Evaluating Technology
You need to have your people, processes, and data identified before you begin selecting your...
KPIs, or Key Performance Indicators, are indicators of progress toward an intended result. The only way to know if you are succeeding or achieving your goal(s) is to evaluate your KPIs. Peter Drucker, an Austrian management consultant and one of the most influential thinkers on management, famously said “what gets measured gets done.” Therefore, to achieve growth, what key indicators should be measured? So as we look at exactly what a growth agency does, we must also look at what they measure.
Sean Ellis, the CEO of GrowthHackers, coined the term “growth hacker” and he stated that a growth hacker’s “true north is growth”, which is sales revenue. At the end of the day, one of the best indicators of growth is sales revenue. Sales revenue, as a KPI, indicates the long-term health of a business, as well as serving as a good indicator when it comes to strategic planning and growth trends.
When evaluating sales revenue, it is important to evaluate the recurring revenue rate from subscription services in addition to project revenue.
For growth to occur, all aspects of the business must collaborate, and as marketing and sales bring in new customers, the rest of the business, including operations, must be able to successfully manage the growth.
EBITDA gives insight into the profitability of a business, and this number can be compared to other businesses within the same industry. It helps measure profitability and efficiency.
To understand how much profit a company is making, the company needs to understand the cost of delivering the goods or the cost of goods sold (COGS). COGS takes into account the total cost of manufacturing or creating the product or service, including labor, material, and service and delivery expenses. To calculate:
The more leads you have the more sales opportunities you have, which means the better the chances for sales growth. The importance of leads to an organization is as important as it is for sunlight for a solar power plant. Leads are required. Not all leads are valued the same. A marketing qualified lead (MQL) may be more likely to become a customer than another lead, but a sales qualified lead (SQL) is a lead that the sales team has accepted as worthy of direct sales follow-up and is likely the prospect is likely to decide. (This is where inbound marketing comes in, by the way...) By understanding the difference of MQLs and SQLs, a business will be able to understand the Leads to Close ratio, which is the number of leads received over a specific period of time divided by the actual amount of leads closed.
Acquiring a new customer can cost five times more than retaining an existing customer. In fact, according to studies by Bain & Company, in conjunction with Earl Sasser of the Harvard Business School, have shown that even 5% increase in customer retention can lead to an increase in profits of between 25% and 95%. Therefore, customer retention is an important indicator of growth. This KPI is a great way to gauge a company’s ROI. It involves figuring out all sales your average customer initiates over the course of the relationship.
As stated above, the cost to acquire a new customer is generally five times greater than retaining a customer. This cost should take into consideration the cost of the marketing and sales team, as well as any other advertising or marketing tools needed, including PPC ads.
Client Contribution, especially in the B2B industry, demonstrates the value that each customer generates and helps determine how to grow the business, as well as let go unprofitable clients.
How quickly a sales team member contacts a lead directly impacts how quickly the lead will respond to a sales person. The quicker the response time, the more likely the lead will turn into a customer. In fact, the odds of making a successful contact with a lead is 100 times greater when a contact attempt occurs within minutes. Leads degrade over time. For many B2B leads, B2B companies take 42 hours to respond. Much too late.
The website conversion ratio is simple, how many website visitors become leads. By understanding this metric, you can improve the quality of your website’s traffic and the conversion of your website. Within this KPI, it is important to break down the conversion to MQL and SQL, as well. How many website visitors become marketing qualified leads? How many website visitors become sales qualified leads.
This is the sales team’s closed ratio. This indicates out of all of the quotes how many become customers. If the ratio is large, it may indicate some problems with your pricing. It could also indicate that your team is inflating numbers because your goals are unrealistic. The quote to close ratio should not be high.
When analyzing website traffic it is important to evaluate sessions, users, page views, page per session, average session duration, source, and bounce rate. By understanding website traffic, you understand what customers and prospects want from you, which helps you anticipate your customer’s and potential customer’s needs. Using data analytics and a system like HubSpot can really help you figure out these numbers.
Social media allows a business to distribute content and interact with current and potential customers. To evaluate social media, a business should look at followers or likes, engagements, lead conversions, customer conversions, and a percentage of web traffic associated with social media efforts. Social media tools like Hootsuit and HubSpot are great sources of information to help you measure these KPIs.
Email is a business’s lifeline with current customers. Delivery rate, unsubscribe rate, open rate, click through rate, conversion rate, and forwards/shares should have KPIs set. Using a tool like HubSpot automatically generates dashboards for you to measure these numbers.
Link acquisition impacts SEO. When someone shares a link to your website, it means you are gaining authority on that topic in your industry. The more links, the better the search rankings, which means more traffic to your website.
Again, assess how many people visited the landing page versus how many of the visitors converted into leads.
Blog posts are supposed to drive traffic to the website. It is important to see how the blog posts are driving traffic and to see if they are leading to conversions.
By knowing what metrics to measure and setting smart goals with measurable KPIs, you will be better able to determine what strategies are working well and what aren’t. These informed pivots will aid your business growth and help strengthen your growth strategy.