Keeping a tab on sales activities is crucial for every organization. With today’s available tools, companies can track almost everything they want to know in their sales department. Different sales metrics have different utilities – some have been in place for many years, whereas others are new and more precisely focused.
However, companies often try to identify and measure as many key performance indicators (KPIs) as possible, rather than understanding the ones most relevant to them. It is equally vital to measure these KPIs in a meaningful way. But with changing dynamics between the customer and companies, you need to know which metrics work best for your organization.
Which Metrics Really Matter to Your B2B Company?
Not much has changed over the years in terms of fundamentals when it comes to measuring end goals. In an interview with technology writer Phillip Britt for Destination CRM, Rebecca Wettemann – principal at consulting firm Valoir – puts this in perspective. “The fundamentals haven’t changed; what’s changed is that the sales cycle has become more complex. Sales managers have tried to measure things that indicate progress toward the end goal, which is to increase revenue.”
One such fundamental is the size of the sales pipeline – without which there is no chance of closing sales. In this metric, every qualified lead gets a dollar value. The total value of all the deals represents a company’s pipeline. However, there are internal and external factors – such as mergers, acquisitions, etc. – that can affect the ability to turn the pipeline into revenue.
Interviewed for the same Destination CRM article as Wettemann, Joe McNeill – chief revenue officer of Influ2, a B2B marketing technology specialist – says, “I’ve worked primarily with traditional sales organizations, and the metrics I focus on are qualified pipeline growth at the top of the funnel and contacts associated (multi-threading) mid-funnel. Specificity is key with both metrics. Qualified pipeline should be clearly defined as a pipeline from your ideal customer profile (ICP) with your primary personas. This will ensure that volume growth delivers healthy revenue growth. For managing multi-threading mid-funnel, you should have a clearly defined target buying group that you would like to engage.”
When the entire relevant buying group gets engaged in the sales cycle, your conversion rates and average sale price will climb accordingly. “Managing quality with quantity creates alignment throughout the entire commercial organization, resulting in increased collaboration and efficiency,” McNeill says.
According to Yamini Bhat, co-founder and CEO of Vymo, provider of a sales engagement platform for financial firms – while the focus for the company is the pipeline, the salespeople may have different priorities. “Sales folks have a one-track mind. They’re thinking quotas all the time. Especially in large enterprise sales where they may need two or three deals a quarter to make a quota, it may be hard to get salespeople to care about the pipeline, but they have to be held accountable to leads and opportunities so there are minimum slippages and drops.”
There are two important metrics that sellers should focus on, says Bhat, and these include the following:
Net revenue retention – This metric highlights the funds you have to land and expand. It also impacts other factors – such as how you need to structure your team, compensation, where you need to expand, etc. “It would be great to track this for a few different cohorts: industries, product lines, and geographies.”
Sales activity/information metrics – Not many teams track activities the way they do pipeline or customers. “It’s best to draw a playbook by stage for activities and information required so you can standardize your process and make it as much a science as possible. Go beyond calls or meetings and look at the number of stakeholders engaged, champions enabled, and so on. These could be leading indicators.”
In her article for Destination CRM, marketing writer Hazel Raoult lists four additional important B2B marketing metrics:
- Lead-to-customer conversion rate – Finding leads is important, but if you cannot convert them into paying customers, then you are just wasting your time, energy, and money. So make sure you are paying attention to the lead-to-customer conversion rate (average percentage of leads that end up becoming your customers) and including this metric in your marketing practices. It’s quite easy to calculate; all you need to do is divide the number of sales made during a specified time period by the number of leads. For example, if you converted 30 leads out of 100 leads then the lead-to-customer conversion rate would be 30 percent.
- Customer acquisition cost – Though most companies know about this metric, it is one of the most crucial metrics for any B2B organization. Here is how you can calculate your customer acquisition cost – add your total sales and marketing cost and divide it by the total number of customers acquired in a given period.
- Customer lifetime value – Customer lifetime value impacts your customer acquisition cost directly. Your customer lifetime value is an indicator that tells you the amount of money you should spend on acquiring your customers. Customer lifetime value tells you the amount a customer will spend with your business in a lifetime. To make your business profitable, you need to ensure that your customer lifetime value is as high as possible.
- Keep track of your lifetime value to customer acquisition cost ratio – To know whether your sales and marketing efforts are in the right direction, you need to keep track of your lifetime value to customer acquisition cost ratio. You can divide the average lifetime value by the average customer acquisition cost to get this ratio. You must aim for a high lifetime value to customer acquisition cost, but the ratio should not be too high because values above 3:1 or 4:1 mean you are missing out on hidden opportunities. However, if the ratio is on the lower side, it means your efforts are not in the right direction or your sales team is not approaching their job correctly.
Don’t be Distracted by Irrelevant Metrics
Wasting your time on unimportant metrics not only leads to confusion, but can also hamper your targets and revenues.
McNeill puts this in perspective. “Too many organizations focus on vanity metrics such as [marketing-qualified leads], meetings, or undefined opportunity growth. Focusing on these metrics typically drives the wrong behavior, which creates a wedge between your marketing/demand gen teams and your sales team. If you manage to volume, you will probably get it, but you likely won’t get the outcomes you’re looking for.”
According to Kathleen Black – owner of Kathleen Black Coaching & Consulting Inc. – companies often focus on unwanted metrics like impressions and traffic for websites and social media that might not indicate actual sales opportunities. “That’s a really dangerous path to go down because there are so many different marketing specialists that want to drive traffic to a website that doesn’t provide value or doesn’t enhance it. Some think that all eyes are good eyes, and that’s not the case. It’s easy to get leads on social media, but it’s harder to convert them unless they are looking for your particular product or service.”
Net Promoter Score is another such metric that is losing relevance. Peter Graf – chief strategy officer of Genesys, a provider of cloud customer experience orchestration technology – makes this observation. “We’re seeing a shift to metrics that are more actionable, ones that allow me to correlate customer sentiment with actual business outcomes. To which degree does my customer satisfaction correlate with my revenue or my ability to get a repeat sale?”
In addition, Graf says, the Net Promoter Score is just not precise enough. “Gartner predicted last year that by the year 2025, 75 percent of organizations will have abandoned Net Promoter Score as a measure of success for customer service.”
Another sales metric losing sheen is the number of leads and number of calls or meetings logged. “It may look good to fill up your top of the funnel with as many leads as possible, but weighting those based on quality and intent will really streamline your effort rather than just chasing vanity metrics,” says Bhat. “Also, ensuring lead-specific cadences between sales and marketing will help optimize both sourcing and engagement. This could demonstrate skill vs. will, but simply logging in these activities without having a holistic understanding of the account or playbook is missing the forest for the trees. The goal isn’t to log 50 calls a day, it is to close sales.”
Bring Sales and Marketing Teams Together to Get Results
If you want to get the best results, it is crucial to bring your sales and marketing teams together. Your marketing and sales verticals work toward the same goal. That is why they need to work closely with each other and share the responsibility equally. This is where key performance indicators (KPIs) enter the picture. In his article for Cience, Will Cannon makes the distinction between B2B sales metrics and KPIs. Although often used interchangeably, they are two different terms.
“We describe business metrics as the measure that can be quantified and used to track and assess the progress of different business processes. The main reason businesses use metrics is to control and track their spending to increase revenue and assess the progress of their short-term and long-term goals. On the other hand, a key performance indicator (KPI) is a measure of performance we can quantify over time for specific objectives. B2B sales teams (or any teams) use KPIs to define and target their goals better, determine progress, and make better decisions. The main difference between business metrics and KPIs is that KPIs are the measures you take and monitor that have the most impact on your business. They are the ones that clearly state what your organization needs to reach long-term and short-term goals.
“The first thing you need to do is choose which KPIs are most important for your organization based on the results you want to achieve and determine which department is responsible for their successes or failures. For instance, let’s say your KPI is the number of qualified leads. You need to state which department is responsible for deciding whether leads are qualified or not – who’s filtering them before they go into the sales process. If you only consider the number of qualified leads, you won’t know which department is responsible for the success or failure.”
As a leader or a business owner, you need to communicate transparently with both departments, use the right tools, and convince them that they share the same goals and complement each other. Sales and marketing automation tools can help you achieve your goals with ease. One of the tools that can help you bring your sales and marketing teams on the same page is a unified CRM solution.
Out of all functions, perhaps, sales and marketing are the two most important for almost every organization. With a unified CRM, sales and marketing work together more effectively, and can collaborate much more closely. A unified CRM helps build strong and long-lasting relationships with your customers because it combines such various business functions as contact management, sales, marketing, service, support and project management into one central data platform. Our blog post – “Why Your Business Needs a Unified CRM Solution” – covers this topic in greater detail.
If you are looking for an industry-leading unified CRM solution. eZnet CRM can help streamline your business processes and increase collaboration among your teams – allowing you to focus on relevant metrics in order to achieve your goals. eZnet CRM is intuitive as well as user-friendly. Our CRM solutions offer comprehensive support and training that is essential for a smooth end-user adoption. Contact us to learn more and begin your free 30-day trial.