As useful as metrics are, they can often be tricky to understand. This is especially true when you have to give performance updates to everyone in your team and you’re inundated with data that you need to make sense of. To identify the metrics that will be useful for measuring your performance, it is important to remember the objective of metrics in the first place — to reflect how impactful your work is and to help you craft goals to make you even better. “Without the right metrics, our ‘performance’ may not accurately reflect the work you’ve done,” explains Kiera Abbamonte from Databox. With that said, here are the metrics you should be measuring:
1. Sales indicators
Sales are usually the first thing a business looks at when trying to determine whether it is successful or not. This is because measuring sales metrics gives businesses insight into product and employee performance and enables you to assess your brand’s ROI. When assessing sales metrics it is important to consider:
Sales revenue
When measuring how successful a business is, the volume of sales and the frequency at which these sales are made are key metrics to look at. This is because the amount of revenue a business is generating is a clear indicator of whether it is doing well or not. You can calculate sales revenue by taking the sum of all purchases made and subtracting the cost of any returns or products you weren't able to sell.
Net profit margin
When looking to make sense of how much profit your business is making, you should calculate your net profit margin. You can do this by calculating your total monthly revenue and subtracting your expenses. Aside from giving you an indication of your profits, it also gives you insight into how your business is growing.
Lead conversion rate
You should monitor sales to get an idea of whether or not your marketing efforts attract high-quality leads that can be converted into sales. Monitoring this metric helps you to understand how many leads are being converted into actual customers. This gives you insight into your brand’s consumer growth and helps you gauge whether your marketing strategies are effective or not.
Customer retention
Although customer satisfaction and retention are metrics all on their own, it is also key in measuring sales performance. Building a loyal following is something all brands strive for because if you are retaining customers, you are maintaining a solid stream of income.
2. The break-even point
Conducting a break-even analysis should be a crucial part of any business plan, as it gives you insight into the point at which your revenue covers your business’s running costs. A break-even point (BEP) is a ‘benchmark metric’ as it gives businesses an idea of the sales target they need to reach to cover their expenses. This can provide your business with insight into whether your product, service, or business in general is self-sustaining. If your company can sustain itself, it means that it can keep on covering its expenses and, with time, make a profit. According to Brex, you can either measure a BEP in currency or volume: Break-even volume in units: fixed costs ÷ contribution margin per unit BEP in currency: sales price per unit × BEP in units. Conducting a break-even analysis can help you to motivate your sales team as they will know which targets they need to meet, so they are aware that anything beyond that is profit and could be a commission for them. Additionally, monitoring your BEP can help you to keep an eye on costs allowing you to set budgets and determine a pricing plan for your products or services.
3. Website traffic
Living in the digital age, brands must track their website traffic. It is a key metric to measure as it gives businesses insight into how many people know about their brand, as it is likely that most people visiting their web page have some brand knowledge. When looking into website traffic as a performance metric, take note of the:
• Number of page visits: This gives you an idea of how big your consumer base is. Additionally, by exploring this metric, you can look into which pages (or categories) are most viewed, giving you insight into which parts of your website are most popular.
• Returning guests vs first-time visitors: This metric gives you insight into your audience’s engagement rate and how accessible your brand is to new customers. If you have a lot of returning visitors, it is likely your audience is interested in your content.
•Average time on page: This gives you an indication of how much time visitors spend on your site. If you have a high average time of site, your web page ranks higher on search engines. This is because search engines prioritise content according to relevance.
•Conversion rate: This metric takes a look at how effective your website is in converting leads to sales. Essentially, this assesses the effectiveness of your site’s call-to-action (CTA) in getting viewers to click through.
•Click-through rate: This ties into analysing your site’s conversion rate as it is an indicator of how many viewers are clicking on your pages’ CTA.
4. Leads
If you have gotten this far in the blog, you have likely gotten the idea that a company’s lead conversion rate is a key metric to monitor when it comes to measuring its success. Thus, when looking at leads as a metric, you first need to note the number of qualified leads your brand has produced per month. As all leads don't turn into customers, it is crucial to look specifically at qualified leads. Ironpaper describes a qualified lead as “someone who could become a potential customer to you, based on criteria and identifying information that they have freely provided.” Qualified leads can be acquired through marketing as well as sales. Looking into this metric gives your business insight into whether you are reaching your target market and marketing to them effectively. If you are, you will have a high lead-to-customer conversion rate, meaning that you convert a large number of leads into customers. If not, this may be an indicator that you need to look into your sales team’s performance and also possibly alter your marketing efforts.
5. Customer satisfaction
Last, but certainly not least, is customer satisfaction. For many, a satisfied customer clearest indicator of a successful business — but how does one measure this? A key performance indicator that you can look at to measure customer satisfaction is consumer churn. According to Micheal Keenan from Cyfe, this is “the number of customers who cancel your service or stop buying your products over a set period.” If you have a high rate of customer churn, your business will struggle to stay afloat as your customers are unhappy. Aside from this metric, businesses can measure how satisfied their customers are by asking for their feedback. By creating a one-question survey asking something like ‘were you happy with your service?’, with a smiley face and a sad face as options, brands will be able to gauge how customers rate their service directly from the horse's mouth. Following this, to measure this metric, the company would simply need to tally up the pleased customers with the unhappy ones to get an idea of how satisfied their consumer base really is.
To find out more about how you can optimise your business and get ahead of the curve, check out our article, Five AI trends to look out for in 2021.