CRM Metrics and KPIs
A CRM isn’t just about storing data — it’s about generating insights that help businesses make better decisions. Metrics and Key Performance Indicators (KPIs) are how you measure whether your CRM is actually improving customer relationships, sales, and overall growth.
In this chapter, we’ll cover the most important CRM metrics every organization should track.
Customer Acquisition Cost (CAC)
Definition: The total cost of acquiring a new customer, including marketing, sales, and operational expenses.
Formula:
CAC = \frac{\text{Total Sales & Marketing Costs}}{\text{Number of New Customers Acquired}}
Why it matters:
- Helps assess if acquisition strategies are cost-effective.
- Allows comparison with Customer Lifetime Value (CLV) to ensure profitability.
Example: If you spent ₹500,000 on sales and marketing in a quarter and gained 100 customers, your CAC = ₹5,000 per customer.
Best practice: Track CAC by channel (ads, referrals, events) to identify which acquisition efforts bring the best ROI.
Customer Lifetime Value (CLV)
Definition: The total revenue a business expects from a single customer during the entire relationship.
Formula:
CLV=Average Purchase Value×Purchase Frequency×Customer LifespanCLV = \text{Average Purchase Value} \times \text{Purchase Frequency} \times \text{Customer Lifespan}CLV=Average Purchase Value×Purchase Frequency×Customer Lifespan
Why it matters:
- CLV shows how much you can afford to spend on acquisition.
- High CLV customers are worth nurturing with loyalty programs.
Example: A SaaS customer paying ₹2,000/month for 24 months generates a CLV of ₹48,000.
Best practice: Segment customers by CLV to focus retention efforts on the most profitable ones.
Net Promoter Score (NPS)
Definition: A measure of customer loyalty and likelihood to recommend your brand.
Survey question: “On a scale of 0–10, how likely are you to recommend us to a friend or colleague?”
- Promoters (9–10) → Loyal customers.
- Passives (7–8) → Neutral.
- Detractors (0–6) → At risk of churn.
Formula:
NPS=%Promoters−%DetractorsNPS = \% \text{Promoters} – \% \text{Detractors}NPS=%Promoters−%Detractors
Why it matters:
- A high NPS indicates strong word-of-mouth potential.
- Identifies customer satisfaction trends before churn happens.
Customer Satisfaction Score (CSAT)
Definition: A metric that measures immediate satisfaction after an interaction (purchase, support call, etc.).
Survey question: “How satisfied are you with your experience?” (Usually 1–5 scale).
Formula:
CSAT=Number of Satisfied Customers (4 or 5)Total Responses×100CSAT = \frac{\text{Number of Satisfied Customers (4 or 5)}}{\text{Total Responses}} \times 100CSAT=Total ResponsesNumber of Satisfied Customers (4 or 5)×100
Why it matters:
- Quick pulse check on service quality.
- Helps spot issues in customer experience early.
Best practice: Use CSAT surveys right after key touchpoints (onboarding, issue resolution).
Churn and Retention Rates
Churn Rate: Percentage of customers who stop doing business with you during a given time.
Formula:
ChurnRate=Customers Lost in PeriodTotal Customers at Start×100Churn Rate = \frac{\text{Customers Lost in Period}}{\text{Total Customers at Start}} \times 100ChurnRate=Total Customers at StartCustomers Lost in Period×100
Retention Rate: The opposite—percentage of customers who stay.
Formula:
RetentionRate=100%−Churn RateRetention Rate = 100\% – \text{Churn Rate}RetentionRate=100%−Churn Rate
Why it matters:
- Churn directly impacts revenue and growth.
- Retention is often cheaper than acquisition.
Example: If you start with 1,000 customers and lose 50 in a month → Churn = 5%, Retention = 95%.
Best practice: Track churn by segment (industry, product, pricing plan) to identify risks.
Sales Conversion Ratios
Definition: The percentage of leads that move through the pipeline and convert into paying customers.
Formula:
ConversionRate=Number of Deals WonNumber of Leads×100Conversion Rate = \frac{\text{Number of Deals Won}}{\text{Number of Leads}} \times 100ConversionRate=Number of LeadsNumber of Deals Won×100
Why it matters:
- Directly measures sales effectiveness.
- Helps identify bottlenecks in the pipeline (e.g., lots of leads → few closed deals).
Example: Out of 500 leads, if 50 turn into paying customers → Conversion Rate = 10%.
Best practice: Track conversion by stage (lead → qualified lead → proposal → close) to see where deals are getting stuck.
Key Takeaways
- CAC tells you how much it costs to win a customer.
- CLV reveals how much each customer is worth over time.
- NPS and CSAT measure customer happiness and loyalty.
- Churn & retention rates show long-term business health.
- Conversion ratios indicate sales efficiency.
When combined, these CRM metrics create a 360° view of customer success — covering acquisition, engagement, satisfaction, and retention.