Customer Lifecycle Metrics, Part 5: Retention and Expansion

Customer Lifecycle Metrics, Part 5: Retention and Expansion

This is part five in a series of five blog posts that examines the metrics you should measure throughout the five stages of the customer lifecycle: attract, capture, nurture, convert, and expand. 

Once your prospect converts and becomes a customer, your job as a B2B marketer isn’t done – in fact, the most significant part is just beginning.  At least, that’s the case if you’re working for a top performing company.  In a recent report from Gleanster and Act-On, Rethinking the Role of Marketing, the survey results showed that that the best performing marketing teams are the ones that take full control of the customer lifecycle – going beyond awareness and acquisition to extend their focus to conversion, retention, and expansion. 

The research shows that the top performing teams spend more time and resources on building engagement with their existing customers than marketers at average companies. 

As a result, average companies achieve 30% of revenue from their established customer base, while top performers acquire 50% of their revenue this way.  Top performers are also more likely to personalize campaigns based on their customer preferences. 

Why aren’t more marketers focusing on generating revenue from existing customers?  One reason is the simple fact that they’re generally not measured (or compensated) on metrics like current customer satisfaction.  Most marketers are often measured on tactical metrics like the number of click-throughs and conversions they achieve on certain campaigns, as well as the number of new leads generated by those efforts.  In short, those metrics that focus primarily on attracting and capturing new customers.  And if your yearly salary review is focused on how well you’ve achieved your objectives (that is to say, how successfully you’ve attracted new customers), no doubt, that’s how you’ll spend the bulk of your day.  And it’s not just for the marketers in the trenches – it’s true for their leadership as well. 

According to the survey report, the the top two management objectives for average performers were acquisition revenue (82%) and lead generation (also 82%).  For top performers, it was acquisition revenue (81%) and customer satisfaction (also 81%).  As further illustration of the differing priorities, 65% of top performers had objectives tied to customer retention, as opposed to 48% of average firms; and 66% of top performers had objectives tied to upsell revenue, as opposed to 56% of average firms. 

Learn more about the future of marketing and find out how top companies are taking control of the full customer lifecycle with new metrics, technology, and a refined focus.  Download the report from Gleanster and Act-On to learn more about what sets the most successful B2b organizations apart from average performers. 

Expansion Metrics

During the expansion stage of the customer lifecycle, you’re focused on trying to keep your customers loyal – and coming back for more business.  You’re upselling and cross-selling and adding professional services, training, and anything else you can think of to make them a happy, successful customer.  Ideally, you’re also trying to turn them into evangelists for your company.  If they’re extremely satisfied with your products and/or services, they will help spread the word and do some valuable word-of-mouth marketing for you.  Questions to ask at this stage include: Which customer marketing programs and campaigns are the most effective?  How successful are we in retaining and upselling to customers?  How is customer loyalty trending?  Here are just a few of the metrics you can use to measure the results of your expansion efforts. 

Open and click-through rates of customer campaigns: Select the campaigns that target current customers and track the response statistics. 

Churn rate: Number of customers lost in the period, divided by customer count at the beginning of the period. 

Upsell revenue as a percentage of total revenue: This reflects a company’s ability to upsell to current customers.  For new companies, this will be a small percentage (10% to 30%); while for seasoned companies, it will come closer to 50% or more. 

A loyalty metric like the Net Promoter Score (NPS): NPS is an effective metric to show how customer loyalty is trending.  In addition to an overall indicator, NPS provides verbatim answers

These metrics are just part of the picture.  It’s also important to check in with your customers through interviews and surveys to make sure you’re continuing to meet their needs.  If you have VIP, loyalty, or any other type of customer rewards programs, you’ll want to check in on the status and success of those campaigns on a regular basis as well. 

It helps if you think about metrics in two general categories: “activity” metrics and “results” metrics. 

Activity metrics tend to quantify areas where marketing has complete control.  Examples are impressions, response rate and cost per lead.  This data is really easy to capture. 

Results metrics are usually what your business cares about: Measuring what the customer or prospect did, and what benefit accrued to your organization from the campaign.  Examples include lead-to-sales conversion rates and total revenue. 

You should focus on results metrics where possible.  However, results data can be hard to get right away.  When you run a customer upselling campaign, for example, the sales results may not happen for months.  In such situations, you may need to use activity metrics until you can get a clear look at the whole picture. 

What other metrics do you track in order to measure expansion?  Share your thoughts in the comments. 

Lisa Cannon is a writer and editor based in Portland, Oregon.  With over 25 years of experience as a creative writer, editorial director, and email marketer, she specializes in making complex, technical subjects easy to understand.  Visit www.lisacannon.com to learn more.