Metrics may not be the most exciting thing to discuss, but they’re vitally important nonetheless. Companies who ignore metrics are more likely to struggle than companies who stay ahead of the competition with the following three major metrics.

Return on Investment (ROI)

We all know the sage advice about having to spend money to make money. That’s why ROI is such a major player in the business world. You need to know that the money you spend, or invest, will be returned to youand then some. Officially defined, ROI is a calculation of the effectiveness and value of any given investment which shows the gain or loss of that investment by measuring how much is returned to you.

For example, say a company invests $10,000 into Google AdWords and generates $20,000 in net profit from the endeavor. That’s 100 percent ROI, and something to be very happy about. However, if a $10,000 investment only returns $10,500, it means a great deal of money is being tied up for little purpose, and those funds need to be reallocated to deliver better results.

Customer Lifetime Value (CLV)

This metric is not as well known as ROI, but it’s still very important. CLV is used to determine the economic value that each customer provides to your business for his or her entire span as a customer. By tying together a customer’s actions with a specific marketing strategy, you can determine if a particular marketing channel has enough worth to remain in play. A high CLV value from a certain marketing channel indicates that channel should receive more investment in order to gain and retain customers.  

Customer Retention Rate

This is such an important metric in business because it tells you how loyal your customers are. Do they buy once, never to be seen again, or do they return every few weeks or months for a large purchase? The customer retention rate formula helps you identify how many customers you gain and lose each quarter, which will help you determine how to improve your business strategies to strengthen customer retention.

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