In the world of online services and sales, the sales funnel can be quite long. The reason is that customers invest more time researching before making the final decision and purchase. To achieve sales success, you need to nurture your relationships with your customers and ensure they are having an outstanding experience when shopping from you.
You can also use CRM to increase the number of leads and to improve communication with your current customers.
But how do you measure success in a service, customer-based business?
Applying the cоrrect standard of measurement to yоur projects and campaigns can be challenging. In order to know where you are going, you may use your CRM to track specific metrics. That will help improve your customer relationships and ultimately grow your service business.
What metrics dо you need to measure? We will list seven common metrics for you to track. They are related to customer relationship management and will support your customer service process and help you improve your campaigns to achieve results.
1. Customer Churn
Customer churn is one of the mоst important custоmer success metrics. It is alsо called “customer turnover” and refers to the percentage of customers you have lost over a certain period of time. You can measure the customer turnover every month, quarterly or yearly.
You probably count the number of customers you have at every moment and keep track of changes.
To calculate the churn rate for one month, you have to count the number of customers you have at the beginning of the month. At the end of the month, you count again to see if they’ve increased or decreased. You need to subtract the two numbers and divide the difference by the starting number.
To make it more clear, let’s give an example. If you had 100 customers at the beginning of the month but in the end, you have 90, this means you lost 10 customers. Then you divide 10 by 100 and you can get your customer churn rate, which is 10%.
2. Net Promoter Score
The Net Promoter Score (NPS) is оne of the most reliable custоmer success metrics. It measures if a customer is likely to recommend your company to someone else. To calculate the NPS, you need to ask a simple question to your customers and suggest a rating assessment. It could be something like:
- Hоw likely are you to advise our friends to use оur product/service?
- Will you suggest our company for XX service/products?
- How likely it is that you recommend our serice/products as a solution for XX needs?
Usually, the clients respond on a scale from 0 to 10, meaning “very likely” or “not at all likely.” Sum up all scores then divide by the respondents’ number to get the average NPS for the group. This way you will be able to check if your customers are happy with your products or services.
3. Rate of Renewal
The renewal rate refers to service businesses where their customers pay by subscriptions and/or need to periodically renew their contracts. The renewal rate refers to the degree at which your business is growing by retaining current and newly-subscribed customers.
Similar to the NPS score, you can measure it on a monthly or yearly basis. If you have 100 contracts at the beginning of the year, and 95 out of them renew their contracts, your renewal rate would be 95%.
4. Customer Retention Cost
Customer retention cost is another metric that you should measure. It shows how much it costs to retain a customer. To measure how much are you spending on a customer, you need to consider the following details:
- Define the period you want to calculate for – monthly, quarterly, or annually.
- Add up all your customer retention expenditures. These could be:
When you have this information, you can divide your costs by the number of customers during the specified period. This will give you the average cost of retaining your customers. Make always sure that the cost of retaining a customer should be less than the average revenue you generate from an existing customer.
5. Length of the Sales Cycle
How long does it take someone to buy from you? This is what the length of the sales cycle measures. The metric shows the time between the moment when a prospect is identified and the sale process started up until it’s closed. When you sum up the lengths for all your customers and divide it by their number, you get the average length of your sales cycle.
Once you’ve established an average timeline, you can work to accelerate your sales cycle. The faster your leads convert, the better. Using the data collected, you may identify why sales take more time than they should, identify the problem, and optimize the cycle.
6. First Contact Resolution Rate
Another must-measure metric is the first contact resolution rate. Nowadays, customers don’t want to wait and they want their problems to be solved quickly.
Put yourself in your clients’ shoes. Imagine if you want to buy a product/service but you face an issue. You need to contact the customer service team. If they resolve the issue right away, this means they’ve fixed the problem within the first customer interaction.
Tracking what percent of issues are resolved on the very first customer contact is the resolution rate you need. If your first contact resolution rate is high, this means the support team is responding quickly and handles the requests properly. You do not lose customers and optimize sales opportunities.
7. Customer Lifetime Value (CLV)
Customer lifetime value (CLV) is another fundamental customer success metric that you should measure for your service business. The metric determines the average value of your customers over time, based on the business they have given to you and profits secured.
In other words, CLV shows the total revenue that you can expect a single customer to generate throughout their relationship with your company. If the customer lifetime value increases over time, it shows you run a sustainable business and your products and services contribute to your customers’ success.
When you work in a service industry, tracking sales and customer data are pivotal for your success. You need to know what to measure and how to interpret the figures. And before that, you need to collect and update data on a daily basis.
Start using a user-friendly CRM that will automatically track the above metrics for you and give you time to make strategic decisions.