Picture it. You baked a cake, you thought that you followed the recipe exactly, and yet it still went wrong.
Perhaps you might try again because there could have been a problem with the ingredients or the apparatus or you simply misread something.
If it went wrong again, you’d maybe want to dig a little deeper to find out why. You thought you’d measured your ingredients correctly.
You didn’t substitute anything and the consistency of the batter seemed right so you can’t figure out how it went wrong.
Perhaps some analytical evidence could help you improve the outcome on your next try.
The same can be said for sales analytics. If something is wrong (or, indeed right) with your sales figures, this indicates that you may need to look at your sales funnel in more depth.
Data-driven analytics can help you pinpoint at exactly which point in your funnel you can make positive changes or build on current success.
Using data-driven analytics can show you how your business compares to others. For example, the average sales close rate is 29% globally. Knowing your own business’s close rate helps you see how well you’re performing.
What is Sales Analytics?
Put simply, sales analytics is the process of gathering sales data to understand your business’s sales performance. The metrics gathered can then be used for future planning, refining sales processes, and forecasting future sales more accurately.
Using analysis tools and techniques, analytical software can spot patterns and trends in sales and customer behavior. This provides useful insights into the strengths and weaknesses of your current sales strategy, allowing sales team leaders to make suitable decisions on how to move forward and improve performance.
When compared to data from previous years and mapped against your sales KPIs, this can provide valuable information on where improvements can be made and what was happening behind the scenes when sales were going well.
The Importance of Sales Analytics
Sales analytics is crucial to the ongoing survival of any business and forms an essential part of your business’s enterprise architecture strategies. If sales fall at any point, sales analytics can highlight why, meaning you can act quickly to rectify the problem.
If utilized properly, they can have a huge positive impact on the following areas of your business:
- Revenue through higher conversion rates
- Sales performance through improved strategy and staff training
- Customer experience through improved understanding and processes
- Planning by using past data to shape future strategy.
How to Track Sales Analytics
Tracking sales analytics is a process compiling several steps
1. Use the Right Tools
Choosing the right tools for the job will depend a lot on your business needs and budget.
There are several tools available, including many CRM systems with in-built analytics tools. When deciding on the right tool. Think about:
- Data requirements: Does the analytic tool enable you to collect and analyze the right data?
- Integration: Does your chosen tool integrate well into your current systems?
- User-friendly: What will the training requirements entail?
- Reporting: Are the reports and visualizations easy to interpret?
- User support: Is there a support package available with the tool?
Here we’ll share a few different tools available on the market. These range from free tools for smaller or newer businesses to specialized platforms for larger, mid-sized businesses:
- Google Analytics: This is a free option that collects data from your website and apps to create useful performance reports. This is a great option for small or newer businesses.
- Hubspot: This is more of a one-stop shop, combining a CRM with analytics and reporting to provide insights on sales performance. This is a good consideration for mid-sized businesses.
- Gong: This is a revenue intelligence platform for B2B teams. It helps sales and marketing teams drive more sales by highlighting team conversion rates. It can record, transcribe, and analyze all sales calls to monitor effectiveness. This is also great for mid-sized businesses.
- Salesforce: This is a CRM service that combines an automated tracking tool for sales data-driven analysis, again useful for mid-sized businesses. There are several powerful, cloud-based Salesforce reporting tools available on Salesforce AppExchange, each offering unique features and capabilities.
2. Pick Key Metrics
If you want to hone in on one specific aspect of your sales funnel or pipeline, you can pick specific metrics to analyze. For example, September sales, Facebook advert conversions, or identifying a specific team member struggling to close sales.
Being specific rather than general can help give more valuable insights. We’ll look at key metrics you should be focussing on a little bit later.
3. Collecting Data
Once you’ve identified the best analysis tool for your business, you’ll need to plan how to collect and store sales data. Firstly, you’ll need to decide where you’ll be taking data from, for example, your website, email campaigns, or paid adverts.
Next, you’ll need to set up tracking codes to collect real-time data (your analysis tools may be compatible with current systems).
4. Analyzing and Interpreting Data
Once you’ve collected data, understanding it and presenting it in a usable format is the next step. A good analytics tool will provide what you need, as long as you’ve set it up to gather the right data in the first place.
It’s worth having a plan for the kind of data you want to see to make sure you get the best out of the analytics. For example, is there a particular problem with abandoned carts?
Having this data helps you determine why. Is it that the check-out process is too complicated? Are customers required to create an account when they just want to buy a product?
5. Sales Reporting
The sales report is the outcome of the analysis process. It gives digestible and valuable insights into sales performance metrics showing anything from individual to organizational performance and providing sales forecasts.
A sales report forms the basis for decision-making by highlighting strengths and weaknesses to show where changes in practices will improve performance and it’s important to choose a tool that produces reports that are easy to interpret.
Key Metrics to Consider
As noted earlier, each business will have different requirements for sales analytics, however, several key metrics would be useful for most businesses. Here we’ll look at each one in more detail.
1. The Average Sales Value
This key metric tells us how much each customer spends per visit on average. A simple calculation can give you this figure, just divide your total sales revenue by the number of transactions.
As an example, if your business sold $50,000 worth of sneakers in a quarter and made 625 sales in the same period the average sales value would be $80. This information is useful because it can be compared to previous years to see if customers are spending more or less. It can also be used for forecasting future spending allocation as well as driving a plan for upselling to maximize customer spending.
Upselling can drive 21% of company revenue so knowing where to increase this is vital.
2. Sales Growth
This metric can tell us whether you’ve turned more (or less) revenue in a certain period when compared to previous years. It’s therefore a great way to measure the performance of your sales team and products. It also stops you from becoming stagnant in your field and enables future sales forecasting.
A report showing weak sales growth gives leaders the chance to look at ways to improve, such as expanding the customer base, upselling, or introducing new product lines.
3. Lead Conversion Per Sales Rep
It’s important to know which members of your sales team are performing well and which aren’t. This gives a valuable insight on where investing in staff training may improve overall sales growth. It may also give you the chance to implement a rewards system, for example, if there isn’t a training need but a motivational one.
High-performing sales team members would be good candidates for future leadership roles so it’s worth identifying them for when the time is right. High-performing sales team members can share the best sales techniques with other team members to ensure future success.
4. Product Performance
Identifying the products that perform well can help you hone in and develop future lines that will be a success. Knowing overall sales is great, but actively being able to distinguish your best and worst performers is a powerful tool for decision-making.
It’s important to measure more than just sales volume though as some products may have a better bottom line, so looking at revenue per product is probably a better metric. It’s also worth considering seasonal changes. For example, if you sell holiday items, compare sales to previous holiday periods rather than measuring them against other products.
5. Customer Lifetime Value
This metric tells you how much the average customer spends over time. It tells you how much a customer spends on their first purchase and any subsequent purchases throughout their entire relationship with your company.
This can help you assess customer loyalty (and implement measures such as loyalty discounts to improve this) and also predict the average total spend of a customer for future forecasting. If you can leverage CLV, it can help reduce new customer acquisition costs.
6. Sell-Through Rate
The sell-through rate tells you how quickly you can sell your entire inventory. It’s beneficial to know this because it can be compared against stock deliveries to monitor the efficiency of your supply chain.
The stock you have in your warehouse or on your shelves is costing rather than making you money. Items with a low sell-through rate should be reduced to make room for stock that sells faster.
7. Sales Pipeline Performance
This measures how long it takes a lead to move through your sales pipeline. This metric measures all the points of interaction in the sales pipeline and which ones take the customer through to making a sale. It measures everything from your advertising campaigns to newsletters and other communication.
Measuring sales pipeline performance can tell you where any ‘leaks’ are, for example, common points where you lose customers and they don’t go on to make a sale.
This can help business leaders to refine areas in the pipeline that are not performing as well as they could. This is a major part of understanding your business and forms part of your business overview as detailed by Ardoq enterprise architecture.
8. Sales by Region
This can tell you where in the world your sales are high and where they are low. This information can help you allocate resources to the right regions. In addition, it can show you which products perform better in which areas. This helps sales and marketing teams to know where best to target.
When operating in multiple countries, it’s important to understand vendor management risks for each region. Any security threat to business could damage sales at any point, anywhere.
9. Sales by Channel
Many businesses today use multiple channels to sell products. Of course, there’s your business’ website, but there are also marketplaces like Amazon, Etsy, and eBay as well as social media sites with in-built stores such as Instagram and TikTok.
Knowing where the bulk of sales come from means you can allocate marketing spending accordingly. With 79% of shoppers shopping online once a month, businesses can monitor how their customers stack up.
Key Takeaways for Sales Analytics
Sales analytics are a fundamental necessity for any business that wants to succeed.
There are many factors to consider on an individual business level, but what’s clear is that all businesses must have a full overview of sales performance to be sustainable whether you’re a new business, a small business, or a large, well-established company.
Choosing the right metrics and the right analysis tools for the job is key to making sure your business can gain traction and grow.
Whilst online sales make up a large chunk of sales for most businesses, it’s just as important to monitor physical sales too.
With the available sales analysis tools starting at zero cost, if you’re not already analyzing sales, what’s stopping you?
