Target or KPI... Are you confused?
Many business owners and sales managers are in the process of conducting staff performance reviews (appraisals) and setting targets and KPI for the year ahead. However, many managers and organisations are confused by the difference between a target and KPI. Many set KPI which quickly become targets. So I hope to explain the difference and why KPI are so important.
Putting it simply, a target or goal is the outcome you hope to achieve. For example, the achievement of £10k revenue each month, 5 new customers each month, the sale of 50 widgets each week etc.
The KPI is a metric to let you know how well you’re doing working towards that goal or target.
There are a few reasons why sales people and teams need to have KPI in addition to their targets. Having them will benefit the business and provide opportunities for growth for the individual and company. They are a brilliant way to regularly monitor each salesperson’s progress on a weekly or monthly basis.
KPI will tell you and your team how particular targets have been reached. For example, if the average value of sales is low, KPI will provide you with an explanation. KPI also help to determine strengths and areas for development of the team and the individuals within it. If, for example, someone is not great at increasing their average sale value through up and cross-selling, understanding their strengths and development needs will be much more straightforward.
Sales managers often take a subjective view when measuring performance but having KPI will help track performance more objectively and provide valuable feedback around the clearly defined expectations. Teams who know they are being evaluated on the same criteria are far more likely to be fully engaged with their work and focus on achieving targets.
There are three questions you should ask when setting KPI for your sales team:
- What questions are you hoping to answer through your KPIs?
- Do the KPI link directly to the growth of the individual, team and business?
- Are you able to accurately and regularly monitor each KPI?
Finally, her are some examples of KPI that I have set for teams in the past. Each gives detail what is being measured, why and how, and the success indicator:
- Average sale value (reported monthly). This will provide an insight into the overall productivity of each team member and measures the average value of each sale that the team processes. Example of KPI target: £150 average sale value. The success indicator will be an increase in sale value.
- The percentage of add-on and cross sales (reported monthly). This will measure the amount of additional products and services sold per individual over this period of time. Example of KPI target: 40% of sales to include extra service warranty. The success indicator will be an increase in the percentage of additional products and services sold.
- The percentage of sales converted from email marketing campaigns (reported monthly). This will provide an insight into the effectiveness of emails being sent by each team member and highlight coaching needs to improve success rate. Example of KPI target: 10% minimum conversion % C2B. The success indicator will be an increase in the percentage of sales converted via email links.
If you’re a business owner or sales manager and want to get the best out of your sales team, improve sales, retain more customers and achieve a positive image of your brand, get in touch and let’s meet for coffee and informal chat.
Passionate about unleashing people's sales and leadership potential.