As a business owner, you already know how important it is to foster strong customer relationships. It’s almost as strong as I felt during my last yoga class — an experience that highlighted how one company got the customer journey just right.
A couple of weeks ago, I needed yoga pants. I already had a classic pair of black leggings, so I started searching online for something different. I was at the start of my customer journey, and there seemed to be a million options. It didn’t help that I was living in London, so I wasn’t as familiar with the brands as I was with those in the United States.
Like many shoppers, I started searching online. A few brands popped up, and I browsed those websites. One website had a pop-up window that offered me a 10% discount if I provided my email, which I did. After they emailed me the coupon code, I added a few potential items to the shopping cart, but I kept looking at other sites, too. Then, I found a pair of pants I really liked with another brand instead and purchased them.
This is a fairly typical shopping experience, and you may wonder how you can turn my example into a measurable statistic for your business. The answer is tracking customer relationship management, or CRM.
CRM is a best practice that combines a wide variety of actions to enhance the customer experience in an effort to improve customer loyalty and increase your bottom line. CRM goes beyond just deciding that “the customer is always right.” Company owners must create an intentional strategy to see sustainable success.
And like any business strategy, CRM can be measured by analyzing customer-related data. For example, these yoga brands can track the time it took me to go from considering the purchase to making it. They can track how much it costs to rank high enough in my search engine to get noticed by me. They can track the rate at which potential customers decide to go with a different company — like I did when purchasing my new yoga pants.
With the right CRM metrics, you can pinpoint trends and changes within your company and industry and stay ahead of the competition by focusing on customer satisfaction.
Thankfully, technology can help in this process. You can automate the work to track many CRM metrics with software and systems. But for these processes to work, you must identify what measurements are key to ensuring your business goals stay on track.
To determine this vital element of your CRM strategy, you must first understand the metrics that track customer relationships and see how best to align these key performance indicators with your overall business goals.
What are CRM metrics?
CRM metrics are data points that will help you measure the strength of your customer relationships. This number-based, or quantitative, analysis provides an objective look at what may otherwise be a biased or limited perspective.
After all, a meeting with your sales team will likely uncover a wide range of opinions about why a customer decides to go with your company or a competitor. And some team members may feel uncomfortable sharing their honest viewpoints about how well the company fosters customer relations.
CRM metrics provide a big-picture analysis of the best data to paint a comprehensive and realistic picture. After all, maybe I was the only customer who didn’t use the coupon code to make a purchase. You don’t want to make business decisions based on outliers.
Besides, while the initial purchase is a crucial step, it’s just the beginning of the customer journey. You can track CRM metrics to see how many new customers create life-long relationships with your brand. After all, these aren’t the only yoga clothes I’ll buy because I practice yoga every day.
To determine the best CRM metrics to track for your company, consider your short- and long-term goals for the growth of your business. When you’re clear on your goals, you can use these metrics as benchmarks to gauge success.
How to set clear CRM goals
Like any quantitative tracking, CRM analysis must be done regularly to monitor the results of your overall customer experience. Only then will you know if the work you’re doing is meeting your goals. And, of course, the only way to meet CRM goals is to set them.
Before you purchase CRM software or create a method for collecting and measuring data, determine what specific and measurable results you seek. The clearer your goals, the easier it will be to perform the proper CRM analytics.
Identify specific business objectives
Every business owner wants their business to thrive; that’s a big and broad dream that differs from a strategic goal. To get strategic about your goals, use the SMART goals acronym: Goals should be specific, measurable, achievable, relevant, and time-bound.
Your big goals can be met by creating smaller, action-oriented objectives that drive the goal’s success. Your strategy could be new email marketing efforts, a customer loyalty initiative, or any other creative method that could work.
For example, a goal could be increasing sales by 3% in the next quarter. Or, a goal could be encouraging 50 new customers to sign up for a monthly subscription by the end of the year.
SMART goals make it easier to figure out the appropriate CRM KPIs to measure.
Establish measurable key performance indicators (KPIs)
KPIs, or key performance indicators, are measurements used to determine the success of your business initiatives. They are linked directly to your objective, tracking the success of your work for your current and potential customer base.
We’ll go in-depth with some of the most common examples of lead-gen CRM metrics, but KPIs can go beyond simply tracking customer relationships. They can also focus on:
- Financial goals
- Operational performance
- Competitive measurements
When setting your KPIs, start with a narrow focus. Don’t spend so long tracking that you don’t have the time to execute the strategy you’re trying to measure.
Align CRM goals with overall business strategy
The best way to create effective CRM goals is to ensure the goals dovetail with your larger business model plans. Integrate your strategies so all your work points toward your definition of business success.
For example, suppose I happened to want neon orange yoga pants and sent a note asking if the company had any. That random request is exactly the kind of thing that leads some business owners down a very wrong path. While listening to your customers’ evolving needs is important, you should clearly understand who your target audience is. If I want bright colors and your business strategy doesn’t include that, I’m not your target — and that’s OK!
Let your overall business strategy lead the work in coordination with your CRM analytics.
Key CRM metrics to track for business success
Many measurements are used to analyze the success of customer relations strategies. Let’s look at some of the most common examples of CRM metrics.
Customer acquisition cost (CAC)
Customer acquisition cost, or CAC, is what your company spends to add a new customer to your books. This comprehensive calculation may include anything from the cost of integrating email marketing with your CRM to the salaries of your sales and marketing teams.
The money the yoga company paid in search engine optimization of their website, for example, helped them rank highly on my search engine results page (SERP). That’s part of their cost to acquire me as a customer.
To find your CAC, add all the costs to attract new business and divide that by the number of customers you’ve added — during a specific time frame. Whether that’s the last year, the last quarter, or the last month.
Customer lifetime value (CLV)
Another KPI for customer relationships is the customer lifetime value (CLV). This is defined as the total value a person offers to your company during the entirety of their customer journey. This can vary dramatically based on your products and services, but often, a loyal and returning client costs less in customer retention cost than a new one does to acquire.
If your business is relatively new, this can be a challenging metric to calculate. You’ll need to know the value the customer brings — the money spent as total earnings — and multiply it by the average customer lifespan. The higher this metric, the better your company’s long-term viability and financial success.
Customer churn rate
On the other side of the coin from CLV is the customer churn rate, which is the rate at which customers stop doing business with you over a period of time. For example, this could be the rate of people who end monthly subscription plans, unsubscribe from email newsletters, or otherwise drop out of the sales pipeline.
To calculate this rate, divide the number of lost customers by the total number of customers at the start of a specific period, then multiply that number by 100. Of course, you want your churn rate to be as low as possible. If it’s higher than you’re comfortable with, work to strengthen your customer relationships, and this customer turnover metric should go down over time.
Measuring your conversion rate is an excellent way to determine the success of specific marketing campaigns. The conversion rate is defined as the rate at which people see an advertisement and go on to become paying customers. To find this metric, calculate the number of conversions during a specific period and divide that by the total interactions with a digital ad during the same timeframe.
This is easier to measure when a digital ad goes directly to a landing page. Then, you can track the number of people who complete the sale from that specific landing page. This separates out the customers who may find your products or services organically (as I did through my web search for yoga pants in the UK) or through other marketing efforts.
Sales cycle length
The sales cycle length is the time that passes from the first time you’ve connected with a potential customer to the time you complete the transaction. This CRM metric is how you can create sales forecasts throughout the year.
It’s best to have the sales process length be as short as possible, as longer times can require additional marketing costs or time devoted by your sales team. The faster the turnaround, the quicker you can scale up your company.
I purchased my pants less than an hour after first discovering the brand. Imagine if every customer journey started that quickly — the growth potential would be amazing!
Customer retention rate
Another effective KPI for customer relations is the customer retention rate (the percentage of existing customers who return to purchase additional products or services during a given period). When this measurement is high, you know you’ve successfully attracted repeat customers with excellent products, email marketing, or customer service.
To calculate this, take the number of customers at a given time and subtract the number of new customers within a specific timeframe. Then, divide that number by the number of customers at the beginning of that timeframe and multiply that by 100.
When your customer retention rate is low, you’ll know there’s room for improvement. If I buy just one pair of yoga pants and never return, that brand knows it’s time to focus seriously on customer relationship management.
Lead response time
Also known as the speed to lead, the lead response time is a measurement used to track the time it takes to follow up with potential customers after they make initial contact. Hot leads like this should never be wasted, which is why businesses often use email marketing campaigns that automatically send messages after potential customers sign up for an email newsletter.
To calculate this metric, average the total time between lead creation and the first response to that lead. The lead response time can be averaged company-wide by dividing the total time by the number of leads.
When you leave potential customers on the hook, you will likely miss valuable opportunities that could otherwise increase your overall revenue.
How CRM metrics can improve sales performance
No business can run on autopilot, yet many busy business owners don’t always take the time to identify and track CRM metrics to ensure they’re staying on course.
Whichever measurement you decide to analyze, know that the time it takes is an investment in your company’s success, as you’re making future business decisions easier and allowing for new opportunities for your sales team.
Enhance sales forecasting and pipeline management
You may know your average sales cycle, but you may be unable to forecast your sales for the year or even the next few quarters. Collecting and tracking the data makes you better positioned to manage your team and be strategic in your decisions.
Identifying trends within your company and your industry makes it easier to know when to increase marketing spending or focus on internal initiatives.
Identify opportunities for sales team improvement and training
If you’re tracking metrics and finding disappointing results, think positively: Knowing how and where to improve is better than not knowing at all. Sometimes, CRM metrics indicate real opportunities for professional development for your team. To improve your CRM, you must ensure your team is ready to execute any new strategies.
Drive business growth with informed insights
Like yoga, customer relationship management helps businesses be flexible to meet the ever-changing and evolving needs of their potential and current customers. It should be a strategic priority that’s linked with goals and objectives. Then, you can measure with CRM metrics to develop an objective picture of where to celebrate and where to improve.
As you begin your CRM metrics strategy, start by identifying the goals that will support the long-term success of your business as defined by your comprehensive strategic planning document. Think about how you can create more loyal customers that will get you where you want to be in the next year, five years, or 10 years.
When these clear objectives are supported and tracked with good data, you’re much more likely to stand apart — or on your head if you join me in yoga class — from your competition.