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Want to measure the success of your Customer Acquisition & Retention Strategies? It’s easier than you think! All you have to do is take note of certain KPIs and metrics, and based off of those, you can determine whether your efforts have been worthwhile or not.
We’ve broken down 5 of the most important metrics to consider:
1. CAC (Customer Acquisition Cost/Cost Per Acquisition): this metric helps a business measure the cost incurred by them to draw and eventually win over a new customer. Besides including the resources utilised on advertising, CAC also comprises all that you spend on producing, storing, and supplying your wares.
For calculating the CAC of your e-store, you just have to divide the expenses incurred for sales and marketing by the total number of new customers.
So, as you run a marketing campaign, average customer acquisition cost will help you find out what you are paying for new customers as against what the customers are spending on your e-commerce site.
2. CLV (Customer Lifetime Value): Customer lifetime value, as the name suggests, helps in measuring how valuable the relationship of a customer is with a business.
CLV is a significant customer acquisition metric since every customer has their own lifetime value. In addition, you want to attract customers who have a higher CLV and accordingly make your customer acquisition efforts worth it.
Here is how CLV is calculated:
CLV = average value of a purchase X number of times the customer is going to buy every year X average duration in terms of years of the customer’s relationship with the business.
So, if a customer spends $2,000 a month and is expected to stay back for 5 years, their CLV will be $120,000.
You’d multiply $2,000 x 12 (months per year) x 5 = $120,000.
3. Churn Rate: No matter how first-rate your offering is or how many devoted customers you succeed in creating, some will part ways with you as time passes by. And for finding out the average of those who leave your business, the churn rate is what you will have to calculate. And calculating the churn rate is fairly easy; you just have to divide the customers who have left during a certain time by the total number of customers that you had at the start of that period.
So, if you lose 100 customers in a month that you started with 2,000 customers, your churn rate will be 5%.
4. CTR (Click Through Rate): For driving traffic to your site, you must have designed an ad, created an emailer, or done something to entice your probable customers to click and come to your page. The percentage of clicks is what is known as the click-through rate (CTR). If you are into email marketing, the percentage is known as email CTR and is a key metric of your campaign.
Again, calculating CTR is no big deal; you simply need to divide the total number of clicks by the impression count (meaning the number of times your ad was displayed).
CTR = Clicks ÷ Impressions
So, if the number of clicks and impressions is 10 and 100 respectively, the CTR will be 10/100 = 0.1 or 10%.
5. Conversion Rate: Conversion rate too is a most valuable acquisition metric. When you show an ad that brings traffic to your site, it is not necessary that all those who click on your ad are going to buy something. But the ones who do make a purchase qualify as conversions. And when you calculate the average of your conversions, you end up calculating the conversion rate of an ad campaign.
Conversions constitute acquired customers and retaining them forms the next step. Conversion rate measurement is done by dividing the total conversions by the total visitors.
For instance, if an ad campaign generated 5000 visitors and only 1,000 converted, the conversion rate, in this case, will be 20%.
However, you must remember that every conversion does not mean a purchase. A conversion could also signify downloading an e-book, filling out a form, and more. What really matters is that the visitors took the desired action and led to a conversion.
Melt Digital Media can provide you with professional assistance to create, implement and follow all of these customer acquisition metrics. Reach out to us when you’re ready!