How do you know if your new CRM system is working?

If it isn’t

  • Sales doesn’t have the information or tools they need to convert marketing leads
  • Leads stall at certain parts of the sales cycle, fall through the cracks, or take way too long to close
  • Customers don’t stick around
  • Marketing, sales, and customer support don’t share information or insights with each other
  • Your customer support team works overtime, but can’t get through all of the tickets

But without waiting to see if any or all of that happens, how can you tell? By tracking CRM metrics.

Metrics are numbers that tell you whether something’s working the way it should. Your CRM affects teams and goals across your business — so you need to know it’s working!

In this post, you’ll learn how to:

  • Set measurable goals
  • Determine how well you’re closing valuable deals with sales metrics
  • Figure out if you’re marketing the right message to the right people with marketing metrics
  • Learn how well you’re meeting customers’ needs with customer service metrics
  • Run the right CRM reports to measure success

Let’s dive into the world of CRM metrics!

Set measurable goals

“What gets measured gets managed.” – Peter Drucker, The Price of Management (1954)

To measure CRM success, you need to set SMART goals:

  • Specific
  • Measurable
  • Achievable
  • Relevant
  • Timely

Setting measurable goals upfront makes it easier to measure the effectiveness of your CRM later on. (For more about setting SMART CRM goals, check out this blog post.)

To make goals measurable, you need to assign key performance indicators (KPIs) to each. A key performance indicator is a quantifiable measure a company uses to determine how well it’s meeting its goals. KPIs tell you:

  1. If your CRM strategy works
  2. If you’re on track to meet your CRM goals

If your goal is to increase customer retention, you wouldn’t measure the number of open sales opportunities. If your goal is to shorten your sales cycle, you wouldn’t measure your email list growth rate.

Sales metrics: How well are you closing valuable deals?

What does sales success look like for your business? Here are 5 metrics to measure sales team performance and CRM success.

1. Close rate

Your close rate is the number of deals closed compared to the number of leads in the pipeline. If you have 100 leads in your pipeline and only 10 close, your close rate is 10%.

It’s the holy grail of sales metrics.

Pretty much every sales team under the sun uses close rate as a measure of success — but close rate alone doesn’t always tell the whole story.

What’s the missing information?

  • Business 1 closes 75% of their deals.
  • Business 2 only closes 5% of their deals… but makes more money. How?!

Higher average deal size. Make sure to look at average deal size alongside close rate. How much are your closed deals actually worth?

Compare your close rate for the six months leading up to the implementation of a new CRM system with the six months after. If your CRM’s doing its job, your close rate should increase.

If it decreases, it’s time to take a close look at your sales team productivity and the quality of your leads.

“Alec Baldwin is in this movie for 15 minutes, and they’re all incredible.” – Ernie Santeralli (via GIPHY)

2. Upsell rate

Upselling: Convincing the customer to spend more than they originally planned. Your upsell rate is how many customers buy things that they weren’t originally planning to buy.

Let’s say you run sales for a home cleaning company. Upselling might involve selling customers:

  • A year’s worth of monthly cleaning, instead of purchasing month-by-month
  • Deep cleaning services instead of the basic option

If you convince 1 out of every 5 customers to upgrade their purchase, your upsell rate is 20%.

A CRM can help increase your upsell rate by helping you predict which leads are most likely to upgrade or buy other products. If finding predictors increases your upsell rate, congratulations — your CRM works.

3. Net-new revenue

New revenue means spend from new customers.

How long a customer stays “new” depends on your business model.

  • If you sell yearly subscriptions, new revenue is the revenue generated by customers within their first year.
  • If you sell one-time products, new revenue is the revenue generated by customers’ first purchases.

Why measure net-new revenue? It tells you how much money your sales team is making. Tracking new revenue and close rate tells you how valuable your newest batch of customers is.

What can you do with the right CRM in place?

  • You should be able to identify more high-value deals
  • You should be able to close more high-value deals
  • Your net-new revenue should steadily increase

This is you calculating your net-new revenue. But you should probably ask a little more nicely. (via GIPHY)

4. Length of each pipeline stage

How long does the average lead stay in each stage of your pipeline?

Stages are the steps of your pipeline (or sales process). Tracking stages helps you find bottlenecks in your sales process (like if deals tend to get stuck in a certain pipeline stage).

Let’s say leads stay in the proposal creation step 10x longer than any other step. Sure, creating proposals takes time, but how can you help your sales team move these leads to the next step more quickly?

  • Is there a way to automate some of the proposal creation process?
  • Do you have proposal templates?
  • If so, are they easy to use (and is your team using them)?

The more effective your CRM system, the faster deals move through each stage of your pipeline. Which brings us to…

5. Length of sales cycle

Also called lead velocity, which sounds more fun (and science-y). Lead velocity measures how long the average deal takes to close.

If a lead’s first conversation with your sales team is in early January, and they make a purchase or sign a contract in early July, your sales cycle is about six months long.

These two factors play a big role in length of sales cycle:

  1. Number of decision makers involved
  2. Cost of product or service

The more people involved in the decision to purchase, the longer it will take to close. Same goes for price: the more expensive the product or service, the longer the sales cycle.

Those factors are out of your sales team’s control. But you want to speed up the sales process and close deals more quickly.

Which is exactly what CRM software was made for.

CRM makes your sales process more efficient, meaning you can sell more in less time. A match made in heaven!

Keep an eye on this metric over time as a way to measure CRM success.

Marketing metrics: Are you marketing the right message to the right people?

Is your marketing team making the most of CRM? Here are 5 metrics you can use to measure marketing success.

6. Customer lifetime value (CLTV)

This metric predicts how much revenue you can expect from a single customer account.

To calculate CLTV, you need 4 pieces of information:

  1. Average purchase value: Your company’s total revenue over the course of a year divided by the number of purchases that year.
  2. Average purchase frequency rate: The number of purchases over the course of a year divided by the number of unique customers who made purchases that year. This tells you how many times per year the average customer buys from you.
  3. Average customer value: The average purchase value multiplied by the average purchase frequency rate. This estimates how much money the average customer spends with you per year.
  4. Average customer lifespan: How long the average customer continues to purchase from your business.

Once you have all the above info handy, multiply average customer value by the average customer lifespan. Voila: your company’s average CLTV.

The right CRM helps you:

  • Increase the average customer lifespan by improving retention and satisfaction
  • Target more high-value leads through your marketing

When your customers spend more and stay longer, your CLTV goes up.

7. Customer acquisition cost (CAC)

Your CAC is the total sales and marketing spend required to close a customer:

Fact: Every single marketing team wants to decrease CAC. Closing more deals while spending less money? Sign us up! (via Smile.io)

Effective CRM helps you lower your CAC by:

  • Targeting more qualified leads
  • Automating sales and marketing tasks

When you target more qualified leads, you close more deals. Automation makes your marketing team more efficient, which saves you time and money. Combine the two? Your CAC will drop.

8. Revenue generated by campaign

How do you know that your email marketing campaigns work? Sure, you’re getting clicks and your unsubscribe rate is low, but how does a series of emails contribute to your company’s bottom line?

This metric answers just that. If you run an ecommerce business, this metric is especially important. The goal for (almost) all email campaigns: to convince people to buy from you.

Breaking down how much you make from each campaign can help you identify what resonates with your customers. This lets you test and improve:

  • Email length
  • Calls to action
  • Subject lines
  • Images
  • “From” field
  • Number of emails in the campaign
  • Much more!

In ActiveCampaign, you can track this metric through the Campaigns Performance report. Learn more about ecommerce reporting here.

CRM gives you insight into customer behavior and preferences. Knowing what your customers want helps you send the right messages to the right people.

9. Email list growth rate

This metric measures how much your email list grows over a certain time period.

To calculate email growth rate:

  1. Subtract the number of unsubscribes from the number of new subscribers
  2. Divide by the total number of contacts on your list
  3. Multiply by 100

Say you have 500 new subscribers and 50 unsubscribes. Your list has 5,000 contacts total. Here’s the math:

  1. 500 new subscribers – 50 unsubscribes = 450
  2. 450 / 5,000 = 0.09
  3. 0.09 x 100 = 9% email list growth rate

Your CRM helps your marketing team increase this metric with:

  • More opportunities for opt-in forms (pop-ups, gated content, etc.)
  • More targeted emails → fewer unsubscribes

Customer service metrics: How well are you meeting your customers’ needs?

You might think of CRM as a way for sales and marketing to gain new customers — but it can also work wonders for keeping your existing customers happy. Here are 4 customer service metrics to measure.

10. Net promoter score (NPS)

How likely are your customers to recommend your business to someone else? NPS answers that question on a scale from 1 to 10.

To measure NPS, you need to send customers a survey with some variation of these questions:

  1. On a scale of 1 to 10, how likely are you to recommend our company to a friend or colleague?
  2. What made you choose that score?

Respondents are broken into three categories:

  1. Promoters (9-10): People who are really pumped about what your business has done for them (and want to shout it from the rooftops!)
  2. Passives (7-8): People who get what they want from your business, but aren’t particularly excited about it
  3. Detractors (0-6): People who had a less-than-great experience and are likely to switch to a competitor

What does NPS have to do with CRM? (Besides fun acronyms?)

  • CRM helps personalize the customer experience, which makes people happier (and more likely to give you a higher score!)
  • CRM keeps all customer info in one place, letting you see a customer’s NPS and how it changes over time at a glance
  • CRM lets you automate sending out NPS surveys and reporting on the findings.

You can automate sending out NPS surveys through ActiveCampaign. In this automation, NPS surveys are sent only to customers who have been active for longer than six months.

One caveat of NPS…

Before you get too excited about measuring NPS, you should know that this metric has its fair share of data-backed criticisms. Data shows that:

  • NPS is not a strong indicator of retention
  • NPS rarely correlates with churn

If you’re looking for a metric to predict churn and revenue, look elsewhere — like to your financial and retention metrics.

As Patrick Campbell of ProfitWell says, “NPS is still useful, but likely only as a framework for identifying those customers on an individual basis who are raising their hands in frustration.”

Where NPS really shines is as a pulse check at the account level. Regularly collecting customer feedback helps you address customer frustrations and stop would-be bad reviewers in their tracks.

You can also use NPS to find your biggest potential brand advocates. Right after a customer gives you a high NPS is a great time to automatically follow up and ask them to review you (or ask for a customer story).

11. Churn rate

The dreaded churn.

This metric tells you how frequently customers leave. It’s the opposite of your retention rate. To calculate churn rate, divide the number of churned customers by your total number of customers.

68% of customers who churn do so because they believe you don’t care about them. CRM makes it easier to prove that you do. Track customer interests, activity, and interactions, then use that information to:

  • Send personalized emails based on previous purchases
  • Ask for customer feedback
  • Reward customers for hitting certain milestones

The more appreciated and listened to your customers feel, the more likely they are to stick around.

Another way to lower churn with your CRM: look at accounts who have churned in the past. What do they all have in common? Keep an eye on indicators that a customer might churn, then work with at-risk accounts before it’s too late.

12. Average time to resolution

The right CRM system should lighten the team’s workload and help them serve customers more efficiently.

Average time to resolution: How long does it take your customer service team to resolve the average support ticket after it’s been opened?

(Pro-tip: Measure this metric in business days or hours so that it doesn’t factor in off-hours.)

Look at your overall average time to resolution, then drill down to a rep-by-rep level. If certain reps take way longer than others to resolve tickets, make sure they have the right tools and training they need. Analyzing this metric can help you figure out where certain reps might be struggling.

If your CRM works (and your team knows how to use it), the average time to resolution should decrease. We’ll get into the “why” in just a minute, but first…

13. Average number of follow-ups per ticket

Lucky number 13. How many callbacks or emails does it take for the average issue to be resolved?

This dives a little deeper than the average time to resolution. It doesn’t take into account how quickly the rep or customer replies. Instead, it measures how effective the responses are.

How can CRM help you lower these two metrics?

Make sure your support team gives customers the most relevant and tailored info the first time around.

CRM software makes it easy to see everything about your customer — behavior, preferences, activity, previous support tickets — in one place. Use it! Incorporate this information into the solutions you offer customers. The more background your customer service team has, the better (and faster) they can help your customers solve their issues.

Run the right CRM reports to measure success

Use these CRM metrics as a starting point — but don’t feel pressured to use all of them. Choose the KPIs that measure the things you want to improve.

Your KPIs should tie closely to the goals you set as part of your CRM strategy — why did you put this new CRM system in place originally? Make sure you’re measuring how well you’re meeting those original needs. (If you set SMART goals, you’re already halfway there.)

Once you know what you want to measure, you need to figure out how to measure it. Many CRMs offer built-in reporting that lets you track the same sales, marketing, and customer service metrics we just ran through.

Here are 4 popular CRM reports you can run to measure some of your chosen metrics:

Sales forecast report

A sales forecast report uses your lead data and sales trends to predict future revenue.

With ActiveCampaign, you can use win probability to take revenue prediction one step further. Win probability uses machine learning to analyze hundreds of factors, then predicts how likely you are to close a certain deal.

Win probability helps you figure out which actions lead to closed deals and which are unimportant.

Sales conversion report

This report tells you what percentage of leads convert within a certain date range — aka your close rate.

You can break this report down by lead source to see where these leads came from. Do more inbound leads close vs. outbound leads? What about leads from social media vs. organic search?

This report has the answers.

Sales performance report

A sales performance report gives you a leaderboard view of your sales team’s current and historical performance.

In ActiveCampaign’s Deals CRM, you can view:

  • Sales performance metrics, including total deal value, total number of deals, and average deal value
  • Bar graphs depicting the deal value by stage and number of deals for each sales representative on your team
  • A table of each deal in a pipeline with deal owner and deal value
    Deals sorted by Deal Status (Open, Won, or Lost), Currency, or Pipeline

In ActiveCampaign’s CRM, this graph breaks down the total deal value and total number of deals by stage. This can help you ID bottlenecks and inefficiencies in your sales process.

Lost deals report

Analyzing your wins feels great, but don’t forget to learn from your losses, too. Finding out why someone said ‘no’ to your business can be even more important than knowing why someone else said ‘yes.’

A lost deals report shows you which deals your team didn’t close — and why. Use this report to:

  • Find common reasons that leads fail to close
  • Figure out how to handle those objections from other leads as they come down the pipeline

The (success) story is in the data

“Data, I think, is one of the most powerful mechanisms for telling stories. I take a huge pile of data and I try to get it to tell stories.” – Steven Levitt, Co-author of Freakonomics

Measuring the right metrics can be the difference between a success story and a cautionary tale. If you know how to measure your CRM success, you can keep track of how close you are to reaching your goals.

If you find yourself off-track, be willing to test different ways of using CRM to meet your business goals. Try something new, measure the results, rinse, and repeat. You got this!