The Three Metrics That Matter for Your Business
According to Econsultancy, fortunately for businesses, “data is plentiful, and there is no shortage of services that aim to analyze that data and make it meaningful.” However, not everybody knows the key metrics that really matter.
In a recent post, Patricio Robles lists these three metrics every business needs to know:
• Customer lifetime value (CLV): Jim covers this topic in his post, A Customer’s Value Doesn’t Stop at the Checkout Screen, where he defines the term and then lays out two ways to figure out LTV (Lifetime Value). He adds:
“It can be a little tricky and you should reality check the number you get, but it’s an important thing to do if you want to understand how the economics of your marketing works. Knowing this will also help you explain and justify longer term marketing programs and higher quality marketing programs, because they’ll show up in higher lifetime values.
Thinking about today’s transaction is important, but you could be missing a lifetime of value if that’s all you think about.”
• Cost of customer acquisition (CAC): What does it cost to acquire new customers? “Many companies spend more than they estimate on customer acquisition and in many cases, they continue to invest in marketing channels that make little sense given the lifetime value of their customers,” Robles reports. “Additionally, meaningful reductions in customer acquisition costs can provide companies with an unfair advantage against their less conscientious and diligent competitors.”
• Gross margin: How much money is your company making before factoring in operating expenses? Robles writes, “In many cases, gross margin ratio ranges are well known for specific industries, so this metric is often one of the easiest ways for a business to establish how it’s doing versus its peers.”
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