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
The three golden metrics – Quantity, Quality, Productivity – provide an ideal framework to manage any team in any business. Those metrics are essential to build a team's scorecard and performance management system (PMS). You might ask: are there any other metrics that are necessary or relevant?
What are the three key process metrics? ›
There are three major categories of process metrics, which include: Static process metrics: Relate to the properties of a defined process. Dynamic process metrics: Relate to the performance of a process. Process evolution metrics: Relate to making changes within a process over time.
What are metrics in business? ›
Business metrics are standardized quantitative measurements used to track, assess, and analyze specific data, performance, or conditions in various fields and industries. They provide critical insights and help stakeholders make informed decisions based on tangible evidence.
What are the three metrics for customer service? ›
As we mentioned before, some of them include customer satisfaction rates, first contact resolution rates, and average handle time. Additionally, teams can also track the number of support tickets closed per month or per week.
What are the 3 main metric measurement types? ›
The metric system is a system of measurement that uses the meter, liter, and gram as base units of length (distance), capacity (volume), and weight (mass) respectively. To measure smaller or larger quantities, we use units derived from the metric units.
What are the three types of metrics that? ›
' There are three types of metrics that an organization should collect. These are –Technology metrics, process metrics, and service metrics.
What 3 things should a good system of metrics measure? ›
A good system of metrics should measure three things: Reliability, Efficiency, and Value.
What are the three types of performance metrics? ›
The four main types of performance metrics
- Return on investment (ROI). This metric calculates the ratio of investment spend to profitability, informing you exactly how much a business investment is worth. ...
- Net income ratio. ...
- Customer lifetime value. ...
- Effectiveness ratio. ...
- Web traffic analytics.
The three A's of metrics are: Actionable, Accessible, and Auditable.
What are basic metrics? ›
Basic Metrics are Metrics that are available by default in Databox. No additional work is required to report on these Metrics, so they allow you to quickly and efficiently access data from your Data Sources.
Also known as a key performance indicator, or KPI, a key metric is a statistic which, by its value gives a measure of an organization or department's overall health and performance.
What is quality metrics in business? ›
Quality metrics are quantifiable measures used to assess the performance, effectiveness, and overall quality of a product, process, service, or system. These provide objective data that can help organizations understand how well they are meeting their goals and standards.
How many types of metrics are there? ›
Five types of metrics are commonly used to evaluate business performance. Each of these metrics shines a light on a different aspect of organizational performance. Input metrics focus on the resources used to get some work done.
What are the three weight metrics? ›
The Metric System of Measurements uses the mass units: gram (g), kilogram (kg) and tonne (t).
