Numbers tell a story.
A business will turn to the numbers and gauge its performance vis-à-vis others in the field.
Numbers can tell a story of success, when profits are on the rise and customers are happy. Or it can tell a story of wasted campaigns and unrequited marketing efforts.
At times numbers can be describing a fairytale, a story untethered to reality and doesn’t really matter.
In this post, we look at 3 KPIs (Key Performance Indicators) that provide every entrepreneur unequalled insights into the state of his business.
Piercing the Veil: 3 KPIs For Every Business
# 1 Customer Profitability Score
In their desire to “delight” customers, many companies have become “customer-obsessed” (instead of being “customer-focused”), putting out unnecessary services and costs that cannot be realistically recouped.
But not all customers are created equal.
Research has found that profitability for every customer varies greatly and that the 20% most profitable ones generate 104% of the profits, while the least profitable ones tally losses. (This is the Pareto Principle in action.)
Having a Customer Profitability Score (CPS) gives a company insights into the most profitable activities and customers. In turn, they can efficiently allocate efforts and resources to the most productive customer segments and bring down costs.
CPS is the difference between the cost of giving the product/service and the profit gained from that customer (COST minus PROFIT).
To calculate CPS, you’d need to have a handle on your cost. Depending on the nature of the business, you can have an “activity-based” or “time-based” approach to calculating cost.
For example, if you’ve established that an hour’s worth of calls in your customer service department is $50 and the customer took 30 minutes to make the buying decision, then the cost from that customer would be $25.
If the product or service you’re selling has a $65 profit, subtracting $25 from $65 would yield a Customer Profitability Score of 40.
The higher the score, the better for the company.
Looking into CPS allows a business to finetune its activities, target profitable customer segments and control its costs without sacrificing service quality.
#2 Employee Engagement Level
After customer satisfaction, companies have always been interested in knowing how satisfied their own employees are. Research is solid on the idea that happy employees lead to happy customers, which, in turn, leads to profits and happy business owners.
For example, Oxford researchers found that happy workers are 13% more productive. Multiply this with the number of guys on your team and it seriously adds up. “We found that when workers are happier, they work faster by making more calls per hour worked and, importantly, convert more calls to sales,” said Professor Jan-Emmanuel De Neve, one of the lead researchers.
And so, many businesses have come to rely on “employee satisfaction” indices which provided insights into the employee experience. But often, the instruments used (eg. surveys, focused group discussions), while revealing important attitudes at the workplace, have their own weaknesses, shortcomings, and drawbacks.
For example, an employee might report being very “happy” at work because he or she has an easy job that pays rather well. Meanwhile, those who wanted to be stretched and challenged, and wanted to contribute more meaningfully to the company get labelled as “dissatisfied,” and tacked with all the negative connotations.
So to resolve these issues and dig deeper into employee experience, “employee engagement” surveys have been devised to look deeper into the workplace and whether or not people are thriving in it.
One of the most popular instruments for the said objective is Gallup’s Q12. It comprises 12 questions and is the culmination of research into 2.7 million workers, in over 100,000 teams, covering over 50 industries.
Here are the 12 questions in the survey:
- I know what is expected of me at work.
- I have the materials and equipment I need to do my work right.
- At work, I have the opportunity to do what I do best every day.
- In the last seven days, I have received recognition or praise for doing good work.
- My supervisor, or someone at work, seems to care about me as a person.
- There is someone at work who encourages my development.
- At work, my opinions seem to count.
- The mission or purpose of my company makes me feel my job is important.
- My associates or fellow employees are committed to doing quality work.
- I have a best friend at work.
- In the last six months, someone at work has talked to me about my progress.
- This last year, I have had opportunities at work to learn and grow.
Each question has a science behind it and taken together, it provides leaders with a robust framework to increase satisfaction, loyalty and productivity in the workplace.
With a measure of employees’ general engagement level, managers and business owners have a more intimate insight into their teams.
#3 Digital/ Social Networking Footprint
The world has turned inside out.
It used to be that a brand doesn’t exist if it doesn’t come as a brick-and-mortar store that people can visit. Today, if your business is not online, it’s as if it doesn’t exist.
To be “real” then means to exist in the virtual world. It means competing with a million other voices and brands, and always having something to say online. It means constantly and consistently churning out content via articles, posts, tweets, pics, videos and updates.
In this ecosystem, a brand’s “digital footprint”—people’s awareness, perception, and interaction with the business—becomes strategically important.
When people want to buy things or require a service, they simply fire up an app or open a browser to search for it—essentially rifling through brands’ and products’ “digital footprints.”
To know how they are coming off online, businesses need to employ social media “listening tools.” These provide business intelligence and point business owners to what they need to do in order to stay relevant in the digital space.
Examples of these tools include:
Monitors & Alerts— An example is Google Alert. It allows you to monitor the entire internet and receive email notifications in cases of new hits to a watched “keyword” or phase. If the Google search engine hears about it, you’ll get an alert. Companies can flag their competition, for example, to keep themselves abreast of what the other guys are doing.
Reputation Management Tools—A business can sink with a single bad review or a negative incident not handled quickly and correctly. A reputation management tool allows you to monitor cyberspace 24/7 for any review about your company. This way, you can respond quickly and act decisively. You also get direct feedback and sentiment from the people who interacted with your product, service or brand. An example of this is Reputology.
Brand Analysis—You already know about SEO, conversions, bounce rate, backlinks, etc. You can have a more comprehensive and in-depth look at your digital footprint by looking at things like “brand interest,” “organic visibility,” “customer engagement,” etc. There are outfits (eg. Jellyfish) that do this kind of work. It’s like putting a mirror on your brand’s face and seeing what people online are seeing.
Competition Analysis—You can also leverage the services of these agencies to look into your competition. How are they doing online? What moves are they making in the digital space? Outfits like Jellyfish and Trust Insights specialize in those kinds of benchmarking.
In this post, we’ve talked about Customer Profitability Score, Employee Engagement Level and Social Networking Footprint. There are still a couple more vital metrics owners should have for their business. We will cover them in a future post.
When talking of figures and numbers, one of the most important of them all is COST. All businesses incur costs—from office rentals, power bills, and employee salaries. Kinetic Innovative Staffing understands how vital it is for businesses to be competitive and keep expenses low.
Kinetic helps companies and organizations keep their costs in check by helping them hire highly-skilled remote workers at affordable rates. From labour costs alone, our clients save as much as 70% of their usual budgets. And by working with remote professionals, companies skip the high cost of renting office space, and paying for electricity, and overhead.
Contact us to find out if the remote setup works for your business.
Kinetic Innovative Staffing has been providing hundreds of companies in the Asia Pacific, North America, the Middle East, and Europe with professionals working remotely from the Philippines since 2013. Get in touch to know more.