Part III of the FREE eBook: The Key Metrics for Workspace Success
In Part III of our Workspace Metrics for Success series, we’re taking a look at the Sales, Marketing and Customer metrics that operators can measure to evaluate customer value and ROI on marketing initiatives. For many operators, putting a dollar sign over every members’ head seems wrong, for some even sinister. Yes, establishing a community of collaborative members and delivering more than a workspace is important – especially for creating a pleasant vibe, member experience, and retaining customer retention rates. But, at the end of the day, you’re running a business that must be profitable in order to sustain itself in the hopes of growing.
It’s essential to understand the metrics around what it costs to acquire a member or what their value is to your organization over time. Ultimately it’s about knowing where you’re dedicating your marketing dollars and the return you get on that spend. It starts with your sales pipeline, through to leads and tours metrics and in-life customer spend.
Sales and Marketing Metrics
Measuring existing business is vital, but operators must also prioritize generating future deal flow, pipeline and closed opportunities to understand where they must focus their efforts to increase occupancy rates. Your baseline marketing metrics should be:
a. Lead Flow & Channel Attribution
Measuring organic leads versus referrals versus brokers will tell you which marketing channel is proving most successful for leads that convert to sales. Is Google AdWords bringing you the most success? Member referrals? Facebook advertising? Tracking your most effective sales channel and attributing converted sales is a reliable metric to determine where to allocate your marketing dollars.
b. Lead Cost per Acquisition
While it’s vital to know where your best leads and sales come from, it’s just as important to know how much you’re spending to capture new business. While your cost per acquisition (CPA) can vary, the best starting point is to take your total revenue over a time period, monthly, quarterly or annually, and divide it by the number of customers in that same period. This will give you an idea of how much each customer is worth and just how much you’re willing to spend to acquire a customer.
More specifically, calculate your CPA by adding your total spend on marketing and sales initiatives in one period and then dividing by the number of new customers acquired in the same time period. Your CPA will show you what you’re spending to acquire new customers. The lower this metric, the better.
c. Customer Lifetime Value
Running a workspace is becoming more and more akin to the hospitality industry, causing many operators to take a more customer-centric approach to their business. Without a doubt, you’re in a service industry and your focus is to deliver an optimal member experience. However, you also need to understand what the value of your customers are, specifically their value over time with your organization. Let’s consider a monthly customer scenario:
If you want to get down to the real nitty gritty, you can calculate the lifetime value based on the margin you make from each customer after deducting overhead and real estate. Some take it a step further and deduct marketing spend and acquisition costs to bringing on new customers in the same period.
d. Lead to Tour Ratio
Calculate your conversion ratio of raw leads to qualified leads to viewings to closed deals. Know where your leads are converting from and where to focus your budget and effort.
e. Conversion Rate: Incoming Leads to Deals Closed
On a weekly and monthly basis, successful operators are tracking the number of leads that enter the pipeline and sales closed in comparison to the previous week or month. Track who on your team is closing the most deals, increasing sales, and bringing in new customers. Tracking and analyzing these numbers help operators make substantial sales and staffing decisions that can contribute to generating revenue.
f. Tracking Promotions
If you’re extending promotions on your services via third-party services, track the amount of incoming business from each source and make sure that all discount limitations are met. Assigning discount codes to all of your promotions, much like a campaign to your marketing efforts, makes it easier to track and demonstrate which promotions have the greatest success.
Aside from measuring your performance by occupancy, square footage and services, operators should also capture their customers’ footprint throughout their workspace. From events attended and services consumed to retention rates. You may know your customers on a personal level, but you must also know how they interact with your workspace from a business perspective.
a. Customer Retention Rate
Maintaining high occupancy levels is attained partly by generating new members but equally working to retain existing customers. Run frequent reports of contracts and renewal dates, be sure to know who is up for renewal and check-in with them well before their lease expires to prevent the risk of losing them.
b. Average Length of Stay per Customer
Track customer departures over time and calculate the average duration of residence per customer. When customers leave your center, be sure to survey them before they move to understand why and to improve your operation or policies if needed.
c. Customer Departures over Time
Calculate how many customers leave your center per year, or over time, to have a current and historical view and percentage reference of how many customers are abandoning your space.
d. ROI on Community Events
If you’re organizing daily, weekly or monthly events or classes for your members, measure the cost in time, money and effort spent compared to revenue from actual ticket sales. You may have a greater return on free events targeting prospects likely to convert to customers than turning a small profit from a members-only event.
Up next in the 4-part Metrics for Workspace Success series: Part IV: Workspace Financials