Driving Sales Success: Leading with Metrics, Lagging with Incentives

Building upon our insights from the March 24th post, "Talent, Tech, and Targets," where we explored the interconnectedness of key elements for sales success, today we dive into the crucial role of metrics and incentives in maximizing your sales performance. It's about understanding what drives results and how to reward those results effectively.

Leading Metrics: Guiding the Sales Journey

Leading metrics are predictive indicators of future sales performance. They provide insights into the activities and processes that ultimately lead to closed deals and revenue generation. These metrics are your compass, guiding your sales team toward success.

The specific leading metrics you track will vary depending on your business model and growth objectives. Here are a few examples:

• Tech Startup:

  • Number of new qualified leads generated. This metric focuses on top-of-funnel activity, crucial for early-stage growth.

• Enterprise Software Sales:

  • Number of demos scheduled and completed. This metric measures the effectiveness of your sales presentations and the ability to move prospects through the pipeline.

• Manufacturing Sales:

  • Number of new customer meetings or site visits. This metric tracks the initial engagement and relationship-building efforts.

• Retail Sales:

  • Website traffic, and conversion rates. Measuring the effectiveness of marketing efforts, and the conversion from website visitor to customer.

Crucially, these metrics must have "hard targets." At the end of each month or quarter, you should know whether or not the targets were met. This quantifiable approach ensures accountability and allows for data-driven adjustments. It is also important to publish these results on a "scorecard" for the sales team. This provides transparency, and allows the sales team to see their progress, and also to understand where they are lacking, and where they are exceeding expectations.

Lagging Metrics: Rewarding Results

While leading metrics guide the sales process, lagging metrics measure the actual outcomes. These are the results that ultimately matter to your shareholders: revenue, profit, and market share.

Our view is that sales incentives should be aligned with lagging metrics. Why not pay bonuses based on leading metrics? Because doing so can create perverse incentives.

For example, if you incentivize solely on lead generation, your team may focus more on quantity over quality, resulting in a flood of low-value leads that don't convert. Sales incentives should be closely aligned with what shareholders care about: profits and sales.

Here are some effective lagging metrics for incentives:

• Quarterly or Annual Sales Revenue: A straightforward measure of sales performance.

• Gross Margin Dollars or EBITDA: More sophisticated metrics that account for profitability, crucial in long sales cycles or when sales reps have pricing influence.

• Customer Lifetime Value (CLTV): Important for subscription-based sales. This metric incentivizes salespeople to look for long-term customers.

Furthermore, consider whether individual or team incentives are more appropriate. In many B2B sales environments, teamwork is essential. Think of a fine dining restaurant: the waiter receives the tip, but their success depends on the entire team. Similarly, sales success often relies on collaboration between sales, marketing, and support teams. In these cases, a team-based incentive structure can foster collaboration and shared success.

V17 Advisory: Your Partner in Sales Excellence

At V17 Advisory, we understand the complexities of sales effectiveness. We help businesses design and implement sales strategies that drive sustainable growth. By focusing on the right metrics and incentives, we empower your sales team to achieve their full potential. If you're looking to optimize your sales performance, contact us today for a consultation. We're here to help you turn your sales goals into reality.