Businesses often deal with heaps of different metrics. Each promises to reveal the key to success. It’s easy to get distracted by vanity metrics like social media likes or website visits, which might make you feel all warm and fuzzy but rarely translate into actionable insights. However, it is harder to pin-point what core metrics you should be focusing on.
Businesses and organisations, regardless of size or industry, depend on data to gain crucial insights and make informed decisions that increase opportunities and performance. But how do you know what data to follow?
The real impact comes from focusing on the right core metrics that matter for your business. These are the ones that will truly drive business growth.
What Are Core Metrics?
Core metrics are the metrics that impact your bottom line. Vanity metrics can look good but don’t necessarily translate to actual business outcomes. Core metrics give you actionable insights to make strategic decisions. You’ll know exactly what’s working and what’s not and can refine your strategy, optimise your processes, and ultimately get better results.
Tailoring Core Metrics to Your Business Model
Every business is unique, and the metrics that matter will vary depending on your business model. As a business owner or decision maker, you need to align the metrics you measure with your business type and forget the vanity metrics. Vanity metrics make you feel good but lack substance. For example, many followers and likes on social media may look great on the surface, however, the metric is meaningless if those followers aren’t converting into customers.
Core metrics like conversion rates or churn rates are valuable because they directly impact your business’s health and growth.
1. Lead Generation Companies
The main goal for lead gen companies is to attract prospects, capture their info, and convert them into paying customers. The success of these efforts is measured by a set of core metrics that reflect the performance of your campaigns and give you insights on how to optimise for better results. So the core metrics for the lead generation companies are:
Form Completion Rate:
The form completion rate is the percentage of visitors who complete and submit a form on your website or landing page out of the total number of visitors who view the form. This metric tells you how good and compelling your offer is.
A high completion rate means visitors find the form easy to fill out and are motivated enough by your offer to give you their info. A low completion rate could mean issues like too many fields, irrelevant questions, or more worryingly no perceived value in the offer.
Form Abandonment Rate:
The form abandonment rate is the percentage of visitors who start a form but don’t complete and submit it. A high form abandonment rate is a warning sign that something is going wrong in the user experience. It means visitors are interested enough to start the form but hit a snag that causes them to abandon it. This could be due to many reasons, such as confusing form fields, technical issues, or even second thoughts about the offer.
Cost Per Lead (CPL):
Cost per lead is the average cost to get each lead. This is all marketing and ad spending to get leads, divided by the number of leads. CPL is key to managing your marketing budget and ensuring your lead gen is cost-effective. It will also help you compare the performance of your different marketing channels and campaigns.
If your CPL is too high it means your marketing spend isn’t converting into enough leads. With this data, you may need to rethink your strategy.
Quality of Leads:
Lead quality is the likelihood a lead will convert into a paying customer. Not all leads are good leads. Some will convert easily, and others will never get past the initial contact. Focusing on lead quality, not just quantity, means your sales team spends time on prospects who are more likely to generate revenue. High-quality leads clearly need your product, have the budget, and the authority to buy.
2. Subscription-Based Businesses
Subscription-based businesses have a different model that relies heavily on customer retention and maximising the lifetime value of each subscriber. Unlike traditional sales models focusing on one-off transactions, subscription models are all about building long-term customer relationships. You need to monitor and optimise core metrics that reflect both customer acquisition and retention. The core metrics for this model include:
Cost per Acquisition (CPA):
Cost per Acquisition (CPA) is the average amount you spend to get each new subscriber. This includes all marketing, sales, and advertising expenses divided by the number of new customers acquired in a specific period.
CPA is a core metric to measure the effectiveness of your customer acquisition strategies. If your CPA is too high, you’ll struggle to be profitable, as the cost of acquiring customers is more than the revenue they generate. But it’s not just about keeping CPA low, it’s about getting high-quality customers who will stick with your business for the long term.
Customer Lifetime Value (CLTV):
The Customer Lifetime Value is the total revenue a customer will generate for your business over the entire lifetime of their relationship with you. CLTV is calculated by multiplying the average order value by the number of orders a customer makes per year and then by the average customer lifespan. It helps you know how much you can afford to spend on acquiring new customers.
If your CLTV is way higher than your CPA, you’ll be profitable. Plus, focusing on increasing CLTV will give you more revenue and better overall business sustainability.
Churn Rate:
Churn rate is the percentage of customers who cancel their subscription in a period, usually monthly or annually. It’s one of the most important metrics for subscription-based businesses, directly affecting your revenue and growth.
A high churn rate is a warning sign of underlying issues such as low customer satisfaction, product not delivering enough value, or poor customer onboarding. Reducing churn is key to having a stable and growing subscriber base, which, in turn, will give you consistent revenue streams.
Monthly Recurring Revenue (MRR):
Monthly Recurring Revenue (MRR) is the monthly recurring revenue from subscriptions. It helps you to predict cash flow, make informed decisions on scaling your business, and measure the impact of new marketing campaigns or product changes. Plus, it helps you see trends in your revenue, new subscribers, or losses from churn.
3. E-Commerce Businesses
E-commerce is a competitive space where the main goal is to drive sales and revenue. To achieve this, you need to track and optimise the core metrics that impact the customer journey from the moment they land on your site to the point of purchase. By focusing on these metrics, e-commerce businesses can refine their strategy, improve the customer experience, and increase their bottom line. Core metrics for e-commerce:
Conversion Rate:
Conversion rate is one of the most important metrics for e-commerce because it directly measures how well your site converts visitors into paying customers. A high conversion rate means your site is appealing, your products are desirable, and your checkout is seamless. A low conversion rate means there’s an issue with your site design, pricing, or lack of trust.
Average Order Value (AOV):
Average Order Value (AOV) is the average amount spent each time a customer buys from your site. It’s calculated by dividing total revenue by number of orders. Increasing AOV is a direct way to increase revenue without getting more customers.
You can increase profitability by getting existing customers to spend more in each transaction. A higher AOV means your marketing and customer acquisition efforts are more profitable, which is a core metric for e-commerce success.
Cart Abandonment Rate:
This metric shows how many customers add to cart and then leave the site without buying. A high cart abandonment rate is a common e-commerce problem and a big revenue loss. It means customers are interested in your products but something is stopping them from buying.
Return on Ad Spend (ROAS):
ROAS is the revenue generated per dollar spent on ads. This is a core metric to know how your ads are performing. It helps you see which ads are driving the most revenue and where to put your marketing budget.
4. Media Sites
A media site is a site that traditionally creates its own unique content to attract and share with an audience. The audience is then sold as inventory to advertisers. Businesses that succeed in this industry are content focused, trying to attract repeat visitors who spend ample amount of time on the site and view lots of pages. For media sites ad revenue is everything and it can come in many different forms from pay-per-view, sponsorships, affiliate models or pay-per-click, this makes tracking complex and in order to generate this ad revenue they need to be aware of the core metrics:
Audience and Churn
These metrics track how many people visit the site and how loyal they are. Tracking the growth of an audience is essential, which is why for this business model it is important to track unique users to the site. However, it is also equally important to track how many users a site is losing as well.
Essentially the higher number of users on the site the more eyeballs you have to view ad inventory and the more money your site can make.
Ad Inventory
Tracking unique users is a good start but you also need to measure what inventory you have available to show these users. Ad inventory comes down to the number of unique pageviews in a given period of time multiplied by the average number of advertising elements on each page. This is the number of impressions that can then be monetized.
Each page view is an opportunity to show a visitor an ad or multiple ads. This metric helps you understand what capacity you have on site to offer to advertisers.
Ad Rates
The ad rate is how much your site can make from the ads based on the amount of inventory available, content covered and the number of visitors you get to your site.
The ad rate is driven by the topic or niche of your site, content you publish and visitor demographics, so what type of users your site attracts.. Combining average ad rates with inventory can help you understand your potential ad revenue earnings.
Click Through Rates
Most advertisers want to know how many of your users are actually clicking through the ads to ensure they aren’t wasting advertising budget. The click through rate shows of the number of users that interact with an ad divided by those that see the ad.
Content to Ad Ratio
The balancing act of ad inventory and content that maximises the performance of both the site experience and the ad revenue. Too many ads leads to poor content, terrible user experience and therefore a reduction in returning visitors which then leads to reduced inventory. It is important to strike a balance between great content and well placed, relevant ads. Content to ad ratio can help distinguish what the optimum number of ads per page is.
Wrapping Up
It all comes down to the metrics. Focus on the right ones, and you’ll drive your business strategy and achieve sustainable growth. Align your core metrics to your business model and use data to inform your decisions every step of the way.