How To Monitor The Metrics That Matter: Sales Analytics Guide
Sep 22, 2022
14 min read
Sales analytics is one of the most important aspects of any business. It can help you track your progress, understand your customers, and make better decisions for the future. But what are the key metrics to focus on? And how can you make sure that you're monitoring them correctly? Here we'll walk you through everything you need about sales analytics, from the most important metrics to track to sales analytics software suggestions.
What Is Sales Analytics?
Sales analytics is the process of analyzing data to improve sales performance. Sales analytics can identify trends and patterns, optimize marketing campaigns, and predict future sales. By understanding historical data, businesses can make better decisions about where to allocate resources and how to target potential customers.
Sales analytics generally fall into two categories: descriptive analytics and predictive analytics. Descriptive analytics answer the question "What happened?" by summarizing past data. Predictive analytics answer the question "What will happen?" by using historical data to build models that identify trends and patterns.
Businesses use sales analytics to improve several different outcomes, customer acquisition, customer retention, cross-selling and upselling, lead conversion, and sales productivity. Sales analytics can also be used to identify which products are selling well and which are not and to understand why certain products are not selling.
What Metrics are Worth Tracking in Sales Analytics?
Various metrics can be tracked in sales analytics. However, not all of them are equally valuable. Some metrics may provide little insight into sales performance, while others can be extremely helpful in identifying areas for improvement. When choosing which metrics to track, it is important to consider what information will be most useful in achieving your goals.
Annual Recurring Revenue
As a sales metric, Annual Recurring Revenue (ARR) is a number that provides insight into the health of your business. You can make informed decisions about how to grow your business by tracking ARR:
- ARR is a good predictor of future revenue because recurring revenue is more predictable than one-time sales. When you understand your recurring revenue well, you can make more accurate predictions about your future sales.
- ARR can help you identify up-sell and cross-sell opportunities. By tracking ARR, you can see which products or services generate the most revenue. This information can be used to identify up-sell and cross-sell opportunities.
- ARR can help you track the health of your customer relationships. This metric can help you track customer churn rate. Customer churn rate is the percentage of customers who cancel their subscription or stop using your product or service. By tracking ARR, you can identify trends in customer behavior and take steps to reduce churn.
Average Revenue Per User
Sales teams have long used various measures to assess and predict success. While some of these, like gross sales or the number of new deals, are important, they don't always give the whole picture regarding understanding how effective the team is. This is where the metric of Annual Revenue Per User (ARPU) can be extremely helpful.
ARPU measures the average revenue a company generates from each user over a given period, typically one year. This metric is particularly useful for subscription-based businesses, as it provides insight into how much revenue each customer brings in over time. Additionally, ARPU can be a good predictor of future growth; companies with higher ARPUs tend to grow more rapidly than those with lower ARPUs.
There are a few different ways to calculate ARPU. Still, the most common is to take the total revenue generated over time and divide it by the number of users during that period. For example, if a company generated $1 million in revenue from its 100,000 users last year, its ARPU would be $10.
ARPU can be a valuable metric for sales teams to track for several reasons:
- First, it can help teams identify which products and services are generating the most revenue per user. This information can then be used to inform future sales strategies and priorities.
- Additionally, tracking ARPU can help sales teams assess whether their efforts result in higher-value customers or more numerous but lower-value customers.
- Finally, ARPU can be a useful benchmark for comparing the performance of different sales teams or channels. For example, a company might compare the ARPU of its online sales team to that of its brick-and-mortar stores. If the online team has a significantly higher ARPU, this could indicate that the company should invest more in its online sales efforts.
Quota attainment is a key metric for any business, but it's especially important for sales teams. By understanding how much revenue is being generated against a set target, businesses can identify areas of improvement and ensure they are on track to reach their goals.
Many factors contribute to whether or not a business reaches its quota. Still, some of the most important ones include the number of salespeople working towards the quota, the average deal size, the win rate, and the close rate.
Sales quotas provide a level of clarity and transparency for sales teams. They give everyone a specific number to aim for and help to measure progress along the way. Attaining a quota is essential for any business – it ensures that revenue goals are met and helps to keep the sales team on track.
Win rate is the percentage of sales converted into actual revenue. The higher your win rate, the more successful your sales operation will be.
There are several different ways to calculate the win rate, but the most common method is to take the total number of sales made and divide it by the total number of opportunities (leads) generated. This will give you your overall win rate for the entire sales operation.
Win rate is a metric that should be tracked in sales analytics for several reasons."
- Win rate can be used to identify which products or services are selling well and which ones are not. This information can then be used to make changes to the product mix in order to improve sales.
- Win rate can also be used to identify which salespeople are performing well and which ones need improvement.
- Win rate can also be used as a predictor of future sales performance.
By tracking win rate over time, businesses can better understand whether their sales are increasing, decreasing, or staying the same. This information can then be used to decide how to allocate resources to improve sales.
Sales conversion rate is a metric that quantifies the number of sales or leads generated from a given number of marketing or advertising contacts. It is usually expressed as a percentage and can be used to compare the effectiveness of different marketing strategies or campaigns.
Many factors can affect your sales conversion rate, such as the quality of the leads, the skill of the salesperson, the price of the product, and the overall market conditions. However, tracking sales conversion rate can give you valuable insights into which aspects of your sales process are working well and which could be improved.
There are a few different ways to calculate sales conversion rate, but the most common formula is:
Conversion Rate = Number of Sales / Number of Contacts
For example, if you made 100 sales calls and ten resulted in a sale, your sales conversion rate would be 10%.
If you're not tracking your sales conversion rate, you could miss out on valuable information about your sales process. By understanding which factors are affecting your sales conversion rate, you can make changes to improve your results. If you find that your sales conversion rate is low, there are some things you can do to try to improve it, such as:
- Generating higher-quality leads
- Providing more training for your sales team
- Changing your pricing strategy
- Improving your overall marketing strategy
Sales Cycle Length
Sales cycle length is a metric that measures the time it takes to complete a sale, from initial contact with a potential customer to the final purchase. This metric is important for sales organizations because it can help them track their progress and identify areas they need to improve.
By understanding how long each step of the sales process takes, organizations can make changes to improve their efficiency and close more deals. Additionally, sales cycle length can be used to predict future sales volume, which can help organizations plan for future growth.
Several factors can influence sales cycle length, including the type of product or service being sold, the sale's complexity, and the sales team's experience level. External factors such as the overall economic climate can also impact sales cycle length.
Average Deal Size
Sales teams should track average deal size as a metric to better understand their performance and improve their selling strategies. Average deal size provides valuable insights into which products or services are selling well, what the average order value is, and where sales teams may be able to increase their prices. By understanding these patterns, sales teams can optimize their strategies to close more deals at higher prices.
Average deal size is also a helpful metric for forecasting future sales. If sales teams know the average order value, they can estimate how many deals they need to close to reach their targets. This information can help sales teams manage their pipelines and resources more effectively.
Overall, tracking average deal size is a worthwhile exercise for any sales team that wants to improve its performance. By understanding the average order value and where sales teams can optimize their strategies, they can close more deals and increase their revenues.
Average Profit Margin
This measures the average profit a company makes on each sale. It's a good way to gauge how efficient your sales operation is and whether or not you're making the most of your opportunities.
There are a few things to remember when tracking average profit margin. First, it's important to understand your cost of goods sold (COGS). This includes the cost of materials, labor, and overhead. Once you know your COGS, you can subtract it from your revenue to get your gross profit.
From there, you can calculate your average profit margin by dividing your gross profit by your total revenue. This will give you a percentage that you can use to compare different time periods or against other companies in your industry.
Profit margins can vary widely from industry to industry. For example, companies in the retail sector typically have lower profit margins than companies in the tech sector. Retail companies generally have higher costs associated with inventory and brick-and-mortar store locations.
Customer Lifetime Value (CLTV)
CLTV is a metric that is worth being tracked in sales analytics for a number of reasons. First, it allows sales teams to identify and track their most valuable customers. Second, it helps sales teams optimize their marketing and selling strategies to maximize customer lifetime value. Finally, CLTV provides a way to measure the financial impact of customer churn on a business.
Churn, or the rate at which customers stop doing business with a company, is a major issue for businesses of all types. It can have a significant negative impact on revenue, profitability, and growth. For this reason, it is important for sales teams to track CLTV to identify and prevent churn.
There are several ways to calculate CLTV, but the most common method is to take the average total order amount and multiply it by the average number of purchases per year and the churn rate. This number can then be used to inform marketing and selling strategies. For example, if a company has a high CLTV but a low churn rate, it may want to focus on acquiring new customers. On the other hand, if a company has a low CLTV and a high churn rate, it may want to focus on retaining existing customers.
CLTV is an important metric for sales teams to track because it provides insight into which customers are most valuable and how best to keep them.
Average Selling Price
Regarding sales analytics, one of the most important metrics to track is average selling price (ASP). This metric can give you a good indication of the health of your business and whether or not you are achieving your desired margins.
There are many reasons why ASP is such a valuable metric.
- First, it can help you to identify trends in your pricing. If your ASP is consistently increasing, it could indicate that you need to adjust your prices downwards to remain competitive. On the other hand, if your ASP is decreasing, it could mean that you are losing market share to competitors.
- Second, ASP can also help you to assess the effectiveness of your sales and marketing efforts. If you see that your ASP is increasing, it could indicate that your marketing efforts are working and that you can charge more for your products or services. However, if your ASP is decreasing, it could mean that your sales and marketing efforts need to be improved.
- Third, ASP can also help you monitor your business's profitability. If you see that your ASP is increasing, it could be an indication that your business is becoming more profitable. However, if your ASP is decreasing, it could mean that your business is becoming less profitable.
- Fourth, ASP can also help you assess your pricing strategy's effectiveness. If you see that your ASP is increasing, it could be an indication that your pricing strategy is working and that you are able to charge more for your products or services. However, if your ASP is decreasing, it could mean that your pricing strategy needs to be improved.
What Sales Analytics Software Should Your Business Use?
Sales analytics software provides businesses with valuable insights into their sales data. By analyzing this data, businesses can make better-informed decisions about their sales strategies and operations. There are various sales analytics software products on the market, each with its unique features and benefits. So, how do you choose the right sales analytics software for your business? Here are a few key factors to consider:
- Customizability: Does the software allow you to customize it to fit your specific business needs? Can you track and measure the most important KPIs of your business?
- Ease of use: Is the software easy to use and navigate? Can you generate reports and access data quickly and easily?
- Data visualization: Does the software provide clear and concise data visualizations? Can you easily identify trends and patterns in your data?
- Supported integrations: Does the software integrate with your existing sales and marketing tools? This can make tracking and managing your data easier across all your platforms.
- Native app builder: Does the software include a native app builder? This can be beneficial if you want to create custom reports or dashboards specifically for mobile users.
Choosing the right sales analytics software for your business can be a challenge. However, by considering these factors, you can narrow down your options and find a product that will meet your specific needs. FiveCRM is a great option for businesses looking for a customizable, easy-to-use, and data-driven sales analytics solution.
FiveCRM Can Help
Sales analytics is the process of tracking, measuring, and analyzing sales data to improve future sales performance. You can gain insights that will help you make better business decisions and increase your bottom line by monitoring the right metrics.
If you're looking for a comprehensive guide to sales analytics, contact FiveCRM today. Our experts can help you set up the right system to track the data that matters most to your business.
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