Updated: May 25
By: Dayana Cadet Validity
Sometimes the old cliches work best: “If you can’t measure it, you can’t improve it.”
Measuring performance and adjusting tactics accordingly is critical to spurring growth in just about every industry.
But with so many data points available to businesses today, choosing what to measure can be overwhelming.
This is particularly true when it comes to CRM metrics.
When chosen and monitored accurately, customer relationship management (CRM) metrics identify the strengths, weaknesses, and opportunities of customer relationships.
In this post, we’ll show you how to develop measurable SMART goals to understand what CRM metrics you should focus on.
Then, we’ll highlight 12 examples of CRM metrics that can make the lives of your marketing and sales teams easier by demonstrating how well they’re doing and where improvements need to be made.
How to create SMART goals for your CRM metrics
Even if you’ve heard about SMART goals before, it’s a topic worth revisiting. These goals form the foundation from which you’ll measure key CRM metrics. SMART is an acronym that stands for:
Specific: What goal do you want to achieve?
Measurable: What data will you use to track your progress?
Achievable: Is your goal pragmatic, and do you have the capabilities and resources to achieve it?
Relevant: Why is this goal important? How does it fit in within the bigger picture for your business?
Time-bound: When do you want to achieve your goal?
Thinking about your customer relationship goals this way gives them more context, and will ultimately make you more successful in reaching them.
“We want to sign new customers,” is not a SMART goal.
Instead, say “we want to sign 12 new customers by the end of the year. To do so, we’re going to highlight our new product and launch a targeted email marketing campaign that runs between now and the end of December.”
Specific: “We want to sign 12 new customers by the end of the year.”
Measurable: The goal is quantifiable. You can measure your closing rate to estimate how many leads you need to get acquire 12 customers. Also, if your close rate is low, you can start trying to figure out why.
Achievable: “We’re going to highlight our new service and launch an email marketing campaign.” The goal is realistic and there is a concrete plan to reach it.
Relevant: Gaining new customers is pretty much always important.
Time-bound: Your deadline is “the end of the year.”
Whether you’re looking to improve customer lifetime value (CLV), customer acquisition cost, sale cycle duration, or virtually anything else, you can set benchmarks (and track progress) for your key CRM metrics by setting SMART goals.
However, your CRM metrics will only provide accurate insights if you’re drawing from a clean well of data. And unfortunately, many companies simply aren’t, According to Validity’s State of CRM Data Health in 2022 report, 44 percent of respondents said they lose at least 10 percent in annual revenue due to low-quality CRM data.”
That’s why establishing clear data governance policies is critical to your future success. Data governance refers to a set of principles and processes that formally manages a company’s data through every stage of its lifecycle. The goal of data governance is to guarantee that data is secure, high quality, and relevant to the business’ goals. With a tight data governance plan, companies can be confident that they’re setting and tracking CRM metrics based on accurate information about their company. Related: Cloud CRM
That said, here are 12 of the most important CRM metrics your team should be tracking:
1. Customer churn rate
One of the most important key performance indicators (KPIs) for your business is your customer churn rate. Every business, no matter how exceptional, has a churn rate. Your customer churn rate (also known as attrition rate) defines how many customers stop doing business with you during a specified period. Your churn rate can also be applied to your number of email subscribers. Typically, the lower your churn rate, the better.
While this CRM metric won’t tell you why customers are leaving, it can help you identify problems. And remember, the better your customer data quality is, the more variables you can rule out.
You can calculate churn rate with this simple equation: Customer churn rate = # of churned customers / Total # of customers
It’s one of the easiest CRM metrics to track, and one that should always be in your line of sight. After all, it’s much more cost-effective to keep current customers than to find new ones.
2. Rate of renewal
If your business has subscribers of any kind, you should be tracking your renewal rate. The rate of renewal refers to the percentage of customers who choose to retain your services, and it serves as a substantial indicator of growth (or lack thereof).
Rate of renewal = # of renewing subscribers / Original # of subscribers
Much like your churn rate, your rate of renewal can indicate if something is going well or give an early warning that things are slipping.
For example, say Brenda has 1,000 subscribers who sign a one-year contract. At the end of the year, 900 renewed their subscriptions. Therefore, Brenda’s rate of renewal is 90 percent.
The following year, Brenda is back up to 1,000 subscribers. But this time, only 60 percent of them renewed.
Using the right CRM metrics (coupled with a solid CRM data management plan to make sure she’s armed with the right information) can help Brenda see that 30 percent fewer customers renewed their subscriptions this year. From there, she can work to find a solution.
3. Customer retention cost
The Pareto Principle states that 80 percent of outcomes result from 20 percent of causes. In business, it means that 80 percent of your revenue comes from 20 percent of your existing customers.
It’s not a precise measurement, but the key takeaway is that your priority should be customer retention, not customer acquisition.
Your customer retention rate refers to the number of customers you retain over a specific time period. Here’s the formula:
Customer retention rate = (Total # of customers at the end of a time period – # of new customers acquired) / Customers at the start of the time period
4. Customer lifetime value (CLV)
Do you know how much revenue you can expect from a single customer? To find out, you need to know your average:
Purchase frequency rate
Here’s the equation for each:
Average purchase value = Total annual revenue / # of annual purchases
Average purchase frequency rate = # of annual purchases / # of unique customers
Average customer value = Average purchase value x average purchase frequency rate
Average customer lifespan = # of years the average customer purchases from you
CLV = average customer value x average customer lifespan
For example, say Miguel is trying to figure out his average CLV. Here’s what he knows:
Annual revenue = $100,000
Annual purchases = 2,500
Unique customers = 500
Average customer lifespan = 4 years
Average purchase value = 100,000 / 2,500 = $40
Average purchase frequency rate = 2,500 / 500 = 5
Average customer value = $40 x 5 = $200
Average customer lifespan = 4 years
CLV = $200 x 4 = $800
If Miguel was expecting his CLV to be higher, he can start thinking about ways to increase it. For example, let’s say Miguel discovers that the average customer lifespan increases to six years when the average purchase value is $35.
Average customer value = $35 x 5 = $175
Average customer lifespan = 6 years
Customer lifetime value = $175 x 6 = $1,050
There are obviously other metrics to consider, like Miguel’s profit margins, but armed with his CLV, Miguel can take a more informed look at his marketing mix and determine if the costs to acquire a customer (more on this next) is worth it in the long run.
5. Customer acquisition cost (CAC)
The goal of every sales and marketing team is to acquire the maximum number of customers for the least amount of money. Customer acquisition cost indicates how well they’re meeting that goal.
CAC = Total spent on acquiring customers / # of customers acquired
As a regularly tracked CRM metric, CAC can help you identify if your marketing and sales efforts are working or if there are leaks in your sales funnel. If there’s a steep drop-off point, you can diagnose the problem and get on the right path to acquire more customers.
6. Close rate
Your close rate is arguably the most vital metric for your sales team. It refers to how many deals you’ve closed compared to how many leads were in your pipeline. If you had 100 leads and 30 closed, your close rate is 30 percent. If that’s below your company or industry average, you can start figuring out why others are seeing more success.
Close rate = # of leads in your pipeline / # of closed deals
When tracking sales metrics like close rates, remember that quantity isn’t everything. If you have a low sales cycle, but you’re attracting and retaining high-quality clients, take that into account.
7. Length of sales pipeline stages
Certain customer relationship metrics can identify how long leads linger in your pipeline, and if there are any leaks in your processes along the way.
If you notice a sharp drop-off point in a particular stage of the sales funnel, you can work to determine why. It could point to a disconnect between your sales and marketing teams. Or maybe your proposal templates or email cadences are lacking.
Once you identify and solve the problem, you should quickly notice improvements in your average sales cycle.
8. Net new revenue
Net new revenue shows you how much money you’re making from new customers. How you want to define “new” is up to you (and CRM metrics help with that).
For example, if your subscribers are month-to-month, you can consider them “new” for the first month. If you’re selling a one-time product, your customer is “new” the first time they buy it.
By analyzing the data gathered from CRM KPIs, you can:
Track net new revenue
Identify and solve problems new customers are experiencing
Improve sales growth
9. Quota attainment
In sales, it’s all about the quota. Quota attainment measures your sales team’s total sales and how close they came to meeting or exceeding their sales goals.
Quota attainment = Actual sales/quota for a set time period
Of course, if you’re setting quotas based on a database riddled with duplicates and other data quality issues, setting and meeting quotas is a tall order. If you’re using Salesforce, check out our post on how to improve Salesforce data quality. These tips can help you clean your data to more accurately define your quotas.
10. Upsell rate
Your upsell rate shows you how many customers your sales team convinced to upgrade their purchases or subscriptions.
Upsell rate = # of customers upsold / Total # of customers
CRM metrics like this one can be broken down so teams can see who’s agreeing to make purchase upgrades by demographics, content shared, or by sales representative. Once you identify trends in purchase upgrades, get to work modifying your workflows to increase upsell rate.
11. Average resolution time
No product or service is perfect—at least not every time. To improve customer satisfaction, your company must resolve service tickets efficiently and expediently.
CRM metrics can quantify your average resolution time as a company and your average resolution time per service rep.
If one of your service reps takes much longer to resolve tickets than the others, this is an opportunity to ensure they have the right training and tools to improve their performance.
12. Net promoter score (NPS)
Another way to measure customer satisfaction is with your NPS. If you acquire your customer’s data when they make a purchase from you, you can contact them and ask how likely they are to recommend your product or service to others on a scale of 1-5 (or 10).
5 = Extremely Likely
4 = Very Likely
3 = Likely
2 = Unlikely
1 = Not likely at all
Customers that respond with 4 or 5 are your “promoters.” Customers that say 3 are probably indifferent, and customers that say 1 or 2 might have had a negative experience.
Your NPS affects how you’re perceived on the market, making this number incredibly powerful.
With this information in hand, you can analyze trends for each of these scores, reach out to your 1s and 2s to see how you can improve their experience or the experiences of future customers, and so much more.
Measuring CRM metrics can help you make vital improvements
Analyzing CRM metrics won’t solve all your business problems, but they can help you identify where these problems lie. By tracking some or all of the CRM metrics we’ve outlined, you’ll get a full understanding of how your business is performing and if you’re on track to achieve your SMART goals.
Even then, you’re only scratching the proverbial surface of how CRM KPIs can help you run your business.
Remember, the metrics you choose to track will only be as helpful as the data that’s fueling them. The better your data is, the more meaningful your CRM metrics will be.
Before you start defining your CRM metrics, read our guide, 7 Ways CRM Data Quality Issues can Sabotage Sales and Marketing Teams.