3 KPIs Every Sales Team Should Track
Key Performance Indicators (KPIs) are measures of how your company is performing towards certain goals or objectives.
For sales teams, tracking KPIs related to customers is key because quite simply, there are no sales without customers.
3 customer-related KPIs that every sales team should track
Customer Retention Rate: CRR = ((E-N)/S) x 100
How well are doing at keeping your customers? Acquiring a new customer can cost 5x more than retaining an existing customer. Increasing customer retention by 5% can increase profits by 25 - 95%.
To calculate your customer retention rate (CRR), determine the number of customers you have at the start (S) of a given period, as well as at the end (E) and also the number of customers acquired during the period you're measuring (N), then apply these numbers to the formula above.
Customer Acquisition Cost: CAC = MCC (W + S + PS + O) ÷ CA
How much is it really costing you to acquire a customer? You need to know this number in order to manage it.
To calculate your customer acquisition cost (CAC) using the bolded formula above, first determine your total marketing campaign costs related to acquisition (MCC) in a given period, typically a year. These costs can include:
W: Wages associated with marketing and sales
S: The cost of all marketing and sales media and software
PS: Any additional professional services (e.g., consultants) used in marketing/sales
O: Overhead
As well as determine the total customers acquired (CA) in the same given period.
Customer Lifetime Value: CLV = T x AOV x ALT
Just how valuable are the customers you acquire and retain? The Customer Lifetime Value calculation determines the overall customer value that could be realized in the time that a customer stays with you.
To calculate your average customer’s lifetime value (CLV), determine the average number of transactions a year (T), the average order value (AOV), and the average customer lifespan (in years) (ALT) and multiply these numbers together.
Producing a concrete CLV dollar figure gives you a tangible point around which to design customer strategies. Once you understand customer acquisition cost (CAC), and customer lifetime value (CLV), you can then focus on optimizing your resources and acquiring the right customers to drive your return on investment (ROI).
The ability to retain and grow your customers’ business with you is key, especially with harder economic times on the horizon. Businesses focused on retaining their customer base during times of uncertainty are better positioned to come out ahead when the economy improves.
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