It's easy to get so immersed in the day-to-day demands of running a business that you forget to take the time to carefully evaluate your progress in order to ensure that your company is on the right track.
Having the ability to measure performance is especially important for American exporters. One of the most important best practices for American exporters is to regularly benchmark performance against your own well-defined key performance indicators (KPIs). A good time to do that is mid-year, in order to ensure that you are achieving your business objectives.
“Benchmarking performance relative to peers and historical performance is critical for all key elements of performance, not just exports," notes Todd M. Alessandri, associate professor of international business and strategy at the D'Amore-McKim School of Business at Northeastern University in Boston. “This benchmarking process helps companies to understand performance trends and identify warning signals. By benchmarking export performance, the company understands trends in exports that will help it remain competitive as well as prepare for the future."
Developing KPIs for exporting should be part of every exporter's business plan for expanding overseas. KPIs will help exporters implement an actionable methodology for analyzing and reporting on mission-critical operational data. As the experts at consulting form Deloitte note, it is important to have an "efficient control system for monitoring the implementation of key strategic changes."
While KPIs must be customized to your own industry sector and business requirements, three key areas of focus should include analyzing data on new growth measures, monitoring the health of existing customer relationships, and benchmarking operational data against projections and historic costs. Within these three areas, there are 10 KPIs that can help you measure your global export performance at the mid-year mark.
Analyze New Growth Measures
Start by analyzing new leads and opportunities, which represent potential future growth. In addition to helping to measure expansion into new markets, new opportunities provide a way to replace lost sales in order to meet overall revenue growth targets.
It also is important to get a handle on new client acquisition rates, which measure how successful your conversion efforts are in relationship to costs for generating new leads.
Another good barometer for new growth are up-sell and cross-sell rates, which measure new business from existing clients. “This captures synergies across product lines and the ability to capture more of the customer's wallet, in general," says Alessandri. “ Specific to export performance, this is where the nature of, and relationship with, export partners can have a strong effect."
Monitor the Health of Existing Customer Relationships
Benchmarking sales volume by location and channel is essential for knowing where your sales are coming from, both geographically and online. “This measure helps to know which markets are successful and which ones are not," says Alessandri. “It also helps to understand the trend for each location, particularly with historical factors in mind."
Comparing your total export volume year-to-date against the same period the previous year is another key benchmark. This will help you understand overall trends, and will reveal areas in which sales results with existing customers are not growing as projected.
“It is particularly critical," notes Alessandri, “to understand whether the drivers of changes in exports are driven by external conditions or by company-specific factors."
In addition to monitoring and protecting your existing client base, you need to identify key operational indicators related to performance, outcomes and potential return on investment (ROI).
Benchmark Operational Metrics
One operational benchmark that relates to existing sales is competitor pricing. This can help you understand your relative performance and, for example, help you to identify if competitive pressures are resulting in lost sales.
Another important KPI is existing client engagement, although it can be difficult to measure. “Obviously, understanding how successful your company is in working with and satisfying its clients is important information," says Alessandri. “But, the devil is in the details. It is also helpful to understand client retention in combination with this measure."
As Bain & Co. notes, your Net Promoter Score is a way to gauge the efficiency of your company's growth by taking the percentage of customers who are promoters and subtracting the percentage who are detractors. “This is a useful indicator of how customers feel about a company's products and services," says Alessandri. “However, it is also susceptible to some bias, depending on the process for gathering this input from customers."
Another important KPI is sales cycle length, which is essential for understanding trends in export performance. “As a company allocates resources and takes actions to influence export performance, this measure will help them to understand the timeline and expectations for the performance implications of such actions," says Alessandri.
It is particularly critical [...] to understand whether the drivers of changes in exports are driven by external conditions or by company-specific factors.
—Todd M. Alessandri, associate professor of international business and strategy, D'Amore-McKim School of Business at Northeastern University
Finally measuring employee satisfaction is another indicator that can provide insight into overall performance. While this measure is much broader than export performance, it can uncover indirect factors, such as understaffing or management deficiencies, that are impeding sales growth and progress toward meeting the company's export goals.
Ultimately, notes Alessandri, effective KPIs start with a well-developed strategy for differentiating your company from the competition. “The benchmarking of export performance provides your company with a comparison of its export performance relative to some standard," he says. “The critical step is to understand why your company's export performance is higher or lower than the benchmark. You must analyze the nature of the differences to understand what steps you need to take to improve your export performance."
Photo: Getty Images
