Growth metrics can be a great way for companies to measure how they evolve over time. Many businesses can benefit from using growth metrics to learn about which of their processes work effectively and which they might want to improve. Learning about the types of growth metrics can help you track growth at your workplace accurately and efficiently.
What are growth metrics?
Why are growth metrics important?
Growth metrics are essential for understanding how your business is performing and where you need to make improvements. Tracking and analyzing growth metrics allows you to evaluate your product-market fit and customer value proposition, identify your strengths and weaknesses, experiment with strategies and tactics to measure their impact, communicate your progress to stakeholders, and align your team and resources around growth goals.
How to choose growth metrics?
When selecting growth metrics, there is no one-size-fits-all formula. You need to choose metrics that are relevant and meaningful for your business, based on your stage, industry, audience, and objectives. Generally, you should pick metrics that align with your business goals and vision, are actionable and controllable, simple and easy to understand, consistent and comparable. It’s best to focus on a few key metrics that matter most
7 types of growth metrics
1. Revenue generation- Revenue generation is typically one of the most basic growth measurements a company can track. This is because a company can usually track its revenue by simply reviewing its profits at the end of the fiscal year. Tracking revenue generation can be especially beneficial when a company evaluates its earnings each quarter, as it can use that information to identify which actions it’s taken or products it’s sold that boost revenue during particular periods. Then, the company can prioritize its most profitable products or operating strategies to maximize its revenue during the next financial quarter.
2. Conversion rates- In business, the term “conversion rate” refers to the number of sales leads who become customers after making a purchase. Tracking your company’s conversion rates can be an effective way to track its growth, as it can help you identify specific successes that the company has achieved with its products and customer service.Since leads often become customers after speaking with a sales associate, tracking the conversion rate can help a business determine which of its sales associates and promotional methods are most effective. Then the company can increase the use of its most profitable techniques. This can help the company grow consistently over time.
3. Cost per lead- The cost per lead refers to how much money a business typically has to spend to generate a sales lead. This can include costs like paying for the salary of sales representatives and promotional materials, like advertisements and marketing campaigns. A company can use its cost per lead as a growth metric by keeping track of what it pays for each lead and comparing that amount to its conversion rate.For a company that experiences positive growth, the cost per lead might be lower than the conversion rate. This can indicate that the company makes more money from customers than it spends trying to attract them.
4. Cost per customer acquisition- Cost per customer acquisition (CPC) is another growth metric that can help companies determine what they need to do to make consistent improvements to their businesses. This metric compares a company’s number of leads and its conversion rates to identify whether the cost of attracting a customer is greater or lesser than the amount of money a company makes from that customer’s purchases. For example, if a company typically needs 10 leads to get one customer, but its customers spend more money than the company does to acquire the 10 leads, the business might be experiencing positive growth.
5. Retention- Retention is the measurement of the number of customers a business receives repeat purchases from. Tracking customer retention can be valuable because it can tell a company whether its customers make subsequent purchases, which can indicate high levels of customer satisfaction. Companies that experience positive customer retention can also typically increase their revenue by catering to the types of customers they typically retain. For example, if repeat customers often purchase a particular type of clothing, a company may release similar clothing that may appeal to them and encourage them to buy more.
6. Active users- The term “active users” refers to the number of people who interact with a company’s website or applications over a certain period. This growth metric can be especially valuable for companies that offer services, subscriptions or digital products that can track user data. This is because having a high number of active users can typically indicate that a company’s performance is positive.One way for a company to track its active users is to note the number of daily active users throughout a month or multiple months. Then, the company can compare the numbers from the beginning to the end of the tracking period to determine whether the number of users increased, declined or remained consistent.
7. Churn rate- A company’s churn rate refers to the number of customers who stop purchasing its products or services. This can be another helpful growth metric because it can help a company predict the decline of revenue it may experience if it continues losing customers. When a company has a low churn rate, this typically means that it’s continuing to earn consistently high revenue. However, if a company notices its churn rate is increasing, it can research the potential causes and try to increase customer retention to improve its sales practices and increase its revenue.
FAQs
How to track growth metrics?
Tracking your growth metrics regularly and systematically is key when you have chosen them. You can use various tools and methods to collect, store, and analyze your data, such as spreadsheets, dashboards, analytics platforms, or surveys. To track your growth metrics effectively, define your baseline and target values and time frames, use reliable and accurate data sources and methods, segment your data by relevant criteria such as customer segments, channels, or features, visualize your data in clear and compelling ways, and review your data frequently to adjust your actions accordingly.
How to use growth metrics to improve your business?
Tracking your growth metrics is essential for improving your business. You can use various frameworks and models, such as the growth funnel, the pirate metrics (AARRR), or the lean startup cycle to interpret your data and identify opportunities and challenges. To use your growth metrics to their fullest potential, identify the gaps and bottlenecks in your growth funnel and customer journey, generate hypotheses and ideas to solve the problems, test your assumptions with experiments and validations, measure the outcomes, learn from the feedback, implement the changes, and scale the successes. Growth metrics are powerful tools that can help you gain valuable insights into your business performance and value. Start measuring your growth today to see the positive effects it can have on your business.
