Sales Potential - using KPI's to measure sales performance
Key Performance Indicators (KPI's) are performance metrics that management use to help make effective decisions to guide a business and enhance performance. Common sales performance metrics include t...
Key Performance Indicators (KPI's) are performance metrics that management use to help make effective decisions to guide a business and enhance performance. Common sales performance metrics include total sales revenues, number of sales, average order value, repeat sales, sales for year-to-date, and so on. These metrics on their own only provide part of the story however, and as a sales or business manager you need to be able to understand what the metrics actually represent and how they are affecting your overall business performance. Looking at KPI's in isolation is not of such great help, but when you are able to look at trends and the relationships between metrics and how these integrate to form a complete picture, you are well on your way to unleashing the power of the metric.
Certain sales metrics provide more information than others, for instance gross sales is quite an accurate and absolute indicator however it does little for providing information on it's own, particularly if you are looking to maximize profitability with a diverse product range. Similarly, it is of little use if you are looking to direct sales efforts by incentivizing sales of certain product lines that provide the greatest contribution to the bottom line. In short, you need to use a range of KPI's to provide a fuller picture of overall sales performance.
When identifying the KPI's you will be using, ensure that they are relevant, can accurately be measured, and collected in a timely fashion. Applying weightings to those metrics that you consider more important to overall sales performance will allow you to produce a balanced scorecard that will provide a realistic picture of what is going on to produce your actual sales results. This is where many sales managers end their use of KPI's and balanced scorecards, simply consigning them as management measures of what has been rather than using these powerful tools for their true purpose, not measurement but control.
Taking an holistic approach to sales performance management will mean that you are able to establish and explain why performance gaps appear, and set realistic targets that can be compared not only internally, but with industry benchmarks. The ability to identify KPI's and implement standard reporting and measurement allows managers to implement individual team member targets that will contribute to the overall sales plan and gain acceptance and responsibility for delivering personal targets. Further, historical data produced by metric reporting on sales performance will assist in deciding where future sales efforts are best placed. The ability to determine which sales territory or customer is likely to produce the best results will assist in reducing wastage and improve sales team effectiveness.
Control over a sales team's efforts can be readily exercised if management understand where performance is coming from and where remedial attention is needed if sales metrics are updated and collated as part of a standardized reporting routine. It is a management maxim, that you cannot measure what you do not measure however, it is also equally important that the metrics you select for inclusion in your reporting are contributing to the picture of sales performance and not clouding the fundamentals with extraneous information.
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