What is a Metric?

A metric is simply a measure of performance. In business, metrics are quantifiable measures that track key performance indicators (KPIs) to determine a company’s progress toward key business objectives.

For consumer companies, some of the most important metrics revolve around the customer experience and journey.

Metrics allow companies to track how customers discover, engage, and buy from their brand. By analyzing metrics over time, companies can identify trends, see what's working, and make improvements to optimize the customer experience.

Understanding Key Metrics for Consumer Companies

1) Revenue

The money a company generates from sales of goods or services is one of the most important metrics. Consumer companies aim to increase revenue through new customers, higher prices, or more sales. Track revenue over time to see if your overall strategy is working.

2) Customer Acquisition Cost (CAC)

The cost to acquire new customers is critical. Lower CAC means profiting sooner and affording more marketing. Calculate CAC by dividing total marketing costs by the number of new customers in a given period. Aim for CAC that’s less than the revenue from each new customer.

3) Customer Lifetime Value (CLTV)

CLTV estimates how much revenue a customer will generate over their relationship with a company. It’s calculated by multiplying the average annual spending of a customer by the average number of years they remain a customer. CLTV should be higher than CAC for a healthy business. Increasing CLTV depends on improving customer loyalty and the frequency and dollar amount of purchases.

4) Churn Rate

The percentage of customers who stop using a service or buying from a company in a given period. Lower churn means higher CLTV and more stable revenue. Track churn rate to determine how well a company satisfies and retains customers. Make changes to reduce churn like improving product quality, service, loyalty programs, and the overall customer experience.

What's the Difference Between a KPI and a Metric?

A metric could be anything from page views to conversion rate to customer satisfaction. The key thing is that it gives you data about what's happening.

A KPI, or key performance indicator, is a metric that really matters. It's tied directly to your business goals and objectives. KPIs help determine if you're on the right track to achieve what you want.

For example, if your goal is to increase revenue from your ecommerce site, a good KPI would be conversion rate - the percentage of visitors who buy something. You'll want to track that number and try to improve it over time. Page views, on the other hand, is just a metric. It's useful data to have but may not directly show if you're achieving your goal.

KPIs require context - you need to know your targets and benchmarks to understand if you're performing well. 

In summary, all KPIs are metrics but not all metrics are KPIs. KPIs are the key measures that really matter for your business goals. 

Tracking and Measuring Success: Top Metrics to Monitor

To properly track the performance of your consumer business, focus on a few key metrics. 

1) Conversion rate

It refers to the percentage of visitors who take a desired action, like making a purchase or performing any other key task. A higher conversion rate means your messaging and user experience are effective.

2) User lifetime value

It calculates how much revenue you can expect from a customer over their lifetime. It helps determine how much you can spend to acquire new customers. Higher CLV means greater potential for business growth.

3) Customer satisfaction

Loyalty is best measured through surveys and Net Promoter Score. Satisfied, loyal customers keep coming back and referring others. Aim for at least 30-50% satisfaction and an NPS of 20 or higher.

4) Cost per acquisition (CAC)

CAC shows how much you're spending to get each new customer. Lower CAC means higher efficiency and more budget to scale your customer base. For most consumer companies, a LTV:CAC ratio of 3:1 is good. Anything higher is better. 

5) Churn Rate

The percentage of customers who stop using a service or buying from a company in a given period. Lower churn means higher CLTV and more stable revenue. Track churn rate to determine how well a company satisfies and retains customers. Make changes to reduce churn like improving the product, loyalty programs, and the overall customer experience.

Turning Data into Action: Using Metrics to Drive Growth

Metrics are only useful if you actually use them to improve your business. Once you’ve identified the key metrics that matter for your company’s growth, you need to monitor them regularly and take action based on the insights.

For example, if you notice your customer retention rate declining over time, that’s a sign you need to focus more on loyalty programs, increasing engagement and retention through gamification, and improving the overall user experience. If your cost per acquisition is going up, it may be time to reevaluate your marketing spend or run gamified referral programs. 

Monitor, understand, optimize, repeat—that’s the cycle of growth.