What is a KPI and Why Should Your Sales Team Care

Dec 10, 2017
4 min read
Measuring the right metrics gives sales leaders the data they need to plan effectively. Here's everything you need to know about KPIs and why you should care.

Key performance indicators are also known as KPIs. They are used to determine the effectiveness of processes that are implemented to achieve business objectives. In fact, they are linked directly to a company's strategic goals and help managers to figure out how far along they are towards meeting specific goals.

In terms of sales, a KPI can be a metric such as average deal size, deal pipeline size, new revenue, new customer rate and more. To determine if a deal needs to be modified in one form or another to meet weekly, monthly and/or yearly quotas, sales managers must understand average deal size.

For example, you might have a weekly quota of $10,000 and you have 100 deals per week worth $100 each. Working on 100 different deals takes a lot of time. To save time, you might want to increase the deal size and decrease the number of deals. Yet, the only way to figure out the average deal size is through the use of KPIs.

KPIs Save Money and Decreases Complexity

Sales management can be challenging. Even when deals are closing, they can take longer than desired. Sales is a numbers game, but there is a time to stop talking as much and to start closing deals. Plus, there is a heightened pressure to bring in more revenue--this is especially true of changing market dynamics. Yet, it is difficult to predict future sales when you don't have a clear picture of your business. Why should your sales team care?

Well, they are also under pressure to meet their targets. Oftentimes, they are left to that task without any support. It is the height of complexity to have to go through various spreadsheets and lists when figuring out a pipeline. The chaos only heightens confusion and leads to dire results. Yet, with KPIs, managers and sales teams can manage the indicators in order to adjust plans as needed to improve targets.

KPIs Define Expectations

When it comes to your sales team, they should care about KPIs because it sets expectations. In that sense, it also improves communication since everyone is on the same page with goals and metrics. Salespeople want to make money. As a result, they will focus on activities they believe will give them the biggest paychecks. Yet, that might not always align with the goals of the company.

To illustrate, they might focus on selling product X because product X nets the most commission and they know how to sell it. Yet, your company just came out with Product Y and the goal is to sell a specific number of Product Y before the end of the year. So, one KPI might be to track sales of Product Y with incentives for sales reps who meet quota.

Then, during sales meetings, reps can share success stories around selling Product Y to help other reps become more comfortable talking about it with customers and sales reps. Without a defining KPI, then the sales reps might only focus on selling Product X. You can also use commission tracking software to show them how reaching the company's goals helps to boost their paychecks.

KPIs Lead to Consistency

Your sales reps will do what they need to do to keep their jobs. Even with sales training, every rep will have their own personal style around closing deals. Some may close several deals at the beginning of each month and taper off towards the end.

On the other hand, there will be some reps who wait until the end of the month to close deals. Yet, as a sales manager, you want deals every week. So, if your sales reps see that you track deals weekly—and tie compensation to performance around closing deals on a weekly basis—then, they will become much more motivated to do just that. In fact, you can learn more about creating the right compensation plans here.

KPIs Increase Efficiency

Sales reps can be busy all day long with various activities from making phone calls to giving presentations to entering data into their CRM systems to discussing strategies with other team members. There are a host of activities to keep a sales rep busy.

Nonetheless, staying busy can be confused with actual productivity. If they aren't focused on the right activities, then time will be wasted. By tracking KPIs, you can ensure that your sales reps are working on the right activities. Here are a few KPIs that help sales teams reach peak performance:

  • Rates of client acquisition
  • New contact rate
  • Sales funnel win rate
  • Revenue per dial

KPIs Normalize Coaching

It's difficult to evaluate overall performance without a key measurement and standard KPIs. The last thing you should do is to judge sales reps based on their personality. KPIs help to make coaching more predictable. As a sales manager, you know where sales reps need help and the sales reps can see the data that conveys the areas that need improvement.

It is black and white and matter of fact. Sales performance management is key to your team's success. Coaching would be a waste of time if you had to figure out where your guidance would be most beneficial. All that you need are performance measurements related to KPIs.

KPIs Improve Learning

When you measure targets with KPIs, you create a learning environment within your department. The data reported, related to KPIs, can foster important conversations around how to succeed. Plus, you can always modify KPIs based on results or if employees feel they are unrealistic.

Final Thoughts

KPIs are important for conveying a picture of the overall performance of your sales reps. In a highly competitive, global market, knowledge is power. KPIs can provide real-time data that gives you the right information for making adjustments to your sales strategy as needed. Plus, KPIs increase accountability as KPIs provide quantifiable proof of performance. In the end, KPIs help to improve your business results and your bottom line.

  • Analytics and Technology
  • Sales Performance Management
  • Sales Planning
Ronald Sierra
Ronald Sierra
Content Writer

Ron Sierra is a Content Writer at Xactly. He earned a literature degree from UCSC and specializes in creating value-driven content for professionals in everything from construction to tech to sales & finance.