Peter Drucker, in his classic 1954 book called “The Practice of Management” said, “What gets measured gets managed”.
When you manage something, you can
- extract observations
- convert them into insights
- use those insights to fuel the growth further
When you have implemented a new CRM system, how do you extract insights and see its progress?
The answer is:
Measure the right metrics.
What to measure when measuring CRM success?
You can write down certain goals in plain English to achieve with your CRM. But the CRM software doesn’t measure your goals for you. You must translate these goals into “Key Performance Indicators” (KPIs).
KPIs can be directly associated with stats/numbers from the CRM.
This section explores the sales KPIs that you must measure with your CRM.
1. Customer attrition
Also known as Customer Churn, this metric measures how many customers you lost in any given period. It measures customer retention in a reverse way. The lower the customer churn the better it is for your company.
For example, suppose you started 2020 with 99 customers on Jan 1st. Then, you bagged 3 new customers each in January and February. You had 105 customers at the end of February.
However, your most productive salesperson quit in March and he took your 10 best accounts with him to his next company. You lost these 10 customers and ended up with 95 customers at the end of March 2020.
So, your customer churn is calculated as given below:
(99-95) / 99
= 4 / 99
You had a customer churn rate of 4.04% in the last quarter of FY20.
2. Close rate
It’s a ratio of the number of deals closed against the number of deals in the pipeline, over a given period of time. It’s the simplest of all metrics and used as a measure of a sales team’s success.
For example, suppose you closed 10 out of 50 deals in your pipeline in a given quarter. This means you have a close rate of 20%.
If the close rate of a certain number of months after new CRM implementation is significantly more than the same number of months before the new CRM was implemented, then your CRM is doing its job of helping you close more deals.
Always use at least 6 months’ data to measure the close rate and see how effective your new CRM is.
3. Average deal size
Just the close rate does not give you the full picture. What good is a 50% close rate when your competitor closed only 20% of their deals but made far more money than you?
This is where the average deal size comes into the picture. To raise this number, you need to close a consistent stream of high-ticket deals. To get more high-ticket deals, you need higher quality deals.
This is where the CRM’s Lead Scoring feature can help to extract the best leads possible. It gives a higher score to the leads who can spend more and are ready to buy in the near future.
To measure your newly implemented CRM’s performance in terms of revenue:
Compare average deal size in your pipeline X number of months before and after the implementation of the new CRM.
4. Upsell rate
When existing or brand new customers buy more from you, it shows that their trust in your brand (i.e. your products and services) is increasing.
It is indicated by more than one purchase from the same customer over a given period of time.
For example, if 5 out of 50 customers have multiple (repeat, higher-value) purchases from you in a given quarter, you have a 10% upsell rate in that quarter.
Compare the upsell rate of at least 6 months before and after the implementation of the new CRM. This will give you a decent idea of how well your CRM is working.
5. New revenue
New revenue is the revenue from new i.e. first-time customers.
Together, new revenue, upsell rate, close rate, and average deal size will tell you how well your sales team and your CRM is doing.
If your CRM is doing its job, you should be getting more number of high-ticket and high-quality leads over a given period of time.
If your sales team is doing its job, they should be closing a higher number of these great deals and they should be spending on multiple purchases.
Combine them together and you get higher new revenue.
There are many other CRM metrics
There are many other CRM metrics that give you a detailed picture of your sales team’s performance and strategy.
When these metrics breach levels defined as success, you can assure yourself that you are truly successful. That’s when you can start extracting insights and start using the CRM software to fuel the growth of your CRM strategy.