Looking for the essential KPIs for a field sales team? Start by analyzing the most important processes in your business and setting up requirements for each of them.
Choosing the right KPIs relies upon a clear understanding of what is really meaningful for a business process. Sales representatives play a significant role in generating revenue for organizations. The main duty of sales reps is to visits to the points of sale to sell products and address emerging issues with customers. The performance of sales representatives is relatively easy to measure, because there are plenty of objective criteria. In this article we’ll talk about the KPIs related to sales. It’s natural that for field reps, whose primary function is to sell, the essential KPIs are one way or another related to sales. Below you’ll find some recommendations that will allow you to develop a set of effective KPIs for your sales team.
Estimate sales volume. Most of the companies tend to assess the long-term success of a sales representative on the basis of the sales numbers he produces. However the sales volume itself doesn't provide a meaningful picture of sales performance, and therefore cannot be regarded as an effective indicator. The number itself doesn’t mean much. To create a KPI, that makes sense, sales volume should be analyzed regarding some other numbers. Sales reps normally get quotas for a certain period of time, based on their territory and sales experience. So, there are the following ways an effective KPI can be created:
- Compare a sales representative's actual performance to his previous performance for the equal time periods (sales growth metrics).
- Compare over time a sales reps’ actual performance to his quotas.
- Compare a sales reps’ actual performance to the performance of his peers.
Analyze the ratio of order and shipping volumes.
An effective KPI can be generated when comparing of order and shipping volumes (for the same sales rep). The shipping volumes are generally lower than the order volumes due to the fact that the particular products can be out of stock, not been found by a person, responsible for loading, or returned by a customer. Having noticed a significant difference between the ordered and shipped products, it's possible to find out the reasons of this event and take corrective actions.
Calculate the run rate. A run rate is another KPI that is used to define the performance of a sales rep in the current period and to adjust sales strategy, if necessary, to achieve the required quota. A run rate is an estimate of how much a sales rep will sell over a period of time, and allow managers to project sales through the end of the period. To calculate run rate for a year you have to divide year-to-date sales by the number of remaining sales periods and add it to your year-to-date sales.
A run rate can be calculated for any period of time. E.g.: by 15 July a sales rep has sold products worth $5000 in 11 business days. His monthly quota is $13000 and there are 12 more business days left in August. Calculating the run rate, ($5000 (actual sales volume for 10 days)/(11 (the number of past days)*23 (the number of business days in August)= $10455), a field team manager can figure out that if the sales rep continues at the same pace till the end of the month, he will not fulfill his quota. Having this knowledge in the middle of the month, a field team manager still has enough time to correct the situation.
Evaluate the number of orders and returns. Estimating the number of orders and returns for each field reps over time and comparing to the same indicators for his peers you’ll be able to identify the most productive reps and to take appropriate measures if there are too many returns for a particular sales rep.
Assess the average size of an order. To get this number, divide total sales volume for a certain period by the number of orders. Sales reps, having average order size less than the others either sell customers a smaller number of products, or sell cheaper products. This KPI allows managers to identify weak points of territory division between field reps.
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