How to create meaningful sales measures

How to create meaningful sales measures

We wrote last month about the importance of sales funnel measures.

This month we’re focusing more on sales measures and results.

How many sales measures should I have?

A question you might want to consider is how many sales measures you should have. We’ve seen everything from one to twenty!

We’ve yet to see a sales job that doesn’t have some sort of target, so you probably think as a minimum you’ll set a £ sales target, but what comes next?

If you’re not sure we recommend you take one from each of these three buckets so you don’t complicate things too much.

Once you’re happy these are working for you maybe add another couple – but don’t be tempted to take on too many. You really can spend more time measuring than delivering.

1. Sales or profit measures

This is the key measure for any sales person. As a minimum you should set a revenue target, though this can hide a multitude of sins.

There have been many business owners moaning about sales teams giving away too much discount to get the deals. If you only bonus people on revenue or volume that’s what you might end up with.

See if you can add a level of profitability to this target to ensure your sales people are driving the number that really counts to you.

It might not be a fully-costed profit & loss calculation, maybe just a simple equation that shows revenue minus cost of sales. That will be a good start.

If you’re in an organisation with major accounts you might want the full account P&L though. If only a few customers deliver most of your revenue this extra level of work might pay back in the quality of decisions.

2. Customer measures

This measure is about finding something that demonstrates your customer rates you higher than your competitors.

This is effectively your north star measure, the one that sets you apart.

In some industries customers might have Preferred Supplier status. Getting onto this list could give you greater access to senior managers and strategic insight. This might be the measure that shows you’re first choice for that customer.

Do make sure the relationship is two-way, though, and not just a way of the customer extracting better margins from you.

Some companies choose to use a Net Promoter score as the key customer measure. It has its limitations, not least as we’ve all been asked by customer service staff to rate them 9 or 10. If they are actively warping feedback like this the numbers should be treated with a dose of caution.

For us this measure is about the number of clients who repeat. Most of our work is project-based, so nothing demonstrates more clearly a client rates us than them choosing to spend money with us more than once.

This measure isn’t always obvious, but if you can find one it gives a real focus to your client relationships and is a great way of demonstrating how well you’re servicing them.

3. Input measures

There are lots of these in the sales function. If you’ve got an ecommerce operation, or if you’re using something like Hubspot, there’s a chance you’re swamped with metrics.

Don’t be fooled into thinking that’s always a good thing, though. You might want to keep an eye on these things as early warning indicators, but keep the targets you set the team to a small list.

Call activity levels are important to some businesses. Yet can you really conclude a sales person who makes 20% more calls than another is better at the job?

What if the “slower” sales person is focused on bigger orders, or has a more challenging client base?

We’ve seen people with lower call rates described as lazy – but it’s not always the case they are less effective.

Conversion rate is another metric that bothers senior managers. If I could multiply my conversion rate my sales number would double, they speculate.

That might be true. But only if every other factor stays the same. Jonny Wilkinson went down in history as the kicker who won England rugby the world cup, yet his conversion rate was some way short of 100%. Just think how much better he could have been!

Of course, if he’d only taken kicks in front of the posts then he might have achieved this. But how much weaker the team would have been if they tried to force every other penalty over the line for a try.

Conversion rate only delivers better results when every other metric remains static.

Another measure that might pop up as an input measure is if you provide customers with product demonstrations.

It’s tempting to count the number of demonstrations as a measure of success (and we often recommend recording it as a separate sales funnel step).

But imagine if your team were bonused on the number of demos. You can almost guarantee the number will increase (as will your bonus costs), but will this increase sales?

You could just end up with more demonstrations delivered to clients who aren’t really ready to buy.

In summary…

As we said at the top: If you’re not sure about what sales measures to set, we’d recommend taking one from each of these three buckets.

Maybe start with a variation of sales/profit, a customer measure like repeat rates, and one of the input measures like conversion rate.

Track these for a few months to see what insight they give you and what impact they have on the team.

If you’re happy with results at that point you can add one or two more. But do remember the “keep it simple” principle.

Are you struggling to untangle the complexities of your sales process?

Take the Untangle Your Sales scorecard today and unlock the potential for sales success.