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Sales and marketing metrics help decision-makers gain insight into how businesses can improve to generate more revenue. Here are key metrics to look into.
Productivity drives business forward. But is your team productive in the right areas? How do you know if these are the areas to look into?
There are several dollar-productive departments in a company. But sales and marketing generate the most revenue for most organizations.
Time and resources spent in these departments should see positive results. If not, there may be underlying issues that need to be addressed.
We get insight into this through sales and marketing metrics.
What are sales and marketing metrics?
Metrics are numerical indicators of organizational performance. They're useful for monitoring goals and identifying critical issues.
Marketing and sales use metrics to communicate their department’s value to stakeholders. Data can be translated in a way that’s understandable and actionable.
There are two types of indicators that we use when analyzing metrics:
- Leading indicators - gives predictions based on current performance
- Lagging indicators - base forecasts on previous accomplishments.
For a complete view of past and future sales, sales and marketing professionals should watch both leading and lagging indicators. This helps executives make data-driven decisions and strategize better for the next sales cycles.
But before we can discuss the sales performance metrics to look into, we need to understand how we should actually set our sales and marketing goals.
How should you set your marketing and sales goals?
Businesses need to answer why they want to look through analytics. Setting a clear goal makes it easier for executives to decide which metrics should be focused on.
Every sales metric is important in its own right. However, some are more important than others depending on the business or industry.
But as a rule of thumb, it all comes down to an organization’s goals and focus.
- Goals - If your quarterly sales target is 5% growth, monitoring the likes on your most recent Facebook post certainly shouldn't be focused on. Look into marketing KPIs that have a direct correlation to your goal.
Consider the marketing and sales strategies. It's helpful to have a plan of action in mind while formulating your objectives. Which marketing KPIs are most effective depends on the plan.
You would want to track metrics like CTA link clicks, page views, and average time on the page if the aforementioned BOFU (bottom-of-funnel) content—a blog post on other sites that extensively showcases your product—is a significant element of your marketing campaigns.
- Focus - There are measures that seem to come straight out of a marketing fantasy book that garners a lot of attention. It makes sense to be in the loop about everything related to your company.
However, we know from experience that chasing after every measure just because you think you should is typically time-consuming and counterproductive.
Now that we know how to set our goals, let’s take a look at why metrics are important.
Importance of tracking sales performance metrics
Although it’s important to trust your gut, decision-makers can't rely on instincts alone. Data and metrics reveal what a business is doing right, where it can improve, and what strategies to let go.
Analyzing performance metrics can be categorized into:
- Descriptive analytics - provides straightforward responses to questions like "what's happening now?.”
- Predictive analytics - provides speculative responses to questions like "what's most likely to happen?"
- Prescriptive analytics - provides explanations for issues such as "what should we do in light of what has happened and what is anticipated to happen?"
Because of analytics, decision-makers can do:
More strategic decision making
Data-driven decision-making results from understanding sales and marketing metrics. Data is analyzed to assess trends and make decisions objective, logical, and beneficial.
The data analyzed must be precise and useful to help answer the following questions:
- How should we target audiences?
- Which sales channels should we use to reach a segment?
- How can we convince each group to buy from us?
- Cost of fresh leads? Based on our conversion rate, how much can we spend on new leads?
- What's our ROI across channels?
Insight into conversion rates
When conversion rates are low, something needs to be done. Getting a handle on why and how leads are closing helps reverse-engineer strategies for expanding your conversions.
You need to make sure that the offer is beneficial and appealing enough for the people in your audience to want to convert.
Integration of analytics into business objectives
Data-driven organizations are six times more likely to retain consumers, according to a McKinsey study. They're also 19 times more lucrative and increase client acquisition by twenty-three times.
10 sales performance metrics to know this 2022
As per the McKinsey study, companies analyzing key metrics outperform their competition across the full customer lifecycle.
Understanding marketing and sales performance metrics help organizations learn more about the market, their audience, and what to improve upon.
Here are 10 important metrics to look into:
1. Annual recurring revenue (ARR)
ARR includes contract fees, upgrades, and downgrades minus cancellations. Excludes one-time, variable, and subscription payments.
Sales and financial executives can monitor ARR over time to help them plan for the future and assess growth opportunities. A company's success can be broken down further by analyzing ARR by product line, region, or client type (new, existing, etc.).
The formula for ARR is Total value of contract / Number of contract years
2. Average revenue per account/user
This is the amount of money a firm generates per user or account in a particular period. It can be divided to reveal which client groups or locations earn more money.
The increasing average revenue per user over time is a strong indication that consumers are willing to pay more for a company's goods and services.
If the average revenue per user (ARPU) falls, the sales team could try upselling to a more expensive premium service or additional feature.
The formula for ARRPU is ARPU = Total revenue / Average number of users or accounts.
3. Sales cycle length
Sales executives and teams may utilize this measure to discover prospective sales cycle delays and alter their operations. Sales cycle duration data improve sales forecasting.
The formula for Average sales cycle length = Days required to close all deals / Total number of deals
If we apply this to real life, we might see four transactions completed in a single month. Deal A closes in 10 days, B in 15, C in 20, and D in 25. There will be a total of 70 days needed to complete these transactions. In this case, the average sales cycle was 17.5 days.
4. Average profit margin
The average profit margin shows how much of sales revenue is profit. A business's average profit margin can be measured by goods, services, categories, sales area, and salesperson.
The formula for this is Average profit margin = Net income (overall or for specific areas) / Net sales (overall or for specific areas) x 100
5. Net revenue retention percentage
Net revenue retention measures a company's recurrent revenue from existing customers over a certain period. It factors in upgrades, downgrades, and cancellations for subscription-based enterprises
The formula for NRRP is Net revenue retention percentage = Renewal revenue at beginning of period + upsell revenue – churn / Renewal revenue at beginning of period x 100
6. Pipeline coverage
Pipeline coverage is a sales rep's possible sales prospects compared to their quota. The formula for this is Pipeline coverage = Potential sales in pipeline, in dollars / Sales quota, in dollars
7. Sales productivity metrics
Metrics can measure sales team productivity. Percentage of time spent selling vs. non-selling, the daily average number of sales tools, and hot-lead follow-ups are examples.
8. Sales linearity
Sales linearity is cultivating and completing opportunities at a predictable, constant pace rather than a rush near the conclusion of a quarter. This improves forecasting, resource planning, cash flow, and profit margins.
9. Lead scoring
Lead scoring determines a lead's likelihood of becoming a customer. To a greater extent, the lead can be said to improve as the score goes up.
Lead qualifying allows sales and marketing teams to concentrate on the most promising leads and ignore the rest. Predictive analysis-based CRM systems automate this process, eliminating the complexity, time, and error margins of manual lead scoring.
10. Churn rate
The company's churn rate measures the percentage of customers who end or don't renew their subscriptions. This crucial sales indicator measures customer retention.
Finance leaders monitor churn rates since they can affect sales and earnings. High churn rates reveal issues with the company's products or sales methods. It can also indicate that competitors are winning.
Businesses get the best out of sales and marketing when paired with data and analytics. It provides insight into how organizations can improve their performance and the critical issues that need addressing.
Here are some important details on sales and marketing metrics:
- Analyzing metrics helps with critical decision-making.
- Data and analytics should be integrated with business goals.
- There are two types of indicators: leading and lagging.
- Understanding sales and marketing metrics help improve conversions.
- Sales metrics help identify critical issues within organizations.
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