Sales Leaders Push for Measuring What Matters
Companies today can keep tabs on almost any sales activity they want. Some sales metrics have been used for decades; others are very new and very precise in what they measure. But as customer and company needs have changed, some of those metrics are still extremely important, and others much less so. Knowing which ones are right for your business can make all the difference in the world.
“The transition is that we’re not only looking at revenue per customer; we’re not only looking at retention,” says Peter Graf, chief strategy officer of Genesys, a provider of cloud customer experience orchestration technology. “We are actually trying to figure out along the way the [metrics] that matter. What are their correlations with the overall outcome? How does the quality of my marketing drive overall satisfaction and revenue?”
“The fundamentals haven’t changed; what’s changed is that the sales cycle has become more complex,” says Rebecca Wettemann, principal at consulting firm Valoir. “Sales managers have tried to measure things that indicate progress toward the end goal, which is to increase revenue.”
Too often, though, companies have tried to identify and measure as many key performance indicators as possible rather than understanding the ones that truly matter and measuring them in a meaningful way, Wettemann adds.
One of the most important sales metrics is deal size, Wettemann says, but companies must also know how much of a discount, if any, was offered to close the deal. “The profitability of a deal is going to be important, particularly at scale. So I want to know the cost of sales, the margin on those sales, as well as the margin/percentage, whether it is a small deal or a large deal.”
TECHNOLOGY IS INCREASINGLY IMPORTANT
Amid the ongoing COVID-19 pandemic, companies have continued to move away from in-person sales to direct sales, meaning organizations need to rely more on technology and capabilities to nurture leads down through the sales funnel, according to Wettemann. “That means companies need to have the enabling technologies in place both for individual salespeople to build those connections and nurture those relationships that results in closed deals.”
Other critical technologies in today’s sales environment are solutions like Microsoft Teams to bring collaboration into the CRM, data, and sales environment, according to Wettemann.
Technology has enabled companies to look not only at the number of contacts in their CRM and related systems but also at the number of prospects and customers who are engaged in different communications with the company, be they email exchanges, website visits, or something similar, says Kathleen Black, who operates a sales coaching and consulting firm.
“Sales metrics that matter today have become more sophisticated because we are attaching them to different categories,” she maintains. One such metric that is increasingly important for many organizations is reviews, because prospects rely on them when selecting between similar products and services. “People want to know what their trusted peers are saying about the products and services that they are looking to buy.”
“At the highest level, it’s the whole process that matters,” Graf says, explaining that customer experience-related metrics are a means to an end. “You want to have a fantastic customer experience because that’s what drives your business.”
The problem is that for years customer service operations were seen as a cost center, so most customer service metrics were related to costs and savings, such as cost per call or first-contact resolutions, according to Graf. Now organizations are realizing that it’s not just efficiency that matters, as scoring well on loyalty, customer retention, and similar metrics can drive long-term revenue. Loyalty and customer retention in particular have become increasingly important metrics as a growing number of companies move to subscription models for their goods and services.
With subscriptions, companies measure retention in one of two ways: gross retention and net retention, meaning someone already has a subscription and is buying a larger subscription.
“Getting customers in the first place, even if it is a smaller purchase, gives me the opportunity to continue to sell to them,” Graf says.
A related metric that is essential today is customer satisfaction, which is a good indicator of future sales, Graf says. Customer satisfaction scores have historically been based on survey responses, but companies are now attempting to predict actual customer satisfaction based on customer reactions while they are involved in the sales process.
B2B METRICS
Though there are numerous elements to it, the primary sales metric for B2B sales is the size of the sales pipeline, according to Jason Rushforth, senior vice president and general manager of the Americas for SugarCRM.
“If you don’t have a pipeline, you don’t have revenue,” Rushforth explains. “If you don’t have a pipeline, you have 100 percent chance of closing zero sales. You can look at productivity rate, conversion rates, all of this stuff, but the foundation of anything in the selling world is pipeline.”
Within this metric, each qualified lead receives a dollar value, with the total dollar value of all deals representing the company’s pipeline. So simply filling out paperwork or having an initial engagement with a prospect doesn’t qualify as being in the pipeline. Each company will have its own rules for when the engagement progresses to the point where it is qualified for the pipeline.
“The one thing that is interesting about pipeline is fluidity,” Rushforth says. “There are internal and external sources that can influence your probability of closing the pipeline. So even after you have obtained the pipe, there are material factors and influences that can happen internally within your company or externally. It can be mergers, acquisitions, etc., that can affect your ability to turn the pipe into revenue.”
The COVID-19 pandemic was one such external factor, affecting the sales pipelines of most companies, Rushforth says.
“I’ve worked primarily with traditional sales organizations, and the metrics I focus on are qualified pipeline growth at the top of the funnel and contacts associated (multi-threading) mid-funnel,” says Joe McNeill, chief revenue officer of Influ2, a B2B marketing technology specialist. “Specificity is key with both metrics.
“Qualified pipeline should be clearly defined as pipeline from your ideal customer profile (ICP) with your primary personas. This will ensure that volume growth delivers healthy revenue growth. For managing multi-threading mid-funnel, you should have a clearly defined target buying group that you would like to engage,” he explains further.
Once a company has the entire relevant buying group engaged in the sales cycle, it will see the conversion rates and average sale price climb accordingly, McNeill maintains. “Managing quality with quantity creates alignment throughout the entire commercial organization, resulting in increased collaboration and efficiency.”
While the pipeline might be the company focus, salespeople might be focused elsewhere, according to Yamini Bhat, cofounder and CEO of Vymo, provider of a sales engagement platform for financial firms. “Sales folks have a one-track mind. They’re thinking quotas all the time. Especially in large enterprise sales where they may need two or three deals a quarter to make quota, it may be hard to get salespeople to care about pipeline, but they have to be held accountable to leads and opportunities so there are minimum slippages and drops.”
Bhat identifies two important but under-the-radar metrics that sellers should consider:
Net revenue retention. This metric really tells you how much money is on the table so you can land and expand, Bhat explains. This also impacts other factors, such as how you structure your team, compensation, what businesses or industries are more lucrative, etc. “It would be great to track this for a few different cohorts: industries, product lines, and geographies,” Bhat says.
Sales activity/information metrics. Not enough teams track activities as much as they do pipeline or outcomes, Bhat explains. “It’s best to draw a playbook by stage for activities and information required so you can standardize your process and make it as much a science as possible. Go beyond calls or meetings and look at the number of stakeholders engaged, champions enabled, and so on. These could be leading indicators.”
UNIMPORTANT SALES METRICS
The good thing about the power of today’s computers, cloud-based systems, processing capability, and analysis programs is that they enable companies to track a variety of metrics very quickly and thoroughly. But that is also the drawback of today’s sales-oriented analytics capabilities: They can lead companies to spend too much time with sales metrics that provide little, if any, value.
“Too many organizations focus on vanity metrics such as [marketing-qualified leads], meetings, or undefined opportunity growth,” McNeill says. “Focusing on these metrics typically drives the wrong behavior, which creates a wedge between your marketing/demand gen teams and your sales team. If you manage to volume, you will probably get it, but you likely won’t get the outcomes you’re looking for.”
Some organizations focus too much on impressions and traffic for websites and social media, which might be a poor indicator of tangible sales opportunities, according to Black. “That’s a really dangerous path to go down because there are so many different marketing specialists that want to drive traffic to a website that doesn’t provide value or doesn’t enhance it. Some think that all eyes are good eyes, and that’s not the case. It’s easy to get leads on social media, but it’s harder to convert them unless they are looking for your particular product or service.”
SALES METRICS DECLINING IN IMPORTANCE
The importance of various sales metrics has shifted over time as companies improve their analysis of the ones that lead to improved revenue, sustained sales, etc., and those that don’t provide real short- or long-term value.
Net Promoter Score is one such metric, according to Graf. “We’re seeing a shift to metrics that are more actionable, ones that allow me to correlate customer sentiment with actual business outcomes,” he says. “To which degree does my customer satisfaction correlate with my revenue or my ability to get a repeat sale?”
The weakness of the Net Promoter Score, according to Graf, is that it is used in a very transactional way and doesn’t do enough to correlate promoters and detractors with actual results. “It’s just not precise enough. Gartner predicted last year that by the year 2025, 75 percent of organizations will have abandoned Net Promoter Score as a measure of success for customer service.”
“Prospecting quantity over quality is no longer as important as it used to be,” adds Greg Armor executive vice president of Gryphon.ai, a provider of guided selling and conversation intelligence tools. “As a sales leader, activity metrics are still important, but it must be the right kind of activity. Spray-and-pray no longer works. Just because a prospect picks up the call doesn’t mean that the meeting will get set. Messaging, approach, sentiment of the call are more important than sheer activity for the sake of activity.”
Other sales metrics declining in importance are number of leads and number of calls or meetings logged, Bhat says. “It may look good to fill up your top of the funnel with as many leads as possible, but weighting those based on quality and intent will really streamline your effort rather than just chasing vanity metrics. Also, ensuring lead-specific cadences between sales and marketing will help optimize both sourcing and engagement.”
Bhat adds that sales activity metrics should go beyond rote measures like calls and meetings. “This could demonstrate skill vs. will, but simply logging in these activities without having a holistic understanding of the account or playbook is missing the forest for the trees. The goal isn’t to log 50 calls a day, it is to close sales.”
While the sales metric landscape has changed dramatically in the past few years, the cycle of change is far from complete, experts agree. The importance of different sales metrics will continue to evolve, they note.
“Over the next year, we will look more closely at the speed of new rep productivity in both time and amount of revenue contribution,” Armor says. “We know how long a deal should be in each part of the sales cycle and the key conversations that need to occur to progress deals and improve forecasting accuracy. We will leverage metrics like the ideal time of day and type of messaging needed to improve sales rep efficiency and increase pipeline production. These are some of the evolving ways we see that sales metrics can alleviate the true pain points of a sales leader.”
Phillip Britt is a freelance writer based in the Chicago area. He can be reached at spenterprises1@comcast.net.