This is especially important with any metric with one figure being divided by another.
For example it is important in a B2B (business-to-business) sales team to convert quotes into orders. So how about monitoring the conversion rate of quotes to orders by salesman or region, by dividing the value of orders by the value of quotes?
Before you do so there are two main issues, manipulation and timing.
On manipulation, the conversion rate can be improved not by better conversion, but simply by only raising quotes that are likely to become orders, and not bother with others.
That’s probably not the sort of behaviour you want to encourage, as you may miss out on business. Depending on how tightly you like to qualify prospects, you may prefer to raise quotes in less likely situations. So it will also be appropriate to monitor the total value of quotes, and a ratio like quotes to first-time visits to get a better picture.
There’s then a matter of timing. There’s no point comparing the value of sales this month to the value of quotes raised this month if there is any significant delay between quote and order. If it’s possible to discover when quotes are lost and why, another approach is to look at each month’s (or week’s) quotes and establish the ratios between wins, losses, not proceeded and still in progress. This may be too complex, and "keep it simple" is a good principle. The best approach will depend on the business and its sales methods.
Similar principles apply in other areas of a business. The point is that designing a set of business metrics requires careful thought to ensure they make sense, and will drive the right behaviour.
If you’d like to discuss this further, do give me a call on 01628 632914 or contact me via email.
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