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The goal of all businesses is ultimately the same: to make money—whether by increasing revenue or improving profit.
Now, to accurately measure performance over time and help the decision-making process, you need to track correct metrics and ensure that all of your marketing efforts are aligned with your business goals.
That is crucial to ensure that you're getting your money's worth and you're on the path to reaching financial gains.
However, aside from business-centric metrics such as sales, profit, and ROI that we are all familiar with, another set of KPIs can measure your most important asset of all: customer satisfaction.
The more intuitive the customer experience, the less involved a supervisor has to get when resolving roadblocks. And the more a platform or site fits a customer's needs, the easier it will be for that customer to complete a purchase and recommend your product or service.
To sustain a profitable business, it's necessary to build and maintain a strong connection with your customers. In today's digital environment, customers have more businesses to choose from, so you must start to "measure the unmeasurable": customer loyalty.
Let's look at just how important customer relationships are for your business and what metrics every business should consider to bring in more revenue.
Customer Retention Rate
Retaining a customer is cheaper than acquiring a new one. Indeed, acquiring new customers requires resources to make them aware of your brand, deliver up an enticing offer, and demonstrate enough value over your competitors.
Yet, effective customer retention strategies can easily bring profits up 25-95% because loyal customers usually skip those steps. They've already chosen your brand.
Calculating your customer retention rate can be done by subtracting the number of new customers from your total customer base over a period of time, then dividing that result by the number of customers at the start of that period and multiplying by 100. That is an estimate of how many customers are likely to repeat purchases and continue doing business with you.
Customer Retention Rate = (Total Customers - New Customers) x 100 / Customers at the start of the tracking period
You can increase retention rate by tweaking your communication to help build a solid and meaningful relationship with your customers, ultimately increasing your sales.
Customer Loyalty Programs
Focusing on customer loyalty programs increases profit because your initial investment is lower than when you're acquiring new customers.
Such programs are also a great source of data: You can use personalization to prompt a sale based on previous purchasing habits. Brands can create tailored messages by using consumer data such as preferences, location, and purchase behavior. It's a unique and exclusive opportunity to make customers feel better about the offering and to build a meaningful relationship with them.
Members of loyalty programs are also 60% more likely to increase their spending on a specific brand, significantly adding value to your marketing efforts. Look at your initial investment in bringing engagement and sales as a clear indicator of customer loyalty levels.
Customer Engagement Rate
The key to bringing in valuable long-term customers is to understand their needs and wants and to find ways to directly communicate with them. Those insights can help build your marketing and communication strategy, making way for more optimal and effective engagement.
By tracking and improving your engagement rate, you can assess how many people follow your brand, how many could potentially boost your influence in the market, and who could become potential buyers or promoters of your brand. Such engagement can be measured through impressions, reach, and comments from current and potential customers on posts and content on your and other websites.
Customer Lifetime Value
It's also crucial to know, on average, how much worth your customers add to your business. Customer lifetime value (LTV) is an important metric because it considers long-term value, whereas other metrics track shorter-term success.
LTV is an estimate of the average revenue a customer will generate throughout their time using your product or engaging with your brand. The calculation of LTV predicts the amount of money your company will make from a customer during a set period, which helps set marketing budgets and ensures that companies pursue the most effective customers.
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By tracking the metrics highlighted in this article, you are assuring that you're clearly communicating valuable information to your customers; and they are, in return, inching closer to a purchase. At the same time, you are proving to your stakeholders that your marketing efforts benefit your bottom line.
Measuring the Immeasurable: Customer Loyalty Metrics
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ABOUT THE AUTHOR
Greg Chen is the CEO and a co-founder of Mobiz, a personalized SMS marketing company. He has 15+ years of experience in mobile innovation for both B2B and B2C.
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