In its simplest form, sales effectiveness is a measure of how much return your organization gains on its investment in sales. In this sense, measuring sales effectiveness could be as simple as measuring your cost against the revenue generated. But if you want to measure sales effectiveness in order to improve it, the task is more complex, and few organizations are doing it well.
Most organizations measure a few key performance indicators (KPIs), such as win rates, quota attainment, and revenue growth. But at the end of the day, these measures alone don’t give sales leaders enough information to make good decisions that improve performance. Here’s a better way to measure sales effectiveness in your organization.
Align KPI tracking with sales strategy
Sales effectiveness, in part, is the ability of your sales team to execute on your sales strategy. For this reason, it’s not useful to measure KPIs that don’t impact the sales strategy.
Instead, align the KPIs you track against your sales strategy.
For instance, if your strategy calls for more sales of a particular product or service line, your KPIs should align with that. If your strategy calls for more profit, higher volume, higher transaction value, or stronger win rates, then those are the factors your KPIs must measure for.
Break KPIs down by the stage
Achievement of major goals like “2x profit by the end of the year” and “10x revenue over five years” won’t materialize out of thin air. Major achievements require the achievement of many smaller victories over a long span of time.
To improve the attainment of the large strategic outcomes, you must identify the KPIs at each of the smaller stages that you can track and improve.
Start by breaking your sales process down into its logical chunks, such as, for instance:
- Account management
- Customer satisfaction
For each logical stage of your sales process, identify the KPIs that impact your ability to achieve your larger strategic goals.
Prospecting effectiveness KPIs to measure
A lack of qualified prospects in the pipeline can be devastating to the salesperson’s overall effectiveness.
You can use this assessment to evaluate how effective your salespeople currently are at prospecting. Identify your baseline strengths as well as areas of weakness, and use them to help establish prospecting KPIs to track.
Sample KPIs you might measure for improvement include:
- How much time salespeople spend in research before contacting a new prospect
- How much time salespeople spend in prospecting overall
- How consistently salespeople mine their current network for new prospects
- How knowledgeable salespeople are on current trends in the industry
Of course, you will also measure how many prospects are generated within a sales cycle, whether they are qualified, and how many move to the next stage. But by going a level deeper and measuring what your salespeople are doing and how they are developing their prospects, you provide an opportunity to create performance improvements.
Account management KPIs to measure
For B2B sales organizations, account management is a critical area to measure sales effectiveness. According to Gartner Group, 80% of your company’s future revenue will come from just 20% of your existing customers. It’s also far more profitable to retain existing customers than to find new ones.
This article is a great place to start identifying the KPIs that will help your team be most effective at account management. It will help you identify critical KPIs for retaining customers, strengthening relationships, and growing revenue so that you can measure sales effectiveness at the account management level the right way.
Customer satisfaction KPIs to measure
Common customer satisfaction KPIs include the average length of the customer relationship, average lifetime value, and account growth measurements. You may also want to track customer feedback KPIs. These KPIs may be a part of your account management measurements, or you may want to track them separately.
Focus on a few simple, targeted KPIs
For each element of your sales process, narrow your primary measurement focus to a few simple, targeted KPIs. While you may track many things, it’s impossible to focus on everything at once.
Choose for each element the KPIs that fit the following criteria:
- Aligned with and in support of strategic goals
- Objectively measurable
- Capable of improvement
Aligned with strategy
KPIs that don’t directly support your strategic sales goals are a distraction, so make sure that every KPI you’re measuring has a direct impact on the desired outcomes.
Make sure that the KPIs you focus on are objectively measurable.
For instance, if you wish to measure how many qualified prospects each salesperson places in the pipeline each week, ensure that you have an objective definition for “qualified” so that this can be measured effectively.
In this example, without an objective definition, you run the risk that salespeople will dump large numbers of unqualified prospects into the pipeline to make their KPIs.
Capable of improvement
Finally, focus on KPIs that can be reasonably and substantially improved by direct action such as training, enablement, and technology. For instance, a KPI that measures how many companies exist within your target market is not capable of improvement by direct action within your organization, and therefore not useful to measure for improvement. However, a KPI that measures how many new contacts each salesperson makes within your target market each week is improvable and worth measuring if it fits the first two criteria.
Measuring sales effectiveness is a critical function for improving sales effectiveness. We hope this article helps you identify the KPIs you need to be tracking in order to measure sales effectiveness.