Key Performance Indicators Examples
Expansion Revenue is a metric used to measure the increase in revenue resulting from expanding the customer base or increasing the frequency or value of purchases by existing customers.
There are a few different ways to calculate Expansion Revenue, but a common formula is:
Expansion Revenue = (New Revenue from Existing Customers – Previous Revenue from Existing Customers) + (New Revenue from New Customers – Acquisition Cost of New Customers)
In this formula:
- “New Revenue from Existing Customers” refers to the additional revenue generated from existing customers through upselling, cross-selling, or increased purchase frequency.
- “Previous Revenue from Existing Customers” refers to the revenue generated from existing customers prior to the expansion efforts.
- “New Revenue from New Customers” refers to the revenue generated from new customers acquired through expansion efforts.
- “Acquisition Cost of New Customers” refers to the cost incurred to acquire the new customers.
For example, if a company generated $100,000 in revenue from existing customers prior to expansion efforts, and generated an additional $50,000 in revenue from existing customers through expansion efforts, and acquired $200,000 in new revenue from new customers with an acquisition cost of $100,000, the Expansion Revenue would be ($50,000 – $100,000) + ($200,000 – $100,000) = $150,000.
It’s important to note that Expansion Revenue is a relative metric and should be considered along with other metrics such as customer acquisition cost (CAC) and customer lifetime value (CLV) to evaluate the overall effectiveness of the expansion efforts.
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