Your business’ sales pipeline shows every stage of the customer acquisition process – from when your customers are leads to when they become your repeat clients or require after-sales support. If you want your business to become successful, you must monitor your sales pipeline. And to do that, you’ll need to track several sales pipeline metrics.
Measuring your company’s pipeline metrics will help you track how well your teams perform. The results will, then, help you understand which marketing and sales strategies can be tweaked and optimized so that your sales pipeline stays as healthy as possible.
Identifying the right sales pipeline metrics to measure and track will also help you notice successful tactics. You’ll learn which strategies in your digital marketing bring you the most leads and make your customers choose you over your direct competitors.
Businesses examine and review their sales pipeline metrics to learn what is and isn’t working in the sales process. So, if you’re researching information on how to start a business, you should also get to know the sales pipeline processes.
So, here are the six sales pipeline metrics your business should track for more efficient sales and marketing campaigns:
1. Number Of Qualified Leads
The first metric every business should track is the Number of Qualified Leads. Anyone who has interacted with your business is considered a lead. However, a qualified lead is someone who could become your potential customer based on the criteria your business has set to define ideal customers. Moreover, a qualified lead has the intent to buy.
Without a solid number of qualified leads, you won’t be able to hit your sales targets. Therefore, you should keep track of your total inbound and outbound leads. This way, you’ll stay assured that your sales team has enough qualified leads to hit the revenue goals.
If you notice that your sales department runs low on qualifying leads for the next quarter, you should take swift action. Increasing your marketing resources is one of the ways to attract additional prospects. Other tactics include investing in training your staff and new software that tracks the life cycle of your prospects.
2. Customer Acquisition Cost
The Client Acquisition Cost (CAC) is another sales pipeline metric you should track. CAC illustrates the cost of gaining a new customer to purchase a product or service.
To establish the average client per acquisition, you can use the formula illustrated below:
Your Customer Acquisition Cost = Cost of Sales and Marketing divided by the Number of New Customers Acquired. Knowing CAC will let you see if your sales funnel is effective.
If you notice that the CAC is above the norm, you should adjust your expenses. Even a tiny modification, like allowing business expenses only relating to prospects of specific deal size, can make a significant difference.
Another strategy to reduce customer acquisition costs is automating as many processes as possible. Automating marketing and sales processes could mean employing fewer people and paying fewer wages. It adds efficiency and could allow you to reach more qualified leads.
To reduce customer acquisition costs, you should focus on your repeat customers. Reward your loyal customers with special offers, and offer affiliate programs for your promoters.
It might be cheaper to reward a loyal customer for bringing you a new client than to spend on paid marketing to attract the same clients.
Finally, you should constantly track, monitor, and optimize your customer acquisition strategy. Whether it’s an eCommerce or a SaaS marketing strategy, evaluate your techniques regularly to ensure they’re still effective.
3. MQL To SQL Conversion Rate
MQL to SQL conversion rate is the percentage of your marketing qualified leads that move down the funnel and convert into the sales qualified leads. It’s a great indicator of how successful your lead generation strategies are.
MQL to SQL conversion rate is one of the most accurate ways to check your leads’ quality. It also shows how well your sales and marketing teams are cooperating.
The best MQL to SQL conversion rate is 13%. So, for 100 MQLs, each marketing campaign should bring you at least 13 successful SQLs. If the ratio is low, it may mean that you’re not bringing in prospects likely to make a purchase. Or that there is a disconnect between your marketing and sales team.
Therefore, one effective way to boost this metric is to ensure your marketing and sales team are in alignment as to who qualifies as a “qualified lead.”
To improve the number of SQLs you get, you could also investigate whether you’re getting fewer leads. For example, perhaps your landing page is not optimized well enough anymore, or you need to verify your email list to drive more leads from your email campaigns. Sometimes making small adjustments will be just enough. Alternatively, developing a brand new digital marketing strategy may be necessary.
Finally, you should continue tracking your MQL to SQL conversion rate to see whether your changes are working.
4. Customer Lifetime Value
Customer Lifetime Value or CLV indicates the total revenue your business can expect from a single customer. This is a key metric for many businesses, especially for SaaS companies. If you run an eCommerce, the CLV metric is also critical, as your business relies on repeat sales from the same customers.
Use the following formula to calculate CLV:
Customer Lifetime Value = Average Value of Sale × Number of Transactions × Retention over Time Period of Time
Customer lifetime value should be evaluated alongside the customer acquisition cost. If your customer acquisition cost is higher than your customer value, you are most probably losing money.
The longer you can keep a client, the bigger the lifetime value. Thus, focusing on retaining existing clients and increasing their CLV can bring your company a steady, predictable increase in revenue.
To increase CLV, enhance your onboarding process. Making onboarding as easy and fast as possible for your clients is critical. This is especially important for SaaS companies. You can create content, such as a guide, a tutorial, or a how-to video that helps customers.
Meanwhile, eCommerce sites can use promotions such as upsells and cross-sells to boost customer lifetime value.
You must also keep your customers engaged by sending regular emails. Email marketing is one of the best ways to retain customers. Focus on presenting the value that your products or services bring to customers. Keep educating your clients. Present updates on your products and industry news, and make announcements of new product launches.
Looking after good customer relationships is critical to increasing CLV and the ongoing success of your business.
5. LTV To CAC Ratio
LTV stands for the lifetime value of a customer, and CAC stands for the customer acquisition cost. Therefore, the LTV to CAC ratio compares the value of your customer over their lifetime to the cost of acquiring them.
You need this sales funnel metric to measure the return on investment for each dollar your company spends to acquire a customer.
So, for instance, if your LTV to CAC ratio is 5:1, it means that for every $1 that you spend, you earn $5 back. A 1:1 ratio means you are unlikely to make money. A 5:1 ratio implies a good return.
If you have a low LTC to CAC ratio, you’ll need to generate more leads for your business. This could be through running more marketing campaigns. You may also want to boost the CLV to improve this ratio.
The Corporate Finance Institute set an industry standard for LTC to CAC at 3:1.
Various factors have an impact on the LTV/CAC ratio:
So, if you want to improve this metric, you should increase your customer retention rate or ARPA. ARPA is the average revenue generated by a single customer per given year (Average Revenue Per Account).
6. Sales Velocity
The final sales funnel metric you should track is Sales Velocity. Sales velocity measures how quickly deals move through your sales pipeline and generate revenue. Generally, the faster a lead passes through your sales pipeline, the better. The faster a lead converts, the more free time you have to look at other possibilities.
You can measure the sales velocity using the following formula:
The number of deals in your pipeline x the overall win rate (%) x average deal value (in $) / length of sales cycle (in days).
For example, let’s assume that you have 100 opportunities in your sales pipeline. Your average win rate is 30%, and your average deal size is $5,000. An average sales cycle in your company takes 20 days.
Your sales pipeline velocity = 100 x .3 x 5,000 / 20 = $7,500.
That means your company has $7,500 moving through the sales pipeline every day.
This metric allows you to observe the money that your sales strategy pulls in daily. To raise your sales pipeline velocity, you’d need to improve your win rate, boost average deal size, or shorten the average sales cycle.
Selecting the right metrics to measure your business’ performance is key to acquiring the most relevant data for making informed business decisions.
To sum up, the essential sales pipeline metrics your business should track include:
- Number Of Qualified Leads
- Customer Acquisition Cost
- MQL To SQL Conversion Rate
- Customer Lifetime Value
- LTV To CAC Ratio
- Sales Velocity
Use these sales metrics to assess your marketing and sales teams’ success and track the performance of your business. This way, you’ll have a healthy sales pipeline and a good perspective for your business to become successful.
ABOUT THE AUTHOR
Austin Andrukaitis, Entrepreneur Leadership Network Writer
Austin Andrukaitis is the CEO of ChamberofCommerce.com. He’s an experienced digital marketing strategist with many years of experience in creating successful online campaigns. Austin’s approach to developing, optimizing, and delivering web-based technologies has helped businesses achieve higher profit, enhance productivity, and position organizations for accelerated sustained growth