Measuring performance is vital if you ever wish to succeed in a business. It provides a window view into business profitability, productivity, and customer satisfaction. Furthermore, performance measurement also provides valuable insights into the effectiveness of marketing campaigns, business strategies, etc. It helps to assess whether the business is moving toward the desired goals or not.
Business KPIs come in quite handy in this regard. They act as a pointer to the strengths and weaknesses in your business process. Without these measurements, your business will be operating in the dark with no sense of direction to where it’s going in terms of revenue, profits, and growth. Let’s explore the direct sales KPIs that every company must track if it wants to attain long-term growth.
What direct sales KPIs you must track?
The productivity and performance indicators vary across different businesses. In direct sales, KPIs revolve around sales, recruitment, inventory, etc. Let’s check the top KPIs that every direct-selling company must track;
Sales revenue is a vital KPI in direct selling. It represents the total revenue generated through the sales of products over a given period.
Here’s why it’s important;
- Sales revenue directly indicates the financial health of the company.
- Changes in sales revenue provide details on whether the company is going up or down.
- Sales revenue is the essential tool to calculate profits.
- It helps the company evaluate its market performance.
Customer Acquisition Cost (CAC)
Sales are the core of direct selling business. Companies have to invest heavily in customer acquisition. The average cost a company incurred for acquiring a new customer is known as Customer Acquisition Cost (CAC). Monitoring CAC is essential because it helps companies formulate their marketing strategy and allocate budget.
Here’s the significance of Customer Acquisition Cost;
- CAC helps assess the efficiency of marketing campaigns.
- It helps companies plan their growth strategies.
- The KPIs provide information about market competitiveness.
- CAC, in conjecture with customer lifetime value, helps with the profitability analysis of the business.
In direct selling, the conversion rate can be used in several contexts throughout the sales process. For example, you can apply a conversion matrix to lead to recruits’ conversions. Likewise, it can also represent leads to customer conversion. In any case, conversion rate denotes an essential matrix that directly impacts revenue and profitability.
Why it’s crucial;
- Conversion rate helps evaluate the viability of marketing initiatives.
- Conversion rate can help identify bottlenecks in the sales process.
- It helps calculate the ROI accurately.
- Conversion rate helps businesses understand customer behavior.
Average Order Value (AOV)
The direct selling sector is rapidly adopting an e-commerce model for product sales. In this context, monitoring Average Order Value becomes crucial. It represents the amount customers spend on each order. The KPI is important because it offers valuable insights into customer’s purchasing behavior. Companies can use the information to devise pricing strategies.
Here’s why average order value (AOV) is important;
- It can help in revenue maximization.
- AOV has a direct link with company profitability.
- Understanding AOV can help businesses provide personalized offers to customers.
- AOV data can help companies revise their pricing strategy.
- By analyzing AOV data, companies can identify upselling and cross-selling strategies.
Sales Cycle Length
Sales cycle length denotes the average duration that a potential customer or recruit takes to move through the entire sales funnel. In the context of direct selling, Sales Cycle Length represents the efficiency of the sales and recruitment process.
MLM companies can utilize this KPI to evaluate the time it takes to convert potential leads to active distributors or customers. Companies can then adopt strategies to shorten the sales cycle length to make MLM operations more efficient.
The benefits of tracking Sales Cycle Length;
How do you track and analyze KPIs?
Knowing about the importance of KPIs is one thing, but tracking them in practice is an entirely different endeavor.
To help you out, here are the steps you must follow to track and analyze KPIs;
- First, identify the most relevant KPIs per your direct selling business.
- Define clear and measurable objectives for each KPI.
- Implement KPI tracking tools. A well-equipped MLM software packs features to track important business KPIs effectively.
- Set the frequency of data collection.
- Segment your data to get better insights.
- Look for patterns, trends, or anomalies in your KPIs.
- If possible, hire an expert who can effectively read KPI data and suggest changes accordingly.
How to Use KPIs to Improve Sales?
Strategic use of KPIs can provide you with deep insights into the sales process. Here’s how you can use them to improve sales;
- Use sales revenue figures to ensure you are a sales target.
- Analyze the revenue sources and work on optimizing them.
- Analyze your pricing strategy to keep the product cost competitive.
- Monitor conversion rate and optimize sales funnel accordingly.
- Review sales cycle length and take steps to keep it to a minimum.
- Use automation tools to optimize sales processes like order processing, shipment, follow-ups, etc.
- Periodically revisit marketing strategies based on the insights from KPIs.
That’s all the essential KPIs that direct-selling businesses should constantly monitor. Tracking these KPIs can help businesses identify areas of improvement. Furthermore, it can provide insights about emerging trends that the business can leverage to achieve more sales and leads.
For example, if a directly selling company is getting leads, but the conversion rate stagnates, it may indicate an issue with customer experience. Likewise, if the Customer Acquisition Cost (CAC) is too high, it might point to issues in your marketing strategies.
Monitoring these performance indicators enables companies to gauge the effectiveness of their business process. The insights can help ensure that the direct selling company is moving in the intended direction.