In the old days, marketing was all about the "spray and pray" approach. We would place an ad in a popular publication and hope for the best, crossing our fingers that it would generate leads. Things have come a long way since then.
I recently earned a certificate with honours on a course in marketing metrics. I chose to take this on because I wanted to refresh my knowledge and learn a few new tricks.
Let's dive into a handful of metrics that I think you'll find valuable - market penetration, customer churn and retention, plus read on for a bonus metric.
First, we have MARKET PENETRATION - this one is key to understanding your company's growth potential.
Understanding the market size is the first part to determine market penetration. You may have heard of this by the acronyms TAM (Total Addressable Market), SOM (Serviceable Obtainable Market), and SAM (Serviceable Available Market).
Let's say you want to attract more customers aged 20-24. You can look at the TAM for all of Canada, the SOM for your specific province, and the SAM for the area where your business is physically located.
Helpful tip: You can get all this information from the latest census data from Statistics Canada. If you need help navigating their website, check out my quick video for tips and tricks.
Once you know the market size, it's time to determine how many customers you have in that age range.
Divide the total number of your customers by the number in the market, then multiply it by 100. Voila! You've got your market penetration score.
Let's dive into an example to illustrate:
Business ABC has 347 customers aged 20-24, and they've determined that the SAM is 1156. The calculation goes like this:
347 divided by 1156 equals 0.300.
Multiply that by 100, and you get a market penetration of 30%.
That means 30% of potential customers in that age group are already loyal customers of Business ABC. The big question is, is there an opportunity to grow, or is this the greatest penetration the company feels it can get for now?
Okay, now let's move on to customer churn and retention. These metrics are helpful for understanding how well your customers stick around.
Calculating CUSTOMER CHURN is a straightforward calculation if you keep track of the number of customers you have.
Just subtract the number at the beginning of a period from the number at the end and divide that by the number at the beginning.
Here's an example that can help to understand this better:
Let's say you want to know the customer churn rate of Business ABC. You take the total number of customers at the beginning of the period (in this case, it is June 1, 2022), which is 1968. Subtract that from the number of customers at the end period (May 31, 2023), which is 1850.
The calculation looks like this: (1968-1850) divided by 1968 equals 0.0599. Multiply that by 100, and you get a churn rate of 5.99%.
So, 5.99% of Business ABC's customers are leaving.
The churn rate allows you to calculate the RETENTION RATE
The calculation is 100% minus the churn rate.
In above example, the retention rate is 100% minus 5.99%, which equals 94.01%.
BONUS: You can figure out HOW LONG THE AVERAGE CUSTOMER WILL STAY with your business.
The calculation is to simply divide 1 by the churn rate.
In this example, it's 1 divided by 5.99%, which equals a whopping 16.69 years. Of course, remember that this is just an average. Some customers may stay longer, while others will leave sooner.
These are only a few of the many metrics you can track to create profound value in your marketing initiatives.
The most important part is to determine the metrics that make sense.
Set targets at the beginning/before you launch your initiative(s).
Check in on the metrics regularly throughout the campaign.
Evaluate at the end of the campaign to determine results (what worked, what would you change next time).
I hope you found this post insightful. If you are wondering what marketing metrics to use in your campaigns, would like to discuss what specific results mean, or are interested in learning more about my experiences in the marketing metrics course I took, I would be so pleased to discuss them with you.
Keep on being amazing,
Lyanne
With a drive to accomplish high-quality results, the marketing work Lyanne has spearheaded in business has been recognized and awarded nationally on several occasions. In addition to this, she proudly holds the Chartered Marketer designation through the Canadian Marketing Association.
After serving 28 years in corporate finance, she emboldened into new territory by striking up a business marketing consulting practice that exists to lighten the load of marketing leaders. Having been a leader in marketing, she appreciates the complexities of the job and the many demands that come with it.
Whether you are interested in learning more about how blue dragonfly can help your business, are interested in joining or learning more about Mastermind groups, would like to chat about a speaking engagement, or want to meet with Lyanne, this is a great way to get started. Connect today.
Cheers to the beginning of a great relationship.