What is sales effectiveness? Metrics and improvement strategies

You’ve invested time, training and resources into your sales team so they can do their job well and close more deals. Measuring your reps’ sales effectiveness is the best way to determine if your investment is paying off.

In this article, you’ll learn what sales effectiveness is, the best metrics for tracking performance and how to train your team to reach their full potential.

What is sales effectiveness?

Sales effectiveness is a method of measuring how effective your sales organization is at converting prospects, guiding buyers through the sales journey and closing deals.

Measuring effectiveness is important because it gives sales managers and business leaders an idea of how the company is growing and how to improve. You can track sales effectiveness via benchmarks like:

• Average deal size

• Conversion rate

• Sales cycle length

• Monthly recurring revenue (MRR)

The metrics you choose will vary based on your growth priorities. No single approach will work for everyone. Select metrics based on your current performance and sales forecast to understand the best way to achieve your objectives.

Rather than tracking and optimizing every metric, focus on those that align with your goals. For example, if you’re trying to expand into new markets, track lead generation and close rates in those locations. You can also measure sales activity related to target markets (e.g., the number of emails sent to French prospects).

How to increase sales productivity by improving efficiency and effectiveness

Sales efficiency and effectiveness are closely related but not interchangeable.

Sales efficiency measures how long it takes to complete tasks and the number of resources spent on each deal. The fewer resources spent, the more efficient your sales system is. Maximum efficiency would be executing activity quickly while spending minimal resources to generate revenue.

Sales effectiveness measures the results of those tasks. Of the many contacts a sales rep reaches during their day, how many convert? How many move to the next stage of the funnel or convert into new customers?

Combine the two and you have sales productivity, defined as the ratio of revenue generated (or deals closed) to activity conducted in order to generate it.

Sales performance is more than a simple input-output equation. Each metric is a separate case with an individual cost-benefit analysis.

Not measuring sales effectiveness, sales efficiency and sales productivity is like flying blind. Together they provide a holistic picture of how productive your sales team is.

Important sales effectiveness metrics

Every business must turn a profit, but there are multiple ways to measure how effective your sales team is at reaching that goal.

To measure sales effectiveness accurately, a company needs to define the key performance indicators (KPIs) that matter.

Average deal size

The average dollar amount of each new deal closed by your reps. A higher rate of closed deals means they’re using effective sales tactics.

Calculate average deal size with this formula:

Say a company closed 10 deals. Five of them were $20,000 each and the other five were $50,000 each. The average deal size would be ($100,000 + $250,000) / 10 = $35,000.

Reps need to focus on the right goals, especially when it comes to revenue. If your company is trying to expand into a certain industry, the majority of its deals should be from that industry.

Conversion rate

Conversion rates not only indicate the effectiveness of your team’s sales tactics but also the quality of the leads they acquire. Of the many prospects your reps engage, this is how many convert into paying customers.

Use this formula to calculate conversion rate:

So if you had 100 interactions and five of them converted, your conversion rate would be 5%.

Since marketing traditionally generates the leads that sales teams close, a dip in conversion rates might indicate a lack of qualification. It could also indicate your sales and marketing teams are out of alignment and should clarify their mutual goals.

Sales cycle length

The sales cycle is the average time a sales rep needs to convert a lead into a paying customer. What constitutes an effective sales cycle will vary depending on the complexity and cost of your solution.

B2B sales cycles tend to be long, between one and three months, according to Databox.

Here’s how to calculate sales cycle length:

Let’s say you closed five deals in a quarter. The length of each was:

• Deal 1: 30 days
• Deal 2: 40 days
• Deal 3: 50 days
• Deal 4: 60 days
• Deal 5: 70 days

The sales cycle length would be (30+40+50+60+70)/5 = 250/5 = 50 days

Monthly recurring revenue (MRR)

Monthly recurring revenue, or MRR, shows the amount of income your business expects to earn from subscription accounts in a single month. You can also calculate annual recurring revenue (ARR) to measure predictable income over 12 months.

As methods for measuring sales effectiveness, MRR and ARR best suit software-as-a-service (SaaS) companies and others with subscription models. When these metrics increase, it typically means your team is converting customers, keeping them happy and potentially even upselling or cross-selling.

One simple equation you can use to calculate MRR is:

For example, if your software company had 1,000 subscribers paying an average of $50 per month, your MRR would be $50,000.

Substitute monthly revenue for annual revenue to calculate ARR.

Sales adoption

Sales adoption is the rate at which people purchase a product or service from their first touchpoint with your brand. Adoption is effective for companies who want to measure how responsive their audience is to a new product or service.

Here’s the sales adoption formula:

If you added 100 new users this month and your total user base is 1,000, your sales adoption would be (100/1,000) x 100 = 10%.

Quota attainment

A measurement of whether a rep met their sales targets. You can calculate quota attainment annually, quarterly or monthly using this formula:

If a rep’s annual sales goal was $100,000 and they made $80,000, their quota attainment would be (100,000/80,000) x 100 = 80%.

If reps are exceeding expectations regularly, that means they’re performing well and you can increase their targets. If they aren’t meeting their quotas, it might be time to reassess their targets or identify sticking points for further training.

Average win rate

The average win rate is how many deals end in a sale and the amount of value those sales bring to the business.

The win rate formula is:

If a rep wins 45 opportunities out of 100 total, their win rate would be 45%.

A high win rate doesn’t necessarily mean a high dollar amount per deal.

High-value clients are great, but good sales reps know they must nurture several deals to meet quota.

Return on ad spend (ROAS)

Comparing the cost of your advertising campaigns to the revenue you bring in from ads gets you this metric:

Let’s say you invest $10,000 into an ad campaign and attribute $20,000 in revenue. Your ROAS would be (20,000/10,000) x 100 = 200%.

A high ROAS shows your marketing is effective. A low ROAS indicates you should reallocate ad dollars or further optimize creative, targeting or messaging.

How to measure sales effectiveness

Identifying the right metrics is only half the battle when assessing sales effectiveness. Here’s how to get an accurate read so you can improve problem areas and start hitting targets faster.

Monitor sales activities and engagement

See how your reps interact with leads and ensure their tactics fit your target audience’s communication preferences.

A customer relationship management (CRM) tool helps you keep track of how customers engage with your company. For example, if a sales rep determines one of their leads is more responsive to phone calls than email messages, they can make a note in the CRM system, so all future communication happens through that channel.

You also need to see how engaged sales reps are with their work since a lack of engagement will likely damage productivity and effectiveness.

A project management tool, or even a CRM with task management features, will show when tasks are overdue and which team members are falling behind. If the same people show up often, it could be a sign they’re not fully engaged with the work. Discuss any issues openly to rule out other possibilities, like poor workload management.

Fixing engagement issues is a no-brainer because it will help your team hit sales quotas more often, which supports your company’s growth.

According to Pipedrive’s 2022–23 State Of Sales Report, 14% of businesses that hit sales quotas regularly grew revenue year-over-year. Only 2% of companies that hit their sales quota regularly saw less revenue growth.

I usually hit my sales targets and my company...

Get in front of engagement issues as early as possible by carrying out regular performance reviews. Meetings allow you and your employees to talk through minor concerns before they grow into bigger problems that impact sales effectiveness.

Review your sales pipeline

Use a CRM to map your sales pipeline so you can see where leads make key decisions in the buying journey. When you identify bottlenecks and common drop-off points , you can address inefficiencies in your sales strategy.

For example, if you spot a pattern of leads spending a lot of time in the “proposal” stage before going cold, it’s a sign to revisit your proposal document and ensure it contains the information leads need to make a confident buying decision.

In Pipedrive, you can create custom pipeline stages for the clearest, most accurate view of your sales process, however simple or complex it is. Pipedrive’s pipeline management view looks like this.

If you can’t pinpoint the reason for leads losing interest, request feedback. Identify a buyer who’s recently dropped off and, without applying any pressure to restart the deal, ask what you and your team could’ve done better. The insights you gain could help you patch costly holes in the sales process.

While a CRM will give you the clearest view, you can also map your pipeline in a spreadsheet if you’re not ready to commit to software. Speed up the process with help from a sales pipeline template.

Track wins and losses

Your win/loss ratio shows who is over- and underperforming. From there, you can figure out why those bottlenecks are happening. If you discover a systemwide issue, you can train people in the areas they’re struggling with so they close more deals.

Look at lead response time

Track the average time it takes your reps to contact a prospect after they’ve shown interest, since shortening this period can help to increase engagement.

According to consulting firm Invesp, reps who contacted new leads within an hour of getting a query were 60 times more likely to qualify that lead than those who waited a day or more.

If you find team members are frequently taking more than 24 hours to get back to buyers, dig into the reasons why. It could be they have too much on their plates, don’t realize the value of prompt follow-ups or are simply forgetting.

Triggering follow-up emails at certain stages in the sales pipeline can take some responsibility away from busy reps, ensuring they’re less likely to miss opportunities. You can also schedule automatic reminders in a CRM or project management solution. That’s useful if the follow-up needs to be more personal than a templated email.

Sales effectiveness improvement strategies

Once you have an idea of your weak points, you can figure out how to improve sales effectiveness. Ask yourself these questions:

• What’s working well?

• What isn’t working?

• How can the things that work well get even better?

Sales managers use this information to remove ineffective processes and guide their teams toward higher productivity. These strategies can become best practices for the whole company.

Invest in sales training

Continuing education and sales training ensures your team members know current techniques and are ready to use them in day-to-day operations.

The combination of training, tools and sales collateral utilized to boost team sales effectiveness is called sales enablement. It can include anything from one-on-one coaching to procuring a CRM and training reps on how to use it.

A good sales enablement strategy empowers your reps to make better decisions in the field while working toward a common goal.

If everyone knows their role and how their departments work together, the company will run like a well-oiled machine.

Develop a strong sales process

Having a structure for your sales process gives your reps the proper context and a strong framework to apply everything they’ve learned.

This background allows your team to cut to the chase when talking to a lead. They know what the steps are, the exit criteria for moving to the next stage of the sales funnel and how to pivot if the conversation deviates from the script.

Reevaluate your sales process periodically. See if it’s still working effectively, if new bottlenecks formed and how to address those issues. Making this an ongoing practice will keep your sales process strong and adaptable.

Improve opportunity management

This metric uses your team’s handling of sales opportunities as a measure of effectiveness.

One way to track this: look at how well your team scores and manages new leads. See if they’re prioritizing them correctly and sending them to the right people on your team through a lead scoring and prioritization system.

Streamline the process of guiding new leads through your sales funnel. Figure out the best ways to reach them and the most efficient processes. Once people make contact, you can manage interactions at each stage of the buyer’s journey.

For example, Pipedrive has pipeline and lead management features. You can label deals, import them from spreadsheets and set up notifications when a deal is inactive for too long.

A key component of opportunity management is meeting your customers where they are. Create marketing content across multiple channels and push it out to people consistently.

Optimizing your opportunity management in this way means fewer deals slipping through the cracks or going unanswered.

Align your sales goals

This process has two parts:

• Operational alignment between your sales and marketing departments

• Goal alignment among your sales reps

The first ensures smooth and efficient operations with a consistent pipeline. The second focuses your reps so they make the right sales and produce effective results.

Your marketing team’s job is to bring in new qualified leads. Your sales department’s job is to close deals. If the two aren’t talking to one another and working toward the same goals, there can be bottlenecks in your sales process. Clear communication prevents that from happening.

Say your company is pushing for more sales in the construction industry. A sales rep on your team performs well, exceeding their target, but all the sales they made were to grocery store chains.

Even though they performed well individually, they didn’t have the right goal in mind, so they weren’t effective.

To prevent that from happening, ensure teams communicate consistently. Give them the tools they need to succeed and ensure they know the objective. Then you can take the final step: tracking the data.

Track everything

Tracking key sales performance metrics helps you see which processes and tactics work (i.e., which ones to repeat and build on) and which to change.

Establishing these benchmarks early helps you gauge real-time changes in customer behavior and adjust accordingly. It also lets you improve internally and helps reps perform better.

A good CRM system should let you track all your relevant metrics on a sales KPI dashboard and drill down into a particular area if needed.

Revisit benchmarks regularly, measure consistently and always check the results against your original performance objectives. Once you know what works, build it into your sales process with clear, actionable workflows for your team.

Final thoughts

Measuring sales effectiveness helps you identify weak points in your sales process and make them more impactful. It can boost performance, build reps’ confidence and grow revenue.

Pipedrive has many features to help you monitor sales effectiveness while growing your business, including pipeline visualization and customizable reports and dashboards.