The technology available to businesses today allows them to easily capture and analyze a host of business intelligence (BI) metrics. The days of using intuition over data to make business decisions are mostly gone.
With the availability and affordability of tools like unified CRM solutions, the measurement of many metrics is automated. Plus, these tools provide dashboards that compile the metrics you need to see in one easy-to-access location.
Unfortunately, many businesses still don’t have a formal metrics and reporting structure established within their organizations. Moreover, those who do report on various metrics, do so in a siloed way and miss opportunities to extract valuable insights and act on them in a timely manner.
Marketing might be reporting on email open rates, but what does that mean for the rest of the business? How does that impact revenue, productivity, customer satisfaction, and company growth? If all marketing does is pat themselves on the back for increasing email open rates, they end up with what are referred to as “vanity metrics.”
Vanity metrics don’t provide much actionable insight. However, certain metrics provide significant insight into business health and drive the smartest growth decisions. We’ll call them “golden metrics.”
Golden productivity metrics
Internal teams’ productivity levels are key to business growth—that’s common sense. But it’s easy to mistake the activity for productivity. Let’s quickly touch on that before diving into productivity metrics as it’s an important distinction.
Activity vs. productivity: an important distinction
Excessive meetings provide a great case study through which to distinguish activity from productivity.
Let’s say an employee often schedules meetings to discuss X, Y, or Z. However, during those meetings, little is accomplished, no one is engaged, and the information shared could have easily been conveyed through an email.
On the surface, that person may be seen as a proactive and productive colleague who brings people together to drive initiatives forward. But, more often than not, all they are doing is activelywasting time.
With that important distinction out of the way, let’s look at some key productivity metrics you can start measuring today.
Employee experience: The overlooked key to business success
Employee experience (EX) is one of the important variables that dictate employee productivity and a business success. If your employees aren’t happy, inspired, engaged, and motivated (all parts of the overall EX), the quality of their work product will decline. Plus, employees in these states of mind deliver a poor customer experience, further damaging your bottom line.
The challenge of measuring employee experience
It’s challenging to measure EX because there are too many variables involved. Most companies use surveys. But surveys don’t paint an accurate picture of EX for a variety of reasons, key among them are:
- Many employees are hesitant to answer survey questions honestly for fear of retribution and this skews results. (You may tell them it’s anonymous, but many employees won’t believe you.)
- Most companies design their own surveys. However, they are rarely designed by psychometric specialists with the expertise to develop an unbiased survey that produces reliable results. For a survey to be effective, it’s best to outsource it to the experts.
Fortunately, you can maintain insight into the quality of the employee experience without using surveys. You do so by analyzing additional metrics that are directly or indirectly connected to EX. These additional metrics, in addition to being an aggregate representation of EX quality, are themselves great ways to measure productivity.
Employee turnover rate
Turnover is natural and happens in every company. But if your turnover rate is significantly higher than industry benchmarks, it’s a strong indication that productivity is down, and your employee experience needs improving. The average national employee turnover rate in the US (as of 2019) was 22%. (1)
What’s the main driver of employee turnover? The graphic below says it all—82% of respondents to a recent survey cited better job opportunities as the leading cause.(2)
You can measure employee engagement by looking at their usage rates of the technology you provide to make their jobs easier. Participation in employee engagement programs such as employee volunteer initiatives is another way to measure engagement. And you can use surveys, of course. Just be aware of the points mentioned above about using a psychometric expert to design and administer the survey.
Why is employee engagement so important? Consider that disengaged employees in the United States cost businesses between $450–550 billion annually. (3)
Golden sales metrics
Fortunately for businesses, it’s much easier to measure sales performance than productivity. Below we lay out the golden metrics for sales, many of which can be measured by the powerful reporting productivity tools of a unified CRM.
Sales revenue is a simple metric to measure and can provide much insight into the health of your business. This metric can tell you how sticky your product or service is, how competitive you are in your market, whether your marketing initiatives are producing results, and a lot more.
Plus, it’s easy to calculate. There are two types of sales revenue: gross revenue and net revenue. While both are easy to calculate, they provide quite different types of insight.
Gross sales revenue
Gross revenue is simply the amount of money your company brings in through sales. If you sell 100 widgets at $10 each, your gross revenue would 100 times 10, which equates to $1,000. That would be your gross revenue.
Net sales revenue
Net revenue considers expenses as well as incoming cash flow. To calculate net revenue, simply take gross revenue and subtract all the expenses in producing and selling that product or service.
For example, let’s say to produce one widget, you pay $1 for parts, $2 for an employee to produce it, and $2 to rent the space and pay the utilities needed to keep your shop open. Your expenses per widget are $1 + $2+ $2, which equals $5. When you subtract that $5 from the $10 in gross revenue you made from selling it, your net revenue would be $5.
What does each tell you?
If gross revenue is increasing, you can ascertain that sales are up. However, if, at the same time, net revenue is dropping, it means the costs of producing and selling your widgets are increasing. And that means less profit for your business. These are important distinctions that inform different types of forward-looking business growth decisions.
Customer acquisition cost
This is another helpful sales metric that sheds helpful light on the effectiveness of your sales team and the overall health of your business.
This golden metric is calculated per month, quarter, and/or year. To calculate customer acquisition cost, start by calculating the amount of money spent on acquiring new customers: marketing spend, sales technology subscriptions, sales team travel costs, etc. in a given time frame.
Next, divide that amount by the number of new customers acquired during that same time and you have your total customer acquisition cost. This metric is best used in tandem with customer lifetime value.
Customer lifetime value
Customer lifetime value (CLV), when used with customer acquisition cost, is one of the most important metrics to measure. In short, it is the total monetary value your average customer brings to your business.
It’s a bit more complicated to calculate. You start by calculating the average value of a single sale for a given time frame—typically one year. For subscription-based businesses, this isn’t limited to average annual subscription cost per customer—you must consider upsell transactions as well.
Once you calculate the average cost per sale, you then multiply it by the average number of purchase transactions you process per year (again, don’t forget to include upsell purchases). Finally, take that number and multiply it by the average customer lifespan (the amount of time the average customer remains a customer before leaving). That’s your CLV. It’s a particularly important business intelligence metric that all businesses should measure. If this is new to you, read this comprehensive piece on customer lifetime value.
Golden marketing metrics
Let’s turn our attention to marketing metrics and reporting. Metrics are especially important for marketers. Proving the impact of marketing via metrics and reporting is one of the only ways marketers can justify their worth within an organization.
Marketers measure all sorts of metrics—open rates, click-through rates, new leads generated, marketing qualified leads (MQLs), etc. However, many of them don’t shed any light on overall business health and some don’t even help marketers themselves.
Why measuring MQLs isn’t golden
New leads generated and leads qualified don’t mean much because there’s no telling what will happen to them after they are generated and qualified. Many marketers revel in their ability to generate marketing qualified leads (MQLs).
The problem with that metric? The marketers using it to measure their own performance are the same people who define what it means to become “qualified.” It’s a subjective metric that many marketers spend way too much time focusing on and celebrating.
Sales measures lead-to-customer conversion rates (how many leads they convert into customers). It’s a helpful metric for sales teams but it doesn’t tie back to marketing because sales teams find many leads on their own.
MQL-to-customer conversion rate: Where the gold lies
The golden marketing metric in this mix is MQL-to-customer conversion rate, which measures the percentage of MQLs that sales convert into customers. Why is this important? It tells marketers how precise their criteria for qualifying a lead is. You can send MQLs to sales all day, but if only two out of 50 of them convert into customers, you’re not qualifying them properly and should sit down with sales and discuss your lead qualification criteria and revisit your lead disposition process.
What matters is that marketing is sending sales the right leads—those that are sales-ready. Quality wins over quantity here. The MQL-to-customer conversion rate will tell you whether you’re sending the right leads at the right time, or if your process needs to be refined. If your ratio is low, you are qualifying leads too soon. If it’s high, congrats, you should be promoted.
Among the most important elements of a successful business in the digital era is a healthy website. It’s crucial that your site can easily be found and is engaging enough for visitors to stay for a bit and return later. To drive traffic to your website, you need to constantly tend to search engine optimization (SEO) tactics—both on-page and technical SEO tactics.
Marketing is typically charged with SEO and website design. In the 80s, the physical brochure was your brand’s public face, and it was incredibly important to make yours shine and stand out from the rest.
Websites are today’s brand brochures and it’s equally if not more important that it shines. Why? There are exponentially more websites today (more competition) than there were brochures in the 80s.
How do you ensure your site’s visibility and high engagement? A few golden metrics will give you a constant sense of how well your site is doing, as well as inform you when something needs to be fixed. Let’s break them down.
Total organic traffic
Organic traffic refers to site visitors that find you via search results. Organic traffic doesn’t include visitors that arrived on your site by clicking an ad result—that’s pay-per-click traffic and is a separate tactic and metric altogether.
It’s easy to measure organic traffic. If you have a website, you can connect it to Google Analytics for free and easily grab loads of real-time data about site health, visitor trends, and more. Logically, you want to see a steady uptrend in traffic per week and month over time. Ideally, you want your traffic chart to resemble Berkshire Hathaway’s stock share price chart.
How to interpret organic traffic
You’ll see traffic dips here and there, but you should expect to see more and more visitors to your site as you grow. If your traffic plateaus, it could be caused by any number of things, including backend technical SEO issues that Google and other search engines see as negative factors and penalize your site’s ranking for.
The other usual culprit that causes traffic to stop growing is a drop in the quality of your content. Google’s algorithm keeps getting smarter and can increasingly differentiate high-quality content from fluff and clickbaits. But content quality is better measured by the next metric on our list: average session duration.
Average session duration
This metric can also be pulled from Google Analytics. It tells you the average amount of time visitors spend on your site. If this metric is hovering around one minute, it’s an indication that your site is not engaging visitors and needs some work. If session duration is, on average, three minutes or above, you’re looking good. When you reach five minutes, it’s time to bring out the champagne.
We’re still in Google Analytics with this one. A “bounce” refers to a visitor who lands on a page, takes no action such as scrolling, clicking anything, etc., then leaves. In other words, they did nothing on your site. They came, took a peek, didn’t like what they saw, and left.
Alternatively, it wasn’t that they didn’t like what they saw but rather they realized they were in the wrong place. That results from your site’s rankings not aligning with search intent, a topic that’s broad enough to deserve its own article.
Backlinks are links on other sites that reference information on your site, then link to and send their visitors to your site to learn more. Google sees this as a powerful sign that your site is authoritative and thus ranks it higher.
Backlinks are an important metric to track but beware of one tempering yet self-destructive temptation. Don’t purchase backlinks. You must generate them organically by publishing amazing content that people want to consume. If you buy backlinks, anyone who clicks on them is likely to bounce and/or skew your other website metrics in a negative direction. Also, make sure that your backlinks are from high-ranking, relevant, and quality sites, otherwise they’ll affect your SEO negatively.
Golden customer-focused metrics
We round out our guide to golden business intelligence metrics with some important customer-focused key performance indicators (KPIs). We’re now in the age of the consumer and customer expectations are higher than ever before. Catering to customers’ needs has never been more important. The metrics below are vital to maintaining a healthy business and insight into your future growth trajectory.
Customer churn and retention
These are two separate metrics but tie into one another. They provide the same type of insight but from opposite ends of a spectrum.
Calculated as a percentage, customer churn rate is the proportion of customers that you lose in a given month or year. It’s a great metric for keeping an eye on how quickly your business is growing and reflects the performance of every team in your business. It’s particularly helpful for subscription-based businesses.
It tells you if you’re losing more customers than you acquire and vice versa. Churn rate is easy to calculate. Simply take the number of customers you lost during a given time frame and divide that by the number of customers you had at the beginning of that timeframe. Then represent that number as a percentage.
For example, if you started the year with 100 customers but lost 15 that year, you would divide 15 by 100, which equals 0.15. As a percentage, that’s 15%. So, your customer churn rate would be 15%.
Customer retention is also most helpful for subscription-based businesses. Customer churn shows you one side of the coin while retention shows you the other. Customer retention tells you the percentage of customers who stick with you and renew their subscription to your product or service.
To calculate retention, you need three numbers: the number of customers you started the year with (A), the number you acquired during the year (B), and the number of customers you had at the end of the year (C). The formula looks like this: ((C – B) / A)) x 100.
For example, let’s say you started the year with 100 customers, acquired 20 new ones, and ended the year with 110 (because you lost 10 during the year). You could subtract 20 from 110 and have 90. Then you’d divide 90 by 100 (the number of customers you started the year with) which gives you 0.9.
Viewed as a percentage, 0.9 is 90%, which would be your customer retention rate. Now, is 90% a good retention rate? That depends on your business model. However, in most cases, it’s a high retention rate that means your business is stable with reliable recurring revenue. If this metric is new to you, learn more about customer retention and strategies to keep your rate high.
Customer effort score
Customer effort score (CES) is a simple metric that measures customer satisfaction and customer experience at the same time. There are various customer satisfaction metrics out there. Many businesses rely on net promoter score (NPS) as the holy grail of satisfaction metrics. However, using NPS as an end goal is misleading both for employees and businesses. NPS should be used as a beginning point, a way to learn and track customer satisfaction for ongoing improvements and building better customer relations.
Now, back to CES. CES measures the amount of effort a customer had to put into a specific interaction with a company. Many businesses use CES to assess the effectiveness of their customer support function, but you can use it to measure any interaction your business has with a customer.
In many ways, higher levels of customer satisfaction depend on reducing the effort a customer must put forth when interacting with a business. If their issue can be solved in a few minutes without putting much of the burden on their shoulders, they will come away satisfied. That indicates a satisfied customer who just received a positive customer experience. Checkmate.
CES tends to be more reliable than other satisfaction metrics. CES is calculated by asking customers to rate the amount of effort they had to put into an interaction, on a 5-point scale, with 1 being “very low effort,” and 5 being “very high effort.”
Collect a number of scores and calculate the average. A score of 2 or lower means that a company is making life easy on its customers, and they are happy. A score of 4 or 5 means that the company should rethink how they support their customers with a mind towards taking some of the burden off their shoulders.
Connecting the dots
We just covered some of the most valuable metrics businesses today—metrics that provide real, actionable insight. That insight is necessary to make data-driven decisions today.
It’s important that your leadership team gets behind business intelligence and reporting efforts. After all, we have the data at our fingertips. Why would we not use it to inform the decisions we make that will dictate the future survival or failure of our businesses?
Good luck, and may the data be with you.
If you’d like to learn how Insightly CRM can help you to align teams around key metrics, reduce data silos, and create a data-driven culture and decision-making, then request a free demo.
1-2. North American employee turnover: trends and effects, Mercer, 2020