The 3 KPIs To Get Your Creative Agency Process Back On Track
Metrics are critical to keeping track of how your agency is performing. They can be a reason to celebrate and they can also be an indicator of when things aren’t going to plan with your creative agency process.
A little while ago, we published this post on KPIs for ad agencies, and today we’re giving you a few more to help you track the success of your creative agency process.
1. Net Promoter Score (NPS)
NPS is a widely used KPI which answers the question ‘how likely are you to recommend us?’. It looks at whether or not your clients are willing to put their reputation on the line and tell people how much they love your agency. The higher your NPS score is, the higher your loyalty rates will be, and because of that, you’ll have a greater chance of attracting new business from the networks of your current clients.
NPS uses a 0-to-10 scale where those who score you as 0 to 6 are ‘detractors’ — those who are unhappy with your business; 7 to 8 are ‘passive’ — people who are satisfied, but not ecstatic; and 9 to 10 are ‘promoters’ — these are your advocates, the people who will shout your name from the rooftops. The overall score is calculated by subtracting the number of detractors from the number of advocates and converting this to a percentage.
So, if you have 100 clients and 15 give you a 0 to 6 (let’s face it, nobody is perfect), 20 give you a 7 to 8 rating, and 65 give you a 9 to 10 rating, your total NPS will be: (65-15)/100 = 50%
Pat yourself on the back, that’s a pretty good NPS score!
2. Churn Rate
Do you know how many clients have left your agency over the past month? The past year? Knowing your churn rate keeps you in the loop of how many clients want to continually work with you. It’s cheaper to keep a client than to acquire a new one, so having a low churn rate will keep those profits rolling and give you more budget to keep growing your business.
Figuring out your churn rate is pretty simple. Just take the number of clients you had at the beginning of the month (or year) and divide it by the number of clients you have at the end of the month (or year).
So, if at the start of the month you had 100 clients, and now, at the end of the month, you have 92, your churn rate would calculate as: (100-92)/100 = 8%
3. Lifetime Value
What is the average value of each client to your business? Do you know, on average, how much of a difference losing one will make to your bottom line? Knowing and understanding the lifetime value of a client helps you calculate how long they’re likely to be with your agency, and how many clients you need to sign to hit your goals. It’ll also help you put a dollar value on your churn rate.
To calculate lifetime value, take the average bill of each client, multiply it by the number of times they do business with you. If you have the acquisition cost available, subtract this from the number you have. You’ll now have the lifetime value of each client worked out. If you lose a client, your bottom line will be missing this amount on average.
For example, if you know each client spends $10,000 a month on your services and they typically will use your agency for 12 months, their lifetime value would be calculated as: $10,000 x 12 = $120,000.00
If you’re not tracking any customer satisfaction or value metrics, your creative agency process is likely operating blindly. Reports show that satisfied clients are more likely to bring you business, and do so more frequently. By delighting your customers from the initial signing onwards, you’re helping your agency keep clients happy and keep them for longer, making business boom.
What metrics can your agency not live without? Let us know in the comment section below.
Function Point is the leading all-in-one project resource management software, specially designed for creative agencies looking to streamline their business. To see what FP can do for you and your team, book a demo with one of our software experts today.
This article was contributed by former Function Point employee, Katherine Elliotte.