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Lee Tsao
Lee has more than 20 years experience in Oracle focused business and technology solutions, and “Big Four” Management Consulting Services. Lee joined BizTech as a Partner working with the other members of the senior management team to lead and expand the company’s sales and delivery operations. Lee’s specific area of focus includes Business Intelligence and Analytics solutions, enhancing Business Insight for his clients. Lee has won certifications and awards including Oracle Applications Sales Consultant of the Year in Oracle’s Mid-Atlantic region. He now serves Director of the Mid-Atlantic Oracle Applications Users Group, (MAOAUG). Lee is a Certified Oracle Applied Technologist and IBI instructor. Lee received his B.S. in Commerce & Engineering from Drexel University in Pennsylvania.
KPI Demystified Series
Date: April 21st, 2011
Categories: Oracle Business Intelligence
Just about every for profit business organization generates it precious life blood (revenue) from sales, and the current SFA/CRM market is estimated by Gartner to exceed $US 9 Billion in annual spend. However, a 2009 study revealed that only 39% of corporate executives believe their employees have the right tools and authority to solve SFA/CRM related client issues (source: Strativity Group, Inc 2009). So an astounding 61% do not feel they have the right tools in place.
We here at BizTech believe that having the right level of monitoring and measurement by deploying relatively simple sales related key performance indicators can help identify problems and enable corrective action thereby maximizing the value from SFA/CRM investments.
Over the next weeks we will showcase some Sales related KPIs that we feel are simple to measure, and provide high value back to the organization, so let’s start with some Top sales related KPIs.
KPI Name: Average sales per customer or transaction.
KPI Description: Total sales for a given period divided by the number of customers or transactions for the same period.
Measure Frequency: Monthly or Quarterly is suitable for most organizations
Causes for Variability: If your average sales per transaction was $100K and now it’s $85K, it is an alert for your team to investigate if (1) The sales price is being lowered by product marketing, (2) Your sales team is giving away higher discounts due to product quality or competition, (3) Your business is subject to seasonality and now entering a lower sales transaction season, or it could be many other reasons.
Why it’s important: Measuring this trend helps you to determine the “Return” on your sales efforts. Understanding what influences this KPI can help maximize your return on each dollar invested in Sales, Marketing, Promotions, and Customer retention initiatives.
What to do next: Ensure your SFA/CRM/ERP system is capturing sales by sales order and sales by customer over time. Seasonal trends are well represented in horizontal line charts. You can contact Lee Tsao (KPI Crusader) at ltsao@biztech.com and I am happy to explore this with you further. Until next time, keep up the KPI crusade!
KPI Demystified Series
Date: March 18th, 2011
Categories: Oracle Business Intelligence
Most KPIs become common sense, once you understand the underlying measures. I want to introduce two important measures that are often ignored by companies. The first measure is: Cost to acquire customers (CAC). To calculate CAC, consider and capture all of costs (Lead generation, Marketing, Sales, Partnerships, Support staff) required to capture a customer. If this proves to be too cumbersome, create a baseline estimate. We can help you derive this just call us.
The second measure to consider is lifetime value (LTV) of your customers. This number may be significantly different per customer based on your business, take the average to set the baseline estimate.
Once you have CAC and LTV values, a simple calculation of LTV/CAC will give you great insight into the profit ($ Returned) per sales effort ($ Invested). The higher the number, the more attractive your business because each $ invested yield higher $ returned. For example, if it costs $10,000 to sign on a customer, and the customer relationship can yield $150,000 over the life of the relationship, the ratio is $150,000 / $10,000 = 15. For each $1 you invest you will yield $15 back to your business.
On the negative side, if you are an ecommerce start-up and it costs $250 to sign on a customer, and the customer relationship can yield $150 over the life of the relationship, the ratio is $150 / $250 = 0.6 (Anything less than 1 is operating at a loss). For each $1 you invest you will yield $.60 back to your business. You may know some classic Internet flame-outs with this type of ratios.
Why it’s important: Measuring this ratio can help you determine projected profit and loss with a fair level of confidence, versus the method of adding or subtracting a certain percent based on historical performance. You can also embark on campaigns to (1) Lower your CAC, and (2) Increase you LTV over time.
What to do next: Ensure you are aware of the cost elements required to sign on a customer, and start to measure the lifetime value of each customer type. Remember a ratio less than 1 is indicative of a projected loss. You can contact Lee Tsao (KPI Crusader) at ltsao@biztech.com and I am happy to explore this with you further. Until next time, keep up the KPI crusade!
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