Customer Growth and Retention - Measuring Success and Failure

My work with Fortune 500 companies and leading consultancy firms have made me a firm believer in the power of information and metrics and a skeptic to the fact that most people would know how to utilise this info effectively.
Most of the work in my blog covers how to synthesis information and action it effectively. However, with the devil in the detail sometimes we need to dig deeper... we need to understand our customers.

Customer Growth

Other parts of this blog will teach and give examples of aggregated metrics for Revenue, Volume, Margin Dollars and Margin Percentage for the whole business or business unit. Great value can be found from applying this logic to your main customer accounts.

I recommend reviewing your top 15 customers (choose from 10-20) sorted by total Revenue and reviewing their performance through the above four metrics. Measure them for the current period performance against the previous, I typically default to SPLY (Same Period Last Year).

See the image below for a great example:

This should enable you to see a little more detail behind the headline figures and ask some pertinent questions.

Is my business becoming more concentrated in my top customers?
Are we getting price increases across the board or only at our smallest accounts?
Is there any common themes in our growth across customers?
Etc...

Challenge the data in your dashboard and challenge your leadership team on their understanding and ability to make decisive actions.


Customer Retention

A simple but effective metric, do we have more or less customers than we did last month/quarter/year?
Simply count if a customer ordered in both periods for a steady state. If a customer ordered in the previous period only and not the current one? Count them as lost. If a customer didn't appear in the previous period but has recorded sales in the current period? Count them as a gain. Sum this and track if overall customer count is increasing or shrinking. See an example below:

This is a metric that people can over-react to. Make sure your leadership team are reviewing this over a long enough period and not reacting to order patterns alone. I recommend tracking this quarterly or annually rather than monthly.

Also try to filter our true customers from small samples. If you sent a test product to a customer in 2015 and they never re-ordered, that's not a lost customer. Work to agree a minimum threshold.



Data is vital for today's business but can be a curse if we let it overwhelm us. When we need to get more detailed information it's a good idea to frame that from our customers perspective.