Glossary
- Acquisition Value
Acquisition value is a combination of two components. The first is the purchase price of the asset, which is an amount that does not include the deduction of value added tax and excise duty. The second component is the cost associated with putting the asset into service, e.g. transport, packaging, installation, assembly.
Acquisition value = purchase price + costs related to purchase
- Annual Contract Value
Annual Contract Value is a measure that provides information on the average annual revenue generated from the contracts signed by a given customer. For example, for SaaS companies, ACV refers to subscription contracts. If you know what average contract value is appropriate for your company you are able to create a better sales and marketing strategy.
- Annual Run Rate
Annual Run Rate is an annual revenue and expense calculation or annual run rate, an indicator that allows us to estimate the future financial performance of a company. It is a useful way to increase annual sales. It is estimated based on current financial information.
6 ways to calculate Run Rate:
1) Based on last quarter (quarterly revenue x 4)
2) Based on quarterly recurring revenue (quarterly recurring revenue x 4)
3) Seasonal revenue (final 12 months revenue)
4) Net revenue [(monthly revenue – monthly expenditure) x 12]
5) Based on costs incurred (monthly cost x 12)
6) Metrics (current monthly consumption x 12)- Average Customer Lifetime Value
Average Customer Lifetime Value is an indicator to determine the average cash flow received from a consumer over the average time they use a particular service. Why take ACLV into account? You can manage your budget better, you can build your customer profile more accurately, your marketing funds will be better allocated and you will know the profitability of a single customer.
How to calculate ACLV?
ACLV = average customer lifespan * amount
For example:
A customer buys hair shampoo every 3 months at a cost of 50 PLN. Over a period of 12 months the result will be: 4 * 50 PLN = 200 PLN
- Average Deal Size
Average Deal Size is an indicator of how much money a customer has spent on your product or service in a single transaction.
To increase Average Deal Size, the following should be kept in mind:
– don’t start your offer presentation with a discount offer, grant it only when necessary (each discount granted requires you to get another deal to fulfill the plan),
– customers do not always focus on the price, the value of the product or service is very important to them,
– extend the customer’s purchase, e.g. offer a case and tempered glass for the phone.How to calculate?
Average Deal Size = total order value / number of orders in the given period
- Business development
Business development is the process of improving and streamlining a company. Relationships with partners, customers, employees, the press etc. are the foundation. In order for a company to flourish, we must focus on providing value to the company in the form of financial resources, in the long term. We can achieve this by taking care of the customer, i.e. by informing, encouraging and maintaining the relationship.
- Business to business advertising
Business to business advertising is a form of marketing that targets business-to-business (B2B) consumers in order to present a business product or service. For example, while offering logistic services, you target entrepreneurs and not to individual consumers. When attracting B2B customers, it’s worth choosing your communication channels and methods carefully so that they best suit the nature of your target audience.
- Buying signals
Buying signals are verbal and non-verbal messages sent by a potential customer during a sales call. Interest can be expressed by asking questions, asking for repetition, objections (the customer is interested but doesn’t have enough information) or tone of voice, leaning forward, looking straight in the eyes, etc.
Examples:
What else can this product do?
Could you describe in more detail?
Is this product available in a different colour?- Cold Lead
We can classify customers into 3 types: Hot Lead, Warm Lead or Cold Lead. The last of these is characterised by ignorance of the company, lack of interest in buying your product or service and not expecting any contact from you. However, a prospect classified as a Cold Lead may still be interested in your product in the future. Therefore, if a Cold Lead matches your preferred recipient group, it is worth initiating contact. In the case of Cold Leads, the response doesn’t have to be immediate, but it should not be abandoned.
Example: a person who wants to open a restaurant but has not specified whether they need software.
- Collaborative selling
Collaborative selling is a cooperation between a customer and a company based on a partnership relationship. It involves joining forces to identify a need and assess the benefits of a sales solution. The next stage is a decision-making process conducted in a side-by-side model instead of head-on.
When is it worth moving from consultative to collaborative sales?
1) Both parties have built a business relationship based on trust.
2) The organisations need each other to succeed.
3) There is a potential risk in one company but threatening the welfare of both companies.- Consumer characteristics
Consumer characteristics is the identification of specific consumer attributes by dividing customers into groups (market segmentation). There are 4 types of consumer market characteristics: demographic, psychographic, behavioural, geographical. Each category has elements tailored to the specific type, e.g. age, gender, interests, values and attitudes, brand loyalty, market size.
- Content network
A content network is a set of sites that allows advertisements to be broadcast on their pages. These activities bring financial benefits to both parties through revenue-generating advertising. The term is related to search engine marketing (SEM), which is why contextualised advertising is displayed.
- Conversion path
A conversion path is a process which, through a series of actions, is to lead an anonymous user to the completion of a transaction. The path starts with a page with interesting content, and then leads click by click to the desired action (access to the offer, purchase of the product). When creating a conversion path, we should provide the user with the simplest, fastest and intuitive navigation through the website. Conversion path identifies different patterns of user behaviour on the website, taking into account, for example, which tab was the first click, whether the user uses filters to find products.
How to do it effectively?
– Stand out from the competition, show that your company is the best choice,
– try not to create additional costs,
– the website should work quickly and smoothly,
– the website should be easy to understand, intuitive for the user.- Conversion Rate
Conversion Rate is an indicator which enables to measure the effectiveness of an advertisement and a website. It is expressed in percentages and indicates the users who performed the desired action (e.g. filling in a form, buying a product). Thanks to Conversion Rate we are able to measure effectiveness of undertaken actions and convert potential customers into leads.
How to calculate CVR?
Conversion Rate = number of conversions / all visitors to the website- Cost of Sales to Revenue Ratio
Cost of Sales to Revenue Ratio is an indicator helping to measure the performance of a company. It compares the expenses generated by sales activities with the company’s revenue.
Within this framework it is recommended to :
– determine the company budget,
– be familiar with periodic reports -they will help you observe deviations from forecasts,
– make adjustments if necessary, draw conclusions.How is the Cost of Sales to Revenue Ratio calculated?
Divide costs by total revenue
- Cost Per Lead (CPL)
Cost per lead is a type of settlement applied to Internet advertising. The model is based on charging costs for the so-called active interest in the product, i.e. providing some personal data.
Example: A lead may be a person who: fills in a contact form, registers on the website, takes part in a competition or downloads an e-book.
- Cost Per Thousand
Cost per thousand is a method of charging for Internet advertising presented in text or graphic form. It is defined by two abbreviations: CPT and CPM. By choosing CPT as a settlement model, you determine the price per 1000 impressions and ad spaces. CPM is usually used for graphic ads or reach campaigns.
- Customer Lifetime Value
Customer Lifetime Value is an indicator that informs a company about the amount of money it will receive from a consumer over the entire subscription period. If we compare LTV with CAC, the cost of acquiring a customer, we obtain data on the profitability of the buyer. This indicator can also be used to compare target groups in order to find out which of them brings the highest return on investment and, on this basis, to implement further actions.
How to calculate CLTV?
subscription amount * subscription time
Example:
A customer pays PLN 50/month for a subscription term of 6 months.
Calculation: 50PLN*6=300PLN
LTV will amount to 300 PLN- Customer Retention Cost
Customer Retention Cost is an indicator we use to calculate the costs associated with retaining an existing consumer. The calculated data gives us an overview of the market situation or problems with the marketing plan. Analysis of the results can also contribute to acquiring more customers and reducing the number of their departures, as well as increasing the spending of existing consumers. Unfortunately, calculating retention costs does not have a universally accepted formula and is a complex process that can include various aspects, e.g. the cost of training, marketing, adapting a new function.
- Demonstration
A demonstration is a method of presenting a product or service that focuses on meeting customer needs. A demo can take different forms, e.g.
– Describing products – two different pieces of software are described to enable the customer to choose the one that suits them better;
– Giving a sample of something – in-store tasting;
– Using the product – demoing the software;
– Visualisation – imagining what could have happened if we had not taken out insurance.