Businesses today often have more metrics than they know what to do with.

Thanks in large part to multiple online platforms, companies frequently have access to large volumes of data.

From their websites to their bank accounts, data is plentiful, and there is no shortage of services that aim to analyse that data and make it meaningful.

But despite the amount of data and analysis tools available to businesses, it's not uncommon to find that business owners and executives don't know the key metrics that really matter.

Here are the three metrics every business needs to know.

Customer lifetime value (CLV)

What is every new customer worth over the lifetime of their relationship with your business? It's a simple metric with big implications.

Knowing the lifetime value of a customer is a crucial part of understanding how much is reasonable to spend on acquiring new customers.

Measuring CLV is also a good way to determine whether your business is taking full advantage of its customer relationships.

In many, if not most cases, it costs less money to increase revenue from existing customers than it does to acquire new ones.

Yet still, marketers are still more focused on acquisition than retention.

According to our own Cross Channel Marketing Report only 15% of companies surveyed are ‘more focused on retention’. 

Cost of customer acquisition (CAC)

What does it cost to acquire new customers? While the importance of knowing the cost of acquiring a new customer is obvious, surprisingly a lot of business owners don't pay as much attention to this metric as you'd expect them to.

Keeping customer acquisition costs top of mind can benefit a business in numerous ways.

For starters, many companies spend more than they estimate on customer acquisition and in many cases, they continue to invest in marketing channels that make little sense given the lifetime value of their customers.

Additionally, meaningful reductions in customer acquisition costs can provide companies with an unfair advantage against their less conscientious and diligent competitors.

Gross margin

How much money is your company making before factoring in operating expenses?

Gross margin, which is commonly expressed as a gross margin ratio in percentage terms, is a way of describing the difference between revenue and cost minus the direct costs of providing a product or service.

As such, it is a good measure of how profitable a product or service is on its own. 

Gross margin can be a great way to compare a business to its peers. In many cases, gross margin ratio ranges are well known for specific industries, so this metric is often one of the easiest ways for a business to establish how it's doing versus its peers.

Patricio Robles

Published 16 April, 2015 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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Ray McHale, CEO at Marketing based Assets International Pty Limited

Good post Patricio, I totally agree these are key metrics that need to be closely monitored by any business with expectations of doing business more than once with each customer. You might want to check out www.valuiza.com - it's a platform that helps businesses collect feedback, calculate CLV and take precise actions to maximise the value generated from each customer.

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