Small business owners have a lot on their plate. From balancing sales to finding suppliers and more.
Still, you need to take the time to understand different CPG terms and track data that will help you make informed decisions. If you don’t know what your customers want, you’ll be throwing darts blindly.
Read on to learn more about metrics for CPG businesses, how to track them, and what value they bring.
Buyer Loyalty Metrics
If a brand wants to find long-term success and growth, they need to establish brand loyalty. But, brand loyalty isn’t the easiest thing to establish. That’s why it’s vital to establish KPIs to track your success or uncover areas in need of improvement in a good analytics program.
Here are the five most important brand loyalty metrics you should be tracking:
- Customer Lifetime Value (CLV). The most important loyalty metric, CLV measures the average overall value you’ll receive over the lifetime of your relationship with a customer. To find your CLV, you multiple your average order value by purchasing frequency. Then, you’ll multiply this number by the average lifetime of your customers. This varies greatly by business and industry, so it’s important to pay attention to your customer retention.
- Net Promoter Score (NPS). A metric that many small business owners find confusing, NPS is essentially a measure of customer satisfaction. Customers rate their satisfaction on a scale of 1-10 and you group them as follows: Promoters who scored a 9 or 10, Passives who scored a 7 or 8, and Detractors who scored 6 or below. Your goal is to convert as many customers as possible to Promoters.
- Customer Loyalty Index (CLI). Like NPS, CLI is based on customers’ self-reported feelings. CLI measures how loyal to your brand the customer feels they are or will be. Customers need to answer how likely they are to recommend your products to friends and family, how likely they are to purchase again, and how likely they are to try your other products. The higher the score, the better your position. You’ll also need to check this periodically to avoid missing a shift in customer loyalty.
- Repeat Purchase Rate (RPR). Unsurprisingly, RPR is a measurement of how many purchases are repeats. You can uncover this figure by dividing repeat purchases by one-time purchases. This figure will give you insight into how much of your revenue comes from loyal customers over new or one-offs. According to Adobe, nearly 40% of all revenue for U.S. businesses comes from repeat purchases, so it’s important to keep your customers satisfied.
- Customer Return Rate (CRR). Finally, CRR is a measurement that goes hand-in-hand with RPR and defines how often your customers come back. This metric is valuable because you can see how many customers come back and how often. Certain industries rely heavily on regular repeat purchases, so this metric can give you a heads up if something is going poorly.
What Is Brand Equity?
Brand equity is a marketing term that refers to how well-known your brand name is. For larger businesses, their brand name alone can generate millions of dollars in sales. However, most small businesses have to rely on marketing and promotions to attract customers. Establishing brand equity will allow you to increase sales and grow customer lifetime value based on the inherent value of your name. It can even help you increase sales of newly introduced product without having to spend as much on marketing efforts.
Unfortunately establishing and measuring brand equity is not easy. By using analytics and tracking both your own and competitor sales data, you can get a baseline for yours and begin investing in the right products and markets. You should regularly run CPG reports so you are never caught unawares by a shift in equity.
What Are Buyer Conversion and Migration?
Buyer conversion and migration evaluates the amount of customers who shift from one market or brand to another. In essence, it shows how well your marketing is doing at taking sales from competitors. This metric is important because it directly impacts your market share without requiring bringing in new customers to the market. It also allows you to pick out the competition that is weakest and target them directly through an effective trade promotion.
What Is Market Penetration?
Market penetration is a brand or product’s level of recognition and sales in a given market. The more penetration your brand has, the greater the recognition and easier it is to communicate with your customer base. This figure is generally shown as a percentage and lets you evaluate your success in the market as a whole as well as pick out competitors to challenge or avoid. If the market is very large, this also opens the door for more small business owners to gain market share and establish their brand.
What Is Purchase Frequency?
Put simply, purchase frequency is how often a customer purchases your products on average. This metric helps illustrate how fast you sell products as well as highlighting seasonal purchasing trends. When looking at your own purchase frequency vs your competitors, you can see how well you stack up against them and uncover products with the best opportunity to increase sales. This is a great metric to use data to develop a winning assortment strategy.
What Is Purchase Size?
Purchase size, or order size, is a measurement that shows the average amount of product or value a household makes in a single trip to the store. It may also be called Item Sales per Item Trip and is a useful data point to help illustrate the value each household has for your business and show areas where you can increase sales either by increasing trip frequency or average order value.
Data Is Key For Growth
CPG companies rely on getting and holding shelf space. Unfortunately, many find themselves losing space to competitors, seasonal trends, and big businesses. Only an investment in data and analytics will ensure your product remains there.
For smaller businesses, the need is urgent. 36% of smaller companies said their traditional competitors have already gained a material edge by integrating data and analytics into their core business.
Building a “data first” company doesn’t happen overnight. Evolve your company and culture one step at a time. Promote employee education around CPG data and analytics. Task leadership with setting strategies that enable quick iteration based on insights drawn from your analytics. And choose a data and analytics tool that helps you do that efficiently and effectively – we think Byzzer can help you with that part.
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