W. Edward Deming, the father of modern business operations and the vanguard of American industry’s quality crusade in the 1960s, once observed, “You can’t manage what you can’t measure.”
To be sure, if there ever was an idea that's transcended decades, it is our focus on measuring everything we can—usually in the form of a metric or KPI (key performance indicator). With the ever-increasing availability of data and IT advances, even the once amorphous world of marketing is managed with sophisticated metrics that drive tactical and strategic decisions in near real-time.
It seems the hardest decisions for today’s CEOs and marketing and sales executives are what metrics should you use to manage the sales and marketing function. After all, there are scores of metrics you can use to oversee this area of your business.
With this article, we’ve done some of the “heavy lifting” for you by listing what we consider to be the most important metrics for measuring sales and marketing success. Let’s break it down:
Top Sales Metrics
To help find the right metrics for your sales team, authors Frank Cespedes and Bob Marsh urge you to deconstruct your sales funnel to find the most relevant metrics to track for your company. “Wins are the most common metric used across sales roles and industries.” While Entrepreneur magazine shares six metrics that could boost your sales:
Total sales by period:
By tracking sales by period, you know exactly how well you're performing. You know if your sales are up versus the prior period, be it the preceding day, week, month, quarter or year.
Sales by product or service:
Sales by product or service tells you exactly what's selling and what's not. With this information, you can spend more time promoting what's already selling and less time on what isn't.
Sales by lead source:
When you track your lead sources, you can optimize sales. For instance, when formerly good lead sources slow down, you can identify the issue and try to address the problem.
Sales by product or service:
This simple metric tells you exactly what's selling and what's not, which helps you redirect your marketing tactics toward weaker product lines.
Revenue per sale:
The easiest way to increase sales and profits for most companies is to increase the average revenue per sale. For B2B companies this tactic often means using up-selling techniques and adding accessories or options on to a transaction.
New vs. returning customer sales:
A healthy business has both new and returning customers. Indeed, it costs a company much more money to acquire a new customer than it does to retain an existing one. Why else do many companies spend lavishing on customer retention programs? “Getting customers to buy from you again, and increasing customer lifetime value, can dramatically improve sales and profits,” says Entrepreneur.
Sales per prior activity:
The final sales metric to track is sales per prior activity, which helps you isolate the cause of success (or failure). Prior activities are those events that occurred shortly before the sale.
Top Marketing Metrics
With the rapid rise of digital marketing strategies and tactics in the past decade, the marketing metrics landscape has become more complicated. This family of metrics mainly focuses on the performance of your website, social media platforms and digital marketing campaigns. According to Convince & Convert, these tactics have now familiar measures like overall traffic, channel-specific traffic, conversions, bounce rate, search trends, new vs. returning visitors, brand sentiment, and others.
But atop these KPIs is a pantheon of metrics that should be foremost on the minds of every CMO and CEO. From the paper "Marketing Metrics: Note for Marketing Managers," Professors Michael A. Stanko and Matthew Fleming provide the following metrics:
Simply put, market share is a particular company’s percentage of sales of the entire market as the company sees it. It’s calculated either as a percentage of total market revenue (i.e., dollar share) or as a percentage of total market units (i.e., unit share).
Customer lifetime value (CLV):
Predictions of the value of the future profit flows associated with an individual customer over the length of time the firm can retain the customer.
Net Promoter Score (NPS):
The NPS is designed to quickly measure customer loyalty by usually only asking one question—“On a scale from 0-10, how likely is it that you would recommend our company to a friend or colleague?”
Awareness plays a crucial role in determining which brands will be considered by buyers and which will not.
Indicates the likelihood of potential customers favoring a given product (for either rational or emotional reasons), typically from among a choice set of relevant competitors.
Tailor Metrics to Your Industry
Within each of these categories of sales and marketing metrics, the examples noted are just a beginning point. In addition to these metrics, there are many more you can consider. Choose the right mix for your company and industry.