Customer Retention Metrics

How do you track the success of customer or account management programs?  Here are some examples I’ve seen: Customer retention rate = The percentage of customers who stay with you over the total number of customers.  The downside is that this number ignores the fact that some customers are more important/valuable than others. Revenue retention rate = Percentage of total potential revenue retained.  This metric misses the impact of account expansion but works better in environments with predictable customer contracts. Average customer revenue (revenue yield) = total revenue divided by the number of customers.  This  gives you a sense of how well you are growing your wallet share with customers. Repeat purchase rate: As the name implies, this reflects the percentage of business from existing customers. Net promoter score: The industry standard metric captures how likely a customer is to tell a friend about your business. I’ve seen a range of approaches and find that more than one metric is often needed to tell the whole story. Did I miss any other meaningful retention...

Read More

ABC: Always Be Compiling

One of my lasting recollections from yesterday’s elections was how effectively the Obama campaign used its database.  I never made a donation.  I never attended an event. I never even talked with a chugger.  All I did was forward a laugh-out-loud viral video to my wife and I was hooked. Early yesterday morning I received an email from the campaign reminding me that it wasn’t over yet and there was still time to send that viral video to friends.  They were encouraging me to send to ten friends and they would send it to ten friends…You get the idea. We all know that identifying a target market is imperative to any marketer.  That is frequently followed by the slow, painful process of compiling a list of likely targets or a “prospect universe”.  Whether you build it yourself or buy it from a third party, it is often difficult to capture more than 75% of a population.  Each new data source shows diminishing returns so you need to think creatively about how to source new names.  Inbound and outbound marketing helps but the acquisition costs can be prohibitive. This viral Obama video was impressive.  I didn’t hesitate to forward it on and unwittingly gave them my name for a future appeal (OK, I should have read the privacy policy more carefully).  Getting people to share their name and interests in exchange for information or entertainment is a proven acquisition technique and we just witnessed a group that mastered this art. Can you suggest any other creative examples of ways to economically build a prospect...

Read More

Thursday night in Beantown

It is always difficult to be in three places at one time so I had to make a difficult decision about what where to go last night.  I had three options: MIT Entrepreneurship Center Reception, WBUR Tweetup or the Mass High Tech All Stars.  In the end I chose the E-center reception and the tweet-up.  Here are some of the story lines from the evening. MIT Entrepreneurship Center Reception What can I say – Ken Morse knows how to throw a party.  I didn’t count but there must have been over 400 people crammed into the MIT Faculty Club.  The idea is bring together entrepreneurs, students and venture capitalist together for one evening to mix and mingle.  I know, MIT people have a lousy reputation for networking skills but Ken is trying to change this.  The event was sponsored by Highland Capital, Goodwin Proctor and Agilent. If there is a slowdown in the Boston startup world, it wasn’t obvious to me. People were enthusiastically pitching ideas to friends and investors.  This is one major reason why I love Boston.  Even in the midst of our current capital crisis, the universities continue to churn out technology start-ups.  They may need to work a little harder for capital right now but they will always drive our growth in good times and bad. I met great people like Brian Halligan, CEO of Hubspot and learned more about their inbound marketing platform.  It seems like the social media infrastructure guys like Hubspot will continue thrive as business figure out how to make money using these new technologies.  I also bumped into fellow Sloanies Sean Brown who has returned to McKinsey after a stint running Alumni Relations at the Sloan School as well as Tim Rowe of the Cambridge Innovation Center.  It was also nice to catch up with Jack McCollough of the CCR Group and my former Sloan protege John Hebert who is doing well at Genzyme. As a favor to Ken (many of us owe him a great deal for his sage advice and candid feedback), here is a plug for the E-center at MIT.  Take a look at the link for ways to get involved.  It isn’t just for MIT grads. More from the WBUR Tweetup to come this weekend.  Stay tuned. FM...

Read More

Metrics that Matter

A couple of weeks ago I poked fun at the array of numbers that frequently masquerade as metrics.  As a follow-up to that post, here are some additional thoughts about the attributes of meaningful marketing measures: Connected – The best metrics are related to your overall business goals. This means things like program revenue or cost per new customer. Results-oriented – Whenever possible try to connect activity to specific results.  Don’t get confused by activity-based metrics like homepage visits or page views. Think about measures that reflect real results like converted leads. Have benchmarks – Are there industry-specific numbers you can compare your metrics with?  Checkout  Lynne Harrold’s recent post for some ideas for selecting the right benchmark. She references a variety of places to find relevant numbers for comparison including the Direct Marketing Association and Marketing Sherpa. In the end, they are numbers not an answers.  They can illustrate progress (or the lack thereof) and help mediate differences of opinions.  Choose them...

Read More

Is it Time for a Web 2.0 Bailout?

Now that Washington has bailed out the financial services, insurance and auto industries, isn’t time to rescue the investors in Web 2.0 companies?  Sure they funded businesses with limited (or even no business models) but here is my logic: These companies just need time to be merged with others with more traffic and/or advertising revenue The damage caused by the failure of someone like Twitter could be severe and extremely difficult to contain Pension funds often invest in venture capital funds and we wouldn’t want retirees to be at risk The bailout could be structured as a loan until they can find a deep-pocketed acquirer or revenue model These small business owners shouldn’t be penalized for the predatory lending of a few greedy investors Joe the Tumblr shouldn’t have to pay to share his status updates Americans would face lower incomes, lower home values, higher borrowing costs for housing, education and other living expenses, lower retirement savings, and rising unemployment (OK, that was taken directly from Senate testimony by New York Federal Reserve Bank President Tim Geithner and is not related to this post) If we lose online friendships then the terrorists win (watchout @amandachapel…) There would be chaos on college campuses across the country if students didn’t have a place to share their drunken photos Thousands and thousands and thousands of social media bankruptcies would create as much systemic risk as one Facebook or Myspace faliure My guess is the bailout would cost less than $25 billion over the next five years to keep these companies solvent and Valleywag full of anecdotes about Web 2.0’s young and vapid. I need more content for my impending congressional testimony.  Any suggestions? Disclaimer: This post brought to you in part by @limeduck’s irresponsible use of cough...

Read More