What Are The Most Important Revenue Operations Metrics?

DEFINITION
Revenue operations metrics are the measures of effectiveness and performance of the revenue operations team. The key metrics include customer churn rate, lifetime value, customer acquisition cost, conversion rate, and pipeline velocity.

💡Understanding Revenue Operations Metrics

Revenue operations work with every revenue-generating department of an organization such as marketing, sales, and customer success. 

While the goal of revenue operations is as straightforward as increasing revenue, the measurement isn’t as simple as hitting a certain MQL target or sales quota.

The reason: there are many factors that contribute to your bottom line revenue. Without optimizing each of the factors, it’s difficult to increase and sustain the revenue number. In fact, revenue operations work by identifying the issues in every department.

This is why measurement of the revenue operations becomes difficult—there are too many factors involved. However, they’re important since having data will help the RevOps team to make better decisions.

So, measuring a single metric—revenue—isn’t enough. You have to measure intra-departmental metrics to understand how effective the RevOps strategies are. 

🖋 Takeaway

Revenue operations is a data-driven field. The more data the RevOps team has, the better they’ll be able to create strategies and take decisions.

However, measuring revenue operations with just one metric is not justified because of the involvement of several departments. 

Thus, you have to take into account metrics across the different departments to form well-informed decisions. 

The most important revenue operations metrics you should be tracking are customer lifetime value, cost of customer acquisition, churn rate, conversion rate, and sales pipeline velocity.

What Are The Most Important Revenue Operations Metrics?

Here are the crucial RevOps metrics with explanations of their importance:

Customer Acquisition Cost

Customer acquisition cost or CAC is the amount you spend to acquire a new customer. A high CAC cuts into your profits as you’re spending more money on acquisiton.

A high CAC can be the result of inconsistent branding, poor positioning, and ineffective marketing strategies. RevOps work closely with the marketing team to identify the target audience and devise strategies to effectively speak to them.

Customer Lifetime Value

Customer lifetime value or CLTV is the monetary amount that a customer contributes during the entire course of their relationship with you. 

For example, suppose a customer signs up for an annual contract with you at $1000 per month. If they work with you for only that year, their CLTV will be $12,000. 

But if they renew their contract and stay with you for four years in total, their lifetime value increases to $48,000.

You get more value out of each customer compared to CAC if they stay for a longer period of time. So, a higher LTV not only generates more revenue but increases profitability, as well.

Customer Churn Rate

Customer churn rate shows the percentage of customers that discontinued using your product or service within a certain time period.

The higher your churn rate is, the less profitable you become. This is because you’ll have to spend an extra amount to acquire a new customer to replace the past customers.

This is why customer success is an integral part of RevOps. Customer retention is as important as, if not more than, customer acquisition. A low churn rate shows that the strategies of RevOps are working to retain clients, hence increasing profitability. 

Sales Pipeline Velocity

Sales pipeline velocity is the speed at which your sales team moves leads into the conversion stage. You’ll have more sales-ready leads if this process is fast. 

A high velocity means the sales process is organized and structured, minimizing back and forth. If the rate of moving leads is slow, it points to underlying problems in the sales cycle.

As the pipeline velocity contributes directly to the bottom line revenue, RevOps identify and rectify the issues in the sales cycle through sales enablement. 

Conversion Rate

Conversion rate is the percentage of leads that become your paying customers. 

The higher the conversion rate, the better your marketing and sales efforts are. If you’re consistently maintaining a low conversion rate, it’s time to bring in RevOps to diagnose the core issue.

A low conversion rate is a sign of attracting the wrong audience, ineffective marketing efforts, or poor sales technique. No matter how well-trained your sales team is, if they’re not getting quality MQLs, they won’t be able to have a high conversion rate.

On the other hand, if your sales team isn’t using proper sales techniques, they might not be able to convert well-qualified MQLs either.

RevOps align both the departments, resulting in an overall well-oiled conversion system.

It all starts with optimizing the quality of your leads and reaching out to the sales-ready ones first. Breadcrumbs help you identify better MQLs and PQLs, resulting in better conversion and increased revenue for your organization. Book a demo to understand how.