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Right metrics can drive sales growth, aide revenue

Unlike other processes, sales is pretty matured and there are good performance metrics available to measure investment effectiveness

July 31, 2021 / 07:58 AM IST
Representational image (Shutterstock)

Representational image (Shutterstock)

Times are hard for sales teams. Companies are sweating it out trying to drive business development and sales. As with any major business initiative, an investment in sales enablers will need a business case. Unlike other processes, sales and marketing are pretty matured and there are good performance metrics to measure investment effectiveness. I will list some of these metrics and explain how companies can effectively drive sales.

We begin the process by outlining their impact on the sales process. All organisations have hundreds of sales factors that can be measured, however, probably four or five factors are critical for successful execution.

These five metrics have the biggest impact on revenue: number of opportunities in the pipeline, average deal size, success rate, length of the sales cycle, and the total number of “active” salespersons.

There is a mathematical relationship between these metrics in terms of their impact on revenue. Significant improvements in sales performance can be achieved with minor tweaks in each metric. It is found that a 5 percent improvement in each area yields a 26 percent increase in revenue.

How significant is a 5 percent improvement?

Close

>> If the average number of opportunities pursued by a salesperson annually is 100, they can now pursue 105.

>> If the average deal size is Rs 100,000, it’s now Rs 105,000.

>> If the success rate is 50 percent, it can now be 53 percent.

>> If the length of the sales cycle is 26 weeks (six months), it’s now 24 weeks.

>> If the number of “fully-ramped” salespeople is 50, the new “active” headcount is 53.

So how does the sales process impact these performance metrics?

An increase in opportunities

The most important benefit is the time required to create customer-facing sales materials. By using automation tools, organisations can create the best content for a selling situation and make it much easier to personalise these assets for the customer. This will save them time to drive more important higher-value sales activities.

By pursuing such processes, one of our clients saved more than 45,000 hours for their sales team in just a year. If you enable the salesperson to deliver a customer-centric message to a prospect, you can dramatically improve the conversion rates of leads to qualified opportunities.

Larger average deal size

Nowadays, most business-to-business (B2B) enterprises are selling solutions rather than products, which they hypothesise will differentiate them from the rest.

The solution-selling strategy essentially covers a macro revenue-generating capability and can be sold within a single sales cycle. However, it is not enough to tell your sales team about selling solutions, you may have to train them to do so. One of our clients struggled for a couple of years to make this transition.

You also need to enable the sales team with the right toolkit to assess the situation at the client’s end and suggest possible solutions. For another client—say an industrial chemical leader—the problems of one furnace user could be very different from another. Technology can indeed be of help here and that can institutionalise up-selling and cross-selling.

Better success rate

Supporting a salesperson to deliver a more targeted value proposition to a client will impact their success rate. Some of our clients equip the sales force with the latest industry data, discovery guides, competitive intelligence, objection-handling guidance and so on.

With this and a handheld device, they can save time and prepare well for a sales pitch better than before. By being able to answer all the questions of the customer and also by providing proactively industry data and ratios of productivity, etc, the salesperson can get the respect of the client and therefore, better success with sales.

Faster sales cycle

These days, sales cycles across all industries have been steadily increasing. The economic conditions, lack of will or inability to take bold decisions by the government, and increasing complexity of customer needs—all have an impact on both the duration of the sales cycle as well as the number of decision-makers and influencers involved in the buying process. The earlier three points will also help to accelerate the sales cycles.

Increase in ‘active’ sales headcount

Attrition has always been high in sales, though it varies from industry to industry—it is about 10 percent in chemicals and 40 percent in retail. Recruiting and bringing up a new salesperson up to speed takes time. So, an active sales force may be less than optimal at most times.

By helping and supporting the sales force actively and in real time in the above four areas will help in retaining talent and increase the active sales headcount. If you can compress that ramp-up time, you will increase your “active” sales headcount, and as a result, can increase revenue.
M Muneer is the managing director of CustomerLab Solutions, a consulting firm.
first published: Jul 31, 2021 07:58 am

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