Metrics are the best way to identify what’s working for your audience and what isn’t.
A metric is a quantifiable piece of data used to track, monitor and evaluate the success or failure of a company’s marketing efforts. The process of tracking customer metrics can get time-consuming. It’s important to know which metrics are worth focusing on.
Customer metrics give us insight on where we are at with our campaigns and if we are achieving our long-term and short-term goals. In the end, everyone’s goal is making and increasing profit.
Is your company growing or declining? You’ll know never if you aren’t tracking these important customer metrics.
The most important customer metrics: Follow the 5 C’s
1. Customer Lifetime Value (CLV)
The CLV is the amount of money a customer will generate for your business over their lifetime (hence the name). You might be wondering, how in the heck you would measure something like this?
Well, there’s a formula. We’re not about to get into the math, but here’s a great article on how to calculate this number and what to do with your findings.
You’re going to have short-term and long-term customers. This number helps you keep your current customers and tells you when you need to attract new ones.
This number also helps with determining your company’s retention and customer acquisition – which we will get into next:
2. Cost Per Acquisition (CPA)
The CPA is the cost associated with acquiring each customer. This metric measures the success of your company’s campaigns. It shows how much money you’re spending to acquire each customer.
So if the CPA rate is very high, you’ll want to reevaluate and look at another method of acquiring customers with a lower price.
This metric relates to the Customer Lifetime Value (CLV) because it ties together the value of your customer and how much to spend on them.
Cost per acquisition is measured by taking the amount of money spent on a marketing campaign and dividing it by the number of customers gained since the marketing campaign went live.
Is this number high or low? You’ll want to shoot for a low number. The lower, the better, and the more money you can spend on other things!
3. Customer Satisfaction
We all know what customer satisfaction means — it’s what the reviews and the five-star rating on a company’s website tell us. It’s how likely a customer is to make a positive recommendation or come back for a repeat purchase.
As one of the most important customer metrics, it can be one of the hardest to track down.
In order to find out how satisfied your customers are, you’ll have to ask them to fill out a survey, partake in an interview or focus group, etc. Throw an incentive in the mix and you’ll get much more results.
Just remember to be consistent and treat every customer and process the same. This is key to keeping your satisfaction levels the highest.
If you’re seeing low satisfaction, it’s definitely time to change something. Customer satisfaction can lead to many other key metrics like referrals, which impact your business big time.
4. Churn Rate
The churn rate is the rate at which customers leave your site and stop doing business with you. If you run a SaaS or a COGS company, churn rate is something you want a low number in.
A churn rate could indicate a customer unsubscribing to your services, leaving to go to a competitor, deciding not renew with your company or simply being unsatisfied with your product or service.
There are two types of churn you’ll want to consider calculating:
- Customer churn – this is done by measuring the amount of customers lost during a specific time frame and dividing it by the number of customers that you started with in the beginning of the time frame.
- Revenue churn – this is done by taking your monthly reoccurring revenue and dividing it by the amount of revenue you lost during a specific month.
These numbers can lead to other metrics like retention rates. When you have low churn rates, get feedback from your customers and find out what they didn’t like and fix it.
Don’t worry too much, there are lots of things you can do to improve your churn rates if they’re extra low this month.
5. Conversion Rate
We saved the best for last.
The conversion rate is the percentage of people who achieved something on your site. In other words, people who took action, subscribed, or bought something to benefit your business.
When running a certain campaign, you’ll define specific goals to get out of the project and measure these to determine conversion rate.
If the goal is clicking on a landing page and subscribing to the company newsletter, this will be the conversion you measure.
Ultimately, if your company’s not converting and creating leads during a campaign, you’re wasting your time. If this happens, you’ll want to step back and re-evaluate the situation.
Conversation rates also show if your company is attracting the correct audience, if the audience likes what they are seeing, how attractive your site is and if you’re making money off the big marketing bucks you’re spending.
That’s what this rate is all about. How many leads are converting to your revenue?
After reading these customer metrics, think to yourself — is your company tracking these down? If so, great and keep up the good work. If not, it’s time to start.
Start with one or a few and focus on those until you take on a whole bunch. Remember, these numbers can be overwhelming and you should just be focusing on the metrics that matter to your business.
Not only do these metrics allow you to identify how effective your marketing efforts are but if the money you are spending is making you a profit in the long-run.
Metrics determine how to improve your business. That’s what running a business is all about.
Interesting in hiring a company to consult or track your customer metrics for you? That’s what we do here at TopSpot. Contact us for a free consultation!