Earlier this year, Salesforce released its third “State of Sales” report, a comprehensive assessment of the trends and challenges sales reps and leaders must contend with today and in the future. Comprised of survey data collected from around the globe, the report features snapshots across industries showing what metrics and technologies sales professionals are focused on now, plus what they expect to focus on in coming years.
In this post, we’ll cover the top manufacturing sales KPIs survey respondents expect to see grow over the next two years. For each, we’ll touch on what it is, why it matters to manufacturers and how to measure it. Our hope here is to help sales teams across the industry create forward-looking strategies that emphasize key success drivers like connected data and customer centricity. Because teams that don’t adapt to the changing times — that continue to rely on the same metrics they’ve always used — risk falling behind the competition.
Sound good? Let’s jump in.
Sales KPI #1: Customer lifetime value
Sales executives and managers in the manufacturing space expect to see the use of customer lifetime value grow by 112%. Today, the top reported KPI used by sales teams (71%) is individual quota met.
What it is: As you might guess, customer lifetime value predicts the amount of profit a given customer will bring to your company over the span of time they do business with you. And, as noted by Forbes, this tells you a lot: “It lets you know who’s in it for the long haul, and who’s not; who’s going to invest time, energy and money in your products and services for years to come, and who might just be fairweather.” This information, the article posits, empowers you to allocate resources where they’ll get the best return.
Why it’s important for manufacturers: In a paper published by the International Institute of Informatics and Systemics, researchers from Tokyo University of Science point out that B2B business models tend to feature fewer customers, but higher unit prices and customer repeat rates — all factors that emphasize the importance of tracking and maximizing customer lifetime value.
However, it’s some of the common problems that result from this business model that make customer lifetime value an absolutely essential metric. As the authors of the paper suggest, many manufacturing sub-verticals supply their products to a single major company. This tends to give that company significant power, such that when they seek product discounts, suppliers don’t have much choice but to oblige. In turn, this causes increased competitiveness among those suppliers. Landing new customers becomes much harder. And winding up with a single non-profitable customer? That can prove ruinous.
Manufacturers need to be able to calculate lifetime value accurately when signing a new customer involves such high stakes.
How to calculate it: Some sources will offer formulas and calculators to help you determine a customer’s lifetime value, and they’re worth a try. However, many companies struggle to derive accurate numbers. According to one survey, in fact, only 42% of companies are able to measure customer lifetime value.
Why? According to the team that conducted the survey, it’s often the result of siloed teams and a lack of integrated data. This points to the need for a unified business platform that gives you a 360-degree view of your customers. As the author of the Forbes article mentioned earlier states,
“The opportunity to expand what you know about [your customers] and use that data to create a significantly better experience for them, and win more of their long-term business, would be a missed opportunity that could significantly impact your business.”
Of course, there are also those who look at customer lifetime data a little differently. According to Michael Schrage, author of “Who Do You Want Your Customer to Become?,” “making customers better makes better customers. While delighting customers and meeting their needs remain important, they’re not enough for a lifetime.” Consequently, Shrage argues that “serious customer lifetime value metrics should measure how effectively innovation investment increases customer health and wealth.”
Whether you decide to measure customer lifetime value in a traditional or non-traditional way, though, the most important thing is to make sure your metrics drive the kind of decision making that supports long-term business health.
Sales KPI #2: Pipeline accuracy
Sales executives and managers in the manufacturing space expect to see the use of pipeline accuracy grow by 111%. Today, the second-highest reported KPI used by sales teams (69%) is team quota met.
What it is: There are a thousand definitions for “sales pipeline” out there, but I like this one from HubSpot: “A sales pipeline encompasses every stage of your sales process. An opportunity moves from stage to stage of your pipeline based on concrete actions, which is usually represented visually in your CRM.”
Pipeline accuracy is important, then, because it helps sales reps keep track of their open opportunities and forecast which ones are “likely to close in a given time period.”
Why it’s important for manufacturers: In a post on manufacturing.net, Andy Schoka hits the nail on the head when it comes to the importance of pipeline accuracy in the manufacturing space: “Sales forecasting is a tricky business. Overestimate demand and you end up with excess inventory sitting around and tying up capital. Underestimate demand and you run out of stock — and run the risk that customers will go to competitors.” In other words, manufacturers have an extra burden compared to other industries: The high cost of producing tangible goods.
A firm offering subscription-based Saas products, for instance, isn’t taking on the same kind of risk and can probably afford a larger margin for error when it comes to their pipeline. While all companies want their forecasting to be “just right,” manufacturers need it to be so.
How do you achieve that perfection? Again, it comes down to breaking your data free from silos. As Schoka writes, “In most companies, the demand and supply sides of the business are typically handled separately, operating different processes and systems which often require manual intervention to bridge the gap.” Instead, the front and back office should collaborate to “effectively align forecasts to sales and demand planning.”
How to measure it: To measure your pipeline accuracy, you can weigh monthly or quarterly forecasts — number of closed/won opportunities, revenue, etc. — against actuals. Then, once you’ve got a baseline, you can take action to improve. For the most part, that means getting better data. According to HubSpot, “Periodically cleaning up your pipeline is key if you want an accurate sales forecast. That’s because most forecasts use an opportunity’s stage to determine how likely it is to close — not its age.”
The main thing we recommend you do to clean up your pipeline? Periodically assess all opportunities that have been open for a predetermined amount of time. Have some of them actually closed, and the record simply needs to be converted to closed/won or closed/lost? That’s easy. On the other hand, if you haven’t heard from your contact in a while, make a plan to follow up. The important thing is to make sure you’re not leaving opportunities in limbo for no reason, because that will negatively affect your reporting. And for manufacturers, bad reporting can get costly.
Sales KPI #3: Net Promoter Score
Sales executives and managers in the manufacturing space expect to see the use of Net Promoter Score grow by 94%. Today, the third-highest reported KPI used by sales teams (63%) is customer satisfaction.
What it is: The idea behind the Net Promoter Score is pretty simple. First, you ask your customers a single question: “How likely is it that you would recommend [blank] to a friend or colleague?” Customers respond using a 0-10 scale, and the “blank” can represent anything or anyone you want to collect feedback on. For our purposes, a sales rep or sales team.
After that, you categorize and group your responses. 9s and 10s are promoters, 7s and 8s are passives, and everybody else is a detractor. To calculate your NPS, subtract the percentage of detractors from the percentage of promoters. Your score will range from -100 (all detractors) to 100 (all promoters).
The most important thing to note about the NPS is that it isn’t designed to measure customer satisfaction. Customer satisfaction is great, but it doesn’t necessarily lead to new business. Customer referrals, on the other hand, can. And the NPS is an effective way to gauge how likely you are to earn them.
Why it’s important to manufacturers: According to a survey of B2B executives conducted by Bain & Company, “68% of respondents said customers are less loyal than they used to be. B2B companies thus need to go beyond mere satisfaction to earn customers’ enthusiasm and loyalty so that they can improve the business’ economics.”
The numbers back that up: Per the same survey report, “B2B customers who are ‘promoters’ have an average lifetime value typically three to eight times that of ‘detractors,’ depending on segment and industry.”
How to measure it: Since I already covered how to measure a Net Promoter Score in my explanation above, I’ll use this space to suggest ways for sales reps to improve their scores. Based on research cited by Retently, there are five factors that influence whether or not customers will recommend (or “promote,” to use the official lingo) a sales rep. According to the article, reps must be:
- Highly knowledgeable about the customer’s business
- Well-versed in the customer’s business needs
- Able to explain the value of what they’re selling
- Transparent and trustworthy
- Act in a professional manner
Good news is, none of this should come as a surprise. Long gone are the days when pushy, manipulative salespeople find success, so you’ve probably already been playing the role of a trusted partner. If not, well… it’s definitely time to start.
Running through these KPIs are two key themes: The importance of connected data and the value of a customer-centric business model. Which makes plenty of sense. At Torrent, we believe that if you want to grow your business, it’s absolutely essential that you deliver a world-class customer experience throughout the buying cycle. We also believe that to do that effectively, you need an integrated technology stack. It’s why we do what we do.
If you’ve got questions about how your manufacturing company can implement these metrics into your sales process, drop us a line. We’d love to help.