Revenue Performance Management Metrics

We’ve been looking at revenue cycle analytics, and are now ready to check out specific revenue performance management (RPM) metrics. RPM is a strategy that seeks to optimize interactions with potential buyers within a revenue cycle. The ultimate goal is to accelerate reliable revenue growth. RPM metrics describe how well Sales and Marketing are working together in driving revenue.

The prime RPM metric is called revenue engine effectiveness (REE), which is equal to total revenue divided by the total investment for sales and marketing. REE is an accurate measure of the efficiency of your revenue engine.

By concentrating on the RPM paradigm, you can answer a couple of important questions:

1. How is your marketing spending affecting your sales productivity?
2. How do your marketing efforts reduce the overall expense-to-revenue ratio for sales and marketing combined?

Notice that marketing is not viewed in isolation; rather, it is analyzed with regard to its impact on sales productivity and return on investment (ROI).

Other RPM metrics that are important to track include:

• Sales cycle time
• Average selling price
• Sale productivity
• Success rates
• Sales rep training time
• Total period revenue vs. quota
• Discounts
• Pipeline
• Renewals/Retention

Identifying the important RPM metrics is a good starting point, but you will want to explore variants of each metric so that you can make better decisions in a number of different contexts. Here are the benefits of various tracking methods that can be applied to RPM metrics:

1)    Time period – by maintaining a regular cadence (week, month, quarter, etc.), you are more likely to keep your operational focus sharp.

2)    Trends over time – no better way to see if you are improving your results than to examine trends over time.

3)    Versus goals – your management wants you to set specific goals for specific time periods so that they can measure how your results stack up against goals. Lord help you if you continually blow this one.

4)    Versus benchmarks – measure your results against those of other companies in your industry, and against your historical results. For instance, if conversion rates are lagging behind those of your competitors, better start getting your resume together.

5)    Sources – measuring who created lead flows and opportunities. Was it the Sales Department or was it Marketing that filled up the lead pipeline?

6)    Finer granularity – get deep into the data by slicing and dicing according to product, region, channel, etc. This allows you to spot problems that may hide in larger aggregate numbers.

Eric Bank