The customer is always right, but what if you don’t know what your customers are telling you?
We’re living through unique times with very unique issues. It seems that we are bombarded with data on all sides, and yet it seems harder than ever to get real insights out of that data.
It’s estimated that upwards of 70% of data collected goes unused. One of the reasons for this is the lack of actionable data, but another part of the equation is the difficulty finding and analyzing the data.
Thankfully, both of those issues can be solved by creating a customer analytics dashboard.
Creating a customer analytics dashboard helps aggregate all of your most important customer insights in one place, and then also simplifies the actions that you need to take from the data.
In a lecture that I attended, it was pointed out that there are only two ways that you can increase revenue. Those are to increase the number of customers purchasing, or increase the amount that they spend with you.
With that in mind, we’ll look at the ways that a customer analytics dashboard helps you increase your quantity of customers, as well as quality of customers.
When it comes to quantity of customers, or customer acquisition, there are a few questions that you need to answer in order to improve your acquisition strategy:
- What platforms drive the highest number of purchasers?
- What platforms drive customers most efficiently / have the best cost per acquisition (CPA)?
- How much can we afford to acquire our customers (allowable CPA)?
The first two questions on that list are relatively straightforward and can be answered generally within the ad platforms themselves.
The third question requires a bit more legwork. In order to figure out your allowable CPA, you need to examine your cost of goods sold (COGS), profit margins, and average order value (AOV).
The equation works out to something like this:
Allowable CPA = AOV - COGS - Profit Margin
This metric is so important because of what Dan Kennedy said: “The company who can afford to spend more on their clients will win every time.”
Which transitions us nicely into the next thing that your customer analytics dashboard must provide in order to maximize its value to the organization.
The next insight that a customer analytics dashboard must provide is the lifetime value of the customer (LTV).
Using the customer’s lifetime value rather than the initial order value in the previous equation allowed Danette May to go from 13 sales per day to more than 650 sales per day on one of their funnels. You can read more about their story here.
That equation looks like this:
Allowable CPA = LTV - COGS - Profit Margin
Obviously, you can’t wait around forever to reach your break-even point on your customers. That’s why it’s important to break down your customer LTV into time periods (i.e. 30-day LTV, 60-day LTV, 90-day LTV, etc.)
You need to know the timeline that you can expect to break-even on your customers. The general rule of thumb is that the longer that it takes to break-even on a customer, the more risk that you are assuming.
Once you have figured out your LTV, risk tolerance, and decided on your allowable CPA, the next question that your customer analytics dashboard needs to answer is which customers are the best customers.
Since it’s 80% cheaper to maintain existing customers than to acquire new ones, your best customers are generally the customers that you already have. In fact, one study found that increasing customer retention by just 5% can increase profits by 25-95%.
In order to capitalize on this effect, your customer analytics dashboard needs to provide you with data on which of your platforms is driving sticky, repeat customers.
Getting that data is no easy feat, as you need to tie each subsequent order that your customers place back to the original source data that drove them to purchase from you in the first place.
In addition to looking at the platforms that are driving repeat customers, you also need to look at what products bring them in. One of our clients, JavaPresse, was able to rapidly increase their profits and LTV by examining this metric.
They discovered that customers who purchased a mug in addition to their coffee were much more likely to make repeat purchases, and had a much higher LTV than customers who just bought coffee.
So, based on that data, they updated their marketing to drive customers to purchase a mug as well as coffee, and also made sure to try to cross-sell mugs to any coffee-only orders.
The final customer retention metric that your customer analytics dashboard must provide is repurchase timelines for customers. We touched on this a little bit in the LTV section, but this metric helps you see more clearly the timelines that your customers are coming back to purchase from you.
This will help you better understand and plan out your break-even points, inventory needs, and cash flow projections.
The last thing that your customer analytics dashboard should provide for you is insights into your products. This will help you develop products that better fit the needs of your customers, therefore driving more purchases, higher performance, and bigger profits.
As we touched on previously, your dashboard needs to provide you with data into what products drive repeat customers. As you analyze that data, you can find commonalities between the products to better understand what your customers come to you for.
In addition to helping you understand what products are winners, it can also help you understand what products fall short, and provide better insights into what your customers are not looking for.
From there, you can look into the differences between your high-performing and low-performing products and try to figure out how you can improve the low-performing products. Additionally, you can look at questions like:
- Are there features of the high performing products that you could implement in the lower performing products?
- Are there cross-sales opportunities that you can take advantage of to pair low-performers with the high-performers?
- Can we update the positioning or messaging of the low performing products to better align with the positioning of the high performing products?
In order to maximize your profitability, you need to understand your customers inside and out. You need to understand what products they’ll buy, when they’ll buy them, and how much they’ll spend with you.
The more information that your customer analytics dashboards can provide on your customers, the better.
Fortunately, Praxis has been in this game for a long time and has built out extremely robust customer analytics dashboards that provide you with all of these metrics and KPIs. If you’re interested in leapfrogging your competition, we have the dashboards to help you do it.