Investing in a CRM solution will help grow revenues, cut operating costs, and boost IT efficiencies, but many businesses need help quantifying the ROI of implementing CRM software. Of the dozens of insights a CRM program can provide, what are the most valuable to small and medium sized businesses? To some extent that is a personal choice question since not all metrics fit every industry or every company.
There are, however, some numbers that are key to the success of all businesses. Since the success of every business is founded on its customers, these universal metrics focus on the health and growth of the company in terms of sales and customer retention.
Everyone from the CEO to each individual salesperson must have a solid grasp of what it takes to find and acquire a new customer, the value of that customer, and success in retaining that customer. Being able to track and quantify these has been a difficult task—until now. With the advent of CRM programs small and medium size companies now have a tool that can make acquiring and maintaining these numbers a reality.
1. Number of Sales Calls Made
The foundation of sales is the sales call, no matter whether the call was initiated by the prospect (an incoming call) or by the seller (an outbound call). Each individual seller needs to know how many sales calls they are making and, of course, management needs to know whom many gross calls are being made. This most basic metric will be the basis for additional metrics – like how to calculate overall productivity gains from your CRM.
2. Number of Sales Calls per Sale
Simply knowing the number of sales calls made is of little use in and of itself. Certainly that metric can give an indication of how much time a seller is devoting to getting in contact with prospects, but by itself it doesn’t indicate the value of those contacts. Consequently it needs to be measured in terms of how many of those sales calls are required to be made in order to acquire a new customer. Once the number of sales calls must be made in order to acquire a new customer is known management and sellers have a tool they can use to predict what will happen in the future—how much new business can be reasonably expected to be produced and what it will take to produce it.
3. Sales Cycle Duration
How long does it take from initial contact to closing a sale? Unless the seller and management know how long the sales cycle is they will have a very difficult time projecting future sales and revenue. Every company has a unique sales cycle. Some companies operate on a one or two time close cycle while others may have a sales cycle that takes months or even years. Without knowing how long it takes to find, connect with and close a new customer it is virtually impossible to make time sensitive decisions. With the advent of CRM programs, this metric, which at one time was difficult to track, can now be tracked for every customer, giving management and sellers the information needed to make decisions and quickly to recognize new purchasing and sales patterns.
4. Customer Value
Knowing what it takes to acquire a new customer is important but by itself doesn’t provide management with enough information to make informed decisions regarding logistics, production, personnel, and a myriad of other issues. In order to turn the above sales metrics into usable information management needs to know what a new customer is worth—what that customer’s value is. There are, in fact, two Customer Value metrics: the value of the individual customer and the value of the average customer.
For the individual seller knowing the value each customer brings will help prioritize their time, as well as help guide decisions about providing incentives or discounts to the customer. From the bigger picture perspective, management needs to know in addition what the value of the average new customer is in order to calculate everything from customer acquisition costs to anticipating borrowing needs to making short and long-term profit projections.
5. Cross-selling and Up-selling
Are sellers successful in cross-selling or up-selling existing customers? Is the company producing the right accessories or additional lines that are attracting customers to purchase more of the company’s products or services? The most cost effective sales are those to existing customers, either additional purchases of what they have bought or purchases of additional products and services the company offers. It is critical that both the company and each individual seller know whether or not they are successful cross-selling and/or up-selling existing customers.
6. Client Retention
Finding, connecting with, and selling a new customer is a costly, time consuming task. The process of generating a new customer is expensive. In order for companies to grow that must add new customers to their existing customer base—meaning they must retain as many of their existing customers as possible. Knowing how many customers are being retained is critical to growing a business, but equally important is to know which customers are retained as over time patterns can be discerned to help understand why some customers stay and others leave.
Many of the sellers and companies using a CRM program have yet to capitalize on the benefits of the programs by not concentrating on mining them for the key metrics the program puts at their fingertips. Although CRM software can produce dozens of metrics, these six are absolutely critical if you want to grow your company—or your individual sales.
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