Sales Velocity (Turn-Around time to achieve sales)

Definition

This KPI class assesses the performance on how fast are you able to close a sale, from initiation or a certain step within the sales process.

Explanation & Specification

Sales velocity is the quickness with which you close a sale, before a customer looses interest or is pulled away by the competition. This KPI points to the level of discipline within the organization in following a sales lead and the infrastructure to support a fast closure. While this page is complete, within itself, you can get more background from the 'Sales Velocity' topic in 'sales revenue management' chapter, with in 'Sales & Distribution' section.

Some examples of these KPIs in this KPI-class are:

• TAT for initiation to final closure
• TAT for Initiation to product demo.
• TAT for initiation to risk assessment (for assets products in banking and insurance) Etc.

Complexities in TAT

Turn-around time can be a tricky, from the following perspective, especially in a scenario where the sales closure passes through different functions and activities. Sales people blame supply-chain delays on a high TAT, and supply-chain blames on low quality of fulfillment inputs resulting in delay (for example half-filled application forms). Following complexities are sometimes needed to be built to handle the same:

• Each step defined at a granular level enough to be assigned to one specific function. As multiple functions handle different steps, single accountability for a given step helps in better performance.
• Sometime there is a to-and-fro between the steps. For example a customer application is in 'Application processing' stage, and due to discrepancy, it is sent back to the customer for re-fill. One may like to track on if a sale process repeats a step, due to quality issues.

One also needs to define the start and completion criteria of a step, otherwise you may have huge data quality issues. Some examples are:

• Sales closure can be customer raising a purchase order OR delivery of goods OR raising an Invoice
• Sales Initiation can be telemarketing call to customer OR first Customer Meeting

It is also possible that some sales finally do not happen, but you may still like to measure the TATs for the steps completed in that transaction. This will help you to do problem diagnostics on why you lost the sales. For example, customer may cancel his loan application, but you may still like to know the TAT from the time he submitted his application and the time at which he cancelled it. If the time period is large, this may point to reason of cancellation.

Interpretation and Analysis

High and Low TATs should be seen in context of the industry benchmarks and also the kind of products and markets you are dealing in. The objective is to optimize TATs given your business objectives.

The plusses in the favor of low TATs:

• Higher customer satisfaction
• Higher sales staff satisfaction
• Better inventory management
• Overall preferred vs. high TATs
• More efficient

Few plusses in the favor of high TATs are:

• Lower cost
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• You may enjoy the float (time value of money), if a customer has given you monies (though at the cost of higher inventories)
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• Sometimes better quality

Variability in TATs

Measures-Facts associated with this KPI Class (Refer dimensional modeling in data Warehouse section for measures-facts)

• Sales Revenue
• Sales Units
• Number of turn-around time days

Dimensions and some of their attributes (or cuts) over which you can slice and dice the KPI.

• Product
• Location
• Sales Channel
• Period
• Turn-around time Slab

Direction of improvement

Optimize

Industry Relevance

All

Functional Relevance

Sales & Distribution