How To Measure Your Sales Performance Management?
Sales managers and leaders are overwhelmed by too much data that needs to be analyzed. A never-ending list of reports, metrics, and data make it almost impossible to analyze everything. In order to measure your sales performance management successfully, you need to focus on the key things.
There are several Key Performance Indicators (KPIs) that are used in measuring performance, and in this post, the 3 of them will be discussed.
They include conversion rates, average deal size, and customer acquisition cost vs. lifetime customer value.
Conversion rates
A poor conversion rate indicates the waste of money, time, and resources on sharing the wrong information or connecting with the wrong people. A conversion rate represents a return on investment. High conversion rate means you invest in prospects who value your service or product, and a low conversion rate tells the mark is missing in the sales process.
To calculate a conversion rate, the formula below is used:
Conversion rate = (total number of converted customers /total number of sales prospects)* 100
Calculating conversion rates can help to:
- Determine your funnel’s weak points: a drop between the phases of the sales process indicates that leads don’t get the right information
- Spot high and low performing employees
- Identify a start and a close date for every deal: in order to grow, the conversion should happen in a timely manner, so you need to track the average conversion time.
Average deal size
An average deal size can help determine the amount of money each deal brings in, so stronger strategies to sell more efficiently can be created.
To calculate the Average Deal Size (ADS) the following formula is used:
Average deal sale= total monetary value of deals within specific timeframe/ total number of deals within the same timeframe.
Knowing the average deal size can help identify risky leads and determine if your contracts are staying consistent, growing, or shrinking.
Lifetime customer value vs. customer acquisition cost
To achieve growth, sales teams successfully nurture leads into customers and convinces the existing customers to make more purchases. To keep a business sustainable, the number of how much you earn from the purchases your customers make must be higher than the number of how much you spend to acquire customers. The costs of attracting new customers than keeping the current ones are higher but the old customers spend more than new ones.
Knowing the Customer Lifetime Value (CLV) to Customer Acquisition Cost (CAC) ratio helps in assessing the prospects’ quality of prospects and whether or not you meet customers’ needs.
The formulas used for determining CLV to CAC ratio is:
CLV= average purchase value per year * average customer lifespan in years
CAC =total sales spend during a period of time/ total customers acquired during that time
Breaking down CLC and CAC ration will help you know where you find your best prospects and customers, the CAC payback period helps in identifying how long it takes your customers to pay back acquisition costs you’ve made and the customer churn rate helps you check how fast you lose customers so you can find better strategies to acquire new customers and replace the lost ones.
In order to grow, it is important to measure sales performance management so leaders can know the weak spots and determine new strategies that will lead to improvement by reinforcing the desired behavior so every person on a sales team can work on meeting business goals.
