The New Sales Metrics
In this lesson, we’ll explore the modern sales metrics that data-driven sales leaders use to extract key insights.
Are your sales metrics outdated and holding you back?
In this new age of sales, companies have started to adopt tools built for the way sales teams work, leading to a whole new set of data points that can be tracked and measured.
This sea of data has given rise to a new set of sales metrics, providing sales leaders with a complete picture of their sales performance and the ability to better predict their sales revenue.
Are you ready to update your sales metrics?
Breaking down a sales metric
Sales metrics are used to quantitatively track, monitor and assess the performance of your sales strategy.
Your strategy is the process by which you convert leads into sales revenue. The key conversion points of that process can be calculated using the Sales Formula, a consistent way to measure how a lead converts to an opportunity, and how an opportunity converts to a won deal.
So how do we measure the progress of a lead?
Tracking the status of a lead
As a lead moves through your sales process, its status changes as well. The two key status changes of a lead during the sales process can be referred to as:
An Opportunity (Op)
A point at which a lead is accepted as an opportunity worth pursuing, based on a shared set of qualification criteria. An Opportunity can still be unqualified upon further review.
A Qualified Opportunity (QOp)
A point at which an Opportunity is qualified as an opportunity worth pursuing, based on shared set of qualification criteria. A QOp cannot be unqualified; only “won” or “lost.”
The New Metrics of Sales
With increased visibility into how a lead moves through the sales process, the new sales metrics provide a way to dig deeper into the mechanics of your sales strategy.
These new metrics can be broken into two categories:
Used to understand how you take in leads and produce sales revenue.
Used to understand and compare the value you get in return for everything you put in.
Let’s explore the new metrics for each of these measures.
Part 1: Process Measures
Process Measures are used to understand how leads and opportunities flow through your sales process. The quantification of these measures allows you to pinpoint bottlenecks and inefficiencies in your process and find ways to increase your sales revenue.
Let’s explore each of these new process sales metrics and see what they measure.
1. LEAD → Op%
Lead → Opportunity %
# of Opportunities / # of Leads = Lead → Op %
In a sales process, there are two reasons why a sales rep would not convert a lead to an Opportunity:
During the review process, the sales rep determines the lead does not meet a set of established criteria, and the lead that is not worth pursuing.
Your rep did not connect with the lead in time. For example, the prospect moved on, bought another solution, etc.
2. Op → QOp%
Opportunity → Qualified Opportunity %
# of Qualfied Opportunities / # of Opportunites
= Op → QOp %
In a sales process, there are two reasons why a sales rep would not convert an Opportunity to become a Qualified Opportunity:
During the review process, the sales rep determines the Opportunity does not meet a set of established qualification criteria, and the Opportunity is not worth pursuing.
Your rep did not connect with the Opportunity in time (e.g. the prospect moved on, bought another solution, etc.)
3. LEAD → QOp%
Lead → Qualified Opportunity %
# of Qualfied Opportunities / # of Leads
= Lead → QOp %
While analyzing your sales performance, you may also want to measure how many leads become Qualified Opportunities. This measure shows how many leads are actually real prospects that can only be won or lost, filtering out all the leads that are deemed “unqualified."
4. QOp → WON%
Qualified Opportunity → Win Rate%
Won Deals / # of Qualified Opportunities
= Win Rate %
In a sales process, there is only one reason why a sales rep would not convert a Qualified Opportunity to a won deal:
Your rep did not win the deal based on an established set of reasons (e.g. competition, timing, features, lost touch, etc.)
(A QOp should never become “unqualified” at this stage.)
5. SALES CYCLE LENGTH
Sales Cycle Length
The amount of time it takes for your reps to advance leads and opportunities through the sales process.
By segmenting this data, you can measure the time it takes to move a lead or opportunity through each stage of the pipeline. This allows you to:
• Flag deals that are less likely to close by the amount of time they’re taking to progress
• Identify sales bottlenecks where you need to make some changes (e.g. increase capacity, improve training, prioritize leads or opportunities, update processes, etc.)
6. AVERAGE QOp SIZE
Average Qualified Opportunity Size
The predicted deal value
Before a deal is won, there is typically a “predicted deal value” associated with a Qualified Opportunity.
The “Average Qualified Opportunity Size” is used to measure the potential deal value (i.e. the average dollar amount of a sale or contract) of the opportunities in your pipeline and helps forecast your potential sales revenue (as opposed to actual sales revenue).
7. AVERAGE DEAL SIZE
Average Deal Size
The actual average deal size of won deals
When a Qualified Opportunity is converted to a won deal, there is an “actual deal size” that the customer will pay in exchange for your product and/or service.
The “Average Deal Size” is used to measure the actual deal value of won opportunities and makes up the actual sales revenue.
8. PIPELINE VALUE
QOp Total ($) = Pipeline Value ($)
The pipeline value is calculated by adding together all of the potential value of qualified opportunities currently active in your sales process. The accuracy of this number is dependent upon your sales team consistently tracking and updating the potential value in a centralized location (i.e. your CRM).
A pipeline report helps you measure how much potential revenue you can generate and forecast totals for a specified date (considering other factors such as predicted sales cycle lengths and conversion rates).
Part 2: Yield Measures
Yield Measures are used to understand how much value you get in return for your investments. The quantification of these measures allows you to normalize and compare the ROI for how you’re currently investing your time, money and effort into various resources.
Let’s explore each of these new yield sales metrics and see what they measure. In addition, you can start to see how they work hand-in-hand with Process Measures to give you a complete picture of your sales performance.
1. LEAD YIELD
Sales Revenue / # of Leads Generated = Lead Yield
Lead Yield is a simple way to compare the value a lead produces versus another on an equal playing field.
For instance, if you want to know how much value you get in return for a lead from one source (A) versus another source (B), you can compare their respective lead yields.
2. Op YIELD
Sales Revenue / # of Ops Generated = Op Yield
The Opportunity (Op) Yield shows the value you get in return for an Opportunity in your sales pipeline.
In this example, the Op Yield for Source A and B are closer than their respective Lead Yields. This is due to the fact that the Lead to Opportunity % for Source A (27%) is considerably lower than Source B (60%).
In order to make sense of this variability, dig into how many leads are being unqualified versus lost for each source. Does it make sense? How can you change the outcome?
3. QOp YIELD
Qualified Opportunity Yield
Sales Revenue / # of QOps Generated = QOp Yield
The Qualified Opportunity (QOp) Yield ultimately shows how much value you get for Opportunities that are determined to be the most “qualified” during your sales process.
Looking at this chart, you can see that the QOp Yield for both Source A and B ended up being the same ($50). However, the QOp to Win Rate % for Source A (50%) is much higher than for B (10%).
Again, what’s driving this variability? How do you dig in and discover potential causes?
Apply the new sales metrics to evaluate how to invest your time and effort
If you’re looking to increase your sales in a specified period of time, you can re-adjust your sales strategy and focus on the leads and opportunities that provide you the most value. For instance, you might be over-invested in a lead source channel that has a low lead yield. Likewise, you might be under-invested in a channel that has a high lead yield.
However, you should not take yield measures at face value, as there could be issues with your sales performance that can cause variability.
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Lesson #5 Summary: The New Sales Metrics
With better tools to track and measure sales activity, a new set of sales metrics has been created that gives sales leaders a complete picture of their sales operations.
These new sales metrics are made up of Process and Yield Measures. Process metrics provide insights into how your sales team takes in leads and produces sales revenue, and yield metrics help you compare and assess what you get in return on your investments into various resources.