We explain how to use key sales metrics to understand your sales and revenue – and to shed light on your customer experience. This is the second post in our CX metrics series.
Last week, we kicked off our series with a look at the most important customer experience (CX) metrics. This week, we’ll examine 8 key sales metrics. These not only help you understand the health of your revenue stream(s), they’ll also give you some clues about how your customers feel about your brand.
We’ve already discussed the importance of business metrics in general and explored quantitative vs. qualitative metrics in our first CX metrics article. Now, let’s find out what these key sales metrics can tell us about our business health!
8 Must-know sales metrics
- Customer Lifetime Value, or CLV, is considered the king of metrics. It seems simple: the total amount you expect to make from an individual customer over their entire relationship with your company. High-CLV customers not only tend to earn you more profit, they tend to be a loyal and satisfied repeat buyer. However, this metric is packed with meaning for several areas of your business; we recommend reading Gartner’s Customer Lifetime Value: A critical metric for building strong customer relationships for a deep dive into the subject. Suffice it to say that understanding CLVs is the starting point for many marketing and CX strategies.
- Total number of orders (or just orders) is the total number of orders your business has received over a stated time period. While this doesn’t tell you much on its own, it’s a critical component of other metrics, like net orders (the total number of orders minus the number of returned orders).
- Total number of online orders is the total number of orders coming from online channels, such as your website, an e-commerce store, your social media buy button, etc. The net online orders metric calculates the number of online orders placed minus the number of returned online orders.
- Average order amount (AOV) is the average amount of money each customer spends per order. This can be measured for the entire business or for just one area (e-commerce, wholesale, etc.). Higher average order values usually correlate with more profitability; comparing AOVs across regions, locations, offerings, or channels can provide insight into the health of specific parts of your business.
- Repeat customer rate (aka repeat purchase rate) is the percentage of customers who have made a minimum of 2 purchases from your company in a given timeframe. This metric gives insight into the loyalty of your customer base and how well your offers meet their needs. However, a repeat customer/ purchase rate that’s high while revenue is low may indicate that you need to invest in better marketing and outreach strategies.
- Customer Acquisition Cost (CAC) measures how much it costs your business to bring in one new customer. A high CAC can indicate that your company’s sales and marketing spends aren’t being adequately covered by the income you’re receiving from customers. This is another complex and valuable metric; we recommend HubSpot’s Confused about Customer Acquisition Cost? for more details.
- Repeat customer sales reflects the percentage of sales that come from repeat customers (i.e. those with 2 or more purchases).
- First-time customer sales reflects the percentage of sales that come from new customers (i.e. those with no previous purchases).
CX metrics in action: How to calculate repeat customer rate
Finding the percentage of customers that are repeat buyers (as opposed to first-time purchasers) is very easy. Simply divide the total of customers who have at least 2 purchases by the number of customers who have 1 purchase. Multiply the result by 100 to get a percentage.
If you have 10,000 customers and 4,309 have placed multiple orders with your company, you have a 43% repeat customer rate.
What key sales metrics tell you about the customer experience
These key sales metrics give you a good idea of the effectiveness of your sales and marketing teams – particularly at the later Consideration and Decision stages. They can also be valuable pointers to potential problems in the customer and user experience of your brand.
For example, if we see low first-time customer sales, we immediately look at our client’s customer journey map and their target audience profiles and research. Has there been an error or a mismatch somewhere? What about the in-store or e-commerce experience? Are there slow page load times or technical problems with the website? Are in-store checkout lines too long? Is there enough variety in the product mix – or too much?
When you track, analyze, and combine insights from the right key sales metrics, you’ll have solid data on that part of the customer experience. You can use your findings to fix any gaps in the sales process (or earlier in the funnel) and pass on your knowledge to other customer-facing departments later in the consumer’s journey.
Next week, we’ll continue our examination by looking at process and efficiency metrics and their part in the customer experience.
