6 Key Metrics Your Business Needs to Track

All metrics are not made equal. Sure, a high number of social media likes are nice, but if your engagement isn’t translating to revenue, does it matter?

 

Businesses have so much data at their disposal that it can often be difficult to know which metrics to keep a close eye on. 

 

Let’s take a look at 6 key metrics your business needs to track.

1. Customer Acquisition Costs (CAC)

Your customer acquisition costs refer to the total marketing and sales costs associated with acquiring a new customer. This includes ad spend, employee salaries, bonuses, free gifts, and can be calculated using the formula below. 
CAC = (All Marketing Expenses + All Sales Expenses) / # of New Customers Acquired
Using the formula above, let’s suppose a business spent $50,000 in marketing and sales in one month, and the business acquired 50 new customers in that same month. The CAC for that business would be $1,000.
 
This is an extremely important metric in determining your businesses’ profitability and/or the viability of your marketing strategy. 

2. Customer Lifetime Value (LTV)

Customer lifetime value refers to the average total revenue that your business earns over the course of your relationship with a customer. This can be calculated using the formula below. 
LTV= (Average sale per customer) x (Average Transactions per year per customer per time period) x (Average Customer retention time)
Let’s suppose a business sells children’s pajamas and the average sale of a pajama is $10, the average number of transactions a customer makes is 20 per year and the typical customer purchases from the business for 2 years. Using the formula above, we can conclude that the customer lifetime value of the business is $10x20x2 which equals $400!
 
This is an important metric in evaluating how much you want to invest in acquiring your customers (CAC) to form a profit.

3. Return on Investment (ROI)

Return on investment refers to the total gains you receive from a particular investment.
 
Your ROI is arguably the most important metric because it determines the marketing tactics are working for you and if you should keep investing in them.
 
You can calculate ROI with the formula below:
ROI= (Amount Gained – Amount Spent) / Amount Spent
Look very closely at the ROI for each of your marketing initiatives to get a better understanding of what to invest in. Your most profitable channel may be neglected.

4. Conversion Rate (Website)

Conversion rate refers to the percentage of visitors to your website or landing page who complete a particular goal such as a button click, purchase, email submission, etc.
 
You can determine your conversion rate by using the formula below.
Conversion Rate = (# of conversions / # of visitors) x 100
The conversion rate will vary depending on your industry, your website, your goals, and a variety of other factors, but you should always strive for the highest conversion rate possible.
 
If your conversion rate isn’t as high as you’d like, consider improving the user experience, A/B testing your landing page, or clarifying the value proposition.

5. Organic vs Paid Traffic 

The ratio between your Organic and Paid traffic is essential in understanding your online presence and your channel performance.
You can review this data in your Google Analytics Account.
If your organic traffic is lacking, consider performing an SEO audit on your website and optimize it to increase the probability that your website appears in searches with your target keywords.
 
If your paid traffic is low, consider performing optimizations on your ads to increase your click-through rate.

6. New vs. Returning Users

Last, but certainly not least, let’s take a look at new vs returning users. This metric is important for a lot of businesses that have the potential to increase their customer lifetime value. This too can be found in your Google Analytics Account.
 
Remember: it’s cheaper to retain a customer than acquire a new one.
 
As such, if your business can cross-sell, upsell, and re-engage with your existing customers, you should be encouraging them to visit your website.
 
Moreover, as you continually invite your customers back to your website, this metric will provide you with incredible insight into the difference in website interaction between customers who are familiar with your brand and visitors who are learning about you for the first time.

Conclusion

Remember, these metrics are not the end-all-be-all for your business but rather a specific set of metrics that your business should definitely keep a closer eye on.
 
As you become more comfortable with analyzing data and making decisions based on your findings, I encourage you to expand the metrics you observe. 
 
Examine and extract insight from as much of your data as possible. This will make your decisions a lot more informed and make your marketing a lot more effective.

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