10 Key Metrics Every Business Owner Needs to Measure

Ian Landsman photo
Written By
Ian Landsman
Last Updated
March 9, 2020
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What metrics are you tracking for your business? If that question makes you uneasy, you’re not alone. As you may already know, tracking metrics is not so much the challenge as is knowing what metrics to track. Should you track Net Promoter Score, or Customer Satisfaction? Customer Acquisition Cost or Customer Effort Score? Retention rate or churn? Or all of the above?

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10 Metrics to Start Tracking Now

Although there are potentially an infinite number of metrics for your business, we’ve narrowed the field down to 10 key performance indicators–numbers you’ll want to know to gain valuable insight into your customers, profits, and future as a business.

Customer Satisfaction Score

Customer satisfaction score, or CSAT, is your most basic measure of customer satisfaction. Typically, CSAT is collected with a simple online survey that asks, How satisfied are you with Brand X? Please provide a rating on a scale of 0-5 (0 being extremely unlikely, 5 being extremely likely).

Survey takers are grouped into two categories: Satisfied (4’s and 5’s) and Unsatisfied (3’s and below), and the following equation is then applied:

[(# of satisfied customers) / (# of unsatisfied customers)] x 100 = CSAT

By tracking this number and even comparing it to industry benchmarks, you’ll get a richer understanding of how satisfied your customers are and how you measure up to the competition.

Net Promoter Score

Like CSAT, the Net Promoter Score (NPS) is a customer satisfaction-focused metric. But NPS dives a little deeper by asking customers how likely they would be to _recommend _your brand.

Typically collected and tracked with NPS software, Net Promoter Score is produced from the following question: How likely are you to recommend Brand X to others? Please provide an answer on a scale of 0-10 (0 being extremely unlikely, 10 being extremely likely).

The resulting number identifies the survey taker as a: Promoter (9 or 10), Passive (7 or 8), or Neutrals (6 or below). Then, the following equation is applied:

[# of promoters / Total # of survey takers] - [# of detractors / Total # of survey takers] = NPS

The resulting number, which can be as high as +100 or as low as -100, gives you insight into not only how satisfied your customers are with your product, but how loyal they are to your brand. And loyalty, my friend, is a key indicator of future success.

Customer Acquisition Cost

Customer acquisition cost, or CAC, gives you insight into how much it costs for you to acquire a single customer–a key insight for helping to ensure your marketing budget is on point.

CAC takes into account the amount of money you spend on marketing, as well as the hours you spend on reaching potential customers, using the following basic formula as a starting point:

[Money + Time Spent]/ Number of Customers Acquired = CAC

Depending on your industry, your CAC could range dramatically. If you’re in the B2B space, your CAC is likely to be much higher than that of an ecommerce company, for example. But if the payoff is a high-value account, then a high CAC is appropriate.

Customer Effort Score

Customer Effort Score, or CES, seeks to discover how _easy _it is for customers to engage with your product or service. It’s often collected after a specific customer touchpoint with your brand, such as when a customer has an interaction with a service representative.

The basic idea of CES is that a customer has a more positive experience when they are able to exert less effort. And that idea seems to be more than theory–an article published by The Harvard Business Review found that what customers want the most from brands is the ability to make an easy decision.

Rather than asking a question, a CES survey asks customers to provide a 1-7 rating for how much they agree or disagree with a specific statement (such as “Today’s checkout process was easy.”) Anyone who gives you a 5 or above is considered a positive response.

Then, CES is calculated with the following formula: Total # of positive responses / Total # of survey takers = CES

CES may not give a comprehensive overview into your product or customer base, but it can give you targeted insight into your customer experience–and flag potential improvements.

Retention & Churn

Retention and churn essentially go hand-in-hand. Retention is the rate at which your customers are staying; churn is the rate at which they are leaving.

To measure both metrics, you’ll need to determine a time period (such as 30 days), and then use the following formulas:

Retention = [# of customers at the end of the time period - # of customers at the beginning of the time period] x 100

Churn = # of customers lost during time period / total # of customers at the beginning of the time period

Other than seeking to improve both metrics over time (increasing retention and decreasing churn), it may also be helpful to compare your churn and retention rates to industry averages. Ultimately, both are critical insights–and of course, if your churn outpaces your retention, you’ll want to take immediate action to correct the situation.

Average Revenue Per User

Average revenue per user (ARPU) measures how much revenue an average user, or customer, generates on a monthly or yearly basis.

ARPU is calculated with the following:

Monthly recurring revenue / total number of customers = ARPU

ARPU helps you project future revenue–valuable knowledge in any case, but especially in the event that you’re making a change to pricing structure or creating a promotion that might affect that number.

Customer Lifetime Value

Rather than focus on a specific time period, Customer Lifetime Value (CLTV) looks at the total amount of revenue generated from a customer. It’s measured with the following equation:

Average Revenue Per User (ARPU) x Average Customer Lifetime = CLTV

Knowing your CLTV is critical to determining a Cost of Acquisition that’s cost-effective. If an average customer is worth $1k over time, for example, and costs only $100 to acquire, then you’re on the right track.

Traffic & Bounce Rates

Metrics that are directly impacted by your marketing efforts can give you richer insight into other metrics. For example, if your customer acquisition cost is unusually high, you may need to take a second look at your website traffic and bounce rates.

Is your paid advertising paying off and driving prospects to your site? Or are potential customers visiting your website and bouncing without clicking through? By asking these questions, you’ll gain new understanding of how successful your marketing is, and how prospects are interacting with your brand.

Your website traffic and bounce rates are two key metrics that should be easily accessible on the backend of your site. Both of these metrics should give you indication of how successfully your site is attracting and retaining new visitors.

Finally, Choosing a Point of Focus

Hopefully, the vast field of metrics has now been narrowed down into a helpful assortment of benchmarks and numbers that give you rich new insight. Still, it may feel overwhelming to pick a starting point to lead all other decisions from: Should you focus primarily on ARPU? Or start with churn and retention?

We suggest focusing first on a customer satisfaction-focused metric. Doing so can help ensure that your decisions remain customer-centered and focused on long-term retention. Net Promoter Score is a great starting line for seeking to build customer loyalty that will positively impact all other metrics. If you’d like to get started on measuring NPS (for free), click here.

Try Thermostat NPS. 200 NPS surveys free each month.
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