Everyone knows that “what gets measured gets done.” This goes double for selling anything, including service contracts. However, before we start looking at the essential contract-selling metrics, let’s first look at the service contract sales process and the audiences who will use them.
Who Uses Contract Selling KPIs?
Two general audiences will use the Key Performance Indicators (KPIs):
- People selling the contracts and renewals, as well as the managers responsible for the outcome daily.
- People less engaged in the selling process, including high-level executives and people on the product sales side of the business.
Salespeople are short-term and goal-oriented; they ring a bell when they get an order! I recommend updating the selected KPIs continuously or at the close of business each day for the contract-selling group. For everyone else, I recommend publishing the “operational KPIs” weekly and the more strategic ones monthly. This pattern will keep everyone in the loop and interested in progress. They may even step up and offer constructive suggestions if things go awry.
What are the Most Important KPIs?
This is where it gets tricky because we can think up many metrics without blinking an eye. I will discuss below my version of the “significant few” that tell the story without getting people bogged down in details, which can be found if needed.
- Database accuracy – The input to the selling process is the contact database. It may be maintained by the sellers or may come from a master customer database. Either way, garbage in, garbage out; if the sellers waste valuable selling time trying to update records, their effectiveness will be diminished. The metric is the percentage of attempted contact that cannot be completed because of record inaccuracy. If that number exceeds 5%, something is broken in your system and must be fixed immediately.
- Orders received (in $’s) – I like to graph cumulative orders that the selling team received, either new contracts or renewals on the Y-axis and time on the X-axis. I also superimpose the cumulative orders budget on the same graph. This combination allows the sellers, and everyone else, to monitor Y-O-Y performance. If the VP/Director is very analytical, she can include the prior year’s data. This picture eliminates any place to hide; it’s all out there for everyone to see.
- % Offers Accepted – This means the percent of warranties converted to contracts and the percent of expiring contracts that were renewed, plotted against time. This is useful for high-level folks, but for those managing the service delivery and marketing functions, it is necessary to break these metrics into more detail, especially since you most likely offer several contracts with individual value propositions and costs. Contract conversion and contract renewals also have different acceptance rates and should be individually managed.
- Contract and warranty offer decided before expiration – this is the percent of all opportunities resolved before the decision date (end of warranty or contract period). It should be as high as possible, but care must be taken not to push people “on the fence” not to purchase, so this KPI looks good. It should be tracked every month, going back in time as far as possible or around three years (whichever makes sense from your knowledge of the process). Remember that the objective is to make money, not game a KPI!
- Unfortunately, customer satisfaction with the contract sales process is one area that receives much too little attention. Service groups are usually very good at systematically collecting customer feedback about their “most important” touch-points. However, their own sales process is generally ignored. The service sales team must remember that they are part of the service group and represent that group as much as the call center, field service, or professional services. You must ensure that customers do not perceive them as pushy or annoying and consider them helpful, demonstrating empathy and consultation. I recommend a brief (less than five questions) email survey when the customer has made her final decision. It would help if you looked at the results by the group in total, by individuals, and by the outcome of the buying decision. Your expectation for overall satisfaction should be the same as for any other customer-facing group in your company!
What’s Next?
In our next post, we will complete this topic by describing other vital metrics that will provide you with a fuller picture of how your service-selling team is performing and if they are improving.
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