Written by: Sean Twomey
To grow your business, you need to know your numbers! At times it’s easy to focus on vanity metrics – these are those numbers that look impressive and appealing but don’t directly contribute to the profit, growth and efficiency of your business.
In this short list, I will share the key metrics to focus on and I’ll compare them to similar metrics that are less important.
💰 1. Profit vs Revenue
Revenue will always be larger than profit and naturally, it’s the more appealing figure to quote when discussing the financial performance of your business. The truth is that there are companies that generate massive amounts of revenue, but they fail to make a profit.
Focus on the profit and profit margin of your business and increase those two figures to grow your business.
- Profit = Revenue – Expenses
- Profit Margin % = Total Profit / Total Revenue
💵 2. Paying Customers vs Likes, Followers & Fans
The most quoted vanity metrics in online marketing are likes, followers and fans.
These figures paint a picture of how your brand is performing online, but (unless you are selling product placements and advertising space) they don’t directly generate income. Paying customers, on the other hand directly generate the revenue and profit to grow your business.
Focus on increasing the amount of paying customers.
🤗 3. Engaged Subscribers vs Subscribers
When it comes to email marketing, having a smaller engaged list of subscribers is more valuable than having a massive list of disengaged (or cold) subscribers.
More engaged subscribers will open your emails, click your links and buy your products and services.
Focus on keeping your email subscribers engaging. Track engagement metrics (email open rates and click-through rates), and regularly purge your list by removing cold subscribers.
💌 4. Opt-Ins vs Traffic
Traffic is the lifeblood of online marketing success. We all need traffic to our web properties to get our message in front of our target audience, however, what’s more interesting is your opt-in conversation rate. In other words, the total number and percentage of users that opt into your list (by signing up for a free lead magnet or adding themselves to your email list).
Focus on providing valuable content to increase your opt-in rate. Your main goal is to increase the number of leads that enter your marketing funnel, which will lead to an increase in sales and revenue.
🏅5. Champion Customers vs Customers
As mentioned above, it’s crucial to focus on the total number of paying customers your business serves. You can however take this one step further and focus on those happy customers who:
- Rave about and recommend your business to family and friends – i.e. Brand Ambassadors
- Make up a large portion of your revenue – i.e. High Value Customers
- Send you high-value referrals – i.e. Affiliate Partners
Ask yourself how you can show your appreciation to your champion customers, how you can help them refer more leads and how you can convert more ordinary customers into champions.
🔁 6. Recurring Purchases vs Once-Off Purchases
While focusing on attracting new customers, don’t neglect and underestimate the potential value of your existing customers. Instead of focusing on the once-off deals, shift your attention to promoting value-adding recurring or additional purchases.
It’s a lot less expensive to sell more to an existing customer than to acquire a new customer. Recurring purchases, like subscriptions, lead to increased Monthly Recurring Revenue (MRR), which makes your business more profitable and predictable.
Consider offering your customers a subscription or membership or a monthly, quarterly or annual payment plan in exchange for an ongoing product or service.
💬 7. Engagement vs Views
When it comes to online content the most appealing metric is usually subscribers and views. What’s far more interesting and accurate is looking at engagement.
How many viewers or readers are taking the time to engage with your content – for example, leave a comment or question?
Focus on and encourage engagement to gather feedback from your audience and to better understand their challenges and needs.
😍 8. Testimonials vs Compliments
It’s easy for friends, family members and even customers to compliment your business. What’s far more interesting is focusing on individual customer success stories and testimonials.
Capture and share testimonials and case studies showing how specific customers have benefited from using your service and/or product. Written testimonials are great, but video testimonials are 100 times more effective.
💳 9. Customer Lifetime Value
Customer Lifetime Value (CLV, CLTV, LCV or LTV) is a prediction of the net profit attributed to the entire future relationship with a customer.
• CLV = (Avg Monthly Revenue per Customer * Gross Margin per Customer) ÷ Monthly Churn Rate
For example: ($100 average monthly spend * 25% margin) ÷ 5% monthly customer churn = $500 CLV
Calculating your estimated CLV will help decide how much you can afford to spend on acquiring a new customer.
For example: If your CLV is $500, then you can spend up to $499 to acquire a new customer, while still making $1 in profit.
If you found this resource valuable or if you have any questions, send me a quick email to sean@posmaymedia.com – I’d love to hear from you.
