Sales Conversion: What is an Acceptable Conversion Rate ?
Most businesses are obsessed with metrics. They want to know the conversion from cold emails, paid ads, and influencer outreach. However, the only conversion rate that matters is that of sales conversion. And this unit of measurement has little to do with open rates, click-through rates, and the number of phone calls made daily.
What matters is the number of sales opportunities closed, MQLs that end up as SQLS, and in turn, SQLs that end in closed won. For that reason, salespeople are always on the lookout for ways to improve conversion rates, as well as the best rate to measure against. And those are some of the few things you will be learning in this guide.
But first, What do salespeople mean when they talk about conversion rate?
What’s Sales Conversion?
Conversion rates mean different things in several industries. For digital marketers, it’s the number of clicks and sign-ups on their lead magnet landing page, for content marketers, it’s the number of website visitors converted into leads.
But for sales, its context runs deeper. Sales professionals see conversion rate as the ratio of leads converted to customers by the sales team. Leads in this aspect, do not refer to contacts i.e people that provide their email address in exchange for free information or webinar signups.
Instead, we’re talking about the MQLs and SQLs. For better comprehension, MQLs are prospects that sign up for a demo call, while SQLs take it a step further to show up in the meeting and indicate interest in your product.
As we’ve come to notice, there are several definitions for both terms, and it varies from company to company. But there’s one aspect of sales conversion that brings even more confusion among salespeople.
And it’s the question of the best or acceptable conversion rate to measure against.
What Is a Good Sales Conversion Rate for Your Business?
There’s no definite answer. It depends on several factors which include your conversion goal, industry, and lead quality. For instance, someone selling an eCommerce product might aim for a conversion rate of 40% but gunning for the same number would be almost impossible for a company that offers enterprise-level products with a sales cycle of 12 months.
Hence, when we talk about the best conversion rate, the first step is to avoid comparison with other industries that sell something different from yours. The conversion rate should be determined in-house, and it has to tie in with your revenue goal.
To do this, you need to determine your MRR and identify the number of deals you have to close to meet your said goal. This will also inform sales of the number of calls they have to make daily and the kind of leads to let into theirpipeline . So, depending on your revenue goal, a 10% or 20% conversion rate might be ideal.
How to Calculate Sales Conversion
In most industries, sales conversion is measured by calculating the total number of leads against the number of closed deals. But in sales, specificity is key. Regular contacts whose intention is to download lead magnets aren’t prioritized.
Instead, a higher priority is given to SQLs (leads handed off to sales by marketing). So, for instance, if marketing generates 1,000 leads, 100 of those are marked SQLs ( or sales opportunity) and 20 of those end up as closed won, here’s how you calculate the conversion rate:
Sales Conversion Rate= (Number of Sales Closed / Number of Sales opportunities) *100
Plug the number above into this formula, and you end up with (20 / 100) *100 = 20% conversion rate.
How to Improve Sales Conversion
Will a 20% conversion rate help you meet your revenue target? Or do you need to go higher to achieve that? If you answered yes, to the second question, here are a few strategies you can use to improve your conversion rate
- Reach out to more customers i.e have your sales team make more calls daily
- Set up a lead qualification system and only allow prospects with conversion opportunities into your funnel
- Analyze each sales rep’s closing rate, and see how you can help low performers improve
- Pair top performers with low performers to help the latter learn hidden strategies
- Improve customer engagement during product demos to discover customer needs and pain points.
By measuring conversion rate, you can gain insights into what’s going on within your pipeline and what needs to change. A low conversion rate means less revenue, and more struggle to achieve your income goal. What could be wrong? Perhaps leads aren’t well qualified, or someone isn’t closing the way they should.
In that case, you can pair them with the high performers in your team. And when you get to that point where you need your high performers to design their sales process and teach it to struggling reps,SalesDeck is that tool you will need. Want to know how SalesDeck helps your team improve their conversion rate? Become a part of our community to keep up with updates or join the Early Adopter Program.