Everyone knows that “what gets measured gets done.” This goes double for selling anything, including service contracts. However, before we start looking at the most important contract-selling metrics, let’s first look at the audiences who will use them.
Who Uses Contract Selling KPI’s?
There are two general audiences that will use the Key Performance Indicators (KPI’s):
- People selling the contracts and renewals, as well as the managers who are responsible for the outcome on a day-to-day basis.
- People less engaged in the actual selling process including high level executives and people in the product sales side of the business.
Sales people are short-term goal oriented; they ring a bell when they get an order! For the contract-selling group I recommend updating the selected KPI’s either continuously or at the close of business each day. For everyone else I recommend publishing the “operational KPI’s” weekly and the more strategic one monthly. This pattern will keep everyone in the loop and interested in progress. If things go awry, they may even step up and offer constructive suggestions.
What Are The Most Important KPI’s?
This is where it gets tough because we can think up a very large number of metrics without blinking an eye. What I will discuss below are my version of the “significant few” – those that really 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 have to waste valuable selling time trying to update records then their effectiveness will be diminished. The metric is percentage of attempted contact that cannot be complete because of record inaccuracy. If that number is greater than 5%, there is something 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 renewal 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 then she can include the prior year’s performance. This picture eliminates any place to hide; it’s all out there for everyone to see.
- % Offers Accepted – This means the percent of warranties that converted to contracts and the percent of expiring contracts that renewed, plotted against time. This is useful for high-level folks but for the people managing the service delivery and marketing functions, it is necessary to break these metrics into more details, especially since you most likely offer a number of 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 offers decided before expiration – this is the percent of all opportunities being decided 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 who are “on the fence” to not purchase just so this KPI looks good. Remember that the objective is to make money, not game a KPI! It should be tracked on a monthly basis going back in time as far as possible or around 3 years (whichever makes sense from your knowledge of the process).
- Customer satisfaction with the contract sales process – this is one area that unfortunately 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 usually ignored. It is very important that the service sales team keep in mind that they are part of the service group and represent that group as much as the call center, field service or professional services. You have to make sure that customers do not perceive them as pushy, salesish, or annoying and consider them as helpful, demonstrating empathy, and consultative. I recommend a brief (less than 5 question) email survey when the customer has made her final decision. You should look 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!
In our next post, we will complete this topic by describing other important metrics that will provide you with a fuller picture of how your service selling team is performing and if they are improving.