Every business understands the importance of knowing where their sales are coming from, which products are best-selling, and which parts of the operation are most profitable. Modern cloud-based POS systems provide a range of sales activity metrics that support decisions about the best way for a retailer to increase revenue and profit.
With the myriad of metrics available, the question becomes which sales activity metrics or key performance indicators (KPI) provide the most actionable insights?
The Top 10 Sales Activity Metrics to Look Out for
These 10 sales activity metrics can help unlock potential sources of revenue for any business.
1. Sales Growth and Sales Targets
Sales growth measures the business’ increase in revenue over a set period, and is tied directly to revenue and profitability. Sales targets compare revenue to a preset goal, whether that be a monetary figure or unit sales target for a specified period. Making sales staff aware of the company’s sales performance and progress toward meeting sales goals helps involve them in the process and encourages them to take advantage of data analytics tools.
2. Average Value per Sales Ticket
This key sales metric is also referred to as average ticket size, average transaction size, and average value per transaction. It is calculated by dividing the store’s total revenue by the total number of transactions over a set period. The number helps retailers focus on ways to boost revenue during slow periods or increase the average amount of money customers spend in each transaction.
3. Conversion Rate
This metric indicates how efficiently your store’s sales staff converts visitors into customers. When measuring online sales, the conversion rate shows the percentage of site visitors who make a purchase, register, or otherwise interact with the business. To calculate the store’s conversion rate, divide the number of visitors by the number of transactions over a given period. At its most basic, this metric lets the store keep a running count of the number of sales opportunities it receives.
4. Sales per Rep and Sales per Employee
More experienced sales staff can be expected to generate more sales than new hires without extensive retail experience, but measuring sales per rep or sales per employee is an effective way to set realistic goals for all sales staff, including offering incentives for reaching exceptional sales levels. The metric is used to establish a baseline for measuring employee performance and to spot opportunities to create teams whose strengths and weaknesses complement each other.
5. Sales per Unique Customer and Customer Lifetime Value
Sales per unique customer is also called average revenue per user (ARPU), and is primarily used to track a business’ progress toward achieving its sales goals. The metric is calculated by dividing the total number of customers by the total value of transactions in a given period. By contrast, customer lifetime value (CLV) determines the value created when retailers acquire a customer and all subsequent profit generated by that customer. While both of these metrics can be used to calculate sales growth and market share, they don’t account for the business’ revenue collected from other sources, such as financing, fees, or subscriptions.
6. Cannibalization Rate
This metric indicates the effect of new product sales on sales of existing products. The measurement helps sales staff determine the products they should focus on to maximize the store’s profitability. For example, one way to overcome the reservations of existing customers to switch to the store’s new product lines is by offering them discounts or promotions tied to the release of the new products. The goal is to find the break-even cannibalization rate (BECR), which is when the decline in sales of existing products meets the increase in sales of the new products. The business will make a profit so long as the cannibalization rate stays below the BECR.
7. Sell-Through Rate
This metric compares the amount of inventory sold in a given month, quarter, or year with the amount of inventory received in the same period. The rate indicates how quickly the store is converting its inventory into revenue. Generally speaking, the higher a retailer’s sell-through rate is, the less money it has tied up in inventory sitting on shelves. While the metric can help companies identify slow-moving inventory items, it doesn’t provide any insight into why the products aren’t selling as expected.
8. Enterprise Value to Sales
Enterprise value (EV) calculates the business’ total value, including market capitalization, short-term and long-term debt, and cash on hand. It represents the amount of money that would be required to purchase or take over the company, similar to market capitalization. Enterprise value to sales, or EV/sales, compares the business’ EV to its annual sales, which indicates a company’s value in terms of sales, equity, and debt. Beyond determining a retailer’s value, EV/sales helps the business manage its cash balance and debt load.
9. Sales by Product, Department, or Category
Modern cloud-based POS systems make it simple for retailers to generate reports breaking down the store’s sales by product or product line. Measuring a product’s sales performance helps sales staff identify popular and slow-selling items and adjust their sales strategies accordingly. This metric is tied to the real-time inventory management features of POS systems that help stores decide on sales, promotions, and other marketing efforts geared to boost revenue and profitability.
10. Return on Investment Capital
This metric is designed to help retailers calculate the profit they can expect to realize as a result of their investments in new technologies, updated operations, and other enhancements to the business. It indicates how efficiently capital can be applied to investment opportunities, as well as the investment required for the business to meet its profit goals. Return on investment capital is often paired with the cost of capital to the business to ensure that the investment creates value for the company.
There is tremendous insight for a retailer to gain by applying sales activity metrics to the data collected by its POS system. However, making sense of the numbers often requires the aid of an experienced POS vendor who works with you to craft the optimal POS solution for your business’ needs.
When you partner with talech for your retail technology needs, we devote our time to identify your business challenges. We then work with you to craft an innovative POS solution that will provide invaluable sales activity metrics you can use to enhance your business.
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