8 Essential Sales KPIs Every Sales Manager Should Measure in 2021
Life as a sales manager is often stressful. Sales managers 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.
That is why today we will be discussing the top key performance indicators for sales manager productivity.
Key performance indicators (KPIs) are metrics that help sales managers gain a clear understanding of how their sales team (and product) is performing, and whether they’re hitting your company’s sales goals.
By measuring the right sales KPIs, you can optimize your sales process and help your sales team prioritize the right activities for stronger success and higher sales revenue.
Let’s take a look at a few more concrete reasons why you should measure sales KPIs.
To Better Guide Your Sales And Marketing Teams
As a sales manager, it’s your duty to keep your sales reps motivated and on the right track. You’re the person they look to for the right guidance on how to optimize the sales process.
With the right KPIs, you’ll know which sales strategy is working and which is not. You’ll be able to determine their wins and weaknesses, and consequently, improve their and your company’s sales performance.
To Understand Sales Team Performance
By monitoring your sales KPI, you would know which sales rep is getting top results and which sales rep is underperforming.
It is only by identifying the sales team members who are lagging that you can train them to improve their skills, and thereby your sales metrics and monthly sales growth.
To Set Benchmarks
With numbers assigned to desired results and hitting sales targets efficiently, you can create benchmarks for your sales teams to do better in the next sales cycle.
Without measuring sales KPIs, you can’t gauge your current sales performance, set a direction for continuous improvement in the sales process, or increase monthly sales growth.
To Drive Better Behavior
When your sales teams know 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 sales metrics. When sales managers keep a close eye on the sales team’s performance, sales rep productivity will automatically increase and the sales revenue will reflect that.
To Keep Everyone in Line
Without data available to show something happened, sales metrics can be distorted or manipulated. This can be disastrous for your company and its repercussions would be on you.
So, evaluating sales metrics regularly puts the responsibility on the entire sales team to ensure they’re giving their best and generating the most sales-qualified leads they are capable of.
To Better Align Company Goals
Keeping your entire sales team working toward the same sales goals can be tricky. Having well-defined sales KPIs and metrics make it easier to do so as they clearly state which sales KPIs matter the most and deserve the most attention.
Furthermore, KPIs turn subjective information into tangible sales 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 teams and it gives them a clear understanding of where they stand in terms of receiving them.
Let your sales teams know the incentives they’ll get for hitting or surpassing certain sales KPIs, and you’ll witness a surge in motivation. Plus, metrics can’t be manipulated so favoritism is out of the question.
Measuring high-level sales KPIs, like the number of monthly new qualified leads, customer acquisition cost, and client acquisition rates is obviously important, but there are a few sales 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 important sales KPIs for sales managers to be measuring, and working with their sales team to improve upon, in 2021 and beyond.
KPI #1: Competitor Pricing
Competitor pricing isn’t a KPI per se, but as sales managers, 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 revenue.
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 in your sales pipeline.
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 sales 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 sales 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 sales managers, make sure your team does the latter.
KPI #2: Customer Lifetime Value (CLV)
The customer acquisition cost can be cost five times more than existing customer retention, so successful sales is not just about converting leads but keeping those customers and maximizing the customer lifetime 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 customer lifetime value 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.
Customer lifetime value also helps you to figure out which customer segments or buyer personas drive the most revenue in the long run.
This way, you can fine-tune which new customers you focus your sales targets on.
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.
This sales metric is a reliable method of evaluating customer satisfaction and discovering the attraction new customers have to your business model.
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?”
Source: Medium
Source: Medium
As you can see, NPS sorts customers into three groups: Promoters, Detractors, and Passives.
Promoters (9 to 10) are happy customers who would love to spread positive word of mouth. Passives (7 to 8) are satisfied customers, but won’t mind switching to a competitor.
Detractors (0 to 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 total percentage of Detractors from the total 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 and elevating sales volume.
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 promote customer satisfaction.
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.
Monitoring this sales KPI is essential in ensuring customer retention and potentially learning more about generating qualified leads.
KPI #4: Employee Satisfaction
Recent research by Marc Wayshak, a sales strategist and the best-selling author of multiple sales books, found that most sales representatives don’t love their jobs.
In his survey of 400 sales reps, only 17.6% of the average sales rep group regarded 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 sales managers, 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. So 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 each individual sales rep, 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 get feedback from your sales reps regularly. Ask each sales rep 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 qualified leads to closing deals. This is an important sales KPI as it conveys the efficiency of your sales process and helps you to make reasonably accurate sales metrics 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 sales 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 sales KPI for more accurate insights.
If it’s an inbound call, your sales reps can use call value attribution & reporting to keep track of the value associated with inbound calls.
This helps you, the sales managers, understand the ROI of inbound sales campaigns and allows you to review calls of high value so you know what’s converting well in your sales department and double down on that.
It is important to track the average length of your team’s sales cycle. For example, are some sales 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 businesses and how lasting or valuable those deals are in the coming months.
You may have a sales 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.
KPI #6: Customer Acquisition Cost
Sales leaders go to great lengths to research varying aspects of sales opportunities to reach more sales and increase their average revenue. However, realizing how much revenue is impacted by sales costs is an essential factor to consider.
Customer acquisition costs are defined as the total sales costs involved in recruiting new customers.
If the average purchase value and customer lifetime value do not surpass the customer acquisition cost significantly, your monthly recurring revenue will not be at a desirable level.
It is important to track the customer acquisition costs, so your sales reps have a better idea of which sales strategy benefits the average profit margin and which strategies result in little to no gains.
If sales representatives have comprehensive insight into these sales metrics, their decisions will be based on an understanding of what reaches sales targets.
Ultimately, a decreased cost is desirable as it will increase overall annual sales revenue.
KPI #7: Monthly Sales Growth
Keeping track of your monthly sales growth is one of the most important sales KPIs, as it helps you distinguish valuable strategies in your sales department. Sales representatives often require a clear and statistical outline of the approach that will help them reach sales targets.
If you notice you’re monthly recurring revenue decreasing, you know there is a flaw in some aspect of your sales department, and identifying areas that need improvement will significantly benefit your average profit margin.
Furthermore, this sales KPI will reflect on how many sales your sales reps are managing monthly and help you identify bottlenecks in the sales funnel before it advances to a great extent.
As a whole, assessing average purchase value and monthly subscription revenue will guide you as to where you should be making adjustments. You can also compare your monthly recurring revenue to that of other modern sales teams to reevaluate your monthly sales targets.
KPI #8: Percentage Of Sales Reps Hitting Sales Targets
One of the most crucial KPIs for sales leaders is identifying which sales reps are hitting their quotas. This percentage reflects on the performance of each sales representative, but it also indicates whether your sales goals are set realistically or not.
A good rule to stick to as a sales leader is to adjust your sales targets if less than 60% of your modern sales team is reaching your sales goals.
Conversely, if more than 90% of your sales team is reaching your target, you likely have to consider raising your standards to maintain a successful sales funnel.
Sales rep productivity does not solely depend on the amount of sales opportunities a sales representative can realize but also on their average customer retention capabilities. After all, more sales are not the primary determining factor of a successful sales pipeline. How many customers a sales rep can retain also plays a vital role.
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.
