What gets measured gets done! Data is the key to making informed decisions and achieving success. Without analyzing these indicators, it can be challenging to identify areas for improvement. That's why successful companies focus on measuring every aspect of their go-to-market model, sales strategy, and sales team. But focus on the core and expand when your company matures. Here is an overview of common sales metrics and some examples.
Sales metrics are key performance indicators (KPIs) used to measure the effectiveness of a sales team and the overall sales performance of a business. The specific sales metrics that are important will vary depending on the industry, business model, and goals of the organization. However, here are some common sales metrics that businesses use to track their performance:
Sales revenue: The total revenue generated by the sales team over a given period of time.
Sales growth: The percentage increase or decrease in sales revenue over a given period of time.
Sales cycle length: The amount of time it takes for a sales team to convert a lead into a paying customer.
Conversion rate: The percentage of leads that are converted into paying customers.
Customer acquisition cost (CAC): The amount of money it costs to acquire a new customer.
Customer lifetime value (CLV): The total amount of revenue that a customer is expected to generate over their lifetime as a customer.
Average order value (AOV): The average amount of revenue generated by each customer order.
Sales pipeline: The total value of deals that are currently in the sales process but have not yet closed.
Lead response time: The amount of time it takes for a sales team to respond to a new lead.
Win rate: The percentage of deals that a sales team successfully closes.
These metrics can help businesses identify areas where they are performing well, as well as areas where they need to improve. By tracking and analyzing these metrics on an ongoing basis, businesses can make data-driven decisions to optimize their sales process and drive growth.
Here are some examples of successful implementation of sales metrics, companies that have excelled in designing and implementing sales engines through the effective use of sales metrics:
Salesforce: Salesforce is renowned for its comprehensive sales metrics and performance tracking. The company focuses on key metrics such as lead conversion rates, pipeline velocity, sales cycle length, and win rates. They use these metrics to identify bottlenecks, improve sales processes, and optimize team performance.
HubSpot: HubSpot, a leading inbound marketing and sales software company, has built a successful sales engine by employing a range of sales metrics. They closely monitor metrics like customer acquisition cost (CAC), customer lifetime value (CLTV), sales rep activity, deal velocity, and pipeline health. These metrics enable them to make data-driven decisions and drive revenue growth.
Amazon: Amazon, the e-commerce giant, has developed a highly efficient sales engine supported by robust sales metrics. They track metrics such as conversion rates, average order value, repeat purchase rate, and customer satisfaction. Amazon leverages these metrics to optimize their online shopping experience, enhance customer loyalty, and drive sales growth.
Netflix: Netflix, a global streaming platform, has established a successful sales engine by leveraging key sales metrics. They closely monitor metrics like subscriber growth, customer acquisition costs, customer retention rates, and engagement metrics such as content consumption patterns and user ratings. These metrics help them refine their content strategy, improve user experience, and drive customer acquisition and retention.
Zappos: Zappos, an online shoe and clothing retailer, has built a strong sales engine with a focus on customer-centric metrics. They track metrics like customer satisfaction, Net Promoter Score (NPS), average order value, and customer lifetime value. Zappos' emphasis on customer satisfaction has played a significant role in their success and high customer loyalty.
Shopify: Shopify, an e-commerce platform, emphasizes sales metrics to drive growth for their merchants. They monitor metrics such as gross merchandise volume (GMV), average order value (AOV), conversion rates, and customer acquisition costs. By providing merchants with comprehensive sales metrics and insights, Shopify enables them to make informed decisions to grow their businesses.
During my Gartner tenure we focused the sales force on two very important metrics: Contract value (CV) per sales executive and more importantly Net Contract Value Increase (NCVI). In the day-to-day management the only metric that mattered was NCVI. When a sales executive lost CV because a client did not renew business the rep had to off set the loss with more NCVI. A very simple and effective way to focus on revenue growth. The result? 30+% year on year growth. With the expansion of the sales force and implementation of CRM and other tools more metrics were introduced to optimize sales territories, processes, product portfolios and marketing.
Here is a list of ten commonly tracked sales metrics that Gartner and other organizations often utilize to assess sales performance:
Contract Value (CV): The total value of contracts signed with clients for their subscription or service.
Net Contract Value Increase (NCVI): The growth in contract value over a specific period, accounting for upsells, cross-sells, renewals, and price increases.
Annual Recurring Revenue (ARR): The predictable and recurring revenue generated on an annual basis from active contracts set to renew within the next 12 months.
New Business Revenue: The revenue generated from new clients or new sales within a specific period.
Renewal Rate: The percentage of existing contracts that are renewed by clients at the end of their contract term.
Churn Rate: The percentage of customers or revenue lost due to cancellations, non-renewals, or downgrades within a specific period.
Average Deal Size: The average value of individual contracts or deals closed by sales representatives.
Sales Cycle Length: The average duration it takes for a lead or prospect to convert into a paying customer.
Conversion Rate: The percentage of leads or prospects that successfully convert into paying customers.
Sales Productivity: Metrics such as the number of sales activities per rep, average revenue generated per salesperson, and revenue per salesperson, which evaluate the efficiency and effectiveness of the sales team.
Gartner is well-known for its effective implementation of sales metrics and it's performance management practice. This is what it looks like:
Clear Performance Metrics: Gartner establishes clear performance metrics to measure individual and team performance. These metrics include revenue targets, new client acquisition goals, retention rates, and client satisfaction scores. By setting specific and measurable targets, Gartner provides its sales teams with a clear understanding of expectations and motivates them to achieve their goals.
Sales Funnel Management: Gartner closely monitors its sales funnel and implements metrics to track progression at each stage. This includes metrics such as lead generation, conversion rates, pipeline size, and sales cycle length. By tracking these metrics, Gartner gains insights into the health of their sales pipeline, identifies potential bottlenecks, and takes proactive measures to optimize the conversion process.
Sales Activity Tracking: Gartner utilizes sales activity tracking to monitor the effectiveness and productivity of its sales teams. Metrics such as number of prospecting calls, client meetings, and product demonstrations are tracked to measure the level of sales team engagement and their efforts in generating leads and closing deals.
Data-Driven Decision Making: Gartner leverages data and analytics to make informed decisions and drive sales performance. They collect and analyze data on client interactions, market trends, competitive landscape, and sales team performance. By identifying patterns and trends in the data, Gartner gains actionable insights that help them refine their sales strategies and allocate resources effectively.
Performance Reviews and Coaching: Gartner conducts regular performance reviews and coaching sessions to provide feedback and guidance to its sales teams. These sessions focus on analyzing performance metrics, identifying areas for improvement, and providing constructive feedback to enhance sales effectiveness. Gartner invests in continuous training and development programs to empower its sales teams and help them achieve their full potential.
Sales Incentives and Recognition: Gartner implements a robust sales incentives program to reward and motivate its sales teams. Incentives are tied to achieving specific sales targets, meeting performance metrics, and driving revenue growth. Additionally, Gartner recognizes top performers through internal recognition programs, awards, and public acknowledgment, fostering a culture of excellence and healthy competition.
Sales Technology and Tools: Gartner leverages sales technology and tools to enhance sales effectiveness and performance management. They utilize CRM systems, sales automation tools, and analytics platforms to streamline sales processes, gain real-time insights, and track performance metrics accurately. These technologies enable Gartner to optimize sales operations and provide valuable data for decision-making. This, and the adoption and rigorous training of a sales methodology led to well trained and well managed sales professionals and a leading sales force in the world.