Setting KPIs for Sales – What You Have to Know
When thinking about setting KPIs for sales team, managers often think about the sales quotas, the average size of deals and the revenue per sales member. KPI for sales is regularly misunderstood and misused. For a better understanding of KPIs and learn how to build an effective KPI-driven sales procedure, this article about will help you by providing some basis of KPIs and how to make them effectively work for your own sales team.
What is a KPI?
KPI is the abbreviation of Key Performance Indicator. Basically, it has 3 functions which are helping you meet the end goal, controlling and tracking all the time, and providing a reliable source of information to show that you’re going towards the desired sales result.
KPIs are categorized into two major groups: lagging indicators and leading indicators.
- Lagging indicators measure the consequence of what coming before it. For instance, the average size of deals, the length of sales cycles, and closed sales. It’s a measurement, and you cannot change anything related to it because it already happened.
- On the other hand, leading indicators reveal whether your sales team is correctly going towards to your desired outcome and easily controllable or not. In case of being behind the leading indicator, you can adjust the behavior to influence the outcome.
In this article, the main focus will be the leading indicators since they are main factors that sales managers often “swing and miss” with regards to successful sales team management. For example, when sales supervisors yell at their team “We must strike it up. You guys have to close 20 deals more to make it all work out before the month’s over.” This is no way effective or productive.
Of course, your sales members always want to close the deals, even more than you do as that’s their salary, incentives, and job. Do you still think that a coach just needs to tell his athletes: “Run faster, and you will be the winner!”? No way. The same thing happens to your sales team. As a result, you should decide start managing performance or stop managing quotas for better sales result as soon as possible.
KPIs encourage the sales team members to perform with proactive yet controllable behavior instead of focusing on just the finish line; therefore, they bring out the optimum outcome. Besides, they prompt the sales manager and sales team members to think about what is effective, what works, what does not work to review their performance and to see where they can spend their right time for the right place and the most effective result.
KPIs Should Be Defined As Activities – Not Just As Financial Targets
Results are the base of all plans, and meeting sales budget is what makes the difference. In any case, from what we’ve experienced throughout the years, the best sales team is the one that can break the sales procedure into single and quantifiable actions.
The fact of the matter is that most deals are successfully closed as the consequences of certain actions, while unsuccessful deals are frequently because of ignoring of these actions. Below are some examples of activities-based KPIs:
- Finishing x meeting with new /existing clients
- Calling x potential clients
- Conducting x item introductions
- Email sending x existing clients
- Letter Sending x wrote offers
- Conducting x follow up phone calls
Not all these above activities will essentially prompt to a real deal, but part of them will. Setting objectives for the individual sales actions and monitoring them lead to positive results. Some of them are:
Better Sales Management
Understanding the relationship between sales results and sales activities help you get much more effective tools for dealing with your sales team, reviewing sales, re-organizing future sales activities and focusing sales revenue. In summarize., more successful sales!
More Practical Tools
It will be much more helpful for you, especially for sales representatives, to get more practical tools to do the work. Since the whole procedure is broken into individual activities, it will be much more simple to perform your sales work.
More Effective Dialogue
The following up dialogue between a sales supervisors and sales team members will be significantly improved when using the counting of implemented sales activities into the sales review. Similarly, communication between sales and marketing team will be much more effective.
These things together can help you get better sales outcome. As an additional advantage, employee satisfaction and efficiency will no doubt increase along with the quality cooperation between the marketing team and sales team in general.
4 Steps of Setting KPIs for Sales
Setting up activity-based KPIs for sales depends on your specific business field, services, products and own company culture. Determining which KPIs for sales are right for your team requires you to answer these two main questions:
- Which types of customers you are targeting?
- Which activities are suitable for these types of customers?
Once you carefully and thoroughly answer these questions, you can move on to setting each activities’ targets for each type of customer. The following four steps bring you a simple way to start:
Outline Sales Activities to Specific Types of Customers
Carefully consider each of the individual sales activities. Determining how each sales activity is relevant to each type of client. For a clearer view, some sales activities may target in acquiring new clients, while others may focus on taking care of existing clients.
Set Goal for Each Activity
Set goal for every activity that you want your sales team members to perform each week, each month or each quarter. Once you have general objectives for your whole team, you can break down to get the individual target for each member of your sales team.
Set Up Support System
A support system allows sales team members to track their activities they carry out. This can be a CRM tool or any tool that you build for your own organization to share with all to charge members.
Track, Review and Adjust
When finishing setting up your framework, you can use it to supervise the performance of your sales team members. By taking a look at the relationship between your actual sales outcome and sales activities, you can adjust the most significant and relevant activities later on to adjust the targets.
7 Key Indicators of Rate Employees Performance
It’s said that the revenue per sales reply metric is the most important matter in sales management. To optimize the sales process, you need to identify what your key strengths are and think about how to train each of your team into a proficient selling machine. A successful manager should be able to lead his/her team to achieve the goals.
Discuss the KPIs means that we are looking at leading indicators that reflect how your sales is going on and what your team should do to reach success. In other words, A KPI is one of ideal approaches to keep your team’s progress on track. Let’s check what sales managers should do in setting KPIs for sales.
With regards to lead response time, speed is a fundamental key in boosting sales success. The information appears to agree with our instincts that an immediate responsive company equals with a good company. Harvard and other studies on response results proved that if sales reps and leads are reached in time of 1 hour, then it is likely 7 times more effective to have a significant discussion with a decision maker.
The main question is not when to react but rather who should. Are some kinds of computerization, such as a robot call or an email, enough? There is truly no possible replacement for an individual phone call by a real sales rep. You will have to track the numbers of outbound and inbound telephone calls and check how rapidly your team responds on average. With a couple of special cases, you should attempt to guarantee that your sales group/team responds in an hour.
There is one thing that we should learn, and that’s what an excellent sales manager does to ensure a high outbound volume of calls. Some new studies suggest that real opportunities coming from effective reps are approximately 32 for each 1000 of outbound calls. But those also include cold calls, so you have better pay attention to the call logs. If the achievement does not get along with the numbers of activities, maybe you should listen to some installed call recordings to find out what is wrong.
Work with determination then you will get pay off. A study conducted by the National Sales Executive Association (NSEA) showed that 48% of sales employees leave their leads after the first try. This is really something if you know that 10% of sales succeed after 4 contacts and 80% are closed after 5 to 12 contacts. Therefore, as a good manager, make sure that you check the lead records and do not skip any of them at several first contacts.
Follow-Up Emails Clicks
Let’s consider the most remarkable follow-up emails that you have received until now. Effective and efficient reps will try to attach something into the conversation to gain your interest and have your engagement again. Usually some links to a pricing page, online papers or a promotion, etc. are used to add in the content. The purpose of this metric is not all about the click-through-rate or volume but to make sure that links embedded in the content of follow-up emails really work.
Social Media Links
This data is rather difficult to analyze among all indicators setting KPIs for sales, but all you have to bear in mind is to keep your sales reps active on various social media channels. There is a strong bond between the social media fame and your company revenue. With very few guide of KPI on this measure, you will need to depend on your senses and experiences to clarify how your reps make associations and take advantage of current social media channel.
Marketing Usage Rate
From my personal experience on various marketing and sales projects, there are many sales contents go unused after all. This is due to the sales reps forget available favorable responses or get none of them or did not even recognize them at first. Good content like videos and whitepapers provide reps a chance to keep up with lead and see what leads think of them. Check www.salesforce.com, and it will give you the information of various marketing collateral and whether you should use it or not.
Chance to win
Have you ever counted how many times your reps win after prospecting the opportunity? Surprisingly an important metric it is! If you have excellent door openers and networkers in your team as sales reps then nothing matter. But in case you have terrible closers, either you help them to improve or change their roles. Then, the key is to track this metric.
To conclude, if you want an effective setting KPIs for sale, then you should keep the below 3 key points in mind:
- Keep your KPIs attached to both activities and results.
- Match your activities with your customer types.
- Apply simple tools for your company to support the KPIs
KPI is an excellent approach to measure the success of the organization or individual goals and enhance the performance quality of your employees. However, it’s just useful if you can keep your focus on it. Take a look and review your sales KPIs data on schedule. Attend to new trends in order to respond quickly.
Additionally, it’s good to incorporate the sales group/team simultaneously and review each member’s performance once per week so you can recognize any unusual mistakes or inappropriate behaviors at an early stage and are able to modify in time. Follow the 7 key indicators, and you will reach your goals earlier than you could expect.