New tools to improve performance
on February 25, 2022 (last modified on May 5, 2022) • 15 minute read
Ever used a fitness tracking app before? There’s this unconscious desire to beat the numbers from yesterday; eat fewer calories, walk more steps, run more laps… you get fit faster.
That same unconscious desire to beat your numbers manifests when you track business operational metrics, too. No wonder famous management thinker Peter F. Drucker, is recorded as saying “You can’t manage what you don’t measure”.
Imagine how powerful it is then when you track not just any operational metrics, but the ones that can reduce costs, turnover, or increase profits when improved.
We asked 48 experts what operational metrics they track and how those have affected business growth. Our respondents include Marketing agencies (25%), Professional Service Providers (37.5%), SaaS Businesses (16.67%), eCommerce (16.67%), and professionals from the Manufacturing industry (4.17%).
The majority consider Marketing (CPC, CPA) and Sales (Lead-to-Opportunity Ratio, Lead Conversion Ratio) to be key operational metrics businesses should track.
Read on to learn more about:
Operational metrics or key performance indicators (KPIs) are specific, quantifiable measurements used to monitor and benchmark business performance. They often center on customer acquisition and retention, product sales and profits, and also time and talent management.
These metrics help you identify strategies that are working, as well as those that need improvement based on real data, not gut feelings or intuition.
For example, to sell more products, your sales by traffic channel metric will help you identify your best-performing acquisition channels so you can focus resources on them.
Operational metrics can also help you see how you compare to your competitors. Well-documented metrics like customer acquisition costs (CAC), for example, will tell you whether you are spending more or less on ads and other acquisition efforts when you look at industry reports.
Operational metrics are so important that 1 in 3 companies we interviewed invests in a centralized dashboard (like Databox) to aggregate data from different sources — so they can monitor more efficiently.
According to our respondents, Marketing (CPC, CPA) and Sales (Lead-to-Opportunity Ratio, Lead Conversion Ratio) are some of the top operational metrics to track. Here’s the list of all 10 key metrics your business should consider tracking:
Customer acquisition cost (CAC) is the approximate amount of money a company spends to get a new paying customer. It includes money spent on salaries, tools, ads, and other sales and marketing costs.
Your CAC tells you whether you’re spending more than you should to gain new customers, whether you’re using the wrong acquisition channels, and if the customers are paying well enough to make your acquisition efforts worth it.
Charmaine Allen of LuvMeKitchen says “A metric that is integral to my business is the customer acquisition cost. I look at the cost of content versus the number of visitors that visit my site. Since my site also relies on advertising, I want to know how many pages are profitable. I compare the costs versus the advertising revenue. I rely heavily on content to drive visitors to my site, so metrics that measure the profitability of the content are very important for my business.”
Dan Ni of Messaged.com says that CAC (also called CPA) helps the Messaged.com team directly predict the outcomes of their marketing strategies. “For us, it has to be our CPA, cost per acquisition. Mainly because this metric is so performance-based as it is directly linked to the cost of acquiring a customer. this metric helped us directly predict outcomes of any marketing strategies that we employed which gave us invaluable insights,” says Ni.
Stephen Light of Nolah Mattress votes CAC as the metric of choice for eCommerce. Light shares, “As an eCommerce business, Customer Acquisition Cost (CAC) – or Cost Per Acquisition (CPA) – is the operational metric that helps us make the most influential pivots and shifts. Tracking CPA/CAC is crucial for eCommerce businesses like ours to gain a clear sense of our profitability and to determine how to optimize our acquisition channels so that we’re collecting the most revenue possible per customer. If we’re expending so much effort to bring consumers in that our business model isn’t viable, that’s a major issue, and it’s one that CAC/CPA can point out to us quickly and succinctly.”
Light says that CAC is more important than CLV and retention rates for eCommerce “For Nolah specifically, our products are meant to last up to a decade, so it’s simply not as helpful to monitor metrics like CLV and retention rates, because if we’ve done our job well, our customers will be satisfied for years and won’t return until then. We rely on our marketing to send a steady stream of consumers to our products, and our CPA/CAC rate can tell us whether we need to optimize our marketing channels to achieve a higher quality of traffic.”
Finally, Harriet Chan of CocoFinder says that CPA helps them gauge their ROI and opportunities for improvement. “CPA is a crucial operational metric for our business. By monitoring CPA, we manage to gauge how effective our ROI is and how we can optimize it further to help us deliver a better experience to our subscribers and utilize our marketing budget well for growth.”
If you’re driving business with ads, cost per click (CPC) is one metric to watch. It defines how much you spend whenever a lead clicks on your Google, Facebook, Instagram or other platform ads.
Graham Grieve of My Voyage Scotland says CPC is a great measure for determining ROI: “Cost per click or CPC lets me understand how effective my campaigns are at driving traffic to my site. Understanding CPC metrics is vital as clicks and effectively, costs, can mount up fast. With a high CPC, you won’t achieve the ROI that you are aiming for.”
Boster Biological Technology uses CPC to compare the cost-effectiveness of different campaigns for better ROI. CJ Xia shares says: “Marketing (CPC) is the key operational metric that indicates the true state of our business. We use it to compare the cost-effectiveness of different online campaigns. The CPC overview of campaigns expounds on the standard pricing model in online advertising; while comparing different campaigns into CPC of the strategy, we can easily spot which one had the lowest price and tackle deeper into the details. I believe that this KPI is priceless when advertising, and it should be viewed with other operational metrics.”
For agencies, Natasha Rei of Explainerd says you should measure your CPC in addition to CPA: “Marketing metric (CPC/CPA) is one of the most prominent metrics in our business. Since we are a marketing agency, specifically producing services for startups and B2B companies, knowing the rate of lead conversion from marketing campaigns is critical. We ensure to improve the way we advertise our services in order to get more leads. That’s why CPC/CPA metrics become key points to measure our marketing efforts.”
It’s not enough to pour traffic to your website, it’s important to track how much of that traffic converts as well.
Charmaine Allen of LuvMeKitchen says the first operational metric that determines the success of LuvMeKitchen is “…the conversion rate. For my business the higher the conversion rate, the higher the profit. As a matter of fact, a 3% increase in conversion rates has a dramatic effect on my profits.”
Similar to the conversion rate, the lead conversion ratio is another metric our respondents deem important. It signifies the amount of traffic that converts into leads and buyers, compared to the traffic which doesn’t.
Dean Kaplan of Kaplan Collection Agency shares “Our lead conversion ratio shows us the effectiveness of our ability to convert visitors to our website into leads. Because we have many website visitors at different stages of the buying cycle, we offer multiple paths to turn them into leads. We improve our lead conversion ratio by adding quality content that speaks to visitors at all stages. A good lead conversion ratio tells us that our content is building trust from our customers to the point where they are willing to buy from us. Quality is important to us, so we focus not on simply increasing the number of leads in general, but specifically on increasing the number of quality leads that will turn into business relationships.”
Melanie Musson of AutoInsuranceReviews.com agrees. Musson says “The lead conversion ratio is the most accurate reflection of our business performance. When we reach our KPIs, we typically see a corresponding improvement in our lead conversion ratio. It’s the heartbeat of our company, and when that metric gets better, our profits increase, and our customer acquisition improves.”
While the lead-to-opportunity ratio is a less common metric, it’s an important one nonetheless. This operational metric measures the percentage of qualified leads i.e the number of leads who actually have the potential to buy rather than warm your mailing list.
That’s why Evgenia Evseeva of Searcheva calls lead-to-opportunity ratio “one of the most vital operational metrics to track the efficiency of lead generation”. Evseeva says “Lead-to-opportunity ratio is one of the most vital operational metrics that we use to track the efficiency of lead generation in our marketing agency. By analyzing this metric we can identify if marketing or sales departments are spending their time unproductively or if there are any optimization opportunities in the lead nurturing funnel.”
Related: How the Spot On Agency Turned a Niche Client Campaign into 20,000 Searches Per Month (and a 300+ Percent Increase in Leads)
Another less common business metric, meaningfully active user (MAU) measures the number of users who perform actions most likely to generate value for your business. These “meaningful actions” will differ for every business — a share, a comment, a sign up or something else depending on your business model.
No wonder Nick Churcher of Scribe votes it the metric of choice. “Active users (weekly or monthly) is frequently used as the ‘north star’ metric in SaaS companies. However, each business should carefully define what constitutes a ‘meaningfully active user (MAU)’ within their context. Specifically, user actions that are highly correlated with value generation on their platform should form part of the ‘meaningful’ definition, rather than just considering anyone who logs in as active. For example, on a user-generated content platform, content creation, sharing and consumption could all form parts of the MAU definition.”
If you want to discover how visitors engage with your website, and which content drives the most engagement and conversions, there are several on-page events and metrics you can track from Google Analytics 4 that will get you started:
Now you can benefit from the experience of our Google Analytics 4 experts, who have put together a plug-and-play Databox template showing the most important KPIs for monitoring visitor engagement on your website. It’s simple to implement and start using as a standalone dashboard or in marketing reports, and best of all, it’s free!
You can easily set it up in just a few clicks – no coding required.
To set up the dashboard, follow these 3 simple steps:
Step 1: Get the template
Step 2: Connect your Google Analytics account with Databox.
Step 3: Watch your dashboard populate in seconds.
Bruno Marrato of Im-a-puzzle adds, “It’s easy to look at vanity metrics and be misled. We used to measure user growth, but noticed that our number of jigsaw puzzles solved wasn’t increasing with users. It turns out a lot of users were bouncing. Now we look at active user growth, or the number of users who are engaging with our puzzles. This has changed how we look at our business and make decisions.
Customer retention rate is one of the more popular operational metrics to monitor, especially for SaaS businesses. The retention rate shows you how long users are staying with you as paying customers.
With retention rate, you can determine if new users stay long enough to pay for your customer acquisition costs or if they churn before they earn you any profits.
“As a Saas business, we focus a lot on the sales side, and how customers are interacting with the business. Customer retention rates are crucial in this regard. The customer retention rates not only show how the customers are interacting with the business but also how the business is performing from a customer loyalty standpoint. High churn rates are typical of businesses that are underperforming.” shares Alina Clark of Cocodoc
Customer lifetime value (CLV) measures how long customers stay with you on average and how that length of time translates to revenue. It’s the total amount of revenue you can expect to generate per customer from signup to churn on average and is useful for benchmarking CAC. After all, you don’t want to spend more acquiring and supporting a customer if that customer can’t pay at least that much money for your services.
Roy Morejon of Enventys Partners shares “As a digital marketing agency, some typical operational metrics simply don’t serve us, which is why we look to metrics like Customer Lifetime Value to truly assess our operational strengths and weaknesses. Customer Lifetime Value is crucial for a digital marketing agency like us because we’re in the business of cultivating long-term relationships with clients, and we depend on their word-of-mouth advocacy and referrals. Focusing on a client’s lifetime value can give us a clear idea of how effective our retention practices are, which is extremely important for an agency’s profitability.”
“Analyzing CLV helps us to offer our clients a stronger experience, which influences many other metrics we track. Zeroing in our retention practices is the key to longevity and growth and bolsters acquisition rates. Offering an amazing experience is what has our clients recommending us for years to come. For all these reasons, CLV is the operational metric that indicates our business’ performance most accurately.” says Morejon.
According to our eCommerce respondents, the fulfillment accuracy rate is an important metric to track for eCommerce. This is because a short customer order cycle puts you ahead of your competition according to Leanna Serras of FragranceX.
“As an ecommerce store, our order status metrics are a vital measure of how well we manage order fulfillment and are a reliable predictor of customer satisfaction. Our fulfillment accuracy rate shows the amount of orders completed correctly as a percentage of total orders. We aim for our fulfillment accuracy rate to be as high as possible and regard any dips as signs that our order fulfillment process needs attention. Our customer order cycle gives the average length of time for a customer to receive their item after placing their order. We aim for our customer order cycle to be as short as possible to ensure our deliveries are faster than our competition.” Serras says.
Your employees are the lifeblood of your organization. With employee turnover comes knowledge loss, recruitment fees, and onboarding costs. That’s why it’s a good idea to monitor employee turnover rate so you can improve retention.
Jeffrey Gabriel of Saw.com shares “To my mind, the employee turnover rate is the most important operational metric. Much of what you can track turns out to be illusory or doesn’t give you the full scope of how a department is running. But employee turnover is real and inevitable. You may not be able to keep all your staff in a given year, but you can always improve your retention. Companies that have a harder time retaining staff tend to have a tougher time in other fields as well, from bottom-line profits to recruitment and expanding services. It’s a lodestar metric for sure, and one that’s worth improving.”
Related: Free Employee Time Tracking Dashboard Examples and Templates
If you’re looking to scale your business, focus on optimizing business metrics that make the most impact. Don’t know where to start? You can use the operational metrics our respondents shared as a foundation for understanding the health of your business.
But don’t forget that the goal of tracking your metrics is so you can analyze and improve your business based on your analysis. If you’re not using a tool like Databox yet, sign up for a free trial to track and analyze all your data in a centralized dashboard today!
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