In a previous post, we talked about the 5 most important KPIs for VP's in 2017. However, we have also talked at length about the important difference between KPIs and metrics. The problem is that most VPs don't know what that difference is and why it matters to improving their bottom line.
In this post we are going to go through the difference between metrics and KPIs and which metrics you should be keeping an eye to make the biggest impact on your bottom line.
What is the difference between a KPI and a metric?
According to Klipfolio, "A Key Performance Indicator (KPI) is a measurable value that demonstrates how effectively a company is achieving key business objectives." A metric, on the other hand, "A metric is a quantifiable measure that is used to track and assess the status of a specific process" and are usually more goal or performance oriented than measures (which is just the raw data.)
In practical, actionable terms KPIs are data applied directly to business objectives. What those objectives (or in this context goals) are depend entirely on the business at hand, and it is up to the VP to set those goals and thresholds.
Metrics, on the other hand, are aligned more with process performance. They are similar to KPI's in that the VP will determine what constitutes good performance or bad, but they are more finite in their scope than KPIs. In other words metrics are the more actionable data points you can track and are incredibly useful in narrowing your scope from the sea of data your CRM collects.
1. Lead Response Time
This sales metric is one of the easiest to track with the data in your current CRM and it is, undoubtedly, the best place to start improving your bottom line. According to Openview, "A lead that is responded to in 5 minutes or less is 21 times more likely to be qualified." On this blog we love starting with this KPI because, according to all best practices available today and our own experience, this is the single easiest thing to change to start seeing an immediate improvement in your bottom line, which is really what Sales VPs are most concerned with.
2. # of Qualified Leads
You should be looking not at how many leads are coming into your funnel, but specifically the number of qualified leads. Why should you be focusing more on qualified leads than total leads? According to a recent study by SAP "Over 2/3 of buyers wait longer to initiate contact with vendors than they did two years ago because they are doing more research themselves." With so many possibilities doing their own education it has never been more difficult to qualify leads, which is why the VP should take it into account.
3. Process Steps
Sales processes have never been more necessary than they are today. A recent study by the TAS group found "companies that follow a well-defined sales process are 33% more likely to be top performers" and "the win rate exceeds 50% for 2/3 of companies that have a defined process in place." But specifically, you should be adjusting your processes and concordant sales metrics where your reps are interacting face to face with customes. According to Avanade "More than 80% of companies have changed at least one business process in the past three years to better interact with customers."
4. # of Activities per Opportunity
This is one of the easiest metrics to track and improving it has one of the largest positive impacts on your bottom line. You simply track the number of activities on an account, setting a reasonable threshold for when that activity gets too low. This is valuable because, according to The Marketing Donut, "80% if sales require 5 follow-up phone calls after the meeting. 44% of salespeople give up after 1 follow-up call." It is therefore worth your while to make sure that your teams are following up and logging activiites on accounts frequently.
5. Time to close
Often times VPs will make the wrong choice when looking at this metric and assume that longer closing times mean that they need a drastic overhaul of their processes to start closing more deals faster. However, a recent study by Robert Clay found that "63% of people requesting information on your company today will not purchase for at least three months - and 20% will take more than 12 months to buy." So when you are looking at this metric keep these statistics in mind and don't make any huge changes until you are sure your organization is out of alignnment.
VPs are always concerned about improving their bottom line, and data can help you do that. This is purely because metrics, by their very nature, are actionable. You can look at the data points in each of these five areas and immediately see the changes you need to make in order to start improving in the most efficient way possible.