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Improving sales performance with metrics that count

For any business, the measures you choose are fundamental to understanding and controlling sales performance, revenue growth and ROI. Having a solid set of measures in place can be the difference between achieving your goals or falling short of target.

Our ‘go-to’ measures, however, are often those we are most familiar with, not necessarily those best aligned to our strategy or overall business priorities. If you aren’t measuring the right outputs, how will you know if your strategy is on track? The key is to measure what matters, rather than what is easiest to measure; only then will you truly understand how you are performing against goals and be able to adjust direction if required.

Some of the most common metrics such as sales revenue, lead volume, or lead conversion may make performance look strong but can be deceiving:

  • Sales revenue – we want to grow revenue, but it must reflect profitable long-term business.

  • Lead volume – high volumes of poor-quality leads is a worst-case scenario, sapping your sales team’s time and stopping them from closing good opportunities.

  • Lead conversion – if opportunities don’t convert into long-term profitable customers, a strong conversion rate may not be positive.

These are perfectly valid metrics, of course, but the point is that what you measure must be in line with what you are trying to achieve. Focusing on the wrong metrics can jeopardise your strategy, creating a false sense of security as you fill your pipeline with prospects who are unlikely to become profitable, loyal customers in the long run.

Healthy metrics

While conventional metrics offer a snapshot of performance, delving into less common indicators provides a more nuanced understanding of your sales and marketing pipeline's true health.

Let’s look at some of the measures that give deeper insight into the true value of your pipeline and a richer perspective on the effectiveness of your sales strategies in driving sustainable growth.

Customer Lifetime value (CLV)

CLV is a measure that looks beyond short-term revenue and conversion to shine a light on existing and prospective customers that will drive long-term profitable business. It considers a customer's revenue value and compares that to its predicted customer lifespan.

There are many ways to measure CLV but a simple option is:

Customer Lifetime Value (CLV)
>(average purchase value x average purchase frequency) x average customer lifespan lifespan

Once you have calculated CLV, it can guide you to customers that have most potential value, so you can tailor your sales and marketing efforts accordingly. Not only can you look at which channels and strategies feed those segments, you can prioritise resources to nurture their loyalty, so their value will increase exponentially once they are with you.

Sales accepted leads (SALs)

SALs are leads that have been validated against an established set of qualification criteria. They are qualified decision makers in the right businesses with a need and a budget to buy and a greater propensity to become long term, high value customers. Qualification criteria will vary but a robust set of criteria and a systematic qualification process will not only ensure your sales resource isn’t wasted chasing poor prospects, it will also pinpoint which channels and programmes are generating high-quality leads for you.

Customer retention 

How long customers stay with you is one of the strongest indicators of a healthy, profitable business. Measuring your retention rate will help you identify if you are losing business to competitors or due to a poor experience and act quickly.

We know that acquiring new customers is much more costly than retaining existing, so having retention measures in place is essential to increase profitability and reduce acquisition spend.

A basic retention formula is:

Customer Retention
> (number of customers at the end of a period) - (number of customers acquired in that period)
> divided by number of customers at the start of the period
> multiplied by 100.

Brand equity 

With pressure on to drive revenue, brand equity as a metric is more nuanced but highly valuable if you are looking at the long-term health of your business. The indicators you choose to value your brand will again depend on your objectives, but there are many options:

  • Voice of Customer Research – whether measuring satisfaction, awareness or perceptions, qualitative surveys add colour and depth to your quantitative data.

  • Net promoter score (NPS) – a simple measure that asks customers how likely they are to recommend your product or service on a scale of 0-10.

  • Emotional connection score (ECS) – measures the emotions customers have with your brand. Acquiring a large customer base but failing to generate positive sentiments towards your brand isn’t a recipe for success.

Be careful what you wish for

Aside from choosing metrics that align well to your goals, it is critical to work with multiple metrics to ensure a comprehensive understanding of your outputs. A range of metrics also offsets the danger of surrogation, which is the tendency of individuals to adjust their behaviour to optimise their score, only in relation to the metric they are measured against. By choosing multiple metrics, it is possible to avoid this myopic approach and take a balanced view of sales and marketing performance rather than changing the behaviour of your team to artificially inflate one particular score.

With the economy uncertain, it is now more important than ever to focus on sustainable growth, shifting away from immediate quick wins to long-term profitability and business that sticks. No business can claim to have the measure of every aspect of its strategy, but it is always important to make sure the metrics we have are aligned to strategic objectives.

Read more on testing and measuring campaigns 

 

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