Best Of
Article written by Mathew Maniyamkott
Regular contributor to various magazines. Passionate about entrepreneurship, startups, marketing, and productivity.
17 min read
11 June 2024
Are you a sales manager of a field sales team? Looking to effectively manage and track the performance of your sales team?
Sales managers might feel as if they are getting a lot done. But they will be going nowhere if they don’t measure their efforts.
That’s why having KPIs is important for salespeople so that sales managers can keep them accountable. It is the best way to measure the performance of the team and the product.
But choosing the most relevant KPIs for a sales manager is also important so that they are relevant to the business and the product that the company sells.
Now, since we know the benefits of measuring KPIs, let’s dive deep into the matter. We have listed out the top 10 KPIs for sales managers to track. Take a look:
This is one of the most important metrics or KPIs for a sales manager to monitor.
Each of the leads that you get is not necessarily going to be converted into a customer. But you need to account for the kind of effort that went into closing the lead.
Having this as a KPI means that you will be tracking numbers like the following:
When you have quantified data that you can show to your salespeople, you can easily make them understand if anything has gone wrong or the areas where they are doing good.
The kind of insights that you can get from your salespeople based on the lead response time is significant. To calculate lead response time, you need to have accurate timestamps for:
| Lead Response Time = Time of Response – Time of Lead Generation |
If the lead response time is bad, it means that the salespeople are invested in some other work. Understand the other work they are involved with and you might be able to add it or remove that totally if it is unimportant.
If the leads get responded to on time, then you are doing something right. Follow up with your salespeople if they are reaching out to the leads as soon as they get a notification.
An incoming lead means that they are already interested and are looking to finalize the vendor. It means that they would have reached out to a few more players. But if you are late to reach out to them, you stand to lose them.
This KPI is directly related to the revenue – which means that there should be more concentration on this. To calculate the number of wins, you typically count the total number of deals that have been closed within a given period. Here’s the formula:
| Number of Wins = Total Number of Closed Deals |
Depending on the context and specific sales process, you might have different criteria for what constitutes a “win” or a closed deal. Some companies may consider a win when a contract is signed or a purchase is made, while others may have different criteria.
If you aren’t winning at least 30% of all the opportunities, then there are some issues. It means that the salespeople need more training so that they can close the sales effectively. Or your offering isn’t appealing to your leads. No matter what it is, this needs checking so that you can identify the challenges that your business is facing and act accordingly.
A simple employee engagement form would give you great insights into how your sales team is performing and if they are actually enjoying the work they do. Here’s one such survey questionnaire prepared using SurveySparrow:
To create these kind of surveys, sign up for free.
It is the total amount of money that you bring in. Revenue is not only the money that you get when a new customer comes in but it is also based on the amount that you receive when existing customers upgrade or buy more from you.
There are two common ways to calculate revenue:
| Sales Revenue = Number of Units Sold x Selling Price per Unit
For example, if you sold 100 units of a product at $10 per unit, the sales revenue would be: Sales Revenue = 100 units x $10 = $1,000 |
| Total Revenue = Sales Revenue + Other Revenue
Other revenue can include other income sources such as subscriptions, royalties, upgrades or licensing fees. |
You can look at revenue in so many ways. It is a clear indicator of how your salespeople are doing, how your marketing team is faring, and the kind of brand value that your company holds.
You can look at the revenues generated each month, quarter, per sales rep, etc. That’s why this is one of the most flexible KPIs for a sales manager.
Cost per lead is a sales KPI that lets you know how much you are spending on each customer. The goal should be to reduce the cost incurred on each customer while increasing the effectiveness of your outreach program.
Even the incoming leads that you get are a result of incessant marketing and content that you publish on a regular basis. All of this costs money and you cannot keep spending more money to attract leads.
| Cost Per Lead (CPL) = Total Cost / Number of Leads
For example, if you spent $1,000 on marketing campaigns and generated 100 leads, the CPL would be: CPL = $1,000 / 100 leads = $10 per lead |
To know how much money was spent, you need to calculate all the expenses that they have incurred, including advertising costs, social media management, content, etc. Then, total the costs and divide it by the number of leads that you get for the particular period. This will give you the cost per lead. If the cost per lead is more than the amount of money spent by the customer, you are at a loss.
It is the amount of money that a customer would spend over the course of their lives. There is no specific time period for it.
This KPI is calculated by the profit earned during the entire period and the cost associated with the customer during the relationship. It shows how a customer is worth it to you monetarily.
| CLTV = Average Purchase Value x Average Purchase Frequency x Customer Lifespan |
If Customer Lifetime Value is less than the money you spend on customers, then there is something drastically wrong with the way you do business. You need to completely overhaul your business by looking at all the systems that are put in place.
You can also use this metric for different groups of customers based on the segmentation that you have done. Find out the value that customers bring in based on their age, location, interests, designation, industry, etc. If there are customers from certain segments who are bringing a loss to you, then stop doing business with them.
NPS is one of the best metrics that you can use to understand how customers feel towards the salesperson based on their latest interaction with them.
Net Promoter Score asks a customer how likely they are to recommend their service/brand to a friend. You can measure this metric with customer surveys and interviews. One of the best ways to get to know this is by asking follow-up questions when they do one more transaction or have an interaction with your team.
The NPS question is asked on a scale of 1 to 10. There are three levels of customers based on this:
These are customers who gave a score of 9 or 10. They are happy customers and will stay loyal to your brand. They will even go out of their way to recommend your product/service to their friends and family.
Customers who give a score of 7 or 8 are called Passives. These are customers who are satisfied with your product but wouldn’t mind switching over to a competitor if they see something better.
These are your unhappy customers who have given you a score between 0 and 6. They will damage your brand’s reputation and will spread a lot of negativity surrounding your brand.
| Formula for NPS = % of Detractors – % of Promoters. |
The NPS score can be positive or even negative. If your NPS score is negative, it means that there are more detractors than promoters, and it is not a good sign.
The NPS score average depends on the industry. Industries like telecom will usually have lower NPS scores while the consumer electronics industry average is usually higher.
So do not worry if your NPS score is only 10. Check your NPS score and compare it against your industry average. If it is less than your industry average, then you have something to worry about.
Understand what your NPS score is telling you with our Free NPS Benchmark Calculator.
Scheduling product demos for your clients means that they have accepted your proposal. This means that they are closer to being your customers than earlier.
So the onus is on the sales manager to train the salesperson effectively, now so that they can convert the product demo and make them a paying customer.
The salespeople should be trained by the top salespeople in the organization on how they can convert the product demo to a sale. In other words, demos are one of the KPIs for a sales manager that measures knowledge sharing and transfer.
How good are your salespeople at prospecting? How many emails are they sending every day? Is there a strategy behind each of the prospects that they are reaching out to?
How many cold calls are they making? How many of these convert from a sales call/email to a product demo and finally into a customer?
Keep observing these numbers so that you can identify the trends. It can help you make business decisions when things go differently than planned. That’s why prospecting counts as one of the crucial KPIs for sales manager.
Do you know that it is 5x times more difficult to get a new customer than it is to keep an existing one? It is also easier to sell more products to the latter and they will also be ready to pay a premium.
| Client Retention Rate = (Number of Customers at the End of a Period – Number of New Customers Acquired) / Number of Customers at the Start of the Period) x 100 |
A high client retention rate is a strong indicator of customer satisfaction, loyalty, and ongoing revenue generation. This is the reason why you need to have a clear client retention policy in place.
You can even try customer loyalty programs to keep the loyal ones into your fold while persuading others to stay with you by offering them incentives.
KPIs are used as the primary reason for measuring and managing salesperson performance by the sales managers.
KPIs have the ability to communicate the progress that the sales team is making to the management.
Here are some of the benefits of measuring top KPIs for sales managers.
Sales Managers are the ones who are responsible for keeping the salespeople in high spirit as well as giving them the right guidance.
When you measure certain KPIs for a sales manager, you will be able to know if they are on the right track or not. If not, there would be no indication as to what is going wrong at all.
By tracking KPIs, the sales managers would know who are the reps that are getting the best results and who are the ones lagging behind.
By identifying the ones who are struggling, you can put them on a training program to improve their skills.
When you know that there is a number assigned to getting some work done efficiently, you can use it as a benchmark to make yourself better in the next sales cycle.
Without measuring KPIs, there would be no benchmark and the entire exercise will become directionless. There would be nothing to take inspiration from.
When salespeople know that their activities are being tracked and measured, they would ensure that at no point do they come across as bad.
Because they know that their commissions also depend on it, that is not the only reason for them to put on their best behavior. Salespeople will want to perform better when their efforts are also measured.
When there is no data available to show something happened, then everything can be manipulated and it would revolve around hearsay.
A professional organization cannot let that happen. Evaluating the results on a regular basis puts the onus on the management to see if they are working well.
Ensuring that everyone works towards the same goals is a bit difficult. That is why having KPIs makes the job easy because it will clearly state which are the areas that matter and needs more concentration on.
This way, everyone who is a stakeholder will make it happen. Also, KPIs break down information into easily digestible metrics using which you can provide constant feedback to your organization.
KPIs are linked to incentives and it will give the salespeople a clear idea of where they stand in terms of getting them. Knowing that having a better number would boost their income will act as motivation.
Let your salespeople know that for certain KPIs, they would be getting an incentive. Since it is monitored by the sales manager and because it is impossible to manipulate the numbers, there would be no question of favoritism.
The best part about KPIs is that the results are always measurable. Everything that you want to measure can be done without much ado.
Whatever you do to track your sales activities, when you measure it, there are high chances that it will help you streamline your activities. You can use it to identify trends, change course or make new plans.
When you keep your salespeople accountable, they will be working much more effectively. No matter what kind of sales they need to do, let it be B2B, B2C, online, offline, or SaaS-based products, having KPIs in place can give a lot of direction to your salespeople.
The only thing you need to remember is that you need to monitor the right metrics. You have to be a data-driven sales manager to get the best out of your salespeople.
KPIs will become useful only when you dig deeper and understand things that are more obvious than just what is under the surface.
Having good information is not only the prerogative of companies. But it is also core to the success of an organization, no matter how big or small it is. When an organization doesn’t know what its strengths and weaknesses are, it would not be able to get ahead because of the heavy competition.
KPIs are chosen by businesses based on what matters most to the success of the organization. KPIs provide a benchmark with data, thus ensuring that organizations can move forward on the right track.
In this time and age, it is impossible to be successful without the help of data. Only when you measure that data would you be able to use it for producing business outcomes. This is where measuring KPIs for a sales manager comes in.
With sales metrics, you will be able to understand the areas that you have been doing well and the areas where you need to improve. Without hard data, it is impossible to measure it or stay on top of it.
Ensure that you only choose KPIs that are relevant to your business objectives, short-term and long-term plans. You do not have to worry about all the sales KPIs we have mentioned in the article here; only make use of the ones that are most relevant to your business.
There is no guarantee that measuring KPIs for a sales manager will make you successful. But if you don’t do so, then you can surely expect it to go kaput.
Once you have the KPI data, you need to analyze the information at hand. Look for ways to improve the performance, devise a strategy for it and ensure that the plan is implemented to the T. Tie the KPIs to goals and you will surely do a good job of it.
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