The Customer Metrics Every Manager Should Know

The most important thing a business needs is customers. Just as importantly, you need to understand the needs of your customers, and what it is that makes them come to you for help. If you know this, you’ll be able to persuade more people to come to you, for the same help. Because the second most important thing a business needs, is more customers!

These metrics are designed to help you get a solid overview of who your customers are, why they come to you, and where you will find others like them.

1 Net promoter score (NPS)

Put simply, this is a measure of how likely a customer is to recommend your business to their friends. A business needs loyal, returning customers to grow – they are your most effective and cost-efficient form of advertising.

Evidence shows that customers who talk about your company will return more frequently, and often bring their friends with them. This leads to higher rates of business growth for companies with a high NPS. A simple customer survey can show you how many of your customers fit into the three key groups – promoters, passives and detractors – and where you should be focussing your efforts on improving customer satisfaction.

2 Customer profitability score

Attracting a customer, persuading him that you can fill their needs, and getting them to hand over their hard-earned cash, all takes money. By subtracting the cost of attracting that customer, from the amount of money they hand over, you have their customer profitability score.

Business analysis has shown that this can often mean a business is losing money on a sale – when the cost of attracting that customer exceeded the amount that they end up spending! Understanding which of your customers are profitable, means you can tailor your service to meet their needs – leading to greater overall business efficiency.

3 Customer retention rate

Once you’ve spent the money and put in the hard work to attract a customer, it’s self-evident that it is more profitable to sell to them more than once. Keeping the customers you have happy is a cheaper way of maintaining healthy turnover of business, than constantly needing to draw in new ones.

Once you have established a relationship with a customer, and they trust that you will provide them with what they need, in a reliable and honest fashion, they are more likely to come directly to you when they need something similar again, rather than spend more time shopping around.

Understanding which of your customers are the most loyal means you can target marketing and customer support efforts where they matter.

4 Conversion rate

Most businesses spend a lot of money on attracting and converting customers, so it makes sense that these operations run as efficiently as possible.

To understand how effective your business’s marketing efforts are, you need to know how your enquiries, web page visits and sales calls translate into attracting paying customers.

Dividing the number of conversions by the number of total visitors (or calls, or email enquiries, or whatever you are measuring the conversion rate of) will show you where your efforts are achieving results, and where you should be focusing on improvements.

5 Relative market share

In simple terms, this is how big your slice of the pie is, compared to your biggest competitors. If your objective is to become the biggest player in your game, you need to know where you stand in relation to the competition.

Studies suggest that the biggest players in a particular market tend to be the most profitable (although this is not always the case!) and tracking this metric allows you to monitor your growth and predict where opportunities will arise in the future.

To find your relative market share against a competitor, divide your market share by theirs. The figure might seem of little value alone, but tracking it over time and comparing it with your relative market share versus other competitors will help you focus on opportunities for growth.

I very much hope that you find this list useful. As always, let me know your thoughts. Are there others you would add? Or do you have wider comments on customer KPIs and how they are used? Please share your thoughts in the comments below.

If you would like to learn more about these KPIs (e.g. how to measure them, what to look out for, etc) then have a look my book ’25 Need-to-Know Key Performance Indicators’ as well as my free online KPI Library.

For more free articles, white papers and case studies, check out the knowledge hub of my website: Knowledge Hub.

I have also put together this slide deck, which you might want to download or share:

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Here are some other related posts I have written:

• Caution: When KPIs Turn To Poison
• What The Heck Is a... KPI?
• The Seven Secrets of Top Performers
• The Top 5 Performance Management Tools: Good News And Cautionary Tales
• KPIs Don't Improve Decision-Making In Most Companies
• Big Data: The 5 Vs Everyone Most Know
• What The Heck is a Balanced Scorecard?
• The One Thing Successful People Never Do!

About : Bernard Marr is a globally recognized expert in strategy, performance management, analytics, KPIs and big data. He helps companies manage, measure and improve performance.

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