A Comprehensive Guide to Improving Your Teams’ Sales Productivity
When asked about the standard sales metric used to measure sales rep productivity, Oleg Rogynskyy, CEO of People.ai, said, “I don’t think there’s a single ‘standard’ measure of productivity that works. How you measure productivity changes from company to company.”
The sales productivity of your team isn’t a one-size-fits-all process, but it is a process. Consistent sales and revenue growth comes from a scalable, replicable sales process that yields results each time, and once you have that, your business can grow with new team members that can be trained on the winning formula.
Unfortunately, this can’t occur until you’re fully aware of what works for your business, and more importantly, what doesn’t. While you may know who’s a consistent performer time and time again, that knowledge can’t be passed on to the rest of the team until you understand why they perform well.
Improving sales productivity comes from understanding how and why to monitor your sales metrics. What you can gain from this information helps you make proactive decisions to elevate your business.
What are Sales Metrics?
A sales metric is a data point that represents individual, team, or company-wide performance. Sales teams use metrics, also known as key performance indicators (KPIs), to measure progress toward goals, adjust compensation, award bonuses or incentives, identify weaknesses and prepare for future growth or market changes.
Ideally, the productivity distribution between your high-, medium- and low-performing sales representatives should be balanced, and the team as a whole should see consistent success.
A sales target, also known as a quota, is the number of sales a representative or sales leader aims to make in a specified period of time. This is usually measured in revenue or volume.
Sales metrics to measure company-wide performance include:
1. Total Revenue
Arguably the most important metric of any business is revenue. Total revenue can be measured on any time scale, typically monthly, quarterly, or annually. Annual Recurring Revenue, or ARR, is a common metric of sustained RevOps performance. Similarly, Monthly Recurring Revenue, or MRR, is an equivalent metric on a shorter time frame.
ARR is a great metric for predictable revenue when reps are closing multi-year contracts and retention rates are high.
2. Average Revenue Per Account/Product/Customer
The average revenue brought in by a single product, service, account, or customer helps leaders and managers to understand where they should focus their attention and resources. It’s also important to know when your business is heavily weighted and dependent on a few key accounts, which will be evident by a higher ARPA.
3. Market Penetration
Understanding your market share is important because it measures where your business is compared to the expected growth outlined in your business or sales plan. Usually, you will find businesses measuring this against their total addressable market (TAM), which is an estimation of how big a given market is for a product or service.
It’s worth noting that markets are dynamic, meaning that they can expand or contract for a number of reasons. For example, when Salesforce was preparing to go public in 2003, they stated, “We believe that the CRM applications market was approximately $7.1 billion in 2002.” In the last 12-months, Salesforce revenues were more than $21 billion, which demonstrates that the market for CRM software has grown significantly.
4. Percentage of Revenue from New vs. Existing Customers
Understanding what percentage of revenue is from new and existing customers is helpful for a few reasons. If existing customers account for a growing percentage of total revenue, this can be an indicator your RevOps team is doing a great job of upselling and growing accounts, but the team tasked with acquiring new logos is lagging behind.
If new customers are the lion’s share of your revenue, then this could either be an indicator of high churn rate or hypergrowth. To understand which end of the spectrum your team is trending, it’s important to track LTV, NPS, and more, which will be discussed shortly.
5. Win Rate
Win rate, or the opportunity-to-win ratio, is the percentage of deals that close compared to total deals, including those that are open, lost, slipped, or in another pipeline phase.
There are a number of factors that contribute to a sales team’s win rate, many of which are covered later in this article, but we have also identified the key factors that can enable you to double your win rate.
Win rate measures your sales effectiveness or the ability for your team to close deals.
6. Year-Over-Year Growth
Although growth can be measured over any time-frame, such as a month-over-month, quarter-over-quarter, or year-over-year, annual growth showcases high-level execution of strategy and whether long-term growth goals have been achieved. The formula for calculating year-over-year (YOY) growth is as follows:
For example, let’s assume that revenue last year was $50 million and the current year’s revenue has grown to $75 million.
[($75MM – $50MM) / $50MM] * 100 = 50% YOY Growth
7. Lifetime Value (LTV) of a Customer
Lifetime value is the revenue that can be expected throughout the duration of the average relationship with a customer. Once a relationship and rapport has been established with an account, ideally your team would nurture this existing relationship to keep them satisfied and grow the lifetime value of the account.
LTV is an important sales metric because if your ACV is greater than or equal to your average LTV, it can signal deficiencies in your products or services and your ongoing sales expenses will likely erase any profit margins. Retention rate and churn rate are important factors in LTV and should be considered when determining the sustainability of your sales team. There are two ways to increase LTV: increase ACV or increase retention rate.
If your ACV is $500K, for example, and the average customer renews their two-year contract once, for a total retention period of four years, the LTV is $500K * 4 or $2 million.
If you want to truly understand the lifetime profitability of your customers, append your profit margin to the equation for lifetime profit (LTP) — not a widely used metric, but vital in our opinion.
8. Net Promoter Score (NPS)
How likely are your customers to recommend your product or service to their network?
This question is the basis of the net promoter score, where you ask each customer the likelihood of them promoting your business through word of mouth from 1 (not very likely) to 10 (very likely). NPS can be a proxy for customer satisfaction since we can assume one would only share a product, service, or business they trust and respect.
Your champions are those that reported 8-10 on your NPS survey, and detractors are those who reported 7 or lower.
9. Quota Attainment
Quota attainment is an important sales metric because a declining quota attainment rate can be an indication of deeper problems, such as inadequate rep ramp, coaching, or capacity planning.
It’s worth noting that we believe progress towards quota attainment should be tracked in your BI dashboard to intuitively understand how sales activity metrics (more on these later) directly contribute and correlate to quota attainment.
A natural next question for sales leaders and managers is what percentage of sales representatives are reaching 100% of their sales target? The formula for this is quite simple:
10. Pipeline Coverage
Sales people at all levels must understand the health of their pipeline compared to their quota. This sales metric will be a leading indicator towards quota attainment because if you don’t have an adequate pipeline to cover your quota, it’s going to be extremely difficult to achieve your goal.
Deal slippage can interfere with the results of this metric because if your reps mark an opportunity that slipped from the last period as committed this period, it can offer a false sense of coverage. People.ai scores opportunities based on the actual activity in the pipeline, offering a more accurate analysis of pipeline coverage.
11. Sales Expense Ratio
It’s important to understand how your cost of sales, including direct customer acquisition costs, as well as indirect operating expenses, compare to your revenue. The higher your sales expense ratio, the less profitable your sales organization will be. Startups typically have higher expense ratios as their reps ramp and they move up the product adoption curve, but as the market matures, your sales expense ratio should decrease.
Already have the right sales performance metrics? Check out how to Improve Sales Effectiveness
Sales Activity Metrics
What are Sales Activity Metrics?
Sales activity metrics show what your sales representatives are doing on a daily basis. It’s important for sales leaders and managers to have a firm grasp on how these daily actions can impact the metrics covered above.
Activity metrics can reveal strengths and weaknesses that may influence a sales representative’s performance. By analyzing the outcomes of these activities, you can determine which are most impactful and share these lessons with the wider team.
Activity sales metrics sales leaders should track:
- Social media engagement
- Scheduled meetings
- Sales presentations
- Referral requests
Tracking a rep’s activity can be mistaken for micromanagement. Instead, frame how a rep’s sales activity measures up to the macro-landscape of the broader team’s activities to clarify their impact and improve execution.
Sales Pipeline Metrics
As a sales leader, the health of your pipeline is about as important to understand as a doctor taking a patient’s “vitals.” Many of the sales metrics discussed above can indicate the health of one’s pipeline, but they can also influence that health.
Net Promoter Score, for example, might seem like a customer satisfaction metric exclusively, but it can impact your sales pipeline. If your existing customers are recommending your product or service to their network, you are more likely to experience organic pipeline growth and unexpected revenue.
Quota attainment and rep quota attainment can be measured and monitored to understand if and when quota adjustments should be made. Overwhelming quota attainment, for example, might mean there is more opportunity to grow than initially expected and targets should be adjusted to motivate performance.
Alternatively, a declining quota attainment may indicate a lengthening sales cycle, which could necessitate a decreased quota and increased focus on closing later-stage deals.
Sales pipeline metrics include:
- Length of the sales cycle
- Open opportunities by month or quarter, team or individual
- Closed opportunities by month or quarter, team or individual
- Value of the pipeline by month or quarter, team or individual
- Value of sales by month or quarter, team or individual
- Average contract value (ACV)
- Win rate
- Conversion rate
Lead Generation Sales Metrics
Prospecting is the pump-priming of your sales pipeline. Any sales organization worth its salt will need to measure lead gen performance and continue to monitor leads as they flow through the sales process.
Having a firm grasp on lead generation can indicate how well your sales and marketing organizations are functioning — or dysfunctioning.
Lead generation sales metrics include:
- Volume of new opportunities
- Lead response time
- Percentage of lead follow-up
- Percentage of lead follow-up within a given time frame
- Dropped leads
- Qualified leads
- Customer acquisition cost (CAC)
Sales Productivity Metrics
What is sales productivity?
Sales productivity is the rate at which your representatives achieve their sales target. The less time it takes for a sales representative to meet the sales target, the higher the sales productivity.
From a high-level, sales productivity is similar to how productivity is measured in economics; output (revenue) is measured against each unit of input (reps). Understanding which inputs drive the most output should be the goal of measuring sales productivity metrics.
Sales productivity metrics include:
- Percentage of time selling
- Percentage of time on data entry
- Percentage of time in content creation
- Percentage of marketing collateral for use by sales representatives
- Number of sales tools used
- Percentage of high-quality lead follow-up
Leading vs. Lagging Indicators
Your performance indicators are broken down into leading and lagging indicators.
Leading indicators predict your results, and while they can be more difficult to measure effectively, they’re easier to change and influence in advance. Activity metrics are an example of lagging indicators.
Lagging indicators are reactive and reflect your results. They’re easier to track, but more difficult to influence. A low quota attainment or top-of-the-funnel weakness are examples of lagging indicators.
Sales Tracking Tools
With so much information to keep track of, utilizing revenue intelligence systems like People.ai, is helpful to keep everything organized and ensure you can make informed decisions within a sales process moving forward.
A customer relationship management (CRM) tool is the main hub of information on your customers and prospects. The data held within the CRM is the foundation for reports and predictions to make strategic business decisions. Tools like People.ai automatically track contact and activity and populate your CRM with accurate, real-time data to the right opportunity accounts.
Once the sales information is organized in a CRM, marketing automation accounts for the leads coming into the pipeline. The data from marketing automation platforms can provide a holistic view and deep learning of the prospects’ activities for your sales reports.
A buyer activity tracker monitors and logs the sales interactions from the buyer’s side, such as the content shared within the buying team, so your sales representatives can take action in real time.
Once you know how buyers respond to your content and interactions, that information can be used to coach sales representatives in effective sales. People.ai shows the calls, emails, meetings, and identifies people in the buying group, as well benchmarks sales rep performance for targeted coaching.
People.ai can take over the time-consuming administrative work and allow sales representatives to spend more time selling and closing deals. AI in sales can tackle activity logging, identify high-priority leads, create new contacts, predict a forecast for the quarter, and more. This all saves time and helps you become more proactive as a sales leader in managing your sales team.
Create a Winning Team
Compiling and tracking these sales metrics is much easier with AI in sales and sales tracking tools in place to track the right indicators, review them on an ongoing basis, and address performance weaknesses within your process, pipeline, or team.
In his book, The Seven Habits of Highly Effective People, Stephen Covey said, “When people are crystal-clear about the most important priorities of the organization and the team they work with and prioritize their work around those top priorities, not only are they many times more productive, they also discover they have the time they need to have a whole life.” Once the winning formula is identified for your unique business, you can create a replicable, scalable process that works for your sales process and business goals.