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 revenue, profit, growth and efficiency of your business.
In this short list I will share with you 8 key metrics to focus on and I’ll compare them to similar metrics that are less important.
1. Profit vs Revenue
Revenue is 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 measuring and increasing the total profit and profit margin percentage to grow your business.
You can do this by increasing revenue while keeping expenses constant or decreasing expenses while keeping revenue constant, or both.
2. Paying Customers vs Likes or Followers
The most quoted vanity metric in online marketing is likes, followers and fans. These figures paint a picture of how well your brand is performing online, but they don’t directly generate income. Paying customers, on the other hand, generate the revenue and profit.
Focus on sales to increase your amount of paying customers, as well as your customer retention rate. Increasing these will increase your revenue and profit, and ultimately help you grow your business.
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.
Keep track of and improve your engagement metrics (email open rates and click-through rates), and regularly purge your list by removing cold subscribers.
4. Opt Ins/Leads vs Traffic
Traffic is the lifeblood of online marketing success. We all need traffic to our web properties in order to get our message in front of our target audience, however what’s more interesting is the opt in rate. In other words, the total number and percentage of users that opt into your list (sign up for a free lead magnet or add themselves to your notification list) and become a lead.
Focus on providing valuable content to increase your opt in rate. Your main goal is increasing the number of leads that join your email list and enter your marketing funnel.
5. Champion Customers vs Ordinary 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 extraordinary customers that:
1. Rave about and recommend your business to family and friends — i.e. Brand Ambassadors
2. Make up a large portion of your revenue — i.e. High Value Customers
3. Send you high value referrals — i.e. Affiliate Partners or Strategic Partners
Figure out how you can convert more ordinary customers into champion customers and make sure to communicate your appreciation to your existing champion customers.
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 once-off deals, shift your attention to creating more value that you can sell as a recurring purchase or an additional purchase.
On average it costs less to sell more to an existing customer than to acquire a new customer. And recurring purchases, like subscriptions, increase your monthly recurring revenue (MRR), which is more predictable and lead to more business growth.
Consider offering your customers a subscription or membership or a monthly, quarterly or annual payment plan in exchange for an ongoing product or service package that adds value.
7. Engagement vs Views
When it comes to online content the most appealing metric is usually subscribers and views. What’s more interesting is looking at user engagement. How many viewers or readers are taking the next step and engaging with your content — for example leaving a comment or asking a question?
Encourage engagement and interaction to gather feedback from your audience. This will help you better understand your audiences' challenges, so you can refine your products and services to better meet their needs and market to them using the language that resonates with them.
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, case studies and testimonials.
Source and document customer testimonials, case studies and success stories and use them as part of your marketing material.
Document how a specific customer has benefited from using your service and/or product and how your business has helped them experience a transformation. Written testimonials are great, but video testimonials can be even more effective.
Bonus Metric: 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 = (Ave. 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 your CLV is $5000, then you can spend a lot more to acquire a new customer.
1. Track your revenue and profit and maximise your profit margin.
2. Focus on sales to increase paying customers.
3. Track and increase your email engagement, as engaged customers are customers that purchase.
4. Track and increase your opt ins to get more leads into your marketing funnel.
5. Convert more ordinary customers into loyal champion customers and brand ambassadors.
6. If possible, increase recurring revenue by offering a subscription or payment plan.
7. Increase your user engagement to learn more about your audience.
8. Capture testimonials, success stories and case studies and use them in your marketing material.
9. Track and increase customer lifetime value.