4 categories of metrics to help keep your company in the right course
How do you measure success for your company? There are many answers to this question and probably every company will have its own one based on its mission and goals. For instance one company may correlate success to the profit it generates or the number of satisfied customers or the number of fulfiled orders. One thing is for sure: You need to keep track of your company’s performance so that you won’t end up overwhelmed and confused like Homer Simpson!
Every company needs to establish several key metrics in order to measure key activities, like consumers’ engagement and usage of the product/service, and monitor their progress. Key metrics help brands identify specific areas that need improvement and function as a diagnostic tool, so that potential problems are located and solved before they can pose a threat to the brand’s revenue and position to the market. Furthermore, they enable brands to evaluate their corporate strategies in several aspects and decide whether they will continue to pursue them or not.
In this article, we are going to suggest several metrics that will help you develop an understanding of how your company is doing in several business aspects. To achieve this, we are going to categorize those metrics based on the business activity they refer to:
1. Customer Acquisition
The first activity that needs to be measured is customer acquisition and its related costs. Companies need to make revenue to survive and for this to happen new customers should be brought in, who are going to pay for using the brand’s products or services. However, brands should make sure that the cost of attracting new customers does not outweigh the benefits of bringing them on board. In order to calculate the customer acquisition cost, the following data should be gathered:
• Number of new customers per month • Costs to develop product/service • Estimated life of product/service • Monthly marketing costs
• Monthly maintenance costs
Metrics of this activity would be quantitative and comparative between the different channels customers are coming from. Those metrics will be:
- Total monthly cost of the channel/campaign: it will include development, marketing and maintenance costs
- Cost per customer acquired for each channel
- Volume of the channel/campaign: how many customers have been acquired through it
- Efficiency of the channel/campaign= number of customers acquired/ number of visitors
2. Customer Retention
After a new customer is acquired, the company needs to make sure that he/she will continue to use its services/products for a reasonable period of time. Customer retention is a very important activity for the brand, because it is more cost-effective to retain one existing customer than to acquire a new one. Measuring customer retention, a company can evaluate the value it offers to its customers. When customer retention is high, that means the brand’s offering is considered valuable enough by customers. On the other hand, when customer retention is low, then the company needs to increase the value it offers to customers. A good strategy would be for companies to measure customer retention in a quarterly basis, so that it can be cross-referenced with the financial earning reports that are also quarterly published.
In order for a customer to be considered as retained, he/she should make repeated use of the brand’s services or products. The metrics we are going to use for this activity are the following:
1. Retain volume: number of customers that make repeated use of our services
2. Retain efficiency= number of retained customers/ number of customers acquired
3. Cost per customer retained
3. Financial Transactions
The final step in the customer lifecycle is when the company receives financial benefits from its transactions with customers. These financial benefits are measured through revenue, which is a very well-known metric for companies. However, a common mistake for startup in their first years of operations, is that they focus their attention to profit instead of revenue. Operation and maintenance costs tend to significantly vary for the first years of operations, so startups need to first concentrate on revenues to realize if their business model is working. If the revenue metric presents satisfactory results, then the company needs to start looking at ways to reduce operating costs.
Metrics for this stage will include:
1. Total revenue earned each month
2. Revenue volume: number of customers that bring us revenue
3. Revenue efficiency=number of customers that bring us revenue/ number of customers acquired
4. Revenue per channel
4. Social media marketing
A basic target for brands regarding their social media marketing is to expand the reach of their messages, sending them to a bigger audience. Reach of a brand’s messages in social media is determined by using the number of followers as a metric, which will ideally increase as time goes by. This metric should be measured over a significant period of time in order for brands to be able to gather all the necessary information that will help them assess their marketing strategy and make changes whenever needed. For instance, measuring it day by day will not provide any valuable information. However, major changes in the metric that have happened on a specific day of the month should be noted and the reasons of that change should be explored, so that they can be replicated if they have brought positive outcomes or avoided if they have brought negative ones.
There are, however, a lot of marketers that consider number of followers to be a vanity metric, arguing that it is better to have fewer and more engaged followers than having a huge number of followers that do not engage with your posts. Even though this statement appears to be valid, this metric reveals a brand’s potential reach for the content it is uploading. Having lots of followers gives you a better chance to have your content noticed and engaged with.
Engagement of users goes deeper than reach and indicates people’s feelings about brands. Engagement on social media is usually determined by measuring the likes, comments and shares a brand’s post generates. Comments are considered as a stronger indicate of engagement, since it takes more time for people to think and write a comment on a post than just liking it and it demonstrates a kind of emotion for both the brand and the content.
There are, of course, many other metrics for you to explore and include in your list that can help you keep your business in track. It is important to notice, though, that different departments need to work together, exchange data and consult each other to make sure that a balance is being kept. If departments try to improve their related metrics alone, without getting feedback from other involved departments first, this could lead to trouble. For example, imagine a marketing team trying to improve the number of orders a company receives in a specific area. If, however, they are not in touch with the logistics department, they will not be able to know that there are not enough drivers to deliver the orders to customers. Moreover, if they are not in touch with customer support, they will not be able to know that a high number of complaints has been made for delays and unfulfilled orders. Consequently, this will lead to many unsatisfied customers who will provide bad reviews. To prevent this from happening both marketing, logistics and customer support departments should communicate effectively with each other.
To sum up, do some research and find out those metrics that indicate how your company is performing and monitor them on a regular basis. Don’t forget you have to constantly review your metrics and make changes so that they better reflect the progress of your company. For instance, a metric like ‘’number of orders delivered/week’’ does not reflect customer satisfaction. Thus, a metric like ‘’number of orders delivered on time to satisfied customers/week’’ will probably be a better choice.
I will be glad to listen to your own ideas and thoughts about what metrics should a company measure to see if its strategy is leading to desirable outcomes! Feel free to share this article with your friends, colleagues and family!