“Information is the oil of the 21st century, and analytics is the combustion engine.” - Peter Sondergaard, Global head of research, Gartner Inc.
A successful business is all about taking the right decisions at the right time.
Previously, business owners were completely relying on their experience and gut feeling to make business decisions. But, now data analysis has removed subjectivity and helped teams take more data-driven decisions.
As per McKinsey, decisions taken based on the data analysis are 19% more profitable.
But, there is no doubt, sales data analysis is a daunting task. You just cannot do it manually. It is only possible through the right sales analytics tools.
Before, we jump into the sales analytical tools, let’s understand the what, why, and how of sales analytics.
What Is Sales Analytics?
Sales analytics is a process of collecting and analyzing sales data to get useful insights for the business. It helps in identifying sales opportunities, optimize sales processes and strategies, streamline sales operations, and predict the future growth of the company.
This data is collected through sales funnels, activities, and customer interactions. It is further segmented into useful business metrics. Using these metrics, sales managers create sales analysis reports and use them further to improve sales revenue.
Sales analytics is of four types, those are:
- Descriptive analytics - It helps track historical sales data such as monthly revenue, number of subscribers, etc. It makes it easy for sales managers to understand the actual situation.
- Diagnostic analytics: It is one step next to the descriptive data where we try to understand why something happened.
- Predictive analytics: Once you understand why something has happened, you can use this information to understand the patterns and trends, and use it to predict.
- Prescriptive analytics: After predicting, now you have to get ready for it by having a good strategy. This is done with prescriptive analytics.
Benefits Of Sales Analytics
When done correctly, sales analytics can bring a lot of benefits to the business. Here is the list of some of them:
Identifying new opportunities
With proper sales analytics, you can track sales data and understand the right target audience and generate more opportunities. Then, once the opportunities are generated and by analyzing multiple parameters, knowing which opportunity you must approach first can also be done through sales metrics. Further, using historical data, you can up-sell and cross-sell the products to the right customers.
Helps strategize sales targets
By analyzing metrics related to sales like monthly sales, win rate, length of sales cycles, conversion rate, etc. you can plan your sales goals and create the perfect sales strategy.
It further helps you predict the sales revenue and plan sales targets for your team accordingly.
Improving sales productivity
Your company’s sales productivity depends on how many deals you close monthly. Longer sales cycles, sales pipeline leakage, salesperson performance, etc. are some of the many reasons behind low sales productivity
Sales analytics gives a full view of sales cycle health and helps you understand what makes a sales cycle lengthy and why the team is unable to close more deals. This helps one increase sales productivity by 20%.
Improving customer acquisition
Sales analytics helps you understand your prospects better and engage them.
- How much time do they spend on your website?
- Which page do they visit more?
- What is the bounce rate?
- What is the click-through rate?
These are some metrics you collect with sales analytics and use to improve customer experience with your brand. It further makes customer acquisition a bit easier.
Better customer retention
Acquiring a new customer is five to seven times more costly than retaining the old one. Even after you acquire a new customer, the duration it takes to actually contribute to profit is also longer.
Another study shows just by increasing the retention rate by 5%, businesses can increase profit by 25% to 95%. It means by increasing the customer's lifetime value, an important sales analytics metric, the business can improve its revenue.
Make right decision
Data gives you insights to understand things better. Having this information helps you take data-driven decisions and modify your sales strategy. You can cut down on what is not working and replicate what works for your business.
It helps in reducing the marketing cost and increasing the ROI.
Now that you know the benefits of sales analytics, let’s discuss the key metrics you must measure for sales analysis.
Key Sales Analytics Metrics
The key performance indicators (KPIs) can vary based on your business and business model. Let’s have a look at some of the important and common sales metrics you must include in your KPIs list.
Monthly sales growth
Monthly sales growth metrics helps you know the increase or decrease in monthly revenue. It helps you understand overall growth in business and allows you to modify your sales process if results are not as expected.
You can calculate quarterly, half-yearly, and yearly sales to see a broader picture.
The formula to calculate monthly sales growth is:
Monthly sales growth = Previous month net sales- Current month net sales / Previous month net sales x 100
Where, Net sales means income generated after subtracting all discounts, returns, and payments.
A sales target, as the name depicts, is a sales goal set by your business to achieve in a particular period of time. It can either be revenue, number of subscriptions, units of product sold, number of customers acquired, etc.
This metric is very important for measuring a company's success, profitability, and revenue. It also shows how well your sales team is performing.
This metric helps you evaluate current sales and compare them with long-term goals.
Sales target = (Sales target of current period / Sales target) X 100
This metric helps sales managers determine the number of sales opportunities created by a sales rep. Through the sales opportunity metric, you can prioritize the opportunities based on their purchase value and closing probability.
Sales per rep
Sales per rep metric measures the revenue generated by sales reps or teams. You can display this metric on the leaderboard to showcase a sales rep of team success. It is a great way to inculcate healthy competition among teams or team members.
It helps you create a baseline for the reps and work as a performance-measuring tool.
Sales by region / contact method / date
Sales analysis by region helps you find out the region where your product is most liked by your customers. It also helps you plan your strategy to tap those geographies better.
Sales by contact method is about the outreach method such as calls, and emails you use to generate sales. It gives you information about which contact method is working best for your business to reach customers.
Sales by date metric gives insight into when the sales occur and helps you evaluate total sales that happen in a particular period. You can use this metric to compare it with sales that happened in the previous period. If there is any month of the year when more sales are happening, or any days when deals are closing more, etc. can be tracked with this metric. Usually, it is tracked quarterly.
Sales per product / Product performance
When you have multiple products and you want to analyze which product is performing better.
You can rely on the product performance metric. It is a very important KPI to understand which company’s product is selling more and contributing to revenue. It helps you rank your products and plan the right sales strategy for them.
When product sales are increasing, it indicates the success of that product. Whereas, lower sales of a product do not mean it is a failure. There can be many reasons for lower sales that you need to study such as pricing, competitors, customers review, etc.
Pipeline velocity metric measures how frequently leads move to the next step of the sales pipeline. There are many factors that can impact pipeline velocity.
With the growth in pipeline velocity, the number of convertible leads increases and ultimately, your revenue too. It also helps you in sales forecasting.
Just by making minor changes in each pipeline phase, you can improve overall pipeline velocity.
You can calculate pipeline velocity using the below formula:
Pipeline velocity = SQL in the pipeline x average deal size x win rate/sales cycle length in days
Lead conversion rate
This metric helps you track the percentage of your website visitors converted into leads. It is top of the funnel metric. It helps you understand how perfectly you are able to attract the right prospects and convert them to leads.
Lead conversion rate = Number of leads in a particular period / Total number of visitors in a particular period
Average purchase value
As the name depicts, this metric helps you measure the average sales value of each deal you close. You can calculate it with the below formula.
Average purchase value = Total revenue / number of orders
If you have sold five units for $400, then the average purchase value would be 400 / 8 = $50
Once you know the average purchase value, you can make a strategy to increase the average value by cross-selling, up-selling, or increasing the price of a product and increasing the total revenue.
Customer acquisition cost (CAC)
Simply put, the customer acquisition cost is nothing but the amount spent by a business to convert prospects into paying customers.
It includes the expenses of all the marketing efforts from physical billboards to online advertising, marketing staff compensation, design cost, etc.
You can calculate CAC by adding all the costs of marketing efforts divided by customers gained.
CAC = Total amount spent on marketing and advertising efforts / new customers gained
Customer lifetime value (LTV)
It is a measure of the average revenue a company can generate from a single paying customer. It helps you measure a customer’s profitability and potential for achieving long-term targets.
It helps you modify your marketing strategy and customer acquisition cost to improve sales, profit, and customer retention.
Customer lifetime value = Customer value x average customer lifespan with the company
Customer value = Average purchase value x average number of purchases
The churn rate helps you track the number of customers who stop buying from your brand. You can measure revenue lost by calculating this metric.
It offers valuable insight into the company's services, pricing, customer satisfaction, etc. A high churn rate means less profit.
Formula to calculate churn rate:
Churn rate = Lost customer / total number of customers at the start of a particular period x 100
How Frequently Should You Measure These Sales Metrics?
There is no definitive number or time limit to measure these metrics. Based on the nature of sales, campaign type, and parameters you are focusing on, this number can vary.
Every sales manager has his/her own understanding of it. Still, there are some common factors that can affect the frequency of sales performance analytics are:
- If you want to go for in-depth analysis, conducting analytics regularly is a must. When you do analysis at regular intervals, you get better results.
- Not every metric needs to be measured daily. Some make sense only when measured on a weekly and monthly basis. So, understanding it is important to save time and money.
How To Perform Sales Analysis?
Now that you understand the basics of sales analysis, we can discuss how you can perform it for your business. Here are the steps you can follow:
Choose the data you want to analyze
Based on what you want to analyze, sales data can be different. Leads, sales activities, quotes, and accounts, are some of the types. Having a clear goal helps you choose which data you should collect. Then, based on the data type, you can further decide on important metrics.
Measurable sales targets
You can collect vast amounts of data. But, you need to choose measurable data. If it is qualitative data, then it will be difficult for you to draw any measurable insights from it.
Measurable insights can be easily compared with past collected data and used to make proper decisions.
Frequency of sales data analysis
Based on the sales data analysis you want to perform, choose the frequency. It can be daily, weekly, monthly or yearly. For example, if you want to check the weekly performance of your sales team, then you need to measure relevant metrics weekly. You can compare it with last week's performance and check the improvement.
Compile sales data
You can compile sales data in two ways- manually or through sales analytics tools.
If you choose manual compilation, you can use a spreadsheet to compile it. Though manual compilation takes more time and changes of errors are more. And if you have too much data to compile, it can become a difficult process.
Modern CRMs are very helpful in data compilation. These are quick and accurate. You can easily compile all kinds of sales data in just minutes
Visualize the sales data
Data visualization tools help you understand the data better. With Excel, you cannot understand what that data exactly means to your business. But, with data visualization methods like graphs, heat maps, histograms, charts, etc., you can understand critical insights easily and make the right decisions.
Analyze the sales data for insights
After data visualization, you can easily compare the results with your sales target. You can use sales targets as a reference and compare your tracked metrics using sales analytics solutions.
Use analytics result
After analysis, you will get a sales analysis report of your marketing campaigns or strategy. You can use this result to modify future sales efforts. Sales data analytics results help you in understanding your prospective customers' behavior better and making sales forecasts.
These were some basic steps of sales analytics. The same steps, you can keep repeating until you start getting the results you want for your business growth.
Sales Analytics Reports
Sales analytics reports are nothing but documents that include all the important sales insights and trends you get after processing the sales data.
Sales reports helps you understand if sales are increasing or decreasing. Using the report, you can improve your sales strategies and save campaign costs and identify the areas that need optimization.
Sales analytics reports helps you understand where your business is going with the following details:
- Actual and projects sales
- Product demand in the market
- Market price assessment
- Customer analysis
- Sales strategies results
There are different types of sales reports such as conversion rates reports, sales cycle length reports, churned customers reports, revenue reports, etc. Sales analytics systems help you with these reports in a few clicks. You can use these reports to present sales growth to stakeholders or teams. It helps in motivating your team and giving a better understanding of sales performance to stakeholders.
Sales Analytics Tools
One of the most important parts of sales analytics is sales analytics tools. There are different types of sales analytics software available in the market:
Customer relationship management (CRM)
CRM helps you manage relationships with your customers. It helps sales organizations track the existing customer base, time sales reps spend on sales calls, automate communication, count how many customers you get, how much revenue you earned, etc. CRM data is helpful in aiding sales management and retaining customers.
As per the LinkedIn survey, 68% of sales representatives find CRM very helpful in closing new deals.
Sales intelligence tools
Sales intelligence tools help in understanding prospects and existing customers better. It collects contextual information about contacts such as buying history, objective, social media, address, contact details, etc. This helps sales managers improve their sales and marketing efforts.
You may need to use multiple tools for sales analysis and data collection, using integration tools you can connect different software to share data between them.
This improves the usability of tools and helps collect data from scattered sources. Having a centralized system helps you understand data better.
Sales analytics tools
These tools help you track, and evaluate the business metrics and improve sales management. It offers a granular view of data collected and helps sales managers understand products’, campaigns’, and businesses’ performance deeply.
You can integrate it with CRMs and get useful insights for predicting sales trends.
These are some important sales analytics solutions that every sales organization must include to understand their sales funnel and target market better.
Sales analysis is a difficult but necessary process for business growth. It helps sales leaders in many ways to optimize the sales process and handle sales operations. From sales performance to sales reps’ performance management, all need sales analytics.
The only way to make this difficult process easy is to choose the right sales analytics solution like Salesken.
Salesken is conversation intelligence software that helps your sales reps in real-time with cues to have engaging conversations. It records sales reps' and customers' calls and provides visibility to the sales reps' performance as well as opportunities available.
With its post-call analytics feature, you can collect insights about prospects' and sales reps' performance and use it for offering better sales training and creating strategies to close the deals.
You can collect revenue insights with Salesken and predict future growth.
To learn more about Salesken, book a demo now!