We won’t deny it: it’s tempting to consider the success of your marketing and business success through lenses that focus on customer acquisition. The amount of new customers per month, along with other metrics such as lead conversion rates, gives you a great idea about your growing business and what you can do to accelerate that growth.
Unfortunately, while these metrics are undoubtedly important, they may not be enough if you’re looking to accurately estimate the success of your business, for one simple reason: retention. None of them actually measure how easily you keep current customers on board, which is a core component of any business success.
That’s why when considering Key Performance Indicators (KPI) for your business, you may want to look beyond acquisition metrics. Instead, here are some alternatives and additions that can help you measure, and ultimately improve your customer retention efforts.
Average Customer Life Span
On its surface, this metric is relatively straightforward. Once a member of your target audience becomes a customer, how long do they stay on?
Of course, it’s also much easier to measure for businesses with recurring revenue models than it is for merchants selling consumer packaged goods. In that case, your customers generally show less loyalty, and purchase more infrequently. Other metrics can better help you evaluate your retention metrics.
Customer Lifetime Value
Customer Lifetime Value, or CLV, takes the concept one step further. Instead of focusing on time span, it helps you understand how much revenue an average as well as individual customers actually brought to your business. Because of its value-focused nature, this metric can be applicable to companies in any industry.
Calculated by simply adding up the average purchase values over their life span, CLV helps you compare individual customers and better determine the long-term success of your marketing efforts. If, for example, customers gained through Facebook have a higher CLV than their counterparts gained through a Google Search, you know where to focus your efforts for maximum retention.
Repeat Purchase Percentage
Where life span-based metrics work particularly well in recurring revenue pricing models, repeat purchase percentage is most beneficial as a retention metric in industries where customers buy irregularly. Again, the metric itself is straightforward: what portion of your first-time customers comes back for more after a while?
Repeat Purchase Percentage takes timing completely out of the equation, which can be helpful depending on your industry. You can, for example, more easily track loyal customers, even if they only buy from your company once a year.
Finally, don’t underestimate the value of post-purchase engagement as a customer retention metric. A one-time customer may not need to buy from you again in order to remain valuable to you. If they simply continue to engage with you on social media or via email, they can still remain a valuable brand advocate helping you to grow your business.
Imagine, for example, a one-time customer who continues to share your Facebook posts on social media. According to each of the above metrics, this customer is no more valuable than one who buys your product only to never be heard from again. But through tracking post-purchase engagement, you can determine those who loved your product, and turn them into loyal brand advocates over time – even if they don’t ever have need for your product again.
Optimizing Your CRM for Customer Retention
By incorporating some or all of the above metrics, you can more accurately track not just how many new customers you gain on a regular basis, but also how many of them become productive and valuable repeat customers and brand loyalists.
Of course, you also need a CRM that can help you in these efforts and make a tangible impact on your retention strategies. For help in that regard, contact us. We’d love to talk to you about BigContacts, and how it can help you retain more customers.