Collecting data within a business has never been easier, thanks to smart technology, AI, and machine learning. However, transforming that data into valuable information is another thing entirely.
One of the biggest challenges new companies and startups face is knowing which metrics matter. Here are six business performance metrics to capture in 2021.
Net Promoter Score (NPS)
The Net Promoter Score (NPS) has long been a favored metric in the business world. This simple number is an effective way to gauge overall customer satisfaction with minimal collection effort. Using NPS Software, companies can determine how likely a customer is to recommend their business to a friend. The better the likelihood, the better the overall customer satisfaction rate.
In addition to being simple to capture, the NPS is also easy to track over time as it’s presented on a scale. If the NPS is moving up, all is well. Conversely, if the NPS is moving downward, there’s an issue to be addressed.
Customer Lifetime Value (CLV)
The CLV is a complex metric to capture but highlights the importance of customer loyalty and retention. This data point measures how much any given customer is estimated to spend during their lifespan with your company. The longer the relationship with the business, the higher the CLV tends to be.
In addition to showcasing the importance of customer loyalty, this metric also highlights which customer segments and relationships should be nurtured.
Cost of Customer Acquisition (CAC)
There are a lot of different things that happen to move someone through the sales funnel toward a conversion. Measuring the CAC can indicate the overall return on investment for marketing spend and clarify which promotions are the most profitable over time.
For example, assume your company spends $5,000 on marketing and promotions in the month of May. During that time, you acquire 50 new customers. The CAC of these 50 customers is $100. The goal is to minimize the CAC and to have each customer replace the cost of acquiring them through their purchases.
While many metrics tend to focus on growth and positivity, the churn rate is perhaps the most telling metric for a business. Customer churn is your turnover rate. In other words, the customers who purchase from you and never come back.
This metric and the associated goals will look different from one company to another. For example, if you run a fitness business, you might expect a customer to come back within a week or a month. Conversely, if you operate a car dealership, having a customer come back every five to ten years might be more realistic.
The churn rate goes hand in hand with CLV and CAC. Together, these numbers can shed some light on the customer journey.
Click-Through Rate (CTR)
The CTR indicates how many people are clicking through your marketing links and promotional campaigns. This metric is an effective way to evaluate how well your campaigns are performing and if they’re getting the attention you desire.
Your CTR can also provide insights into what’s not working with a campaign or offering. For example, if you have a low CTR, the ad or promotional material isn’t attractive to customers. If you have a high CTR but a low conversion rate, the ad is working, but the offering or landing page is a problem. In essence, this number helps you troubleshoot your marketing efforts.
The lead-to-conversion rate provides deeper insights into your sales pipeline and highlights problem points within your business. To calculate this number, you simply divide the new leads you get per month by the new customers you acquire per month.
Ideally, the ratio will be low, meaning that the majority of your leads convert into customers. A significant gap indicates that you aren’t nurturing your leads effectively — or perhaps not attracting the right leads in the first place.
Use these key performance metrics to determine where the opportunities lie for improvement in your business in 2021.