IS Performance Measurement & KPIs 3 — Questions and Answers
Question 1: Which of the following is the correct formula for calculating Customer Lifetime Value (CLV)?
- Annual revenue × number of customers
- Average purchase value × purchase frequency × average customer lifespan (Correct answer)
- Total revenue ÷ churn rate
- Gross margin × monthly active users
Correct answer: Average purchase value × purchase frequency × average customer lifespan
CLV = average purchase value × purchase frequency × average customer lifespan, representing the total revenue expected from a customer.
Question 2: A sales leader notices that conversion rates are high early in the funnel but drop sharply at the proposal stage. What should they analyze?
- Top-of-funnel advertising spend
- The quality and relevance of proposals being sent (Correct answer)
- The number of leads entering the funnel
- Email open rates for marketing campaigns
Correct answer: The quality and relevance of proposals being sent
A drop at the proposal stage indicates the proposal content, pricing, or timing may not be aligned with prospect needs.
Question 3: What is the primary purpose of tracking 'quota attainment' at the individual rep level?
- To determine office real estate needs
- To identify top performers, coaching needs, and forecast accuracy (Correct answer)
- To calculate marketing ROI
- To set product development priorities
Correct answer: To identify top performers, coaching needs, and forecast accuracy
Individual quota attainment reveals performance gaps, informs coaching decisions, and validates whether quotas are set appropriately.
Question 4: When tracking KPIs, what does 'leading indicator' mean in an inbound sales context?
- A metric that shows results after the sales period ends
- A metric that predicts future performance based on current activity (Correct answer)
- The most important KPI on the dashboard
- A metric used only by sales leadership
Correct answer: A metric that predicts future performance based on current activity
Leading indicators like call volume and demos scheduled predict future revenue, allowing managers to course-correct before the period ends.
Question 5: A sales team's MRR grew 15% but churn rate also increased from 3% to 7%. What is the correct interpretation?
- The team is performing exceptionally well overall
- New revenue growth may be masking a retention problem that threatens long-term MRR (Correct answer)
- Churn rate is irrelevant as long as MRR grows
- The team should stop acquiring new customers temporarily
Correct answer: New revenue growth may be masking a retention problem that threatens long-term MRR
Rising churn erodes the base of recurring revenue, meaning the team must sell even faster just to maintain MRR, signaling a sustainability risk.
Question 6: Which inbound sales KPI measures the average dollar value generated per sales call or conversation?
- Revenue per rep
- Revenue per call (Correct answer)
- Average contract value
- Customer acquisition cost
Correct answer: Revenue per call
Revenue per call helps assess the efficiency and value of each sales interaction as a unit of effort.
Question 7: A manager wants to know if the sales team is spending time on the right prospects. Which KPI best answers this question?
- Total dials per day
- Percentage of pipeline from ideal customer profile (ICP) accounts (Correct answer)
- Email response rate
- Number of demos completed
Correct answer: Percentage of pipeline from ideal customer profile (ICP) accounts
Tracking ICP-fit percentage in the pipeline reveals whether reps are pursuing prospects most likely to close and retain.
IS Performance Measurement & KPIs 3
Which of the following is the correct formula for calculating Customer Lifetime Value (CLV)?