Solid teamwork results in happy customers, but the ever-growing sales phrases and acronyms often cause miscommunication and delayed decisions.
Unify your team with this sales glossary. So, the next time you coordinate sales strategies, set up campaigns, create reports, or anything in between, nothing is lost in translation.
A-Z Glossary of Sales Terminology
Your sales team has one job: increase revenue.
Good sales teams focus on attracting customers, but great sales teams focus their attention on revenue, pulling on four levers that control the amount of revenue they generate. This may sound complex, but it’s not. In reality, there are only four ways your company can increase revenue.
Increasing revenue begins with understanding important sales terminology.
This glossary is split into six categories.
These categories are important because they give your education and training direction.
If your profit per employee (sales team) is low across the board, you can take a closer look at your team’s daily activities (via your CRM). On the other hand, if you see that your profit is low with specific sales reps, you know you can investigate then (a.) retrain, (b.) move laterally, or (c.) let go of these problem sales reps.
It begins with terminology.
This measures the amount of subscription or recurring revenue that flows into your company annually, normalized for the calendar year or a given period.
You get this number by dividing total sales dollars for a given period by the number of sales/closed deals.
This event takes place at any point during the sales process. Customers stop communicating, disengage from the sales process, the account is closed, and the opportunity for a sale is lost.
The final step in the process where customers sign your agreement, make a purchase and officially become a customer or repeat customer.
The compensation, reward, or incentive your sales reps (and sales team) receive in exchange for closing the sale. The sales commission is typically a percentage of the product’s sale price. If you sell a specific product for $150, a 15% sales commission would be $22.50.
The number of desired actions “known as conversions” divided by the total number of prospects. These desired actions could be an opt-in, a retainer, subscription, or flat fee purchase. So, if you persuade 80 out of 1,000 prospects to buy your product or service, your conversion rate would be 8% since 80 customers ÷ 1,000 prospects = an 8% conversion rate.
An agreement made between two parties – buyer and seller. These agreements are typically a value exchange. Deals can be arranged in various ways, including win/win, lose/win, win/lose, and lose/lose; the ideal outcome is, of course, win/win.
These are prospects who share their contact data and personal information with you. At first glance, this seems generic; in reality, it’s a useful metric you can use to gauge prospect commitment and lead quality right off the bat. For example, Prospect A contacts you but shares their name, email, and phone number. Prospect B shares the above info, but they also share their budget, decision timeframe, pain points, and the best times to reach you. If we’re looking at this rationally, prospect b is the more qualified prospect, simply because they were more willing to be open, transparent, and vulnerable. As a result, the likelihood of a completed sale is high. Unless they’ve stated otherwise, IQLs are typically top of the funnel (ToFu).
Also known as prospecting, is the list of leads or contacts you plan to pitch or approach. Lead generation focuses on accumulating a steady supply of prospects who are able and willing to buy. When leads meet both criteria, they’re known as a marketing qualified lead (MQL) or sales qualified lead (SQL).
These are leads that your marketing team has vetted. These prospects have self-identified; they’ve expressed interest or desire for your product or service. This isn’t simply about prospects sharing their contact information. MQLs display greater attentiveness, engagement, and responsiveness, indicating greater interest and commitment. MQLs are typically top or middle of the funnel.
Your pitch is the offer, incentive, or value you extend to your prospects. When you ask customers for a commitment, or you state a desired action you’d like them to take, you’re making a “pitch” to your customers.
These are the prospects verified by marketing teams. MQLs are higher quality leads. Sales teams then verify and confirm these leads; these prospects have expressed interest in your product or service and are ready to talk to a salesperson, becoming a SQL.
Selling to existing customers, enticing them to spend more on additional products and services. An upsell can move in any direction (e.g., cross-selling, upselling, down-selling, etc.), but it’s still an upsell if existing customers spend more money with you. Upselling is an essential part of increasing your customer’s CLTV.
BoFu is the zone of the sales funnel where the prospect is almost ready to close on a purchase. Prospects at this stage are sales-qualified leads (SQL) and are fully prepared to make a decision. BoFu consists of a small pool of hot prospects who are able and willing to buy. BoFu customers are highly educated; they’ve done their research and are much clearer on the product or service they’re looking for.
These signals are verbal (high engagement, sharing information) or nonverbal (open body language, gesture clusters that communicate interest) cues from a potential customer that they are ready to close the deal and purchase a service or product. Buying signals include – sharing pain points, attentiveness, nodding their head, being personable, price transparency, questions about post-sales support, payment plans, etc.
The make-or-break moment when prospects make their final decision to sign the agreement and purchase your product or service.
This is the relationship-building portion of your sales or marketing funnel. You’ve established a connection with a specific prospect, and you’re building rapport and a trust relationship with the prospects in your list. The significant part about MoFu is the fact that your audience consists of already captured prospects and audience members. These are your fans and followers on social media, your email subscribers, custom audiences, and offline or in-store lists.
This is all about eligibility; prospects evaluate your company to see if you’re a good fit. When salespeople pre qualify customers, they determine whether that customer has the ability and willingness to buy their product or service. It’s an essential step since, at any given moment, only 3% of your prospects are ready to buy.
This is a series of predictable and repeatable steps required to convert a lead to a customer. These steps vary tremendously but typically include prospecting, contact, qualification, nurturing, pitching, addressing objections, negotiation, and closing. The steps in the sales cycle are oriented around a customer’s decision-making process.
This is a visual representation of the sales process and a systematic outline of the sales activities needed to take customers from the top of your funnel to the bottom. The steps in a pipeline vary from company to company; they’re typically five to seven steps that follow a logical series of actions (e.g., qualification, needs analysis, quote, negotiation, and close).
The specific group of prospects your company focuses its attention on, marketing to them to convert these prospects into customers. Your target market is dependent on – demographic, psychographic, ethnographic, behavior, and geography, among other factors. The more precise your target market, the easier it is to sell to your audience.
This is the beginning of the buyer’s journey with your company. From a brand perspective, ToFu is all about casting a wide net, and attracting as many people as possible. That way, you can build awareness, exposing your audience to your company, products, and services. From the customer’s perspective, ToFu refers to the level of education a customer has about your product or service. ToFu prospects have the least amount of education.
In sales, A/B testing, otherwise known as split testing, is an experiment that uses two variants of sales materials or approaches, using a “control” (the original or starting point) and your “treatment” (a modification or variant). You can use this method to test ad and sales copy, landing pages, offers, pitches, and a variety of marketing strategies. It’s part of a systematic process sales teams use to identify what works in sales and marketing.
This is the average value of your customer contracts over a specific period of time (e.g., one year). The formula is straightforward; you add the total contract value over a set time, then divide it by the number of contracts received. This is a helpful way to identify the products or services that are driving revenue, profit, and value.
As the name suggests, this metric measures the amount of time sales reps follow up with prospects and customers. This metric is easy to misuse; many sales reps struggle with follow up so it would be easy to assume that more is better. A better approach would be to use this metric as a volume knob. Use it to identify the number of follow-ups that attract or repel customers. This metric is especially powerful when paired with other metrics (e.g., meetings set, average order values, or conversion rate). This metric is useful at the individual, group, department, and company levels.
This is an average of the revenue for your company, over a set period of time. It’s important because this enables your team to forecast revenue or make financial projections. This metric is another canary in the coal mine; it gives you context, showing you the amount of revenue that should be coming in at a particular time of the year. If you’re over or under the trend, it’s a helpful indicator that tells managers to do some digging so they can find out why.
Here’s the formula for average revenue: Total Revenue / Total Units Sold = Average Revenue Per Unit
Also known as the attrition rate, this refers to the number of customers that end their business relationship with your company over a set time. Your churn rate is also important because it’s a subtle indicator of the number of customers your company can reasonably support at any given time.
Here’s the formula for churn rate: # of Customers Lost / Total # of Customers at the start of the Time Period = Churn Rate
The number of desired actions “conversions” divided by the total number of prospects. These desired actions could be an opt-in, a retainer, a subscription, or a flat fee purchase. So, if you persuade 80 out of 1,000 prospects to buy your product or service, your conversion rate would be 8% since 80 customers ÷ 1,000 prospects = an 8% conversion rate.
The amount of resources and costs required to acquire a new customer. To calculate CAC, you must divide the money and time spent on acquiring new customers in a given period by the number of new customers. This metric is valuable when you want to evaluate how much money you spend while scaling up your business.
This is an estimate of the total revenue you expect to receive from a customer throughout their relationship with your company. This metric is the canary in the coal mine. It helps sales teams identify whether they’re leaving money on the table or if revenue leaks are a problem. For example, If your CRM tells you that your CLTV ranges from $9,000 to $11,000 over two years, but you see that customers are suddenly spending $3,000 over two years, you know something is wrong.
The formula for CLTV is: Average Total Order Amount * Average # Purchases Per Year * Retention Rate = CLTV.
These are the number of sales presentations you want to complete over a specific time. If demos are a large part of your business and you know they lead to sales, this is an essential detail to add. Demos are common in a variety of industries, though they’re known by different names (i.e., free samples). These demos must be tied to next steps and important goals that are aligned with your prospect’s desires.
This metric answers the question, “how much will we have to spend on closing each sale?” Believe it or not, this is an incredibly helpful training metric. It’s easy to point out why your sales reps should not promise a $75% discount if they know your product retails for $150 and it costs $100 to close a sale.
The formula for expense-to-sales ratio is: Operating expense / net sales * 100 = Expense-to-sales ratio
This benchmark can be simplified to a simple idea. The more sales you attempt, the more sales you’ll make. This seems obvious (and it is) until you realize that sales reps spend less than 36% of their time selling. They’re focused on meetings, administrative tasks, research, presentation, etc., but little time on selling.
Your organization needs to determine what you consider a “qualified lead.” To do that, you’ll need to know about the various types of leads. These types include – IQLs, MQLs, and SQLs, as well as hot, warm, and cold leads.
How many leads do you need in your sales pipeline? Are the leads you have enough to meet your revenue goals? Pipeline coverage answers these questions. Here’s how it works.
If you have a revenue goal of $1 million and all of the opportunities in your pipeline are valued at $1 million, you have 1x coverage. You’d have to close every single deal in your pipeline to meet your revenue goal (which is pretty unlikely). If the opportunities in your pipeline are worth $6 million, you’re much more likely to meet your goal, as you’d only need to close a portion of the prospects in your pipeline to meet that goal.
These are leading indicators that enable companies to forecast revenue, opportunities, demand, etc. Many organizations send quotes, proposals, and sales packages out without qualifying the prospect, so, in these cases, this metric isn’t as helpful as it should be. Prequalify prospects before the proposal or quote is created and its forecasting value skyrockets.
Prequalifying:
Will immediately allow you to gauge a prospects level of commitment. It’s as simple as setting a date and time to go over your proposal or quote with them. If they’re serious, they’ll make an appointment. They’ll stall for time If they’re not being transparent with you.
These are performance targets individual salespeople must meet to earn their incentive pay. This is distinct from metrics like conversion or win rate as these metrics are extrinsically focused and focused on the past. Quotas are intrinsically focused (from the salesperson’s point of view) and, as leading indicators, are focused on the future. Quotas can be powerful motivators when they’re used appropriately.
This metric determines which salespeople have met their quota. Quota attainment is typically measured on a monthly, quarterly, or annual basis. Quota attainment is essential because it enables you to identify your salespeople. Are you dealing with an A-player potential which just needs some help and training, or are you dealing with a salesperson who isn’t a good fit for the role? Quota attainment is a helpful starting point for your analysis.
This is the percentage of customers who continue to use your product or service over a pre-determined period. Your retention rate is a helpful indicator of problem areas. Poor retention stems from poor customer service, unmet expectations, a failure to deliver on promises or poor experiences. Use the following formula to calculate your customer retention rate:
(Customers at the End – Customers Acquired / Customers at the Start) * 100 = CRR
475 Customers at the End – 50 Customers Acquired / 450 Customers at the Start * 100 = 94% Retention Rate
If you’re using a CRM system in conjunction with your analytics, you should be able to identify the revenue you’re receiving from new and current customers. Several sources state that 30% of your revenue should come from new sources, with current customers carrying the remaining 70%. This will vary by industry, but the general idea behind this is that it’s cheaper to upsell an existing customer than to acquire a new one.
Consistent documentation of a company’s sales performance over time. Sales reports are an essential part of a healthy sales team. Salespeople provide the company with the lifeblood (cash flow) it needs to survive. Your sales reports should provide you with performance data on a daily, weekly, monthly, quarterly, annual, and ad hoc basis. Primary data (e.g., deals won/lost, lead conversion, revenue), secondary data (e.g., pipeline coverage, quota attainment, follow-up attempts, etc.), and tertiary data all have their place.
These are quotas at the group or team level. Sales targets are goals the sales team can rally around, giving everyone on the team clarity of purpose and direction. Sales targets are typically focused around a quantifiable goal, e.g., units sold, gross revenue, proposals sent, etc. Sales targets are macro-level goals that provide individual salespeople with the micro-level goals they need to perform.
This is a key metric that identifies productivity leaks. If your salespeople spend most of their time on administrative activities, it’s obvious that sales are more difficult to come by. Remember, sales reps spend less than 36% of their time selling. They’re focused on meetings, administrative tasks, research, presentation, etc., but little time on selling.
This metric can be broken down into subcategories (e.g., total revenue by product, service, account, or customer). This metric helps management identify profitable product/service lines, profitable and unprofitable customers, or business units and product lines with growth potential. It also helps to identify shrinking demand in the marketplace.
Win rate by count is the ratio of deals won to the number of total closed opportunities.
This is an unconventional approach to selling. Instead of focusing on closing sales, sales teams train their reps to focus on the activities that produce sales. The idea here is simple. You can close more deals by focusing on the activities that are within your control. So instead of high-pressure closing tactics, sales reps focus on prospecting, disqualifying customers, setting appointments, sending proposals, and creating offers for the right customers.
ABM is a business marketing strategy where sales and marketing teams work together, sharing resources and collaborating to close deals in a specific market or segment. Sales and marketing work to personalize their marketing efforts around the needs of their target segment, increasing customer personalization and improving conversion rates.
Stands for Budget, Authority, Need, and Timeline; it’s a sales qualification methodology that evaluates whether a lead is qualified and worth pursuing. Prospects who don’t have at least one of these four factors are unqualified candidates and should be nurtured further or discarded.
This is when someone contacts your company for the first time, wanting to know more about your product or service.
Getting in contact with a potential customer with no prior relationship in hopes of informing them about your product or service or making an appointment. While many experts believe cold calling is dead, others use it with great success by modifying their strategies. Channel partnerships, Ad assisted cold calling, and reverse cold calling.
An inventory of your prospect or customer’s contact and account information, as well as their interactions with your company, in a centralized system accessible to salespeople, fulfillment, support, and management teams.
Demand Generation:
When your marketing team attempts to create excitement or perceived need over a company’s service or product, they engage in demand generation. Sales professionals often use this marketing style to promote new products, tap into fresh markets, increase customer loyalty and generate a buzz among consumers.
Importing contact, company, lead or deal data from a platform into a customer relationship management (CRM) tool.
The obvious definition is this is a demonstration of your product or service. The not-so-obvious answer is that a demo is a sales presentation intended to persuade your prospect to buy. Great sales demos accomplish several distinct goals (a.) They provide customers with compelling reasons to use your product, (b.) give a set question and answer period where salespeople can address fears, frustrations, concerns, objections, and risks, (c.) provide an irresistible offer that incentives customers to take immediate action.
Words that create stress and concern in your prospect, increasing friction and resistance in the sales process. These words typically establish (premature) commitment before a prospect is ready to decide. Pressure words include – agreement, contract, sign up, deposit, decision maker, legalities, and payment.
Reverse cold calling is often viewed as dishonest; telemarketers are known for using false pretenses to get prospects to contact them. However, reverse cold calling can be used ethically, especially with advertising and channel partnerships. A targeted voicemail or message to the right prospect at the right time can be effective and profitable.
This is the process of recruiting, training, developing, coordinating, managing, and supporting a sales team. Effective sales management means paying attention to the team, groups, and individuals, working to optimize the various facets of the team to maximize performance.
This refers to the sales strategies, tactics, and operations you’ll need to activities to achieve your desired goals. Sales management planning uses the lessons from previous sales to create a plan that accounts for the target audience, risks, and pitfalls you’ll need to deal with.
This answers the question, “How fast are we making money?” Sales velocity measures the time a lead enters and travels through the pipeline from beginning to close.
A customer relationship management tool feature that organizes your deals and facets of the sales process.
The term CRM refers to two things: (1.) a process businesses can use to build strong relationships with customers and (2.) Software that brings your customer data into a single, centralized location, enabling your team to manage your customer relationships and your sales pipeline from a centralized interface.
This is another name for your CRM system; a deal tracker is a way for brands to store customer data and communication, document pipeline progress and the status of opportunities, and receive sales reporting. While a CRM is a deal tracker, not all deal trackers are CRMs.
An ADR is a sales specialist who focuses on generating new leads for account executives. These specialists help to maintain client accounts, developing strategic techniques to create additional sales opportunities for sales reps and account executives.
This is the person who’s responsible for authorizing purchase decisions. Decision makers are often difficult to get a hold of; they’re often hidden behind researchers, influencers, gatekeepers, and assistants who are expected to shield decision makers from eager or aggressive salespeople.
This is a prospect (person or entity) with the ability and willingness to buy. When leads meet both of these criteria, and they pass BANT (and other qualification criteria), they’re known as a marketing qualified lead (MQL) or sales qualified lead (SQL). The terms lead, and prospect is often used synonymously.
A person who works directly with customers to sell a product or service.
This is the leader of a sales team responsible (in whole or part) for recruiting, training, developing, coordinating, managing, and supporting members of their sales team. They oversee a company’s sales process, shepherding and guiding their sales team so individual members can perform and the company reaches its sales targets.
Understanding sales terminology is essential. These terms help to increase productivity; they give your education and training direction.
Jargon is counterproductive when misused; when the right terminology is used appropriately, it helps salespeople quickly and concisely communicate big, complex ideas quickly and concisely. Directing the team’s attention and getting everyone on the same page, it’s much easier when everyone speaks the same language.
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