Sales metrics are key performance indicators (or KPIs) for tracking a company’s sales progress. They provide essential data points to help you make informed decisions, determine what’s working, and fix problems that emerge over time.
This article will provide an overview of important sales metrics to track, why it matters, and some examples of how to use sales metrics effectively.
Why tracking sales metrics matters
Specifically, tracking sales metrics is helpful for the following:
1. Performance evaluation: Sales metrics help businesses understand the performance of their sales team and identify areas for improvement. By tracking key metrics such as conversion rates, average deal size, and lead response time, businesses can determine what is working well and what needs to be changed.
2. Goal setting: Sales metrics provide a way to set realistic sales goals, track progress towards those goals, and measure the success of sales strategies. This information can be used to set new goals and make informed decisions about future sales initiatives.
3. Resource allocation: Sales metrics can help businesses allocate resources more effectively by providing insight into which sales tactics are generating the best results. This information can be used to focus resources on the most effective sales activities, leading to better returns on investment.
4. Customer insights: Sales metrics can provide valuable insights into customer behavior, such as what drives them to make a purchase and what factors influence their buying decisions. This information can be used to improve the sales process and better meet the needs of customers.
5. Data-driven decision-making: By tracking and analyzing sales metrics, businesses can make data-driven decisions that are informed by real-world results. This helps to reduce the risk of making decisions based on assumptions or gut feelings and can lead to more effective sales strategies.
Overall, businesses that strategically track sales metrics are better positioned to maintain a high level of performance and to spot and resolve any issues in their sales more quickly.
Valuable sales metrics to track
Some of the most important sales metrics include:
1. Sales pipeline: This metric tracks the progression of leads through the sales process. It can help identify bottlenecks and areas for improvement. For example, tracking a sales pipeline can show you the leads you have and how far along they are in your sales process.
2. Close rate: This metric measures the percentage of leads that are converted into paying customers. It can be used to identify which sales strategies are most effective. You might find that some marketing campaigns generate a ton of leads but with a poor close rate, completely negating the volume of leads.
3. Average deal size: This metric measures the average value of a sale. It can be used to identify trends and adjust pricing strategies.
4. Customer acquisition cost: This metric measures the cost of acquiring a new customer. It can be used to determine the cost-effectiveness of marketing and sales efforts.
5. Retention rate: This metric measures the percentage of customers that continue to do business with a company. It can be used to identify which products or services are most valued by customers.
6. Churn rate: The flipside of the retention rate is the churn rate. This metric measures the rate at which customers are leaving a company. High churn rates can indicate a problem with the product or service, or with the customer experience. By tracking this metric, companies can identify the root cause of customer churn and take steps to address it. This can include offering better customer support, improving the product or service, or offering special promotions or discounts to retain customers.
7. Salesperson performance: This metric measures the performance of individual salespeople. It can be used to identify top performers and provide coaching for underperformers.
8. Lead response time: This metric measures how quickly a company responds to leads. It can help identify how responsive the company is to customer needs and improve customer service.
9. Customer lifetime value (CLV): This metric measures the total revenue that a customer will generate for a company over their lifetime. By understanding the CLV of a customer, companies can identify which types of customers are most valuable and allocate resources accordingly. For example, maybe your products cost $100 each, your CLV is $200, and it costs $100 to acquire a new customer. Even though on the surface it just looks like you’re breaking even (by spending $100 to get a $100 purchase) it’s actually a net positive over time (spending $100 to get a customer worth $200 over time).
These metrics will give a more holistic view of the company’s sales performance. By tracking these metrics, companies can gain a better understanding of their sales effectiveness and make data-driven decisions to improve their sales and customer acquisition efforts.
Keep in mind this isn’t an exhaustive list, and the final list of sales metrics you utilize might vary slightly based on your industry and business model. In addition to the above, companies can also track a variety of other sales metrics such as Net Promoter Score (NPS), Gross Margin, and Quarter over Quarter (QoQ) Sales Growth.
NPS will help in understanding customer loyalty and advocacy, Gross Margin will help in understanding the profitability of sales, and QoQ Sales Growth will help in understanding the rate of sales growth over a period of time.
How it looks in practice
A small SaaS company, named CodeRays, is focused on selling its software product to medium-sized businesses. The sales team of CodeRays tracks several key metrics to evaluate their performance and make data-driven decisions.
They’ve found that the most important metric they track is the average deal size. By carefully tracking this metric, they discovered that their average deal size was decreasing over time. To address this issue, they conducted a thorough analysis of the sales process and discovered that they had been focusing too much on lower-value prospects and not investing enough time and resources in engaging their highest-value leads.
To address this issue, CodeRays provided additional training to its salespeople to help them better differentiate between high-value and low-value prospects, and how to best invest their energy accordingly. They also made changes to the lead qualification stage of their sales process to more efficiently screen their leads.
As a result of these changes, CodeRays soon saw a significant increase in their average deal size, which led to an increase in total revenue over time. The sales team continued to track this metric, along with other key metrics such as conversion rates and lead response time, to make data-driven decisions and continuously improve their sales performance.
This simple scenario highlights how tracking the right sales metrics can help you troubleshoot issues, quickly and reliably. By tracking key sales metrics, CodeRays was able to identify a problem, make changes, and see a positive impact on their bottom line.
