'What gets measured, gets managed.'
This quote by Austrian-American management consultant and author Peter Drucker is often cited by sales managers, and with good reason: it’s a phrase that has passed into cliché because it rings true. But how many sales managers are measuring - and managing - the right things? Perhaps you’re at a loss as to why your metrics analysis isn’t working.
Perhaps you’re focusing on the wrong areas. 'Some managers fall into the trap of becoming too focused on quota and “making the number” that they lose track of some vital performance metrics,' writes Docurated’s Cóbhan Phillipson.
So let’s have a look at nine of the most vital sales analytics metrics you need to track.
The problem sometimes is there are so many sales metrics that you could be tracking that you don’t know where to begin. So let’s make things simple by starting off with tracking open opportunities.
The logic behind this is simple: if you don’t know how many open opportunities your sales team is working on at a particular point, you’ll never know if enough sales opportunities are being funneled into your pipeline.
You might be shocked to find that your opportunity creation figures are low. The arithmetic here is straightforward: if your reps aren’t receiving enough leads, they’ll be struggling to hit quota. A particular culprit in this area is the marketing-qualified lead or MQL.
Check your MQL-to-opportunity percentage: if the percentage of MQLs that become opportunities is low, it’s time to have a word with marketing and find out what their criteria for an MQL actually are. (That could be a great opportunity to tell them what yours are.)
Conversely, you can use this metric to ensure that your sales reps aren’t working on too many opportunities.
'Reps working too many opportunities will become ineffective because they only have so many hours in a given selling period to qualify and close these opportunities,' writes Zorian Rotenberg on the InsightSquared blog. 'They won’t have sufficient time to work them all and prospects will feel neglected and you risk losing them.'
This metric is important in that it assesses all closed opportunities whether won or lost. As well as looking at the total number of closed opportunities your team has won and lost, assess each rep individually.
This will give you an insight into whether they are working enough pipeline to meet your targets.
'Keep a historical record of this and compare it to the number of open opportunities,' suggests Lauren Macias of the Docurated blog. 'You can use this sales analytics metric to assess whether your reps are opening and closing enough deals and whether your pipeline is growing steadily over time.'
Rate Of Contact
Also known as reach rate, rate of contact concerns the percentage of outbound activities (calls, emails) that result in a meaningful conversation with a decision maker.
A 2013 study by Matt Bertuzzi of The Bridge Group and Pete Gracey of AG Salesworks showed that a good rep should be generating around 32 opportunities from every 1,000 calls they make. If your team’s average is below 32, it’s time to have a look at the reasons why.
It could be that the team is just not making enough outbound calls. '[V]irtually every good manager wants to make sure that outbound call volume is high,' writes William Tyree of the Salesforce blog. 'So keep an eye on those call logs. If lots of activity doesn’t lead to achievement, it may be time to start listening to sample call recordings to try to work on the pitch.'
Time Spent Selling
This is hugely important. We’ve talked about this before: research from The Bridge Group has provided shows that sales reps are spending a huge swathe of their time on… anything except doing the job they’re paid to do. With most sales reps spending more than 50 working days a year carrying out tasks other than selling, it’s vitally important you keep a tight grip on this metric.
'Take the time to measure how much time your reps actually spend selling,' writes Phillipson. 'Look to eliminate sales roadblocks. For example, many reps today struggle to locate relevant content… If content retrieval issues are holding your sales team back, think about introducing sales-enablement software that eliminates this inefficiency and improves sales performance.'
Speed-to-contact attempt, also known as lead response time, is the time elapsed between a rep receiving a lead and that rep making contact in response. This is absolutely crucial in modern sales and if you doubt that statement, have a look at these statistics:
- 30-50% of sales are awarded to the first company that responds to an interested prospect
- When a lead is contacted within the hour it originated, that lead ends up being 700% more likely to have a meaningful conversation with key decision makers
- Companies that wait 24 hours before contacting a lead are 60 times less likely to qualify that lead than a company that responded within the first hour
It is, therefore, imperative speed-to-contact attempt is measured - so important that it should be second nature to any rep worth their salt. 'This metric is a leading indicator of whether your salespeople are covering the basics,' writes Nick Hedges, president and CEO of Velocify, in Inc. 'Speed to reach out to a hand-raiser is one of the metrics that is also most correlated with the ultimate metric, your conversion rate.
'If a salesperson is calling quickly, it means they’ve not only got their head in the game but you will also see results in them hitting higher sales numbers. This metric also provides sales managers with insight into which sales reps are lagging behind or failing to contact leads in a timely manner.'
Make sure you’re measuring it.
Average Deal Size
In sales, size matters. You can learn an awful lot about a rep - even one who is closing a lot of deals - by checking their average deal size. This metric can also tell you a lot about lead generation.
Reps with a small average deal size may not be spending their time as wisely as they might be - or they may be reluctant to chase bigger deals for fear of failure. 'The average size of closed won deals is a metric which can quickly flag deals that may not be worth pursuing,' writes Phillipson.
'One of your priorities as a sales manager is to ensure your reps are spending their time as wisely as possible. You might also learn that reps are veering towards smaller deals because they are easier to close instead of pursuing the most important opportunities.'
Or perhaps the problem lies with marketing - why do their leads always end up as smaller-scale deals? Are their criteria correct? Equally, if your average deal size is increasing, have a look at your lead-generation process and find out why the bigger deals are suddenly flooding in.
'A change in average deal size isn’t good or bad,' writes Rotenberg. 'It just means you need to dig into your historical data and pipeline generation efforts to figure out how (and whether) to react.'
Sales Cycle Length
How long does it take your team to win a deal on average? If you haven’t checked the sales cycle length, you won’t know. The reason this metric is so important is because, if you don’t know how long a successful sale usually takes, you won’t know when something has gotten stuck in the pipeline, jeopardizing your team’s chances of closing the deal.
'The amount of time an opportunity spends on a stage has a high correlation to its likelihood of becoming a won deal,' writes Phillipson. 'If your opportunity has been stuck in the pipeline much longer than the typical won cycle then this opportunity is less probably to be won.'
How long should an average sales cycle be, then? In a study conducted by Steve W. Martin, of the University of Southern California Marshall School of Business, in which more than 100 vice presidents of sales at top technology companies participated, 70% reported an average sales cycle length of 60 days or less for inside sales, with 54% reporting a length of 90 days or more for outside sales.
That should give you some idea of what to aim for.
Sales To New Vs. Existing Customers
It’s essential for any business to have a balance between a steady flow of new customers and a core base of loyal devotees who keep coming back for more. Monitoring sales to new customers versus those to existing ones will help you see if a balance is being struck between the two or if one is dominating.
If customers are not coming back to buy from the company again, why is that the case? Is there dissatisfaction with the product? Are they not being given enough incentive to return? Equally, if loyal customers are accounting for a huge chunk of your business, why are you struggling to get new people interested? Is the marketing not good enough? Have your sales practices slipped in the intervening period between the time when all those loyal customers found something they loved about the company to now?
This metric tells you a lot about the quality of your reps when it comes to closing. It’s calculated by taking the number of closed-won opportunities and dividing it by the total closed opportunities, both won and lost. Tracking this metric stage by stage will allow you to identify reps with consistently low win rates and find out why. This will then allow you to train those reps on the areas where they most need help.
For example, a rep might be a brilliant networker and great at pushing a deal through the pipeline, but they somehow freeze when it comes to the meat and drink of closing the deal. Conversely, if their conversion rates are low early on, they might need to better learn how to build relationships with clients or require a crash-course in product knowledge.
'As a sales leader, you should always be trying to increase your team’s win rate,' writes Rotenberg. 'It’s not as simple [as that] but through setting a solid sales process, through consistent training, good sales coaching, and sales and marketing support, this is possible to increase gradually and over time until a point that it is sufficiently good and steady.'
So, there you have it: nine sales metrics that are simple to follow but which will hopefully help remove any doubt and confusion from your sales management strategy. Incidentally, nine metrics are completely sufficient: any more than that and you can become overwhelmed by data, which only leads to inertia. Scott Edinger of Forbes puts it this way:
'The good news for all sales leaders is that a few metrics go a long way, and you needn’t create 38-row spreadsheets tracking everything your sales team does with customers. Just like your car, you don’t need a mechanics diagnostic unit to successfully drive down the road. If you know how full the gas tank is, [what] your RPMs and your miles per hour [are] and a few other things, [the] odds are you will make it to your destination just fine. And in the case of the sales leader, that destination is a predictable and healthy sales pipeline.'
Measure, manage and give your team a few extra miles to the sales gallon.
About the Author
A serial entrepreneur and digital nomad, Geoffrey has been running his own marketing consultancy for the past year.More Content by Geoffrey Walters