Top 19 Customer Success Metrics You Should Know

Customer success refers to the establishment of a great relationship with your consumers. This involves listening to and understanding their needs and wants, as well as supporting them along their journey to reach their own goals.

In order to do that, you need to implement close customer monitoring. Then you can combine the gathered customer data and use the resulting insights to take proactive actions that deliver value for your firm.

To help you understand and evaluate your company’s customer success there are a high number of metrics you can facilitate.

Within every customer success metric, the value lies in their ability to reveal the customer experience of the product or service you are offering. This will allow you to add value to that experience and increase the growth of both your consumer relationships and your own business.

If you find it a bit too difficult to start building and maintaining the best possible relationship with your consumers by yourself – don’t worry. Luckily, there are several companies that can help you with your firm’s customer success.

One of them is the customer success software Saizmo that can help any SaaS customer success team with actionable insights and timely alerts. Saizmo, will act as your personal assistant and tell you, which of your consumers need your attention and why. Then you can focus on the most important thing: making your consumers happy!

In this article, we will look closer at the top 19 customer success metrics you should know, in order to increase the success of your SaaS business.

 

1) How to measure customer success

Unfortunately, there is no “one size fits all” set of success metrics that can be used for any SaaS company. What success looks like will vary depending on your service and how it is used by your consumers.

However, we have identified some overall categories of customer success metrics that seem relevant to all businesses.

 

1.1 Length of contract

Have your users signed up for a monthly or a quarterly/annual/multi-year contract?

With a monthly contract, the user can leave at any time, which is usually with 30 days’ written notice. That means every customer is theoretically at risk of churn every month. Therefore, you do not have the advantage of paying more attention to the customers that are close to their renewal date.

However, if your users signed up for a quarterly/annual/multi-year contract, there is a renewal date. The only time the customer can get out of their contract is on that renewal date. In this case, your customer success team can practice the renewal date as a specific part of their prioritization strategy.

 

1.2 Financial Metrics

Financial metrics can give a top-level picture of the overall financial health of your business.

Some of the top five customer success financial metrics include:

● Revenue Retention Rate (Gross & Net)

● Revenue Churn Rate (Gross & Net)

● Customer Retention Rate/Customer Churn Rate

● Renewal Rate (Gross & Net)

● Quick Ratio

1.3 Product usage

Product usage is a solid indicator of the value your customers are getting from your service or product.

Start to understand factors, such as how frequently they are logging in to your platform and whether they are using all of its features.

Overall, the more functionalities they are using from your software, the more value they are getting.

Learn more about how to measure customer success for your company.

 

2) Customer Success Metrics for SaaS

2.1 Customer success metrics for SaaS

You have to figure out the right metrics to use for your company. Once you have achieved that you will be able to analyze your company’s current situation and help your customers to reach their goals.

 

#1 – Expansion Revenue

The expansion revenue metric refers to the percentage of your new revenue that is coming from your existing consumers. Expansion revenue can be generated when customers start to pay for additional features and/or functionalities from your service or from customers who upgrade from lower-tier plans to higher-tier plans.

If measured on a monthly basis, expansion revenue is known as expansion MRR.

When calculating expansion MRR simply take all of your new revenue from upsells and cross-sells for a given month and divide it by the revenue you ended up with the month before.

 

#2 Churn

The customer churn rate is the percentage of customers who cancel their subscription in a given period of time

Nevertheless, there are two additional churn rates that you can measure, which are gross dollar churn and net dollar churn.

Gross dollar churn is the percentage of total revenue lost as a result of customer churn, down selling or downgrading.

Similarly, the net dollar churn looks at the revenue lost from customer churn and down selling. Yet, this metric also factors in the revenue that results from expansion income, when upselling or cross-selling to existing customers.

 

#3 Customer Retention Cost (CRC)

Customer retention cost (CRC) is the sum of all expenses a firm has for each user. For instance, from providing technical support to keep existing consumers.

You will have to add all the costs necessary for customer retention and engagement when calculating CRC.

The formula to calculate the average cost of retaining each customer segment looks like this:

Customer Retention Cost =

Cost of {Customer Success Team

+

Renewals and/or Account Management Team

+

Customer Engagement and Adoption Programs

+

Professional Services and Training

+

Customer Marketing}

 

#4 Customer Health Score

A customer health score is a metric that can inform you about the health of each of your consumer accounts. The score indicates the probability for a user to become a profitable consumer for your firm or the risk for consumers to churn.

The measure usually consists of several smaller metrics that help determine the current condition of the consumer account. The customer health score allows any business to be proactive and take the required actions based on the estimations.

 

#5 Customer Satisfaction

When utilizing the customer satisfaction metric, you will get an understanding of how your customers are feeling.

Knowing about your customers’ feelings toward your product/service will give your customer success team the opportunity to take action if needed. That should decrease the number of customers who decide to either downgrade or completely churn.

 

#6 Customer Satisfaction Score (CSAT)

When analyzing the short-term happiness of your consumers you can apply the Customer Satisfaction Score (CSAT) metric. When conducting a CSAT survey you will ask your consumers a question similar to “how would you rate your over­all happiness/sat­is­fac­tion with [Product/Service]?”

You consumers will give a response on a 1-5 scale:

● 1 = very unsatisfied

● 2 = unsatisfied

● 3 = neutral

● 4 = satisfied

● 5 = very satisfied

The result of the CSAT survey is then indicated as a percentage between 0-100 based on how many customers were “satisfied” or “very satisfied.” So a score of 100% would mean that every single customer gave you a 4 or a 5.

 

#7 Net Promoter Score (NPS)

Another customer satisfaction metric, and probably the most popular among SaaS businesses, is the Net Promoter Score (NPS).

When conducting an NPS survey among your users, you ask them about their intentions of recommending your offering; “How likely are you to recommend the product/service to a friend or colleague?”

The response will be given on a scale from 0-10. A score of “0” means that the user is not at all likely to recommend the product. On the contrary, a score of “10” means that the user is extremely likely to recommend the product.

Following, the users are grouped into three categories, based on the responses they have given:

● A score of 0 – 6 = “detractors”

● A score of 7 or 8 = “passives”

● A score of 9 or 10 = “promoters”

When calculating your NPS score, you should subtract the percentage of users in the “detractor” category from the percentage of users in the “promoter” category. The percentage of users within the “passive’ category can be ignored.

For instance, let’s say you have 500 customer responses in an NPS survey. If 250 are promoters (= 50% of respondents), 150 are passives (ignore them), and 100 are detractors (= 20% of respondents), then your NPS would be 30.

Because 50% – 20% = 30%.

 

#8 Average Revenue per Account (ARPA)

This metric calculates the average amount of revenue per consumer or revenue generated per account over a defined period of time. The time interval is usually measured in months or years.

The formula looks like this:

ARPA (per month) = Monthly recurring revenue (MRR) / Total number of customers

So you would have to divide the total revenue generated by all customers during a defined period by the number of customers.

 

#9 Customer Lifetime Value (LTV)

LTV is an estimation of the average gross margin contribution of a consumer over the lifetime of that specific consumer.

It is a well-known fact that acquiring new customers is much more difficult and expensive compared to increasing the revenue of an existing customer.

The formula looks like this:

LTV = ARPA / Customer Churn Rate

Or

LTV = (ARPA * Gross Margin %) / Revenue Churn Rate

(If you calculate different ARPA across your customer base)

 

#10 LTV (Lifetime Value) / CAC ratio (Customer Acquisition Cost)

The LTV/CAC metric is the most significant measure to identify how your company has improved over time, how much you should invest, and how it will impact your business growth.

LTV : CAC Ratio = LTV (Lifetime Value) / CAC (Customer Acquisition Cost)

A good ratio between these two measures is 3:1, which means that the LTV is 3 times higher than the CAC. This implies that for every dollar invested your return is 3 times higher ($3).

If you would like to know more about customer success metrics, you can read our more thorough review of all the customer success metrics for SaaS companies.

 

2.2 Customer engagement success metrics

An engaged customer is a user that gets the best value out of the product or service that you are offering. Learn more about the most essential customer engagement success metrics.

 

#11 Activity Time

Activity time is defined by the total time a user spends online, interacting with the service provided.

If the product/service is one that creates value for the end-user, people will use it and they will use it often.

 

#12 Visit Frequency

The metric describes how often a user returns to your service. This is a great representation of the value they get from using your software.

Knowing your users’ visit frequency will provide you with insights into potential patterns in customer behavior. These user patterns can be divided into groups such as “everyday use”, “weekly use”, and “sporadic use”.

Each SaaS company has to identify the pattern that is most relevant for their given service and then monitor users against that pattern.

For example, if you expect a happy user of your service to visit every day, you need to measure against that. Whereas if you offer a seasonal service and assume your customers to solely return on holidays, look for that pattern and so forth.

 

#13 Core User Actions

“Core user actions” are generally serviced specific and need to be aligned to your offerings.

If a user is performing core user actions on a continuous basis, it is a great indication of the adoption of your product. Moreover, when your users explore new features and start to apply them, it tells that your service is growing on them.

Opposite, if a user is not performing core user actions, while still spending time on your website, it may be because the user is unable to adopt the features of your offering. This will indicate a usability problem.

 

#14 Website engagement

When examining your website engagement level, you will be encountering a process of analyzing how likely your users are to stay on your website and perform any actions. The action could be things such as buying products or services, commenting, subscribing, etc.

Generally, website engagement metrics are about reach, social buzz, brand positioning, and interactions.

 

#15 Session Time

The earliest indication that can tell you if you need to make changes to keep users engaged is measuring your users’ session time. What is considered an appropriate session time will vary depending on your business.

We advise that you compare your teams’ session times with existing and new users. This will show you whether users really understand your product like your team or if they don’t know how to make the most out of your product/service.

 

#16 Frequency of Return Users

Are your users logged in every day?

If not, your product/service might not be of great value to them. Furthermore, if or when the frequency of your returning users starts to get low (and maybe even gets lower and lower over time) your marketing investments go to waste.

These are some vital issues that you will need to address fast.

As mentioned earlier, it costs more to acquire new customers than to retain the existing ones. Consequently, it is necessary that you understand and increase the frequency of your returning users.

2.3 User adoption metrics
When defining adoption in the context of products and services, adoption is the act of beginning to use something new. Therefore, adoption is of great importance for every SaaS company.

Accordingly, understanding user adoption metrics should be a high priority if running a SaaS business.

 

#17 Adoption Rate

The adoption rate is the percentage of new consumers to total consumers.

The formula looks like this:

Adoption rate = (The number of new users / Total Number of Users) x 100.

For example, if you have 30 new users and the number of total users is 300: Your adoption rate is 30/300 x 100 = 10%.

This metric can be measured on a daily, weekly, monthly or yearly basis.

 

#18 Time-to-first key action:

This metric is the average time it takes a new consumer to use an existing feature of your product/service.

Furthermore, it can be the time it takes an existing consumer to use a new feature for the first time.

 

#19 Percentage of users who performed the core action for the first time:

The title of this final metric obviously explains its definition.

It is simply the percentage of your users who have performed a core feature for the first time in a given period of time.


3) Conclusion


So there you have an overview of the most vital customer success metrics you should know.

Remember, that not all metrics will be relevant to your firm. Therefore, you will have to focus on the metrics that actually help your decision-making processes.

Furthermore, avoid working with too many metrics because it can often result in over-analyzing the situation. You should only track a few success metrics that are a valid measure of success for your specific business.

In short, concentrate on those metrics that matter and are related to your business model. Then you will start to gain great success!

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