If your sales funnel is like a road map, metrics are a lot like the step-by-step directions you take to get from where you started to where you want to end up. Metrics are a snapshot of the present – they tell you where you are, how effective your past choices were and what you need to do to make sure you end up in the right place moving forward. When it comes to designing and optimizing the perfect sales funnel, there are a few core metrics that you'll absolutely want to start using.
Your conversion rate allows you to essentially take a macro look at how your sales funnel is performing. Remember that this is just one small part of a much bigger picture, but to be fair – it's a pretty important part. Out of all of the people that you have the attention of, conversions will tell you how many of them were really buying into what you have to say and how many couldn't wait to go find someone else to listen to.
You can use conversion rate to break down all of your individual channels and see how they're doing. If you send 1000 emails and get 10 conversions, for example, your conversion rate is 1% – not great. Getting 500 conversions from those same 1000 emails would be a conversion rate of 50%, however, which is pretty spectacular.
We use Improvely, Google Analytics and Infusionsoft Data to gather conversion data, however there are plenty of tools out there to help you gather this data. If you use funnel builders like ClickFunnels, this data is built in.
CLV (Customer Life Time Value)
CLV or Customer Lifetime Value is a number that essentially breaks down how much money you'll make from a particular customer over the lifetime of their relationship with your company. As the general success and efficiency of your sales funnel increases, this CLV metric should be increasing at the same time. If it's not, you likely have a serious issue somewhere along the sales funnel that you should identify and correct as soon as possible.
CAC (Customer Acquisition Cost)
Customer Lifetime Value is hugely important to know so that you can compare it to another important metric – Customer Acquisition Cost. If you're spending $100 to acquire a new customer but the average customer only has a CLV of $75, you're essentially losing money on the deal. These two metrics have a direct relationship – as you work to increase one (CLV), you should be working to decrease the other (CAC) at the same time.
Revenue pipeline is an important metric to understand because it helps make sure your sales funnel is still headed in the right direction. Based on data like lead close rates, average revenue per sale and more, revenue pipeline can help you take a look into the future and project the average value of each lead based on current information.
As you make adjustments to your sales funnel, you can use revenue pipeline to help get a sense of their effectiveness in real-time as other metrics increase or decrease as a result.
DPL (Dollars Per Lead)
Dollar Per Lead (also known as Revenue Per Lead) is the total revenue from all sales made to a specific lead group divided by the total number of leads from that group. For example, if a total of $10,000 in revenue had been generated from a specific lead group and the number of leads in the group was 100, the calculation would be $10,000/100 which equals $100 per lead. The total revenue should include all sales made to date including sales made via an offline process (i.e. tele-sales, live event sales, etc.)
It is important to know your DPL for two reason. First, assuming that you know your customer acquisition cost then by knowing your DPL you will know if your marketing campaign is ultimately making you money or not. If you’re spending more money to generate a lead than you are making from that lead it’s time to tweak the campaign or even shut it down. Second, by knowing your DPL you can create a revenue model that will allow you to project revenue over a given time period. Revenue forecasting is a key component to scaling a business.
ROI (Return On Investment)
Return On Investment is the bottom line metric used for any marketing campaign. It is simply the total amount of profit (Revenue Minus Cost) generated by sales made to a specific lead group divided by the total marketing cost it took to create those leads. If $100,000 of revenue was generated at a cost of $50,000 the ROI would be 100% (ROI is always displayed as a percentage.) Any ROI over 100% means that the marketing campaign created at least double your investment.
ROI is the highest level view of the success or failure of a marketing campaign and should only be used to make decisions when taken into context with all the other metrics and data. For ongoing marketing campaigns ROI can be calculated at specific intervals (i.e. monthly, quarterly, etc) to show trends.
All of the above metrics are what are known Quantitative Data. Quantitative Data helps you identify what the strengths and weaknesses of your funnel are, and the overall performance.
QUALITATIVE Data helps explain why OR why not steps in your funnels are converting. Integrating tools like scroll, click and tap heatmaps or page recordings on your funnel pages or order forms, allow you to see HOW people are interacting with your funnel.
Studying your funnel's qualitative data is extremely helpful when trying to identify potential funnel optimizations. It is an extra layer on top of your funnels quantitative metrics.
To collect qualitative data we suggest installing something something like HotJar on to all of the pages on your website.