But despite the amount of data and analysis tools available to businesses, it’s not uncommon to find that business owners and executives don’t know the key metrics that really matter.
Here are the three metrics every business needs to know.
Customer lifetime value (CLV)
What is every new customer worth over the lifetime of their relationship with your business? It’s a simple metric withbig implications.
Knowing the lifetime value of a customer is a crucial part of understanding how much is reasonable to spend on acquiring new customers.
Measuring CLV is also a good way to determine whether your business is taking full advantage of its customer relationships.
In many, if not most cases, it costs less money to increase revenue from existing customers than it does to acquire new ones.
Yet still, marketers are still more focused on acquisition than retention.
According to our ownCross Channel Marketing Reportonly 15% of companies surveyed are ‘more focused on retention’.
Cost of customer acquisition (CAC)
What does it cost to acquire new customers? While the importance of knowing the cost of acquiring a new customer is obvious, surprisingly a lot of business owners don’t pay as much attention to this metric as you’d expect them to.
Keeping customer acquisition costs top of mind can benefit a business in numerous ways.
For starters, many companies spend more than they estimate on customer acquisition and in many cases, they continue to invest in marketing channels that make little sense given the lifetime value of their customers.
Additionally, meaningful reductions in customer acquisition costs can provide companies with an unfair advantage against their less conscientious and diligent competitors.
Gross margin
How much money is your company making before factoring in operating expenses?
Gross margin, which is commonly expressed as a gross margin ratio in percentage terms, is a way of describing the difference between revenue and cost minus the direct costs of providing a product or service.
As such, it is a good measure of how profitable a product or service is on its own.
Gross margin can be a great way to compare a business to its peers. In many cases, gross margin ratio ranges are well known for specific industries, so this metric is often one of the easiest ways for a business to establish how it’s doing versus its peers.
FAQs
While these five metrics: sales, gross margins, cash flows, CLV, and productivity—are essential, firms must additionally identify and monitor key metrics that are more aligned with their business model and industry.
What are the 4 main metrics? ›
Four critical DevOps metrics
- Lead time for changes. One of the critical DevOps metrics to track is lead time for changes. ...
- Change failure rate. The change failure rate is the percentage of code changes that require hot fixes or other remediation after production. ...
- Deployment frequency. ...
- Mean time to recovery.
Top Video Metrics To Measure Success (With Brand Examples)
- View Count. This metric is one of the most common, but for good reason. ...
- Video Completion Rate. Do your viewers drop off before finishing your video? ...
- Click-Through Rate (CTR) ...
- Conversion Rate.
Key metrics in business are the numbers you track to make sure your business is doing as well as it can. They help businesses achieve goals and determine where improvement is needed.
What are the three A's of metrics? ›
The three A's of metrics are: Actionable, Accessible, and Auditable.
What are the three types of metrics? ›
' There are three types of metrics that an organization should collect. These are –Technology metrics, process metrics, and service metrics.
What are 3 the most widely used metrics and tools to assess a classification model? ›
Accuracy, confusion matrix, log-loss, and AUC-ROC are some of the most popular metrics. Precision-recall is a widely used metrics for classification problems.
What are critical metrics? ›
Identify Senior Management Sponsors: By definition, the Critical Metrics are those metrics which senior management deems critical to the successful operation of the organization. Therefore the Critical Metrics should be chosen by senior management.
What are the 4 key metrics lead time? ›
Here are four DORA metrics: Deployment Frequency, Lead Time for Changes, Mean Time to Restore and Change Failure Rate. These metrics are considered key indicators of the efficiency and efficacy of an enterprise's DevOps practices.
What 3 metrics would you chose to track the efficiency of the process? ›
Productivity, profit margin, scope and cost are some examples of performance metrics that a business can track to determine if target objectives and goals are being met.
Key performance indicators (KPIs) measure a company's success vs. a set of targets, objectives, or industry peers. KPIs can be financial, including net profit (or the bottom line, net income), revenues minus certain expenses, or the current ratio (liquidity and cash availability).
What 3 measures can be used to determine the effectiveness of the process? ›
To measure process efficiency and effectiveness, you need to identify and collect relevant process metrics, or quantitative indicators of performance. Process metrics can be classified into four categories: time, cost, quality, and customer satisfaction.
What is a metric for success? ›
What is a business success metric? A business success metric is a quantifiable measurement that business leaders track to see if their strategies are working effectively. Success metrics are also known as key performance indicators (KPIs).
Which is the key management metrics? ›
The leading project management metrics include productivity, cost, gross margin, quality, satisfaction, and scope of work. Key project management metrics provide insight into how your projects are progressing, how much money you're spending, and your team's performance.
What are key metrics or KPIs? ›
KPIs are directly tied to strategic goals and they're used for measuring performance against set objectives. Metrics, on the other hand, are much broader and include various data points used for analysis – but may not directly align with key objectives.
What are the top 5 metrics? ›
5 Business Metrics You Should Analyze Every Year
- Gross profit margin. Gross profit margin is your company's total revenue minus total costs, divided by total revenue. ...
- Customer churn. ...
- Employee satisfaction. ...
- Customer lifetime value. ...
- Cost of goods sold.
KPIs measure performance based on key business goals, while metrics measure performance or progress for specific business activities. KPIs are strategic, while metrics are often operational or tactical.
What are key performance metrics examples? ›
Productivity, profit margin, scope and cost are some examples of performance metrics that a business can track to determine if target objectives and goals are being met. There are different areas of a business, and each area will have its own key performance metrics.
