Today’s post is by Ben Taylor, content marketing manager at Richardson Sales Training Company. He has an MBA in finance from LaSalle University and more than a decade of business and writing experience. He has covered content for brands including Nasdaq, Barclaycard, and Business Insider.
To move forward, businesses need answers. That’s why feedback is critical when leading a sales performance initiative.
Selling metrics offer this feedback. Sometimes, the metrics confirm that the approach is working. Other times, they indicate that strategies are failing. However, without measurement, businesses are left with the worst outcome: inconclusive results.
The problem, however, is that – in the frenzied race to win the sale and move to the next opportunity – businesses ignore these measurements. Therefore, it’s often more effective to think about using the data that is readily available in a different way. In doing so, the business can get an actionable read on how it’s performing.
At Richardson, we’ve determined eight core metrics that are the most critical for revealing sales effectiveness. Many businesses will find that the basic numbers needed for any of the below metrics are easy to source. Some organizations will need to use only a few of these. Others may need them all. Here, we take a closer look at how each one works – and why they matter.
Metric #1: Win Rate
Nearly all performance metrics trace back to win rate. As an all-encompassing measurement, leaders can use win rate to reveal their competitiveness. The metric – which counts how many new pursuits close with a win status – also tells leaders where to look for more detail. If the win rate is not up to expectations, leaders may choose to examine the strategies sellers are using to position solutions, articulate value, and identify potential customers.
Metric #2: Quota Attainment
When leaders want to compare performance with expectations, they turn to quota attainment. Like win rate, quota attainment – a qualitative metric – is a starting point for more questions. A falling rate may indicate that the sales team is not articulating value properly or succeeding in getting clarity on the core of the customer’s needs. Essentially, this metric reveals how all initiatives are performing.
Metric #3: Time to Productivity
Every new hire on a sales team represents an investment. Time to productivity measures how long it will take for that investment to appreciate. As internal efficiencies grow, new sellers can rise faster and start contributing revenue. Therefore, this metric is particularly useful when looking to expand team capacity or when an organization is facing high turnover. As Harvard Business Review reports, global companies like SAP examine time to productivity and even ongoing productivity. In doing so, they gain insight into what sellers can accomplish while helping managers more effectively staff their teams.
Metric #4: Attrition
The median cost of turnover is 21 percent of an employee’s annual salary, according to research from the Center for American Progress. A look at attrition helps prevent this cost. Moreover, increasing attrition can signal deeper problems within a business. For example, attrition may be the result of diminishing demand for the product being sold. Looking at this number is well worth the effort. Why? Approximately 20 percent of workers leave their job voluntarily every year. High attrition should be taken seriously as a warning of systemic problems within the sales team.
Metric #5: Contract Value
Technology has, to an extent, eroded many competitive advantages. As a result, a commoditizing effect has set in across various products. Therefore, as sales become harder to win, sellers seek larger contract values so the deals they close offer more value. Contract value serves to gauge the effectiveness of this shift to selling multi-divisional solutions. This measurement also reveals the ability of a sales team to create valued relationships that lead to larger business deals over the long run.
Metric #6: Profitability
Pricing and product mix drive profitability. Pricing connects to the team’s ability to articulate competitive advantage to customers. When pricing falls, it may indicate that the general value proposition is faltering and not connecting with customers. Additionally, product mix is critical to profitability because different products carry different margins. By using this metric, leaders can determine how to prioritize their product mix.
Metric #7: Pricing
Pricing not only signals competitive advantage; it also indicates how effective sellers are when protecting the value of the sale through the closing process. Doing so means using strong negotiation skills that seek to achieve mutually beneficial outcomes. Controlling pricing can be difficult, as market conditions often dictate movements. Justifying prices requires a sales team to take the extra steps to earn the role of a trusted advisor from the customer’s perspective.
Metric #8: Sales Cycle
Changes to the sales cycle often begin by adequately identifying the appropriate customer profile. As a sales team coalesces around a shared understanding of their target, the sales cycle can shorten. This effect is powerful because longer sales cycles drive up costs. With a clearer target, customer profile sellers are better suited to deliver solutions that fit needs. This synergy is critical, as seen by research from Accenture showing that “only 12 percent of CSOs believe that their customers and prospects view their companies as trusted partners, with the majority considering them only as vendors or suppliers.”
These metrics serve not only to answer key questions regarding the health of a business, but also to lend valuable insight as to where leaders should explore further. Nearly every business will find it has quick access to data that allows it to leverage at least some of these eight metrics. The earlier a business begins measuring, the more complete (and therefore useful) the picture will be for leaders effecting change.