Analytics and reporting have always been a central part of sales, yet this increased access to data doesn’t always result in an increase in sales performance. Even with data readily available, strategy and tactical knowledge can be a challenge for reps and sales managers alike.
Of all the things one could do to ensure the success of a sales organization, identifying, tracking, understanding, and incentivizing performance with sales metrics is perhaps one of the most important. Great teams build this into their culture.
It all starts with knowing some basics about metrics. Good rules to follow when choosing metrics should help drive actionable change in your sales campaigns, moving the needle in the right direction. Before you create the perfect sales campaign, you need to know what your goals are and how you’re going to track its success. To track its success, you need to understand what makes a good metric in the first place.
3 Elements of a Powerful Sales Metric
1) A good metric is comparative. Being able to compare a metric to other time periods, lead segments, lead sources, and account owners helps you better understand what the numbers actually mean. An increase in response rate is more useful than just a 9 percent response rate.
2) A good metric is a ratio or a rate. Ratios are comparative and easier to act on. Number of demos booked is purely informational. Number of demos booked per week gives you insight that you can act on because it’s a leading indicator that tells you your current effectiveness and whether you are on pace or not to hit your quota.
Ratios are also good for comparing factors that are seemingly opposed, gaining insight into inherent tensions. This might be new leads per month divided by customers who churned per month. The more leads you get, the more business closed. But customers who turned per month may go up. This ratio suggests pushing your sales reps for more leads at the top of the funnel may not be the main metric they should be measured on.
3) A good metric changes the way you behave. What do you do differently based on how the metric changes? This speaks to a few different things. First, it has to be a simple number to measure and understand. Second, there has to be a direct line of sight to how it affects the bottom line. Rather than a correlational relationship, you have to be able to explicitly show the relationship is causal. And lastly, you should have direct control over your ability to act on you insights from measure this metric.
If you’ve been following the PersistIQ blog, you’re probably already reporting on the correct sales metrics. But I think it’s always important to pause and take a step back to look at the larger picture no matter what stage your company is at.
A Deeper Look at the Sales Funnel
Before we dive into the important metrics that matter, let’s first, let’s take a look at some metrics of a sales funnel from top to bottom. Organizations differ in what they sell and to whom, and thus the granularity of their funnel will differ and so too will the most important metrics.
To illustrate complexity, a high-value, enterprise deal with a long sales cycle and a much more complicated sales process may look something like this:
(emails, dials, voicemails, etc.)
Conversations with DMs
Meetings converted into qualified Opportunities
Opportunities (or Pipeline) Closed Won
Companies selling at this level are almost always taking an account based sales development approach to generating revenue.
It’s relatively standard for sales managers and VPs to meticulously track overall sales/business development rep performance on activity and pipeline, which are results metrics. But is that enough?
Let’s dive even deeper into activity and effectiveness metrics, which are leading indicators for your team’s results metrics.
Most savvy sales teams are paying attention to these activity metrics and have the proper technology stack to increase lead velocity. The thing that many teams don’t know is what poor performance on metrics looks like or how to improve.
Measuring the Things that Matter for SDRs: Activity, Effectiveness and Results Metrics
Let’s start at the very top with activity metrics. These metrics are leading indicators of success, meaning if these numbers are healthy, it’s a sign of success to come later in the funnel.
There are opposing opinions when it comes to tracking open rates.
Ask the VP of Sales and open rates don’t matter. Ask a rep and it’s the first number they look at when viewing their sales campaigns and workflows
They’re both right.
We’re trying to maximize every step of the conversion funnel, and open rates is a big first step. However, you can’t look at and optimize for open rates alone. You need to see how it fits into the bigger picture. You could be getting high open rates, but low response rates, and thus less closed opportunities.
Open rates for cold outbound sales emails are declining, but yours should be between 45-60 percent.
If you’re having trouble hitting those numbers, utilize platforms like PersistIQ to test, measure and refine your subject lines.
Elements to test in a subject line to increase opens:
- Custom variable vs. no variable (such as name or company)
- Question vs. statement
- Long vs. short
- Feature vs. benefit
After you get someone to open an email with a good subject line, the next step is to get a positive response. For a sales rep, this is the arguably the most important number, and rightfully so. No need for much explanation here.
Response rates are also declining, but your should be around 10 percent – 15 percent.
If you’re having trouble hitting those numbers, it’s time to test!
Elements to test in email body to increase response rates:
- Value proposition A vs. Value proposition B
- Call-to-action A vs. call-to-action B
- P.S. vs. no P.S.
- Social proof vs. no social proof
- Whitepaper vs. no whitepaper
Moving down the funnel a little more, we can look at effectiveness metrics. These are numbers that can begin to assess how successful a team is at the activities they’re doing each and every day.
Here, we’re looking at the percentage of total outbound activities that results in a meaningful conversation. These activities could be anything and everything from emails and calls to touches on social media and physical mail. And when we’re talking about conversations, we’re talking about positive conversations. Sentiment matters!
Conversation rates should be around 8 – 12%.That means for every 100 activities, you should be having 8 – 12 conversations with qualified prospects.
For some reps, this number seems high, where other reps may think this is low. There are a few things that can affect this number. For example, if you’re targeting the C-suite and using multiple channels, you can easily hit 20+ touches with a single prospect to get one conversation.
If your conversation rates aren’t where you’d like them to be, here are some things to consider:
- Are you using the right messaging?
- Are you targeting the right prospects?
- Are you using the right channels to reach your prospects?
- Do you have the right strategy in the first place, or are you shooting from the hip?
We can define pass rate as the percentage of conversations that become qualified and passed to an Account Executive. In order to track and measure this properly, you need to have a clear cut definition for your qualifying criteria. Make sure everyone knows this and it’s enforced.
Your pass rate should be around 60%. That means for every 10 conversations you have, 6 should result in a qualified lead being passed to an AE.
If you’re struggling to sustain a good pass rate, it generally means you’re struggling on the phone. It could go back to getting on the phone with the right people, in which case you’d have to look at your lead source, but chances are this far up stream, you’ll need more coaching.
The best advice that I can give you to begin improving your conversations is record and listen to yourself. People hate doing it, but there’s often no better way to start having better conversations.
Now, moving down the funnel even more, we can focus on results metrics. When we look at closed deals, there is valuable information to be gleaned. Results metrics are the bottom line and ultimately what really matters to a sales team.
This is important not only for AEs, but SDRs as well. The idea that since an SDR is not tasked with activities downstream, such as closing deals, they should not be incentivized with, say, deals closed-won, can be dubious.
Regardless, it’s important to give reps visibility of a lead all the way through the funnel to close. It can seem a little removed from the campaign, but you should have the ability to do full cycle attribution if you’re using the right technology and your systems are fully integrated.
Your close rate is likely going to be so small (about 1-2 percent), so the important thing to watch here is fluctuation in this number. And since one or two more deals closed can dramatically affect your close rate, two more important aspects of close rate is that I’d add to this is cycle time and Average Contract Value (ACV).
If you’re having trouble with close rates (and cycle time or ACV), it’s going to take more than tweaking a few variables. You must take a step back and try testing:
- Lead source
- Seniority level of your target
- Target Persona
- Target industry or vertical
- Company size
If you’re using a robust platform like PersistIQ, important activity metrics will be broken down for you at many different levels so you can start making sense of what is working.
It will also seamlessly sync with Salesforce or your CRM so you can have full visibility into funnel.
Properly Incentivizing SDRs on Their Metrics
Just because you’re tracking many important metrics along the funnel doesn’t necessarily mean you should be compensating on each of them. Compensation and incentives are always tricky. Which metric to incentivize your reps with should be consciously decided upon based on what your needs are as a business. If you incentivize a rep to make phone calls, they will find a way to make lots of phone calls. But, to whom? And why? What are those phone calls producing?
These are the questions one must address when considering what metrics to incentivize their reps with.
Another pitfall might be to incentivize your reps solely on activities downstream, without the proper knowledge of how best to ensure those are the results of activities upstream. For example, if you don’t know who is going to need your product the most, you may want to get into the marketplace and learn. This would be a situation in which you’d want to incentivize purely on meetings booked, so as to have as many conversations and at-bats as possible.
Once you learn some new information about product fit in the marketplace, you can dive back down into the funnel, arm your reps with new knowledge of who to prospect, and incentivize based on deals closed won. As you connect more of the dots between your sales metrics, you’ll be able to work your way back down the funnel. Go as high as you need up the funnel until you can fully understand your business model, but don’t lose focus on the fact that the end in itself is revenue generated.
Stay tuned for more of the latest in outbound sales best practices and methods.
This post was brought to you by PersistIQ. Our software empowers salespeople to easily convert prospects into a qualified pipeline and create personalized outbound campaigns at scale. See how PersistIQ can help you make your own sales efforts more effective today.