How to Measure Customer Success in 2020 [Comprehensive Guide]

When measuring Customer Success there are many different customer success metrics and KPIs you and your team should be focusing on. All businesses with a focus on providing great customer experiences knowns that every interaction during the customer journey has a direct or indirect influence on each metric. These are all metrics that determine the overall health of your SaaS business.

When applying a customer-centric business strategy, every department in your business that is responsible for a touchpoint along the customer journey can affect different metrics. Consequently, every step in the customer journey chain provides value and creates the overall customer experience for your users.

This also means that no single department in your firm is responsible for customer retention. Rather, customer retention is determined by the combined outcome that marketing, sales, customer support, customer success, business development, and product management generate during the customer journey.

 

1) What is Customer Success?

Before we dig into, how you should be measuring customer success in your company we need to understand what customer success actually is.

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 theory, this can sound rather simple, but in reality, it is important to implement a clear strategy that incorporates some actionable customer success tactics. SaaS businesses need to employ effective measures that have an impact on the customer journey. Only when you know How to Measure Customer Success in 2020 [ Comprehensive Guide] you will be able to create long-term growth for your company.

You need to be able to understand what makes your customers happy and how to maintain that. Therefore, you have to collect and analyze customer feedback and manage communication with your customers.

 

2) The Importance of Measuring SaaS Customer Success

As mentioned above, various units in your firm will have an impact on your customer success. Because everyone from your customer success managers, customer service team, salespeople, etc. will add to the complete customer experience, which eventually leads to direct results on business growth.

The journey to achieve customer success, advocacy and high retention begins from the very first interaction a user has with your brand. Each improvement or adjustment in the approach of a single unit can profoundly affect the overall outcome of the consumer journey.

Customer success and company profitability are eventually determined by how well communication and operations are integrated across the board in any firm. Therefore, it is essential for separate business units to keep an eye on all the SaaS metrics in a company’s dashboard.

Having an overview of the entire dashboard will also help to track and measure metrics, which are vital to steer the overall strategy of the firm.

A data-driven approach to decision making will help you define those measures, which need to be employed in order to drive successful business operations. By collecting and analyzing a big amount of data, we can determine the effectiveness of strategic decisions and the direction we need to take to move ahead. Data can help remove any uncertainty and limits the number of experiments that need to be carried out in order to improve each KPI.

To be successful, SaaS businesses need to track the right metrics, know how to analyze and make sense of them, and understand how they can go from data analysis to creating an actionable plan.

Consequently, all decision starts with data and metrics. Once you are able to find correlations with specific actions and make sense of past results, you will be able to determine successful channels, strategies, and tactics. These should lead to better operational efficiency in your company, and as a result; great customer experience and higher revenue.

 

3) The Difference between Metrics and KPIs

Before learning about some specific metrics that need to be tracked, you need to understand the difference between metrics and key performance indicators (KPIs).

Metrics are based on quantitative data that is collected during different stages of the customer journey. These are all useful to measure behavior.

On the other hand, KPIs are related to targets and are established to measure performance. One could argue that KPIs are a subcategory of metrics that are correlated to specific goals. Metrics then becomes general measurements that are used to make strategic decisions that affect a business’ KPIs.

There are several metrics and KPIs any SaaS company need to track. Though the metrics and KPIs will be different for each firm, there are some generic metrics categories that all firms should include. These categories are:

● Product metrics

● Customer metrics, such as customer success, customer service, and customer support metrics

● General business metrics

 

4) Categories/type of customer success metrics

There is no “one size fits all” set of success metrics that can be used for any SaaS company. Success for your customers is the factors that help them decide whether they are getting value from your service or product. Therefore, what success looks like will vary depending on your service and how it is used by your consumers.

However, below we have identified four overall categories of customer success metrics that seem relevant for all businesses.

 

4.1 Length of contract

A monthly contract: Here there is no term in the contract and the user can, therefore, leave at any time. Normally with 30 days’ written notice. Consequently, every customer is theoretically at risk of churn every month. Your customer success managers will not have the advantage of paying more attention to the customers that are close to their renewal date. Because every month is a renewal without the contract signature. Of course, your customer success managers will have to prioritize your consumers in some way, but it will not be based on the renewal date.

A quarterly/annual/multi-year contract: Conceptually, these are all the same as there is a renewal date. The only time the customer can get out of their contract is on that renewal date. Yet, clearly your consumers can stop using your product any time they want, but there is a specified contract term, which they are obligated to.

When it comes to auto-renewals, the users most often have to notify the vendor 30 days or more before the renewal date in order to cancel the contract. In this case, customer success managers can use the renewal date as a specific part of their prioritization strategy. If two customers were of equal value to the firm, the higher priority should go to the user with the nearest renewal date.

4.2 Financial Metrics

Often customer success metrics are typically referred to as the core SaaS financial metrics. These financial metrics can give a top-level picture of the overall financial health of a business. Furthermore, these metrics can serve as a powerful indicator when it comes to long-term growth and scalability of a company.

Some of the top five customer success financial metrics include:

● Revenue Retention Rate (Gross & Net):

This is measured as the ratio of customers or revenue you have kept in a given period of time.

● Revenue Churn Rate (Gross & Net):

This is the percentage of revenue you have lost from existing customers in a period of time.

● Customer Retention Rate/Customer Churn Rate:

This is the percentage of customers your company has retained over a given time period.

● Renewal Rate (Gross & Net):

This is the percentage of customers who renew the contract at the end of each contract period.

● Quick Ratio:

This measures a SaaS company’s growth efficiency. Find more information here.

 

4.3 Health score

A Customer Health Score is a score that is intended to measure how healthy and loyal your users are. It can include a number of different elements that all create a picture of the overall health of your customers.

Some of the most common customer health indicators include:

Customer Support: How often do your customers call Support, how long tickets are open, what hardness are they, etc.
References: Are your customers doing and references? If so how often and how many?
NPS score: This stands for Net Promoter Score, which is a metric that measures the loyalty of customers to a company.
Community engagement: If you build a community, is it something that your customers use and what do they do when they are there?
Invoice history: Do your customers pay their bills on time?
Transaction history: Have your users renewed their contract and how often, have they bought more product from you, what is their contract value compared to their original contract?
Marketing engagement: How do your users engage with your marketing campaigns? Do they click on the links, attend your webinars, open your emails, etc.
Marketing participation: Do your consumers speak on your behalf, are they performing case studies, video testimonials, participate in your customer submit, etc.

When creating a customer health score it should be done as an attempt to create a score that will be predictive in regard to both renewals and upsells among your current users. It is a value indicating the probability for a buyer to become a profitable, high-value consumer or to drop off on a long-term basis.

4.4 Product usage

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

You should be looking into aspects such as how frequently they are logging in to your platform? Whether they are using all of its features, or only a small percentage of the tool’s functionality, etc.

Overall, the more functionality they are using your software, the more value they are getting from your tool. Consequently, the more likely it is that they are achieving their success factors.

In addition, the longer and more heavily a consumer is using your service, the higher is the cost and inconvenience of switching to a competition. This provides an added incentive for them to stay.

5) Conclusion


So there you have an overview of the high-level customer success metrics categories that top customer success leaders are using to drive big impacts and growth among their customers.

As you have probably learned by now, it is easy to get lost in the big bowl of customer care and product metrics.

Remember, that not all metrics will be relevant to your firm. So you will have to focus on those metrics that actually help your decision-making processes. Focus on the need-to-know metrics for your firm, and not just the nice-to-have. Then it will start to get too complicated.

In short, focus on those metrics that matter and are related to your business model. The end result needs to be a constant, sustainable growth rate.


So start accumulating metrics now and build your product and customer strategies on the most important indicators that relate to your company goals.

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