Key indicators to start a real "Sales Ops" strategy – Part 2
As we saw in our first part, measuring your results using the main KPIs (Key Performance Indicators) used by Sales Ops can allow for a complete optimization of your entire sales process.
If you are not up to date on what "Sales Ops" are or part 1 of this article, we advise you to start your reading with: « Sales operations, the new ally to boost your figures and your teams » before starting with the first part of « Key indicators to start a real "Sales Ops" strategy ».
A few weeks ago, we were wondering:
- How could managers know if their sales teams were functioning correctly?
- How to evaluate them?
And we gave you a start of an answer by telling you about the first 2 categories (out of 5) of KPIs to measure to start your Sales Ops strategy. These KPIs concerned:
Your CRM, which hides essential KPIs
Your sales funnel and its possible optimizations
So we will address the following 3:
Procedure indicators,
Sales resource KPIs,
Financial KPIs.
1/ Process Metrics
Within a "Sales Operations" approach, "process metrics" or "procedural metrics" are measurements that evaluate the effectiveness and efficiency of your sales process or a specific step in that process. The Key Performance Indicators (KPIs) in this section serve as benchmarks to indicate which processes should be optimized, improved, or abandoned.
By regularly evaluating these metrics, you can identify bottlenecks and inefficiencies in your sales process, and then implement improvements to enhance their effectiveness and profitability.
Your sales teams may sometimes use different processes (and this is particularly true in the cardboard packaging converting and printing industry). It is therefore wise to choose the right KPIs for each specific procedure used by the team.
Sales Cycle Length
The sales cycle length indicates how long it takes – on average – to go through all the stages of the sales cycle. These steps may include:
- Data enrichment
- Prospect outreach
- Lead generation
- Sales calls, video conferences, and meetings with the prospect/client
- Closing the deal
Or even more, but it is often possible to streamline your sales cycle by reducing the total number of actions.
If you want to reduce the length of your sales cycle, it may also be helpful to track the number of touchpoints that your sales teams generally have with a prospect before they schedule an appointment.
With HIPE, you can easily measure the length of your sales cycle because you have access to:
- The Project opening date,
- The dates of the sales tasks (calls, prospect/client emails),
- The dates of information gathering and configurations,
- The date the order was placed (Project won and/or Configuration won),
- The date the order is moved to "Production"
If you have a marketing team, you can even analyze customer-driven marketing actions (newsletter, trade shows, acquisition via the website) and obtain additional information to that of the sales effort.
Ultimately, the analysis of the sales cycle time is measured against these key steps for you:
- Prospect/client acquisition/identification,
- Opening a client account,
- Opening a Project,
- The initiation of an initial collection/configuration,
- Exchange times: mock-ups, reconfigurations,
- Order placement,
- Validation of final elements, especially graphics (artwork approval),
- Moving to production.
Lead generation (Marketing vs. Sales)
B2C companies primarily rely on marketing to generate a larger percentage of leads.
In contrast, B2B companies often find it useful to invest in leads generated by sales and do not always have a marketing team as such (this is probably your case).
In B2B, it is preferable for your marketing to focus on your brand identity and facilitate its search (especially in SEO and, above all, in keyword purchasing).
This is especially true in our industry... That being said, you need to know what the right acquisition strategy is to implement for industrial B2B: you must therefore know how to measure how many leads come in and through which channel.
With HIPE, you can find out:
Which configurations/projects have been created by your prospects and customers who have never been onboarded by your sales representatives:
- Indeed, it is important to distinguish between your prospects/customers who have not discussed with a sales representative to place an order or simply initiated an initial request (first configuration) from customers/prospects who were brought to HIPE by your sales representatives.
- The percentage of leads entering through your marketing efforts therefore corresponds to the projects/configurations created by autonomous customers/prospects on HIPE (initial request, subsequent projects after the initial request).
All other associated Projects (and configurations) therefore correspond to your percentage of leads entering through your sales efforts.
With this indicator, you can measure the ROI (return on investment) of each acquisition channel (marketing or sales).
From there, you can:
- Boost the ROI of each channel, such as choosing, with the help of the right information, to invest differently in them.
- Measure again how your actions, your new tools and processes have enabled you to achieve your strategic objectives and iterate again.
Lead Response Time: a problem?
Here we are talking about the response time that one of your sales representatives takes to respond to an identified prospect.
Identified prospects are those who accept sales solicitations by downloading white papers, subscribing to newsletters, or responding to surveys on landing pages.
Noting this response time can help determine which segments of the sales cycle are the longest. It can also show you at what point in the sales cycle time investments are most profitable.
The response time of your teams to prospects and customers is notably a common pain point in the packaging industry,
HIPE is a powerful generator of qualified leads when connected to a website. Once your prospects and customers use it independently, how long does it take you on average to become aware of a new request and process it?
With HIPE, from the creation of an incoming request by a prospect or customer to its handling by the sales representative, it is relatively simple to measure the time spent.
It seems particularly interesting to analyze this indicator with your conversion rate. You should find that a low lead response time is correlated with a higher conversion rate.
Other "response times" can be measured when going down the funnel of a packaging manufacturer:
- The feasibility study and/or quotation time
- The lead time for managing mock-ups: from the initial request to its production, its dispatch, its delivery to the customer, its follow-up by the sales representative and the customer feedback (positive or not).
- The lead time for managing the production launch: after the quotation approval, finalization of the elements, in particular graphic elements, to launch the production.
In fact, when HIPE generates quotations in real time, it also participates in reducing the "quote response time", which seems to be a real pain point for our industry's customers.
Be precise about your Sales Forecast Accuracy
Sales forecasting gives you an overview. It shows you how close a sales manager's projections are to the actual sales figures afterward. The best sales forecasts take into account internal data and market data.
Accurate sales forecasts are necessary to make effective downstream decisions. Analytics software, accurate input data, and rationality are all factors that can improve the accuracy of sales forecasts.
The "Pipeline Forecast" KPI must itself be measured against the accuracy that can be expected.
For example, by comparing initial forecasts and actuals quarter by quarter, you can identify the biases and factors that generate the biggest discrepancies.
By eliminating them, you improve your future visibility on your activity and make better decisions.
With HIPE, we explained how to generate the pipeline forecast.
You can of course consolidate orders by quarter by filtering your "ordered" configurations over the chosen period.
All that remains is to keep this analysis up to date and measure the gaps.
2/ Sales resource KPIs
KPIs allow operations managers to evaluate a sales team from a more personal point of view. Human resources are a key partner in these evaluations.
Poor sales resource performance (indicated by the following KPIs) tells the company that it needs to rethink its approach to recruiting, training, and incentivizing sales representatives.
In terms of Sales Efficiency
Sales efficiency indicates how much revenue a sales team generates per euro invested.
To determine sales efficiency, all sales expenses for a given quarter must be added up. These include:
- Recruitment,
- Training,
- Overhead,
- Salaries,
- Compensations and bonuses,
- Travel expenses for the sales team,
- Sales management software (and other tools),
- Sales-related marketing expenses
Next, add up the total revenue generated by the sales team during that quarter. Finally, take the sum of the revenue and divide it by the sum of the expenses.
This figure indicates the return on investment of the sales team per euro and per quarter.
In our B2B custom industry (cardboard converters, cardboard manufacturers, etc.), where the sales effort often (if not always) surpasses the marketing effort by far, it is crucial to track this indicator.
For a cardboard manufacturer, we believe it is essential to extend the evaluation of expenses to all teams involved in sales, based on the proportion of their time dedicated to the sales effort for order processing, i.e.:
- Sales administration
- Quoting
- The Design Office
Certainly, these "sales support" teams likely spend a significant portion of their time structuring production methods and supporting the production effort. Therefore, only count the expenses in proportion to the time spent managing customer/prospect requests, creating files, preparing quotes, studies, mock-ups, etc.
Especially when you implement Sales Ops best practices, as this indicator will also allow you to measure the ROI of your Sales Ops.
For example, imagine:
- Your quarterly turnover amounts to 3 million euros.
- Your "sales" expenses for a quarter amount to €300,000, to which should be added the pro-rata of the "support" teams: another €300,000.
- Your sales efficiency ratio is therefore 5 euros of revenue for every euro invested in your sales effort.
Track this indicator every quarter, and measure its evolution compared to the previous year to understand seasonality. With the best practices of the Sales Ops concept, you should significantly improve this indicator.
The Turnover Rate of your Sales Team (Sales Agent Turnover Rate)
Employee turnover is an increasingly common reality in the world today. The research organization Gartner predicts that the total annual employee turnover rate will be 20% higher this year than last year.
And this applies to all sectors...
Employee turnover can be costly. Every time a sales representative leaves the company, the company has to spend time and money hiring and training a replacement.
This is even more true for a manufacturer of cardboard packaging and more generally for packaging manufacturers. A salesperson must:
- Be a "good" salesperson,
- Possessing advanced technical knowledge of packaging.
- Understanding the marketing and supply chain challenges of its clients.
- Being comfortable with complex sales and lengthy processes to close a sale of customized packaging.
The alternative would be to shift this employee's workload onto other sales representatives. However, this could lead to even greater long-term turnover.
To calculate the turnover rate of your sales representatives:
As with the previous indicator, we recommend extending this analysis to sales support functions.
Imagine your team consists of 6 sales representatives, 3 sales administrators, 2 estimators, and 2 design office engineers in 2022, totaling 13 people.
In 2023, a junior sales representative joins the team, but another sales representative retires, and 1 estimator resigns. Your turnover rate is therefore 2/(13+1) = 14%.
Note: we believe this indicator only makes sense for very large companies with sales teams of over 50 people. Below that, exceptional elements, such as retirement, can distort the analysis of this indicator.
- For SMEs (Small and Medium Industries), measuring team satisfaction levels via internal surveys or the sick leave rate relative to the number of days worked seems more relevant.
- As we explained in our first article, "Sales Operations: The New Ally to Boost Your Numbers and Teams," Sales Ops improve the satisfaction of "internal clients." These satisfaction indicators should therefore mechanically improve in line with your approach to aligning strategy with your human resources, data, processes, and tools!
3/ Financial KPIs
Customer Lifetime Value (CLV)
Customers with a higher budget or greater brand loyalty have a higher CLV.
To determine the CLV:
- Measure your retention rate: this is the proportion of customers who place orders with you from one period to the next.
- Determine the "lifetime" of your customers.
- Identify the average basket size and purchase frequency of your customers.
Ultimately, CLV is:
Let's take an example with HIPE by cross-referencing your Company and Project information:
- You can determine when the customer placed their first order and when they placed their last order before leaving you: because they found another packaging supplier, because they filed for bankruptcy, or for any other reason.
- In the example below, by cross-referencing your "Configurations" and "Projects" information, you determine that this customer brought you €17,000 between December 7, 2021, and January 10, 2023, the date on which you know they will no longer reorder from you – i.e., 14 months of activity.
- The CLV (Customer Lifetime Value) of this customer is therefore €17,000, and the monthly CLV is €1214.
By exporting your complete data and analyzing 'lost' customers, you can obtain this figure on average for all your customers and classify them as:
- Strategic (above the CLV or monthly CLV)
- Typical customers (average)
- Non-strategic customers (below the CLV)
And provide analysis, strategy, and very different actions based on this framework...
The churn rate of your users to your services (Customer Churn Rate)
This is the percentage of customers who discontinue using your service after a given period. This period can be monthly, quarterly, or annual. A low churn rate indicates that you retain more customers, while a high churn rate is not a good sign because it means you are losing revenue by not generating quality leads.
Again, with HIPE, and using the same data export as for the previous analysis, you can determine each year: what is your active customer base (for example, customers who have placed at least 1 order) and which are the active customers from the previous year.
Let's say you have 750 active customers in 2022 and 120 active customers in 2021 are no longer active in 2022. This gives an attrition (churn) rate of 16%.
The goal, once this data is structured and analyzed, is to lower this rate, which will increase your customer retention.
To do this, you will need to call on your sales team to analyze each customer case, provide a qualitative response, and then structure the cases that explain the attrition:
- Bankruptcy,
- An internal decision to stop working with the customer (bad payer, non-strategic customer who requests many studies and quotes and orders little or not at all),
- Loss to competition due to poor service quality,
- Loss to competition due to poor price positioning,
- Loss to competition due to non-compliance with production deadlines,
- Loss to competition due to non-compliance with manufacturing issues,
- ...
From then on, you will have visibility on the actions to take, the tools and processes to put in place to deal with each case.
Some examples?
- Internal decision to stop working with the customer: bad payer. In this case, you can better analyze customer information before referencing them, and request down payments or payments upon order from certain financial thresholds.
- Loss to competition due to poor service quality (response time). In this case, analyze and understand the steps that take too long internally, streamline information (from request to response), provide a tool and processes that reduce response times by reducing the team's workload (HIPE for example).
Customer Acquisition Costs (CAC)
The cost of acquiring a customer (CAC) tells you the average amount your company spends to acquire a new customer. It starts with the sum of several costs over a given period, including:
- Marketing and advertising campaign costs,
- The costs of CRM tools, website, E-Commerce, or HIPE
- The salaries and overheads of the extended sales team (*)
- The salaries and overheads of the marketing team
(*) : including the relevant proportion of the Sales Administration, Cost Estimation, and Engineering departments when they contribute to the acquisition of a new customer.
Once you have this sum, divide it by the number of new customers acquired during that period. This gives:
NOTE: A subset of the Customer Acquisition Cost is the Cost Per Lead (CPL).
Let's go back to the example of the KPI "Sales Agent Turnover Rate." Your team consists of: 6 sales representatives, 3 sales administrators, 2 estimators, 2 design engineers and 1 marketing manager in 2022.
By valuing the salaries and associated costs of the sales and marketing team, plus the portion of salaries of other people in proportion to the time spent on the sales effort to acquire a new customer, you get an expense of €300,000 over the year.
Over the year, you have gained 450 new customers.
Your Customer Acquisition Cost is therefore €6,666 per customer.
High or not? Only the analysis of this indicator in relation to the CLV indicator can help you answer it.
You, therefore, need to calculate your CLV/CAC ratio because it presents the sustainability of your company while indicating whether your acquisition costs to convert your new customers are too high.
Some market indicators:
- A 1:1 ratio indicates that you spend as much to acquire a new customer as they bring you over their lifetime with you. The more you invest in acquiring new customers, the more money you lose.
- A 3:1 ratio likely demonstrates strong growth for your company.
- A 4:1 ratio proves an excellent business model.
The Customer Management Cost
This indicator is also a relevant tool for us for financial analysis with regard to your commercial performance because it is not limited to the cost of acquisition. It includes all of your marketing and sales expenses, including those of the support teams (sales administration, quotations, engineering).
Let's go back to the previous example. Your team consists of: 6 sales representatives, 3 sales administrators, 2 estimators, 2 design engineers and 1 marketing manager in 2022.
By valuing the salaries and associated costs of the sales and marketing team, plus the portion of salaries of other people in proportion to the time spent on the complete sales effort this time, you spend €1,000,000 over the year.
You have 750 active customers, including those acquired during the year.
The CMC is therefore established at €1333.
By deducting the portion of expenses related to pure acquisition, you can then check what a loyal customer actually costs you.
By deducting the 45 new customers, you have 705 active customers for whom you spent €700,000 over the year. This base of loyal customers has a CMC of €992, which is almost 7 times less than acquiring a new customer.
It is clearly more profitable in this example to retain your customers rather than going to look for new ones.
In any case, you must acquire more new customers than you lose (churn) to guarantee your commercial development, with a constant Customer Lifetime Value (CLV).
In summary
Streamlining sales operations with HIPE will not only save you time but also improve your KPIs.
It is a very powerful tool, implemented within the framework of the 5 pillars of your company: strategy, people, data, processes and tools.
Moreover:
- HIPE vs strategy: a customizable tool at the service of your strategy > modules according to strategy (e-commerce, COFN to accelerate and improve studies, intranet with prices for sales representatives, etc.),
- HIPE vs people: designed for commerce and the management of commercial flows – the solution's primary end-users,
- HIPE vs data: HIPE collects millions of structured data points that must then be analyzed and tracked,
- HIPE vs process: HIPE should be designed in conjunction with your processes. It can either conform to them or challenge them to better serve your strategy.
- HIPE vs tools: HIPE is a tool. And only a tool. It can only serve you if you implement it in line with the other 4 pillars.
Sales operations are complex. But they don't necessarily have to be overwhelming.
Track your progress with a wide range of key performance indicators for sales operations with HIPE: Improve, reinforce, and optimize your sales approach.
Want to know what HIPE can do for you? Contact our experts today.
__________________________
Join us on Tuesday, March 7th at 5:00 PM for our webinar "Sales Ops: Boost your sales strategy" with our two exceptional guests:
- Rogelio Cárdenas Arriola, Revenue Operations Manager at Splio
and
- Lyes Boukeroui, Head of Sales Operations at Uptoo
Two specialists in the field, working in hyper-growth companies where they have had a real impact. We are convinced that their valuable advice will be more than useful to you and that their ultra-optimized sales methodologies will give you a definite competitive advantage if you decide to apply them in your company.
Each month, we try to bring original and relevant content to our industry. Your presence at this webinar means a lot to us: