Key performance indicators are an important measure of how your company is doing. These factors, known as KPI, are valuable to every business and should be watched carefully. KPIs help you make the best decisions for your company early in its history so you can take it from an idea to a well-established business. Thanks to monitoring and analytics tools, you can gain access to all the information that you may need in order to make your company great. Below are some of the best KPIs for a small business to follow:
Customer Acquisition Costs
Customer acquisition costs are the dollars spent marketing your business per new customer. For example, if a banner ad costs $100 and brings in 10 fresh customers, the customer acquisition cost (per customer) would be an average of $10.
Track what you spend in a certain time period on sales, marketing and promotional items along with the number of recent customers you acquire during that same time frame or directly from the campaigns you are running. Now divide your expenses by the number of new customers.
Panalysis is a great tool that offers a free calculator and gives a number of suggestions so that you can include every source of customer acquisition expense.
This term is also known as churn, and is describing the fact that businesses can lose customers as a natural part of operations. There are different ways to determine this number depending on how your business operates.
If you’re in the retail industry, you have two options. First is a 30-day measure of which customers do not access and buy your product for a short term. The second is a 90-day study to see how many permanently stop buying. This way, you can stay in touch with those who stop buying to find out why and fix the problem.
If your business works on a subscription basis or deals with long term contracts, you would look at the number of canceled subscriptions or contracts within a certain time frame. For example, if you had 50 active subscriptions at the start of the month and 2 of them cancel during the month, your customer attrition rate would be 4% (2 divided by 50).
Lead Conversion Rate
This is the percent of visitors to your website who will become leads. It is an important statistic to know because leads can become sales, and knowing how to find the best leads that later become sales is a significant part of ensuring your company’s growth in the market.
Tools like Google Analytics can help you track the number of visits your website receives as well as how many leads your site generates. You might also want to consider a call tracking solution as well so you can include phone leads in this calculation as well.
Customer Conversion Rate
Once you have leads, your customer conversion rate will tell you how many of your leads turn into customers. What is ideal for a sales team in a business is to have as many leads as possible turn into sales, of course. And by knowing your numbers in regard to leads vs sales you can fine-tune the marketing approach and areas you put resources into. This will maximize your return without adding more expense.
You can also get into more detail here by looking at the customer conversion rate for individual salespeople. This might help you identify team members than need additional coaching on closing prospects.
Customer Lifetime Value
You will also want to know the value of your customers over the long term so that you can tailor deals and benefits toward the ones who will most often help you reach sales targets. Customer lifetime value equals what your customer spends over a lifetime using your product.
Once you’ve determined the average lifetime value of your clients, compare these statistics to your customer acquisition costs to see if you are spending more money marketing to customers than they are spending on your products or services.
Net Promoter Score
Net Promoter is a professional-level tool that is used to evaluate and sort customers by three categories. These are known as Promoters, Passives, and Detractors.
Using things such as short surveys or directly asking the right question can be the ultimate test of how well your site and company are working, from the perspective of your customer. Simply ask the likelihood that your customer will recommend your company to others.
A ten-point scale rates the answer and helps make your sort list. Promoters will give a 9-10 score. They are very loyal to your company and its products and will help spread the word about you. Passives, on the other hand, are in the 7-8 range; they are happy with your company, but can be vulnerable to the influence other marketers have and stand a higher chance of going with your competition if the deal is right. Detractors score between 0 and 6; they are most likely to generate negative word of mouth.
Once you have surveyed your customers you take the percentage which are promoters and subtract from the percentage of detractors to reach your net promoter score. You can use this information to see how happy your clients are with your business in general. You can also reach out to individual Promoters and remind them to refer new business to you or reach out to Detractors and see what you can do to make them happier.
It is prudent in business to use all the tools available to your company to its advantage. When it comes to statistics such as the ones discussed above, recording the numbers regularly is the best way to ensure that your small business is doing all it can to find and keep its customers.