Besides measuring business and staff performance, sales KPIs (key performance indicators) serve as major guideposts for organizations. They allow for strategic business alignment and let you effectively manage actionable results, and achieve (or hopefully surpass!) sales targets.
If you get too lost in the numbers, however, you may fall victim to analysis paralysis. So how do you decide which metrics deserve your attention? According to Dennis Mortensen, CEO and founder of meeting scheduler x.ai, KPIs should echo organizational goals, provide context, create meaning on all levels of the business, be based on legitimate data, be easy to understand, and lead to action.
Here are five KPIs that top leaders rely on to measure sales performance.
Rate of contact
“Pretend that every single person you meet has a sign around his or her neck that says, ‘Make me feel important.’ Not only will you succeed in sales, you will succeed in life.”
Mary Kay Ash, Founder, Mary Kay Cosmetics
Also called “reach rate,” rate of contact is the percentage of outbound activities, i.e., calls or emails that result in a meaningful conversation with a decision-maker.
This metric gives you a snapshot of how each salesperson contributes to ramping up your business, allowing you to see those who are hitting sales targets and those who are not, which can help set more realistic quotas per sales rep, per sales territory.
Follow-up rate
“To build a long-term, successful enterprise when you don’t close a sale open a relationship.”
Patricia Fripp, Hall of Fame keynote speaker
Following up and establishing ongoing dialogues help build trust with prospective clients. Perseverance counts a lot. How tenacious are your salespeople in qualifying leads and converting them into clients? Do they give up after one unanswered phone call or email?
According to a lead response management study, the “odds of calling to contact a lead decrease by over 10 times in the first hour” alone, and “the odds of qualifying in five minutes versus 30 minutes drop 21 times.”
Robert Clay, the founder of Marketing Wizdom, cites that only 2% of sales occur at the first meeting. 80% of non-routine sales happen only after a minimum of five follow-ups. That’s something to think about when a prospect says no for the third time.
Follow-up rate lets you measure the frequency and intervals your reps perform check-ins with sales leads.
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Lead response time
“For every sale you miss because you’re too enthusiastic, you will miss a hundred because you’re not enthusiastic enough.”
Zig Ziglar, author, salesman, and motivational speaker
Not just speed, but the timing of responding to sales queries can make or break the sale. A study by the Harvard Business Review shows that online leads, specifically, go cold quickly and, as such, should be responded to immediately.
Analysis of 1.25 million sales leads received by 13 B2B and 29 B2C companies in the U.S. indicated that sales reps who try to reach out to potential customers within the first hour of receiving a query were seven times most likely to have a meaningful conversation with a decision-maker, compared to those who respond after 24 hours or longer.
Lead response time lets you find the most effective time to respond to queries, allowing you to increase your lead qualification success rate.
Opportunity-to-win ratio
“Sales are contingent upon the attitude of the salesman, not the attitude of the prospect.”
William Clement Stone, businessman, philanthropist, and self-help books author
Perhaps one of the most crucial performance indicators that you can track is the ratio of leads to closed sale.
This KPI measures a rep’s effectiveness in turning a lead into a win. It also identifies their strengths and weaknesses. Because let’s face it, some reps may be great networkers but inept in closing a deal, while others do well in both areas.
This will determine individual team members’ areas for improvement, which allows for a strategic allocation of training resources with the ultimate goal of increasing close rates.
Ratio of cost to sales revenue
“Your business is never really good or bad ‘out there.’ Your business is either good or bad right between your own two ears.”
Zig Ziglar, author, salesman, and motivational speaker
Also referred to as efficiency ratio, cost-to-sales-revenue ratio gauges how productive or effective an operation is.
It focuses on the level of resources required to generate a dollar of revenue and serves as a guide to better control expenses—including salaries and allowances, supplies, technology investments, and other administrative costs.
You may need to commit more cost resources in one or two areas to see an immediate effect on efficiency improvement, for example.
Final word
In the highly competitive world of sales, details are important. Employing a data-driven culture ensures you stay on top of your game and fosters competitiveness among team members. So choose the KPIs that give you a full picture of your operations, without getting buried in numbers.
How do you measure your sales team’s effectiveness? Let us know in the comments below.