University:
California State University, Los Angeles
Course:
BUS 5026 | Global Business Environment
Academic year:

2024
Views:

419

Pages:

2
Author:

Amel S.

BASIC CONCEPTS OF BUSINESS METRICS IN BUILDING A BUSINESS A. Understanding Business Metrics Business metrics are a series of concrete values that function to measure and monitor the achievement of a company's business goals, as explained by Scoro. Every aspect and part of a business must have its own metrics so that its performance can be monitored. For example, the marketing department has metrics to measure the performance of social media, digital advertising, or ongoing campaigns. Meanwhile, the sales department has metrics to monitor leads. Monitoring metrics is very important so you can ensure whether your goals will be achieved within the specified time period. However, you have to be smart in determining what metrics you want to monitor and measure. This is so you can focus on the main things. Don't let your attention and efforts be diverted by things that are not really a priority. B. Difference Between Business Metrics and KPI At this point, you may be wondering, what is the difference between metrics in business and key performance index (KPI)? Well, the two actually overlap, because they both measure performance or business performance. However, according to Klipfolio, the differences between the two are: 1) Business metrics monitor the overall business area 2) KPI only targets a few very important aspects For example, business metrics monitor the percentage or comparison between total site traffic and your business goals. Meanwhile, KPI will only monitor how much traffic on your site contributes to increasing sales. C. Types of Business Metrics There are four types of business metrics that you must monitor. Glints has summarized it for you here: a. Sales revenue Sales revenue is obtained from the amount of income from customer purchases, minus costs incurred to cover goods that were not sent and sold or returned. b. Net profit margin This metric is also known as return on revenue (ROR). The way to calculate it is a month's income minus all costs incurred to support sales. c. Customer loyalty and retention rate Retention rate is a number used to measure your customer loyalty. The calculation formula is like this: 1) Retention rate = ((CE-CN)/CS)) x 100 Note: • CE is the number of customers at the end of a certain time period (e.g. end of year or end of quarter) • CN is the number of new customers acquired in the same time period • CS is the number of clients at the beginning of the period No less important, NPS is also one of the business metrics that you should know. NPS can measure the quality of your product or service as well as the level of satisfaction of your customers. Usually, this value is obtained through distributed surveys or customer interviews. The value range is 0-10, with a value of 10 being the best.