Beyond KPIs – What Top CEOs Monitor Religiously
As a CEO you know the importance of KPIs (Key Performance Indicators)
in tracking a company’s performance.
But top CEOs often look beyond the obvious metrics to get a
deeper understanding of their business.
In this post, we’ll explore some of these hidden metrics, why they matter,
and how you can use them to drive success in your business and personal life.
Let's dive in!
1. Customer Lifetime Value (CLV)
What is CLV? Customer Lifetime Value (CLV) measures the total
revenue a business can expect from a single customer over the course
of their relationship.
Why it Matters: CLV helps you understand the long-term value of
your customers, guiding you on how much to invest in acquiring
and retaining them.
How to Calculate CLV:
Average Purchase Value: Total revenue over a period divided
by the number of purchases.
Average Purchase Frequency: Number of purchases over
a period divided by the number of customers.
Customer Value: Average purchase value multiplied by
the average purchase frequency.
Average Customer Lifespan: Average number of years a
customer continues to buy from you.
CLV: Customer value multiplied by the average customer
lifespan.
Action Plan:
Business: Use CLV to segment your customers. Focus marketing efforts on high-CLV segments for better returns. Identify why customers leave. Use surveys or feedback forms to gather insights and make necessary improvements.
Personal: Apply the CLV concept to your relationships. Invest time and effort in those that offer long-term mutual benefits. Reflect on personal habits or behaviours that might push people away. Work on improving these areas.
2.Churn Rate
What is Churn Rate? Churn rate is the percentage of customers who stop
doing business with you over a specific period.
Why it Matters: A high churn rate can indicate customer dissatisfaction
and can hurt your revenue. Reducing churn is often more cost-effective
than acquiring new customers.
Number of Lost Customers: Customers who left during a period.
Total Customers at Start of Period: The number of customers at the
beginning of the period.
Churn Rate: (Number of lost customers / Total customers at start of
period) x 100
Action Plan:
Business: Identify why customers leave. Use surveys or feedback
forms to gather insights and make necessary improvements.
Personal: Reflect on personal habits or behaviors that might push
people away. Work on improving these areas.
3. Net Promoter Score (NPS)
What is NPS? Net Promoter Score (NPS) measures customer loyalty
by asking customers how likely they are to recommend your company
to others on a scale from 0 to 10.
Why it Matters: NPS is a strong indicator of customer satisfaction
and loyalty, predicting future business growth.
How to Calculate NPS:
Survey Question: "On a scale of 0 to 10, how likely are you to recommend our company to a friend or colleague
Categories:
Promoters (9-10): (Promoters)
Passives (7-8): (Passive)
Detractors (0-6): ( Detractors Unhappy customers)
NPS Calculation: NPS is calculated by subtracting the percentage
of Detractors from the percentage of Promoters.
NPS = % Promoters − % Detractors
First, calculate the percentages: Percentage of Promoters:
50/100 ×100 = 50%
Percentage of Detractors: 20/100 × 100 = 20% Next, subtract the
percentage of Detractors from the percentage of Promoters:
NPS = 50% − 20% = 30 So, the NPS in this example is 30.
Interpreting NPS: Positive NPS: Indicates more Promoters than
Detractors, suggesting good customer loyalty. Negative NPS:
Indicates more Detractors than Promoters, suggesting customer
dissatisfaction. Higher Scores: The closer the score is to 100,
the better, indicating a higher level of customer satisfaction and loyalty.
Action Plan:
Business: Regularly survey your customers and act on the
feedback from detractors to improve their experience.
Personal: Use a similar approach in your personal life. Ask for feedback
from friends and family and work on areas where you receive criticism.
Linking Metrics to Everyday Operations
Integrate CLV in Marketing Strategies:
Focus your marketing budget on campaigns that attract high-value customers. Offer loyalty programs to increase their lifetime value.
Monitor Churn Rate in Customer Service:
Use churn rate data to improve your customer service. Implement retention strategies like personalised follow-ups or special discounts for returning customers.
Utilize NPS in Product Development:
Incorporate feedback from your NPS surveys into your product development process. This ensures that your products meet customer needs and expectations.
Summary
By focusing on these hidden metrics, you can gain deeper insights into
your business's health and future trends.
Implementing CLV, churn rate, and NPS into your daily operations will help
you make informed decisions, improve customer satisfaction, and drive
long-term success.
Start using these metrics today to transform both your business
and personal life!
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