Key performance indicators (KPIs) are trackable goals that help everyone, from sales leaders to sales reps, get a clearer picture of how well they're performing.
It’s important for sales teams to choose KPIs that are relevant to them and their team’s goals. That way you’re working toward major business goals while also tracking your team’s improvement.
KPIs also help sales leaders zoom in on the most important data for their team. This helps prevent data overwhelm while still maintaining visibility across the sales cycle, customer relationship management (CRM), and bottom line. Fewer spreadsheets and disconnected numbers are never a bad thing.
Here’s what you should know about sales KPIs, how they compare to sales metrics, and which KPIs are the most important to track.
Your team can use sales KPIs to measure a team’s, company’s, or even individual’s performance compared to set goals.
KPIs help you combine data into more easily understandable metrics. This lets you compare your current progress to the goal you set. For example, if your sales KPI is to gain 20 new leads in a month, you can analyze your data to determine whether you’ve successfully met that goal.
Sales KPIs are sometimes confused with sales metrics, but the two aren’t exactly the same.
Sales metrics are measurements of your sales performance over a period of time. Metrics can measure the performance of individuals, teams, or a whole company.
KPIs are a type of sales metric that measures performance over a period of time and then compares it to a set goal. Your sales KPIs indicate whether you’ve met your objectives or not.
Sales KPIs are important because they show your progress toward strategic goals. KPIs provide a clear picture of whether your current activities are helping you reach your goals.
Sales leaders can analyze KPIs to decide if they need to change course. This could involve selling different products, adjusting sales scripts, or coaching individuals to reach personal goals.
Setting KPIs also help incentivize individual sales reps. With a clear goal on the horizon, it can be easier for your sales team to know what actions must be taken to succeed. Gamifying your sales KPIs can boost your team’s motivation by combining a clear vision with friendly competition.
Your sales KPIs should track the most impactful data for your team. Here are a few tips to help you choose the right KPIs for your team:
Need some inspiration pinpointing sales performance indicators for your team to track? Here are some KPIs that every successful sales team should consider:
Tracking your successful upsells (and cross-sells) can identify groups of customers that respond best to certain types of pitches. This could help your sales team decide which clients are most likely to respond positively to certain product or service upsells.
Once you’ve identified a trend, add this critical information to your sales playbook and coach your reps on how to approach the topics of upselling and cross-selling.
Comparing sales cycle length for each rep can highlight potential selling issues that might be resolved with coaching. Alternatively, analyzing the sales cycle length can show whether a short sales cycle actually results in the most satisfied customers.
For example, a sales rep may close deals in record time. But if a majority of their clients end their relationship with your company later on, that could indicate a longer sales cycle helps reduce churn and keep clients satisfied.
Tracking sales rep activity can indicate how productive your team is. Some important activity numbers to measure include:
Of course, different reps have different approaches, and some may rack up lower activity numbers because they’re focused on creating a quality experience for clients.
Pro tip: Help your sales team boost their productivity by gamifying the sales process. Learn how Arcade’s sales leaderboards incentivize your team with our free e-book.
Measuring your deal win-loss ratio can unearth opportunities to coach your sales development reps (SDRs) on improving the customer experience throughout the sales process.
Analyzing your win-loss ratio can help get a high-level view of the overall win rate and win-loss ratio first. This puts everything in perspective when you take a closer look to identify the following:
Your customer lifecycle, or the different steps a client goes through to get from lead to purchase, can directly impact acquisition cost and acquisition rate. Ideally, by focusing on this KPI, your team shortens the amount of time each customer spends in each stage of the lifecycle.
Keeping a close eye on your client acquisition rate (CAR) can help you spot glaring variations in your team’s conversion rates. If you spot irregularities in the number of new customers you’re acquiring, you should dig into the details to find out:
The answers to these questions can help solidify your team’s best approach to discovering, contacting, and converting leads.
Your customer acquisition cost (CAC) tells you how much you can expect to spend to acquire new customers. You can segment your CAC by customer persona to spot customers that may react positively to your product, service, or company and cost less to acquire.
Spotting the intersection of a low-cost, positive-sentiment client can help your team identify and go after higher-quality leads.
Your net promoter score (NPS) tells you how likely your clients are to recommend your business to others. It helps you break your clients into three categories, based on a scale of 0 to 10:
NPS is a KPI you should measure regularly — at least every three to six months. (But you should also avoid sending out NPS surveys too early or too often.)
You can track the success of your sales and marketing campaigns by analyzing the cost per lead. Effective campaigns result in a low cost per lead and can help you identify successful campaign traits to use in the future.
To measure the cost per lead, use this equation:
Cost per lead = campaign budget / number of leads acquired
It’s important to share the results of this KPI with your marketing team, especially since marketing and sales often work closely together to reach company goals.
Unengaged employees can lead to high turnover, which costs your business money. On the other hand, engaged employees can boost profitability by up to 23%, according to Gallup.
One-on-ones are a great opportunity to poll your employees on their current engagement levels. If you need help digging into questions and answers in your one-on-one meetings, CultureAmp has an excellent list of questions that help you check in on alignment, relationships, career aspirations, and more.
Your customer lifetime value (CLV) measures the value each client contributes for as long as they do business with you. You can calculate this KPI using the following equation:
Customer lifetime value = customer value x average customer lifespan
Keeping tabs on CLV can provide you with a benchmark, which helps you spot fluctuations in the quality of clients and decreases (or increases) in customer lifespan. Knowing whether changes in these two metrics are merely a blip or worth taking action on can help your team strategically pivot only when necessary.
When your customers cancel their business with you or don’t renew their contract, they churn.
Measuring customer churn rates helps sales leaders understand when there could be an issue with the products or services reps are selling. Alternatively, a rising or high churn rate could indicate a poor customer experience, high competition, or even a need to rework the sales playbook and approach.
Whatever action you take, it’s important to look at churn rate as a metric that helps you optimize your sales strategy.
If your sales team takes great care of your clients, your customer retention rate should benefit. There are many ways to measure customer retention. The following equation allows you to measure retention rates over a certain time period:
Customer retention rate = (number of customers at end of [month, quarter, year] - number of customers acquired during [month, quarter, year]) / number of customers at the start of [month, quarter, year]
A high customer retention rate can boost your profitability, and loyal customers are known to buy and spend more than new customers. Last but not least, a high customer retention rate can lead to more referrals.
Don’t let your outreach efforts be a shot in the dark. Instead, take a look at your customer conversion rate to spot trends in the most effective outreach types.
Conversely, knowing which types of outreach aren’t effective can help you avoid wasting time, effort, and money in the future.
As a sales leader, keeping tabs on your competitors’ pricing strategies is critical. Using competitor pricing as a KPI gives you the ability to:
Tracking the number of lead follow-ups your sales reps make can help you spot areas where your team can improve. Coaching sales team members on when to follow up with leads, how to follow up, and how to spot the most qualified leads can improve lead conversion.
Checking the percentage of follow-ups can also help sales managers refine their team’s sales strategy and playbook by identifying the most effective approaches and most receptive client personas.
As a sales leader, sales per rep is an important KPI for multiple reasons:
An effective way to help you and your team keep an eye on the number of sales made by each rep is to use a leaderboard that tracks real-time performance. Gamifying your sales process and showcasing top performers in a leaderboard improves engagement and boosts productivity. Your team can track the metrics that affect your sales goals most, such as number of deals closed or total number of phone calls made.
Learn how to set up sales leaderboards and motivate your team with a free Arcade demo today.
Your sales opportunities KPI helps you filter potential customers into different stages based on where they’re at in your sales pipeline. This performance indicator can help sales leaders forecast sales and identify the most valuable leads.
Once you’ve grouped your prospects into each stage of the sales funnel, you can assign the stages a weighted value that helps you determine the value of each opportunity.
For example, if your prospect is in the proposal stage, you’ve weighted that stage as 25%, and you predict this prospect could sign a $5,000 contract, you’d estimate this sales opportunity as:
$5,000 x 0.25 = $1,250
Tracking your average profit margin tells you how much of your sales revenue will result in profit. You can break this KPI down further by digging into the average profit margin for specific products or services, individual sales reps, and different sales territories.
To measure your average profit margin, use the following equation:
Average profit margin = (net income / net sales) x 100
Did you know that 35% to 50% of deals are made with the first company that responds to a lead? That’s why your team’s average response time is a critical KPI to follow — and improve on — if your reps are losing deals to the competition.
One key thing to remind your salespeople of when responding to leads is that the first follow-up isn’t always successful. It’s important to be persistent (but not pushy), provide the information the lead is looking for, and underline the value your company provides.
Without these important metrics, your sales team and your company are making decisions in the dark. A lack of KPIs — or not tracking the right sales KPIs — can damage company growth.
Ensure you communicate your sales KPIs regularly and provide updates on how your team’s performance is measuring up against those metrics. A sales dashboard is an easy way to keep tabs on how much your sales efforts are contributing to your goals. Similarly, encourage your team to set individual KPIs that match both the company’s overarching goals and their personal goals for growth and development.
Keep it simple: Simple sales compensation plans are cheaper, easier to administer, and yield better results than complex plans.