Sales planning is a strategic function necessary to help any organization succeed in today’s vigorous market competition. It includes playing a key role in setting goals, prioritising resources and measuring performance. A powerful class of systems designed to make sales planning performant are incentive plans targeted at motivating profitability. These plans need to be balanced to give equal weight and importance to quantitative versus qualitative Key Performance Indicators (KPIs), in order to maximise their effectiveness in two ways: 1) ensuring that quantitative goals are met and 2) eliminating any gaps in behaviour that inhibit customer relationship and long-term success.
The Role of KPIs in Sales Planning
Key performance indicators (often abbreviated as KPIs) are a way for sales teams to measure and track performance against targets. There are two main types of KPIs:
1. Quantitative KPIs: Quantitative KPIs are measures of performance expressed in numerical terms (volume, revenue, growth, efficiency): sales revenue, units sold, average deal size.
2. Qualitative KPIs: measures of how good the work and the behaviours that shape sales success are, such as customer satisfaction, product knowledge, their adherence to the sales processes.
Using both type of KPIs in a composed sales plan contributes to a cost-effective and efficient performance management process.
1. The Importance of Balancing Qualitative and Quantitative KPIs
KPIs That Drive Sustainable Growth: In contrast to the short-term focus of quantitative KPIs, qualitative KPIs drive behaviours needed for building long-term success. For example, high sales volumes may be needed – but, without satisfied customers (a key qualitative KPI), repeat business and referrals may falter.
For instance, a technology firm might have a quantitative sales goal of $1 million per quarter, but quantitative measures such as sales taken alone are too narrow. Qualitative measures should be introduced to track customer satisfaction scores. Or if sales are high but there’s low customer satisfaction, the quality of service needs to be improved if the firm wants repeat sales.
2. Enhancing Employee Engagement
Measuring things that add value such as professional development, collaboration, innovation or recognition of effort (all non-numbers) are all good qualitative KPIs that will fire up sales teams where numbers alone seem to be dead-weights.
Aside from any appropriate qualitative measures, a pharmaceutical company might keep track of the number of prescriptions written (quantitative); however, they should also acknowledge and reward sales reps for how many patients they educated on the correct use of their product, or the quality of the product training they provided to their colleagues (qualitative). This will encourage a team that is better informed and engaged.
3. Aligning with Strategic Goals
This way, the sales approach is nicely balanced so it fits the rest of the organisation’s professional agenda: quantitative goals define what’s good for the bottom line, while qualitative goals assure how the team or department is playing in tune with customer service standards, organisational reputation, and ethics.
For example, a chain of retail stores may focus on quantitative metrics, such as daily sales volumes, while also tracking qualitative aspects, such as the cleanliness of the store and courtesy of staff, which are aligned with its brand promise of a superior shopping experience.
Frequently Asked Questions (FAQs) on Balancing Qualitative and Quantitative KPIs in Sales Planning
1. Why should organizations balance qualitative and quantitative KPIs in their incentive plans?
Answer: When these KPIs are in balance, they result in organisations holding their sales teams to measurable targets while encouraging them to maintain the behaviours and practices that will create customers for life, and that align with organisational values. This results in more holistic performance reviews – one that supports the achievement of victories in the near term while enabling advances to be made over the longer term.
2. How can qualitative KPIs impact sales performance and profitability?
Answer: Qualitative KPIs contribute to sales performance by motivating behaviours that enrich customer experiences, promote innovation and generate a sense of unity among colleagues. These factors ensure customers are satisfied and return, which enhances company profitability. For example, by applying those methods, a company might reap extra referrals, upselling opportunities and other benefits that immediately boost net revenue.
3. What challenges might organizations face when integrating qualitative KPIs into their incentive plans?
Answer: KPIs in sales might seem pretty straightforward: show me how many opportunities you have in the pipeline, how many are already qualified, what your closing ratio is, and I can tell if you’re doing a good job based on that. However, while quantitative KPI metrics are an old and proven way to define success, our new conviction on qualitative KPIs is that they are essential to giving senior managers essential context and giving employees meaningful framing for their roles. While qualitative KPIs can be subjective by nature (what is an engaged team?), one of the biggest challenges is to measure and evaluate against them in a way that is clearly definable and consistent. Another common challenge is that sales teams used to and expected to be measured in quantitative areas are sometimes resistant to the perception that they’re being assessed on their ‘soft skills’. One way to counter this is to clearly define the relevant metrics, ensure that they are robustly evaluated and that their importance is clearly and consistently communicated to everyone.
4. Can you provide examples of effective qualitative KPIs that organizations might use?
Answer: Qualitative KPIs: Customer satisfaction scoresCustomer engagement levelsStaff product knowledgeAdherence to the brand’s valuesInnovation in problem-solvingQuality of customer interactions, for example: Percentage of issues resolved on first contact (a qualitative KPI for a customer service team).
5. How do you ensure that qualitative KPIs are fairly and accurately assessed?
Answer: Solution: In order to generate valid KPIs, organisations need to have clear, standardised, and objective rules for what constitutes a strong or weak dating of a qualitative KPI. This can be accomplished by employing standardised customer feedback forms, timely performance reviews, peer evaluations and uniform scoring systems. In conjunction, qualitative and quantitative data can produce a joint and subtle evaluation of performance.
‘At the more qualitative and less quantitative end of the spectrum, sales teams utilise KPIs that feed into their incentive plans to successfully achieve profitability and, in turn, foster the practices and relationships that become the foundation of long-term sales growth. With this balance between qualitative and quantitative KPIs now the sales planning norm, sales teams are better positioned than ever before to respond to market changes and sell effectively to customers in an ever-changing marketplace.
