Key performance indicators (KPIs) are vital metrics that reveal whether your business is functioning according to plan. In today’s competitive and tight marketplace, CEOs and CFOs demand a return on their investment for their marketing dollars. But a singular focus on sales revenue as a KPI for marketing can create serious problems. When revenue is on the rise, organizations often assume that everything is going well and should continue on the same track. But without closer examination, leaders can miss dangerous trends and overlook crucial opportunities.
Four Key Performance Indicators
- Customer retention. Customer loyalty is fundamental to any business’ success. In fact, research shows that an increase in customer retention as modest as 5% can boost profits anywhere between 25% and 95%. Therefore, a key goal of marketing should be to retain customers over the long term and to generate recurring revenue from the existing customer base. Remember, it’s far less expensive to keep an existing customer than to attract a new one. To determine your customer retention rate, use this helpful formula on a weekly, monthly or annual basis: (CE – CN) ÷ CS x 100.
CE = number of customers at end of period CN = number of new customers acquired during period CS = number of customers at start of period - Customer satisfaction. Today, customers have more options than ever before. This means they have higher expectations when it comes to customer service. How customers are treated after making a purchase has a huge effect on their loyalty and future purchases. When customers are happy, they will spread the word within their networks. There are a number of customer-satisfaction KPIs to consider such as Net Promoter Score (how likely a customer is to recommend your product or service), overall satisfaction, brand awareness and competitor comparisons.
- Value per customer. This metric shows how engaged active customers are with your company. What is the average purchase of active customers? Is this value rising or falling? Which customers are consistently driving sales? Understanding this information helps organizations determine which customers to invest in, how to identify new customers and markets, refine and innovate product and service offerings, and determine which initiatives are not generating growth.
- Employee engagement. It’s easy to focus on external marketing, but happy employees contribute to satisfied customers and a stronger organization as well. Engaged employees invest themselves in the success of the company and support the organization inside and outside the workplace. In fact, according to the Harvard Business Review, “long-term employment relationships are key to high performance and enduring levels of employee motivation.” Benefits of employee engagement include higher productivity, decreased turnover, increased product and service innovation, lower absenteeism, and higher profits. To support this important KPI, marketing should work hand-in-hand with human resources to develop internal marketing programs that support and measure employee engagement.
The future of any business can be enhanced by not measuring marketing success only in terms of the revenue it creates. Forward-thinking marketers are looking beyond traditional metrics and developing KPIs that gauge the value of customers and employees. To learn more about developing a marketing strategy that supports long-term success, contact Trade Press Services today.