Original article from the Flevy business blog can be found here: http://flevy.com/blog/the-customer-metrics-every-manager-should-know/ The most important thing a business needs is customers. Just as importantly, you need to understand the needs of your customers and what it is that makes them come to you for help. If you know this, you’ll be able to persuade more people to come to you for the same help. Because the second most important thing a business needs is more customers! These metrics are designed to help you get a solid overview of who your customers are, why they come to you, and where you will find others like them. 1. Net promoter score (NPS) Put simply, this is a measure of how likely a customer is to recommend your business to their friends. A business needs loyal, returning customers to grow – they are your most effective and cost-efficient form of advertising. Evidence shows that customers who talk about your company will return more frequently and often bring their friends with them. This leads to higher rates of business growth for companies with a high NPS. A simple customer survey can show you how many of your customers fit into the three key groups–promoters, passives and detractors–and where you should be focusing your efforts on improving customer satisfaction. 2. Customer profitability score Attracting a customer, persuading him that you can fill their needs, and getting them to hand over their hard-earned cash all takes money. By subtracting the cost of attracting that customer, from the amount of money they hand over, you have their customer profitability score. Business analysis has shown that this can often mean a business is losing money on a sale–when the cost of attracting that customer exceeded the amount that they end up spending! Understanding which of your customers are profitable means you can tailor your service to meet their needs–leading to greater overall business efficiency.

1. The Customer Metrics Every
Manager Should Know
Contributed by Bernard Marr on June 25, 2015 in Strategy, Marketing, & Sales
The most important thing a business needs is customers. Just as importantly, you need to
understand the needs of your customers and what it is that makes them come to you for
help. If you know this, you’ll be able to persuade more people to come to you for the same
help. Because the second most important thing a business needs is more customers!
These metrics are designed to help you get a solid overview of who your customers are, why
they come to you, and where you will find others like them.
1. Net promoter score (NPS)

2. Put simply, this is a measure of how likely a customer is to recommend your business to
their friends. A business needs loyal, returning customers to grow – they are your most
effective and cost-efficient form of advertising.
Evidence shows that customers who talk about your company will return more frequently
and often bring their friends with them. This leads to higher rates of business growth for
companies with a high NPS. A simple customer survey can show you how many of your
customers fit into the three key groups–promoters, passives and detractors–and where you
should be focusing your efforts on improving customer satisfaction.
2. Customer profitability score
Attracting a customer, persuading him that you can fill their needs, and getting them to
hand over their hard-earned cash all takes money. By subtracting the cost of attracting that
customer, from the amount of money they hand over, you have their customer profitability
score.
Business analysis has shown that this can often mean a business is losing money on a sale–
when the cost of attracting that customer exceeded the amount that they end up spending!

3. Understanding which of your customers are profitable means you can tailor your service to
meet their needs–leading to greater overall business efficiency.
3. Customer retention rate
Once you’ve spent the money and put in
the hard work to attract a customer, it’s
self-evident that it is more profitable to sell
to them more than once. Keeping the
customers you have happy is a cheaper way
of maintaining healthy turnover of
business, than constantly needing to draw
in new ones.
Once you have established a relationship with a customer and they trust that you will
provide them with what they need in a reliable and honest fashion, they are more likely to
come directly to you when they need something similar again, rather than spend more time
shopping around.

4. Understanding which of your customers are the most loyal means you can target marketing
and customer support efforts where they matter.
4. Conversion rate
Most businesses spend a lot of money on attracting and converting customers, so it makes
sense that these operations run as efficiently as possible.
To understand how effective your business’s marketing efforts are, you need to know how
your enquiries, web page visits, and sales calls translate into attracting paying customers.
Dividing the number of conversions by the number of total visitors (or calls, or email
enquiries, or whatever you are measuring the conversion rate of) will show you where your
efforts are achieving results and where you should be focusing on improvements.
5. Relative market share
In simple terms, this is how big your slice of the pie is compared to your biggest
competitors. If your objective is to become the biggest player in your game, you need to
know where you stand in relation to the competition.

5. Studies suggest that the biggest players in a particular market tend to be the most profitable
(although this is not always the case!) and tracking this metric allows you to monitor your
growth and predict where opportunities will arise in the future.
To find your relative market share against a competitor, divide your market share by theirs.
The figure might seem of little value alone, but tracking it over time and comparing it with
your relative market share versus other competitors will help you focus on opportunities for
growth.
About Bernard Marr
Acknowledged by the CEO Journal as one of today's leading business brains. Bernard Marr is a best-
selling business author, keynote speaker, and consultant in strategic performance, analytics, KPIs, and
big data. You can connect with him on LinkedIn here .

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