KPIs for effective evaluation of sales performance

1. Customer Churn Rate

To gauge the success of a company in terms of its sales, customer churn or attrition rate is a highly crucial performance indicator. To explain, the customer churn rate represents the number of customers within a specific time period who discontinue using the goods or services of a business. This loss of customers is directly linked to declining sales and hence revenue losses for the company.

Customer churn rate as a KPI

Customer churn rate is a quantitative measure of the performance of a company’s customer retention strategies. It can help the top management understand how many customers is the company losing and for what reasons. Subsequently, to boost sales, companies can think of more improvised strategies to keep customer churn rate and the linked loss of sales under check. In fact, it is a very vital sales performance indicator for businesses that generate recurring monthly revenue from subscription services or via other business models.

2. Sales Growth

The sales success of a company will always be directly linked to the growth in sales. Sales growth represents an increase or decrease in current sales when compared to the sales in the previous period. Needless to say, for companies to succeed, the sales growth has to be positive and impressive in a way that it represents an incremental hike in sales and hence, company revenues. In fact, sales growth is one of the simplest and most relevant measures of the success of the sales strategies of a company.

Sales growth as a KPI

By tracking sales growth percentage in a constant manner, the sales managers can effectively gauge the progress of their sales strategies and the processes initiated with the aim of boosting sales. Positive sales growth will imply that the company is doing well in terms of promoting higher sales and the strategies are paying off. Sales managers can quickly gauge the gap by which sales in the current period have increased or decreased against the previous period. If it is identified that the sales growth is low, a gap analysis of the strategies needs to be conducted and refinements need to be made.

3. Average revenue per user

ARPU is a simple yet vital performance metric when it comes to evaluating the sales success of a company. The average revenue per user represents the average earnings per customer with respect to all the sales made by the company. It is critical to note that the average revenue per user should always be higher than the average cost per acquisition for a company to make its revenue profitable.

ARPU as a KPI

When the ARPU is increasing for a company, it indicates greater customer acquisition of customers with high purchasing power or users subscribing to more expensive products or services. In either case, ARPU gives a realistic measure of sales strategies’ success. When new product lines are launched or innovations are brought in sales strategies, ARPU should be tracked to gauge success in quantifiable terms.

4. Average purchase value

In measuring business success in terms of sales, it is essential to look at the average value of each sales transaction. That is exactly what average purchase value does as a credible metric for evaluating sales success. As obvious, companies will always aim for a higher average purchase value as that would lead to higher revenue and profitability.

Average purchase value as a KPI

As a KPI, the average purchase value can be used effectively to measure the volume of sales in each transaction. Moreover, it can also be used as an effective metric to gauge the sales performance of premium goods or services. A higher purchase value will hint at larger volume of sales or promising sales performance of the premium segment offerings. As a KPI, average purchase value can also be used for revenue projections.

5. Revenue per sales representative

While measuring the overall sales performance of a company, it is equally important to look into the individual performance of each sales representative. This performance is to be measured in terms of the revenue they bring to the company. Needless to say, great individual performances by sales representatives will improve team performance and eventually add to the company’s success. Revenue per sales representative is a monetary expression of the revenue that each representative brings from sales of the company’s products or services.

Revenue per sales representative as a KPI

This KPI will help sales managers track the performance of each individual sales representative proportionate to the designated sales targets. Also, it will help in identifying the best performers who bring the highest sales revenue. These performers can be appreciated to improve the overall performance of the team. Besides, revenue per sales representative can be an effective measure that can be used to set realistic, measurable, and attainable sales goals. Moreover, the average revenue per sales representative can be used as a direct measure to evaluate the team's performance.

6. Average sales cycle length

The sales cycle length is the duration that it takes between the first contact with a prospective lead and the closing of the deal. When looked at in terms of average, the sales cycle length is averaged in accordance with all the closed deals.

Average sales cycle length as a KPI

In terms of measuring sales performance, this KPI has a very salient role to play. It can give the sales managers a direct and quantifiable idea of how fast or slow leads are moving through the funnel. Besides, it can also be a highly relevant metric to measure the effectiveness of salespeople in closing deals.

7. Purchase frequency of a customer

In simple terms, a customer’s purchase frequency denotes the number of times a customer makes a purchase with a business in a specified period, usually one year. As a metric, purchase frequency helps in determining the profitability of a customer and also helps in understanding customers’ purchasing patterns and behaviors. When the purchase frequency of a customer will be high, the customer will be more valuable to the company in terms of sales and revenue.

Purchase frequency as a KPI

Purchase frequency as a metric gives real insights into the purchasing patterns of customers. A high purchase frequency among customers will lead to greater profitability while a low purchase frequency will hint at the need for refining sales strategies or launching customer loyalty programs. In fact, as a KPI, the purchase frequency can be effectively used to assess the success of customer loyalty programs and reward programs that aim at drawing customers into more frequent purchases.

8. Loss in sales due to supply issues

This metric helps in understanding and ascertaining the effectiveness of a company in terms of stocking inventory to meet the demand of customers. Besides, it also helps in gauging the efficiency of a company in forecasting demand, vendor management and control of inventory. This metric gives a quantitative assessment of sales value lost by a company because of supply issues.

Loss in sales due to supply issues as a KPI

The percentage of sales lost due to supply issues will help the top management and sales supervisors in identifying the gaps in inventory management, vendor supervision, and demand forecasting. A high percentage would depict that the company is performing poorly with respect to these verticals and needs to bring new strategies and control measures to keep the loss of sales due to supply issues in check. By tracking this metric, companies can also find a quantifiable way to gauge their inventory management efficiency.

9. Sales quota attainment

Sales quota attainment is the representation of the time that it takes for a sales team to achieve the target sales. With respect to the current sales, this metric will help in determining the expected time that it will take for the sales team to hit the target. Having said that, in terms of tracking the milestone of target sales value, sales quota attainment proves to be a highly useful and efficient metric providing real and credible insights. At any given point in the timeline of achieving the sales target, the sales quota attainment gives a quantitative measure of the percentage of the overall sales target achieved thus far.

Sales quota attainment as a KPI

As mentioned above, by tracking the sales quota attainment, sales managers and the top management can constantly evaluate the performance of sales teams and sales representatives. Besides, this metric can be effectively used to set realistic and measurable targets for the sales team as the progress can be consistently tracked using this measure. By prioritizing this KPI, the sales managers can drive greater efficiency in the sales team as the teams will be able to track their current sales performance at any given time.

10. Qualified leads

Lead generation is a key objective of marketing as leads further get converted and drive the sales of a company. Qualified leads are the leads that are most likely to be converted. In simple terms, a qualified lead is a potential customer for a business with respect to pre-defined criteria by the company. In the usual sense, qualified leads are associated with the willingness of the leads for sharing their information and showing interest in the company’s offerings freely.

Qualified leads are further classified into the following categorization

• Marketing qualified leads
• Product qualified leads
• Sales qualified leads

Qualified leads as a KPI

Given the fact that the sales funnels are quite complicated and not all leads have the same potential for conversion, the KPI of qualified leads enables businesses to identify the highest potential leads and segment them differently. Subsequently, after this segregation, the sales team can channel greater efforts to the qualified leads given the high potential for sales conversion. The qualified leads can be approached with different strategies like offering special discounts or incentives.

11. Percentage of online sales revenue

In the fast-changing business environment where e-commerce sales are on the rise, it is essential for businesses to track the share of online sales as a percentage of total sales. A more refined measure will be to track the success of e-commerce channels in terms of revenue generated by them. Companies can determine if they have been successful in catching up with e-commerce trends and if the e-commerce investments are proving to be profitable enough.

Percentage of online sales revenue as a KPI

As a KPI, the percentage of online sales revenue can help businesses track the performance of their online distribution channels, customer experience from online portals, and ease of buying online offered by the company’s digital platforms. Companies can get quick insights into the efficiency and effectiveness of their e-commerce strategies in increasing sales and the contribution of online channels to revenue generation.

12. Lead-to-win rate

The lead-to-win rate is an effective measure of the proportion of leads entering the sales funnel that have been closed successfully. This metric holds great imperativeness as a realistic and reliable measure of the sales conversion performance of a sales team or salesperson. In fact, this metric can also play a crucial role in the effective alignment of the marketing and sales teams along with the product development department.

Lead to win rate as a KPI

With this metric, companies or sales supervisors can effectively track the success of product marketing fit, strategies of pricing, and the execution of sales strategies and tactics. Sales supervisors can regularly track the percentage of won leads against the total number of leads entering the sales funnel and hence, plan for better conversion rates by reading between the lines while assessing this metric.