Metrics form an essential part of any business. For driving growth to any business, you need to know where you are and where you want to go. Metrics give you precisely that information based on which you can formulate your business strategies. Out of all the metrics for different business units, we are going to discuss today about the customer success metrics.
It all starts with a philosophy. Customer-centricity is the philosophy that modern SaaS companies are progressively adopting to retain their customers. When we drill it down further, we come to strategies. And for strategies to take the form of actions, we need customer success metrics.
Through these metrics, you are able to measure the impact of all the actions you take as a part of your strategy. To give you an idea about using metrics, around 89% of leading marketers world-wide use strategic metrics to measure the effectiveness of their marketing campaigns.
What are customer success metrics?
As we all know, customer success is all about keeping the customer happy, engaging them meaningfully, adding value to their business and maintaining relationships with them so that they remain subscribed to your business. Along with staying subscribed, they also provide you with opportunities for expanding your business.
All these concepts sound nice as long as you are able to achieve results from them. But how do you measure your results? How would you know what actions to take towards the attainment of customer success goals? This is where customer success metrics come into the picture in SaaS.
Through these metrics, you are able to know how efficiently your customer success department is functioning. They will also show you what measures you must take to improve the performance of your CS department.
After all, the cost of maintaining the customer success function in your organization must be justified by the value it is producing. Hence, only through metrics, you can know how much of value-addition is being done by customer success.
What are the benefits of using customer success metrics?
Few of the benefits of using these metrics can be described as below.
Measure the impact of business unit
All business units in your organization, be it marketing, sales, customer support, product management, etc., have a certain impact on your business. Hence, it is important to use customer success KPIs to know what impact they are delivering to your business. Based on that, you can take further decisions like tweaking the strategies, allocating budgets for scaling up or down, and so on.
They help in creating strategies and decision-making
Through different metrics, you can look individually at different business objectives and work towards achieving them. Some of those typical customer success goals can be as follows.
What key parameters are playing a prominent role in driving your business revenues. If you get that information, you can leverage them to drive further revenues to your business.
If you can measure the time taken by each employee in your operations team along with the other parameters that are supporting them, you can take further steps towards enhancing their operational efficiency.
To give a greater customer experience, you need to know what measures promote it. By measuring the key metrics, for example, the turn-around time for resolving a ticket, you can think of ways to reduce it further for better customer experience.
Types of customer success metrics
We are going to discuss nine metrics here which we have classified into two categories – Qualitative and Quantitative.
Quantitative metrics are those which you can measure in a specific number through certain formulae. It gives you the precise information in mathematical data. Whereas Qualitative metrics are those that are more of a subjective opinion you form based on the information you receive.
These are a few of the quantitative metrics which you can use for your customer success function.
Customer health score
This metric gives you the overall information about the health of a particular customer account. It takes into account various customer behavioral aspects along with your pre-defined criteria for what you consider good or bad for a customer success scorecard. Based on these inputs, your customer success tool calculates the health score and shows it to you.
Customer Churn rate
It is the rate at which your customers are quitting your service. It is a clear indicator of how effectively you are managing your customer relationships. If all your customers are happy and stick with your business for a given period then your churn rate is zero. And that is the ideal goal for any subscription-based business.
Monthly Recurring Revenue (MRR)
MRR in customer success shows you how much revenue your customers are generating for your business every month. These can be through various means like renewal fees, or upselling, or cross-selling. When calculated annually, it is called Annual recurring revenue (ARR).
Customer Lifetime Value (LTV)
LTV is the total projected revenue a customer would generate during their entire relationship with your business. It is calculated by adding all the renewal fees with their additional purchases and subtracting that with the customer acquisition cost. It is a very important metric to measure your overall business’ health.
Customer retention cost
This shows you how much you are spending on your customer success programs to retain the customers. The total spend is divided by the number of customers you have retained. The final value gives you how much you are spending on each customer to retain them. You can compare this cost with the revenue generated by each customer to realize your gain or loss.
When your customers are committing to your business for another term/contract, that reflects in your renewal rates. A 100% renewal rate means all of your customers are renewing their subscriptions. It means they are happy with the value they derive from your product. If the renewal rate is low, it means you need to refine your customer success or product development strategies.
Having seen the quantitative metrics above, let us see some of the qualitative metrics below.
This is the most common metric you would ever receive to measure your customer health. What more can give you a better picture of customer health than the customer themselves. It can be in the form of a survey or a regular meeting where you can collect customer feedback.
This is another metric where you ask customers to rate their experience with your brand. This is specially collected after a recent interaction customer had with your support team. But it is also gathered for a longer period in which you ask how satisfied they are with your brand.
Net promoter score is one of the most common qualitative metrics that customer success managers use. It asks a customer how likely they would recommend your product to others they know. On the scale from 1 to 10, 10 represents most likely and 1 represents least likely. It is a good indicator to measure your brand advocacy potential and loyalty of customers.
I hope the above list of key customer metrics serve as an intro for you to different kinds of metrics that we use in customer success. This is not an exhaustive list, as there are many more metrics which companies use. But my intention is to give you some awareness of the metrics rather than overwhelming you with a sea of information in which it is easy to get lost.
You can search for each of these metrics in our SmartKarrrot website to know about them in detail. Different companies have different ways to track and monitor their progress. Hence, there is no one list that serves all for the metrics to use.28
Which ones to use for your business depends on which area you want to focus on to improve. In all your attempts to fine-tune your business processes, remember that you must avoid using vanity metrics. Use only specific metrics that give you a precise understanding of your business. And if you are using them for taking corrective measures, then only you are using it to its fullest.
Stanley Deepak is an accomplished sales and marketing professional with 15+ years of experience. He loves tech products and book reading. He writes on philosophy and culture on LinkedIn.
Published September 21, 2020, Updated April 27, 2023