The Top 3 CRM Metrics

Customer Relationship Management, or CRM as it is more commonly known is software that allows you to track and manage your customer interactions in a data-driven way that is not only profitable but meaningful. The platform that we use here at Marketing Armor has CRM software built in, which makes analyzing metrics so much easier. But which metrics should you focus on when there are so many? CRM metrics can be an invaluable tool to help your business grow and be successful but they can be overwhelming, which is why we have decided to break down the top 3 metrics that you should be looking at, and why.

Customer Acquisition Cost

The first CRM metric that we will talk about is the Customer Acquisition Cost. The customer acquisition cost or CAC, tells you your price per lead and helps you better estimate the total spend for your lead generation efforts.

To calculate your CAC all you have to do is divide the number of customers gained in a given period by the total amount that your business spent in the same period, including all advertising spend, salaries, commissions, bonuses (if applicable) and overhead.

Here’s an example:

If you spent $20,000 on sales and marketing this quarter and added 20 customers, your CAC would be $2,000. This figure is helpful when you are trying to estimate the budget amount needed in order to add more customers. This metric also helps to measure your marketing performance and can indicate how to better allocate resources for optimal customer acquisition.

Customer Lifetime Value

The second metric is the Customer Lifetime Value, otherwise known as the CLV. The CLV is the estimated amount of money that an individual will spend throughout their relationship with your company. Simplified it is the quantifiable benefit of acquiring and keeping a customer. This figure helps you determine how much of your budget should go to customer acquisition. By revealing the value of your customer relationships on a higher level, it can help you determine if you’re focusing your efforts on the right audiences.

To calculate CLV, you multiply the average annual profit you make off of customers by the average retention time per customer. Then you subtract the cost of acquiring the customer.

For example:

You make an average of $6,000 off of your customers each year, and each has signed a two-year contract with your company. If you multiply $6,000 x 2, you will end up with $12,000. Then subtract the CAC from above, $2,000 and your CLV is $10,000.

This metric is extremely important because studies done by Forrester show that acquiring a new customer costs 5x more than retaining an existing customer.* The CLV can help you better invest in your existing customers to increase their value over time, as well as assess the quality of their experience. There are ways that you can improve your CLV, such as cross-selling, upselling and creating customer loyalty programs.

Length of Sales Cycle

The length of a sales cycle is our final metric and is defined as the average time between when a prospect is created and when they are closed. Essentially, how long it takes someone to make a decision about your company. The amount of time that it takes to convert a lead is key because it shows you the velocity of your sales funnel, which in turn helps you estimate the best time for mid-funnel engagements. These engagements can come in the form of emails, phone calls or premium content offers, all with the same goal of moving the lead along in the process.

Once the timeline has been established, you can take a closer look at areas that may be slowing leads down and work on accelerating them. The length of a sales cycle also serves as a baseline metric for the performance of sales reps. If one rep is slower than the rest you can flag areas in their sales cycles that need improvement. If there is a rep that is closing faster than everyone else, you can look at their success points in the sales cycle and share them with the team.

If you would like to learn more about our platform and how it can help you take a closer look at your CRM metrics, click on the banner below to schedule your free 30-minute consultation.



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