How do you know if your marketing is successful? You need to measure it. This blog post will teach you how to calculate the metrics that indicate success in marketing, including lifetime value, ROI and margin.
One of the most important parts of any sales team is tracking sales efficiency metrics. These numbers are important for both sales reps and managers because they give everyone an idea of what is selling well, where there might be a gap in their knowledge or product line, and how successful existing marketing strategies are working with current customers.
It's also good to know when it comes time to allocate your budget, if you have made back your money yet on advertisement spending during the period.
Sales Efficiency Metrics
Prospecting for new customers is an expensive, time-consuming process. You can't just expect anyone with a pulse to buy your product or service. There are very specific qualifications that your target customer must meet in order for you to have any chance of being successful with them.
This means that the most common reason why business owners are not seeing success when it comes to attracting new customers is because they are pursuing prospects who do not actually fit their customer profile .
So how do you find out what kind of person makes the best fit for buying your offerings? This is where sales efficacy metrics come in. Sales effectiveness metrics can be used in marketing and management decisions to help improve the process of making money from incoming clients.
6 Metrics To Improve Your Effectiveness
Companies that focus on sales metrics manage to achieve incredible results. By focusing on the right metrics, you can see your company accelerate faster than ever before and hit all of its milestones (and even beat them!). I want to share with you some of the most important ones:
1). Monthly ticket revenue per rep – This is a metric used by companies like HubSpot and other big players. This tells us how much we sell each month (ticket) for every salesman (representative).
If it's not clear what this number represents, many people use it as if it was MRR (monthly recurring revenue). This is however incorrect because our monthly ticket revenues will always be bigger than our MRR.
A ticket could be a $700 e-book and MRR would be $400 since we're selling 9 at once for $400 each. BUT, the sales rep will only receive commission on the first one (at $70).
This is why we need to set compensation based on tickets and not on MRR as it's easier to explain and better justifies the expectations of the sales team members.
If you give your sales people pay based on MRR there will always be some who try their best to sell the highest-priced product so they can reach their target faster.
2). New qualified leads per month – This tells us how many new customers we bring in which:
This metric is very important because it gives us the opportunity to understand what type of marketing strategy works best for your company. That way we can compare strategies and take action based on which one was most efficient.
If you have a mass-media strategy where you place Google Ads and buy traffic from platforms like Facebook, Twitter etc. you'll want a lot of new leads per month so you can see a return on investment quickly.
As opposed to this, if you run a content strategy where your effective selling point is lead nurturing through emails over time, you won't get as many leads per month, but you'll get a lot more qualified leads.
3). Closure rate - This tells us how good we are at closing deals over time, and what number of deals we close for every x number of prospects who become customers.
There's an equation to measure this: CLV = ARPA / CAC ($). In short, it calculates the value of your customer spent through acquisition cost (CAC), divided by how much money they give back in return over time ($).
So if 1 customer brings you $100 after 2 months from sign-up, then that 1 customer is worth $50 ($100/2 months). The closer the result is to 0, the better it is for your sales team.
4). Deals per month - This tells us how many deals we close in a month, and can be used to evaluate the number of deals closed by every member of the sales team and compared to their targets.
We're not looking for a huge amount here; we just want enough revenue coming in each month to cover all salaries and costs involved with running the company (salaries, rent, marketing, office supplies etc.). As long as you hit your target or better than that, you should be fine!
5). Monthly total revenue per rep - This is calculated using the following formula: MRR monthly tickets sold per month ($). This gives us an estimation of what our monthly revenue would be if we had the same number of rep working with us as whatever is being measured.
In short, it gives an estimation of what our monthly income could look like if we have twice as many salespeople working for us or more!
6). Ranking by any metric - This tells you which members of your team are doing the best job in growing your business. If you rank them by ticket sold per month, then those reps who sell the most will obviously have a higher position on your list compared to those who sell less.
You can also rank them according to new leads or closing deals, and see which ones do a better job at selling and generating revenue for your company's future growth.
Remember that even if someone has a low rank on your list, they may still be doing a great job and have the potential to climb up over time.
Where Are Sales Efficiency Metrics Used?
There are four major areas where sales effectiveness metrics are used.
1). Customer Profiling - The primary reason for using these metrics is to figure out who your perfect customer is.
this way, you can then target that type of person more aggressively in order to increase the amount of new customers you have coming through your door.
Prospecting for this kind of person needs to be done with care so as not to alienate people who would have otherwise been good customers. You will want to avoid making hasty judgments about any potential customers at all costs until they have proven themselves qualified over time by actually purchasing something from you .
2). Generating Leads - Another big part of marketing is generating leads , which just means establishing initial contact with potential customers.
You want to make sure you are doing this in a cost-effective way so that you get the most bang for your buck, which is why sales effectiveness metrics can help with generating leads.
Some of these metrics are designed to tell you how effective your lead generation campaigns are at bringing people into your business , while others can show you why they aren't working .
3). Staff Training - Each employee who deals with clients needs to be able to do their job effectively and efficiently in order for the company as a whole to succeed and generate income.
This means that each person needs training on what it takes to convince someone else to buy something from them. These training programs should always include sales efficacy metrics to show the employees how their performance is affecting the company's bottom line.
4). Workload Distribution - Sales effectiveness metrics can be used to determine who should be doing what and when. If there are two people responsible for bringing in new business but one of them is twice as effective, it makes sense to let them take on a greater proportion of the workload right? Wrong.
aIn order to keep costs down and not over-work your staff, sales efficiency metrics can help you figure out how much work each person should do.
If you have a highly effective salesperson, it makes sense to give them more clients because they will sell more products and generate more income for the company .
Why Sales Effectiveness Metrics are So Important
Sales effectiveness metrics are important for any serious company because they make things run more smoothly.
While many entrepreneurs believe that their employees will automatically know what they need to do in order to sell more products, this is often not the case since everyone approaches selling differently .
Without sales metrics , you won't have an accurate strategy of how to manage your time and who should be what.
You can use these measurements to determine exactly how much work is expected of each employee, and you can tell which employees need to improve their skills so they can continue working with your company.
A good sales effectiveness metric will reveal exactly how your employees are affecting your company's bottom line, so you can be sure that everything is running smoothly.
Conclusion
It's important to keep in mind that the effectiveness of each employee is going to fluctuate throughout time due to a number of factors, so be sure not to get too caught up in one analysis.
Sales efficiency metrics are meant as guidelines only, which should be used regularly by business owners in order to ensure that everything is running smoothly .
For example, if your #2 salesmen were effective 90% of the time last month but then dropped all the way down to 30%. You need to understand why this happened before determining how much work you should give them going forward.
While you don't need to change it all at once, you can analyze what changed in their sales process that caused this drop off and see if there is anything you can adjust.
There are some sales efficiency metrics that can help with this problem. They will tell you exactly how effective each employee has been at generating new business for your company over time so you know whether they are on the right track or not .
They may also show you where they went wrong in certain cases. For example, one of your employees might be contacting people who do not meet your customer profile (such as women instead of men), but this metric reveals that he did get them interested in purchasing something.
This tells the owner that further training is needed to understand why women are not purchasing this product even though they are interested.
This sales effectiveness metric is useful because it helps the owner determine how successful each person has been in generating new business, but it will also show them exactly what they need to do better.
