The Relevance of measuring key Performances indicators concerning sales of SME
If you cannot measure it, you cannot control it. KPI are key performances indicator and are used to measure or to demonstrate the effectiveness of an activity such as sales, marketing campaign…, which represent the key business objectives.
KPI must be well defined and understood for the sale team to work toward achieving those performances.
It is important to make the difference between vanity and KPI. Vanity is basically when the performances is judged based on actions that did not convert into sale. In a marketing campaign that is done online for instance, the number of visit on the website can be a misleading metric because even if it is high, it does not reflect on the interest of the audience or even the sales that will be generated from the marketing campaign.
On the other hands KPI, take into account not only the actions transformed into sales but also those, which did not. If we take the similar example for the marketing campaign, KPI should look first at the number of people that visited the website, the number of people that show interest, the number of people that engage in negotiation for sale and finally the number of secured sales.
The sales can then be represented as a percentage of the number of visit and a strategy can be put in place either to improve the sale through the marketing campaign or to find out about the rejection of the audience.
In the sales environment, KPI is very important as it allow to monitor the performances of the sales team to reach the company key objectives. Let look at few KPI to take into account by the sales team:
- Sales growth
This is probably the most important KPI as it reflect on the monthly basis how is the sales behaving. A decrease of sale should be a sign of worry, which should trigger a strategic plan to recover the sales; on the other hand, an increase of sales should reflect that the sale strategy is effective.
- Monthly sales target
Organisation usually set production or sale target to be reached. It is based on this target, that the sales team put up a strategy and effort to achieve those targets.
- Lead to sale %
This KPI measure how many lead for sale actually turn into an effective sale. This is very important because if the sale is small compare to the lead, the underlying cause for rejection must be establish and action been taken accordingly to increase the sales.
Conclusion
Operating without KPI would be like walking without vision, KPI give us an indication on how we are performing and based on those results, corrective action can be taken to reach the company key objectives. As opposed to Vanity as sale metrics, KPI also looks at the negative results to assess the underlying cause for correction.
