Does it make sense to measure a sales team’s success or failure simply by the quantity of calls they make, or by the quality of those calls? Well, if your company wants to increase its sales and market share, then it’s critical it understands the difference between measuring a sales team’s performance on call quantity versus call quality.
Ultimately, you want your sales team to have valuable discussions that lead to sales. However, some sales close faster than others because the opportunity is there to close those sales immediately. As such, placing greater emphasis on call quantity often correlates with short sales cycle times, ones where purchasing decisions are made immediately. Call quality often correlates with long sales cycles, one where the decision to purchase is almost never made on the spot, and almost always involves dealing and negotiating with multiple decision makers over a longer period of time.
Granted, a salesperson in either sales scenario might have to make multiple calls before reaching that all-important key decision maker. However, it’s the sales cycle times that determine how best to measure your sales team’s performance. It comes down to your market, your customer base, your sales cycle times, and most importantly, how you specifically set up your sales key performance indicators (KPI).
What Kind of Market do you Sell Into?
The first question your company must answer is which market are you operating in? Are you in a highly-competitive market, one where razor-thin profit margins dictate that sales must be closed immediately? In this case, your salespeople are likely selling to one decision maker, be it a corporate buyer or purchasing agent. In this case, the salesperson must be able to close that order immediately, without having to go “back and forth” on competitive bids, ones where buyers use one bid to lower another in a never-ending pursuit of saving a penny.
On the other side of the coin, are you in a market where the salesperson must identify and deal with multiple decision makers in order to close a long and involved sale? In a market where sales cycle times are long, salespeople must be able to navigate the customer’s account in order to build consensus among multiple individuals until a go/no-go decision is made on a purchase. There may still be a lot of competition for the customer’s business, but in the end, it’s a long sales cycle because of the type of product or service the customer is purchasing.
How Should You Measure Performance?
Far too many companies make a mistake on how to assess the performance of their sales team. Sometimes it’s because they underestimate the importance of their sales cycle times. However, other times it’s due to a sales manager applying a strategy that he or she saw work in a different market with different customers.
While there are a number of reasons why this critical mistake occurs, it’s essential that your company avoid this mistake and come up with the right way to measure your sales team’s performance. We’ll provide that solution by defining how to analyze and set up KPI on short sales cycle times, where the quantity of calls is important, versus long sales cycle times, where the quality of calls is more important.
Call Quantity (Short Sales Cycle Times)
If your company operates in that aforementioned market where sales cycle times are short, then measuring the performance of your sales team comes down to an in-depth analysis into the company’s sales KPI. The following steps summarize all the individual KPI that a company may use with a sales team that focuses on quick sales.
- Track number of calls daily, weekly and monthly.
- Track number of RFP’s resulting from calls.
- Track number of proposals from RFP’s.
- Track number of orders from proposals.
- Track customer retention.
- The five- step process above is pretty straightforward. However, all sales KPI should start first with a review of past sales totals. In this case, you need to start by defining all five criteria moving forward in order to have the data you need to define future sales activities for each of your salespeople.
A company will start tracking these five criteria and then total up their sales in a given month and or quarter. With the total sales figures defined, and these five criteria filled out, the company can now go about tracking how its sales team is performing moving forward.
An example might include the following. A company’s sales for a given quarter were $50,000.00. In attaining this sales amount, the company found that each individual salesperson had to make 400 calls over the quarter in order to have 150 RFP’s initiated from customers. From those 150 RFP’s, each salesperson averaged 40 sales or orders. Finally, each salesperson was able to retain 10 clients from the business they closed.The company now knows how many future activities need to be done by each salesperson in order to duplicate the previous sales total of $50,000.00. They know the number of calls that need to be made in order to get the right amount of RFP’s, and they now know the expected sales closing rate for each salesperson, which is simply 40 orders closed out of 150 RFP’s, or 26.6%.
The company now knows how many future activities need to be done by each salesperson in order to duplicate the previous sales total of $50,000.00. They know the number of calls that need to be made in order to get the right amount of RFP’s, and they now know the expected sales closing rate for each salesperson, which is simply 40 orders closed out of 150 RFP’s, or 26.6%.
Call Quality (Long Sales Cycle Times)
So, what would the sales KPI look like for a company that operates with long sales cycle times, ones where the salesperson must be able to identify, negotiate and sell to multiple decision makers? Well, in this case, the sales KPI would be focused over the long term be it six months to one year. We’ll assume that with long sales cycle times, there must be multiple face-to-face customer visits where the salesperson must clearly define all the decision makers, roadblocks and customer concerns that stand in the way of closing a sale.
- Track number of calls within a quarter.
- Track number of face-to-face customer visits within a quarter.
- Track number of proposals submitted within a quarter.
- Define customer decision dates and track number of possible contracts.
- Track number of sales achieved correlating to sales cycle time (6 months to 1 year).
- Track number of renewed contracts (year-after-year).
- Obviously the KPI in the above table are based on long-term objectives, ones where the average sales cycle time is six months to one year. In this case, the company would measure its customer retention rate by the number of repeat customers on a year-to-year basis. Customer retention in this example might include tracking the number of supply contracts that are renewed by customers.
In the end, tracking your sales team’s performance comes down to using the right KPI for the right situation. Also, it’s important to note that all discussions should be quality discussions. You want your sales team to immediately identify the customer’s most pressing concerns and their reasons for making a purchase. With short sales cycle imes those decisions are made quickly. With long sales cycle times, those decisions involve multiple players and take longer to close.