We previously covered the Revenue Prioritization Formula (RPF) and how you can use it as a starting point to prioritize sales initiatives. RPF provides a way to prioritize sales and marketing efforts based on analyzing real data on the best performing offerings you sell to customers. RPF considers two dimensions: the close rate for a specific offering and the average earnings for closing each opportunity. Sorting by the RPF result gives you a priority baseline of the sales initiatives that give you the best return for the level of effort spent. Once you have done an initial RPF prioritization analysis, consider using additional agile sales performance measures to adjust your priorities to what matters the most to your organization over time.
RPF is a starting point to prioritizing your sales efforts. Often, there are other factors you also need to consider when prioritizing. Strategies may change, new products may emerge, or a critical customer issue may need attention. With competing priorities in sales, you may also need to factor in other agile sales performance measures to prioritize your sales planning decisions.
Leading Performance Measures
Leading performance measures are your inputs. They benchmark the activities that lead to the results you are working to achieve. Performance measures can be tracked and compared against data based on times. For example, this month to last month, the current quarter to the previous quarter, or this year over last year. Leading performance measures are also typically used when setting KPIs for a sales professional and team. Ultimately, the leading performance measures you hold most valuable and worthy of tracking depends on your business model and goals. Highlighted below are a few leading performance measures most typically used by sales organizations.
Activity Measures (by Type)
Activity measures are performance-based. These are the activities performed by sales professionals during their interactions with prospects and customers. Examples of activity measures are calls, emails, and meetings. Reporting on activity measures by type allows you to determine where your team is most effective and where improvements need to happen.
Time to Convert a Lead to an Opportunity (by Source)
Measuring, by source, the length of time it takes to convert a lead into an opportunity allows you to check an individual’s performance and the overall performance of a particular source or campaign. Conversion of a lead to an opportunity is key to filling your sales funnel. Focusing on improving the time it takes and the quality of sources you use is essential to ensure your team’s healthy pipeline.
New Opportunities Added & Opportunities Lost
Just as significant as the time it takes to generate an opportunity is the number of opportunities in your pipeline. The number of new opportunities entered into or lost from the funnel during a set timeframe is another important pipeline measure. Without a constant flow of new opportunities feeding into the pipeline, the inevitable loss of opportunities will make it challenging for a team to achieve their goal.
Other Leading Measures
You can use many other leading measures to help you prioritize your sales initiatives. They may be performance-based, such as proposals/quotes sent or the number of opportunities versus goals. Or they may be people-based, such as headcount deficits or new hires trained/onboarded. Process-based measures, such as sales process adherence or sales compensation/incentive program, are also leading measures that you may use for prioritization.
Lagging Performance Measures
Lagging performance measures are your outputs and measure your actual results. These measures show the final result of your efforts. Highlighted below are a few lagging performance measures most typically used by sales organizations.
Growth Rate of Existing Customers
The growth rate of existing customers is an essential lagging measure since it provides insight into a customer’s adoption of your product or service. If a customer account is purchasing additional products or services after the initial sale, it shows a higher adoption and satisfaction rate. Inversely, if a customer account remains stagnant, it can be a signal that customers are not getting what they need or are looking into other options to fill their needs.
Losing a customer is one of the most expensive costs in sales. It is a loss of all of the hard work that went into earning that customer and a loss of all future revenue with that account. A high or increasing churn rate can signal that you have product or service issues, your support is insufficient, or your processes are lacking.
Close Rate (by Source)
Measuring, by source, the length of time it takes to turn an opportunity into a customer allows you to check an individual’s performance and the overall performance of a particular source or campaign. Many measures attribute to the close rate measure. It is crucial to have a solid understanding of your leading performance measures. The close rate can be helped or harmed by misaligned performance, people, or processes.
Other Lagging Measures
Like leading measures, you can use many other lagging measures to prioritize your sales initiatives. They may be performance-based, such as margin/discounts given or average contract length. Or they may be people-based, such as employee attrition rates. Process-based measures, such as customer acquisition cost, are also lagging measures that you may use for prioritization. Lagging measures may encompass all three areas, like Net Promoter Score (NPS) or Customer Satisfaction Scores (CSAT).
Agile Sales Performance Metrics Fine Tune Your Prioritization
The Revenue Prioritization Formula (RPF) is a first step in organizing your sales initiatives based on the best return on your team’s effort. RPF, however, is only the beginning. Each company is different, with its own unique combination of products, customers, competitors, and business landscape. This requires additional thought to fine-tune sales priorities. Using agile sales performance measures will give your sales teams the actual data they need. In turn, allowing you to determine sales initiatives’ right prioritization to maintain success.