5 Essential Sales KPIs Every Sales Manager Should Measure in 2021
Life as a sales manager is often stressful. You are constantly pushing to hit sales targets, trying to keep your sales team aligned and on track, and figuring out areas of improvement in both processes and people.
You may feel like you’re getting a lot done, but without measuring the right metrics, you’re essentially going nowhere. That is, you’ll never know whether or not you are actually successful in your sales efforts unless “success” is clearly defined and tracked.
After all — “if you can’t measure it, you can’t improve it” — as Peter Drucker, the influential management consultant and author, correctly said.
Key performance indicators (KPIs) are metrics that help you gain a clear understanding of how your team (and product) is performing, and whether you’re hitting your company’s sales goals. By measuring the right sales KPIs, you can optimize your sales process and help your team prioritize the right activities for stronger success.
Benefits of Measuring Sales KPIs as a Sales Manager
Let’s take a look at a few more concrete reasons why you should measure sales KPIs.
To Better Guide Your Team
As a sales manager, it’s your duty to keep your reps motivated and on the right track. You’re the person they look to for the right guidance.
With the right KPIs, you’ll know what’s working and what’s not. You’ll be able to determine their wins and weaknesses, and consequently, improve their and your company’s sales performance.
To Understand Team Performance
By monitoring KPIs, you would know who’s getting top results and who’s underperforming. It is only by identifying the teammates who are lagging that you can train them to improve their skills.
To Set Benchmarks
With numbers assigned to desired results and hitting targets efficiently, you can create benchmarks for your team to do better in the next sales cycle. Without measuring KPIs, you can’t gauge your current sales performance or set a direction for continuous improvement.
To Drive Better Behavior
When your sales team knows that their work is being tracked and measured, they would make sure that at no point do they come across as tardy. They know their commissions and career progress also depends on it, so they’ll want to perform better and show you stronger numbers.
To Keep Everyone in Line
Without data available to show something happened, things can be distorted or manipulated. This can be disastrous for your company and its repercussions would be on you. So, evaluating metrics regularly puts the responsibility on the entire team to ensure they’re giving their best.
To Better Align Company Goals
Keeping your entire team working toward the same goals can be tricky. Having well-defined KPIs makes it easier to do so as they clearly state which sales elements matter the most and deserve the most attention.
Furthermore, KPIs turn subjective information into tangible metrics using which you can provide constant feedback to your teammates and superiors.
To Create Personal Incentives
Sales KPIs can be linked to personal incentives for your sales team and it gives them a clear understanding of where they stand in terms of receiving them.
Let your team know the incentives they’ll get for hitting or surpassing certain KPIs, and you’ll witness a surge in motivation. Plus, metrics can’t be manipulated so favoritism is out of the question.
Sales KPIs That Deserve Special Emphasis From You
Measuring high-level sales KPIs like the number of monthly new qualified leads, cost per lead acquired, and conversion rate is obviously important, but there are a few KPIs that stand out and deserve extra attention from you.
In other words, while there are plenty of sales KPIs you can (and should) measure, here are some of the most essential ones you ought to be measuring, and working with your team to improve upon, in 2021 and beyond.
KPI #1: Competitor Pricing
Competitor pricing isn’t a KPI per se, but being a sales manager, it is something you surely need to keep an eye on. Of course, monitoring your competitors’ every move is not a good idea, but keeping track of their pricing can help you keep your strategy up-to-date for stronger sales.
If your prices are about the same, you can consider adopting a price-matching strategy to assure your customers the lowest prices — and you, the most sales.
Also, by keeping tabs on the average retail price of whatever you’re selling, you can analyze the effects of slashing your prices or running a promotion. See to it that you’re training your reps to handle pricing concerns deftly.
What’s more, if your sales team understands what extra value your product is bringing to the table, you can choose to price more and still come out on top. Again, training your reps so they thoroughly understand your company’s offerings is key.
Many sales teams think of competitor pricing as something they need to beat, instead of trying to understand the “why” behind their strategy and working it to their advantage. As a sales manager, make sure your team does the latter.
KPI #2: Customer Lifetime Value (CLV)
It can cost five times more to attract a new customer than it does to keep an existing one, so successful sales is not just about converting leads but keeping those customers and maximizing their value.
And so, knowing the sales worth of a customer over the lifetime of their relationship with your company is key — and that’s what customer lifetime value (CLV) is all about.
Increasing the value of existing customers is a surefire way to drive sales growth, so CLV is a KPI worth measuring. By knowing the average CLV, you can chart a course that properly balances focus on new sales versus nurturing relations with existing customers to maximize profitability.
Moreover, sales reps can show they’re actively engaged with their clients having a high lifetime value. It proves their ability to establish rapport and keep clients loyal to your company. It’s a useful KPI to get a sense of your team’s overall performance.
CLV also helps you to figure out which customer segments or buyer personas drive the most revenue in the long run.
KPI #3: Net Promoter Score (NPS)
The Net Promoter Score (NPS) is a customer experience metric that reveals a customer’s desire to recommend your product or company to people they know.
NPS is measured with a single survey question, such as “On a scale of 1-10, how likely are you to recommend us to your friends or colleagues?”
As you can see, NPS sorts customers into three groups: Promoters, Passives, and Detractors.
Promoters (9-10) are happy customers who would love to spread positive word of mouth. Passives (7-8) are satisfied customers, but won’t mind switching to a competitor. Detractors (0-6) are discontent customers who wouldn’t do business with you and may even advise people against your company.
After you survey your customer base, subtract the percentage of Detractors from the percentage of Promoters to know your NPS. The score can range from -100 (everyone is a Detractor) to 100 (everyone is a Promoter).
NPS is a straightforward but powerful indicator of various other critical metrics like customer churn, upsell and cross-sell rates, average spend, and more, all of which are vital to boosting sales growth.
Reach out to your Promoters and coax them to recommend your company. Likewise, get in touch with your Detractors to understand where you’re going wrong and what you can do to turn them into Promoters.
The average NPS ranges from 27 to 71 and varies across industries, as shown below.
Set a benchmark for your team by comparing your current NPS with the industry average. Send out your NPS survey at least twice a year so you know how happy your customer base is. Keep monitoring your score for two to three quarters and if you see a 10% or so increase in the score, rest assured your sales performance is heading in the right direction.
KPI #4: Employee Satisfaction
Recent research by Marc Wayshak, a sales strategist and the best-selling author of multiple sales books, found that most salespeople don’t love their jobs. In his survey of 400 salespeople, only 17.6% of respondents regard their job satisfaction as “outstanding” while 47.1% rated their jobs as “just good.”
Working in sales requires tenacity, and sometimes your teammates can feel exhausted. Being their manager, one of your primary concerns is to ensure your sales team is always motivated to give their best while also enjoying their work.
To further complicate things, the pandemic has likely resulted in some of your reps working remotely. How do you keep them happy and make them feel like a valued member of the team?
Just because they’re out of sight doesn’t mean their job satisfaction and efforts can be kept out of mind. In fact, “lack of recognition” is the third biggest reason people say they are or would consider leaving their jobs, and 82% of employees wish they received more recognition for their work.
There are many great ways to give meaningful recognition to your sales team, such as sending a personalized gift card, posting a social media shoutout, fueling their career growth by gifting them an accredited and sought after sales course, etc.
But before you provide recognition, you need to first measure their job satisfaction levels. And you’re right — employee satisfaction is a metric that can be tough to quantify.
To create a thriving sales culture, your best bet is to regularly get feedback from your teammates. Ask each team member to rank their job satisfaction on a scale of 1-10, along with a few open-ended questions to learn what makes them tick, then compare the results against your goal.
Also, learn how to spot burnout in your sales team and have an actionable plan to avoid it.
KPI #5: Sales Cycle Length
The sales cycle length is the average amount of time between the first contact with a lead to closing the deal. This is an important KPI as it conveys the efficiency of your sales process and helps you to make reasonably accurate sales predictions.
If you know your average sales cycle length, you can forecast the number of won deals you’ll have in a defined time period based on how many leads you have in your pipeline right now.
However, sales cycle length can vary depending on the lead source or type (say, inbound vs. outbound). So it’s a good idea to segment this KPI for more accurate insights.
If it’s an inbound call, your team can use call value attribution & reporting to keep track of the value associated with inbound calls. This helps you, the sales manager, to understand the ROI of inbound sales campaigns, and also allows you to review calls that are of high value so you know what’s converting well and double down on that.
Pay attention to the average length of your team’s sales cycle. Are some reps closing deals in a couple of weeks while others are taking a month? Also, take a look at the respective attrition rates a few months after closing.
Figure out what sales cycle length results in the highest number of closed-won business, and how lasting or valuable those deals are in the coming months.
You may have a rep who’s turning leads into customers at spectacular speeds, but if the customers they earn also churn too quickly, then it may indicate some malpractice on their part, such as making false promises.
So, make sure to analyze your sales cycle length to get a better understanding of your team’s performance, make more accurate sales forecasts, and fine-tune your sales process.
Over to You
Simply put, KPIs help you identify patterns, monitor performance, and stay on top of things. KPIs help you keep your sales team accountable and efficient. Be it B2B or B2C, online or off, being a data-driven sales manager keeps your team on track for continuous progress and brings the best of them.
With the right KPIs in front of you, you can then dig deeper and gain valuable insights about things that are working well and areas that need reinforcement.
Again, there is no shortage of sales KPIs that you can measure. But as a sales manager responsible for tying sales with the overarching goals of your organization (such as customer loyalty), you must have a special focus on the ones discussed above.