Grow Your Business: Using KPI data to improve your commercial engine

For most manufacturers, your commercial team comprises primarily marketing, sales, and customer service. KPIs should help your team improve the velocity of projects through its three funnel segments.

Note: This article on data democratization is one of the topics covered by a series of nationwide one-day meetings called Made For Manufacturers summits.

The digital transformation has continued to accelerate. Manufacturers have access to vast amounts of data from many sources. The trick is to select the right data, obtain it from the right source, and then democratize it.

Democratizing Data

In the past most data used by manufacturers came from enterprise systems and pertained to finance and production. Executives held most of the data; only a portion of it filtered down to managers and staff. Today’s digital transformation provides more data from more sources, and executives know that the company runs more efficiently when data is accessible to managers and staff.

The digital transformation enables you to create a data strategy that leverages the data you already have on hand, puts it all into one source, and democratizes it. “Data democratization means that the right information is in the hands of the right executive, manager, or employee who enables the right business decision to be made as quickly as possible,” said Paul Ausserer, CEO of Marquis Data.

“Sometimes, creating dashboards and real-time reports is easy. However, usually it is not because the data can be held in many different database locations, and the software holding the data is often not designed to present it. That’s where you have to take a step back, create the ideal strategy, prioritize what information you really need, and then put the new tools available today to work for you.”

The Explosion of Commercial Data

Marketing, sales, and customer service departments have seen a dramatic increase in the capabilities of databases and software programs, the most important being customer relationship Management (CRM) software. A manufacturer’s CRM is the informational hub of the commercial team. It can support the entire buyer's journey. Within the CRM, lead-generating campaigns are launched, new leads are tracked, existing leads are nurtured to sales-ready, sales projects are closed, and customers are cultivated to become loyal customers.

Today buyers expect ultraresponsiveness. Therefore, customer-centric decisions have to be made in real time. CRM programs enable the data collection and democratization necessary to respond quickly to buyer needs.

Key Performance Indicators

Getting the most out of the CRM data requires you to identify your key performance indicators (KPIs). KPIs have been used for decades on the operational side of the business, and as the power of the latest CRM systems has increased, so has the use of KPIs by commercial teams. The power and complexity of these systems, such as Salesforce, HubSpot, Insightly, Zoho, and Dynamics, grows every year.

KPIs should not be a burden. They should help managers and staff improve performance. The collection and dissemination of KPI data must be as easy and resource-light as possible. Don’t track too much. Doing so can reduce your team’s efficiency and morale if they spend too much time entering data rather than serving the marketplace. Always be ready to eliminate useless KPIs;if you find the best course of action is to do nothing when a certain KPI changes, abandon that KPI.

For most manufacturers, your commercial team comprises primarily marketing, sales, and customer service. KPIs should help your team improve the velocity of projects through its three funnel segments.

The rest of this article provides a menu of KPIs to consider for each of the funnel segments. KPIs drive behavior in your organization. If you track the number of quotes delivered by a salesperson, and you push to see that number increased, you might find some salespeople begin quoting too early in the sales cycle, thereby harming the chance for success. Make sure you select KPIs that drive the behavior you require.

KPIs for the Marketing Team

Marketing focuses on building brand, generating leads, and nurturing those leads to sales-ready. Before diving into tracking KPIs, make sure you have calculated these important baseline numbers:

• The average cost per lead. Divide the dollars spent obtaining leads by the number of leads generated. This number will help you gauge the performance of your lead-generation campaigns.
• The cost per lead by source. Lead sources might include internet conversions (visitors fill out the contact form on your website), email campaigns, tradeshows, cold-calling campaigns, direct mail campaigns, webinars, social media conversions, search engine marketing (pay per click, etc.), and print ads. Understanding these numbers helps you focus your limited budget on the best lead-generation ROI. Keep in mind, however, that some activities, such as print advertising, help build brand, which is very valuable but generate few leads.

Common marketing KPIs might include:

• Volume of leads in your marketing funnel segment.
• Velocity of leads in your marketing funnel. How long does it take a lead to be nurtured to the point of being sales-ready?
• Number of new leads generated.
• Number of new subscribers generated.
• Number of sales-ready leads.
• Number of leads that come in sales-ready.
• Cost per lead for each marketing campaign or activity. This value should be weighed against the average cost per lead for all activities.
• Response time to new inquiries.
• New website visitors.
• Website conversions.
• Campaign effectiveness, which will be established as needed based on the campaign. For example, an email campaign might track open rate, click-through rate, conversion rate. For a tradeshow, the KPI might be the number of leads generated and the percentage that are sales-ready.
• Budget. Are you on track for the month or quarter? If not, is the deviation justified?

Of course, there are many more KPIs you could choose to employ based on your go-to-market strategy and structure.

Democratizing data for your marketing team speeds continuous improvement. Your team will learn to recognize when they are starving the top of your commercial funnel with too few leads, or when too few are becoming sales-ready.

KPIs for the Sales Team

The sales team is responsible for closing orders while hitting profit and revenue goals. The toughest part of using data to help the sales team is getting the data in the first place. Today’s CRM software systems can track all kinds of details, from the volume of phone calls, visits, and emails per day to the number of windshield hours per week. However, someone has to input the data, and salespeople, like most of us, prefer not to have every moment of every day tracked and scrutinized. In addition, field salespeople are usually working remotely, making it that much harder for managers to demand data entry.

The sales team and managers must find a balance between time spent entering data and the benefit of the resulting KPI data. Sales staff must see that moving projects through their funnel is in some ways a numbers game, and they need to clearly see the health of their territory sales funnel to be able to perform. Managers must keep the data entry to a minimum, so that the sales staff feels respected, empowered, and has time to sell.

Before working on sales KPIs, calculate the following baseline data:

• Percentage of repeat orders last two years.
• Customer acquisition cost (CAC), found by dividing annual costs of the sales department by the total number of sales. There are many variations of this number. For example, some choose to include marketing costs, and others divide only by new customers, ignoring repeat customers. Select the version that suits your business model and strategy.
• Average revenue per salesperson last two years. This amount often is broken down by product line.

Here are a few of the important KPIs you might consider. KPI tracking frequency can range from hourly to annually.

• Orders and revenue per a specific time period. Often broken down by product line, this is an obvious one.
• Orders and revenue from new customers and from repeat customers.
• 30-day and 90-day rolling average for orders (units and revenue). If the 30-day rolling average is above the 90-day rolling average, your order rate is increasing.
• Year-over-year growth in revenue and orders.
• Average sale value, sometimes called average contract value (ACV). Is it rising or falling?
• Number of projects in the sales funnel segment. The sales funnel might have substages based on probability of closure; if so, track the volume in each substage. This KPI is about sales pipeline volume.
• Conversion rate of projects. How many sales-ready projects, sometimes called qualified sales leads, are converted to closed orders? In addition, how long are projects sitting in each probability stage? These KPIs are about sales pipeline velocity.
• Gross profit margin and discounting.
• Percentage of time spent actively selling. Hard to track as it implies comprehensive data entry.
• Activities (Tracking sales staff activities will drive their behavior. Be careful not to drive them to be inefficient, such as by conducting useless face-to-face visits.)
  • Number of live or video conference demonstrations.
  • Number of face-to-face visits.
  • Number of quotes and the percentage converted to orders – can indicate market share. Lost order reports conducted by an unbiased outside party can provide information for improvement.
  • Number of interactions with lower-priority projects (nurturing).
  • Campaign activity. If you are promoting a certain offering, is the sales staff pushing it according to the company plan?
  • Tools usage – usage of sales tools and marketing collateral.
• Forecasting. This section assumes you use a probability percentage.
• The forecast is updated as required.
• Number of 50 percent, 70 percent, and 90 percent probability projects that close.
• Revenue prediction accuracy.
• Close date accuracy.
• Frequency spikes for close rate. Are most of the orders placed at the end of a period, or are they evenly spaced?
• Equipment list accuracy. Is the equipment purchased as forecast? The more unusual or expensive the product, the more important this KPI will be.
• Budget. Track by department and by territory/salesperson.
• Another set of KPIs can be created if you utilize indirect sales channels.

Democratize the KPIs you choose to use. KPIs are much easier to sustain if they are deemed valuable for both the salesperson and the manager.

KPIs for the Customer Service Team

The customer service team is responsible for maximizing the number of repeat orders and earning customer loyalty while growing revenue and profit. Customer loyalty is defined as when the customer buys all they can from you, is impervious to competition, and recommends you to others. Some of the customer service KPI data will come from the CRM software and some from the enterprise system. Wherever possible, get customer data into the hands of your customer-facing service representatives, so that they can respond instantly to the specific needs of the customer.

Some baseline calculations might be helpful before creating KPIs, such as:

• Lifetime value – What is the average total lifetime value of systems, aftermarket parts, and aftermarket services for a customer group? This number, along with wallet share, often varies across product lines.
• Share of wallet – What is the monthly or yearly amount the average customer would spend with you if they bought all they could from you?
• Service lag time – What is the average time it takes you to serve the average customer who calls in, emails in, or requests a visit by a serviceperson?
• Average order value for the last year.

Common customer service KPIs:

• Tracking customer satisfaction
• Customer retention rate. Often combined with the number of repeat orders.
• Net promoter score (NPS). Rates the likelihood a customer will recommend you to others.
• Transactional satisfaction. Where NPS is an overall performance rating, this KPI refers to the satisfaction a customer feels about a specific transaction. It is often collected via email survey immediately following an interaction.
• On-time delivery.
• Average order value over an appropriate time frame (days, weeks, months)
• Warranty / returns
• Monthly recurring revenue (MRR) and annual recurring revenue (ARR). These KPIs are used by managers to forecast revenue that comes in on a fixed-recurring basis. Service contracts, retainers, and SaaS are examples.
• Response time:
• How to respond to an email.
• How long people are on hold.
• How many interactions occur until their request is satisfied.
• Total time from request to resolution.
• Issues:
• Rate of new issues or problems per day or week.
• Number of active issues or problems.
• Number of issues in versus issues resolved.
• Escalation rate. How many are not immediately satisfied with the first staff member who responds?
• Rate of abandonment. This is when a customer calls with an issue and gives up.
• Employee:
• Number of interactions.
• Number of resolutions.
• Number of escalations.
• Cash flow and budget.

The customer service team interacts with both the enterprise system and CRM,which means more KPIs are possible. Driving service decisions down to your customer-facing teams can greatly enhance customer satisfaction and loyalty.

Today’s CRM systems can track and visualize most, if not all, of these KPIs. Sometimes the data needs to be pulled from multiple sources, in which case you might need help from your IT department or from an outside data expert.

In the end, the KPI must give you useful information about your funnel health that helps you manage and improve your commercial engine. The digital transformation offers more options than ever before to track performance. Democratizing the right data fuels your commercial engine.