3 minute read
4 Metrics Critical to B2B Success—and How Referrals Can Help Get You There
Rome wasn’t built in a day, and neither are Fortune 500 companies. It takes time, determination, and an accurate understanding of the key metrics driving the success of your brand (or empire).
While Rome didn’t have access to a suite of online metric tracking tools (that’s probably why it fell), your company does. So let’s run through four key metrics that your business should track and optimize for success, and consider how customer referrals will help get you there.
1. Customer Acquisition Cost
Customer acquisition cost (CAC) represents how much it costs a business to acquire one new customer. In order for your business to achieve sustainable growth, you must be sure that the amount of money you spend acquiring customers doesn’t exceed the profits you’ll make from having those customers.
If your CAC is high, that probably means you’re dedicating too many resources to acquiring customers. Luckily, incentivizing customer referrals can help solve this issue. A referred customer is a good match for your brand. They already know the features and value of your product before they sign up. Thus, they require fewer marketing efforts and lead nurturing, which means they’ll generate more revenue at lower costs.
2. Customer Retention
Acquiring a new customer is only half the battle. One true sign of a sustainable business model is how long a customer chooses to stay on board. According to a study conducted by Bain & Company, a five percent increase in customer retention can result in a 25 to 95 percent increase in profitability—definitely not a number to scoff at.
The key to an effective retention rate lies in customer loyalty—what are you doing to ensure that your customers stay with your brand, as opposed to defecting to one of the many others that occupy your niche? It’s likely that your customers are satisfied with the services you offer. Providing excellent customer service and a seamless online purchase experience, as well as establishing a strong trust-based relationship with customers are all critical to the success of your brand.
3. Churn Rate
Churn rate refers to the number of customers who stop paying for your product within a given time period (normally 30 days from signup). Now, inevitably some customers are going to leave, but keeping your churn rate low is essential to driving repeat revenue (i.e., success). Did you know that customers referred by trusted sources have a 37 percent higher retention rate than nonreferred customers? If you’re a SaaS company dependent on a low churn rate, then that number is too valuable to ignore.
If your business has a high churn rate, consider the possible reasons why. Is it product based or an issue with customer service? How long are customers staying before they depart? Don’t neglect to collect this information via surveys and emails, but also focus on how you can sign up loyal customers from the onset.
4. Lifetime Value
A customer’s lifetime value (LTV) is the amount of revenue you can expect to earn from a customer during their time with your company. Keep in mind that your CAC should always be lower than your LTV—otherwise you won’t make any money.
Because referred customers have much higher retention rates and a lower CAC, they’re the perfect candidates to increase LTV rates and create sustained sources of revenue for your business.
The facts are proven by tangible metrics: referred customers are the lifeblood of any online brand. So what are you waiting for?
Did we miss anything? What metrics are you tracking to make sure you’re building a successful brand?