure what your expectations should actually be, try the following analysis to get you started. It includes company statistics by industry.
5. Sales Cycle Length
Whether the business opportunity was successfully closed is of course the most important thing. But measuring the average length of the sales cycle is also an interesting insight. The shorter it takes to close a business opportunity, the better. But it doesn't pay to speed up the process by pushing the customer or neglecting anything.
If you want to learn more about using statistics on the sales cycle length, or if you'd like to see a comparison with your industry competitors, you'll find it in our analysis.
6. Customer Acquisition Cost
Converting a lead into a customer is a long process with many costs. Measuring the cost per acquisition tells you how much you have spent to acquire a customer. You can track costs for both sales and marketing. From online or print advertising, to the time sales reps spend communicating with potential customers. This allows you to make sure that the cost per acquisition is lower than your margin and that you are profiting from your deals.
7. Customer Retention Rate
If you have been able to win a lucrative contract or two, great! Why not add another? It's good to keep track of your existing customers and to see which clients you have not communicated with for a while—especially your VIP clients—to make sure everything is in order or to see what you could possibly do for them.
If you want to see how you're doing at retaining existing customers, use this formula:
8. Upsell and Cross-Sell Rates
When your customers are satisfied, they are more likely to buy from you again. Upselling and cross-selling can increase the profitability of your business by offering your customers additional or even better goods or services than they are already using.
However, with upselling and cross-selling it is important to think about the needs of your customers so that they do not get the impression that you are more concerned about your own profit than about them. An analysis of these techniques will tell you when, how, what, and to whom your sales reps should be selling.
9. Competition-Based Pricing
When it comes to price competition, businesses rarely find it fruitful to fight on price alone. But at a time when households and businesses are trying to save money, we recommend including competitor price monitoring in your business strategy. If it makes economic sense for you, you can proceed to lower your prices, and sell cheaper than your competitors. Business should then just pour in. It's up to you whether you go the route of permanent price cuts or discount promotions.
Too many KPIs?
We recommend measuring most of the sales KPIs mentioned above for sure. But there are also many more metrics that will help you optimize your business. It's a challenge not to drown in all the reports and statistics. Especially if you don't have much time to do so.
Using the right software can help you save time. For example, Microsoft's Power BI supports integration with third-party systems such as your accounting or CRM system to automatically update report data, saving you a lot of time spent copying and retyping