Here are some examples of KPIs for the telecommunication business, but they can be applied to other businesses as well:
Customer Acquisition Cost (CAC) refers to the cost of acquiring one customer
Calculation formula = Cost of sales and marketing / Total number of customers
Currently, there are both online and offline channels for public relations and marketing, each with different costs. Therefore, a comparative analysis of each channel is necessary to help management understand which channels are effective and which are not, and which channels have high costs and low customer acquisition rates. This allows for adjustments or cessation of marketing efforts on those channels. Conversely, channels with low customer acquisition costs indicate high efficiency and guaranteed results.
For example...
1. Channel: Facebook
The cost of marketing through Facebook is 1 million baht per month / 10,000 customers. Therefore, the cost of sales and marketing per customer = 1,000,000 / 10,000 = 100 baht per customer
2. Channel: Line Ads
The cost of marketing through this channel is 3 million baht per month / 70,000 customers. Therefore, the cost of sales and marketing per customer = 3,000,000 / 70,000 = 42.85 baht per customer
Comparing just these two channels, it's clear we should continue with Line Ads marketing because the cost of acquiring customers is more than 50% lower than Facebook
Average Revenue Per Customer/User (ARPC or ARPU): Average sales per customer
Once we've acquired customers or they've purchased our products, what is the average sales per customer? How can we encourage more customers to buy our products or use our services? Management will use this figure in their decision-making. For example, a retail store with an average sales per customer of less than 40 baht might market itself by offering points or stamps for purchases over 40 baht, motivating customers to spend more to accumulate them
From example 1, if the cost of acquiring each customer is 100 baht, then if the average sales to each customer are less than 100 baht, it means we are losing money. And if you also consider the cost of goods or services, you might not want to continue this business at all
However, if the average sales per customer exceed 100 baht,
other factors to consider include the direct and indirect costs of goods and services (excluding sales and marketing), their percentage of sales, and the frequency with which customers are likely to repurchase our products and services.
Customer Lifetime Value (CLTV) refers to the total value of a customer's lifetime use of a product/service
This is suitable for businesses with service terms of 6 or 12 months, most often telecommunications businesses providing telephone and internet services. It allows you to calculate the expenditure on those goods or services using the following formula:
Monthly expense x Number of months the customer will use our service (e.g., 6 months or 12 months)
Because these businesses face the risk of customers canceling services prematurely, they often have terms, conditions, and penalties for early cancellation
Churn Rate: The ratio of customer cancellations to the total number of customers
The formula is: Number of customers who canceled their service in that month / Total number of customers in that month
This figure indicates the percentage of service cancellations the company has compared to its total customers. What will management do if the cancellation rate increases? A common example, familiar to most people, is mobile phone service. When we cancel our service or switch providers, the new provider often calls to offer attractive promotions to encourage us to continue using their services
The question from management, after seeing the cancellation rate figures, is: How can we prevent customers from canceling their services and ensure they continue to use our services or purchase our products?
R&D BI Co., Ltd. will be introducing other KPIs regularly, so please stay tuned. If you have any questions or suggestions, please feel free to leave a comment. We are happy to answer all questions
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