Heeding Digital Signals: Which Customer-Behavior Metrics Count

Businesses that utilize behavior data to message and target their customers have 85 percent more sales and 25 percent higher gross margin than do business that don’t, according to a study by McKinsey. For companies to successfully integrate customer data into their marketing programs, their digital marketing teams must focus efforts on the core behavioral-data metrics that will move the needle on campaign performance.  

As customer data has become deeper and more complex, businesses are able to tap into even more insight into customer behaviors, with an unparalleled understanding of their habits and preferences persistently over time. This level of insight has enabled marketers to optimize the entire experience for customers, with the ability to fine-tune their campaigns at different buying stages to improve customer satisfaction, sales, and retention.

With so much new data and the ability to slice-and-dice data and audiences more granularly than ever before, what are the most important digital signals for customer-behavioral data that businesses can focus on to ensure successful marketing campaigns and business value?

According to digital marketing guru Neil Patel, the behavioral metrics your company should focus on are the ones that will most impact your key business drivers. For most modern businesses, these are:  

1. Revenue

2. Customer Loyalty

3. Active Users

Revenue (Conversion Rate and Churn)

While revenue is undoubtedly the top consideration for any for-profit business, you might be surprised to see “active users” and “customer loyalty” suggested as top business drivers today. For any software-as-a-service (SaaS), social media, or other digital or subscription business, counting not just users, but active users who are engaged, is a key driver for revenue and profitability. For e-commerce vendors who want customers not just to return to buy their products again, but become brand advocates and potentially promote and support that brand on social media, customer loyalty is a key driver for success.  

Focusing on core metrics to drive positive outcomes is key to any marketing department success. It’s easy, especially for digital marketers, to get lost in the weeds of a mountain of data, with much of it not being actionable. Keeping your eye on the ball for what will convert and translate into ROI for your business is critical.  

As any seasoned marketer knows, the two key behavioral metrics that impact revenue are conversion rate and churn. What percentage of users interacting with your ads or site do you convert to a sale, and how often must your existing customers be replaced with new ones to maintain or grow the business? In general, you want to keep churn as low as possible while trying to reduce it by retaining existing customers. Evan Bailyn, author and speaker, said customer acquisition cost (CAC) ranges from $87 for e-commerce, to $205 for B2B SaaS, to as high as $862 for higher-ed and college. According to author Amy Gallo, the cost of acquiring a new customer is anywhere from five to 25 times more than retaining an existing one, depending on industry and data sources. With the cost of new customer acquisition skyrocketing in recent years, companies are focusing more on customer loyalty, which leads to better customer retention.  

Customer Loyalty (Retention Rate and Repeat Purchases)

According to Neil Patel, customer loyalty “affects everything from revenue to brand equity to the long-term sustainability of your business and how competitive you are in your industry.” As just mentioned, the extremely high cost to acquire new customers has led more companies to embrace customer loyalty as a key business driver.  

To improve customer loyalty, measuring customer retention rate is key, and driving the right leads to begin with makes sure those are the right customers to pursue for long-term relationships. Poor customer retention can lead to invisible costs, according to Douglas Karr, founder of Martech Zone. He called out some important statistics that show how important customer loyalty and retention can be to your company’s bottom line.  

• By increasing your customer retention rate by five percent, companies can increase profits by 25 to 95 percent;
• 68 percent of customers will not return to a business after having a bad experience with them;
• 62 percent of U.S. customers have moved to a different brand in the last year due to a poor customer experience.

Another important behavioral metric to use that can determine customer loyalty is repeat purchases, which tells you whether a customer is buying multiple products from your company. If a customer is doing multiple purchases from the same company, it suggests more loyalty to the brand.  

Active Users (Login, Session Duration, and Feature Use)

The third key business driver emerging for software companies that have subscriptions services is knowing how many active users are using their product consistently. Engagement is king in terms of metrics for software and social media companies, sinch it drives much of the revenue and profitability. How companies define what “active” means is critical to using it as a valuable metric.  

One way to measure active users is by measuring the data showing how many logins to the software there have been. For example, Facebook counts an active user as one who is logged in, not necessarily doing anything else. Or you can be more granular and transparent with your customers and measure things like how long someone is on for, a session duration. And, obviously, if you really want to know what your users are up to, you measure what features they use and for how long. That will give you deep insight into how active those users are, and what they do when using your product.  

Next Steps

If your company is already digitally mature and you have an established marketing team that is truly driven by behavioral customer data insights, you are probably well on your way to developing behavioral data metrics that impact your key business drivers. Establishing benchmarks and tracking conversion and churn are imperative if you are to improve and optimize revenue. But for companies that are still in the nascent stages of their digital transformation, having a digital transformation maturity model that sets goals and benchmarks for your organization’s growth is a must-have to align customer needs, technology requirements, operational process, and culture to your key business drivers.  

For companies that find some of the more traditional forms of marketing working for them—such as direct mail—having a digital maturity plan is even more critical, since it can help align digital and behavioral processes and data into your current business model, ensuring the proper balance between digital and physical marketing.  

Conclusion

Aligning the right behavioral metrics to your key business drivers is what will ensure the success of your data-driven digital-marketing programs. To ensure revenue is optimized, businesses should prioritize conversion rate and churn as key behavioral metrics. The spiraling cost of customer acquisition has led many companies to increase focus on customer loyalty in order to improve retention. This has not only has proved to be a more cost-effective way of doing business, but focusing more on retention improved overall profitability by targeting on the right leads to begin with.

Brian Carlson is a digital experience expert focused on the intersection of content, technology, and marketing and how they affect the overall customer experience. He is the founder of RoC Consulting.

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