Collecting Sales Metrics & Measuring the Right Things

“What gets measured gets managed.”

– Peter Drucker, management consultant and author

There are 2 main category of metrics that you should pay attention to in sales:

1. Customer Metrics

Conversion rate, sales cycle, customer acquisition cost (CAC), lifetime value (LTV), churn etc. Clarity on these metrics helps you with further improving your messaging and activities to capture more customers, more quickly, and with fewer resources.

2. Representative Metrics/Key Performance Indicators (KPIs)

Sales target achievement, number of deals closed, an individual’s conversion rate, activity metrics (e.g. number of calls made, emails sent, meetings booked, etc.), customer satisfaction, etc. These metrics are necessary to effectively coach and support your sales reps.

I won’t go into the above extensively since there is already an abundance of information available online. I will instead focus more on how to effectively use your data. But before you jump  into trying to capture as much data as possible, remember:

“Data is like garbage. You’d better know what you are going to do with it before you collect it.” 

– Mark Twain

Data is only a part of the picture

If you ask, “How did you hear about us?” to try to better understand what led your prospects to you (a.k.a. source), the answer may not paint the full picture.

They may have originally heard your ad on the radio, seen a few Facebook ads, then searched for a solution to their problem on Google, and so happened to select you because they were already familiar with your brand. They may just say “Google” due to the recency effect – the tendency for people to recall items or information that they encountered most recently more easily and accurately than information encountered earlier. Or it may be that they deflected their response to the most obvious answer because they honestly don’t recall where they first heard about you.

Data is important, but make peace knowing that it won’t always be 100% accurate because you’re dealing with messy humans. Worst case, with bots, and predictability more so in the coming future with AI, a lot of what you capture may not even be human. It’s becoming increasingly difficult to distinguish the humans from bots in ad clicks, web traffic, and even social media engagement.

Always begin your data strategy with your goal and work back from there: What are you trying to improve? What do you need to learn in order to improve it? What data can you capture to help you better understand what you’re trying to learn or give you an indication if you’re trending in the right direction?

Turn data collection into customer value

Say you run a restaurant and you’re trying to learn more about your customers: How many times does a customer return? How frequently? How much do they typically spend on a meal or drinks? What’s their average order size?

You could obtain this information by collecting their phone number or email. This would allow you to associate an individual with their behaviors during each visit and even potentially market promotions or specials to them.

To capture it, you may decide to train your servers to request a customer’s contact information before seating them. Don’t penalize them for failing to capture this information. Perhaps customers are not willing to readily disclose their contact information without context, as they do not want to receive spam. Instead, create an opportunity to improve the customer experience and add value with this information exchange. 

This can be done if you make the benefit of the exchange clear. Perhaps you want their phone number so you can notify them when their table is ready, or they can unlock and track points with their phone number to exchange for discounts or free meals.

Some things take time

Data is often captured in short windows. However, some campaigns may take a while to bear fruit. I don’t recall the specifics, but I heard an example along the lines of:

There was a restaurant (in Yukon, if I’m not mistaken) that was renowned as a high-end establishment, the kind you would take your partner for a fancy date night. In an attempt to grow revenue, they decided to adjust their marketing and branding to better capture casual diners.

In the short term, as they started to pull in both casual diners and fine diners, you could call their campaign a success. However, over time, this shift in positioning ended up sticking more than they anticipated and their establishment became better known as a location for casual dining. This eventually drove down average order value, and they even lost some of their loyal fine dining clientele, ultimately leading to a bigger loss in revenue.

It’s hard to predict the long-term outcome of a campaign like this, but before you jump the gun on defining success metrics, always ensure that 

1. Your activities align with your organization’s values.

And 

2. That you not only measure the short-term results but also continue to analyze the long-term trends.

Many of us harbor common misconceptions and unconscious limitations regarding what we choose to measure and set as goals. Most goals, especially business goals, are set on Monthly, Quarterly, and Yearly targets. Paraphrasing Simon’s talk in this video:

These are unnatural limits because of pre-defined reporting, fiscal, and taxation cycles. We place similar limitations as well when we set personal goals – 30-day diets, new year resolutions, etc. While deadlines can be useful for driving urgency and challenging ourselves, we have to also remember that life is a continuum, it’s not constrained by months or years. Let’s look at an example of 2 different sales teams working towards hitting their monthly revenue goals:

Team A:

• Morale is up and down. If the month started slow and they feel like they won’t hit the target, they are not motivated.
• Poor retention, people are quitting all the time.
• There is no trust amongst the team as people compete with each other to steal sales.
• Toxic leadership.

Team B: 

• Slow and steady growth, trending towards hitting the goal.
• Good and strong team.
• Good morale, capable leader.

We set a monthly revenue target and incentivize both teams to hit that target in order to obtain their bonus. Team A aggressively closes customers, scrambles with last minute discounts, and meets the target. Team B falls slightly shy of the target but displays all the right behaviors. If we incentivize Team A with the bonus, this is the message we’re sending: “We don’t care how you get there. We don’t care if you step on your co-workers. We don’t care if you are unethical. If you hit your number, you’ll do well in our organization.”

Of course, this is just a theoretical example. Team B could also be highly motivated by the bonus and scrambled to meet it. But the point is: HOW you get there matters just as much, if not more, than WHEN you get there.

As Simon says:

“When you have an infinite mindset, absolutely, have the goals, but the trend matters more. How you get there matters as much, if not more, and we pay attention to that. So even if I hit my fitness goal, I’m eating better, I’m sleeping better, my relationships are great, I’m going to the gym. Yes, I miss my goal, but I know if I just keep going, I’ll hit it. I’m getting healthier and healthier. I just got the timing wrong. 

This is what we need to build into business: that infinite mindset. Yes, have the goals; yes, have the ambitions; yes, have the annual targets. If we miss them, as long as we’re doing the right things, we have the right lifestyle to take us there. That’s a much healthier way to live a life and a much healthier way to build an organization.”

Avoid accidentally encouraging bad behavior by incorrectly incentivizing the achievement of metrics without accounting for how we achieve the desired results and the long-term trends. Recognize and reward the appropriate behaviors that contribute positively to your objectives.